REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
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|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report.
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Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
|
|
The
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Large accelerated filer ☐
|
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Non-accelerated filer ☐
|
|
|
Emerging growth company
|
|
International Financial Reporting Standards as issued by
the International Accounting Standards Board ☐
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Other ☐
|
• |
Downturns in the home renovation, remodeling and residential construction sectors or the economy generally; |
• |
Adverse global conditions, including macroeconomic and geopolitical uncertainty, may negatively impact our financial results;
|
• |
The outcome of litigations including those regarding silicosis, other bodily injury claims or other legal proceedings in which we
are involved, and our ability to use our insurance policy to cover damages; |
• |
Laws and regulations relating to our production operations, or to hazards associated with crystalline silica containing surfaces,
changes to such laws and regulations and their impact on us or on our value chain may adversely and materially affect our business;
|
• |
Our ability to effectively manage changes to our production and supply chain and effectively collaborate with production business
partners (“PBP”) suppliers; |
• |
Changes in the availability, prices, or suppliers of our raw materials, as well as constraints in the global supply, prices, and
availability of transportation for raw materials, finished goods, and other essential products, can significantly impact our operations;
|
• |
Our success in further expanding our product offering includes the introduction of new products and materials, along with exploring
new applications; |
• |
Disruptions to our information technology systems globally, including by deliberate cyber-attacks; |
• |
Fluctuations in currency exchange rates, and we may not have adequately hedged against them; |
• |
Competitive pressures from other manufacturers of engineered stone and other surface materials as well as increased competition from
lower-priced alternatives; |
• |
Our ability to maintain our relationships with our large retailers in North America;
|
• |
Risks associated with changes in global trade policies or the imposition of tariffs; |
• |
Our ability to successfully consummate business combinations or acquisitions and our success in integrating previously consummated
acquisitions, such as Lioli Ceramica private limited (“Lioli”) and omicron granite
and tile (“omicron”), into our operations; |
• |
Our ability to protect our brand, technology and intellectual property; |
• |
The impacts of conditions in Israel, such as military conflict (including Israel’s current war with Hamas in the Gaza strip),
political developments, negative economic conditions or labor unrest; |
• |
Disturbances to our operations, the operations of our equipment and raw material suppliers, distributors, customers, consumers or
other third parties; |
• |
Impacts on revenue from sales disruptions in our geographic concentrations or key markets; |
• |
Our tax position, including meeting certain conditions required to receive certain tax
benefits, our exposure to U.S. Tax liabilities and related consequences under the U.S. Internal Revenue Code, and the continued availability
of certain tax benefits granted by the Israeli government; |
• |
Our ability to execute our strategy to expand sales in certain markets; |
• |
Our reliance on third-party distributors, re-sellers, and a limited number of large retailers; |
• |
Our ability to effectively manage our inventory and successfully pursue a wider product offering; |
• |
Quarterly fluctuations in our results of operations as a result of seasonal factors and building construction cycles; |
• |
The failure to meet or achieve our ESG goals, expectations or standards that could adversely affect our business, results of operations,
financial condition, or stock price; |
• |
Our ability to retain our senior management team and other skilled and experienced personnel; |
• |
Our ability to manage or resolve conflicts of interest arising from employee affiliations with kibbutz Sdot-Yam (the “Kibbutz”)
and with Tene investment in projects 2016 limited partnership (“Tene”); |
• |
The effect of the share ownership by the Kibbutz and
Tene; |
• |
The effects of enforcements against us, our officers and directors in the U.S.; |
• |
Coverage by equity research analysts, publicly announced financial guidance, investor perceptions and our ability to meet other expectations
(such as environmental social and governance); |
• |
Differences in the governance of shareholders’ rights under Israeli law; |
• |
The amount and timing of our dividend payments; |
• |
Price volatility of, and effects of future sales on, our ordinary shares; |
• |
Our ability to raise funds to finance our current and future capital needs; |
• |
Our ability to pass rising costs to our customers; |
• |
The impact of global pandemics, such as covid-19 on global economy and our business and results of operations; |
• |
Our status as a foreign private issuer and related exemptions with respect thereto; and |
• |
Our expectations regarding regulatory matters applicable to us. |
PART I |
1 |
||
1 |
|||
1 |
|||
1 |
|||
A. |
[Reserved] |
1 |
|
B. |
Capitalization and Indebtedness |
1 |
|
C. |
Reasons for the Offer and Use of Proceeds |
1 |
|
D. |
Risk Factors |
1 |
|
32 |
|||
A. |
History and Development of the Company |
33 |
|
B. |
Business Overview |
44 |
|
C. |
Organizational Structure |
44 |
|
D. |
Property, Plants and Equipment |
45 | |
46 | |||
47 |
|||
A. |
Operating Results |
47 | |
B. |
Liquidity and Capital Resources |
55 |
|
C. |
Research and Development, Patents and Licenses |
57 |
|
D. |
Trend Information |
58 |
|
E. |
Critical Accounting Estimates |
58 |
|
63 |
|||
A. |
Directors and Senior Management |
63 |
|
B. |
Compensation |
67 |
|
C. |
Board Practices |
71 |
|
85 | |||
A. |
Major Shareholders |
85 |
|
B. |
Related Party Transactions |
87 |
|
C. |
Interests of Experts and Counsel |
92 |
|
93 |
|||
A. |
Consolidated Financial Statements and Other Financial Information |
93 |
|
B. |
Significant Changes |
94 |
|
95 |
|||
A. |
Offer and Listing Details |
95 |
|
B. |
Plan of Distribution |
95 |
|
C. |
Markets |
95 |
|
D. |
Selling Shareholders |
95 |
|
E. |
Dilution |
95 |
|
F. |
Expenses of the Issue |
95 |
|
95 |
|||
A. |
Share Capital |
95 |
|
B. |
Memorandum and Articles of Association |
95 |
|
C. |
Material Contracts |
95 |
|
D. |
Exchange Controls |
96 |
|
E. |
Taxation |
96 |
|
F. |
Dividends and Paying Agents |
105 |
|
G. |
Statements by Experts |
105 | |
H. |
Documents on Display |
105 | |
I. |
Subsidiary Information |
105 | |
J. |
Annual Report to Security Holders |
105 |
A. |
[Reserved] |
B. |
Capitalization and Indebtedness |
C. |
Reasons for the Offer and Use of Proceeds |
D. |
Risk Factors |
• |
Downturns in the home renovation, remodeling and residential construction sectors or the economy generally; |
• |
Adverse global conditions, including macroeconomic and geopolitical uncertainty, may negatively impact our financial results;
|
• |
The outcome of litigations including those regarding silicosis, other bodily injury claims or other legal proceedings in which we
are involved, and our ability to use our insurance policy to cover damages; |
• |
Laws and regulations relating to our production operations, or to hazards associated with crystalline silica containing surfaces,
changes to such laws and regulations and their impact on us or on our value chain may adversely and materially affect our business;
|
• |
Our ability to effectively manage changes to our production and supply chain and effectively collaborate with PBP suppliers;
|
• |
Changes in the availability, prices, or suppliers of our raw materials, as well as constraints in the global supply, prices, and
availability of transportation for raw materials, finished goods, and other essential products, can significantly impact our operations;
|
• |
Our success in further expanding our product offering includes the introduction of new products and materials, along with exploring
new applications; |
• |
Disruptions to our information technology systems globally, including by deliberate cyber-attacks; |
• |
Fluctuations in currency exchange rates, and we may not have adequately hedged against them; |
• |
Competitive pressures from other manufacturers of engineered stone and other surface materials as well as increased competition from
lower-priced alternatives; |
• |
Our ability to maintain our relationships with our large retailers in North America;
|
• |
Risks associated with changes in global trade policies or the imposition of tariffs; |
• |
Our ability to successfully consummate business combinations or acquisitions and our success in integrating previously consummated
acquisitions, such as Lioli and omicron, into our operations; |
• |
Our ability to protect our brand, technology and intellectual property; |
• |
The impacts of conditions in Israel, such as military conflict (including Israel’s current war with Hamas in the Gaza strip),
political developments, negative economic conditions or labor unrest; |
• |
Disturbances to our operations, the operations of our equipment and raw material suppliers, distributors, customers, consumers or
other third parties; |
• |
Impacts on revenue from sales disruptions in our geographic concentrations or key markets; |
• |
Our tax position, including meeting certain conditions required to receive certain tax benefits, our exposure to U.S. Tax liabilities
and related consequences under the U.S. Internal revenue code, and the continued availability of certain tax benefits granted by the Israeli
government; |
• |
Our ability to execute our strategy to expand sales in certain markets; |
• |
Our reliance on third-party distributors, re-sellers, and a limited number of large retailers; |
• |
Our ability to effectively manage our inventory and successfully pursue a wider product offering; |
• |
Quarterly fluctuations in our results of operations as a result of seasonal factors and building construction cycles; |
• |
The failure to meet or achieve our ESG goals, expectations or standards that could adversely affect our business, results of operations,
financial condition, or stock price; |
• |
Our ability to retain our senior management team and other skilled and experienced personnel; |
• |
Our ability to manage or resolve conflicts of interest arising from employee affiliations with The Kibbutz and with Tene; |
• |
The effect of the share ownership by the Kibbutz and Tene; |
• |
The effects of enforcements against us, our officers and directors in the U.S.; |
• |
Coverage by equity research analysts, publicly announced financial guidance, investor perceptions and our ability to meet other expectations
(such as environmental social and governance); |
• |
Differences in the governance of shareholders’ rights under Israeli law; |
• |
The amount and timing of our dividend payments; |
• |
Price volatility of, and effects of future sales on, our ordinary shares; |
• |
Our ability to raise funds to finance our current and future capital needs; |
• |
Our ability to pass rising costs to our customers; |
• |
The impact of global pandemics, such as Covid-19 on global economy and our business and
results of operations; |
• |
Our status as a foreign private issuer and related exemptions with respect thereto; and
|
• |
Our expectations regarding regulatory matters applicable to us. |
• |
fluctuations in exchange rates and currency exchange regulation; |
• |
fluctuations in land and sea transportation costs, as well as delays or other changes in transportation and other time-to-market
delays, including as a result of strikes; |
• |
compliance with unexpected changes in regulatory requirements; |
• |
compliance with a variety of regulations and laws in each relevant jurisdiction; |
• |
difficulties in collecting accounts receivable and longer collection periods; |
• |
changes in tax laws and interpretation of those laws; |
• |
taxes, tariffs, quotas, custom duties, trade barriers and other similar restrictions on our sales, purchases and exports which could
be imposed by certain jurisdictions; |
• |
negative or unforeseen consequences resulting from the introduction, termination, modification, or renegotiation of international
trade agreements or treaties or the imposition of countervailing measures or antidumping duties or similar tariffs; |
• |
difficulties enforcing intellectual property and contractual rights in certain jurisdictions; and |
• |
economic changes, geopolitical regional conflicts, including military conflict in the Middle East and the invasion of Ukraine by
Russia, terrorist activity, political unrest, civil strife, acts of war, strikes and other economic or political uncertainties.
