Caesarstone Reports Fourth Quarter and Full Year 2017 Results
- Q4 record revenue, up 9.8% to
$148.1 million ; up 7.0% on a constant currency basis -
$17 million legal settlement and loss contingency expenses, mainly related to arbitration result drives Q4 controlling interest net loss of$6.4 million - Diluted and basic loss per share of
$0.19 ; adjusted diluted EPS of$0.22 - FY17 revenue up 9.2% to record
$588.1 million ; up 7.4% on a constant currency basis - FY17 Diluted EPS of
$0.73 ; adjusted diluted EPS of$1.45 -
Provides 2018 guidance for revenues and adjusted EBITDA - Declares special dividend of
$0.29 per share and initiates recurring dividend policy
MP MENASHE,
Revenue in the fourth quarter of 2017 increased by 9.8% to a fourth quarter record level of
Gross margin in the fourth quarter was 31.3% compared to 38.1% in the same period in the prior year. The decrease in margin was attributable to lower production throughput in
Operating expenses in the fourth quarter were
The arbitration result described above drove an operating loss in the fourth quarter of
Adjusted EBITDA, which excludes expenses for share-based compensation as well as legal settlements and loss contingencies, was
Finance expenses in the fourth quarter were
The Company reported a net loss attributable to controlling interest for the fourth quarter of 2017 of
Full-Year Results
The Company grew revenue for the full year of 2017 by 9.2% to a record of
Gross margin was 33.5% compared to 39.5% in 2016. The year-over-year gross margin difference was driven by lower throughput in
Operating expenses in 2017 were
Operating income in 2017 was
Adjusted EBITDA, which excludes share-based compensation expenses, legal settlements and loss contingencies expenses and other non-recurring items, was
Finance expenses in 2017 were
Net income attributable to controlling interest was
The Company's balance sheet as of
Dividend
The Company declared a special cash dividend of
The Company also adopted a dividend policy pursuant to which it intends to pay a quarterly cash dividend in the range of
The Company believes that the special dividend and its new dividend policy will not affect its ability to fund its growth strategy, including anticipated capital expenditures and working capital needs for the foreseeable future.
Guidance
The Company today issued guidance for the full-year of 2018. It expects its 2018 revenue to be in the range of
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 13675687. The replay will be available beginning at
About
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
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Condensed consolidated balance sheets | |||||||||||
As of | |||||||||||
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(Unaudited) | (Audited) | ||||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents and short-term bank deposits | $ | 138,707 | $ | 106,270 | |||||||
Trade receivables, net | 73,267 | 63,072 | |||||||||
Other accounts receivable and prepaid expenses | 33,053 | 39,484 | |||||||||
Inventories | 132,940 | 101,474 | |||||||||
Total current assets | 377,967 | 310,300 | |||||||||
LONG-TERM ASSETS: | |||||||||||
Severance pay fund | 3,887 | 3,403 | |||||||||
Other receivables long-term | 15,210 | 7,977 | |||||||||
Total long-term assets | 19,097 | 11,380 | |||||||||
PROPERTY, PLANT AND EQUIPMENT, NET | 216,653 | 222,818 | |||||||||
OTHER ASSETS | 2,241 | 4,546 | |||||||||
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37,029 | 35,656 | |||||||||
Total assets | $ | 652,987 | $ | 584,700 | |||||||
LIABILITIES AND EQUITY | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Short-term bank credit | $ | 4,191 | $ | 8,540 | |||||||
Trade payables | 64,021 | 48,633 | |||||||||
Related party and other loan | 3,463 | 3,099 | |||||||||
Accrued expenses and other liabilities | 55,782 | 33,065 | |||||||||
Total current liabilities | 127,457 | 93,337 | |||||||||
LONG-TERM LIABILITIES: | |||||||||||
Long-term loan and financing leaseback from a related party | 8,336 | 8,070 | |||||||||
Legal settlements and loss contingencies long-term | 23,454 | 12,527 | |||||||||
Accrued severance pay | 5,556 | 4,265 | |||||||||
Long-term warranty provision | 1,151 | 988 | |||||||||
Deferred tax liabilities, net | 657 | 14,921 | |||||||||
Total long-term liabilities | 39,154 | 40,771 | |||||||||
REDEEMABLE NON-CONTROLLING INTEREST | 16,481 | 12,939 | |||||||||
EQUITY: | |||||||||||
Ordinary shares | 371 | 371 | |||||||||
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(39,430 | ) | (39,430 | ) | |||||||
Additional paid-in capital | 151,880 | 146,536 | |||||||||
Accumulated other comprehensive income (loss) | 683 | (1,150 | ) | ||||||||
Retained earnings | 356,391 | 331,326 | |||||||||
Total equity | 469,895 | 437,653 | |||||||||
