Form 6-K SodaStream International For: Feb 25

 

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 6-K

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REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of February 2015

 

Commission File Number: 001-34929

 

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SodaStream International Ltd.

(Translation of Registrant’s Name into English)

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Gilboa Street, Airport City

Ben Gurion Airport 70100, Israel

(Address of Principal Executive Office)

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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F x      Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes ¨      No x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes ¨     No x

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: Yes ¨     No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_______________.

 

 

 

 

 

EXPLANATORY NOTE

 

 

On February 25, 2015, SodaStream International Ltd. (the “Company”) issued a press release announcing its fourth quarter and full fiscal year results for the period ending December 31, 2014.  A copy of the press release is attached to this Form 6-K as Exhibit 99.1.

 

In conjunction with the conference call being held on February 25, 2015, the Company also is releasing commentary from its Chief Financial Officer (attached to this Form 6-K as Exhibit 99.2) and a PowerPoint presentation with additional information (attached to this Form 6-K as Exhibit 99.3).

 

Other than as indicated below, the information in this Form 6-K (including in Exhibits 99.1, 99.2 and 99.3) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

 

The condensed consolidated balance sheets, the International Financial Reporting Standards information contained in the condensed consolidated statements of operations and the condensed consolidated statement of cash flows contained in the press release attached as Exhibit 99.1 to this Report on Form 6-K are hereby incorporated by reference into the Company’s Registration Statements on Form S-8 (File Nos. 333-195578, 333-190655 and 333-170299).

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	SODASTREAM INTERNATIONAL LTD. (Registrant)
Date: February 25, 2015	By:	/s/ Eyal Shohat
		Eyal Shohat
		Chief Corporate Development Officer

 

 

 

 

EXHIBIT INDEX

 

 

Exhibit	Description
99.1	Press release dated February 25, 2015.
99.2	Commentary from the Chief Financial Officer of the Registrant.
99.3	PowerPoint presentation with additional information.

 

 

Exhibit 99.1

 

 

 

 

 

SODASTREAM REPORTS 2014 FOURTH QUARTER RESULTS

Revenue In-Line With Guidance; Adjusted Net Income Ahead of Plan

 

AIRPORT CITY, Israel – February 25, 2015 – SodaStream International Ltd. (NASDAQ: SODA), a leading manufacturer of sparkling water makers, announced today its results for the three and twelve month periods ended December 31, 2014.

 

For the fourth quarter ended December 31, 2014:

•

Revenue was $126.5 million compared to $168.1 million in the fourth quarter 2013

•

Adjusted EBITDA* was $16.7 million compared to $5.9 million in the fourth quarter 2013

•

Adjusted net income* was $7.5 million compared to net income of $0.7 million in the fourth quarter 2013

•

Adjusted diluted earnings per share* were $0.35 compared to diluted earnings per share of $0.03 in the fourth quarter 2013

 

For the year ended December 31, 2014:

•

Revenue was $511.8 million compared to $562.7 million in 2013

•

Adjusted EBITDA* was $52.6 million compared to $62.2 million in 2013

•

Adjusted net income* was $27.9 million compared to $42.0 million in 2013

•

Adjusted diluted earnings per share* were $1.31 compared to $1.96 in 2013

 

* 2014 Adjusted EBITDA represents earnings before interest, income tax, depreciation and amortization, and further eliminates the effect of restructuring costs and goodwill impairment. Adjusted net income and adjusted diluted earnings per share eliminates the effect of restructuring costs.

 

Restructuring & Goodwill Impairment

During the fourth quarter of 2014, the Company recorded non-cash, pre-tax charges totaling $15.6 million as part of the restructuring and growth plan it announced on October 29, 2014. $3.1 million of the total charge was associated with the transition to the new plant in Southern Israel and included the elimination and impairment of fixed assets at the Company’s other production facilities. $12.5 million of the total charge related to the transformation of the Company’s product lines and included the write-off of fixed assets and inventory associated with discontinued products. The Company also recorded a goodwill impairment charge of $3.3 million relating to its acquisition of CEM Industries in 2011.

 

“During the fourth quarter we set a new course for the company that we believe positions SodaStream to take advantage of the rapidly transforming beverage industry,” said Daniel Birnbaum, Chief Executive Officer of SodaStream. “We are confident that repositioning the brand around health & wellness and launching a completely new portfolio of water enhanced flavors fits perfectly with the changing nature of consumer demands and will reaccelerate participation in our home carbonation system. As we announced, in conjunction with our growth plan, we have begun to reform our operational and organizational structure to better support our new strategy and drive improved efficiencies. While our actions will impact our near-term performance, we believe they will put us on stronger footing for delivering long-term profitable growth and increased shareholder value.”