|
• |
the composition of our board of directors (other than external directors); |
• |
approving or rejecting a merger, consolidation, or other business combination; and |
• |
amending our articles of association, which govern the rights attached to our ordinary shares. |
• |
the Companies Law regulates mergers and requires that a tender offer be affected when
more than a specified percentage of shares in a company are purchased; |
• |
the Companies Law requires special approvals for certain transactions involving directors,
officers or certain significant shareholders and regulates other matters that may be relevant to these types of transactions;
|
• |
the Companies Law does not provide for shareholder action by written consent for public
companies, thereby requiring all shareholder actions to be taken at a general meeting of shareholders;
|
• |
an amendment to our articles of association will
generally require, in addition to the approval of our board of directors, a vote of the holders of a majority of our outstanding ordinary
shares entitled to vote and present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and
the amendment of a limited number of provisions, such as increases to the size of the board of directors and the ability for the board
of directors to effect vacancy appointments, requires a vote of the holders of at least 65% of the total voting power of our shareholders;
and
|
• |
our articles of association provide that
director vacancies may be filled by our board of directors. |
A. |
History and Development of the Company |
B. |
Business Overview |
|
For the year ended December 31, |
|||||||||||||||||||
2022 |
2020 |
2016 |
2014 |
2012 |
||||||||||||||||
Region |
||||||||||||||||||||
United States |
21 |
% |
20 |
% |
14 |
% |
8 |
% |
6 |
% | ||||||||||
Australia (not including New Zealand) |
48 |
% |
47 |
% |
45 |
% |
39 |
% |
35 |
% | ||||||||||
Canada |
27 |
% |
28 |
% |
24 |
% |
18 |
% |
12 |
% | ||||||||||
Israel (*) |
53 |
% |
67 |
% |
87 |
% |
86 |
% |
85 |
% |
• |
Emissions - Israel. On March 2018 and later on December 2019 the IMEP issued additional terms
for business license for the Bar-Lev facility, and the Company has implemented all the required terms, with certain implementing of cyber
related requirements underway. The IMEP closely monitors our Bar-Lev facility’s implementation of the additional terms and
emissions, specifically of styrene. During July 2021, the Company received a warning letter from the IMEP in which our Bar-Lev plant was
notified of violations of the Clean Air Act and the plant’s business license terms, following an unannounced styrene emission sampling
that revealed several cases of deviations from the styrene emission standard under the Clean Air Act in Israel. The IMEP has ordered the
Company to take corrective and preventive actions, including reducing the expected timeframe for installation of additional Regenerative
Thermal Oxidizer (“RTO”) system and to implement a continuous (online) monitoring device
on the Bar-Lev plant’s fence. We are cooperating with the IMEP and are currently in the process of implementing all its requirements
and remaining additional terms, such process is currently behind schedule, since the current geopolitical circumstances in Israel prevents
the arrival of experts needed to conclude the project. In February 2022, Israel adopted a long-term goal for the reduction of environmental
styrene emissions. Although such goal is not expected to impact our current operations, the adoption of new regulations could create an
additional burden for any future investment in our Israeli facilities. We are constantly in the process of taking the required corrective
actions in order to comply with the business license terms, the styrene emission standard and the IMEP instructions. |
• |
Workers’ safety and health. The Israeli Ministry of Economics, Labor Division (“IMOE”)
in Israel and the Indian Ministry of Labor and Employment, conduct audits of our plants, in which, among other things, they examine if
there were any deviations from permitted ambient levels of RCS, styrene and acetone in the plants. We seek, on an ongoing basis, to continue
reducing the level of exposure of our employees to RCS, styrene and acetone, while enforcing our employees’ use of personal protection
equipment. A fatal accident occurred at the Company’s facility in Richmond Hill in February 2023. The accident was investigated
by local law enforcement and OSHA and the matter is now closed. |
• |
Australian Market. On December 13, 2023, Australian federal, state and territory governments
announced a joint decision to ban the use, supply and manufacture of engineered stone slabs containing crystalline silica (including our
quartz-based products) in Australia. Subject to the formal adoption of the legislation and regulations, the ban will go into effect on
July 1, 2024, in most Australian states and territories. While we disagree with this decision, we believe that the focus should be aimed
at improving occupational health and safety, and has communicated its position to Australian governments, it is taking the necessary steps
to ensure supply of alternative materials to its Australian customers in line with its high standards. This process may negatively impact
our sales in the near-term in the Australian market, which accounted for approximately 18.8% of revenue during the fiscal year ended December
31, 2023. |
• |
“Risks related to our business and industry—We may have exposure to greater-than-anticipated tax liabilities.”
|
• |
“Risks related to our incorporation and location in Israel— Conditions in Israel could materially and adversely affect
our business.” |
• |
“Risks related to our incorporation and location in Israel—The tax benefits that are available to us require us to continue
to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.” |
• |
“Risks related to our incorporation and location in Israel—If we are considered a ‘monopoly’ under Israeli
law, we could be subject to certain restrictions that may limit our ability to freely conduct our business to which our competitors may
not be subject. |
• |
Our annual budget is based in part on these non-GAAP measures. |
• |
Our management and board of directors use these non-GAAP measures to evaluate our operational performance and to compare it against
our work plan and budget. |
• |
amortization of purchased intangible assets; |
• |
legal settlements (both gain or loss) and loss contingencies, due to the difficulty in predicting future events, their timing and
size; |
• |
Impairment expenses |
• |
material items related to business combination activities important to understanding our ongoing performance; |
• |
excess cost of acquired inventory; |
• |
expenses related to our share-based compensation; |
• |
significant one-time offering costs; |
• |
significant one-time non-recurring items (both gain or loss); |
• |
material extraordinary tax and other awards or settlements, both amounts paid and received; and |
• |
tax effects of the foregoing items. |
2023 |
2022 |
2021 |
2020 |
2019 |
||||||||||||||||
Reconciliation of Gross profit to Adjusted
Gross profit: |
||||||||||||||||||||
Gross profit |
$ |
91,939 |
$ |
163,245 |
$ |
171,498 |
$ |
133,942 |
$ |
148,639 |
||||||||||
Share-based compensation expense (a) |
95 |
315 |
321 |
416 |
285 |
|||||||||||||||
Non-recurring import related income |
— |
— |
— |
— |
(1,501 |
) | ||||||||||||||
Amortization of assets related to acquisitions |
285 |
306 |
852 |
529 |
— |
|||||||||||||||
Non recurring items related to restructuring (b) |
3,924 |
237 |
- |
- |
1,661 |
|||||||||||||||
Other non-recurring items |
(304 |
) |
- |
— |
— |
— |
||||||||||||||
Adjusted Gross profit |
$ |
95,939 |
$ |
164,103 |
$ |
172,671 |
$ |
134,887 |
$ |
149,084 |
(a) |
Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors
of the company. |
(b) |
In 2023, reflects residual operating expenses related to Sdot-Yam after closing; In 2022, reflects workforce reduction and in 2019,
reflects mainly one-time amortization of machinery equipment with no future alternative use, and one-time inventory write down due to
discontinuation of certain product group manufacturing. |
2023 |
2022 |
2021 |
2020 |
2019 |
||||||||||||||||
Reconciliation of Net Income (loss) to Adjusted
EBITDA: |
||||||||||||||||||||
Net income (loss) |
$ |
(108,240 |
) |
$ |
(56,366 |
) |
$ |
17,889 |
$ |
7,622 |
$ |
12,862 |
||||||||
Finance expenses (income), net |
(1,069 |
) |
(3,079 |
) |
7,590 |
10,199 |
5,578 |
|||||||||||||
Taxes on income |
21,281 |
758 |
1,950 |
4,700 |
6,243 |
|||||||||||||||
Depreciation and amortization |
30,007 |
36,344 |
35,407 |
29,460 |
28,587 |
|||||||||||||||
Legal settlements and loss contingencies, net (a) |
(4,770 |
) |
568 |
3,283 |
6,319 |
12,359 |
||||||||||||||
Contingent consideration adjustment related to acquisition
|
264 |
120 |
284 |
— |
— |
|||||||||||||||
Share-based compensation expense (b) |
1,025 |
1,502 |
1,845 |
2,858 |
3,632 |
|||||||||||||||
Impairment expenses related to goodwill and long-lived assets
|
47,939 |
71,258 |
— |
— |
— |
|||||||||||||||
Non-recurring import related expense (income) |
— |
— |
— |
— |
(1,501 |
) | ||||||||||||||
Acquisition-related expenses |
- |
80 |
— |
921 |
— |
|||||||||||||||
Non recurring items related to restructuring (c) |
4,438 |
684 |
- |
- |
1,286 |
|||||||||||||||
Other non-recurring items |
(304 |
) |
- |
— |
— |
- |
||||||||||||||
Adjusted EBITDA |
$ |
(9,429 |
) |
$ |
51,869 |
$ |
68,248 |
$ |
62,079 |
$ |
69,046 |
(a) |
Consists of legal settlements expenses and loss contingencies, net related to product liability claims and other adjustments to ongoing
legal claims, including related legal fees. |
(b) |
Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors
of the company. |
(c) |
In 2023, related to long-lived assets impairment and restructuring expenses related to closure of Richmond plant, impairment and
restructuring expenses related to Sdot Yam plant closure. In 2022, related to workforce reduction, in 2019, relates to non-recurring expenses
related to North American region establishment, one-time charge related to reduction in headcount and certain activities including discontinuation
of certain product group manufacturing. |
2023 |
2022 |
2021 |
2020 |
2019 |
||||||||||||||||
Reconciliation of Net Income (loss) Attributable to Controlling Interest to Adjusted
Net Income Attributable to Controlling Interest: |
||||||||||||||||||||
Net income (loss) attributable to controlling interest |
$ |
(107,656 |
) |
$ |
(57,054 |
) |
$ |
18,966 |
$ |
7,218 |
$ |
12,862 |
||||||||
Legal settlements and loss contingencies, net (a) |
(4,770 |
) |
568 |
3,283 |
6,319 |
12,359 |
||||||||||||||
Contingent consideration adjustment related to acquisition |
264 |
120 |
284 |
— |
— |
|||||||||||||||
Amortization of assets related to acquisitions, net of tax |
2,142 |
2,084 |
2,391 |
446 |
— |
|||||||||||||||
Share-based compensation expense (b) |
1,025 |
1,502 |
1,845 |
2,858 |
3,632 |
|||||||||||||||
Non-cash revaluation of lease liabilities (c) |
(1,556 |
) |
(9,527 |
) |
2,918 |
3,189 |
3,615 |
|||||||||||||
Non-recurring import related expense (income) |
— |
— |
— |
— |
(1,501 |
) | ||||||||||||||
Impairment expenses related to goodwill and long-lived assets |
47,939 |
71,258 |
— |
— |
— |
|||||||||||||||
Acquisition-related expenses |
- |
80 |
— |
921 |
— |
|||||||||||||||
Non recurring items related to restructuring (d) |
4,438 |
684 |
— |
— |
2,486 |
|||||||||||||||
Other non-recurring items |
(304 |
) |
— |
— |
— |
— |
||||||||||||||
Total adjustments before tax |
49,178 |
66,769 |
10,721 |
13,733 |
20,591 |
|||||||||||||||
Less tax on above adjustments (e) |
(12,035 |
) |
(910 |
) |
1,054 |
4,488 |
6,729 |
|||||||||||||
Total adjustments after tax |
$ |
61,213 |
$ |
67,679 |
$ |
9,667 |
$ |
9,245 |
$ |
13,862 |
||||||||||
Adjusted net income (loss) attributable to controlling interest |
$ |
(46,443 |
) |
$ |
10,625 |
$ |
28,633 |
$ |
16,463 |
$ |
26,724 |
(a) |
Consists of legal settlements expenses and loss contingencies, net related to product liability claims and other adjustments to ongoing
legal claims, including related legal fees. |
(b) |
Share-based compensation includes expenses related to stock options and restricted stock units granted to employees and directors
of the company. |
(c) |
Exchange rate differences deriving from revaluation of lease contracts in accordance with FASB ASC 842. |
(d) |
In 2023, related to long-lived assets impairment and restructuring expenses related to closure of Richmond and Sdot Yam plants. In
2022, related to workforce reduction, in 2019, relates to non-recurring expenses related to North American region establishment, one time
charge related to reduction in headcount and certain activities including discontinuation of certain product group manufacturing, one
time amortization of machinery equipment with no future alternative use. |
(e) |
Based on the effective tax rates of the relevant periods. |
C. |
Organizational Structure |
D. |
Property, Plants and Equipment |
Properties |
Issuer’s Rights |
Location |
Purpose |
Size |
Kibbutz Sdot-Yam(1) |
Land Use Agreement |
Caesarea, Central Israel |
Headquarters, research and development center |
Approximately 30,000 square meters of facility and approximately 48,000 square meters of un-covered yard*
|
Bar-Lev Industrial Park manufacturing facility(2) |
Land Use Agreement & Ownership |
Carmiel, Northern Israel |
Manufacturing facility |
Approximately 23,000 square meters of facility and approximately 50,000 square meters of un-covered yard**
|
Belfast Industrial Center (3)(4)
|
Ownership |
Richmond Hill, Georgia, United States |
Manufacturing facility |
Approximately 26,000 square meters of facility and approximately 401,000 square meters of un-covered yard
(excluding 56,089 square meters of wetland) |
Bharat Nagar (5) |
Ownership |
Morbi, Gujarat, India |
Manufacturing facility |
Approximately 60,000 square meters of facility and approximately 55,000 square meters of open land, gas
