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Caesarstone Reports First Quarter 2013 Results

  Caesarstone Reports First Quarter 2013 Results

  *First Quarter Revenue Up 13.5% to $76.4 million
  *Net Income Attributable to Controlling Interest More Than Doubled to $10.5
    million
  *EPS of $0.30; Adjusted EPS of $0.32

Business Wire

MP MENASHE, Israel -- May 08, 2013

Caesarstone Sdot-Yam Ltd. (CSTE), a manufacturer of high quality engineered
quartz surfaces, today reported financial results for its first quarter ended
March 31, 2013.

Revenues in the first quarter of 2013 increased by 13.5% to $76.4 million
compared to $67.3 million in the same quarter of the prior year. Growth in
revenues was experienced in each region, but was primarily driven by continued
increases in sales in the United States and Canada, up 26.3% and 21.8%,
respectively, compared to the same period in the prior year. On a constant
currency basis, first quarter revenue growth was 13.9% compared to the same
period last year.

Yosef Shiran, Chief Executive Officer, commented, “We are pleased to have
begun the year with a good first quarter. Our growth in North America
continues to be strong and we are excited to build our presence into the
fast-growing U.S. and Canadian markets as they embrace quartz as a superior
material. We are also pleased to see growth in sales and margins following a
strong global response to our innovative Super-Naturals product line.”

Gross margin in the first quarter was 44.8% compared to 41.8% in the same
period in the prior year. The Company noted that in the first quarter of last
year, excluding compensation related to its initial public offering, gross
margin was 43.0%. The comparable year-over-year improvement resulted from
benefits of scale, higher margins associated with new products, and favorable
changes in the regional mix of revenues.

Operating expenses in the first quarter were $21.1 million, or 27.7% of
revenues. This compares to the prior year’s first quarter level of $21.0
million, or 31.2% of revenues. The Company noted that expenses in the first
quarter of 2012 included $1.1 million for non-recurring compensation costs
related to the Company’s initial public offering and $0.8 million of
management fees. Excluding these expenses, operating expenses were 28.3% of
revenues.

Operating income in the first quarter increased by 82.5% from the first
quarter of 2012 to $13.1 million, a margin of 17.1%. This compares to
operating income in the first quarter of last year of $7.2 million, or 10.6%
of revenues.

Adjusted EBITDA, which excludes share-based compensation, the excess cost of
acquired inventory and other non-recurring costs, increased by 28.9% to $17.6
million in the first quarter, a margin of 23.1%. This compares to adjusted
EBITDA of $13.7 million, a margin of 20.3% in the first quarter of the prior
year.

Finance expense in the first quarter was $0.2 million compared to finance
expense of $1.5 million during the same period in the prior year, which
consisted mainly of expenses related to foreign exchange rate fluctuations.

The Company’s reported GAAP net income attributable to controlling interest
for the first quarter of 2013 of $10.5 million compared to $4.8 million in the
same quarter in the prior year. Diluted earnings per share for the first
quarter were $0.30 on 35.0 million shares compared to $0.18 per diluted
ordinary share on 27.5 million shares in the prior year’s first quarter.

Adjusted net income attributable to controlling interest for the first quarter
was $11.3 million, an increase of 52.1%, compared to $7.4 million in the same
quarter in the prior year. Adjusted earnings per diluted share for this year’s
first quarter were $0.32 compared to $0.27 per diluted ordinary share in the
prior year period.

The Company’s balance sheet as of March 31, 2013 remained solid with a cash
balance of $73.2 million. Net cash grew by $3.1 million from December 31, 2012
and was $52.9 million as of March 31, 2013. The Company continues to believe
its cash position and expected cash flows will be sufficient to fund its need
for capital expenditures and working capital for the foreseeable future.

Guidance

Today, the Company reiterated its revenue guidance for the full year of 2013
in the range of $330 million to $340 million. The Company also maintained its
adjusted EBITDA guidance of a range of $76 million to $80 million, but now
believes, given the strong first quarter performance, that its results will be
in the upper part of this range.

Conference Call Details

Yosef Shiran, the Company’s Chief Executive Officer, and Yair Averbuch, the
Company’s Chief Financial Officer, will host a conference call today, May 8,
2013, at 8:30 a.m. ET to discuss the results of the first quarter ended March
31, 2013, followed by a question and answer session for the investment
community. A live webcast of the call can be accessed at ir.caesarstone.com.
To access the call, dial toll-free 1-877-857-6177 or +1-719-325-4748
(international). Israeli participants can dial in at 1-80-925-8243. The pass
code is 8587578.

