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 August 2018
 
Commission File Number: 001-35464
 
Caesarstone Ltd.
(Translation of registrant’s name into English)
 
Kibbutz Sdot-Yam
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 August 8, 2018, Caesarstone Ltd. (the “Company”) issued a press release titled “Caesarstone Reports Second 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.
 
 
CAESARSTONE LTD.
 
 
 
 
 
Date: August 8, 2018
By:
/s/ Michal Baumwald Oron
 
 
 
Name:  Michal Baumwald Oron
 
 
 
Title:    Vice President Business
 
 
 
             Development & General Counsel
 
 

EXHIBIT INDEX
 
The following exhibits are furnished as part of this Form 6-K:
 
Exhibit
Description

 



 
Exhibit 99.1

Caesarstone Reports Second Quarter 2018 Results

·
Quarterly Revenue of $149.2 million, Essentially Flat Compared to the Prior Year Quarter
·
Second Quarter Diluted EPS of $0.32; Adjusted Diluted EPS of $0.43
·
Reiterates Guidance for Full Year 2018 and Provides Update on Expected Currency Impact
·
Declared a Second Quarter Dividend of $0.15 Per Share
·
Recently Appointed CEO, Yuval Dagim, to Assume Position on August 12, 2018

MP MENASHE, Israel--(BUSINESS WIRE) -- Caesarstone Ltd. (NASDAQ:CSTE), a global leading developer and manufacturer of high quality engineered quartz surfaces, today reported financial results for its second quarter ended June 30, 2018.

Yair Averbuch, Interim Chief Executive Officer, commented, “Our second quarter results show considerable operational improvement compared to our performance in the first quarter of 2018, highlighted by a significant increase in gross margin. At the same time, we recognize the need to better capitalize on the strong market opportunity for quartz, mainly in North America, and to continue improving our operations. In the second half of 2018, we are taking steps to leverage our global platform, powerful brand, leading products and financial strength to generate stronger returns. While manufacturing challenges in Israel, raw material cost inflation and currency exchange rates are likely to remain headwinds, we are improving our manufacturing operations and our U.S. sales and distribution capabilities to position the company for additional improvement opportunities in 2019.”

Revenue in the second quarter of 2018 was $149.2 million, essentially flat compared to $148.9 million in the same period in the prior year. On a constant currency basis, second quarter 2018 revenue decreased by 1.5% year-over-year, with sales improvement in Canada, Europe and Rest of the World offsetting softer performance in the U.S. and Israel.

Gross margin in the second quarter was 32.4% compared to 34.9% in the same period in the prior year. The decrease in margin primarily reflects increased product complexity and other manufacturing challenges in Israel along with inventory and logistics inefficiencies and higher raw material costs. These factors were partly offset by a significant improvement in manufacturing performance at our U.S. manufacturing facility. On a sequential basis, gross margin increased from the first quarter of 2018, mainly due to higher sales volumes and higher average selling prices, improvements in our manufacturing in Israel and the U.S., and reduced inefficiencies related to inventory and logistics.

Operating expenses in the second quarter were $35.1 million, or 23.5% of revenue, compared to $32.6 million, or 21.9% of revenue, in the same quarter last year. Excluding legal settlements and loss contingencies, operating expenses increased to 21.7% of revenue, compared to 20.9% in the prior year second quarter mainly due to higher marketing and sales expenses in addition to non-recurring expenses of approximately $1.2 million, mainly related to the relocation of the Company’s U.S. headquarter.

Operating income in the second quarter was $13.3 million, a margin of 8.9%, compared to $19.3 million, a margin of 13.0%, in the second quarter of 2017.

Adjusted EBITDA, which excludes expenses for share-based compensation, legal settlements and loss contingencies and for non-recurring items, was $24.6 million in the second quarter of 2018, representing a margin of 16.5%. This compares to adjusted EBITDA of $29.6 million in the prior year’s second quarter, representing a margin of 19.9%. This year-over-year margin comparison primarily reflects the lower gross margin described above.

Finance expenses in the second quarter were $0.5 million compared to $1.4 million during the same period in the prior year. The change primarily reflects the favorable impact of currency fluctuations on certain financial instruments.


