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United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: October 1, 2022
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                       to                      l

Commission File Number: 001-31410

PRIMO WATER CORPORATION
(Exact name of registrant as specified in its charter)
Ontario 98-0154711
(State or Other Jurisdiction of
Incorporation or Organization)
 (IRS Employer
Identification No.)
1150 Assembly Dr. 
Suite 800
Tampa,Florida33607
United States
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (813544-8515

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares, no par value per sharePRMWNew York Stock Exchange
Toronto Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filerý Accelerated filer
Non-accelerated filerSmaller reporting company
 Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding at November 7, 2022
Common Shares, no par value per share 159,788,402



TABLE OF CONTENTS

2

PART I – FINANCIAL INFORMATION
 
Item 1.Financial Statements (unaudited)

Primo Water Corporation
Consolidated Statements of Operations
(in millions of U.S. dollars, except share and per share amounts)
Unaudited

 For the Three Months EndedFor the Nine Months Ended
 October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Revenue, net$584.6 $550.8 $1,682.1 $1,555.3 
Cost of sales236.4 242.4 702.0 685.2 
Gross profit 348.2 308.4 980.1 870.1 
Selling, general and administrative expenses297.3 263.6 867.2 771.5 
Loss on disposal of property, plant and equipment, net2.6  4.4 5.4 
Acquisition and integration expenses3.3 2.6 12.5 6.3 
Impairment charges  29.1  
Operating income45.0 42.2 66.9 86.9 
Other expense, net21.2 4.3 34.6 29.5 
Interest expense, net17.4 16.7 51.3 53.4 
Income (loss) before income taxes6.4 21.2 (19.0)4.0 
Income tax expense 5.1 3.1 8.9 4.4 
Net income (loss)$1.3 $18.1 $(27.9)$(0.4)
Net income (loss) per common share
Basic$0.01 $0.11 $(0.17)$ 
Diluted$0.01 $0.11 $(0.17)$ 
Weighted average common shares outstanding (in thousands)
Basic161,117 160,481 161,064 160,892 
Diluted161,988 161,932 161,064 160,892 

The accompanying notes are an integral part of these consolidated financial statements.

3

Primo Water Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in millions of U.S. dollars)
Unaudited

 For the Three Months EndedFor the Nine Months Ended
 October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Net income (loss)$1.3 $18.1 $(27.9)$(0.4)
Other comprehensive income:
    Currency translation adjustment3.4 1.2 5.1 9.7 
Comprehensive income (loss)$4.7 $19.3 $(22.8)$9.3 

The accompanying notes are an integral part of these consolidated financial statements.




















4


Primo Water Corporation
Consolidated Balance Sheets
(in millions of U.S. dollars, except share amounts)
Unaudited

October 1, 2022January 1, 2022
ASSETS
Current assets
Cash and cash equivalents$95.5 $128.4 
Accounts receivable, net of allowance of $21.2 ($20.8 as of January 1, 2022)
287.4 261.6 
Inventories113.5 94.6 
Prepaid expenses and other current assets47.4 25.2 
Total current assets543.8 509.8 
Property, plant and equipment, net693.5 718.1 
Operating lease right-of-use-assets178.9 177.4 
Goodwill1,267.1 1,321.4 
Intangible assets, net890.6 969.8 
Other long-term assets, net27.0 26.9 
Total assets$3,600.9 $3,723.4 
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings$248.1 $222.1 
Current maturities of long-term debt16.2 17.7 
Accounts payable and accrued liabilities425.3 437.7 
Current operating lease obligations30.5 32.3 
Total current liabilities720.1 709.8 
Long-term debt1,239.3 1,321.1 
Operating lease obligations152.7 148.7 
Deferred tax liabilities160.6 158.8 
Other long-term liabilities65.5 64.9 
Total liabilities2,338.2 2,403.3 
Shareholders' Equity
Common shares, no par value - 160,435,322 (January 1, 2022 - 160,732,552) shares issued
1,286.6 1,286.9 
Additional paid-in-capital90.4 85.9 
(Accumulated deficit) retained earnings(50.3)16.4 
Accumulated other comprehensive loss(64.0)(69.1)
Total shareholders' equity1,262.7 1,320.1 
Total liabilities and shareholders' equity$3,600.9 $3,723.4 