yard, effluent treatment plant, labor colony and roads |
(1) |
Leased pursuant to a land use agreement with Kibbutz Sdot-Yam entered in March 2012 with a term of 20 years, which replaced the
former land use agreement. Starting from September 2014 we use an additional 9,000 square meters pursuant to Kibbutz Sdot-Yam’s
consent under terms materially similar to the land use agreement. However, we have the right to return such additional office space and
premises to Kibbutz Sdot-Yam at any time upon 90 days’ prior written notice. In September 2016, we exercised our right to return
to the Kibbutz an additional office space of approximately 400 square meters which we used since January 2014 under terms materially similar
to the land use agreement. The lands on which these facilities are located are held by the ILA and leased or subleased by Kibbutz Sdot-Yam
pursuant to agreements described in “ITEM 7.B: Major Shareholders and Related Party Transactions—Related Party Transactions—Relationship
and agreements with Kibbutz Sdot-Yam—Land use agreement.” |
(2) |
We own 2,673 square meters of facility and 2,550 square meters of uncovered yard, and the remainder is leased pursuant to a land
use agreement with Kibbutz Sdot-Yam entered into in March 2011, with a term of 10 years commencing in September 2012, which will be automatically
renewed, unless we give two years’ prior notice, for an additional 10-year term. In 2021, the agreement was extended for an additional
ten-year period. This agreement was executed simultaneously with the land purchase and leaseback agreement we entered into with Kibbutz
Sdot-Yam, according to which Kibbutz Sdot-Yam acquired from us our rights in the lands and facilities of the Bar-Lev industrial center,
under a long term lease agreement we entered into with the ILA on June 6, 2007 to use the premises for an initial period of 49 years as
of February 6, 2005, with an option to renew for an additional term of 49 years as of the end of the initial period. For more information,
see “ITEM 7.B: Major Shareholders and Related Party Transactions—Related Party Transactions—Relationship and agreements
with Kibbutz Sdot-Yam—Land purchase agreement and leaseback.” |
(3) |
On September 17, 2013, we entered into a purchase agreement for the purchase of approximately 45 acres of land in Richmond Hill,
Georgia, United States, comprising approximately 36.6 acres of upland and approximately 9 acres of wetland for our new U.S. manufacturing
facility, the construction of which was completed in 2015. On June 22, 2015, we exercised a purchase option in the agreement and acquired
approximately 19.4 acres of land, comprising approximately 18.0 acres of upland. On November 25, 2015, we entered into a new purchase
agreement for the purchase of approximately 54.9 acres of additional land situated adjacent to the previously purchased land, comprising
approximately 51.1 acres of upland. Consistent with our restructuring plan initiated in mid-2023, in December 2023 we announced the
closure of its Richmond Hill manufacturing facility, effective mid-January 2024. This decision is expected to contribute savings of approximately
$20 million annually by optimizing its manufacturing footprint. |
(4) |
In December 2014, we entered into a bond purchase loan agreement, were issued a taxable revenue bond on December 1, 2014, and executed
a corresponding lease agreement. Pursuant to these agreements, the Development Authority of Bryan County, an instrumentality of the State
of Georgia and a public corporation (“DABC”), has acquired legal title of our facility
in Richmond Hill, in the State of Georgia, U.S., and in consideration leased such facilities back to us. In addition, the facility was
pledged by DABC in favor of us and DABC has committed to re-convey title to the facility to us upon the maturity of the bond or at any
time at our request, upon our payment of $100 to DABC. Therefore, we consider such facilities to be owned by us. This arrangement was
structured to grant us property tax abatement for ten years at 100% and additional five years at 50%, subject to our satisfying certain
qualifying conditions with respect to headcount, average salaries paid to our employees and the total capital investment amount in our
U.S. plant. In December 2015, we entered into an additional bond purchase loan agreement with the Development Authority of Bryan County
and were issued a second taxable revenue bond on December 22, 2015, to cover additional funds and assets which were utilized in the framework
of constructing, acquiring and equipping our U.S. facility. If we were to expand our current U.S. facility, we would have been entitled
to an additional taxable revenue bond and a corresponding property tax abatement. In 2017, we notified DABC that we will not be utilizing
such additional bond at this time and, accordingly, it has expired. |
(5) |
In October 2020, we acquired a majority stake, in Lioli, which owns the Bharat Nagar facility in Morbi, Gujarat, India. For more
information on our title to the property in Morbi, Gujarat, India, see “ITEM 3.D. Key Information—Risk Factors—Operational
Risks—Fully integrating Lioli’s and Omicron’s businesses may be more difficult, costly and time-consuming than expected,
which may adversely affect our results of operations and the value of our common shares.” |
A. |
Operating Results |
• |
Our sales are impacted by home renovation and remodeling and new residential construction, and to a lesser extent, commercial construction.
We estimate (supported also by the Freedonia Report) that approximately 60%-70% of our revenue in our main markets (U.S., Australia, Canada)
is related to residential renovations and remodeling activities, while 30%-40% is related to new residential construction. |
• |
Our revenues and results of operations traditionally exhibit some quarterly fluctuations as a result of seasonal influences which
impact construction and renovation cycles. Due to the fact that certain of our operating costs are fixed, the impact of such fluctuations
on our profitability could be material. We believe that the second and third quarters tend to exhibit higher sales volumes than the other
quarters because demand for our surfaces and other products is generally higher during the summer months in the northern hemisphere with
the effort to complete new construction and renovation projects before the new school year. Conversely, the first quarter is typically
impacted by the winter slowdown in the northern hemisphere in the construction industry and might impact sales in Israel depending on
the timing of the spring holiday a particular year. Similarly, sales in Australia during the first quarter are negatively impacted by
fewer construction and renovation projects. The fourth quarter is susceptible to being impacted by the onset of winter in the northern
hemisphere. These trends were not visible during 2023 which was affected by challenging macro-economic conditions impacting our revenues.
|
• |
We conduct business in multiple countries in North America, South America, Europe, Asia-Pacific, Australia,
and the Middle East and as a result, we are exposed to risks associated with fluctuations in currency exchange rates between the U.S.
dollar and certain other currencies in which we conduct business. A significant portion of our revenues is generated in U.S dollar, and
to a lesser extent the Australian dollar, Canadian dollar, Euro and NIS. In 2023, 49.3% of our revenues were denominated in U.S. dollars,
18.8% in Australian dollars, 13.4% in Canadian dollars, 6.4% in Euros and 3.9% in NIS. As a result, devaluations of the Australian dollars,
and to a lesser extent, the Canadian dollar relative to the U.S. dollar may unfavorably impact our profitability. Our expenses are largely
denominated in U.S. dollars, NIS and Euro, with a smaller portion in Australian dollars and Canadian dollars. As a result, appreciation
of the NIS, and to a lesser extent, the Euro relative to the U.S. dollar may unfavorably affect our profitability. We attempt to limit
our exposure to foreign currency fluctuations through forward contracts, which, except for U.S. dollar/NIS forward contracts, are not
designated as hedging accounting instruments under ASC 815, Derivatives and Hedging. We currently engage in derivatives transactions,
such as forward contracts, to hedge against the risks associated with our foreign currency exposure. Our strategy to hedge our cash flow
exposures involves consistent hedging of exchange rate risk in variable ratios up to 100% of the exposure over rolling 12 months. As of
December 31, 2023, our average hedging ratio was approximately 9% out of our expected currencies exposure for 2023. As of December 31,
2023, we had total outstanding forward contracts with a notional amount of $21.2 million. These forward contracts were for a period of
up to 12 months. The fair value of these foreign currency derivative contracts was positive $0.5 million, which is included in our current
assets and current liabilities, as of December 31, 2023. Hedging results are charged to finance expenses, net, and therefore, do not offset
the impact of currency fluctuations on our operating income. Our U.S. dollar/NIS forward contracts are charged to operating expenses as
designated hedge instruments, partially offsetting the impact of the U.S. dollar/NIS currency fluctuations on our operating income (loss).
While we may decide to enter into additional hedging transactions in the future, the availability and effectiveness of these transactions
may be limited and we may not be able to successfully hedge our exposure, which could adversely affect our financial condition and results
of operations. For further discussion of our foreign currency derivative contracts, see “ITEM 11: Quantitative and Qualitative Disclosures
About Market Risk.”. |
Year ended December 31, |
||||||||||||||||||||||||
2023 |
2022 |
2021 |
||||||||||||||||||||||
Geographical
Region |
% of total revenues |
Revenues in
thousands of USD |
% of total revenues |
Revenues in
thousands of USD |
% of total revenues |
Revenues in
thousands of USD |
||||||||||||||||||
United States |
48.1 |
% |
$ |
271,647 |
49.5 |
% |
$ |
342,293 |
47.4 |
% |
$ |
305,353 |
||||||||||||
Canada |
13.4 |
% |
75,462 |
13.5 |
% |
93,377 |
13.1 |
84,467 |
||||||||||||||||
Latin America |
0.6 |
% |
3,285 |
0.6 |
% |
4,481 |
0.7 |
4,702 |
||||||||||||||||
Australia (incl. New Zealand) |
18.8 |
% |
106,223 |
16.8 |
% |
116,284 |
18.4 |
118,714 |
||||||||||||||||
Asia |
4.6 |
% |
25,959 |
5.0 |
% |
34,607 |
4.7 |
30,390 |
||||||||||||||||
EMEA |
10.6 |
% |
59,908 |
9.2 |
% |
63,320 |
9.4 |
60,836 |
||||||||||||||||
Israel |
4.0 |
% |
22,747 |
5.3 |
% |
36,444 |
6.1 |
39,430 |
||||||||||||||||
Total |
100.0 |
% |
$ |
565,231 |
100.0 |
% |
$ |
690,806 |
100 |
% |
$ |
643,892 |
• |
During 2022 - a property, plant and equipment expenses of $26.4 million related to Sdot Yam facility. |
• |
During 2023 - property plant and equipment expenses of $27.5 million related to Richmond
Hill facility and $1.0 million related to Sdot Yam facility, and right of use assets impairment of $16.6 million related to Sdot Yam facility
land use agreement. |
Year ended December 31, |
||||||||||||||||||||||||
2023 |
2022 |
2021 |
||||||||||||||||||||||
Amount |
% of Revenue |
Amount |
% of Revenue |
Amount |
% of Revenue |
|||||||||||||||||||
(in thousands of U.S. dollars) |
||||||||||||||||||||||||
Consolidated Income Statement Data: |
||||||||||||||||||||||||
Revenues: |
$ |
565,231 |
100 |
% |
$ |
690,806 |
100 |
% |
$ |
643,892 |
100 |
% | ||||||||||||
Cost of revenues |
473,292 |
83.7 |
527,561 |
76.4 |
472,394 |
73.4 |
||||||||||||||||||
Gross profit |
91,939 |
16.3 |
163,245 |
23.6 |
171,498 |
26.6 |
||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Research and development, net |
5,086 |
0.9 |
4,098 |
0.6 |
4,216 |
0.7 |
||||||||||||||||||
Selling and marketing |
82,222 |
14.5 |
94,412 |
13.7 |
85,725 |
13.3 |
||||||||||||||||||
General and administrative |
49,490 |
8.8 |
51,596 |
7.5 |
50,845 |
7.9 |
||||||||||||||||||
Impairment expenses related to goodwill and long lived assets
|
47,939 |
8.5 |
71,258 |
10.3 |
||||||||||||||||||||
Legal settlements and loss contingencies, net |
(4,770 |
) |
(0.8 |
) |
568 |
0.1 |
3,283 |
0.5 |
||||||||||||||||
Total operating expenses |
179,967 |
31.8 |
221,932 |
32.3 |
144,069 |
22.4 |
||||||||||||||||||
Operating income (loss) |
(88,028 |
) |
(15.6 |
) |
(58,687 |
) |
(8.5 |
) |
27,429 |
4.3 |
||||||||||||||
Finance expenses, net |
(1,069 |
) |
(0.2 |
) |
(3,079 |
) |
(0.4 |
) |
7,590 |
1.2 |
||||||||||||||
Income before taxes on income (loss) |
(86,959 |
) |
(15.4 |
) |
(55,608 |
) |
(8.1 |
) |
19,839 |
3.1 |
||||||||||||||
Taxes on income |
21,281 |
3.8 |
758 |
0.1 |
1,950 |
0.3 |
||||||||||||||||||
Net income (loss) |
$ |
(108,240 |
) |
(19.1 |
) |
$ |
(56,366 |
) |
(8.2 |
) |
$ |
17,889 |
2.8 |
% | ||||||||||
Net income (loss) attributable to non-controlling interest
|
(584 |
) |
0.1 |
688 |
0.1 |
(1,077 |
) |
(0.2 |
) | |||||||||||||||
Net income (loss) attributable to controlling interest |
$ |
(107,656 |
) |
(19.0 |
)% |
$ |
(57,054 |
) |
(8.3 |
)% |
$ |
18,966 |
2.9 |
% |
B. |
Liquidity and Capital Resources |
Year ended December 31, |
||||||||||||
2023 |
2022 |
2021 |
||||||||||
(in thousands of U.S. dollars) |
||||||||||||
Net cash provided (used) by operating activities |
$ |
66,529 |
$ |
(23,311 |
) |
$ |
20,684 |
|||||
Net cash used in investing activities |
(40,526 |
) |
(7,285 |
) |
(34,885 |
) | ||||||
Net cash provided (used) by financing activities |
(23,779 |
) |
9,156 |
(25,254 |
) |
C. |
Research and Development, Patents and Licenses |
D. |
Trend Information |
E. |
Critical Accounting Estimates |
• |
During 2022, property plant and equipment expenses of $26.4 million related to Sdot Yam facility. |
• |
During 2023, a property plant and equipment expenses of $27.5 million related to Richmond
Hill facility and $1.0 million related to Sdot Yam facility, and right of use assets of $16.6 million related to Sdot Yam facility.