The Company reported net income attributable to controlling interest for the second quarter of 2018 of $11.0 million compared to income of $14.5 million in the same quarter in the prior year. Diluted net income per share for the second quarter was $0.32 compared to $0.42 in the prior year's second quarter.  Adjusted diluted net income per share for the second quarter was $0.43 on 34.4 million shares compared to $0.49 on 34.6 million shares in prior year second quarter.

The Company's balance sheet as of June 30, 2018 remained strong, including cash, cash equivalents and short-term bank deposits of $104.6 million.

Dividend

In accordance with the Company's dividend policy initiated in February 2018, the Company declared a dividend of $0.15 per share to be paid on September 12, 2018 to shareholders of record as of August 22, 2018. The dividend payment is subject to withholding tax of 20%.

Guidance

The Company reiterates its full year 2018 adjusted EBITDA outlook, which is expected to be in the range of $74 million to $82 million. Given current currency exchange rates, the Company expects an adverse currency exchange impact of approximately $10 million for the year and therefore now anticipates 2018 revenue to be at the low end to mid-point of the previously announced range of $590 million to $610 million.

Conference Call Details

The company 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 Second 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 13681791. The replay will be available beginning at 11:30 a.m. ET on Wednesday, August 8, 2018 and will last through 11:59 p.m. ET on Wednesday, August 15, 2018.

About Caesarstone

Caesarstone designs, develops and 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, Supernatural, Metropolitan 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.

Investor Relations Contact
Rodny Nacier
Managing Director
ICR, Inc.
+1 (646) 277-1237
rodny.nacier@icrinc.com


Caesarstone Ltd. and its subsidiaries
 Condensed consolidated balance sheets
 
   
As of
 
U.S. dollars in thousands
 
June 30,
2018
   
December 31,
2017
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
             
CURRENT ASSETS:
           
             
Cash and cash equivalents and short-term bank deposits
 
$
104,641
   
$
138,707
 
Trade receivables, net
   
80,161
     
73,267
 
Other accounts receivable and prepaid expenses
   
41,230
     
33,053
 
Inventories
   
153,780
     
132,940
 
                 
Total current assets
   
379,812
     
377,967
 
                 
LONG-TERM ASSETS:
               
                 
Severance pay fund
   
3,773
     
3,887
 
Other long-term receivables
   
4,790
     
8,502
 
Deferred tax assets, net
   
7,409
     
3,965
 
Long-term deposits and prepaid expenses
   
2,710
     
2,743
 
Property, plant and equipment, net
   
211,160
     
216,653
 
Other intangibles assets
   
1,092
     
2,241
 
Goodwill
   
36,057
     
37,029
 
                 
Total long-term assets
   
266,991
     
275,020
 
                 
Total assets
 
$
646,803
   
$
652,987
 
                 
LIABILITIES AND EQUITY
               
                 
CURRENT LIABILITIES:
               
                 
Short-term bank credit
 
$
9,021
   
$
4,191
 
Trade payables
   
59,610
     
64,021
 
Related party and other loan
   
3,103
     
3,463
 
Short term legal settlements and loss contingencies
   
13,776
     
25,782
 
Accrued expenses and other liabilities
   
36,676
     
30,000
 
                 
Total current liabilities
   
122,186
     
127,457
 
                 
LONG-TERM LIABILITIES:
               
                 
Long-term loan and financing leaseback from a related party
   
7,602
     
8,336
 
Legal settlements and loss contingencies long-term
   
24,892
     
23,454
 
Accrued severance pay
   
4,847
     
5,556
 
Long-term warranty provision
   
1,203
     
1,151
 
Deferred tax liabilities, net
   
-
     
657
 
                 
Total long-term liabilities
   
38,544
     
39,154
 
                 
REDEEMABLE NON-CONTROLLING INTEREST
   
14,959
     
16,481
 
                 
EQUITY:
               
                 
Ordinary shares
   
371
     
371
 
Treasury shares - at cost
   
(39,430
)
   
(39,430
)
Additional paid-in capital
   
152,293
     
151,880
 
Accumulated other comprehensive (loss) income
   
(1,184
)
   
683
 
Retained earnings
   
359,064
     
356,391
 
                 
Total equity
   
471,114
     
469,895
 
                 
Total liabilities and equity
 
$
646,803
   
$
652,987
 
 
 