 

Fourth Quarter 2014 Financial Review
Geographical Revenue Breakdown
Revenue		Three Months Ended
		December 31, 2013				December 31, 2014				Increase (Decrease)				Increase (Decrease)
		In Millions USD												%
The Americas		$	72.7			$	37.2			$	(35.5	)			(49	%)
Western Europe			71.6				66.9				(4.7	)			(7	%)
Asia-Pacific			14.8				16.4				1.6				11	%
Central & Eastern Europe, Middle East, Africa			9.0				6.0				(3.0	)			(33	%)
Total		$	168.1			$	126.5			$	(41.6	)			(25	%)

 

Product Segment Revenue Breakdown
Revenue		Three Months Ended
		December 31, 2013				December 31, 2014				Decrease				Decrease
		In millions USD												%
Sparkling water maker Starter Kits		$	77.8			$	53.1			$	(24.7	)			(32	%)
Consumables			87.8				72.5				(15.3	)			(17	%)
Other			2.5				0.9				(1.6	)			(65	%)
Total		$	168.1			$	126.5			$	(41.6	)			(25	%)

 

Product Segment Unit Breakdown
		Three Months Ended
		December 31, 2013				December 31, 2014				Increase (Decrease)				Increase (Decrease)
		In thousands												%
Sparkling water maker Starter Kits			1,542				1,018				(524	)			(34	%)
CO2 Refills			5,375				6,289				914				17	%
Flavors			9,751				6,054				(3,697	)			(38	%)

 

The decrease in revenue compared to the fourth quarter 2013 was mainly due to lower demand for sparkling water makers and flavors in the U.S. during the holidays, partially as a result of the elimination of discounting and promotional activities that took place in the same period in 2013, and also reflects an adverse foreign currency exchange rate impact of $7.6 million, primarily due to the weakening of the Euro/U.S. Dollar exchange rate by 7%.

 

Gross margin for the fourth quarter 2014 (before the impact of restructuring costs) was 50.4% compared to 42.4% for the same period in 2013. The increase compared with last year was primarily attributable to improved margins on sparkling water makers due to significantly lower discounting and promotional activities and a higher share of CO2 refills, partially offset by the impact of unfavorable changes in foreign currency exchange rates.

 

Sales and marketing expenses for the fourth quarter 2014 were $42.9 million, or 33.9% of revenue, compared to $56.2 million, or 33.5% of revenue for the same period in 2013. The decrease was primarily attributable to lower advertising and promotion expenses, which decreased $9.5 million to 14.9% of revenue from 16.8% of revenue in the same period in 2013 and lower distribution costs due to the lower sales volume. Selling and marketing expenses also benefited from changes in foreign currency (mainly the weakening of the Israeli Shekel/U.S. Dollar exchange rate by 7%), partially offset by additional expenses from our Japanese distribution channel, which was acquired in the second quarter of 2014.

 

General and administrative expenses for the fourth quarter 2014 were $9.4 million, or 7.5% of revenue, compared to $12.5 million, or 7.4% of revenue in the same period in 2013. The decrease was mainly due to a $4.8 million share-based payments provision reversal, partially offset by expenses from our Japanese distribution channel and the impact of favorable changes in foreign currency exchange rates.

 

Operating income )before the impact of restructuring costs) increased to $8.1 million, or 6.4% of revenue, compared to $2.6 million, or 1.6% of revenue in the same period in 2013. Operating income included $3.3 million impairment (in other expenses) of goodwill related to the acquisition of CEM Industries SRL in 2011.

 

The net negative impact of foreign currency exchange rate changes on operating income in comparison with the same period in 2013 was $2.1 million.

 

Financial income was $0.5 million compared to a $1.6 million expense in the same period in 2013 due to profit from reduction in the value of long term, low interest bank loans the company received in Euro during the second half of 2014 and profit from currency hedging transactions.

 

Tax expense was $1.2 million compared to $0.3 million in the same period in 2013.

 

 

Balance Sheet Review

 

Cash and cash equivalents and bank deposits at December 31, 2014 were $46.9 million compared to $40.9 million at December 31, 2013. The increase was primarily due to positive cash flow from operating activities and long-term loans partially offset by acquisition of property, plant and equipment, mainly for our new plant, repayment of short-term debt and the acquisition of our Japanese distribution channel.

 

Cash flow from operating activities in 2014 was $35.6 million compared to $2.8 million in 2013. The increase in cash flow from operating activities was mainly due to tighter working capital control that led to a lower increase in working capital in 2014 compared with 2013. Working capital, before the impact of restructuring, increased $11.7 million in 2014 ($3.4 million including the restructuring impact) compared to $60.3 million increase in 2013.

 

The Company had $43.9 million of bank debt at December 31, 2014 compared to $15.5 million at December 31, 2013. The increase in bank debt is due to the long-term, low interest bank loans obtained to finance the construction of the new plant.

 

Working capital at December 31, 2014, after the impact the restructuring, increased 2.2% to $158.8 million compared to $155.4 million at December 31, 2013. Inventories at December 31, 2014 decreased 1.6% to $138.4 million compared to $140.7 million at December 31, 2013, mainly due to the impact of restructuring actions, which included inventory write-off of $8.3 million.

 

Conference Call and Management Commentary

 

Detailed CFO commentary and a supplemental slide presentation have been filed with the Securities and Exchange Commission today under the cover of Form 6-K and have been posted on the Company’s website, http://sodastream.investorroom.com.

 

The Company has scheduled a conference call for 8:30 AM Eastern Standard Time (U.S. time) today (Wednesday, February 25, 2015) to review the Company’s financial results. The conference call will be broadcast over the Internet as a “live” listen only Webcast. To listen, please go to: http://sodastream.investorroom.com. Listeners are urged to login approximately 20 minutes before the conference call is scheduled to begin in order to register, as well as download and install any necessary audio software. An archive of the Webcast will be available for 30 days after the call at the above website address.