Total liabilities and equity | $ | 652,987 | $ | 584,700 |
Condensed consolidated statements of income (loss) |
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2017 | 2016 | 2017 | 2016 | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
Revenues | $ | 148,140 | $ | 134,975 | $ | 588,147 | $ | 538,543 | |||||||||||
Cost of revenues | 101,797 | 83,543 | 390,924 | 326,057 | |||||||||||||||
Gross profit | 46,343 | 51,432 | 197,223 | 212,486 | |||||||||||||||
Operating expenses: | |||||||||||||||||||
Research and development | 1,251 | 713 | 4,164 | 3,290 | |||||||||||||||
Marketing and selling | 20,415 | 18,568 | 81,789 | 70,343 | |||||||||||||||
General and administrative | 12,610 | 9,930 | 45,930 | 40,181 | |||||||||||||||
Legal settlements and loss contingencies, net | 16,979 | 3,115 | 24,797 | 5,868 | |||||||||||||||
Total operating expenses | 51,255 | 32,326 | 156,680 | 119,682 | |||||||||||||||
Operating income (loss) | (4,912 | ) | 19,106 | 40,543 | 92,804 | ||||||||||||||
Finance expenses, net | 1,074 | 1,000 | 5,583 | 3,318 | |||||||||||||||
Income (loss) before taxes on income | (5,986 | ) | 18,106 | 34,960 | 89,486 | ||||||||||||||
Taxes on income | 35 | 2,790 | 7,402 | 13,003 | |||||||||||||||
Net income (loss) | $ | (6,021 | ) | $ | 15,316 | $ | 27,558 | $ | 76,483 | ||||||||||
Net income attributable to non-controlling interest | (364 | ) | (248 | ) | (1,356 | ) | (1,887 | ) | |||||||||||
Net income (loss) attributable to controlling interest | $ | (6,385 | ) | $ | 15,068 | $ | 26,202 | $ | 74,596 | ||||||||||
Basic net income (loss) per ordinary share (*) | $ | (0.19 | ) | $ | 0.37 | $ | 0.73 | $ | 2.08 | ||||||||||
Diluted net income (loss) per ordinary share (*) | $ | (0.19 | ) | $ | 0.37 | $ | 0.73 | $ | 2.08 | ||||||||||
Weighted average number of ordinary shares used in |
34,338,960 | 34,321,573 | 34,334,197 | 34,706,303 | |||||||||||||||
Weighted average number of ordinary shares used in |
34,338,960 | 34,356,672 | 34,385,870 | 34,763,920 |
(*) The numerator for the calculation of net income (loss) per share for the three and twelve months ended |
Selected Condensed consolidated statements of cash flows |
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Twelve months ended |
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2017 | 2016 | ||||||||
(Unaudited) | (Audited) | |||||||||
Cash flows from operating activities: |
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Net income | $ | 27,558 | $ | 76,483 | ||||||
Adjustments required to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 29,926 | 28,254 | ||||||||
Share-based compensation expense | 5,277 | 3,068 | ||||||||
Accrued severance pay, net | 788 | (150 | ) | |||||||
Changes in deferred tax, net | (4,857 | ) | (963 | ) | ||||||
Capital loss (income) | (7 | ) | 32 | |||||||
Legal settlements and loss contingencies, net |
24,797 | 5,868 | ||||||||
Compensation paid by a shareholder | - | 266 | ||||||||
Increase in trade receivables | (7,573 | ) | (4,184 | ) | ||||||
Increase in other accounts receivable and prepaid expenses | (6,955 | ) | (5,617 | ) | ||||||
Increase in inventories | (27,833 | ) | (5,376 | ) | ||||||
Increase in trade payables | 13,853 | 1,424 | ||||||||
Increase in warranty provision | 234 | 100 | ||||||||
Increase in accrued expenses and other liabilities including related party | 5,809 | 2,314 | ||||||||
Net cash provided by operating activities |
61,017 | 101,519 | ||||||||
Cash flows from investing activities: |
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Purchase of property, plant and equipment | (22,675 | ) | (22,943 | ) | ||||||
Proceeds from sale of property, plant and equipment | 11 | 22 | ||||||||
Increase in long term deposits | (102 | ) | (452 | ) | ||||||
Net cash used in investing activities (*) | (22,766 | ) | (23,373 | ) | ||||||
Cash flows from financing activities: |
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Dividend paid by subsidiary to non-controlling interest | - | (243 | ) | |||||||
Changes in short-term bank credit and loans, net | (5,095 | ) | 5,157 | |||||||
Repayment of a financing leaseback related to Bar-Lev transaction | (1,172 | ) | (1,100 | ) | ||||||
Purchase of treasury shares at cost | - | (39,430 | ) | |||||||
Net cash provided by (used in) financing activities | (6,267 | ) | (35,616 | ) | ||||||
Effect of exchange rate differences on cash and cash equivalents | 453 | 933 | ||||||||
Increase in cash and cash equivalents and short-term bank deposits | 32,437 | 43,463 | ||||||||
Cash and cash equivalents and short-term bank deposits at beginning of the period | 106,270 | 62,807 | ||||||||
Cash and cash equivalents and short-term bank deposits at end of the period | $ | 138,707 | $ | 106,270 | ||||||
Non - cash investing: |