The accompanying notes are an integral part of these consolidated financial statements.
5

Primo Water Corporation
Consolidated Statements of Cash Flows
(in millions of U.S. dollars)
Unaudited

 For the Three Months EndedFor the Nine Months Ended
 October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Cash flows from operating activities:
Net income (loss)$1.3 $18.1 $(27.9)$(0.4)
Adjustments to reconcile net income (loss) to cash flows from operating activities of continuing operations:
Depreciation and amortization59.6 53.3 181.0 158.4 
Amortization of financing fees0.8 0.8 2.5 2.5 
Share-based compensation expense3.2 3.8 10.7 10.0 
Provision for deferred income taxes3.7 1.9 5.2 1.3 
Loss on extinguishment of debt   27.2 
Gain on sale of business  (0.4) 
Impairment charges  29.1  
Loss on disposal of property, plant and equipment, net2.6  4.4 5.4 
Other non-cash items21.9 3.9 35.0 2.9 
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable(12.9)(3.3)(46.1)(65.2)
Inventories(7.4)(9.6)(26.5)(12.7)
Prepaid expenses and other current assets4.3 3.6 (0.9)(0.6)
Other assets(0.2)0.1 (0.2)0.4 
Accounts payable and accrued liabilities and other liabilities15.8 10.8 17.1 42.5 
Net cash provided by operating activities from continuing operations92.7 83.4 183.0 171.7 
Cash flows from investing activities of continuing operations:
Acquisitions, net of cash received(5.3)(12.9)(12.7)(13.2)
Additions to property, plant and equipment(70.0)(37.5)(155.2)(99.3)
Additions to intangible assets(4.0)(2.6)(8.9)(6.7)
Proceeds from sale of property, plant and equipment0.6 0.7 1.6 1.4 
Other investing activities(2.1)(1.2)(1.7)(1.2)
Net cash used in investing activities from continuing operations(80.8)(53.5)(176.9)(119.0)
6

Cash flows from financing activities of continuing operations:
Payments of long-term debt(4.2)(3.5)(13.9)(760.5)
Issuance of long-term debt   750.0 
Proceeds from short-term borrowings12.0 38.2 22.0 83.2 
Payments on short-term borrowings (18.0) (28.0)
Premiums and costs paid upon extinguishment of long-term debt   (20.6)
Issuance of common shares0.5 3.4 2.1 19.1 
Common shares repurchased and canceled(11.0)(29.3)(13.0)(45.6)
Financing fees   (11.3)
Dividends paid to common shareholders(11.3)(9.6)(34.2)(29.2)
Payment of deferred consideration for acquisitions(2.2) (2.3)(1.8)
Other financing activities1.4 1.1 6.0 5.4 
Net cash used in financing activities from continuing operations(14.8)(17.7)(33.3)(39.3)
Cash flows from discontinued operations:
Operating activities of discontinued operations 0.1  (1.7)
Investing activities of discontinued operations    
Financing activities of discontinued operations    
Net cash provided by (used in) discontinued operations 0.1  (1.7)
Effect of exchange rate changes on cash(3.8)(1.2)(5.7)(1.5)
Net (decrease) increase in cash, cash equivalents and restricted cash(6.7)11.1 (32.9)10.2 
Cash and cash equivalents and restricted cash, beginning of period102.2 114.2 128.4 115.1 
Cash and cash equivalents and restricted cash, end of period$95.5 $125.3 $95.5 $125.3 
Supplemental Non-cash Investing and Financing Activities:
Accrued deferred financing fees$ $0.2 $ $0.2 
Dividends payable issued through accounts payable and accrued liabilities0.1 0.1 0.5 0.2 
Additions to property, plant and equipment through accounts payable and accrued liabilities and other liabilities22.8 22.4 24.7 29.7 
Financing lease right-of-use assets obtained in exchange for lease obligations2.0 2.1 5.4 8.0 
Operating lease right-of-use assets obtained in exchange for lease obligations23.6 2.5 39.4 20.7 
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest$4.3 $2.6 $37.2 $42.8 
Cash paid for income taxes, net1.2 1.5 3.7 7.7 
The accompanying notes are an integral part of these consolidated financial statements.
7