 

About SodaStream International

SodaStream is the world's leading manufacturer and distributor of Sparkling Water Makers, which enable consumers to easily transform ordinary tap water into sparkling water and flavored sparkling water in seconds. By making ordinary water more exciting and fun to drink, SodaStream helps consumers drink more water. Sparkling Water Makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks. The products promote health and wellness, are environmentally friendly, cost effective, and are customizable and fun to use. Products are available at more than 70,000 retail stores across 45 countries, including 15,000 retail stores in the United States. To learn more about how SodaStream makes water exciting and follow SodaStream on Facebook, Twitter, Pinterest, Instagram and YouTube, visit http://www.sodastream.com.

 

Non-IFRS Financial Measures

This press release contains certain non-IFRS measures, including Adjusted net income, Adjusted Earnings Before Interest, Income Tax, Depreciation and Amortization (“Adjusted EBITDA”), and Adjusted diluted earnings per share (“Adjusted diluted EPS”).

 

Adjusted EBITDA represents earnings before interest, income tax, depreciation and amortization, and further eliminates the effect of restructuring costs and goodwill impairment. Adjusted net income and adjusted diluted earnings per share eliminates the effect of restructuring costs.

 

 

 

The Company believes that the Adjusted net income, Adjusted EBITDA and Adjusted diluted EPS, as described above, should be considered in evaluating the Company’s operations. Adjusted net income and Adjusted diluted EPS exclude restructuring costs because it is a non-cash expense that does not reflect the performance of the Company’s underlying business and operations. Adjusted EBITDA facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures (affecting interest expenses, net), tax positions (such as the impact on periods or companies of changes in effective tax rates) and the age and depreciation charges and amortization of fixed and intangible assets, respectively (affecting relative depreciation and amortization expense, respectively).

 

These measures should be considered in addition to results prepared in accordance with IFRS, but should not be considered a substitute for the IFRS results. The non-IFRS measures included in this press release have been reconciled to the IFRS results in the tables below.

 

Forward Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include information about possible or assumed future results of our business and financial condition, as well as the results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions: Such statements are based on management's current beliefs and expectations and involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to: our ability to maintain or expand sales in our target markets, including the United States; our ability to maintain or continue to develop our presence in retail networks; our ability to develop and implement production and operating infrastructure to effectively support our growth; the success of our marketing campaigns and media spending in terms of increased sales or increased product and brand name awareness; our ability to maintain our customer base in markets where we have an established presence; the risks associated with our reliance on exclusive arrangements for the distribution of our beverage carbonation systems and consumables in each of the markets in which we use third-party distributors; our ability to compete effectively with other companies which currently offer, or may offer in the future, competing products; our ability to maintain margins due to decline in product selling price and/or rising costs; potential product liability claims if any component of our beverage carbonation systems is misused; our ability to protect our intellectual property rights; our being found to have a dominant position in certain markets which may place limits on our ability to operate; risks associated with our being a multinational corporation, including fluctuations in currency exchange rates; our potential exposure to greater than anticipated tax liabilities; our products being subject to extensive governmental regulation in the markets in which we operate; adverse conditions in the global economy which could negatively impact our customers' demand for our products; and other factors discussed under the heading “Risk Factors” in the Annual Report on the Form 20-F for the year ended December 31, 2014 and other documents filed with or furnished to 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 Contact:

Brendon Frey

ICR

Phone: + 1 203-682-8200

[email protected]

 

 

Consolidated Statements of Operations including Reported (Non - IFRS) to IFRS Reconciliation

In thousands (other than per share amounts)

 

For the twelve months ended December 31 

 

		2013 IFRS				2014 Non-IFRS				Restructuring				2014 IFRS
		(Audited*)				(Unaudited)				(Unaudited)				(Unaudited)
Revenue		$	562,723			$	511,774			$	-			$	511,774
Cost of revenue			277,153				250,379				8,307				258,686
Gross profit			285,570				261,395				(8,307	)			253,088
Operating expenses
Sales and marketing			186,289				177,668				-				177,668
General and administrative			50,353				49,795				-				49,795
Other expenses, net			-				3,312				7,342				10,654
Total operating expenses			236,642				230,775				7,342				238,117
Operating income			48,928				30,620				(15,649	)			14,971
Interest expense, net			551				401				-				401
Other financial expense
(income), net			1,695				(1,593	)			-				(1,593	)
Total financial (income)
expense, net			2,246				(1,192	)			-				(1,192	)
Income before income taxes			46,682				31,812				(15,649	)			16,163
Income tax expense			4,655				3,868				-				3,868
Net income for the period			42,027				27,944				(15,649	)			12,295
Net income per share
Basic			2.02				1.33				(0.74	)			0.59
Diluted			1.96				1.31				(0.73	)			0.58
Weighted average  number of Shares
Basic			20,791				20,968				20,968				20,968
Diluted			21,428				21,251				21,251				21,251

 

 

* Derived from 2013 audited financial statements.