Caesarstone Ltd. and its subsidiaries
Condensed consolidated statements of income
 
   
Three months ended June 30,
   
Six months ended June 30,
 
U.S. dollars in thousands (except per share data)
 
2018
   
2017
   
2018
   
2017
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                         
Revenues
 
$
149,243
   
$
148,914
   
$
285,301
   
$
285,325
 
Cost of revenues
   
100,914
     
96,993
     
202,728
     
184,163
 
                                 
Gross profit
   
48,329
     
51,921
     
82,573
     
101,162
 
                                 
Operating expenses:
                               
Research and development
   
885
     
866
     
1,641
     
1,814
 
Marketing and selling
   
20,249
     
19,615
     
38,609
     
40,774
 
General and administrative
   
11,244
     
10,706
     
22,448
     
22,032
 
Legal settlements and loss contingencies, net
   
2,676
     
1,420
     
5,173
     
2,091
 
                                 
Total operating expenses
   
35,054
     
32,607
     
67,871
     
66,711
 
                                 
Operating income
   
13,275
     
19,314
     
14,702
     
34,451
 
Finance expenses (income), net
   
531
     
1,391
     
(9
)
   
2,915
 
                                 
Income before taxes on income
   
12,744
     
17,923
     
14,711
     
31,536
 
Taxes on income
   
1,703
     
3,051
     
2,214
     
5,399
 
                                 
Net income
 
$
11,041
   
$
14,872
   
$
12,497
   
$
26,137
 
                                 
Net Income (loss) attributable to non-controlling interest
   
(31
)
   
(324
)
   
6
     
(493
)
Net income attributable to controlling interest
 
$
11,010
   
$
14,548
   
$
12,503
   
$
25,644
 
Basic net income per ordinary share (*)
 
$
0.32
   
$
0.42
   
$
0.37
   
$
0.73
 
Diluted net income per ordinary share (*)
 
$
0.32
   
$
0.42
   
$
0.37
   
$
0.73
 
Weighted average number of ordinary shares used in computing basic income per ordinary share
   
34,360,872
     
34,337,060
     
34,352,449
     
34,329,403
 
 Weighted average number of ordinary shares used in computing diluted income per ordinary share
   
34,379,948
     
34,412,160
     
34,387,420
     
34,390,118
 
 
(*) The numerator for the calculation of net income per share for the three and six months ended June 30, 2018 and 2017 has been increased by approximately $0.1 million and $0.1 million and reduced by approximately $0.3 million and $0.5 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
 
   
Six months ended June 30,
 
U.S. dollars in thousands
 
2018
   
2017
 
   
(Unaudited)
   
(Unaudited)
 
Cash flows from operating activities:
           
             
Net income
 
$
12,497
   
$
26,137
 
Adjustments required to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
14,382
     
14,941
 
Share-based compensation expense
   
392
     
2,521
 
Accrued severance pay, net
   
(583
)
   
509
 
Changes in deferred tax, net
   
(3,868
)
   
(1,134
)
Capital loss
   
75
     
-
 
Legal settlemnets and loss contingencies, net
   
5,173
     
2,091
 
Increase in trade receivables
   
(7,382
)
   
(9,106
)
Increase in other accounts receivable and prepaid expenses
   
(5,970
)
   
(4,229
)
Increase in inventories
   
(23,280
)
   
(16,331
)
Increase (decrease) in trade payables
   
(3,744
)
   
14,982
 
Increase in warranty provision
   
154
     
102
 
Increase (decrease) in accrued expenses and other liabilities including related party
   
(8,155
)
   
3,175
 
                 
Net cash provided by (used in) operating activities
   
(20,309
)
   
33,658
 
                 
Cash flows from investing activities:
               
                 
Purchase of property, plant and equipment
   
(7,831
)
   
(11,352
)
Proceeds from sale of property, plant and equipment
   
2
     
-
 
Decrease (increase) in long term deposits
   
(53
)
   
(1
)
                 
Net cash used in investing activities (*)
   
(7,882
)
   
(11,353
)
                 
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
   
5,369
     
1,059
 
Repayment of a financing leaseback related to Bar-Lev transaction
   
(587
)
   
(579
)
                 