Primo Water Corporation
Consolidated Statements of Equity
(in millions of U.S. dollars, except share and per share amounts)
Unaudited
Number of Common
Shares
(In thousands)
Common SharesAdditional Paid-in-Capital(Accumulated Deficit)Accumulated Other Comprehensive LossTotal Shareholders' Equity
Balance at July 2, 2022161,209 $1,292.6 $87.3 $(35.7)$(67.4)$1,276.8 
Net income— — — 1.3 — 1.3 
Other comprehensive income, net of tax— — — — 3.4 3.4 
Common shares dividends ($0.07 per common share)
— — — (11.5)— (11.5)
Share-based compensation— — 3.2 — — 3.2 
Common shares repurchased and canceled(814)(6.6)— (4.4)— (11.0)
Common shares issued - Equity Incentive Plan7 0.2 (0.1)— — 0.1 
Common shares issued - Employee Stock Purchase Plan33 0.4 — — — 0.4 
Balance at October 1, 2022160,435 $1,286.6 $90.4 $(50.3)$(64.0)$1,262.7 
Number of Common
Shares
(In thousands)
Common SharesAdditional Paid-in-CapitalRetained Earnings (Accumulated Deficit) Accumulated Other Comprehensive LossTotal Shareholders' Equity
Balance at January 1, 2022160,732 $1,286.9 $85.9 $16.4 $(69.1)$1,320.1 
Net loss— — — (27.9)— (27.9)
Other comprehensive income, net of tax— — — — 5.1 5.1 
Common shares dividends ($0.21 per common share)
— — — (34.4)— (34.4)
Share-based compensation— — 10.7 — — 10.7 
Common shares repurchased and canceled(949)(8.6)— (4.4)— (13.0)
Common shares issued - Equity Incentive Plan559 6.9 (6.0)— — 0.9 
Common shares issued - Dividend Reinvestment Plan1 — — — — — 
Common shares issued - Employee Stock Purchase Plan92 1.4 (0.2)— — 1.2 
Balance at October 1, 2022160,435 $1,286.6 $90.4 $(50.3)$(64.0)$1,262.7 

Number of Common Shares
(In thousands)
Common SharesAdditional Paid-in-CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Shareholders' Equity
Balance at July 3, 2021161,604 $1,287.7 $80.1 $36.4 $(78.2)$1,326.0 
Net income— — — 18.1 — 18.1 
Other comprehensive income, net of tax— — — — 1.2 1.2 
Common shares dividends ($0.06 per common share)
— — — (9.7)— (9.7)
Share-based compensation — — 3.8 — — 3.8 
Common shares repurchased and canceled(1,783)(14.2)— (15.1)— (29.3)
Common shares issued - Equity Incentive Plan289 3.9 (0.8)— — 3.1 
Common shares issued - Employee Stock Purchase Plan25 0.4 (0.1)— — 0.3 
Balance at October 2, 2021160,135 $1,277.8 $83.0 $29.7 $(77.0)$1,313.5 
Number of Common Shares
(In thousands)
Common SharesAdditional Paid-in-CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Shareholders' Equity
Balance at January 2, 2021160,406 $1,268.0 $84.5 $81.1 $(86.7)$1,346.9 
Net loss— — — (0.4)— (0.4)
Other comprehensive income, net of tax— — — — 9.7 9.7 
Common shares dividends ($0.18 per common share)
— — — (29.2)— (29.2)
Share-based compensation— — 10.0 — — 10.0 
Common shares repurchased and canceled(2,765)(23.8)— (21.8)— (45.6)
Common shares issued - Equity Incentive Plan2,408 32.2 (11.3)— — 20.9 
Common shares issued - Dividend Reinvestment Plan1 — — — — — 
Common shares issued - Employee Stock Purchase Plan85 1.4 (0.2)— — 1.2 
Balance at October 2, 2021160,135 $1,277.8 $83.0 $29.7 $(77.0)$1,313.5 
The accompanying notes are an integral part of these consolidated financial statements.
8

