Board Comments on Legion Partner's Curious
and Unnecessary Campaign to Remove and Replace Highly Qualified and
Experienced Directors
Board Urges Shareowners to Vote on the BLUE
Card FOR Primo Water's Ten Qualified Directors
TAMPA,
Fla., April 3, 2023 /PRNewswire/ - Primo Water
Corporation (NYSE: PRMW) (TSX: PRMW) (the "Company" or "Primo
Water"), a leading provider of sustainable drinking water solutions
in North America and Europe, today filed definitive proxy materials
with the United States Securities and Exchange Commission (the
"SEC") and with the applicable Canadian securities regulatory
authorities in connection with its 2023 annual and special meeting
of shareowners, which is scheduled to be held on May 3, 2023 (the "Annual Meeting"). Shareowners
as of the close of business on March 14,
2023 will be entitled to vote at this meeting.
The proxy statement and other important information relating to
the Annual Meeting can be found at
https://primowatercorp.com/investors/.
Primo Water today also sent a
letter to shareowners. In the letter, the Company describes:
- Primo Water's transformation to
a high-performing business by changing its strategy and reducing
its environmental impact;
- The strong financial performance of the business, including
double-digit top-line growth (on a foreign-exchange neutral basis)
in 2022 and the expansion of Adjusted EBITDA margin from 13% to 19%
over the last five years, driven by the strategy changes, while the
business became carbon neutral across all global operations;
and
- The refreshment of the Board of Directors (the "Board"),
including the addition of seven new directors in the last five
years.
The Board also commented on the campaign being waged by Legion
Partners Holdings, LLC, a 1.5% shareowner that has failed to
meaningfully engage with the Company since first buying shares in
October 2022.
The full text of the letter follows:
Dear Fellow Shareowners,
We encourage you to vote at the upcoming Annual and Special
Meeting of Shareowners (the "Annual Meeting") of Primo Water
Corporation (the "Company" or "Primo Water").
Enclosed you will find materials that describe the tremendous
progress we have made as a company over the last year and the
biographies of our candidates who are standing for election to the
Board of Directors (the "Board").
This year's Annual Meeting will be held on May 3, 2023. You can vote by Internet or by mail
using the instructions on the enclosed BLUE universal proxy
card.
Overview of Primo Water and Our
2022 Performance
Primo Water is a leading supplier
of high-quality drinking water that is sourced responsibly and
delivered in a sustainable manner to millions of customers in 21
countries. Over the last five years, we have significantly
transformed the business by changing our strategy and reducing our
impact on the environment. We even changed our name.
Over the course of this fundamental strategic shift, we have
sold or exited businesses and geographies that were economically or
environmentally unattractive and have grown in scale and efficiency
to better serve our customers and generate better returns for our
shareowners.
Our transformation has not been without challenges. We embarked
on our pure-play water solutions strategy just before the COVID-19
pandemic shut down many of our B2B and commercial customer
locations where we delivered water. Prior to the pandemic,
approximately half of our customers were businesses, and most of
them closed for some period during 2020 and 2021; many of our
commercial customers continue to have fewer workers on site today.
We also exited the Russian market in response to the invasion of
Ukraine and have had to quickly
adjust to high inflation, fluctuating foreign currencies, tight
labor markets, tariffs on water dispensers manufactured in
China, global supply chain
constraints, and other unpredictable business complexities.
Despite those challenges, our strategy is clearly working, and
our team is executing well.
In 2022, the Company had double-digit top-line growth (on a
foreign-exchange neutral basis) and expanded our adjusted EBITDA
margins. Our growth and margin improvements were the result of
deliberate actions taken by our management team as part of our
strategic plan. We implemented an enhanced predictive staffing
model and optimized our delivery routes, purposefully increasing
the levels of route density and units delivered per route per day.
By focusing on profitable growth within our most promising markets,
revenue and profit intentionally grew faster than customer counts
and distribution points.
We also distributed $0.28 per
share in dividends, our highest annual dividend ever, and bought
back $24 million of our stock, all
while reducing our net leverage from 3.8x to 3.4x. We anticipate
increasing the dividend further in 2023 and have forecasted that we
will opportunistically buy back up to an additional $76 million in stock during this year. The
combination of growth in adjusted EBITDA and strong growth in free
cash flow will further reduce our net leverage to below 3x by the
end of 2023.