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Changes in trade payables balances related to purchase of fixed assets | (1,552 | ) | (403 | ) |
(*) 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. |
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Three months ended |
Twelve months ended |
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2017 | 2016 | 2017 | 2016 | ||||||||||||||
(Unaudited) | ||||||||||||||||||
Reconciliation of Net Income (loss) to Adjusted EBITDA: | ||||||||||||||||||
Net income (loss) | $ | (6,021 | ) | $ | 15,316 | $ | 27,558 | $ | 76,483 | |||||||||
Finance expenses, net | 1,074 | 1,000 | 5,583 | 3,318 | ||||||||||||||
Taxes on income | 35 | 2,790 | 7,402 | 13,003 | ||||||||||||||
Depreciation and amortization | 7,509 | 7,211 | 29,926 | 28,254 | ||||||||||||||
Legal settlements and loss contingencies, net (a) | 16,979 | 3,115 | 24,797 | 5,868 | ||||||||||||||
Compensation paid by a shareholder (b) | - | - | - | 266 | ||||||||||||||
Share-based compensation expense (c) | 1,388 | 535 | 5,277 | 3,068 | ||||||||||||||
Provision for employees fringe benefits (d) | - | - | (114 | ) | - | |||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 20,964 | $ | 29,967 | $ | 100,429 | $ | 130,260 |
(a) |
Consists of legal settlements expenses and loss contingencies, net, related primarily to Kfar Giladi arbitration, as well as to product liability claims and other adjustments to on-going legal claims. |
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(b) | One time bonus paid by a shareholder to Company's employees. | ||
(c) | 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. | |||
(d) |
Relates to an adjustment of provision for taxable employee fringe benefits as a result of a settlement with the |
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Twelve months ended |
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2017 | 2016 | 2017 | 2016 | ||||||||||||||
(Unaudited) | ||||||||||||||||||
Reconciliation of net income (loss) attributable to |
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Net income (loss) attributable to controlling interest | $ | (6,385 | ) | $ | 15,068 | $ | 26,202 | $ | 74,596 | |||||||||
Legal settlements and loss contingencies, net (a) | 16,979 | 3,115 | 24,797 | 5,868 | ||||||||||||||
Compensation paid by a shareholder (b) | - | - | - | 266 | ||||||||||||||
Share-based compensation expense (c) | 1,388 | 535 | 5,277 | 3,068 | ||||||||||||||
Provision for employees fringe benefits (d) | - | - | (114 | ) | - | |||||||||||||
Tax adjustment (e) | - | - | - | (1,158 | ) | |||||||||||||
Total adjustments | 18,367 | 3,650 | 29,960 | 8,044 | ||||||||||||||
Less tax on non-tax adjustments (f) | 4,258 | 572 | 6,343 | 1,456 | ||||||||||||||
Total adjustments after tax | 14,109 | 3,078 | 23,617 | 6,588 | ||||||||||||||
Adjusted net income attributable to controlling interest |
$ | 7,724 | $ | 18,146 | $ | 49,819 | $ | 81,184 | ||||||||||
Adjusted diluted EPS (g) | $ | 0.22 | $ | 0.53 | $ | 1.45 | $ | 2.33 |
(a) |
Consists of legal settlements expenses and loss contingencies, net, related primarily to Kfar Giladi arbitration, as well as to product liability claims and other adjustments to on-going legal claims. |
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(b) | One time bonus paid by a shareholder to Company's employees. | ||
(c) | 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. | |||
(d) |
Relates to an adjustment of provision for taxable employee fringe benefits as a result of a settlement with the |
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(e) | Tax adjustment as a result of tax settlement with the Israeli tax authorities. | ||
(f) |
Tax adjustments for the three and twelve months ended |
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(g) |
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. |
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Geographic breakdown of revenues by region | ||||||||||||||||||
Three months ended |
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2017 | 2016 | 2017 | 2016 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Audited) | |||||||||||||||
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$ | 60,632 | $ | 54,963 | $ | 245,361 | $ | 222,597 | ||||||||||
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36,663 | 36,062 | 137,559 | 130,910 | ||||||||||||||
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24,678 | 21,460 | 97,838 | 85,740 | ||||||||||||||
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9,933 | 9,816 | 44,489 | 42,545 | ||||||||||||||
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6,380 | 5,199 | 28,679 | 25,606 | ||||||||||||||
Rest of World | 9,854 | 7,475 | 34,221 | 31,145 | ||||||||||||||
$ | 148,140 | $ | 134,975 | $ | 588,147 | $ | 538,543 | |||||||||||
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