Primo Water Corporation
Notes to the Consolidated Financial Statements
Unaudited

Note 1—Business and Recent Accounting Pronouncements
Description of Business
As used herein, “Primo,” “the Company,” “our Company,” “Primo Water Corporation,” “we,” “us,” or “our” refers to Primo Water Corporation, together with its consolidated subsidiaries. Primo is a leading provider of sustainable drinking water solutions in North America and Europe. Primo operates largely under a recurring razor/razorblade revenue model. The razor in Primo’s revenue model is its industry leading line-up of sleek and innovative water dispensers, which are sold through retailers and online at various price points. The dispensers help increase household penetration, which drives recurring purchases of Primo’s razorblade offering. Primo’s razorblade offering is comprised of Water Direct, Water Exchange, and Water Refill. Through its Water Direct business, Primo delivers sustainable hydration solutions across its 21-country footprint direct to the customer’s door, whether at home or to businesses. Through its Water Exchange and Water Refill businesses, Primo offers pre-filled and reusable containers at over 14,000 locations, water dispenser sales at approximately 10,000 locations and water refill units at approximately 24,000 locations, respectively. Primo also offers water filtration units across its 21-country footprint.
Primo’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 is committed to its water stewardship standards and is proud to partner with the International Bottled Water Association in North America as well as with Watercoolers Europe, which ensure strict adherence to safety, quality, sanitation and regulatory standards for the benefit of consumer protection. Environmental stewardship is a part of who we are, and we have worked to progressively achieve carbon neutrality throughout our organization. Our European operations have maintained carbon neutrality for more than ten years, and our U.S. operations achieved carbon neutral certification in 2020 under the CarbonNeutral Protocol, an international standard administered by Natural Capital Partners. In 2021, the Company achieved carbon neutrality on a global basis. In late 2021, Primo announced its planned exit from the North American small-format retail water business. This business is relatively small and uses predominantly single-use plastic bottles. The exit from this category is estimated to reduce single-use retail water bottles from our production environment by more than 400 million, annually, while also improving overall margins. The exit was completed during the second quarter of 2022.
During the second quarter of 2022, our Board of Directors approved the exit of our business in Russia. Accordingly, we recorded an impairment charge of $11.2 million during the second quarter to reduce the carrying value of the assets to the estimated fair value less costs to sell. Separately, we reviewed and realigned our reporting segments, as further described in "Changes in Presentation" below. The decision to exit our business in Russia and the realignment of segments resulted in a triggering event for goodwill and intangible assets with indefinite lives requiring quantitative assessments for the combined Eden business immediately before the realignment of segments and for the Eden Europe and Israel businesses upon realignment of segments. These assessments resulted in recording a goodwill impairment charge of $11.2 million due to a decrease in cash flows associated with the exit of our business in Russia and recording a trademark impairment charge of $6.7 million primarily due to a decrease in the royalty rate used in the quantitative analysis. These impairment charges, along with the impairment charge of $11.2 million to reduce the carrying value of the Russia business to its estimated fair value less costs to sell, resulted in total impairment charges of $29.1 million which are included within impairment charges on the Consolidated Statements of Operations for the nine months ended October 1, 2022. All impairment charges are included in the Europe reporting segment. During the three months ended October 1, 2022, we did not identify any triggering events, and thus, there were no impairment charges recorded during the third quarter of 2022. The exit of our business in Russia was completed on July 19, 2022 and there was no material change to the charges recorded during the second quarter upon sale.
During the second quarter of 2022, our Board of Directors approved the sale of four of our owned real properties. The sales are expected to be completed within the next year. Accordingly, we classified the land and buildings as held for sale (assets held for sale of $21.6 million are included within prepaid expenses and other current assets).