Net cash provided by (used in) financing activities
   
(5,737
)
   
480
 
                 
Effect of exchange rate differences on cash and cash equivalents
   
(139
)
   
344
 
                 
Increase (decrease) in cash and cash equivalents and short-term bank deposits
   
(34,066
)
   
23,129
 
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
 
$
104,641
   
$
129,399
 
                 
Non - cash investing:
               
Changes in trade payables balances related to purchase of fixed assets
   
186
     
(743
)
 
(*) 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 June 30,
   
Six months ended June 30,
 
U.S. dollars in thousands
 
2018
   
2017
   
2018
   
2017
 
   
(Unaudited)
   
(Unaudited)
 
Reconciliation of Net Income to Adjusted EBITDA:
                       
Net income
 
$
11,041
   
$
14,872
   
$
12,497
   
$
26,137
 
Finance expenses (income), net
   
531
     
1,391
     
(9
)
   
2,915
 
Taxes on income
   
1,703
     
3,051
     
2,214
     
5,399
 
Depreciation and amortization
   
7,132
     
7,512
     
14,382
     
14,941
 
Legal settlements and loss contingencies, net (a)
   
2,676
     
1,420
     
5,173
     
2,091
 
Share-based compensation expense (b)
   
362
     
1,367
     
392
     
2,521
 
Provision for employees fringe benefits (c)
   
-
     
-
     
-
     
(114
)
Non-recurring items (d)
   
1,157
     
-
     
1,157
     
-
 
Adjusted EBITDA (Non-GAAP)
 
$
24,602
   
$
29,613
   
$
35,806
   
$
53,890
 
 
(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 Intitute of Israel.
                   
(d)
Relates mainly to a relocation expenses of Caesarstone USA headquarters (Company's subsidiary).
         
 
   
Three months ended June 30,
   
Six months ended June 30,
 
U.S. dollars in thousands (except per share data)
 
2018
   
2017
   
2018
   
2017
 
   
(Unaudited)
   
(Unaudited)
 
Reconciliation of net income attributable to controlling interest to adjusted net income attributable to controlling interest:
                       
Net income attributable to controlling interest
 
$
11,010
   
$
14,548
   
$
12,503
   
$
25,644
 
Legal settlements and loss contingencies, net (a)
   
2,676
     
1,420
     
5,173
     
2,091
 
Share-based compensation expense (b)
   
362
     
1,367
     
392
     
2,521
 
Provision for employees fringe benefits (c)
   
-
     
-
     
-
     
(114
)
Non-recurring items (d)
   
1,157
     
-
     
1,157
     
-
 
Total adjustments
   
4,195
     
2,787
     
6,722
     
4,498
 
Less tax on non-tax adjustments (e)
   
355
     
475
     
1,012
     
770
 
Total adjustments after tax
   
3,840
     
2,312
     
5,710
     
3,728
 
                                 
Adjusted net income attributable to controlling interest (Non-GAAP)
 
$
14,850
   
$
16,860
   
$
18,213
   
$
29,372
 
Adjusted diluted EPS (f)
 
$
0.43
   
$
0.49
   
$
0.53
   
$
0.85
 
 
(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 Intitute of Israel.
                   
(d)
Relates mainly to a relocation expenses of Caesarstone USA headquarters (Company's subsidiary).
       
           
(e)
Tax adjustments for the three and six months ended June 30, 2018 and 2017 were based on the effective tax rates for these periods, respectively.
     
                   
(f)
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 June 30,
   
Six months ended June 30,
 
U.S. dollars in thousands
 
2018
   
2017
   
2018
   
2017
 
   
(Unaudited)
   
(Unaudited)
 
                         
USA
 
$
60,358
   
$
64,828
   
$
117,108
   
$
122,852
 
Australia (incl. New Zealand)
   
34,731
     
34,265
     
63,635
     
63,786
 
Canada
   
27,349
     
25,289
     
50,704
     
47,593
 
Israel
   
9,125
     
10,845
     
20,916
     
22,545
 
Europe
   
9,133
     
6,967
     
16,565
     
13,344
 
Rest of World
   
8,547
     
6,720
     
16,373
     
15,205
 
   
$
149,243
   
$
148,914
   
$
285,301
   
$
285,325