 

 

Consolidated Statements of Operations including Reported (Non - IFRS) to IFRS Reconciliation

In thousands (other than per share amounts)

 

For the three months ended December 31 

 

		2013 IFRS				2014 Non-IFRS				Restructuring				2014 IFRS
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenue		$	168,110			$	126,526			$	-			$	126,526
Cost of revenue			96,781				62,711				8,307				71,018
Gross profit			71,329				63,815				(8,307	)			55,508
Operating expenses
Sales and marketing			56,242				42,945				-				42,945
General and administrative			12,467				9,437				-				9,437
Other expenses, net			-				3,312				7,342				10,654
Total operating expenses			68,709				55,694				7,342				63,036
Operating income (loss)			2,620				8,121				(15,649	)			(7,528	)
Interest expense (income), net			256				(151	)			-				(151	)
Other financial expense
(income), net			1,359				(383	)			-				(383	)
Total financial expense (income), net			1,615				(534	)			-				(534	)
Income (loss) before income tax			1,005				8,655				(15,649	)			(6,994	)
Income tax expense			324				1,196				-				1,196
Net income (loss) for the period			681				7,459				(15,649	)			(8,190	)
Net income per share
Basic			0.03				0.36				(0.75	)			(0.39	)
Diluted			0.03				0.35				(0.74	)			(0.39	)
Weighted average  number of shares
Basic			20,892				21,007				21,007				21,007
Diluted			21,474				21,076				21,076				21,076

  

 

 

 

 

Consolidated Balance Sheets as of
		December 31,				December 31,
		2013				2014
		(Audited*)				(Unaudited)
		(In thousands)
Assets
Cash and cash equivalents		$	40,885			$	46,880
Inventories			140,709				138,392
Trade receivables			123,936				94,217
Other receivables			22,208				34,789
Derivative financial instruments			538				1,035
Total current assets			328,276				315,313
Property, plant and equipment			107,132				124,817
Intangible assets			48,104				44,389
Deferred tax assets			1,089				2,506
Other receivables			398				273
Total non-current assets			156,723				171,985
Total assets			484,999				487,298
Liabilities
Loans and borrowings			15,452				9,239
Derivative financial instruments			103				491
Trade payables			90,749				67,011
Income tax payable			9,869				11,740
Provisions			1,614				2,469
Other current liabilities			29,674				27,882
Total current liabilities			147,461				118,832
Loans and borrowings			-				34,645
Employee benefits			2,221				2,174
Provisions			714				122
Deferred tax liabilities			2,997				750
Total non-current liabilities			5,932				37,691
Total liabilities			153,393				156,523
Shareholders’ equity
Share capital			3,378				3,400
Share premium			193,649				198,918
Translation reserve			3,394				(14,908	)
Retained earnings			131,185				143,365
Total shareholders’ equity			331,606				330,775
Total liabilities and shareholders’ equity		$	484,999			$	487,298

 

* Derived from 2013 audited financial statements.

 

 

Consolidated Statements of Cash Flows
		For the twelve months ended								For the three months ended
		December 31,								December 31,
		2013				2014				2013				2014
		(Audited*)				(Unaudited)				(Unaudited)
		(In thousands)
Cash flows from operating  activities
Net income (loss) for the period		$	42,027			$	12,295			$	681			$	(8,190	)
Adjustments:
Amortization of intangible assets			2,253				2,948				484				906
Change in fair value of  derivative financial instruments			(310	)			(906	)			(43	)			418
Exchange rate differences on long-term loans and borrowing			-				(2,986	)			-				(1,956	)
Depreciation of property, plant  and equipment			12,740				14,099				4,135				4,014
Share-based payment			11,019				3,760				2,781				(2,972	)
Restructuring costs			-				15,649				-				15,649
Goodwill impairment			-				3,312				-				3,312
Interest expense (income), net			551				401				256				(151	)
Income tax expense			4,655				3,868				324				1,196
			72,935				52,440				8,618				12,226
Decrease (increase) in inventories			(20,217	)			(12,658	)			17,374				2,946
Decrease (increase) in trade and other receivables			(44,406	)			21,471				(8,640	)			(1,954	)
Increase (decrease) in trade payables			3,259				(22,570	)			12,024				(1,082	)
Increase in employee benefits			111				49				87				119
Increase (decrease) in provisions and other current liabilities			(9,226	)			1,371				(9,804	)			(2,562	)
			2,456				40,103				19,659				9,693
Interest paid			(485	)			(438	)			(196	)			(145	)
Income tax received			3,769				956				-				241
Income tax paid			(2,960	)			(5,036	)			(673	)			(675	)
Net cash provided by operating activities			2,780				35,585				18,790				9,114
Cash flows from investing  activities
Interest received			91				87				3				45
Proceeds from short term bank deposits, net			-				-				10,000				-
Proceeds from sales of property, plant and equipment			1,628				-				1,628				-
Proceeds from derivative financial  instruments, net			417				797				367				1,324
Acquisition of subsidiary, net of cash acquired			(1,179	)			-				-				-
Acquisition of property, plant  and equipment			(39,799	)			(55,174	)			(13,503	)			(11,208	)
Acquisition of intangible assets			(4,844	)			(5,684	)			(1,301	)			(1,630	)
Net cash used in investing  activities			(43,686	)			(59,974	)			(2,806	)			(11,469	)
Cash flows from financing  activities
Proceeds from exercise of employee share options			4,184				860				173				40
Receipts of long-term loans and borrowings			-				49,253				-				19,043
Repayments of long-term loans and borrowings			-				(2,383	)			-				(2,383	)
Change in short-term debt			15,452				(15,452	)			(4,561	)			(6,622	)
Net cash provided by (used in) financing activities			19,636				32,278				(4,388	)			10,078
Net increase (decrease) in cash and cash equivalents			(21,270	)			7,889				11,596				7,723
Cash and cash equivalents at the beginning of the period			62,068				40,885				29,211				39,901
Effect of exchange rates  fluctuations on cash and cash equivalents			87				(1,894	)			78				(744	)
Cash and cash equivalents  at the end of the period		$	40,885			$	46,880			$	40,885			$	46,880