|
A. |
Directors and Senior Management |
Name |
Date of Birth |
Position | ||
Officers |
||||
Yosef (Yos) Shiran |
March 26, 1962 |
Chief Executive Officer | ||
Nahum Trost |
September 24, 1978 |
Chief Financial Officer | ||
David Cullen |
April 10, 1959 |
Managing Director, APAC | ||
Ken Williams |
April 4, 1961 |
Managing Director, North America | ||
Edward Smith |
May 14, 1973 |
Managing Director, UK | ||
Idit Maayan Zohar |
November 11, 1972 |
Chief Marketing Officer | ||
Amihai Seider |
November 29, 1967 |
Vice President, Global Operations | ||
Erez Margalit |
July 14, 1967 |
Vice President, Global Research and Development | ||
Ron Mosberg |
December 15, 1979 |
General Counsel and Corporate Secretary | ||
Lilach Gilboa |
April 8, 1972 |
Vice President, Global Human Resources | ||
Gilad Frenkel |
October 25, 1969 |
Managing Director, ROW | ||
José Luis Ramón |
February 2, 1975 |
VP of Global Porcelain | ||
Directors |
||||
Dr. Ariel Halperin(4) |
March 18,1955 |
Chairman | ||
Nurit Benjamini (1)(2)(3)(5)(6) |
October 27, 1966 |
Director | ||
Lily Ayalon(1)(2)(3)(5)(6) |
June 17, 1965 |
Director | ||
David Reis (5) |
February 10, 1961 |
Director | ||
Maxim Ohana |
December 26, 1950 |
Director | ||
Ronald Kaplan(3) (5) |
August 15, 1951 |
Director | ||
Ornit Raz (1)(2)(3)(5) |
August 29, 1971 |
Director | ||
Giora Wegman |
December 14, 1951 |
Director | ||
Tom Pardo Izhaki |
June 3, 1983 |
Director |
(1) |
Member of our audit committee. |
(2) |
Member of our compensation committee. |
(3) |
Member of our nominating committee. |
(4) |
Member of our strategy committee. |
(5) |
Independent under the Nasdaq rules. |
(6) |
External director under the Israeli Companies Law. |
B. |
Compensation of Officers and Directors |
Name and Principal Position (1) |
Salary (2) |
Bonus (3) |
Equity-Based Compensation (4) |
All other compensation (5) |
Total |
|||||||||||||||
(in U.S. dollars) |
||||||||||||||||||||
Yos Shiran |
781,776 |
600,000 |
368,247 |
5,100 |
1,755,123 |
|||||||||||||||
Ken Williams |
405,731 |
62,387 |
29,511 |
2,222 |
499,851 |
|||||||||||||||
Nahum Trost |
292,661 |
42,358 |
76,088 |
46,189 |
457,295 |
|||||||||||||||
Erez Margalit |
318,312 |
42,358 |
45,277 |
48,963 |
454,910 |
|||||||||||||||
David Cullen |
375,731 |
32,255 |
31,697 |
13,242 |
452,924 |
(1) |
All Covered Executives are employed by us on a full-time (100%) basis. |
(2) |
Salary includes the Covered Executive’s gross salary plus payment of social benefits made by us on behalf of such Covered Executive.
Such benefits may include, to the extent applicable to the Covered Executive, payments, contributions and/or allocations for savings funds
(such as managers’ life insurance policy), education funds (referred to in Hebrew as “keren hishtalmut”), pension, severance,
risk insurances (such as life, or work disability insurance), payments for social security and tax gross-up payments, vacation, medical
insurance and benefits, convalescence or recreation pay and other benefits and perquisites consistent with our policies. |
(3) |
Represents annual bonuses granted to the Covered Executive based on formulas set forth in the bonus plans and approvals set forth
in the respective resolutions of our compensation committee and the board of directors. |
(4) |
Represents the equity-based compensation expenses recorded in our consolidated financial statements for the year ended December 31,
2022, based on the option’s and RSU’s award’s fair value, calculated in accordance with accounting guidance for equity-based
compensation. For a discussion of the assumptions used in reaching this valuation, see Note 2w to our consolidated financial statements.
|
(5) |
Includes mainly leased car, mobile phone and other fringe benefit expenses. |
C. |
Board Practices |
• |
an employment relationship; |
• |
a business or professional relationship maintained on a regular basis; |
• |
control; and |
• |
service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the
public if such director was appointed as a director of the private company in order to serve as an external director following the initial
public offering. |
• |
the majority of the shares that are voted at the meeting in favor of the election of the external director, excluding abstentions,
include at least a majority of the votes of shareholders who are not controlling shareholders or have a personal interest in the appointment
(excluding a personal interest that did not result from the shareholder’s relationship with the controlling shareholder); or
|
• |
the total number of shares held by the shareholders mentioned in the paragraph above that are voted against the election of the external
director does not exceed two percent of the aggregate voting rights in the company. |
• |
the chairperson of the board of directors; |
• |
a controlling shareholder or a relative of a controlling shareholder; and |
• |
any director employed by, or providing services on an ongoing basis to, the company, a controlling shareholder of the company or
an entity controlled by a controlling shareholder of the company or any director who derives most of his or her income from the controlling
shareholder. |
• |
retaining and terminating our independent auditors, subject to board of directors and shareholder ratification; |
• |
pre-approval of audit and non-audit services to be provided by the independent auditors; |
• |
reviewing with management and our independent directors our quarterly and annual financial reports prior to their submission to the
SEC; and |
• |
approval of certain transactions with office holders and controlling shareholders and other related-party transactions. |
• |
conduct of the appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates to serve as directors;
|
• |
review and recommend to the board any nominees for election as directors, including nominees recommended by shareholders, and consideration
of the performance of incumbent directors whose terms are expiring in determining whether to nominate them to stand for re-election;
|
• |
review and recommend to the board regarding board member qualifications, board composition and structure, and recommend if necessary,
measures to be taken so that the board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required
for the board; and |
• |
perform such other activities and functions as required by applicable law, stock exchange
rules or provisions in our articles of association, or as are otherwise necessary and advisable, in its or the board’s discretion,
for the efficient discharge of its duties. |
• |
reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other office holders;
|
• |
reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other office
holders including evaluating their performance in light of such goals and objectives and determining their compensation based on such
evaluation; |
• |
reviewing and approving the granting of options and other incentive awards; and |
• |
reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors. |
• |
the majority includes at least a majority of the shares voted by shareholders other than our controlling shareholders or shareholders
who have a personal interest in the adoption of the compensation policies; or |
• |
the total number of shares held by non-controlling shareholders and disinterested shareholders that voted against the adoption of
the compensation policies, does not exceed 2% of the aggregate voting rights of our company. |
• |
at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest
in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or |
• |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting
against the compensation package does not exceed 2% of the aggregate voting rights in the company. |
• |
information on the business advisability of a given action brought for his or her approval or performed by virtue of his or her position;
and |
• |
all other important information pertaining to such action. |
• |
refrain from any act involving a conflict of interest between the performance of his or her duties in the company and his or her
other duties or personal affairs; |
• |
refrain from any activity that is competitive with the business of the company; |
• |
refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for himself or herself
or others; and |
• |
disclose to the company any information or documents relating to the company’s affairs which the office holder received as
a result of his or her position as an office holder. |
• |
a transaction other than in the ordinary course of business; |
• |
a transaction that is not on market terms; or |
• |
a transaction that may have a material impact on the company’s profitability, assets or liabilities. |
• |
a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting must
be voted in favor of approving the transaction, excluding abstentions; or |
• |
the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more
than 2% of the voting rights in the company. |
• |
an amendment to the articles of association; |
• |
an increase in the company’s authorized share capital; |
• |
a merger; and |
• |
the approval of related party transactions and acts of office holders that require shareholder approval. |
• |
a monetary liability incurred by or imposed on him or her in favor of another person pursuant to a judgment, including a settlement
or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability
is provided in advance, then such undertaking must be limited to certain events, which, in the opinion of the board of directors, can
be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria
determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the foreseen events described
above and amount or criteria; |
• |
reasonable litigation expenses, including reasonable attorneys’ fees, incurred by the office holder as a result of an investigation
or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i)
no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, was
imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial
liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent or in connection with
a monetary sanction; |
• |
a monetary liability imposed on him or her in favor of an injured party at an Administrative Procedure (as defined below) pursuant
to Section 52(54)(a)(1)(a) of the Securities Law; |
• |
expenses incurred by an office holder or certain compensation payments made to an injured party that were instituted against an office
holder in connection with an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable
attorneys’ fees; and |
• |
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings
instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which
the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent. |
• |
a breach of duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe
that the act would not harm the company; |
• |
a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the
office holder; |
• |
a monetary liability imposed on the office holder in favor of a third party; |
• |
a monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section
52(54)(a)(1)(a) of the Securities Law; and |
• |
expenses incurred by an office holder in connection with an Administrative Procedure instituted against him or her, including reasonable
litigation expenses and reasonable attorneys’ fees. |
• |
a breach of a duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the
extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
|
• |
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office
holder; |
• |
an act or omission committed with intent to derive illegal personal benefit; or |
• |
a fine, monetary sanction or forfeit levied against the office holder. |
As of December 31, |
||||||||||||
Department |
2023 |
2022 |
2021 |
|||||||||
Manufacturing and operations |
1,080 |
1,339 |
1,397 |
|||||||||
Research and development |
19 |
17 |
24 |
|||||||||
Sales, marketing, service and support |
533 |
557 |
651 |
|||||||||
Management and administration |
181 |
198 |
200 |
|||||||||
Total |
1,813 |
2,111 |
2,272 |
Name of Beneficial Owner
|
Number of Shares Beneficially Held(1) |
Percent of Class |
|||
Executive Officers |
|||||
Yos Shiran |
* |
* |
|||
Nahum Trost |
* |
* |
|||
David Cullen |
* |
* |
|||
Ken Williams |
* |
* |
|||
Edward Smith |
* |
* |
|||
Idit Maayan Zohar |
* |
* |
|||
Amir Cahana |
* |
* |
|||
Amihai Seider |
* |
* |
|||
Erez Margalit |
* |
* |
|||
Ron Mosberg |
* |
* |
|||
Lilach Gilboa |
* |
* |
|||
Gilad Frenkel |
* |
* |
|||
José Luis Ramón |
* |
* |
|||
Directors |
|||||
Dr. Ariel Halperin(2) |
14,089,994 |
40.8 |
|||
Nurit Benjamini |
* |
* |
|||
Lily Ayalon |
* |
* |
|||
David Reis |
* |
* |
|||
Maxim Ohana |
* |
* |
|||
Ronald Kaplan |
* |
* |
|||
Ornit Raz |
* |
* |
|||
Giora Wegman |
* |
* |
|||
Tom Pardo Izhaki |
* |
* |
|||
All current directors and executive officers
as a group (22 persons)(2) |
* |
Less than one percent of the outstanding ordinary shares. |
(1) |
As used in this table, “beneficial ownership” means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any security. For purposes of this table, a person is deemed to
be the beneficial owner of securities that can be acquired within 60 days from March 1, 2024, through the exercise of any option or warrant.