Over the last five years, we have expanded our Adjusted EBITDA
margin from 13% to 19% while reducing our impact on the environment
and becoming a carbon neutral enterprise across all our global
operations. Our decision to exit the single-use retail bottled
water category in North America,
for example, impacted our near-term revenue but also eliminated
approximately 400 million plastic bottles from our production
ecosystem and avoided over 50,000 metric tons of CO2e associated
with the production and transportation of these bottles. Our
commitment to sourcing water responsibly and to increase route
density also both reduced our environmental footprint and improved
our long-term financial results.
Today, we have a more resilient business model than ever before
– one that is well-positioned for strong and sustainable
growth.
This Year's Annual Meeting
At this year's Annual Meeting, the Company is nominating ten
candidates for election to the Board. Seven of our candidates
joined the Board in the last five years and have been instrumental
in helping with our business transformation.
Our candidates for the Board are experienced, dedicated and
diverse. They have been founders, executives, and board members at
some of the largest and most respected beverage and route-based
companies in the world, including PepsiCo, Coca-Cola Enterprises,
Anheuser-Busch, Aramark and Blue Rhino. They also bring important
functional expertise in areas that are integral to our business
such as executive leadership, operations, finance, digital
marketing, capital markets and human resources.
Despite the decisive actions we have taken to reposition the
business for long-term success, one of our new shareowners, Legion
Partners Holdings, LLC ("Legion"), has nominated two individuals to
replace two of our Board members. Legion's candidates include a
manager of a small hedge fund who first purchased our stock about
one month ago and a former PepsiCo executive who once reported to
one of our current Board members.
Notwithstanding our best efforts to get to know these two
candidates better, Legion has flatly refused to allow them to meet
with us. The Legion candidates declined our invitations too. As a
result, we are left not knowing what differentiated perspectives or
ideas, if any, they could bring to the Board. These interviews are
particularly important to us because Legion attempted to nominate
two additional people to our Board both of whom failed to disclose
important and required information to the Company (one neglected to
disclose that he was criminally tried for allegedly bribing a
government official and the other did not disclose a pending case
against her for fraud).
Legion's motives remain unclear. Legion began buying our stock
less than six months ago and currently owns approximately 1.5% of
the Company's total outstanding shares. Since then, Legion has
sought very limited interaction with us and has never had
meaningful conversations with our Board or management team. To our
disappointment, Legion has refused to constructively engage with us
and has provided no recommendations on how to improve Primo Water. As best we can tell, Legion is far
more interested in grabbing headlines than engaging in substantive
discussions about business improvement initiatives. If that
changes, we welcome a conversation and any ideas Legion may have to
support our success.
The Board of Primo Water
recommends shareowners vote "FOR" all 10 nominees proposed by the
Primo Water Board at the upcoming Annual Meeting.
Shareowners who have any questions or need assistance voting
their shares may contact the Company's proxy solicitor MacKenzie
Partners at 1-800-322-2885 or proxy@mackenziepartners.com.
Thank you for your support and investment in Primo Water as we continue to create value on
behalf of all stakeholders.
Sincerely,
The Primo Water Corporation Board of Directors
ABOUT PRIMO WATER
CORPORATION
Primo Water is a leading
pure-play water solutions provider in North America and Europe and generates approximately
$2.2 billion in annual revenue.
Primo Water operates largely under a
recurring revenue model in the large format water category (defined
as 3 gallons or greater). This business strategy is commonly
referred to as "razor-razorblade" because the initial sale of a
product creates a base of users who frequently purchase
complementary consumable products. The razor in Primo Water's revenue model is its industry
leading line-up of innovative water dispensers, which are sold
through approximately 10,000 retail locations and online at various
price points. The dispensers help increase household and business
penetration which drives recurring purchases of Primo Water's razorblade offering or water
solutions. Primo Water's razorblade
offering is comprised of Water Direct, Water Exchange, and Water
Refill. Through its Water Direct business, Primo Water delivers sustainable hydration
solutions across its 21-country footprint direct to customers,
whether at home or to businesses. Through its Water Exchange
business, customers visit retail locations and purchase a
pre-filled bottle of water. Once consumed, empty bottles are
exchanged at our recycling center displays, which provide a ticket
that offers a discount toward the purchase of a new bottle. Water
Exchange is available in approximately 17,500 retail locations.