 

* Derived from 2013 audited financial statements.       

 

 

 

  Information about Revenue in Reportable Segments            

 

		The Americas				Western Europe				Asia-Pacific				Central & Eastern Europe, Middle East, Africa				Total
		(In thousands)
Twelve months ended:
December 31, 2013 (Audited*)		$	218,169				268,500				43,554				32,500			$	562,723
December 31, 2014 (Unaudited)		$	142,301				281,690				53,837				33,946			$	511,774
Three months ended:
December 31, 2013 (Unaudited)		$	72,666				71,649				14,816				8,979			$	168,110
December 31, 2014 (Unaudited)		$	37,160				66,885				16,441				6,040			$	126,526

 

* Derived from 2013 audited financial statements.

 

 

EBITDA and Adjusted EBITDA                          

 

		Twelve months ended								Three months ended
		December 31,								December 31,
		2013				2014				2013				2014
		(Unaudited)
		(In thousands)
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Net income		$	42,027			$	12,295			$	681			$	(8,190	)
Interest expense (income), net			551				401				256				(151	)
Income tax expense			4,655				3,868				324				1,196
Depreciation and amortization			14,993				17,047				4,619				4,920
EBITDA			62,226				33,611				5,880				(2,225	)
Restructuring			-				15,649				-				15,649
Impairment of goodwill			-				3,312				-				3,312
Adjusted EBITDA		$	62,226			$	52,572			$	5,880			$	16,736

 

 

 

The following tables present the Company’s revenue, by

product type for the periods presented, as well as such revenue

by product type as a percentage of total revenue:

           

		Twelve months ended								Three months ended
		December 31,								December 31,
		2013				2014				2013				2014
		(Audited*)				(Unaudited)				(Unaudited)
		Revenue
		(in thousands)
Sparkling water maker starter kits (including exchange cylinders)		$	233,146			$	172,614			$	77,796			$	53,080
Consumables			317,798				327,400				87,829				72,565
Other			11,779				11,760				2,485				881
Total		$	562,723			$	511,774			$	168,110			$	126,526

 

  

 

		Twelve months ended								Three months ended
		December 31,								December 31,
		2013				2014				2013				2014
		(Audited*)				(Unaudited)				(Unaudited)
		As a percentage of revenue
Sparkling water maker starter kits  (including exchange cylinders)			41.4	%			33.7	%			46.3	%			42.0	%
Consumables			56.5	%			64.0	%			52.2	%			57.4	%
Other			2.1	%			2.3	%			1.5	%			0.6	%
Total			100.0	%			100	%			100.0	%			100	%

 

  * Derived from 2013 audited financial statements.  

 

 

 

Exhibit 99.2

 

 

SodaStream International Ltd.

Chief Financial Officer’s Commentary

Fourth Quarter 2014

 

 

Revenue

Fourth quarter revenue decreased 24.7% to $126.5 million from $168.1 million in the fourth quarter 2013. The decrease included a foreign currency impact of $7.6 million, primarily reflecting the weakening of the Euro/U.S. dollar exchange rate by 7% in comparison to the fourth quarter 2013.

 

Americas’ revenue decreased 48.9% to $37.2 million from $72.7 million; Western Europe revenue decreased 6.6% to $66.9 million from $71.6 million, but excluding the impact of foreign currency rates change, revenue increased to $72.3 million; Asia-Pacific revenue increased to $16.4 million compared to $14.8 million in the fourth quarter 2013. CEMEA revenue decreased 32.7% to $6.0 million from $9.0 million in the fourth quarter 2013.

 

The following table sets forth each region’s contribution to total revenue and a comparison with the fourth quarter 2013 (percentage):

 

Region		Portion of the revenue in three months ended								Revenue increase (decrease) between periods
		December 31, 2013				December 31, 2014
The Americas			43.2	%			29.4	%			(48.9	)%
Western Europe			42.7	%			52.8	%			(6.6	)%
Asia-Pacific			8.8	%			13.0	%			11.0	%
Central & Eastern Europe, Middle East & Africa			5.3	%			4.8	%			(32.7	)%
Total			100.0	%			100	%			(24.7	)%

 

The Americas revenue decrease was mainly due to lower demand for sparkling water makers and flavors in the U.S. during the holidays partially as a result of the elimination of discounting and promotional activities that took place in the same period in 2013. The decrease in Western Europe revenue was mainly due to the impact of foreign exchange rates and lower sales in France and Italy partially offset by increased sales in Germany, Switzerland and Austria. Asia-Pacific revenue increased primarily due to increased sales in Australia. The decrease in CEMEA revenue was due to lower sales in Czech Republic and Israel.

