Caesarstone Reports 2nd Quarter 2012 Results
2nd Quarter Results
MP MENASHE, ISRAEL – August 7, 2012 – Caesarstone Sdot-Yam Ltd. (NASDAQ:CSTE), a manufacturer of high quality engineered quartz surfaces, today reported financial results for its second quarter ended June 30, 2012.
Revenues in the second quarter of 2012 increased by 14.2% to $75.4 million compared to $66.0 million in the same quarter in the prior year. Growth in revenues was predominantly driven by strong performance in the United States and Canada, up 60.0% and 27.5%, respectively, compared to the prior year. Pro forma for its May 17, 2011 acquisition of Caesarstone USA, second quarter consolidated revenues increased 7.8% and United States revenues increased 25.8%. Consolidated revenue growth was partially offset by the impact of a stronger US Dollar. On a constant currency basis, second quarter revenue growth was 20.1% and pro forma revenue growth was 13.3%.
Yosef Shiran, Chief Executive Officer, commented, "We are pleased to report record quarterly performance for both sales and net income. Our results were led by growth in the United States, which is now our largest market and which remains our most compelling growth opportunity. The results reflect the successful implementation of our strategy. We are continuing to invest in processes and infrastructure around the world and are confident that we can leverage these investments to drive significant value for our shareholders."
Gross margin in the second quarter increased to 43.0% compared to 40.3% in the prior year, driven primarily by the transition to direct distribution in the United States and by economies of scale over fixed manufacturing expenses.
Operating expenses in the second quarter increased to $18.6 million, or 24.6% of revenues. This compares to $16.7 million, or 25.3% of revenues, in the second quarter of 2011 and, on a pro forma basis, decreased from $19.5 million, or 27.9% of revenues. Included in second quarter operating expenses was a favorable settlement of litigation with a former executive in Australia, which resulted in no payment to that party and a credit, net of litigation expenses, of approximately $1.0 million.
Operating income in the second quarter increased 40.5% to $13.9 million, or 18.4% of sales, as compared to $9.9 million, or 15.0% of sales, in the prior year’s second quarter. The Company noted that operating income was minimally impacted by the strong US dollar as it reduced both sales and operating expenses, which are largely denominated in foreign currencies.
Adjusted EBITDA, which excludes share-based compensation, the excess cost of acquired inventory and the abovementioned litigation credit, was $18.0 million in the second quarter, a margin of 23.8%. This compares to adjusted EBITDA of $15.8 million, a margin of 23.9% last year. On a pro forma basis, adjusted EBITDA improved from $16.4 million, or 23.4% of sales, for the same quarter in the prior year.
Foreign exchange fluctuation and a net cash position created finance income in the second quarter of $443,000 compared to finance expense in the prior year’s second quarter of $659,000.
The Company noted that as of July 1, 2012, it changed its functional currency from New Israeli Shekels to US Dollars. This should mitigate the effect of currency translation on certain balance sheet items and simplify analysis of its financial statements.
The Company’s reported GAAP net income attributable to controlling interest for the second quarter of $11.7 million, or $0.34 per diluted share on weighted shares outstanding of 34.4 million. This compares to net income in the same quarter of the prior year of $7.3 million, or $0.27 per ordinary share on diluted ordinary shares of 19.6 million.
Adjusted net income attributable to controlling interest for this year’s second quarter was $12.0 million, or $0.35 per diluted share, compared to adjusted net income for the quarter ended June 30, 2011 of $9.3 million, or $0.33 per ordinary share. Pro forma adjusted net income attributable to controlling interest in the year-ago quarter was $11.0 million.
The Company’s balance sheet as of June 30, 2012 was strong, with a cash balance of $39.6 million, reflecting the net proceeds from its initial public offering, completed on March 21, 2012.
The Company today reiterated its prior 2012 full year guidance for sales and adjusted EBITDA. The Company continues to expect to report sales in the range of $292 million to $302 million and adjusted EBITDA in the range of $67 million to $70 million.
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, Tuesday August 7th, 2012, at 8:30 a.m. ET to discuss the results of the second quarter ended June 30, 2012, followed by a question and answer session for the investment community. A live webcast of the call can be accessed at ir.caesarstone.com or www.viavid.com in the events section. To access the call, dial toll-free 1-877-627-6585 or +1-719-325-4752 (international). Israeli participants can dial in at 1 80 925 8243. The pass code is 4142578.
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 4142578. The replay will be available beginning at 11:30 a.m. ET on Tuesday, August 7, 2012 and will last through 11:59 PM ET August 21, 2012.
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.