9


Basis of Presentation
The accompanying interim unaudited Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of our results of operations for the interim periods reported and of our financial condition as of the date of the interim balance sheet have been included. The Consolidated Balance Sheet as of January 1, 2022 included herein was derived from the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (our “2021 Annual Report”). This Quarterly Report on Form 10-Q should be read in conjunction with the annual audited Consolidated Financial Statements and accompanying notes in our 2021 Annual Report. The accounting policies used in these interim Consolidated Financial Statements are consistent with those used in the annual Consolidated Financial Statements.
The presentation of these interim Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.
Changes in Presentation
During the second quarter of 2022, we reviewed and realigned our reporting segments to reflect how the business will be managed and evaluated by the Chief Executive Officer, who is the Company’s chief operating decision maker. Following such review, certain of our businesses previously included in the Rest of World segment (now renamed "Europe") were realigned between the Europe reporting segment and the Other category. Our two reporting segments are as follows: North America (which includes our DS Services of America, Inc. (“DSS”), Aquaterra Corporation (“Aquaterra”), Mountain Valley Spring Company (“Mountain Valley”) and Legacy Primo businesses) and Europe (which includes the European business of Eden Springs Netherlands B.V. (“Eden Europe”), Decantae Mineral Water Limited (“Decantae”) and Fonthill Waters Ltd ("Fonthill") businesses). The Other category includes the Israel business of Eden ("Eden Israel"), Aimia Foods Limited (“Aimia”) and John Farrer & Company Limited (“Farrers”) businesses, as well as our corporate oversight function and other miscellaneous expenses. Segment reporting results have been recast to reflect these changes for all periods presented.
COVID-19 Pandemic
In response to the novel coronavirus (“COVID-19”) pandemic, certain government authorities have enacted programs which provide various economic stimulus measures, including several tax provisions. Among the business tax provisions is the deferral of certain payroll and other tax remittances to future years and wage subsidies as reimbursement for a portion of certain furloughed employees’ salaries. During the three and nine months ended October 1, 2022, we received wage subsidies under these programs totaling nil and $0.3 million, respectively, compared to $0.2 million and $2.4 million, for the three and nine months ended October 2, 2021, respectively. We review our eligibility for these programs for each qualifying period and account for such wage subsidies on an accrual basis when the conditions for eligibility are met. We have adopted an accounting policy to present wage subsidies as a reduction of selling, general and administrative (“SG&A”) expenses. In addition, deferred payroll and other taxes totaling $7.5 million were included in accounts payable and accrued liabilities on our Consolidated Balance Sheets as of October 1, 2022 and January 1, 2022.
Significant Accounting Policies
Included in Note 1 of our 2021 Annual Report is a summary of the Company’s significant accounting policies. Provided below is a summary of additional accounting policies that are significant to the financial results of the Company.
Cost of sales
We record costs associated with the manufacturing of our products in cost of sales. Shipping and handling costs incurred to store, prepare and move products between production facilities or from production facilities to branch locations or storage facilities are recorded in cost of sales. Shipping and handling costs incurred to deliver products from our branch locations to the end-user consumer of those products are recorded in SG&A expenses. All other costs incurred in the shipment of products from our production facilities to customer locations are reflected in cost of sales. Shipping and handling costs included in SG&A expenses were $140.0 million and $404.6 million for the three and nine months ended October 1, 2022, respectively, and $125.0 million and $353.7 million for the three and nine months ended October 2, 2021, respectively. Finished goods inventory costs include the cost of direct labor and materials and the applicable share of overhead expense chargeable to production.
10

