Fourth Quarter 2013 Results

February 12, 2014
Caesarstone Reports Fourth Quarter and Full Year 2013 Results
  • Q4 Revenue Up 27.0% to a Record of $96.8 million
  • Q4 Net Income Attributable to Controlling Interest Up 58.1%; EPS of $0.48
  • FY13 Revenue Up 20.2% to $356.6 million
  • FY13 Net Income Attributable to Controlling Interest Up 59.8%; EPS of $1.80
  • Company Issues FY14 Guidance, Expects Continued Growth
MP MENASHE, Israel--(BUSINESS WIRE)-- Caesarstone Sdot-Yam Ltd. (CSTE), a manufacturer of high quality engineered quartz surfaces sold under its premium brand, today reported financial results for its fourth quarter and fiscal year ended December 31, 2013.
Revenues in the fourth quarter of 2013 increased by 27.0% to $96.8 million compared to $76.2 million in the prior year. On a constant currency basis, fourth quarter revenue growth was 29.7% year-over-year. Growth in revenues was broad-based, but primarily driven by continued increases in the United States, the Company's largest region, which rose 59.2% compared to the same period in the prior year.
Yosef Shiran, Chief Executive Officer, commented, "We are pleased to set another record year for both sales and earnings. Revenue growth continued its acceleration into year-end, principally driven by our growth in the United States. We believe these results demonstrate the realization of our quartz penetration vision and our solid position in the US market. This was accompanied by strong demand in all of our other regions, and the success of our Super-Natural collection. We expect 2014 to be another strong year, and we look forward to expanding our capacity to meet the increasing demand, maintain our leadership position, enhance our strong brand and generate value for our customers and shareholders."
In addition, the Company noted that during the fourth quarter, as contemplated by its previously announced agreement with IKEA, Caesarstone is now providing all 38 of IKEA's US stores with quartz countertops. Both IKEA and Caesarstone have been pleased to see a good reaction from consumers who prefer Caesarstone quartz surfaces as their material of choice and find IKEA's kitchen equipped with Caesarstone surfaces as an appealing proposition.
Gross margin in the fourth quarter was 43.0% compared to 41.8% in the prior year. This year-over-year improvement was driven primarily by the benefits of higher volume and the success of the Super-Natural collection, partially offset by a significantly negative exchange rate impact.
Operating expenses in the fourth quarter were $21.8 million, or 22.5% of revenues. This compares to the prior year's fourth quarter level of $19.7 million, or 25.8% of revenues.
Operating income in the fourth quarter was $19.8 million, an increase of 62.2% compared to $12.2 million in the fourth quarter of 2012.
Adjusted EBITDA, which excludes share-based compensation expense, the excess cost of acquired inventory and other non-recurring costs, increased by 47.1% to $24.2 million in the fourth quarter, a margin of 25.0%. This compares to adjusted EBITDA of $16.5 million, a margin of 21.6% in the fourth quarter of the prior year.
Finance expenses in the fourth quarter were $0.4 million compared to finance income of $0.2 million during the same period in the prior year.
The Company reported net income attributable to controlling interest for the fourth quarter of $17.0 million, compared to $10.8 million in the same quarter in the prior year. Diluted earnings per share for the fourth quarter were $0.48 on 35.4 million shares, compared to $0.31 on 34.6 million shares in the prior year. On an adjusted basis, earnings per share in the fourth quarter were $0.49 compared to $0.32 in the prior year.
The Company's balance sheet as of December 31, 2013 remained solid with cash and bank deposits of $92.2 million, compared to $72.7 million in the prior year, after a $20.1 million dividend paid during the fourth-quarter.
Full-Year Results
Revenues for the full year of 2013 grew by 20.2% to a record level of $356.6 million as compared to $296.6 million in 2012. On a constant currency basis, growth was 21.6% year-over-year. Revenue grew in all regions, with the strongest growth coming from the United States, which grew by 42.2% to become the Company's largest region.
Full-year gross margin, excluding a one-time positive inventory adjustment of $3.5 million, was 44.5%, an improvement of 150 basis points over the prior-year.
Operating expenses in 2013 were 24.2% of revenue compared to 26.1% in the prior year, reflecting the benefit of higher volume.
Operating profitability in 2013, excluding the inventory adjustment referred to above, improved by 350 basis points to 20.3%, driven by a combination of scale-related benefits and the success of the Super-Natural collection.
Adjusted EBITDA in 2013 increased by 32.1% to $91.7 million, compared to $69.4 million in fiscal 2012.
Adjusted net income attributable to controlling interest for the full year of 2013 increased by 45.3% to $64.0 million, compared to the fiscal 2012 level of$44.0 million. Adjusted diluted earnings per share was $1.82 in 2013, compared to $1.35 in the prior year.
The Company today issued initial guidance for the full-year of 2014. At present, it expects its revenues to be in the range of $410 million to $420 million, and adjusted EBITDA in the range of $104 million to $109 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,February 12, 2013, at 8:30 a.m. ET to discuss the results of the fourth quarter and fiscal year ended December 31, 2013, followed by a question and answer session for the investment community. A live webcast of the call can be accessed at To access the call, dial toll-free 1-888-329-8877 or +1-719-457-1512 (international). Israeli participants can dial in at 1-80-924-5906. The pass code is 1329081.
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 1329081. The replay will be available beginning at 11:30 a.m. ET on February 12, 2013 and will last through 11:59 PM EST February 26, 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 48 countries around the world. For more information about the Company, please visit our website (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. 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.