To listen to a telephonic replay of the conference call, dial toll-free
1-877-870-5176 or +1-858-384-5517 (international) and enter pass code 8587578.
The replay will be available beginning at 11:30 a.m. ET on May 8, 2013 and
will last through 11:59 PM EST May 22, 2013.

About Caesarstone

Caesarstone manufactures high quality engineered quartz surfaces, which are
used in both residential and commercial buildings as countertops, vanities,
wall cladding, floors and other interior surfaces. The wide variety of colors,
styles, designs and textures of Caesarstone® products, along with
Caesarstone's inherent characteristics such as hardness, non-porous, scratch
and stain resistance and durability, provide consumers with excellent surfaces
for their internal spaces which are highly competitive to granite,
manufactured solid surfaces and laminate, as well as to other engineered
quartz surfaces. Caesarstone's four collections of products – Classico,
Supremo, Motivo and Concetto – are available in over 40 countries around the
world. For more information about the Company, please visit our website
www.caesarstone.com.

Non-GAAP Financial Measures

The non-GAAP measures presented by the Company should be considered in
addition to, and not as a substitute for, comparable GAAP measures. A
reconciliation of GAAP net income attributable to controlling interest to
adjusted net income attributable to controlling interest and net income to
Adjusted EBITDA. The Company provides these non-GAAP financial measures
because it believes that they present a better measure of the Company’s core
business and management uses the non-GAAP measures internally to evaluate the
Company’s ongoing performance. Accordingly, the Company believes that they are
useful to investors in enhancing an understanding of the Company’s operating
performance.

Forward-Looking Statements

Information provided in this press release may contain statements relating to
current expectations, estimates, forecasts and projections about future events
that are "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. These forward-looking statements generally
relate to the Company's plans, objectives and expectations for future
operations, including its projected results of operations and the expected
timing of expanding its manufacturing facilities. These forward-looking
statements are based upon management's current estimates and projections of
future results or trends. Actual results may differ materially from those
projected as a result of certain risks and uncertainties. These factors
include, but are not limited to: the strength of the home renovation and
construction sectors; economic conditions within any of our key existing
markets; actions by our competitors; changes in raw material prices,
particularly polymer resins and pigments; unpredictability of seasonal
fluctuations in revenues; the outcome of silicosis claims and the claim by our
former quartz processor; fluctuations in currency exchange rates; delays in
manufacturing if our suppliers are unable to supply raw materials; and other
factors discussed under the heading "Risk Factors" in the final prospectus for
our initial public offering and other documents filed with the Securities and
Exchange Commission. These forward-looking statements are made only as of the
date hereof, and the Company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise.

(CSTE-E)

Caesarstone Sdot-Yam Ltd. and its subsidiaries
Consolidated balance sheets
                                                               
                                                      As of
U.S. dollars in thousands                             March 31,   December 31,
                                                      2013        2012
                                                                  
ASSETS
                                                                  
CURRENT ASSETS:
Cash and cash equivalents                             $ 14,541    $   29,033
Short-term bank deposits                                58,700        43,700
Trade receivables                                       46,030        44,066
Other accounts receivable and prepaid expenses          20,186        16,238
Inventories                                            54,232       50,550
                                                                  
Total current assets                                   193,689      183,587
                                                                  
LONG-TERM INVESTMENTS:
Severance pay fund                                      3,543         3,424
Long-term deposits and prepayments                     1,426        1,198
                                                                  
Total long-term investments                            4,969        4,622
                                                                  
PROPERTY, PLANT AND EQUIPMENT, NET                     74,788       72,987
                                                                  
OTHER ASSETS                                           15,975       16,898
                                                                  
GOODWILL                                               43,068       42,955
                                                                  
Total assets                                          $ 332,489   $   321,049
                                                                  
LIABILITIES AND EQUITY
                                                                  
CURRENT LIABILITIES:
                                                                  
Short-term bank credit                                $ 5,289     $   5,248
Current maturities of long-term loans                   2,793         5,500
Trade payables                                          39,113        36,925
Account payables to related parties                     2,309         2,888
Accrued expenses and other liabilities                 16,008       15,314
                                                                  
Total current liabilities                              65,512       65,875
                                                                  
LONG-TERM LIABILITIES:
                                                                  
Long-term loan and a financing leaseback from           12,275        12,188
related party
Capital leases                                          -             2
Accrued severance pay                                   4,173         3,987
Long-term warranty provision                            1,620         1,599
Deferred tax liabilities, net                          6,118        6,375
                                                                  
