Primo Water Corp.

The stable outlook reflects our view that elevated demand from residential customers has enabled Primo to successfully mitigate pandemic-related pressures and deliver consistent operating results. It also incorporates our expectation that Primo will maintain leverage in the mid-high 4x area through 2021, reflecting steady EBITDA growth and a disciplined cost management strategy. In addition, the stable outlook reflects our expectation that Primo will maintain a strong EBITDA interest coverage ratio of about 4x. We could lower the rating if the company's debt-to-EBITDA ratio weakens to 7x and EBITDA interest coverage approaches 2x due to underperformance in the existing or acquired businesses or because of a sizable debt-funded acquisition. We believe that, in the case of underperformance, such a scenario would

...Residential customers partially offset sharp declines in commercial customers and should contribute to mid-single-digit revenue growth in 2021. Residential customers generate almost 60% of Primo Water Corp.'s total revenues. Demand for company's residential products and services remained positive through first-quarter 2021. Specifically, the company's revenues from residential customers increased 25% in that quarter compared with first-quarter 2020 or 7% on a pro forma basis (including the legacy Primo acquisition). This growth partially offset the declines in the company's commercial segment, which dropped 23% in the same period. In S&P Global Ratings' opinion, consumers continuing to spend more time at home and an ongoing shift in the preference of healthier beverages should spur steady demand for water. Primo follows a razor/razor blade model that generates recurring revenues. The razor in Primo's revenue model is its industry leading line-up of sleek and innovative water dispensers,...

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