Through its Water Refill business, customers refill empty bottles
at approximately 23,500 self-service refill drinking water
machines. Primo Water also offers
water filtration units across its 21-country footprint.
Primo Water's water solutions
expand consumer access to purified, spring, and mineral water to
promote a healthier, more sustainable lifestyle while
simultaneously reducing plastic waste and pollution. Primo Water is committed to its water
stewardship standards and is proud to partner with the
International Bottled Water Association (IBWA) in North America as well as with Watercoolers
Europe (WE), which ensure strict adherence to safety, quality,
sanitation and regulatory standards for the benefit of consumer
protection.
Primo Water is headquartered in
Tampa, Florida (USA). For more
information, visit www.primowatercorp.com.
Non-GAAP Measure
To supplement its reporting of financial measures determined in
accordance with U.S. GAAP (Generally Accepted Accounting
Principles), Primo Water utilizes
certain non-GAAP financial measures, including and not limited to
Adjusted EBITDA, Adjusted EBITDA margin, and net leverage to
separate the impact of certain items from the underlying business.
Because Primo Water uses these
adjusted financial results in the management of its business,
management believes this supplemental information is useful to
investors for their independent evaluation and understanding of
Primo Water's underlying business
performance and the performance of its management. With respect to
the Company's expectations of its future performance, the Company's
reconciliation of net leverage as of December 31, 2023 is not available, as the
Company is unable to quantify certain amounts to the degree of
precision that would be required in the relevant GAAP measures
without unreasonable effort. The non-GAAP financial measures
described above are in addition to, and not meant to be considered
superior to, or a substitute for, Primo
Water's financial statements prepared in accordance with
GAAP. In addition, the non-GAAP financial measures included in this
press release reflect management's judgment of particular items,
and may be different from, and therefore may not be comparable to,
similarly titled measures reported by other companies.
Safe Harbor Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, Section
21E of the Securities Exchange Act of 1934 and applicable Canadian
securities laws conveying management's expectations as to the
future based on plans, estimates and projections at the time the
Company makes the statements. Forward-looking statements involve
inherent risks and uncertainties and the Company cautions you that
a number of important factors could cause actual results to differ
materially from those contained in any such forward-looking
statements. The forward-looking statements in this press release
include but are not limited to statements regarding the
effectiveness of the Company's strategy and the ability of the
Company's leadership to execute on such strategy. The
forward-looking statements are based on assumptions regarding
management's current plans and estimates. Factors that could cause
actual results to differ materially from those described in this
press release include, among others: risks relating to any
unforeseen changes to or effects on liabilities, future capital
expenditures, revenues, expenses, earnings, synergies,
indebtedness, financial condition, losses and future prospects; the
effect of economic, competitive, legal, governmental and
technological factors on Primo
Water's business; and the impact of national, regional and
global events on our business, including the COVID-19 outbreak. The
foregoing list of factors is not exhaustive. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. Readers are urged to
carefully review and consider the various disclosures, including
but not limited to risk factors contained in the Company's Annual
Report in the Form 10-K and its quarterly reports on Form 10-Q, as
well as other periodic reports filed with the securities
commissions. The Company does not, except as expressly required by
applicable law, undertake to update or revise any of these
statements in light of new information or future events.
Important Additional
Information
The Company, its directors and certain of its executive officers
are participants in the solicitation of proxies from the Company's
shareowners in connection with the Annual Meeting. The Company
filed its definitive proxy statement and a BLUE proxy card
with the SEC and Canadian securities regulators on March 31, 2023 in connection with the
solicitation of proxies from the Company's shareowners.
SHAREOWNERS OF THE COMPANY ARE STRONGLY ENCOURAGED TO READ SUCH
PROXY STATEMENT, ACCOMPANYING BLUE PROXY CARD AND ALL OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT
INFORMATION. The Company's definitive proxy statement for the
Annual Meeting contains information regarding the direct and
indirect interests, by security holdings or otherwise, of the
Company's directors and executive officers in the Company's
securities. Information regarding subsequent changes to their
holdings of the Company's securities can be found in the SEC
filings on Forms 3, 4 and 5, which are available on the Company's
website at https://primowatercorp.com/investors/ or through the
SEC's website at www.sec.gov, and are disclosed on The System for
Electronic Disclosure by Insiders (SEDI) in Canada. Information can also be found in the
Company's other SEC filings, including its Annual Report on Form
10-K for the year ended December 31,
2022, filed on March 1, 2023.