 

Sparkling water maker unit sales decreased 34% to 1.0 million from 1.5 million in the same period in 2013 mainly due to the decrease in sales in the U.S and France partially offset by an increase in sparkling water maker unit sales in Germany and Austria. CO2 refill unit sales increased 17% to 6.3 million and flavor unit sales decreased 38% to 6.1 million.

 

Restructuring & Goodwill Impairment

During the fourth quarter of 2014, the Company recorded non-cash, pre-tax charges totaling $15.6 million as part of the restructuring and growth plan it announced on October 29, 2014. $3.1 million of the total charge was associated with the transition to the new plant in Southern Israel and included the elimination and impairment of fixed assets at the Company’s other production facilities. $12.5 million of the total charge related to the transformation of the Company’s product lines and included the write-off of fixed assets and inventory associated with discontinued products. The Company also recorded a goodwill impairment charge of $3.3 million relating to its acquisition of CEM Industries in 2011.

 

Gross Margin

Gross margin (before the impact of restructuring costs) in the quarter was 50.4% compared to 42.4% for the same period in 2013. The increase was mainly due to a higher portion of CO2 refills in the sales mix and higher sparkling water makers margin following the elimination of promotional activities in the U.S. that included discontinuation of bundled promotional packs. This increase was partially offset by the impact of changes in foreign currency exchange rates.

 

Sales & Marketing

Sales and marketing expenses were $42.9 million, or 33.9% of revenue, compared to $56.2 million, or 33.5% of revenue for the same period in 2013. The decrease was mainly due to lower advertising and promotions expenses, which decreased $9.5 million to 14.9% of revenue from 16.8% of revenue in the same period in 2013, lower distribution expenses as a result of lower sales volume and the impact of changes in foreign currency exchange rates. This was partially offset by additional expenses associated with our Japanese distribution channel which we acquired in April 2014.

 

 

General & Administrative

General and administrative expenses were $9.4 million, or 7.5% of revenue, compared to $12.5 million, or 7.4% of revenue in the comparable period of last year. The decrease was mainly due to the reversal of share-based payments of $4.8 million partially offset by expenses associated with directly managing our Japanese distribution channel.

 

Operating Income

Operating income (before the impact of restructuring costs) increased to $8.1 million, or 6.4% of revenue, compared to $2.6 million, or 1.6% of revenue in the same period in 2013. Operating income was negatively impacted by an impairment of goodwill in the amount of $3.3 million reported in other expenses and a negative impact from foreign currency exchange rates of $2.1 million.

 

Financial income

Financial income was $0.5 million compared to $1.6 million expense in the fourth quarter last year. Financial income in the quarter resulted mainly from a reduction in the value of Euro loans.

 

Tax Expense

Tax expense totaled $1.2 million compared to tax expense of $0.3 million in the fourth quarter 2013. The increase was mainly due to changes in the distribution of profit before tax between territories.

 

Net Income

Fourth quarter 2014 net loss on an IFRS basis was ($8.2) million, or ($0.39) per share, based on 21.1 million weighted shares outstanding compared to net income on IFRS basis of $0.7 million, or $0.03 per share, based on 21.5 million weighted shares outstanding in the fourth quarter 2013.

 

Excluding the impact of restructuring costs, fourth quarter 2014 adjusted net income was $7.5 million, or $0.35 per diluted share.

 

Foreign Currency Impact

Changes in foreign currency exchange rates ("FX") had a negative impact on revenue of $7.6 million mainly due to a weakening of 7% in the Euro exchange rate and 8% in the Australian dollar exchange rate, in each case, against the U.S. dollar compared to their average rates in the fourth quarter of 2013. Conversely, FX had a positive impact on cost of revenue and operating expenses as approximately 60% of costs and expenses are denominated in currencies other than the U.S. dollar, mainly the Israeli Shekel, which the exchange rate vs. the U.S. dollar decreased 7% compared to its average rate in the same period in 2013. As a result, FX had an overall net negative impact of $2.1 million on operating income.

 

 

Full Year 2014

 

Revenue

Full year revenue decreased 9.0% to $511.8 million from $562.7 million in 2013. The decrease includes a foreign currency impact of $5.0 million, reflecting mainly the weakening of the Australian dollar against the U.S. dollar rate by 7% in comparison to its average rate in 2013.

 

Americas’ revenue decreased 34.8% to $142.3 million from $218.2 million; Western Europe revenue increased 4.9% to $281.7 million from $268.5 million; Asia-Pacific revenue increased 23.6% to $53.8 million from $43.6 million; and CEMEA revenue increased 4.4% to $34.0 million from $32.5 million.

