Caesarstone Reports 2nd Quarter 2014 Results
Caesarstone Reports Second Quarter 2014 Results
- Second Quarter Revenue Up 30.4% to a Record of $116.1 million
- Reports diluted EPS of $0.51 and Adjusted diluted EPS of $0.58
- Raises Full Year Guidance for Sales and Adjusted EBITDA
MP MENASHE, Israel--(BUSINESS WIRE)--Caesarstone Sdot-Yam Ltd. (CSTE), a manufacturer of high quality engineered quartz surfaces, today reported financial results for its second quarter ended June 30, 2014.
Revenues in the second quarter of 2014 increased by 30.4% to $116.1 million compared to $89.0 million in the same quarter of the prior year. This was a record for any quarter. On a constant currency basis, second quarter revenue growth was 32.3% compared to the same period last year. Growth in revenues was primarily driven by continued increases in the United States, which grew 55.0% to $47.9 million, as well as contributions from Australia, Canada and other regions.
Yosef Shiran, Chief Executive Officer, commented, “This was a strong quarter with significant growth. Market demand for our products is robust and the Caesarstone brand continues to be a market leader, known for quality and innovative design. We are operating well, controlling our costs and growing our capacity to meet the demand for our products.”
Gross margin in the second quarter was 41.0% compared to 49.8% in the same period of the prior year. The Company noted that the second quarter this year includes $0.8 million of non-recurring cost related to an adjustment of provision for taxable employee fringe benefits and the second quarter last year included $3.5 million of credit related to a change in the value of inventory. Excluding the above-mentioned one-time items, a gross margin decline of 4.2 percentage points year-over-year was driven primarily by the effects of foreign exchange fluctuations, strong growth from IKEA which includes a significant portion of lower-margin fabrication and installation revenue and, to a lesser extent, raw material price increases.
Operating expenses in the second quarter were $24.1 million, or 20.7% of revenues. This compares to the prior year's second quarter level of $22.1 million, or 24.8% of revenues. This 4.1 percentage point improvement reflects the scale-related benefit of increased revenues.
Operating income in the second quarter was up 5.9% to $23.6 million compared to $22.2 million in the second quarter of 2013.
Adjusted EBITDA, which excludes the non-recurring items as well as share-based compensation and the excess cost of acquired inventory, increased by 23.3% to $30.4 million in the second quarter, a margin of 26.2%. This compares to adjusted EBITDA of $24.6 million, a margin of 27.7% in the second quarter of the prior year.
Finance expenses in the second quarter were $1.4 million compared to finance income of $0.4 million during the same period in the prior year. The increase was predominantly due to the impact of foreign exchange fluctuations.
The Company reported net income attributable to controlling interest for the second quarter of 2014 of $18.2 million compared to $19.7 million in the same quarter in the prior year.
Diluted net income per share for the second quarter was $0.51 on 35.4 million shares compared to $0.56 per diluted share on 35.1 million shares in the prior year's second quarter. On an adjusted basis, net income in the second quarter was $20.7 million, or $0.58 per diluted share compared to $18.6 million, or $0.53 per diluted share in the same quarter of the prior year.
The Company's balance sheet as of June 30, 2014 remained solid with cash and short-term bank deposits of $80.3 million.
The Company also provided an update with respect to its planned capacity expansion projects. The Company continues to benefit from expanded production in its Bar Lev facility. It also remains on schedule for its Richmond Hill, Georgia manufacturing plant to be operational in the second quarter of 2015 with a second line to become operational in the fourth quarter of 2015. The Company has decided to increase its investment in its US facility to approximately $115 million, compared to its earlier estimate of approximately $100 million, mostly to accommodate improvements in operations, including upgraded machinery for higher manufacturing capacity. In addition to this investment, the Company intends to start initial steps towards establishing its second building in Richmond Hill to accommodate additional manufacturing capacity in the future as needed to satisfy potential demand.
Following a strong second quarter and to reflect an improvement in both inventory and manufacturing throughput, the Company today increased its revenue guidance for the full year of 2014 to a new range of $435 to $445 million as compared to its prior range of $420 million to $430 million.
The Company also increased its expected range of adjusted EBITDA for the full year to $112 million to $117 million as compared to its prior expected range of $108 million to $113 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, August 6, 2013, at 8:30 a.m. ET to discuss the results of the second quarter ended June 30, 2014, 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 1-877-857-6163 or +1-719-325-4870 (international). Israeli participants can dial in at 1-80-925-8243. The pass code is 7003915.
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 7003915. The replay will be available beginning at 11:30 a.m. ET on August 6, 2014 and will last through 11:59 PM ET August 20, 2014.
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. (CSTE-E)
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 are provided in the schedules within this release. 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.
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; fluctuations in currency exchange rates; the timing of expanding our manufacturing capabilities; the outcome of silicosis claims; changes in raw material prices; unpredictability of seasonal fluctuations in revenues; the outcome of the claim by our former quartz processor; delays in manufacturing if our suppliers are unable to supply raw materials; and other factors discussed under the heading "Risk Factors" in our Form 20-F for the year ended December 31, 2013 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.
Investor Relations Contact
+1 (203) 682-8229