- Quarterly Revenue of $136.1 million, similar to prior year
- First Quarter Diluted EPS of $0.05; Adjusted Diluted EPS of $0.10
- Reduces Full Year 2018 Revenue and Adjusted EBITDA guidance
- Revitalized leadership team focused on improved execution and
strategy
MP MENASHE, Israel--(BUSINESS WIRE)--May 9, 2018--
Caesarstone Ltd. (NASDAQ:CSTE), a manufacturer of high quality
engineered quartz surfaces, today reported financial results for its
first quarter ended March 31, 2018.
Revenue in the first quarter of 2018 was $136.1 million, approximately
flat to the prior year’s first quarter result of $136.4 million; on a
constant currency basis, first quarter revenue decreased by 3.7%.
Yair Averbuch, Interim Chief Executive Officer, commented, “Our first
quarter results fell short of our expectations. We are working with
urgency and purpose to improve execution and resume growth. We plan to
enhance our execution, particularly in the U.S. market, with a focus on
growth and margins. We believe that we have significant opportunities to
leverage our global operating platform, powerful global brand,
innovative and leading products and our considerable financial strength
to return to compelling levels of value creation for our shareholders.”
Gross margin in the first quarter was 25.2% compared to 36.1% in the
same period in the prior year. The decrease in margin primarily
reflects: increased product complexity and related manufacturing
challenges in Israel; inventory and logistical inefficiencies primarily
related to the U.S. distribution operation, the majority of which the
company does not expect will continue in the remainder of the year; and
higher raw material prices.
Operating expenses in the first quarter were $32.8 million, or 24.1% of
revenue, as compared to $34.1 million, or 25.0% of revenue, in the same
quarter last year. Excluding legal settlements and loss contingency
expenses, operating expenses would have been 22.3% of revenue as
compared to 24.5% in the same quarter last year.
Operating income in the first quarter was $1.4 million, a margin of 1.0%
compared to $15.1 million, a margin of 11.1%, in the first quarter of
2017.
Adjusted EBITDA, which excludes expenses for share-based compensation as
well as legal settlements and loss contingencies, was $11.2 million in
the first quarter of 2018, a margin of 8.2%. This compares to adjusted
EBITDA of $24.3 million in the prior year’s first quarter, a margin of
17.8%. This year-over-year margin comparison primarily reflects the
decline in gross margin, as described above.
Finance income in the first quarter was $0.5 million compared to finance
expense of $1.5 million during the same period in the prior year. The
change primarily reflects the benefit of currency in certain financial
instruments.
The Company reported net income attributable to controlling interest for
the first quarter of 2018 of $1.5 million compared to income of $11.1
million in the same quarter in the prior year. Diluted net income per
share for the first quarter was $0.05 compared to $0.31 in the prior
year's first quarter, both on 34.4 million shares. Adjusted diluted net
income per share for the first quarter was $0.10 compared to the prior
year’s first quarter level of $0.36.
The Company's balance sheet as of March 31, 2018 remained strong,
including cash, cash equivalents and short-term bank deposits of $112.1
million as compared to a total of $138.7 million on December 31, 2017
and to $121.0 million on March 31, 2017. The Company noted that during
the quarter, it used approximately $14.2 million in cash, as previously
announced, to conclude long-standing arbitration as well as $10.5
million in cash for the payment of a previously authorized dividend paid
during the first quarter.
With regard to the previously announced dividend policy - the Company
noted that considering the quarter’s results, it will not pay dividend
in the second quarter.
Guidance
The Company today reduced its full-year 2018 guidance to reflect the
first quarter results reported today as well as its outlook for the
remainder of 2018. The Company now expects full year 2018 revenues in a
range of $590 million to $610 million and expects full year 2018
adjusted EBITDA in the range of $74 million to $82 million.
Conference Call Details
Yair Averbuch, the Company’s interim chief executive officer, and Ophir
Yakovian, the Company’s chief financial officer, will host a conference
call today at 8:30 a.m. ET to discuss the results, 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 1-877-407-4018 or +1-201-689-8471
(international). The toll-free Israeli number is 1 80 940 6247. Upon
dialing in, please request to join the Caesarstone First Quarter
Earnings Call.
To listen to a telephonic replay of the conference call, dial toll-free
1-844-512-2921 or +1-412-317-6671 (international) and enter pass code
13678742. The replay will be available beginning at 11:30 a.m. ET on
Wednesday, May 9, 2018 and will last through 11:59 p.m. ET on Wednesday,
May 16, 2018.
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
three collections of products — Classico, Supernatural and Concetto —
are available in over 50 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.