Total long-term liabilities                            24,186       24,151
                                                                  
REDEEMABLE NON-CONTROLLING INTEREST                    7,154        7,106
                                                                  
COMMITMENTS AND CONTINGENT LIABILITIES
                                                                  
EQUITY:
Share capital -
Ordinary shares                                         363           360
Additional paid-in capital                              136,323       135,437
Accumulated other comprehensive income                  8,830         8,517
Retained earnings                                      90,121       79,603
                                                                  
Total equity                                           235,637      223,917
                                                                  
Total liabilities and equity                          $ 332,489   $   321,049
                                                                  

Caesarstone Sdot-Yam Ltd. and its subsidiaries
Consolidated statements of income
                                                             
                                               Three months ended
                                               March 31,
U.S. dollars in thousands (except per share    2013             2012
data)
                                                                
                                                                
Revenues                                       $ 76,444         $ 67,346
Cost of revenues                                42,227         39,195     
                                                                
Gross profit                                    34,217         28,151     
                                                                
Operating expenses:
Research and development, net                    473              737
Marketing and selling                            12,474           11,894
General and administrative                      8,199          8,359      
                                                                
Total operating expenses                        21,146         20,990     
                                                                
Operating income                                 13,071           7,161
Finance expenses, net                           189            1,455      
                                                                
Income before taxes on income                    12,882           5,706
Taxes on income                                 2,172          755        
                                                                
Net income                                      10,710         4,951      
                                                                
Net income attributable to non-controlling      (192       )    (129       )
interest
Net income attributable to controlling         $ 10,518        $ 4,822      
interest
Diluted net income per share of ordinary       $ 0.30          $ 0.18       
shares
Weighted average number of ordinary shares      34,593,529     27,471,052 
used in computing basic income per share
Weighted average number of ordinary shares      34,983,519     27,480,484 
used in computing diluted income per share
                                                                             

                                                                    
Caesarstone Sdot-Yam Ltd. and its subsidiaries
Consolidated statements of cash flows
                                                                             
                                                 Three months ended
                                                 March 31,
U.S. dollars in thousands                        2013           2012
                                                                             
Cash flows from operating activities:
                                                                             
Net income                                       $ 10,710       $ 4,951
Adjustments required to reconcile net
income to net cash provided by operating
activities:
Depreciation and amortization                    3,613          3,589
Share-based compensation expense                 889            908
Accrued severance pay, net                       67             28
Changes in deferred tax, net                     (41)           (651)
Capital gains                                    (14)           -
Foreign currency translation gains               (27)           (167)
Increase in trade receivables                    (1,964)        (4,520)
Increase in other accounts receivable and        (4,392)        (3,147)
prepaid expenses
Increase in inventories                          (3,682)        (5,090)
Increase in trade payables                       647            2,418
Increase in warranty provision                   55             25
Increase in accrued expenses and other           249            3,529
liabilities including related parties
                                                               
Net cash provided by operating activities        6,110          1,873
                                                                             
Cash flows from investing activities:
                                                                             
Investment in short-term deposits                (15,000)       -
Purchase of property, plant and equipment        (2,793)        (624)
Acquisition of the business of Prema Asia        -              (150)
Marketing PTE Ltd.
Decrease in long-term deposits                   -              19
                                                               
Net cash used in investing activities            (17,793)       (755)
                                                                             
Cash flows from financing activities:
                                                                             
Receipt from issuance of ordinary shares,        -              66,916
net
Repayment of long-term loans                     (2,684)        (3,465)
Short-term bank credit and loans, net            41             (100)
Repayment of a financing leaseback related       (280)          -
to Bar-Lev transaction
                                                               
Net cash provided by (used in) financing         (2,923)        63,351
activities
                                                                             
Effect of exchange rate differences on           114            (1,917)
cash and cash equivalents
                                                               
Increase (decrease) in cash and cash             (14,492)       62,552
equivalents
Cash and cash equivalents at beginning of        29,033         11,950
year
                                                                             
Cash and cash equivalents at end of year         14,541         74,502
                                                                             
                                                                             
non - cash investing and financing
activities:
Declared dividend                                -              27,182
Purchase of fixed assets with credit from        1,740          2,986
suppliers
Receipt from issue of shares                     -              (10,275)
IPO deferred expenses                            -              1,722
                                                                             