Ordinary shares subject to options that are currently exercisable or exercisable within 60 days, or other awards that are convertible
into our ordinary shares within 60 days, are deemed outstanding for computing the ownership percentage of the person holding such options
or other agreements, but are not deemed outstanding for computing the ownership percentage of any other person. The percentages are based
upon 34,536,236 ordinary shares outstanding as March 1, 2024. All our shareholders, including the shareholders listed above, have the same voting rights attached to
their ordinary shares. See “ITEM 10.B: Additional Information—Memorandum and Articles of Association—Voting.”
Our directors and executive officers hold, in the aggregate, (i) 388,234 options immediately exercisable
or exercisable within 60 days from March 1, 2024, with a weighted average exercise price of $13.1 per share and have expiration dates
generally seven years after the grant date, (ii) 28,078 RSUs that vest within 60 days from March 1, 2024, and (iii) 8,600 ordinary shares.
|
(2) |
Consists of (i) 60,500 options to acquire our ordinary shares held directly by Dr. Halperin
and (ii) 14,029,494 ordinary shares beneficially owned by Tene Investment in Projects 2016, L.P. (“Tene”).
As further described in footnote (2) under “ITEM 7.A: Major Shareholders and Related Party Transactions—Major Shareholders,”
Each of Dr. Halperin, Tene Growth Capital III (G.P.) Company Ltd. (“Tene III”), and
Tene Growth Capital 3 (Fund 3 G.P.) Projects, L.P (“Tene III Projects”) may be deemed
to share voting power over the 14,029,494 ordinary shares and dispositive power over the 5,589,494 ordinary shares, in each case, beneficially
owned by Tene. See “ITEM 7.A: Major Shareholders and Related Party Transactions—Major Shareholders.” |
A. |
Major Shareholders |
Name of Beneficial Owner |
Number of Shares Beneficially
Owned |
Percentage of Shares Beneficially
Held |
||||||
Mifalei Sdot-Yam Agricultural Cooperative Society Ltd. (1)(3) |
14,029,494 |
40.6 |
% | |||||
Tene Investment in Projects 2016, L.P.(2)(3) |
14,029,494 |
40.6 |
% | |||||
The Phoenix Holdings Ltd. (4) |
3,928,671 |
11.4 |
% | |||||
Global Alpha Capital Management Ltd. (5) |
2,981,057 |
8.6 |
% |
• |
The parties agreed to vote at general meetings of our shareholders in the same manner, following discussions intended to reach an
agreement on any matters proposed to be voted upon, with Mifalei Sdot-Yam determining the manner in which both parties will vote if no
agreement is reached, except with respect to certain carved-out matters, with respect to which Tene, for so long as it holds more than
3% of the issued and outstanding share capital of the Company, will determine the manner in which both parties will vote if no agreement
is reached. In addition, each of Mifalei Sdot-Yam and Tene shall be entitled to vote separately in any manner with respect to the appointment,
replacement or terms of compensation of the Company’s Chief Executive Officer. |
• |
In the event Tene holds less than 3% of the issued and outstanding share capital of the
Company, then the director nominated by Tene will be replaced by an alternate director (in accordance with applicable law and the articles
of association) nominated by Mifalei Sdot-Yam from a list of nominees that was agreed by the parties at the time the Amendment was signed
for a period ending on the earlier of (i) 60 days (after which time the director may resign) and (ii) the date of a general meeting
for the election of directors, and thereafter Tene will vote all its shares for the election of four directors nominated by Mifalei Sdot-Yam.
|
• |
The parties agree that Dr. Ariel Halperin will serve as the chairperson of the Board until June 30, 2024,
and thereafter act to appoint Mr. David Reis as the new chairperson of the board of directors. |
• |
The parties agree that Dr. Ariel Halperin will serve as the chairperson of the Board until June 30, 2024,
and thereafter act to appoint Mr. David Reis as the new chairperson of the Board. |
• |
Tene granted Mifalei Sdot-Yam a right of first refusal and Mifalei Sdot-Yam granted Tene certain tag-along rights with respect to
their disposition of ordinary shares. If Tene sells more than 3% of the issued and outstanding share capital of the Company without providing
Mifalei Sdot-Yam its right of first offer then certain rights contemplated under the September Amendment will terminate, including Tene’s
tag-along right. |
• |
The call option granted by Mifalei Sdot-Yam pursuant to the Term Sheet was not extended and expired on September 9, 2023. The call
option contemplated an option to exercise 2,000,000 ordinary shares of the Company. |
B. |
Related Party Transactions |
C. |
Interests of Experts and Counsel |
A. |
Consolidated Financial Statements and Other Financial Information |
B. |
Significant Changes |
A. |
Offer and Listing Details |
B. |
Plan of Distribution |
C. |
Markets |
D. |
Selling Shareholders |
E. |
Dilution |
F. |
Expenses of the Issue |
A. |
Share Capital |
B. |
Memorandum of Association and Articles of Association |
C. |
Material Contracts |
Material Contract |
Location in This Annual Report |
Agreements with Kibbutz Sdot-Yam |
“ITEM 7: Major Shareholders and Related Party Transactions—Related Party
Transactions—Relationship and agreements with Kibbutz Sdot-Yam.” |
Management Services Agreement with Tene |
“ITEM 7: Major Shareholders and Related Party Transactions—Related Party
Transactions—Management Services Agreement with Tene.” |
Agreements with Breton S.p.A. (Italy) |
“ITEM 3: Key Information—Risk Factors—If
we are unable to manufacture and/or ship our existing products globally as planned, our results of operations and future prospects will
suffer.” |
Form of Indemnification Agreement |
“ITEM 6: Directors, Senior Management and Employees—Board Practices—Exculpation,
insurance and indemnification of officer holders.” |
D. |
Exchange Controls |
E. |
Taxation |
• |
banks, financial institutions or insurance companies; |
• |
real estate investment trusts, regulated investment companies or grantor trusts; |
• |
dealers or traders in securities, commodities or currencies; |
• |
tax-exempt entities; |
• |
certain former citizens or long-term residents of the United States; |
• |
persons that received our shares as compensation for the performance of services; |
• |
persons that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction
or as a position in a “straddle” for United States federal income tax purposes; |
• |
partnerships (including entities classified as partnerships for United States federal income tax purposes) or other pass-through
entities, or holders that will hold our shares through such an entity; |
• |
S-corporations; |
• |
holders that acquire ordinary shares as a result of holding or owning our preferred shares; |
• |
U.S. Holders (as defined below) whose “functional currency” is not the U.S. Dollar; |
• |
persons subject to special tax accounting rules as a result of any item of gross income with respect to our ordinary shares being
taken into account in an applicable financial statement; or |
• |
holders that own directly, indirectly or through attribution 10% or more of the voting power or value of our shares. |
• |
an individual holder that is a citizen or resident of the United States; |
• |
a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or
under the laws of the United States or any state thereof, including the District of Columbia; |
• |
an estate the income of which is subject to United States federal income taxation regardless of its source; or |
• |
a trust if such trust has validly elected to be treated as a United States person for United States federal income tax purposes or
if (1) a court within the United States is able to exercise primary supervision over its administration and (2) one or more United States
persons have the authority to control all of the substantial decisions of such trust. |
• |
at least 75% of its gross income is “passive income”; or |
• |
at least 50% of the average value of its gross assets is attributable to assets that produce “passive income” or are
held for the production of passive income. |
F. |
Dividends and Paying Agents |
G. |
Statements by Experts |
H. |
Documents on Display |
I. |
Subsidiary Information |
J. |
Annual Report to Security Holders |
Australian dollar against U.S. dollar |
Canadian dollar against U.S. dollar |
NIS against U.S. dollar |
Euro against U.S. dollar |
|||||||||||||
2022 |
(7.6 |
)% |
(3.7 |
)% |
(3.8 |
)% |
(11 |
)% | ||||||||
2023 |
(4.5 |
)% |
(3.7 |
)% |
(9.0 |
)% |
2.6 |
% |
USD/NIS |
EUR/USD |
GBP/USD |
USD/CAD |
AUD/USD |
TOTAL |
||||||||||||||||||||
Sell forward contracts |
Notional |
21,162 |
--- |
--- |
--- |
--- |
21,162 |
||||||||||||||||||
Fair Value |
539 |
--- |
--- |
--- |
--- |
539 |
|||||||||||||||||||
Average
rate |
3.705 |
--- |
--- |
--- |
--- |
--- |
|||||||||||||||||||
Total notional value |
21,162 |
--- |
--- |
--- |
--- |
21,162 |
|||||||||||||||||||
Total fair value |
$ |
539 |
$ |
--- |
$ |
--- |
$ |
--- |
$ |
--- |
$ |
539 |
• |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of our assets; |
• |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and |
• |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the financial statements. |
2023 |
2022 |
|||||||
(in thousands of U.S. dollars) |
||||||||
Audit fees(1) |
$ |
954 |
$ |
743 |
||||
Audit-related fees(2) |
58 |
1 |
||||||
Tax fees(3) |
44 |
82 |
||||||
All other fees(4) |
21 |
193 |
||||||
Total |
$ |
1,077 |
$ |
1,019 |
(1) |
“Audit fees” include fees for services performed by our independent public accounting firm in connection with the integrated
audit of our annual audit consolidated financial statements for 2023 and 2022, and its internal control over financial reporting as of
December 31, 2023 and 2022, certain procedures regarding our quarterly financial results submitted on Form 6-K, and consultation concerning
financial accounting and reporting standards. |
(2) |
“Audit-related fees” relate to assurance and associated services that are traditionally performed by the independent
auditor. |
(3) |
“Tax fees” include fees for professional services rendered by our independent registered public accounting firm for tax
compliance and tax advice and tax planning services on actual or contemplated transactions. |
(4) |
“Other fees” include fees for services rendered by our independent registered public accounting firm with respect to
supply chain consulting, governmental incentives, due diligence investigations and other matters. |
• |
risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services,
and our broader enterprise IT environment; |
• |
a security team principally responsible for managing our cybersecurity risk assessment processes, our security controls, and
our response to cybersecurity incidents; |
• |
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
|
• |
cybersecurity awareness training of our employees, incident response personnel, and senior management; |
• |
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and |
• |
a third-party risk management process for service providers, suppliers, and vendors. |
Number |
Description | |
4.11
|
Management
Services Agreement, by and between Tene Growth Capital 3 Funds Management Company Ltd. and the Registrant, dated November 2021 (7) | |
101.INS |
Inline XBRL Instance Document |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
101.PRE |
Inline XBRL Taxonomy Presentation Linkbase Document |
101.CAL |
Inline XBRL Taxonomy Calculation Linkbase Document |
101.LAB |
Inline XBRL Taxonomy Label Linkbase Document |
101.DEF
104 |
Inline XBRL Taxonomy Extension Definition Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
(1) |
Previously filed with the Securities and Exchange Commission on March 6, 2012 as Exhibit 3.1 to the Company’s registration
statement on Form F-1/A (File No. 333-179556) and incorporated by reference herein. |
(2) |
Previously filed with the Securities and Exchange Commission on February 16, 2012 pursuant to a registration statement on Form F-1
(File No. 333-179556) and incorporated by reference herein. |
(3) |
Previously filed with the Securities and Exchange Commission on March 7, 2016 pursuant as Exhibit 4.5 to the Company’s
annual report on Form 20-F for the year ended December 31, 2015 and incorporated by reference herein. |
(4) |
Previously filed with the Securities and Exchange Commission on December 23, 2020 as Exhibit 99.1 to the Company’s Registration
Statement on Form S-8 (File No. 333-251642) and incorporated by reference herein. |
(5) |
Previously filed with the Securities and Exchange Commission on October 13, 2021 as Exhibit 99.1 to the Company’s current report
on Form 6-K and incorporated by reference herein. |
(6) |
Previously filed with the Securities and Exchange Commission on March 15, 2022 pursuant as Exhibit 4.10 to the Company’s annual
report on Form 20-F for the year ended December 31, 2021 and incorporated by reference herein. |
(7) |
Previously filed with the Securities and Exchange Commission on March 15, 2022 pursuant as Exhibit 4.11 to the Company’s annual
report on Form 20-F for the year ended December 31, 2021 and incorporated by reference herein |
* |
Portions of this exhibit were omitted, and a complete copy of each agreement was provided separately to the Securities and Exchange
Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 under the Exchange Act, which
was subsequently approved by the SEC. |
** |
Certain confidential information contained in this document, marked by brackets, was omitted because it is both (i) not material
and (ii) would likely cause competitive harm to the Company if publicly disclosed. “(***)” indicates where the information
has been omitted from this exhibit |
∞ |
English translation of original Hebrew document |
|
Caesarstone Ltd. |
|
|
|
By:/s/
Yosef (Yos) Shiran
Yosef (Yos) Shiran)
Chief Executive Officer
|
|
|
Date: March 6, 2024 |
|
Page
|
|
(PCAOB ID No.
