Sdot-Yam, 2018: Shlomo Katzav / Wikimedia (CC BY-SA 4.0, cropped)
Caesarstone said Wednesday that a California jury verdict has raised substantial doubt about its ability to continue as a going concern, as the countertop maker reported a $56.1 million third-quarter net loss that included a $46.8 million verdict-related charge.
The Israel-based surface manufacturer said it is evaluating the ruling’s effect on its business, liquidity and financial condition and considering its alternatives. The warning does not amount to an announcement that the company has filed for bankruptcy.
Revenue for the quarter ended September 30 was $96.3 million, down from $102.1 million a year earlier. Caesarstone had $50.7 million in cash, cash equivalents and short-term bank deposits at quarter-end and no debt to financial institutions, according to its third-quarter financial results.
Verdict creates uncertainty
A California jury on October 26 awarded a plaintiff about $67.3 million in a silica-exposure case and assigned Caesarstone 69.1% of the fault. The company said its share would be approximately $46.8 million if the award is assessed without modification.
Caesarstone disputes the verdict, says the trial included significant legal errors and is considering available post-trial remedies. It also said earlier verdicts remain under appeal. The figures reported Wednesday are the company’s current assessment, not a statement that every award has become a final payment obligation.
The company and its subsidiaries face approximately 870 individual lawsuits alleging injuries from exposure to silica particles while fabricating their products, including about 670 claims in the United States. It said most U.S. claims are too early or otherwise not sufficiently certain for it to estimate potential exposure and record a provision.
At September 30, Caesarstone had recorded a $105.5 million provision for probable and reasonably estimable losses associated with legal proceedings. Litigation with some U.S. insurers leaves coverage uncertain.
Operating improvement overshadowed
Gross margin rose to 25.4% from 17.3% a year earlier. Adjusted EBITDA, which excludes legal settlements, loss contingencies and other items, was a loss of $0.1 million, compared with a $7.9 million loss a year earlier. Those adjusted figures do not replace the company’s reported net loss.
The results follow Caesarstone’s decision to delay its earnings report by one week after the California verdict. Wednesday’s going-concern warning is a new financial consequence of that case.
Caesarstone is scheduled to discuss the results on an earnings call at 8:30 a.m. Eastern time Wednesday.
JBizNews Desk | New York
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