Caesarstone Sdot-Yam Ltd. and its subsidiaries
                                                                  
                                                          Three months ended
                                                          March 31,
U.S. dollars in thousands                                 2013       2012
                                                                     
Reconciliation of Net Income to Adjusted EBITDA:
Net income                                                $ 10,710   $ 4,951
Finance expenses, net                                       189        1,455
Taxes on income                                             2,172      755
Depreciation and amortization                               3,613      3,589
Excess cost of acquired inventory (a)                       70         469
Share-based compensation expense (b)                        889        243
IPO bonus (c)                                               -          1,970
Caesarstone USA contingent consideration adjustment (d)    -         255
Adjusted EBITDA                                           $ 17,643   $ 13,687
                                                                       

      Consists of charges to cost of goods sold for the difference between the
      higher carrying cost of the inventory of two of the company's
(a)   subsidiaries, Caesarstone USA's inventory at the time of its acquisition
     and Caesarstone Australia Pty Limited's inventory that was purchased
      from its distributor, and the standard cost of the Company's inventory,
      which adversely impacts the company's gross margins until such inventory
      is sold. The majority of the inventory purchased from the Australian
      distributor was sold in 2012.
      In 2012, share-based compensation consists primarily of expenses related
(b)   to the stock options granted to employees of the Company, as well as
      changes in the value of share-based rights granted to the Company's
      Chief Executive Officer in January 2009. In 2013, share-based
      compensation consists of expenses related to the stock options granted
      to employees of the Company.
      Consists of the payment of $1.72 million to certain employees of the
(c)   Company and $0.25 million to the Company's Chairman for their
      contribution to the completion of the Company's initial public offering,
      or IPO.
(d)   Relates to the change in fair value of the contingent consideration that
      was part of the consideration transferred in connection with the
      acquisition of Caesarstone USA.
      

Caesarstone Sdot-Yam Ltd. and its subsidiaries
                                                                    
                                                            Three months ended

                                                            March 31,
U.S. dollars in thousands                                   2013       2012
                                                                       
Reconciliation of net income attributable to controlling
interest to adjusted net income attributable to
controlling interest:
Net income attributable to controlling interest             $ 10,518   $ 4,822
Excess cost of acquired inventory (a)                         70         469
Share-based compensation expense (b)                          889        243
IPO bonus (c)                                                 -          1,970
Caesarstone USA contingent consideration adjustment (d)      -         255
Total adjustments before tax                                  959        2,937
Less tax on above adjustments (e)                            162       321
Total adjustments after tax                                   797        2,616
                                                                       
Adjusted net income attributable to controlling interest    $ 11,315   $ 7,438
Adjusted diluted EPS                                         0.32      0.27
                                                                         

      Consists of charges to cost of goods sold for the difference between the
      higher carrying cost of the inventory of two of the company's
(a)   subsidiaries, Caesarstone USA's inventory at the time of its acquisition
     and Caesarstone Australia Pty Limited's inventory that was purchased
      from its distributor, and the standard cost of the Company's inventory,
      which adversely impacts the company's gross margins until such inventory
      is sold. The majority of the inventory purchased from the Australian
      distributor was sold in 2012.
      In 2012, share-based compensation consists primarily of expenses related
(b)   to the stock options granted to employees of the Company, as well as
      changes in the value of share-based rights granted in January 2009 to
      the Company's Chief Executive Officer. In 2013, share-based compensation
      consists of expenses related to the stock options granted to employees
      of the Company.
(c)   Consists of the payment of $1.72 million to certain employees of the
      Company and $0.25 million to the Company's Chairman for their
      contribution to the completion of the Company's IPO.
(d)   Relates to the change in fair value of the contingent consideration that
      was part of the consideration transferred in connection with the
      acquisition of Caesarstone USA.
      The tax adjustments for the first quarter of 2012 were based on the
(e)   effective tax rate for 2011. The tax adjustments for the first quarter
      of 2013 were based on the effective tax rate for the first quarter of
      2013.
      

Caesarstone Sdot-Yam Ltd. and its subsidiaries
Geographic breakdown of revenues by region
                                    
                            Three months ended
                            March 31,
U.S. dollars in thousands   2013       2012
                                       
                                       
USA                           23,706     18,774
Australia                     19,383     19,031
Canada                        10,715     8,797
Israel                        10,553     9,265
Europe                        5,892      5,725
Rest of World                6,195     5,754
                            $ 76,444   $ 67,346
                                         

Contact:

Investor Relations Contact
ICR, Inc.
James Palczynski, +1-203-682-8229
Senior Managing Director
 
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