Goodwill
Goodwill represents the excess purchase price of acquired businesses over the fair value of the net assets acquired. We test goodwill for impairment at least annually on the first day of the fourth quarter, based on our reporting unit carrying values, calculated as total assets less non-interest bearing liabilities, as of the end of the third quarter, or more frequently if we determine a triggering event has occurred during the year. During the second quarter of 2022, our Board of Directors approved the exit of our business in Russia and our reporting segments were realigned. In connection therewith, we identified a triggering event indicating possible impairment of goodwill and intangible assets, as further described below. We did not identify impairment of our property, plant and equipment, lease-related right-of-use assets, or long-lived assets except as noted above related to the Russia assets.
The Company operates through four operating segments: North America, Europe, Eden Israel, and Aimia. The North America and Europe operating segments are reportable operating segments, and Eden Israel and Aimia are nonreportable operating segments within our Other category. We evaluate goodwill for impairment on a reporting unit basis, which is an operating segment or a level below an operating segment, referred to as a component. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that component. However, two or more components of an operating segment can be aggregated and deemed a single reporting unit if the components have similar economic characteristics. Our North America operating segment was determined to have three components: DSS, Mountain Valley, and Aquaterra. We have determined that DSS and Aquaterra have similar economic characteristics and have aggregated them as a single reporting unit for the purpose of testing goodwill for impairment (“DSSAqua”). Our Europe operating segment was determined to have three components: Eden Europe, Decantae, and Fonthill, none of which have similar economic characteristics. Our Aimia operating segment was determined to have two components: Aimia and Farrers, neither of which have similar economic characteristics. Our Eden Israel operating segment was determined to be a single component. We have thus determined our reporting units are DSSAqua, Mountain Valley, Eden Europe, Eden Israel, Aimia, Decantae, Farrers and Fonthill.
Due to the triggering events identified above arising from the exit of the Russia business and the triggering event arising as a result of the realignment of segments, we were required to perform an impairment test. We elected to bypass the qualitative assessment and performed an interim quantitative impairment test as of May 10, 2022. The interim quantitative impairment test was performed both (1) on a pre-realignment basis on the combined Eden reporting unit (which, prior to realignment, included the Eden Europe and Eden Israel businesses), and (2) on a post-realignment basis, on the Eden Europe and Eden Israel reporting units separately.
We determined the fair value of the reporting units being evaluated using a mix of the income approach (which is based on the discounted cash flows of the reporting unit) and the guideline public company approach. We weighted the income approach and the guideline public company approach at 50% each to determine the fair value of the reporting unit. We believe using a combination of these approaches provides a more accurate valuation because it incorporates the expected cash generation of the Company in addition to how a third-party market participant would value the reporting unit. As the business is assumed to continue in perpetuity, the discounted future cash flows include a terminal value. Critical assumptions used in our valuation of reporting units included the anticipated future cash flows, a weighted-average terminal growth rate of 1.5%, a discount rate of 9.0%, and the comparable company multiples. The anticipated future cash flows assumption reflects projected revenue growth rates, SG&A expenses and capital expenditures. The terminal growth rate assumption incorporated into the discounted cash flow calculation reflects our long-term view of the market and industry, projected changes in the sale of our products, pricing of such products and operating profit margins. The discount rate was determined using various factors and sensitive assumptions, including bond yields, size premiums and tax rates. This rate was based on the weighted average cost of capital a market participant would use if evaluating the reporting unit as an investment. The comparable company multiples were based on operating data from guideline publicly traded companies and provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. These multiples were evaluated and adjusted based on specific characteristics of the reporting units relative to the selected guideline companies and applied to the reporting units' operating data to arrive at an indication of value. These assumptions are considered significant unobservable inputs and represent our best estimate of assumptions that market participants would use to determine the fair value of the respective reporting units. The key inputs into the discounted cash flow analysis were consistent with market data, where available, indicating that the assumptions used were in a reasonable range of observable market data.
11

Based on the quantitative assessment including consideration of the sensitivity of the assumptions made and methods used to determine fair value, industry trends and other relevant factors, we determined that, (1) on a pre-realignment basis, goodwill was impaired for the combined Eden reporting unit and, as a result, we recognized an impairment charge of $11.2 million (which is included in impairment charges in the Consolidated Statement of Operations for the nine months ended October 1, 2022), and (2) on a post-realignment basis, the estimated fair value of each of the Eden Europe and Eden Israel reporting units equaled their respective carrying values (therefore, no goodwill impairment charges were recorded for these two reporting units). During the three months ended October 1, 2022, we did not identify any triggering events, and thus, there were no impairment charges recorded during the third quarter of 2022.
The changes in the carrying amount of goodwill on a reporting segment basis for the nine months ended October 1, 2022, are as follows:

 Reporting Segment
North AmericaEuropeOtherTotal
(in millions of U.S. dollars)
Balance at January 1, 2022
Goodwill$994.1 $377.6 $53.8 $1,425.5 
Accumulated impairment losses (103.6)(0.5)(104.1)
$994.1 $274.0 $53.3 $1,321.4 
Goodwill acquired during the year1.1 1.3  2.4 
Measurement period adjustments1.1 3.4  4.5 
Impairment charges (11.2) (11.2)
Segment realignment allocation (63.3)63.3  
Foreign exchange(2.8)(34.5)(12.7)(50.0)
Balance at October 1, 2022
Goodwill993.5 284.5 104.4 1,382.4 
Accumulated impairment losses (114.8)(0.5)(115.3)
$993.5 $169.7 $103.9 $1,267.1 