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; fluctuations in currency exchange rates;
the success of our expansion efforts in the United States; the outcome
of silicosis claims and other claims; unpredictability of seasonal
fluctuations in revenues; delays in manufacturing and other factors
discussed under the heading "Risk Factors" in our most recent annual
report on Form 20-F 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.
|
|
|
|
|
Caesarstone Ltd. and its subsidiaries Condensed consolidated balance sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
U.S. dollars in thousands
|
|
March 31, 2018
|
|
December 31, 2017
|
|
|
(Unaudited) |
|
(Audited) |
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and short-term bank deposits
|
|
$
|
112,111
|
|
$
|
138,707
|
Trade receivables, net
|
|
|
74,631
|
|
|
73,267
|
Other accounts receivable and prepaid expenses
|
|
|
39,671
|
|
|
33,053
|
Inventories
|
|
|
142,357
|
|
|
132,940
|
|
|
|
|
|
Total current assets
|
|
|
368,770
|
|
|
377,967
|
|
|
|
|
|
LONG-TERM ASSETS:
|
|
|
|
|
|
|
|
|
|
Severance pay fund
|
|
|
3,866
|
|
|
3,887
|
Other long-term receivables
|
|
|
6,722
|
|
|
8,502
|
Deferred tax assets, net
|
|
|
6,102
|
|
|
3,965
|
Long-term deposits and prepaid expenses
|
|
|
2,802
|
|
|
2,743
|
Property, plant and equipment, net
|
|
|
214,428
|
|
|
216,653
|
Other intangibles assets
|
|
|
1,666
|
|
|
2,241
|
Goodwill
|
|
|
36,721
|
|
|
37,029
|
|
|
|
|
|
Total long-term assets
|
|
|
272,307
|
|
|
275,020
|
|
|
|
|
|
Total assets
|
|
$
|
641,077
|
|
$
|
652,987
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Short-term bank credit
|
|
$
|
13,158
|
|
$
|
4,191
|
Trade payables
|
|
|
63,755
|
|
|
64,021
|
Related party and other loan
|
|
|
3,268
|
|
|
3,463
|
Short term legal settlements and loss contingencies
|
|
|
13,455
|
|
|
25,782
|
Accrued expenses and other liabilities
|
|
|
30,897
|
|
|
30,000
|
|
|
|
|
|
Total current liabilities
|
|
|
124,533
|
|
|
127,457
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Long-term loan and financing leaseback from a related party
|
|
|
8,063
|
|
|
8,336
|
Legal settlements and loss contingencies long-term
|
|
|
25,572
|
|
|
23,454
|
Accrued severance pay
|
|
|
5,020
|
|
|
5,556
|
Long-term warranty provision
|
|
|
1,173
|
|
|
1,151
|
Deferred tax liabilities, net
|
|
|
-
|
|
|
657
|
|
|
|
|
|
Total long-term liabilities
|
|
|
39,828
|
|
|
39,154
|
|
|
|
|
|
REDEEMABLE NON-CONTROLLING INTEREST
|
|
|
15,326
|
|
|
16,481
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
|
|
|
|
|
Ordinary shares
|
|
|
371
|
|
|
371
|
Treasury shares - at cost
|
|
|
(39,430)
|
|
|
(39,430)
|
Additional paid-in capital
|
|
|
151,910
|
|
|
151,880
|
Accumulated other comprehensive income
|
|
|
522
|
|
|
683
|
Retained earnings
|
|
|
348,017
|
|
|
356,391
|
|
|
|
|
|
Total equity
|
|
|
461,390
|
|
|
469,895
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
641,077
|
|
$
|
652,987
|
|
|
|
|
|
|
|
|
|
|
|
|
Caesarstone Ltd. and its subsidiaries Condensed consolidated statements of income
|
|
|
|
|
|
|
|
Three months ended March 31,
|
U.S. dollars in thousands (except per share data) |
|
2018 |
|
2017 |
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
Revenues
|
|
$
|
136,058
|
|
$
|
136,411
|
Cost of revenues
|
|
|
101,814
|
|
|
87,170
|
|
|
|
|
|
Gross profit
|
|
|
34,244
|
|
|
49,241
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
Research and development
|
|
|
756
|
|
|
948
|
Marketing and selling
|
|
|
18,360
|
|
|
21,159
|
General and administrative
|
|
|
11,204
|
|
|
11,326
|
Legal settlements and loss contingencies, net
|
|
|
2,497
|
|
|
671
|
|
|
|
|
|
Total operating expenses
|
|
|
32,817
|
|
|
34,104
|
|
|
|
|
|
Operating income
|
|
|