|
F-2 - F-5
|
F-6 - F-7
|
|
F-8
|
|
F-9
|
|
F-10
|
|
F-11 - F-12
|
|
F-13 - F-70
|
|
(PCAOB ID No.
|
F-71 - F-72
|
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
Provision for bodily injury claims related to exposure to silica dust
|
||
Description of the matter
|
As described in note 11 to the consolidated financial statements, the Company is subject to numerous claims mainly by fabricators, their employees or the National Insurance Institute ("NII"), alleging that fabricators contracted illnesses, including silicosis, through exposure to silica particles during cutting, polishing, sawing, grinding, breaking, crushing, drilling, sanding or sculpting Company's products. The Company recognized a provision in relation to Silicosis claims when an unfavorable outcome was probable and the amount of the loss could be reasonably estimated. In order to determine the liability amount, the Company consults with legal counsels.
Auditing the Company’s provision of the Silicosis claims was complex due to the significant estimation required in determining the Company’s liability amount of $26 million. The estimate of the provision involved significant estimation uncertainty primarily due to the different stages of legal claims and the probability of loss, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating management's conclusions related to these legal claims.
|
|
How we addressed the matter in our audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the provision of the Silicosis claims, including management's assessment of the assumptions and data underlying the provision valuation.
To evaluate the Company's assessment of the probability of incurrence of a loss and whether the loss was reasonably estimated, among other procedures, we read the minutes of the meeting of the committees of the board of directors and gained an understanding of the claims by inquiring of the external and internal legal counsels regarding the allegations. We also obtained external and internal legal counsels confirmation letters as well as a management representation letter.
Our substantive procedures also included testing the accuracy, completeness and reasonableness of the underlying data used in management's provision assessment and attending meetings between management and legal counsels to determine a range of reasonably possible loss. We tested management’s assumptions by comparing prior period's estimates versus actual prior period's results and evaluating events occurring up to date of the auditor's report. We also inquired the legal counsels regarding the likelihood of the outcome of the claims and evaluated the Company’s legal contingency disclosures included in Note 11 to the consolidated financial statements.
|
Impairment of long-lived assets of Richmond Hill production facility
|
||
Description of the matter
|
As reflected in the Company’s consolidated financial statements, in Note 2k, as of December 31, 2023, the Company’s recorded an impairment charge of $27.5 Million for Long lived assets related to Richmond hill production facility.
Management identified the closure of its production facility in Richmond hill were indicators for impairment. Consequently, Management performed an impairment test of the long-lived assets of Richmond Hill production facility.
Auditing the Company's impairment test for long-lived assets of Richmond Hill production facility was complex and judgmental due to the significant estimation and assumptions in determining the fair value of the long-lived assets. In particular, management's significant assumptions used in determining the fair value of long-lived assets of Richmond Hill production facility included estimation of the fair value for a unit of equipment (machine, storage facility, etc.), land and building, according to the age of the assets and its condition. Management estimated the equipment value according to accepted equipment prices in the relevant market (local or international market). Land and building value estimated in comparison with sale of same type of properties in the area and the anticipated future benefit from the use of the property. These assumptions are sensitive and affected by the specific market and industry qualitive factors.
|
|
How we addressed the matter in our audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s long-lived assets impairment assessment process. Among other, we tested controls over management's review of the significant assumptions in estimating the fair value of the long-lived assets of Richmond Hill production facility of the Company.
To test the estimated fair value of the long-lived assets of Richmond Hill production facility, our audit procedures included, among others, understanding the company's valuation process, using a professional with specialized skills and knowledge to review the valuation of the equipment, and specialist to review the valuation land and building, understand the work assumptions and the selected data used as part of the assessment. In addition, we performed a sensitivity analysis using independent comparative calculation to estimate the fair value of the long-lived assets of the Richmond Hill production facility.
We also evaluated the related disclosures for long lived assets included in Notes 2k, 6 and 10 to the consolidated financial statements.
|
/s/KOST FORER GABBAY & KASIERER
|
A Member of EY Global
|
We have served as the Company's auditor since 2004
|
Tel-Aviv, Israel
|
March 6, 2024
|
|
|
|
/s/
|
A Member of EY Global
|
|
March 6, 2024
|
December 31,
|
|||||||||||
Note
|
2023
|
2022
|
|||||||||
ASSETS
|
|||||||||||
CURRENT ASSETS:
|
|||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
|||||||
Short-term bank deposits
|
|
|
|||||||||
Short-term available for sale marketable securities
|
3
|
|
|
||||||||
Trade receivables (net of allowance for credit loss of $
|
|
|
|||||||||
Other accounts receivable and prepaid expenses
|
4
|
|
|
||||||||
Inventories
|
5
|
|
|
||||||||
Total current assets
|
|
|
|||||||||
LONG-TERM ASSETS:
|
|||||||||||
Severance pay fund
|
|
|
|||||||||
Deferred tax assets, net
|
12
|
|
|
||||||||
Long-term deposits and other
|
14
|
|
|
||||||||
Property, plant and equipment, net
|
6
|
|
|
||||||||
Operating lease right-of-use assets
|
10
|
|
|
||||||||
Intangible assets, net
|
7
|
|
|
||||||||
Total long-term assets
|
|
|
|||||||||
Total assets
|
$
|
|
$
|
|
F - 6
December 31,
|
|||||||||||
Note
|
2023
|
2022
|
|||||||||
LIABILITIES AND EQUITY
|
|||||||||||
CURRENT LIABILITIES:
|
|||||||||||
Short-term bank credit and current maturities of long- term bank loan
|
8
|
$
|
|
$
|
|
||||||
Trade payables
|
|
|
|||||||||
Related party
|
14
|
|
|
||||||||
Short term legal settlements and loss contingencies
|
11
|
|
|
||||||||
Accrued expenses and other liabilities
|
9
|
|
|
||||||||
Total current liabilities
|
|
|
|||||||||
LONG-TERM LIABILITIES:
|
|||||||||||
Long-term loan from related parties
|
14
|
|
|
||||||||
Long-term bank loan
|
15
|
|
|
||||||||
Accrued severance pay
|
|
|
|||||||||
Deferred tax liabilities, net
|
12
|
|
|
||||||||
Long-term warranty provision
|
|
|
|||||||||
Long term legal settlements and loss contingencies
|
11
|
|
|
||||||||
Long-term operating lease liabilities
|
10
|
|
|
||||||||
Total long-term liabilities
|
|
|
|||||||||
COMMITMENTS AND CONTINGENT LIABILITIES
|
11
|
||||||||||
REDEEMABLE NON-CONTROLLING INTEREST
|
1,2
|
|
|
||||||||
EQUITY:
|
13
|
||||||||||
Share capital-
|
|||||||||||
Ordinary shares of NIS
|
|
|
|||||||||
Additional paid-in capital
|
|
|
|||||||||
Capital fund related to non-controlling interest
|
(
|
)
|
(
|
)
|
|||||||
Accumulated other comprehensive loss, net
|
(
|
)
|
(
|
)
|
|||||||
Retained earnings
|
|
|
|||||||||
Treasury shares at cost –
|
(
|
)
|
(
|
)
|
|||||||
Total equity
|
|
|
|||||||||
Total liabilities and equity
|
|
|
F - 7
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Revenues
|
$
|
|
$
|
|
$
|
|
||||||
Cost of revenues
|
|
|
|
|||||||||
Gross profit
|
|
|
|
|||||||||
Operating expenses:
|
||||||||||||
Research and development
|
|
|
|
|||||||||
Selling and marketing
|
|
|
|
|||||||||
General and administrative
|
|
|
|
|||||||||
Impairment and restructuring expenses related to goodwill and long lived assets
|
|
|
|
|||||||||
Legal settlements and loss contingencies, net
|
(
|
)
|
|
|
||||||||
Total operating expenses
|
|
|
|
|||||||||
Operating income (loss)
|
(
|
)
|
(
|
)
|
|
|||||||
Finance expenses (income), net
|
(
|
)
|
(
|
)
|
|
|||||||
Income (loss) before taxes on income
|
(
|
)
|
(
|
)
|
|
|||||||
Taxes on income
|
|
|
|
|||||||||
Net income (loss)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Net income (loss) attributable to non-controlling interest
|
(
|
)
|
|
(
|
)
|
|||||||
Net income (loss) attributable to controlling interest
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Basic and diluted net income (loss) per share of Ordinary shares
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Weighted average number of Ordinary shares used in computing basic income (loss) per share (in thousands)
|
|
|
|
|||||||||
Weighted average number of Ordinary shares used in computing diluted income (loss) per share (in thousands)
|
|
|
|
F - 8
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Net income (loss)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Other comprehensive income (loss) before tax:
|
||||||||||||
Foreign currency translation adjustments
|
|
(
|
)
|
(
|
)
|
|||||||
Unrealized income (loss) on foreign currency cash flow hedge
|
|
(
|
)
|
|
||||||||
Unrealized income (loss) on available for sale marketable securities
|
|
(
|
)
|
(
|
)
|
|||||||
Income tax expense related to components of other comprehensive loss
|
|
(
|
)
|
(
|
)
|
|||||||
Total other comprehensive income (loss), net of tax
|
|
(
|
)
|
(
|
)
|
|||||||
Comprehensive income (loss)
|
(
|
)
|
(
|
)
|
|
|||||||
Less - comprehensive loss attributable to non-controlling interest
|
|
|
|
|||||||||
Comprehensive income (loss) attributable to controlling interest
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
F - 9
Common stock
|
Additional
paid-in
|
Retained
|
Accumulated
other
comprehensive
income (loss),
|
Capital fund
related to non-
controlling
|
Treasury
|
Total
|
||||||||||||||||||||||||||
Shares
|
Amount
|
capital
|
earnings
|
net (1)
|
interest
|
shares
|
equity
|
|||||||||||||||||||||||||
Balance as of January 1, 2021
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|
||||||||||||||||||||||
-
|
||||||||||||||||||||||||||||||||
Other comprehensive loss
|
-
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||
Net income attributable to controlling interest
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Equity-based compensation expense (2)
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Adjustment to redemption value of the non-controlling interest
|
-
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Dividend paid
|
-
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Cashless exercise of options and RSUs
|
|
(
|
)
|
(
|
)
|
|
|
|
|
|
||||||||||||||||||||||
Balance as of December 31, 2021
|
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|||||||||||||||||||||
-
|
||||||||||||||||||||||||||||||||
Other comprehensive loss
|
-
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||
Net loss attributable to controlling interest
|
-
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Equity-based compensation expense (2)
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Adjustment to redemption value of the non-controlling interest
|
-
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Dividend paid
|
-
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Cashless exercise of options and RSUs
|
|
(
|
)
|
(
|
)
|
|
|
|
|
|
||||||||||||||||||||||
Balance as of December 31, 2022
|
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|||||||||||||||||||||
-
|
||||||||||||||||||||||||||||||||
Other comprehensive income
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net loss attributable to controlling interest
|
-
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Equity-based compensation expense (2)