 

 

The following table sets forth each region’s contribution to total revenue and a comparison with 2013 (percentage):

 

Region		Portion of the revenue in year ended								Revenue increase (decrease) between periods
		December 31, 2013				December 31, 2014
The Americas			38.8	%			27.8	%			(34.8	)%
Western Europe			47.7	%			55.0	%			4.9	%
Asia-Pacific			7.7	%			10.5	%			23.6	%
Central & Eastern Europe, Middle East & Africa			5.8	%			6.7	%			4.4	%
Total			100.0	%			100	%			(9.0	)%

 

The Americas revenue decrease was mainly due to lower demand for sparkling water makers and flavors in the U.S. due to reduced demand and sell-through at retail. The increase in Western Europe revenues was due to mainly to Germany and Austria, partially offset by a decrease in France and Italy. Asia-Pacific revenue increased due to increased sales in Australia and our newly acquired Japanese distribution channel while the CEMEA revenue increase was due to increased sales in the Czech Republic.

 

Sparkling water maker unit sales decreased 27% to 3.2 million from 4.4 million mainly due to a decrease in sales in the U.S and France partially offset by an increase in sparkling water maker unit sales in Germany. CO2 refill unit sales increased 16% to 25 million and flavor unit sales decreased 8% to 31.4 million.

 

Gross Margin

Gross margin (before the impact of restructuring costs) was 51.1% in 2014 compared to 50.7% in the prior year. The increase was mainly due to improved sparkling water makers margin due to significantly lower discounting activities compared to the prior year, higher portion of CO2 refills in the sales mix. This increase was partially offset by the impact of changes in foreign currency exchange rate.

 

Sales & Marketing

Sales and marketing expenses were $177.7 million, or 34.7% of revenue, compared to $186.3 million, or 33.1% of revenue in 2013. The decrease was mainly due to lower advertising and promotions expenses which decreased $9.6 million to 15.0% of revenue from 15.4% of revenue in the same period in 2013, and the impact of changes in foreign currency exchange rates. This was partially offset by additional expenses associated with our Japanese distribution channel which was acquired in April 2014.

 

General & Administrative

General and administrative expenses were $49.8 million, or 9.7% of revenue, compared to $50.4 million, or 8.9% of revenue in 2013. The decrease was mainly due to the reversal of share-based payments of $4.8 million, partially offset by expenses related to IT support and the Japanese distribution channel.

 

Operating Income

Operating income (before the impact of restructuring costs) decreased to $30.6 million, or 6.0% of revenue compared to $48.9 million or 8.7% of revenue in 2013. Operating income was negatively impacted by an impairment of goodwill in the amount of $3.3 million reported in other expenses, and a negative impact from changes in foreign currency exchange rates of $5.4 million.

 

Financial income

Financial income was $1.2 million compared to expense of $2.2 million last year. Financial income for the year was generated mainly from a reduction in the value of Euro loans.

 

Tax Expense

Tax expense was $3.9 million compared to $4.7 million. The decrease was mainly due to lower income before tax and changes in the distribution of profit before tax between territories.

 

Net Income

2014 net income on an IFRS basis was $12.3 million, or $0.58 per share, based on 21.3 million weighted shares outstanding, compared to net income on IFRS basis of $42.0 million, or $1.96 per share, based on 21.4 million weighted shares outstanding in 2013.

 

Excluding the impact of restructuring costs, 2014 adjusted net income was $27.9 million, or $1.31 per diluted share.

 

Foreign Currency Impact

Changes in foreign currency exchange rates ("FX") had a negative impact on revenue of approximately $5.0 million in 2014 compared to 2013, mainly due to the weakening of 7% in the Australian dollar exchange rate against the U.S. dollar compared to its average rate in 2013. Approximately 73% of revenue was in non-USD currencies. Conversely, FX had a negative impact on cost of revenue as approximately 69% of cost of revenue are denominated in currencies other than the U.S. dollar, mainly the Israeli Shekel, the exchange rate of which increased 1% against the U.S. dollar compared to its average rate in 2013.As a result, FX had an overall negative impact on operating income of approximately $5.4 million.

 

 

Balance Sheet

As of December 31, 2014, the Company had cash and cash equivalents and bank deposits of $46.9 million compared to $40.9 million at December 31, 2013. The increase is mainly due to cash flow from operating activities, long term, low interest bank loans obtained during 2014 partially offset by investments in our new production facility and the purchase of our Japanese distributor’s business. As of December 31, 2014, the Company had $43.9 million of bank debt mainly for financing the investment of our new production facility, compared to $15.5 million of bank debt as of December 31, 2013.

 

Cash flow from operating activities in 2014 was $35.6 million compared to $2.8 million in 2013. The increase in cash flow from operating activities was mainly due to tighter working capital control that led to a lower increase in working capital in 2014 compared with 2013. Working capital, before the impact of restructuring, increased $11.7 million in 2014 ($3.4 million including the restructuring impact) compared to $60.3 million increase in 2013.

 

As of December 31, 2014, working capital increased by $3.4 million to $158.8 million from $155.4 million as of December 31, 2013. Inventories decreased by $2.3 million or 1.6% to $138.4 million as of December 31, 2014 from $140.7 million as of December 31, 2013, mainly due to the impact of restructuring actions. Excluding the impact of restructuring, inventory increased 4.3% to $146.7 million compared to December 2013.

