Primo Water Corp., a provider of multi-gallon purified bottled water, self-serve filtered drinking water and water dispensers sold through major retailers throughout the U.S. and Canada, announced financial results for the first quarter ended March 31, 2011.
For the first quarter of 2011, net sales increased 94 percent to $17.1 million from $8.8 million in the first quarter of 2010, ahead of the company's prior net sales guidance of $15.9 to $16.3 million. The first quarter results include the impact of the Refill Business, which was acquired on Nov. 10, 2010, and the Canada Bulk Water Exchange Business, which was acquired on March 8, 2011.
The GAAP net loss for the first quarter of 2011 was ($2.1) million or ($0.11) per share, compared to ($3.1) million or ($2.15) per share in the same period in the prior year. In addition, for the first quarter of 2011 non-GAAP pro forma fully-taxed net income was approximately breakeven and the company reported non-GAAP adjusted EBITDA of $2.0 million. The company does not expect to pay U.S. income taxes in the near future as it has sufficient net operating loss carryforwards to offset taxable income.
Sales from the water segment consist of sales of multi-gallon purified bottled water (exchange services) and self-serve filtered water vending services (refill services). Water net sales for the first quarter of 2011 increased 122 percent to $13.1 million compared to $5.9 million in the first quarter of 2010. The sales improvement was partially due to a 12 percent increase in sales of exchange services driven by a 12 percent increase in 5-gallon equivalent units sold to 1.2 million compared to the same period of 2010, excluding the Canada Bulk Water Exchange Business. Exchange services same-store unit sales increased 6 percent in the first quarter of 2011 compared to the first quarter of 2010, which represents a sequential acceleration from the fourth quarter of 2010 same-store unit growth of 5 percent. In addition, the Refill Business and Canada Bulk Water Exchange Business acquisitions accounted for approximately $6.4 million and $0.2 million, respectively, in net sales in the first quarter of 2011. At March 31, 2011, water services were offered in the U.S. and Canada at approximately 14,600 retail locations, representing a record number of locations installed in a quarter as well as exchange locations acquired as part of the Canada Bulk Water Exchange Business.
The company's water dispenser sales for the first quarter of 2011 increased 37 percent to $4.0 million compared to $2.9 million in the first quarter of 2010. The increase is due primarily to the addition of several new water dispenser models, which began shipping in the fourth quarter of 2010. Dispenser unit sales at retail to end consumers increased 8 percent for the first quarter of 2011 compared to 2010.
Gross profit for the first quarter of 2011 increased to $5.0 million compared to a gross profit of $1.9 million in the first quarter of 2010. The gross profit margin increased to 29.3 percent compared to 21.6 percent in the first quarter of 2010. The improvement in gross profit margin is primarily the result of an increased mix of higher margin Water segment sales. Water segment sales represented 76.7 percent of total sales during the quarter compared to 67.1 percent of sales in the first quarter of 2010.
Selling, general and administrative (SG&A) expenses were $4.0 million or 23.7 percent of net sales for the first quarter of 2011, compared to $2.7 million or 31.0 percent of net sales in the first quarter of 2010. The increase is the result of increased headcount necessary to operate as a public company, additional costs related to the recent acquisitions and the costs of operating duplicate back-office operations following the acquisitions. SG&A decreased as a percent of net sales, a trend the company expects to continue as it reduces duplicate costs related to the Refill Business acquisition and leverages SG&A expenses with increased sales growth.
"We accomplished significant milestones in the first quarter including the addition of a record number of new locations, two acquisitions and progress on the integration of our Refill Business acquisition," commented Billy D. Prim, Primo Water's president and CEO in a prepared statement. "I am very proud of our organization and our ability to deliver strong growth in the quarter as we execute on our long-term strategic goals. We further strengthened our position for many years of profitable growth."