Shareowners will be able to obtain the definitive proxy statement,
any amendments or supplements to the proxy statement and other
documents filed by the Company with the SEC and Canadian securities
regulators at no charge at the SEC's website at www.sec.gov and on
the System for Electronic Document Analysis and Retrieval (SEDAR)
at www.sedar.com. Copies will also be available at no charge on the
Company's website at https://primowatercorp.com/investors/.
Presentation and Reconciliation of
Non-GAAP Measures to GAAP
PRIMO WATER
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY
INFORMATION - NON-GAAP - EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION & AMORTIZATION
|
(EBITDA)
|
|
|
|
|
|
|
|
|
|
(in millions of U.S.
dollars)
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
Ended
|
|
2022
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
(December 31,
2022)
|
|
(January 1,
2022)
|
|
(January 2,
2021)
|
|
(December 28,
2019)
|
|
(December 29,
2018)
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
29.6
|
|
$
(3.2)
|
|
$
(156.8)
|
|
$
(10.8)
|
|
$
28.9
|
Interest expense,
net
|
69.8
|
|
68.8
|
|
81.6
|
|
77.6
|
|
77.6
|
Income tax
expense
|
19.7
|
|
9.5
|
|
4.3
|
|
4.5
|
|
(4.8)
|
Depreciation and
amortization
|
242.8
|
|
219.1
|
|
202.1
|
|
168.6
|
|
194.6
|
EBITDA2
|
$
361.9
|
|
$
294.2
|
|
$
131.2
|
|
$
239.9
|
|
$
296.3
|
|
|
|
|
|
|
|
|
|
|
Acquisition and
integration costs (a)1
|
15.3
|
|
10.8
|
|
33.7
|
|
16.4
|
|
15.3
|
Share-based
compensation costs (b)
|
17.2
|
|
17.5
|
|
22.1
|
|
9.9
|
|
18.4
|
COVID-19 costs
(c)
|
(0.6)
|
|
2.4
|
|
20.8
|
|
—
|
|
—
|
Commodity hedging loss
(gain), net (d)
|
—
|
|
—
|
|
—
|
|
—
|
|
0.3
|
Impairment charges
(e)
|
29.1
|
|
—
|
|
115.2
|
|
—
|
|
—
|
Foreign exchange and
other losses (gains), net (f)
|
15.1
|
|
8.7
|
|
1.5
|
|
0.9
|
|
(10.7)
|
Loss on disposal of
property, plant and equipment, net
(g)
|
8.5
|
|
9.3
|
|
10.6
|
|
7.6
|
|
9.4
|
Loss (gain) on
extinguishment of long-term debt (h)
|
—
|
|
27.2
|
|
19.7
|
|
—
|
|
(7.1)
|
Gain on sale of
business (i)
|
(0.8)
|
|
(3.8)
|
|
(0.6)
|
|
6.0
|
|
(6.0)
|
Gain on sale of
property (j)
|
(38.8)
|
|
—
|
|
—
|
|
—
|
|
—
|
Other adjustments, net
(k)
|
13.2
|
|
13.7
|
|
7.3
|
|
6.4
|
|
(3.9)
|
Adjusted
EBITDA2
|
$
420.1
|
|
$
380.0
|
|
$
361.5
|
|
$
287.1
|
|
$
312.0
|
|
|
|
|
|
|
|
|
|
|
Revenue,
net
|
$
2,215.1
|
|
$
2,073.3
|
|
$
1,953.5
|
|
$
1,795.4
|
|
$
2,372.9
|
Adjusted EBITDA
margin %
|
19.0 %
|
|
18.3 %
|
|
18.5 %
|
|
16.0 %
|
|
13.1 %
|
|
|
|
|
|
|
|
|
|
|
1 Includes
an increase of $1.8 million of share-based compensation costs for
the year ended December 28, 2019 related to awards granted in
connection with the acquisition of our
Eden business and a reduction of $1.1 million of share-based
compensation costs for the year ended December 29, 2018 related to
awards granted in connection with the acquisition
of our S&D and Eden businesses.