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Adjustment to redemption value of the non-controlling interest
|
-
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Cashless exercise of options and RSUs
|
|
(
|
)
|
(
|
)
|
|
|
|
|
|
||||||||||||||||||||||
Balance as of December 31, 2023
|
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
F - 10
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income (loss)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Adjustments required to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
|
|
|
|||||||||
Share-based compensation expense
|
|
|
|
|||||||||
Accrued severance pay, net
|
(
|
)
|
(
|
)
|
|
|||||||
Changes in deferred tax, net
|
|
(
|
)
|
(
|
)
|
|||||||
Capital loss (gain) from sale of property, plant and equipment
|
|
|
(
|
)
|
||||||||
Decrease in trade receivables
|
|
|
|
|||||||||
Decrease (increase) in other accounts receivable and prepaid expenses
|
|
|
(
|
)
|
||||||||
Decrease (increase) in inventories
|
|
(
|
)
|
(
|
)
|
|||||||
Increase (decrease) in trade payables
|
(
|
)
|
(
|
)
|
|
|||||||
Increase in warranty provision
|
(
|
)
|
(
|
)
|
|
|||||||
Legal settlements and loss contingencies, net
|
(
|
)
|
|
|
||||||||
Decrease in right of use assets
|
|
|
|
|||||||||
Decrease in lease liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Contingent consideration related to acquisition
|
|
|
(
|
)
|
||||||||
Amortization of premium and accretion of discount on marketable securities, net
|
|
|
|
|||||||||
Changes in accrued interest related to marketable securities
|
|
|
|
|||||||||
Goodwill and long-lived assets impairment charges
|
|
|
|
|||||||||
Decrease in accrued expenses and other liabilities including related party
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net cash (used in) provided by operating activities
|
|
(
|
)
|
|
||||||||
Cash flows from investing activities:
|
||||||||||||
Net cash paid for acquisitions
|
|
(
|
)
|
|
||||||||
Investment in short-term deposits
|
(
|
)
|
|
|
||||||||
Purchase of property, plant and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Proceeds from sale of property, plant and equipment
|
|
|
|
|||||||||
Repayment of assumed shareholders loan related to acquisition
|
|
|
(
|
)
|
||||||||
Investment in marketable securities
|
|
|
(
|
)
|
||||||||
Sale and maturity of marketable securities
|
|
|
|
|||||||||
Proceeds from (investment in) long-term deposits
|
(
|
)
|
|
(
|
)
|
|||||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
(
|
)
|
F - 11
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Cash flows from financing activities:
|
||||||||||||
Dividend paid
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Proceeds (repayment) of short-term bank credit and loans, net
|
(
|
)
|
|
(
|
)
|
|||||||
Contingent and deferred considerations related to acquisition
|
(
|
)
|
|
(
|
)
|
|||||||
Repayment of a financing liability of land
|
|
(
|
)
|
(
|
)
|
|||||||
Net cash used in financing activities
|
(
|
)
|
|
(
|
)
|
|||||||
Effect of exchange rate differences on cash and cash equivalents
|
|
(
|
)
|
(
|
)
|
|||||||
Increase (decrease) in cash and cash equivalents
|
|
(
|
)
|
(
|
)
|
|||||||
Cash and cash equivalents at beginning of year
|
|
|
|
|||||||||
Cash and cash equivalents at end of year
|
$
|
|
$
|
|
$
|
|
||||||
Cash received (paid) during the year for:
|
||||||||||||
Interest paid
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
Interest received
|
$
|
|
$
|
|
$
|
|
||||||
Tax paid
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
Non cash activity during the year for:
|
||||||||||||
Changes in trade payables balances related to purchase of property, plant and equipment
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Operating lease liabilities and right-of-use assets
|
$
|
|
$
|
|
$
|
|
F - 12
NOTE 1:- |
GENERAL
|
a. |
General:
|
b. |
Acquisition of Lioli Ceramica Pvt Ltd:
|
F - 13
U.S. dollars in thousands (except share data)
NOTE 1:- |
GENERAL (Cont.)
|
c. |
Acquisition of Omicron Supplies, LLC:
|
F - 14
U.S. dollars in thousands (except share data)
NOTE 1:- |
GENERAL (Cont.)
|
d. |
Acquisition of Magrab Naturtsen AB:
|
Components of Purchase Price:
|
||||
Cash
|
$
|
|
||
Deferred consideration
|
|
|||
Less: Cash acquired
|
|
|||
Net for allocation
|
|
|||
|
||||
Allocation of Purchase Price:
|
||||
|
||||
Net tangible assets (liabilities):
|
||||
Trade receivables and other current assets, net
|
|
|||
Property, plant and equipment, net
|
|
|||
Inventories, net
|
|
|||
ROU assets
|
|
|||
Trade payables
|
(
|
)
|
||
Accrued expenses and other liabilities
|
(
|
)
|
||
Short-term lease liability
|
(
|
)
|
||
Long-term lease and other non-current liabilities
|
(
|
)
|
||
Total net tangible assets
|
|
|||
|
||||
Identifiable intangible assets:
|
||||
Customer relationships (1)
|
|
|||
Deferred tax liabilities
|
(
|
)
|
||
Total identifiable intangible assets acquired
|
|
|||
|
||||
Goodwill (2)
|
|
|||
Total purchase price allocation
|
$
|
|
F - 15
U.S. dollars in thousands (except share data)
NOTE 1:- |
GENERAL (Cont.)
|
(1) |
Customer relationships represent the underlying relationships and agreements with Magrab's customer base. In assessing the value of the Customer Relationships, the Company used an income approach method. The Customer Relationships’ economic useful life is estimated at approximately
|
(2) |
The goodwill is primarily attributable to expected synergies resulting from the acquisition.
|
e. |
Major suppliers:
|
F - 16
U.S. dollars in thousands (except share data)
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES
|
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").
a. |
Use of estimates:
|
b. |
Financial statements in U.S. dollars:
|
F - 17
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
c. |
Principles of consolidation:
|
d. |
Cash equivalents:
|
e. |
Short-term bank deposits:
|
f. |
Marketable securities:
|
The Company classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term.
The Company assessed AFS debt securities with an amortized cost basis in excess of estimated fair value to determine what amount of that difference, if any, is caused by expected credit losses in accordance with ASC 326. Allowance for credit losses on AFS debt securities are recognized as a charge of credit loss expenses (income), net, on the consolidated statements of comprehensive income, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders' equity. The Company did not record credit loss allowance on its marketable securities during the year ended December 31, 2023 and 2022.
F - 18
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g. |
Derivatives:
|
F - 19
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following tables present fair value amounts of, and gains and losses recorded in relation to, the Company's derivative instruments and related hedged items:
Balance sheet
|
Fair value of
derivative instruments
|
||||||||
|
Year ended
December 31,
|
||||||||
2023
|
2022
|
||||||||
Derivative assets:
|
|||||||||
Derivatives designated as hedging instruments:
|
|||||||||
Foreign exchange option and forward contracts
|
Other accounts receivable and prepaid expenses
|
|
|
||||||
Derivatives not designated as hedging instruments:
|
|
||||||||
Foreign exchange option and forward contracts
|
Other accounts receivable and prepaid expenses
|
|
|
||||||
Total
|
|
|
|
||||||
|
|
||||||||
Derivative liabilities:
|
|
||||||||
|
|
||||||||
Derivatives designated as hedging instruments:
|
|||||||||
Foreign exchange option and forward contracts
|
Accrued expenses and other liabilities
|
|
(
|
)
|
|||||
Derivatives not designated as hedging instruments:
|
|
||||||||
Foreign exchange option and forward contracts
|
Accrued expenses and other liabilities
|
|
(
|
)
|
|||||
Styrene forward contract
|
Accrued expenses and other liabilities
|
|
(
|
)
|
|||||
Total
|
|
|
(
|
)
|
F - 20
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following tables present fair value amounts of, and gains and losses recorded in relation to, the Company's derivative instruments and related hedged items:
Gain (loss) recognized in
other comprehensive
income, net
|
Gain (loss) recognized in
statements of income
|
||||||||||||||||
Year ended
December 31,
|
Statements of income
|
Year ended
December 31,
|
|||||||||||||||
2023
|
2022
|
Item
|
2023
|
2022
|
|||||||||||||
Derivatives designated as hedging instruments:
|
|||||||||||||||||
Foreign exchange forward contract
|
|
(
|
)
|
Cost of revenues and Operating expenses
|
(
|
)
|
(
|
)
|
|||||||||
Derivatives not designated as hedging instruments:
|
|
||||||||||||||||
Foreign exchange forward and options contracts
|
|
|
Financial expenses, net
|
|
(
|
)
|
|||||||||||
Styrene forward contracts
|
|
|
Financial expenses, net
|
|
(
|
)
|
|||||||||||
|
|
||||||||||||||||
Total
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
h. |
Inventories:
|
F - 21
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following table provides the details of the change in the Company's provision for inventory write-downs:
December 31,
|
||||||||
2023
|
2022
|
|||||||
Inventory provision, beginning of year
|
$
|
|
$
|
|
||||
Increase in inventory provision
|
|
|
||||||
Write off
|
(
|
)
|
(
|
)
|
||||
Inventory provision, end of year
|
$
|
|
$
|
|
i. |
Property, plant and equipment, net:
|
1. |
Property, plant and equipment are stated at cost, net of accumulated depreciation and investment grants.
|
2. |
Costs recorded prior to a production line completion are reflected as construction in progress, which are recorded building and machinery assets at the date of purchase. Construction in progress includes direct expenditures for the construction of the production line and is stated at cost. Capitalized costs include costs incurred under the construction contract: advisory, consulting and direct internal costs (including labor) and operating costs incurred during the construction and installation phase.
|
3. |
Depreciation is calculated using the straight-line method over the estimated useful life of the assets at the following annual rates:
|
%
|
|||
Machinery and manufacturing equipment
|
|
||
Office equipment and furniture
|
|
||
Motor vehicles
|
|
||
Buildings
|
|
||
Leasehold improvements
|
|
F - 22
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
j. |
Leases:
|
F - 23
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
k. |
Impairment of long-lived assets:
|
The Company identified indicators for impairment, among others, slow down in demand due to global market conditions, lower production utilization in certain plants, increased inflation and higher interest rates, and the manufacturing facilities closure in Sdot Yam and in Richmond hill. In 2022, the Company recorded an impairment loss for the excess of the book value over its fair value related to Sdot Yam manufacturing facility, in the amount of $
Following the closure of Sdot Yam manufacturing facility during 2023, the Company evaluated it's right of use asset resulted from non-cancelable lease agreement effective through 2032. Based on future estimated sublease the Company recorded an impairment of $
In addition to the recoverability assessment, the Company routinely reviews the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If the Company reduces the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized or depreciated over the revised estimated useful life.
F - 24
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
l. |
Goodwill:
|
(1) |
An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
|
|
(2) |
If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized.
|
The Company performed an annual goodwill impairment test during the fourth quarter of each fiscal year, or more frequently, if an event occurs or circumstances change that would indicate the carrying amount may be impaired. The Company operates as one reporting unit, and concluded that all of the Company's reporting units should be aggregated and deemed as a single reporting unit for the purpose of performing the goodwill impairment test in accordance with ASC 350-20-35-35, since they have similar economic characteristics.