Intangible Assets
Our intangible assets with indefinite lives relate to trademarks acquired in the acquisition of businesses, and there are no legal, regulatory, contractual, competitive, economic, or other factors that limit the useful life of these intangible assets. Our trademarks with indefinite lives are not amortized, but rather are tested for impairment at least annually or more frequently if we determine a triggering event has occurred during the year.
As a result of the triggering events described above arising from the exit of our Russia business and realignment of segments, we also performed recoverability tests on the trademarks with an indefinite life acquired in the acquisition of Eden ("Eden Trademarks") as of May 10, 2022. We elected to bypass the qualitative assessment and performed an interim quantitative impairment test as of May 10, 2022 on the Eden Trademarks. The interim quantitative impairment test was performed for the Eden Trademarks, including the Eden Europe and Eden Israel trademarks, to identify any impairment immediately prior to the segment realignment. The interim quantitative impairment test was then performed for the trademarks with indefinite lives associated with the Eden Europe and Eden Israel businesses upon segment realignment.
12

To determine the fair value of the trademarks being evaluated, we use a relief from royalty method of the income approach, which calculates a fair value royalty rate that is applied to revenue forecasts associated with the trademark. The resulting cash flows are discounted using a rate to reflect the risk of achieving the projected royalty savings attributable to the trademark. The assumptions used to estimate the fair value of the trademark are subjective and require significant management judgment, including estimated future revenues, the fair value royalty rate (which is estimated to be a reasonable market royalty charge that would be charged by a licensor of the trademarks) and the risk adjusted discount rate. Based on our impairment test, we determined that, (1) on a pre-realignment basis, the estimated fair value of the Eden Trademarks exceeded the carrying value by approximately 9.0% (therefore, no impairment charge was recorded for this trademark), and (2) on a post-realignment basis, the estimated fair value of the trademarks with indefinite lives associated with our Eden Israel business exceeded the carrying value by approximately 103.0% (therefore, no impairment charge was recorded for this trademark), and the trademarks with indefinite lives associated with our Eden Europe business were impaired and recognized an impairment charge of $6.7 million. The impairment charge is included in impairment charges in the Consolidated Statement of Operations for the nine months ended October 1, 2022. The impairment charge is due primarily to the decrease in the royalty rate used in the quantitative assessment. During the three months ended October 1, 2022, we did not identify any triggering events, and thus, there were no impairment charges recorded during the third quarter of 2022.
Recently adopted accounting pronouncements
Update ASU 2021-10- Government Assistance (Topic 832)
In November 2021, the Financial Accounting Standards Board ("FASB") issued guidance that requires business entities to disclose information about certain government assistance they receive. The amendments in this Update are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021. Early application of the amendments is permitted. An entity should apply the amendments in this Update either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions. Adoption of the new standard did not result in additional disclosures within our unaudited Consolidated Financial Statements.
Recently issued accounting pronouncements
Update ASU 2020-04 – Reference Rate Reform (Topic 848)
In March 2020, the FASB issued guidance which provides optional expedients and exceptions to account for contracts, hedging relationships and other transactions that reference LIBOR or any other reference rates expected to be discontinued because of reference rate reform. This guidance is effective as of March 12, 2020 through December 31, 2022 and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We are currently evaluating our contracts and do not expect a material impact at this time. We elected to apply the debt agreement expedient and therefore will account for debt agreement amendments as if the modification was not substantial and thus a continuation of the existing contract. Additional elections of expedients and exceptions provided under the guidance will be made when contract modifications in response to reference rate reform commence.
Update ASU 2021-08- Business Combinations (Topic 805)
In October 2021, the FASB issued guidance that requires entities to use principles in ASC 606 to recognize and measure contract assets and liabilities in revenue contracts acquired in a business combination rather than fair value. For public entities, this guidance is effective after December 15, 2022 for annual and interim periods. Early adoption is permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. We are currently assessing the impact of adoption of this standard on our Consolidated Financial Statements.
13