 

 

Exhibit 99.3

 

 

Q4 2014 % Change Y/Y Total Revenues $126.5 million - 25% Soda Maker Units 1,018,000 - 34% Flavor Units 6.1million - 38% CO 2 Refill Units 6.3 million +17% Net Income Non - IFRS (1) $7.5 million +995% EPS (2) Non - IFRS (1) $0.35 +1,067% Net Income IFRS - $8.2 million NA EPS (2) IFRS - $0.39 NA Financial Highlights Q4 2014 restructuring. Excluding impact of ) 1 ( 4 2013 million weighted shares outstanding in Q 21.5 and 4 2014 million weighted shares outstanding in Q 21.1 Based on ) 2 (

Quarterly Revenue 2009 - 2014 (in $ Million) Quarterly Revenue Change 27.9 31.6 35.9 40.9 39.1 50.0 54.5 64.9 58.5 69.1 75.7 85.7 87.9 103.0 112.5 132.9 117.6 132.4 144.6 168.1 118.2 141.2 125.9 126.5 - 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 Q1 Q2 Q3 Q4 2009 2010 2011 2012 2013 2014

Quarterly Soda Maker Unit Sales 2009 - 2014 (in thousands ) Quarterly Soda Maker Units Change 184 203 285 385 297 463 449 712 592 634 717 767 683 764 940 1,111 776 935 1,196 1,542 604 785 818 1,018 - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Q1 Q2 Q3 Q4 2009 2010 2011 2012 2013 2014

Quarterly Refill Unit Sales 2009 - 2014 (in millions) Quarterly CO 2 Refill Units Change 1.9 2.1 2.2 2.3 2.3 2.5 2.8 2.7 2.9 3.4 3.6 3.4 3.7 4.2 4.3 4.3 4.8 5.5 5.8 5.4 5.8 6.5 6.4 6.3 - 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Q1 Q2 Q3 Q4 2009 2010 2011 2012 2013 2014

Quarterly Flavor Unit Sales 2009 - 2014 (in millions) Quarterly Flavor Units Change 1.4 1.7 2.0 2.2 3.0 3.1 4.1 3.7 3.8 6.1 4.4 4.6 5.8 7.2 7.7 7.4 7.7 8.5 8.3 9.8 8.4 9.3 7.6 6.1 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Q1 Q2 Q3 Q4 2009 2010 2011 2012 2013 2014

Consolidated Statements of Operations Q 4 - 2014 vs. Q 4 - 2013 Consolidated statements of operations including Reported (Non - IFRS) to IFRS Reconciliation In thousands (other than per share amounts) For the three months ended December 31 2013 2014 Non - IFRS Restructuring 2014 IFRS (Audited) (Unaudited) (Unaudited) (Unaudited) Revenue $ 168,110 $ 126,526 $ - $ 126,526 Cost of revenue 96,781 62,711 8,307 71,018 Gross profit 71,329 63,815 (8,307) 55,508 Operating expenses Sales and marketing 56,242 42,945 - 42,945 General and administrative 12,467 9,437 - 9,437 Other expenses, net - 3,312 7,342 10,654 Total operating expenses 68,709 55,694 7,342 63,036 Operating income 2,620 8,121 (15,649) (7,528) Interest expense (income), net 256 (151) - (151) Other financial expense (income) , net 1,359 (383) - (383) Total financial (income) 1,615 (534) - (534) expense, net 1,005 8,655 (15,649) (6,994) Income before income taxes 324 1,196 - 1,196 Income tax expense Net income for the period 681 7,459 (15,649) (8,190) Net income per share Basic 0.03 0.36 (0.75) (0.39) Diluted 0.03 0.35 (0.74) (0.39) Weighted average number of shares Basic 20,892 21,007 21,007 21,007 Diluted 21,474 21,076 21,076 21,076

Consolidated Statements of Operations FY 2014 vs. FY 2013 Consolidated statements of operations including Reported (Non - IFRS) to IFRS Reconciliation In thousands (other than per share amounts) For the twelve months ended December 31 2013 2014 Non - IFRS Restructuring 2014 IFRS (Audited) (Unaudited) (Unaudited) (Unaudited) Revenue $ 562,723 $ 511,774 $ $ 511,774 Cost of revenue 277,153 250,379 8,307 258,686 Gross profit 285,570 261,395 (8,307) 253,088 Operating expenses Sales and marketing 186,289 177,668 177,668 General and administrative 50,353 49,795 49,795 Other expenses, net - 3,312 7,342 10,654 Total operating expenses 236,642 230,775 15,649 238,117 Operating income 48,928 30,620 (15,649) 14,971 Interest expense (income), net 551 401 401 Other financial expense (income) , net 1,695 (1,593) - (1,593) Total financial (income) expense, net 2,246 (1,192) - (1,192) Income before income taxes 46,682 31,812 (15,649) 16,163 Income tax expense 4,655 3,868 - 3,868 Net income for the period 42,027 27,944 (15,649) 12,295 Net income per share Basic 2.02 1.33 (0.74) 0.59 Diluted 1.96 1.31 (0.73) 0.58 Weighted average number of shares Basic 20,791 20,968 20,968 20,968 Diluted 21,428 21,251 21,251 21,251

 

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