1,427
|
|
|
15,137
|
Finance expenses (income), net
|
|
|
(540)
|
|
|
1,524
|
|
|
|
|
|
Income before taxes on income
|
|
|
1,967
|
|
|
13,613
|
Taxes on income
|
|
|
511
|
|
|
2,348
|
|
|
|
|
|
Net income
|
|
$
|
1,456
|
|
$
|
11,265
|
|
|
|
|
|
Net loss (income) attributable to non-controlling interest
|
|
|
37
|
|
|
(169)
|
Net income attributable to controlling interest
|
|
$
|
1,493
|
|
$
|
11,096
|
Basic net income per ordinary share (*)
|
|
$
|
0.05
|
|
$
|
0.31
|
Diluted net income per ordinary share (*)
|
|
$
|
0.05
|
|
$
|
0.31
|
Weighted average number of ordinary shares used in computing basic
income per ordinary share
|
|
|
34,343,749
|
|
|
34,321,573
|
Weighted average number of ordinary shares used in computing diluted
income per ordinary share
|
|
|
34,383,006
|
|
|
34,364,084
|
|
|
|
|
|
(*) The numerator for the calculation of net income per share for
the three months ended March 31, 2018 and 2017 has been increased
by approximately $0.1 million and reduced by approximately $0.3
million, respectively, to reflect the adjustment to redemption
value associated with the redeemable non-controlling interest.
|
|
|
|
|
Caesarstone Ltd. and its subsidiaries Selected Condensed consolidated statements of cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
U.S. dollars in thousands |
|
2018 |
|
2017 |
|
|
(Unaudited)
|
(Unaudited)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,456
|
|
$
|
11,265
|
Adjustments required to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
7,250
|
|
|
7,429
|
Share-based compensation expense
|
|
|
30
|
|
|
1,154
|
Accrued severance pay, net
|
|
|
(513)
|
|
|
469
|
Changes in deferred tax, net
|
|
|
(2,829)
|
|
|
131
|
Legal settlements and loss contingencies, net
|
|
|
2,497
|
|
|
671
|
Increase in trade receivables
|
|
|
(173)
|
|
|
(5,782)
|
Increase in other accounts receivable and prepaid expenses
|
|
|
(3,924)
|
|
|
(1,627)
|
Increase in inventories
|
|
|
(9,863)
|
|
|
(4,374)
|
Increase (decrease) in trade payables
|
|
|
(1,334)
|
|
|
3,426
|
Increase (decrease) in warranty provision
|
|
|
53
|
|
|
(20)
|
Decrease (increase) in accrued expenses and other liabilities
including related party
|
|
|
(13,616)
|
|
|
4,969
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(20,966)
|
|
|
17,711
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(4,112)
|
|
|
(4,708)
|
Increase in long term deposits
|
|
|
(42)
|
|
|
(4)
|
|
|
|
|
|
Net cash used in investing activities (*)
|
|
|
(4,154)
|
|
|
(4,712)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Dividend paid
|
|
|
(9,960)
|
|
|
-
|
Dividend paid by subsidiary to non-controlling interest
|
|
|
(559)
|
|
|
-
|
Changes in short-term bank credit and loans, net
|
|
|
9,294
|
|
|
1,830
|
Repayment of a financing leaseback related to Bar-Lev transaction
|
|
|
(294)
|
|
|
(284)
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(1,519)
|
|
|
1,546
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate differences on cash and cash equivalents
|
|
|
43
|
|
|
194
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents and short-term
bank deposits
|
|
|
(26,596)
|
|
|
14,739
|
Cash and cash equivalents and short-term bank deposits at beginning
of the period
|
|
|
138,707
|
|
|
106,270
|
|
|
|
|
|
Cash and cash equivalents and short-term bank deposits at end of the
period
|
|
$
|
112,111
|
|
$
|
121,009
|
|
|
|
|
|
Non - cash investing:
|
|
|
|
|
Changes in trade payables balances related to purchase of fixed
assets
|
|
|
366
|
|
|
131
|
|
|
|
|
|
(*) Cash used in investing activities does not include changes in
bank deposits as such balance is included in the “cash and cash
equivalents and short term bank deposits” line at the beginning and
end of the period.
