Primo Water(PRMW)2021-03-03 20:38Financial Risks and Debt Management - As of January 2, 2021, the company's total indebtedness was $1,470.7 million, which poses significant financial risks[105]. - The outstanding borrowings under the Revolving Credit Facility as of January 2, 2021, were $104.8 million, exposing the company to interest rate risk[110]. - The company’s financial covenants may limit its ability to incur additional indebtedness or make restricted payments, impacting operational flexibility[107]. - Future cash flow generation is critical for servicing debt obligations and funding capital expenditures, which are subject to various uncontrollable factors[112]. - The company’s growth strategy relies heavily on acquisitions financed by substantial indebtedness, raising concerns about future financing on favorable terms[111]. - Total outstanding debt amounts to $1,486.0 million with a weighted average interest rate of 4.5%[316]. - Debt maturing in 2025 is the largest portion at $760.7 million, with an interest rate of 5.5%[316]. - Debt maturing in 2021 is $125.6 million, with a lower interest rate of 2.4%[316]. - The company has $563.5 million in debt maturing thereafter, with a weighted average interest rate of 3.9%[316]. - Debt maturing in 2022 and 2023 is relatively low at $12.8 million and $12.4 million, both with an interest rate of 4.9%[316]. Intangible Assets and Impairment Risks - The company has intangible assets subject to amortization totaling $532.1 million, primarily consisting of $485.2 million in customer relationships from acquisitions[104]. - The company faces potential impairment risks related to goodwill and intangible assets due to changes in market conditions and loss of key customers[104]. Operational and Compliance Risks - Legal and regulatory compliance is essential, as changes in laws could adversely affect demand for the company's products and increase costs[118]. - The company may face liabilities from product safety standards and potential contamination issues, which could negatively impact financial performance[115]. - Collective bargaining agreements may not be renewed on satisfactory terms, potentially leading to strikes that could disrupt operations and sales[114]. - The company is exposed to significant operational cost increases due to potential aggressive regulations on greenhouse gas emissions, particularly affecting its North America business[122]. - The company faces risks associated with compliance to international trade regulations, particularly regarding tariffs on goods imported from China[128]. - The company is subject to environmental laws that may impose liability for hazardous substances, which could lead to significant future expenditures[126]. - The regulatory environment surrounding information security and privacy is increasingly demanding, potentially resulting in significant compliance costs[135]. - The company has been named a potentially responsible party at third-party waste disposal sites, which may lead to material expenditures for contamination-related concerns[126]. Commodity Price and Market Risks - A 10% increase in commodity prices could raise the cost of sales by approximately $7.2 million over the next 12 months[317]. - The company manages commodity price risk through supplier pricing agreements and derivative financial instruments[317]. - The company is exposed to market risks related to resin and fuel purchases, impacting cash flows and operations[317]. - The cumulative impact of commodity price fluctuations is significant for the company's financial performance[317]. - The company’s strategy includes fixing purchase prices for certain commodities to mitigate risks[317]. Revenue and Foreign Operations - Operations outside the United States accounted for 26.8% of 2020 revenue and 32.6% of 2019 revenue, with a 10% change in foreign currency exchange rates potentially impacting revenue by $52.0 million and gross profit by $28.2 million[311]. Dividends - The company has paid quarterly cash dividends since 2012, with the most recent dividend declared at $0.06 per common share[136]. Interest Rate Exposure - The weighted average interest rate of the outstanding Revolving Credit Facility was 2.1% as of January 2, 2021[312]. - The company had $104.8 million in borrowings under its Revolving Credit Facility as of January 2, 2021, with a 100 basis point increase in interest rates resulting in an additional interest expense of approximately $1.0 million[312].