SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

______________________

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

 

Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

 

For the month of May 2018

 

Commission File Number: 001-35464

 

(Translation of registrant’s name into English)

 

MP Menashe

Israel 3780400

 (Address of principal executive offices)

 

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

 

Form 20-F ☒          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):   __ 

 

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):   __ 

 

EXPLANATORY NOTE

 

On May 9, 2018, Caesarstone Ltd. (the “Company”) issued a press release titled “Caesarstone Reports First Quarter 2018 Results”, a copy of which is furnished as Exhibit 99.1 herewith.

 

The GAAP financial information included in consolidated balance sheets, consolidated statements of income and condensed consolidated statements of cash flows contained in the press release attached as Exhibit 99.1 to this Report on Form 6-K is hereby incorporated by reference into (i) the Registrant’s Registration Statements on Form S-8 (Files No. 333- 180313 and No. 333-210444) and (ii) the Registrant’s Registration Statement on Form F-3 (File No. 333-196335).

 

SIGNATURE

 

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.

 

 

 

EXHIBIT INDEX

 

 

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Caesarstone Reports First Quarter 2018 Results

·	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) -- 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

 

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

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.

Investor Relations Contact

James Palczynski

Partner

ICR, Inc.

+1 (203) 682-8229

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 settlemnets 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.

 

		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

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