|
|
|
Caesarstone Ltd. and its subsidiaries |
|
|
|
|
|
|
|
Three months ended March 31,
|
U.S. dollars in thousands |
|
2018 |
|
2017 |
|
|
(Unaudited) |
Reconciliation of Net Income to Adjusted EBITDA: |
|
|
|
|
Net income
|
|
$
|
1,456
|
|
$
|
11,265
|
Finance expenses (income), net
|
|
|
(540)
|
|
|
1,524
|
Taxes on income
|
|
|
511
|
|
|
2,348
|
Depreciation and amortization
|
|
|
7,250
|
|
|
7,429
|
Legal settlements and loss contingencies, net (a)
|
|
|
2,497
|
|
|
671
|
Share-based compensation expense (b)
|
|
|
30
|
|
|
1,154
|
Provision for employees fringe benefits (c)
|
|
|
-
|
|
|
(114)
|
Adjusted EBITDA (Non-GAAP)
|
|
$
|
11,204
|
|
$
|
24,277
|
|
|
|
|
|
|
|
(a)
|
|
Consists of legal settlements expenses and loss contingencies,
net, related to product liability claims and other adjustments to
on-going legal claims.
|
(b)
|
|
Share-based compensation includes expenses related to stock
options and restricted stock units granted to employees and
directors of the Company. In addition, includes expenses for
phantom awards granted and related payroll expenses as a result of
exercises.
|
(c)
|
|
Relates to an adjustment of provision for taxable employee fringe
benefits as a result of a settlement with the Israeli Tax
Authority and with the National Insurance Institute of Israel.
|
|
|
|
|
|
|
|
|
Caesarstone Ltd. and its subsidiaries |
|
|
|
|
|
|
|
Three months ended March 31,
|
U.S. dollars in thousands (except per share data) |
|
2018 |
|
2017 |
|
|
(Unaudited) |
Reconciliation of net income attributable to controlling interest
to adjusted net income attributable to controlling interest:
|
|
|
Net income attributable to controlling interest
|
|
$
|
1,493
|
|
$
|
11,096
|
Legal settlements and loss contingencies, net (a)
|
|
|
2,497
|
|
|
671
|
Share-based compensation expense (b)
|
|
|
30
|
|
|
1,154
|
Provision for employees fringe benefits (c)
|
|
|
-
|
|
|
(114)
|
Total adjustments
|
|
|
2,527
|
|
|
1,711
|
Less tax on non-tax adjustments (d)
|
|
|
656
|
|
|
295
|
Total adjustments after tax
|
|
|
1,871
|
|
|
1,416
|
|
|
|
|
|
Adjusted net income attributable to controlling interest (Non-GAAP)
|
|
$
|
3,364
|
|
$
|
12,512
|
Adjusted diluted EPS (e)
|
|
$
|
0.10
|
|
$
|
0.36
|
|
|
|
|
|
(a)
|
|
Consists of legal settlements expenses and loss contingencies,
net, related to product liability claims and other adjustments to
on-going legal claims.
|
(b)
|
|
Share-based compensation includes expenses related to stock
options and restricted stock units granted to employees and
directors of the Company. In addition, includes expenses for
phantom awards granted and the related payroll expenses as a
result of exercises.
|
(c)
|
|
Relates to an adjustment of provision for taxable employee fringe
benefits as a result of a settlement with the Israeli Tax
Authority and with the National Insurance Institute of Israel.
|
(d)
|
|
Tax adjustments for the three months ended March 31, 2018 and 2017
were based on the effective tax rates for these periods,
respectively.
|
(e)
|
|
In calculating adjusted diluted (Non-GAAP) EPS, the diluted
weighted average number of shares outstanding excludes the effects
of share-based compensation expense in accordance with FASB ASC
718.
|
|
|
|
|
|
|
|
|
|
|
|
Caesarstone Ltd. and its subsidiaries |
Geographic breakdown of revenues by region |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
U.S. dollars in thousands |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
(Unaudited) |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
USA
|
|
|
|
$
|
|
56,750
|
|
|
|
$
|
|
58,024
|
Australia (incl. New Zealand)
|
|
|
|
|
|
28,903
|
|
|
|
|
|
29,521
|
Canada
|
|
|
|
|
|
23,355
|
|
|
|
|
|
22,304
|
Israel
|
|
|
|
|
|
11,790
|
|
|
|
|
|
11,699
|
Europe
|
|
|
|
|
|
7,433
|
|
|
|
|
|
6,377
|
Rest of World
|
|
|
|
|
|
7,827
|
|
|
|
|
|
8,486
|
|
|
|
|
$
|
|
136,058
|
|
|
|
$
|
|
136,411
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180509005540/en/
Source: Caesarstone Ltd.
Investor Relations
ICR, Inc.
James Palczynski,
+1-203-682-8229
Partner