|
2 The year
ended January 2, 2021 include $3.9 million of benefit associated
with the 53rd week.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
Ended
|
|
|
|
2022
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
Location in
Consolidated
Statements of Operations
|
|
(December
31,
2022)
|
|
(January
1,
2022)
|
|
(January
2,
2021)
|
|
(December
28,
2019)
|
|
(December
29,
2018)
|
|
|
|
(Unaudited)
|
(a) Acquisition and
integration costs
|
Acquisition and
integration
|
|
$
15.3
|
|
$
10.8
|
|
$
33.7
|
|
$
16.4
|
|
$
15.3
|
(b) Share-based
compensation costs
|
Selling, general
and
administrative expenses
|
|
17.2
|
|
17.5
|
|
22.1
|
|
9.9
|
|
18.4
|
(c) COVID-19
costs
|
Selling, general
and
administrative expenses
|
|
(0.6)
|
|
2.4
|
|
20.8
|
|
—
|
|
—
|
(d) Commodity hedging
loss (gain), net
|
Cost of
Sales
|
|
—
|
|
—
|
|
—
|
|
—
|
|
0.3
|
(e) Impairment
charges
|
Impairment
charges
|
|
29.1
|
|
—
|
|
115.2
|
|
—
|
|
—
|
(f) Foreign exchange
and other losses
(gains), net
|
Other (income) expense,
net
|
|
15.1
|
|
8.7
|
|
1.5
|
|
0.9
|
|
(10.7)
|
(g) Loss on disposal of
property, plant
and equipment, net
|
Loss on disposal of
property,
plant and equipment, net
|
|
8.5
|
|
9.3
|
|
10.6
|
|
7.6
|
|
9.4
|
(h) Loss (gain) on
extinguishment of
long-term debt
|
Other (income) expense,
net
|
|
—
|
|
27.2
|
|
19.7
|
|
—
|
|
(7.1)
|
(i) (Gain) loss on sale
of business
|
Other (income) expense,
net
|
|
(0.8)
|
|
(3.8)
|
|
(0.6)
|
|
6.0
|
|
(6.0)
|
(j) Gain on sale of
property
|
Gain on sale of
property
|
|
(38.8)
|
|
—
|
|
—
|
|
—
|
|
—
|
(k) Other adjustments,
net
|
Other (income) expense,
net
|
|
(4.3)
|
|
(2.8)
|
|
(1.7)
|
|
(2.8)
|
|
(14.9)
|
|
Selling, general
and
administrative expenses
|
|
17.5
|
|
15.7
|
|
8.6
|
|
9.4
|
|
8.8
|
|
Cost of
Sales
|
|
—
|
|
0.8
|
|
0.4
|
|
7.0
|
|
2.2
|
|
Revenue, net
|
|
—
|
|
—
|
|
—
|
|
(7.2)
|
|
—
|
PRIMO WATER
CORPORATION
|
|
|
SUPPLEMENTARY
INFORMATION - NON-GAAP - NET LEVERAGE RATIO
|
(in millions of U.S.
dollars except financial ratios)
|
|
Unaudited
|
|
|
|
|
For the Year
Ended
|
|
|
2022
|
2021
|
|
|
(December 31,
2022)
|
(January 1,
2022)
|
|
|
|
|
|
Adjusted
EBITDA
|
$
420.1
|
$
380.0
|
|
Total Debt
(a)
|
$
1,527.8
|
$
1,577.8
|
|
Unrestricted Cash
(b)
|
$
118.0
|
$
128.4
|
|
Net Leverage Ratio
(c)
|
3.4x
|
3.8x
|
|
|
|
|
|
(a) Total debt as of
December 31, 2022 of $1,513.6 million adjusted to exclude $14.2
million of unamortized debt costs.
Total debt as of January 1, 2022 of $1,560.9 million adjusted to
exclude $16.9 million of unamortized debt costs.
|
|
|
|
(b) Unrestricted cash
defined as cash and cash equivalents as of December 31, 2022 of
$122.6 million adjusted to
exclude $4.6 million of restricted cash held in escrow.
|
|
|
|
(c) Net Leverage ratio
defined as net debt (total debt, as adjusted, minus unrestricted
cash) divided by Adjusted
EBITDA
|
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SOURCE Primo Water Corporation