Caesarstone reports third quarter results
Mp menashe, israel--(business wire)--caesarstone ltd. (nasdaq:cste), a manufacturer of high quality engineered quartz surfaces, today reported financial results for its third quarter ended september 30, 2016. revenue in the third quarter of 2016 increased by 5.5% to a new record of $144.3 million as compared to $136.8 million in the same quarter of the prior year. on a constant currency basis, third quarter revenue growth was 3.8%. growth in reported revenue was driven primarily by continued strong performances in australia and canada, which grew 21.8% and 13.0%, respectively; israel and rest of world, up 6.4% and 14.8%, respectively, also contributed to overall growth, partially offset by the united states and europe, which declined 5.4% and 1.2%, respectively. yonathan melamed, chairman, commented, “we are pleased to continue to achieve record revenue with growth in many regions demonstrating the strength of our brand globally and the success of our innovative products. at the same time, given the strength of the ongoing market opportunity for quartz, we are not satisfied with our third-quarter performance in the united states. we have taken significant actions to enhance a number of key operating capabilities. we have a strong business with excellent products, high level service and a tremendous brand and we believe we can reaccelerate our business in the united states.” gross margin in the third quarter was 40.5%, an increase of a full percentage point as compared to a margin of 39.5% in the same period in the prior year. the improved margin was primarily attributable to lower raw material costs. operating expenses in the third quarter were $30.3 million, or 21.0% of revenues, as compared to $29.4 million, or 21.5% of revenues, in the same quarter last year. the company noted that legal settlements and loss contingencies expenses were $1.0 million in third quarter of 2016 compared with $4.7 million in the same quarter last year, when the company initially recorded a liability related to silicosis claims. excluding these costs, operating expenses were $29.3 million, or 20.3% of revenues, as compared to $24.7 million, or 18.0% of revenues, in the same quarter last year. this increase reflects a significant expansion of the company’s sales and marketing capabilities in the united states to support its plan to resume growth in all channels of distribution. operating income in the third quarter was $28.2 million, a margin of 19.5%, compared to $24.7 million, an operating margin of 18.1%, in the third quarter of 2015. adjusted ebitda, which excludes share-based compensation, legal settlements and loss contingencies expenses and non-recurring items, was $37.5 million in the third quarter of 2016, a margin of 26.0%. this compares to adjusted ebitda of $36.2 million in the prior year’s third quarter, a margin of 26.5%. this year-over-year margin decrease reflects increased sales and marketing investments, primarily in the united states, partially offset by improved gross margin, as described above. finance expense in the third quarter was $1.1 million compared to $0.1 million during the same period in the prior year. the change was primarily due to net losses related to currency exchange rates fluctuations in the third quarter of 2016 of $0.2 million as compared with net gains of $0.7 million in the third quarter of 2015. the company's reported net income attributable to controlling interest increased by 12.8% to $22.3 million for the third quarter of 2016 as compared to $19.8 million in the same quarter last year. adjusted diluted net income per share for the third quarter was $0.70 on 34.5 million shares as compared to last year’s third quarter level of $0.69 on 35.5 million shares. this lower share count reflects the impact of the company’s recently completed share repurchase program that was initiated in february 2016. through the end of the third quarter, the company repurchased 1.1 million shares for a total of $39.4 million. the company's balance sheet as of september 30, 2016 remained strong with cash, cash equivalents and short-term bank deposits of $74.5 million, sequential growth of $18.9 million as compared to june 30, 2016, despite $9.7 million of cash deployed for share repurchase during the third quarter. guidance the company reduced its 2016 annual guidance to reflect the third quarter results and the continued organizational and operational transition in the united states. the company now anticipates full year 2016 revenue in the range of $524 million to $534 million and for adjusted ebitda in the range of $125 million to $130 million. conference call details yonathan melamed, the company’s chairman, and yair averbuch, 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 third quarter earnings call. to listen to a telephonic replay of the conference call, dial toll-free 1-877-870-5176 or +1-858-384-5517 (international) and enter pass code 13647437. the replay will be available beginning at 11:30 a.m. et on wednesday, november 2, 2016 and will last through 11:59 p.m. et on november 16, 2016. 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 four collections of products — classico, supernatural, motivo, 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 the claim by our former quartz processor; 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. september 30, 2016 december 31,2015 assets accumulated other comprehensive (loss) income three months endedseptember 30, nine months endedseptember 30, net income attributable to controlling interest weighted average number of ordinary shares used incomputing basic income per ordinary share 34,412,294 35,294,755 34,867,064 35,238,001 weighted average number of ordinary shares used incomputing diluted income per ordinary share 34,450,561 35,464,130 34,927,479 35,468,422 cash flows from operating activities: adjustments required to reconcile net income to net cash provided byoperating activities: legal settlements and loss contingencies, net cash flows from investing activities: cash flows from financing activities: cash and cash equivalents and short-term bank deposits at beginning ofthe period 62,807 54,327 cash and cash equivalents and short-term bank deposits at end of theperiod non - cash investing: caesarstone ltd. and its subsidiaries three months endedseptember 30, nine months endedseptember 30, (unaudited) caesarstone ltd. and its subsidiaries three months endedseptember 30, nine months endedseptember 30, (unaudited) reconciliation of net income attributable to controllinginterest to adjusted net income attributable to controllinginterest: share-based compensation includes expenses related to stock options and restricted stock units granted to employees of the company. in addition, includes expenses for phantom awards granted and the related payroll expenses as a result of exercises. tax adjustments for the three and nine months ended september 30, 2016 and 2015 were based on the effective tax rates for these periods, respectively. 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. three months endedseptember 30, nine months endedseptember 30,