Note 2—Revenue
Our principal sources of revenue are from bottled water delivery direct to consumers primarily in North America and Europe and from providing multi-gallon purified bottled water, self-service refill drinking water and water dispensers through retailers in North America. Revenue is recognized, net of sales returns, when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We measure revenue based on the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when the customer receives the benefit of the performance obligation. Customers typically receive the benefit of our services as they are performed. Substantially all our customer contracts require that we be compensated for services performed to date. This may be upon shipment of goods or upon delivery to the customer, depending on contractual terms. Shipping and handling costs paid by the customer to us are included in revenue and costs incurred by us for shipping and handling activities that are performed after a customer obtains control of the product are accounted for as fulfillment costs. In addition, we exclude from net revenue and cost of sales taxes assessed by governmental authorities on revenue-producing transactions. Although we occasionally accept returns of products from our customers, historically returns have not been material.
Contract Estimates
The nature of certain of our contracts give rise to variable consideration including cash discounts, volume-based rebates, point of sale promotions, and other promotional discounts to certain customers. For all promotional programs and discounts, we estimate the rebate or discount that will be granted to the customer and record an accrual upon invoicing. These estimated rebates or discounts are included in the transaction price of our contracts with customers as a reduction to net revenues and are included as accrued sales incentives in accounts payable and accrued liabilities in the Consolidated Balance Sheets. Accrued sales incentives were $6.3 million and $8.0 million on October 1, 2022 and January 1, 2022, respectively.
We do not disclose the value of unsatisfied performance obligations for contracts (i) with an original expected length of one year or less or (ii) for which we recognize revenue at the amount in which it has the right to invoice as the product is delivered.
Contract Balances
Contract liabilities relate primarily to advances received from our customers before revenue is recognized. These amounts are recorded as deferred revenue and are included in accounts payable and accrued liabilities in the Consolidated Balance Sheets. The advances are expected to be earned as revenue within one year of receipt. Deferred revenues at October 1, 2022 and January 1, 2022 were $13.2 million and $12.6 million, respectively. The amount of revenue recognized in the nine months ended October 1, 2022 that was included in the January 1, 2022 deferred revenue balance was $10.6 million.
The Company does not have any material contract assets as of October 1, 2022 and January 1, 2022.
Disaggregated Revenue
In general, our business segmentation is aligned according to the nature and economic characteristics of our products and customer relationships and provides meaningful disaggregation of each business segment’s results of operations.
Further disaggregation of net revenue to external customers by geographic area based on customer location is as follows:

 For the Three Months EndedFor the Nine Months Ended
(in millions of U.S. dollars)October 1, 2022October 2, 2021October 1, 2022October 2, 2021
United States$428.8 $395.2 $1,230.4 $1,123.2 
United Kingdom35.0 40.1 109.8 115.0 
Canada18.2 18.5 50.7 53.0 
All other countries102.6 97.0 291.2 264.1 
Total$584.6 $550.8 $1,682.1 $1,555.3 

14


Note 3—Acquisitions
SipWell Acquisition
On December 30, 2021, Eden Springs Netherlands B.V., a wholly-owned subsidiary of the Company ("Eden"), completed the acquisition of Sip-Well NV, the leading distributor of water solutions in Belgium (the "SipWell Acquisition"). The total cash consideration paid by Eden in the SipWell Acquisition was $53.1 million, subject to adjustments for any non-permitted leakage since a locked box date. The SipWell Acquisition was funded through a combination of incremental borrowings under the Company’s Revolving Credit Facility and cash on hand.
The SipWell Acquisition strengthens the Company's presence in Western and Central Europe. The Company has accounted for this transaction as a business combination which requires that assets acquired and liabilities assumed be measured at their acquisition date fair values.
A preliminary allocation of the total cash consideration paid of $53.1 million has been made to the major categories of assets acquired and liabilities assumed based on management's estimates of their fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill.
The table below presents the preliminary total cash consideration allocation of the estimated acquisition date fair values of the assets acquired and liabilities assumed:
(in millions of U.S. dollars)Originally ReportedMeasurement Period AdjustmentsAcquired Value
Cash and cash equivalents $6.8 $ $6.8 
Accounts receivables1.3 0.4 1.7 
Inventories0.1  0.1 
Prepaid expenses and other current assets0.2  0.2 
Property, plant and equipment21.7 (3.0)18.7 
Operating lease right-of-use-assets0.4 1.1 1.5 
Goodwill38.1 2.7 40.8 
Intangible assets20.0