F - 25
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
m. |
Warranty:
|
2023
|
2022
|
|||||||
January 1,
|
$
|
|
$
|
|
||||
Charged to costs and expenses relating to new sales
|
|
|
||||||
Costs of product warranty claims
|
(
|
)
|
(
|
)
|
||||
Foreign currency translation adjustments
|
|
|
||||||
December 31,
|
|
|
n. |
Revenue recognition:
|
F - 26
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company has elected to apply the practical expedient such that it does not evaluate payment terms of one year or less for the existence of a significant financing component.
o. |
Research and development costs:
|
p. |
Income taxes:
|
F - 27
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company accounts for its uncertain tax positions in accordance with ASC 740-10. ASC 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with ASC 740. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company classifies interest and penalties on income taxes as taxes on income.
q. |
Advertising expenses:
|
Advertising costs are expensed as incurred. Advertising expenses for the years ended December 31, 2023, 2022 and 2021 were $
r. |
Concentrations of credit risk:
|
F - 28
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following table provides the detail of the change in the Company's allowance for credit loss:
2023
|
2022
|
|||||||
January 1,
|
$
|
|
$
|
|
||||
Charges to expenses
|
|
|
||||||
Write offs
|
(
|
)
|
(
|
)
|
||||
Foreign currency translation adjustments
|
(
|
)
|
(
|
)
|
||||
December 31,
|
$
|
|
$
|
|
s. |
Severance pay:
|
Severance pay expenses for the years ended December 31, 2023, 2022 and 2021 amounted to approximately $
F - 29
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
t. |
Fair value of financial instruments:
|
The following table sets forth the Company’s assets and liabilities that were measured at fair value as of December 31, 2023 and 2022 by level within the fair value hierarchy:
Fair value measurements
|
||||||||||
Fair Value
|
as of December 31,
|
|||||||||
Description
|
Hierarchy
|
2023
|
2022 |
|
||||||
Measured at fair value on a recurring basis:
|
||||||||||
|
||||||||||
Assets:
|
||||||||||
Cash equivalents:
|
||||||||||
Money market mutual funds
|
Level 1
|
$
|
|
$
|
|
|||||
|
||||||||||
Short-term marketable securities:
|
||||||||||
Corporate bonds
|
Level 2
|
$
|
|
$
|
|
|||||
Derivative assets
|
Level 2
|
$
|
|
$
|
|
|||||
Liabilities:
|
||||||||||
Derivative liabilities
|
Level 2
|
$
|
|
$
|
(
|
)
|
||||
Redeemable Non-Controlling Interest (*):
|
Level 3
|
$
|
|
$
|
|
(*) The change in fair value of redeemable non-controlling interest valued using significant unobservable inputs (Level 3), was included in note 2x. The Company estimated the fair value of redeemable non-controlling interest using Monte Carlo simulation. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, the discount rate and the volatility. The fair value measurement is based on inputs not observable in the market and thus represent Level 3 measurements as defined in ASC 820. The extent to which the actual results differ from assumptions made within the probability-weighted analyses will result in adjustments to this liability in future periods.
|
F - 30
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(a) |
As of December 31, 2023, in accordance with Subtopic 360-10, long-lived assets held and used were written down to their fair value, resulting in an impairment charge of $
As of December 31, 2022, long-lived assets held and used were written down to their fair value, resulting an impairment charge of $
|
(b) |
As of December 31, 2023 and 2022, the goodwill balance was $
|
u. |
Basic and diluted net income (loss) per share:
|
Diluted net income (loss) per share ("Diluted EPS") gives effect to all dilutive potential ordinary shares outstanding during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings. The dilutive effect of outstanding stock options is computed using the treasury stock method. For the years ended December 31, 2023, 2022 and 2021 there were approximately
F - 31
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
v. |
Comprehensive income and accumulated other comprehensive income (loss):
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Accumulated loss on marketable securities
|
$
|
|
$
|
(
|
)
|
|||
Accumulated income (loss) on derivative instruments
|
|
(
|
)
|
|||||
Accumulated foreign currency translation differences and other
|
(
|
)
|
(
|
)
|
||||
Total accumulated other comprehensive loss, net
|
$
|
(
|
)
|
$
|
(
|
)
|
F - 32
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following table summarizes the changes in AOCI, net of taxes for the year ended:
Unrealized gains (losses) on derivative instruments
|
Unrealized gains (losses) on marketable securities
|
Accumulated foreign currency translation differences and other
|
Total
|
|||||||||||||
Balance at January 1, 2022
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Other comprehensive income (loss) before reclassifications
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Amounts reclassified from AOCI
|
|
|
|
|
||||||||||||
Net current period OCI
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Balance at December 31, 2022
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Other comprehensive income (loss) before reclassifications
|
(
|
)
|
|
|
(
|
)
|
||||||||||
Amounts reclassified from AOCI
|
|
|
|
|
||||||||||||
Net current period OCI
|
|
|
|
|
||||||||||||
Balance at December 31, 2023
|
|
|
(
|
)
|
(
|
)
|
The following table shows the amounts reclassified from AOCI into the Consolidated Statements of Income, and the associated financial statement line item, for 2023 and 2022:
December 31,
|
||||||||
2023
|
2022
|
|||||||
Affected line item in the consolidated statements of income
|
||||||||
Cost of revenues
|
$
|
|
$
|
|
||||
Research and development
|
|
|
||||||
Marketing and selling
|
|
|
||||||
General and administrative
|
|
|
||||||
Total loss
|
$
|
|
$
|
|
F - 33
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.):
w. |
Accounting for stock-based compensation:
|
December 31,
|
||||||
2023
|
2022
|
|||||
Dividend yield
|
|
|
|
|||
Expected volatility
|
|
|
||||
Risk-free interest rate
|
|
|
||||
Expected life (in years)
|
|
|
The Company used volatility data in accordance with ASC 718 and based on Company's historical data.
The computation of risk free interest rate is based on the rate available on the date of grant of a zero-coupon U.S. government bond with a remaining term equal to the expected term of the option.
F - 34
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The expected term of options granted is calculated using the simplified method (being the average between the vesting periods and the contractual life of the options). In case of grant to Company's CEO or directors, the expected term equales to the contractual life.
For the vast majority of the options granted in 2023 and 2022, the dividend yield is zero, due to adjustment mechanism with respect to the exercise price upon payment of a dividend. For those options granted without adjustment mechanism, the dividend yield applied is
x. |
Redeemable non-controlling interest:
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Beginning of the year
|
$
|
|
$
|
|
$
|
|
||||||
Assuming the non controlling interest due to acquisition
|
|
|
|
|||||||||
Net income (loss) attributable to non-controlling interest
|
(
|
)
|
|
(
|
)
|
|||||||
Adjustment to Put option value (*)
|
|
|
|
|||||||||
Foreign currency translation adjustments
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Redeemable non-controlling interest - end of the year
|
$
|
|
$
|
|
$
|
|
(*) |
|
F - 35
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
y. |
Contingencies:
|
z. |
Business combination:
|
F - 36
U.S. dollars in thousands (except share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
aa. |
Exit or disposal activities:
The company accounts for exit and disposal cost obligations, including restructuring activities, under ASC 420-10 "Exit or Disposal Cost Obligations", which requires that the company record liabilities for such activities only when such liability has been incurred. During 2023 the company closed it's facility in Sdot-Yam, Israel and announced the closure of its manufacturing facility in Richmond hill, Georgia, USA.
|
F - 37
U.S. dollars in thousands (except share data)
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
ab. |
Impact of recently issued accounting standards:
|
F - 38
U.S. dollars in thousands (except share data)
NOTE 3: |
MARKETABLE SECURITIES
|
Amortized
cost
|
Gross unrealized
gains
|
Gross unrealized
losses
|
Accrued
Interest
|
Fair
value
|
||||||||||||||||
|
||||||||||||||||||||
Available-for-sale – matures within one year:
|
||||||||||||||||||||
Corporate bonds
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
NOTE 4:- |
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Prepaid expenses
|
$
|
|
$
|
|
||||
Government authorities
|
|
|
||||||
Advances to suppliers
|
|
|
||||||
Derivatives
|
|
|
||||||
Other receivables (*)
|
|
|
||||||
$
|
|
$
|
|
NOTE 5:- |
INVENTORIES
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Raw materials
|
$
|
|
$
|
|
||||
Work-in-progress
|
|
|
||||||
Finished goods
|
|
|
||||||
$
|
|
$
|
|
F - 39
U.S. dollars in thousands (except share data)
NOTE 6:- |
PROPERTY, PLANT AND EQUIPMENT, NET
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Cost:
|
||||||||
Machinery and manufacturing equipment, net (1)
|
$
|
|
$
|
|
||||
Office equipment and furniture
|
|
|
||||||
Motor vehicles
|
|
|
||||||
Buildings and leasehold improvements
|
|
|
||||||
Prepaid expenses related to operating lease (2)
|
|
|
||||||
|
|
|||||||
Accumulated depreciation and impairment:
|
||||||||
Machinery and manufacturing equipment, net
|
|
|
||||||
Office equipment and furniture
|
|
|
||||||
Motor vehicles
|
|
|
||||||
Buildings and leasehold improvements
|
|
|
||||||
Prepaid expenses related to operating lease
|
|
|
||||||
Impairment of fixed assets (3)
|
|
|
||||||
|
|
|||||||
Depreciated cost
|
$
|
|
$
|
|
(1) |
Presented net of investment grants received in the total amount of $
|
(2) |
Until 2012, the Company leased land from the Israel Lands Administration ("ILA") for its Bar-Lev manufacturing facility. The lease term started on February 6, 2005. The lease is for an initial non-cancellable term of 49 years, with a renewal option of an additional 49 years.
|
(3) |
Non cash pre-tax impairment charges recognized in 2023 were $
|
F - 40
U.S. dollars in thousands (except share data)
NOTE 7:- |
GOODWILL AND INTANGIBLES
|
Balance as of January 1, 2022
|
$
|
|
||
Acquired through business combination (*)
|
|
|||
Goodwill Impairment (**)
|
(
|
)
|
||
Foreign currency translation adjustments
|
(
|
)
|
||
Balance as of December 31, 2022 and 2023
|
$
|
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Original amounts:
|
||||||||
Customer relationships (*)
|
$
|
|
$
|
|
||||
Accumulated amortization:
|
||||||||
Customer relationships
|
(
|
)
|
(
|
)
|
||||
Foreign currency translation adjustment
|
(
|
)
|
(
|
)
|
||||
Total intangibles assets
|
$
|
|
$
|
|
(*) |
In 2022, includes $
|
(1) |
Amortization expense amounted to $
|
(2) |
Estimated amortization expenses for the following years as of December 31, 2023:
|
2024
|
|
||
2025
|
|
||
2026
|
|
||
2027
|
|
||
2028
|
|
||
2029 and on
|
|
||
$
|
|
F - 41
U.S. dollars in thousands (except share data)
NOTE 8:- |
SHORT-TERM BANK CREDIT AND CURRENT MATURITIES OF LONG-TERM LOAN
|
Short-term bank credit and loans are classified as follows:
|
Weighted average interest
|
|||||||||||||||||
Currency
|
December 31,
|
December 31,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
||||||||||||||
%
|
|||||||||||||||||
Short-term bank credit (*)
|
USD
|
|
|
$
|
|
$
|
|
||||||||||
Short-term bank credit (**)
|
INR
|
|
|
$
|
|
$
|
|
||||||||||
Current maturities of Long- term bank loan and other (**)
|
INR
|
|
|
$
|
|
$
|
|
||||||||||
Total
|
$
|
|
$
|
|
(*) As of December 31, 2023, the company has no credit lines in Israeli banks. The credit line outstanding as of December 31, 2022, in Israeli banks was fully repaid during 2023.
|
|
|
(**) Credit line and bank loan in Lioli - During 2022, Lioli engaged with a new bank and signed a new loan agreement. The loan agreement with the bank in Lioli contains customary covenants. Lioli is in compliance with the requirement of the financial covenants under the agreement of own capital contribution. The Loan Agreement also contains certain customary negative covenants that require Lioli to refrain from certain actions unless bank’s consent obtained. Lioli debt is secured by a SBLC (Stand By Letter of Credit) from Caesarstone and floating charge on all of Lioli’s assets. (see also Note 15).
|
NOTE 9:- |
ACCRUED EXPENSES AND OTHER LIABILITIES
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Employees and payroll accruals
|
$
|
|
$
|
|
||||
Accrued expenses
|
|
|
||||||
Advances from customers
|
|
|
||||||
Taxes payable
|
|
|
||||||
Warranty provision
|
|
|
||||||
Derivatives
|
|
|
||||||
Sales return provision
|
|
|
||||||
Operating lease liability short-term
|
|
|
||||||
Contingent consideration liability and other
|
|
|
||||||
$
|
|
$
|
|
F - 42
U.S. dollars in thousands (except share data)
NOTE 10:- |
LEASES
|
a. |
The following table summarizes the Company’s lease-related assets and liabilities recorded on the consolidated balance sheet:
|
Classification
|
December 31, 2023
|
December 31, 2022
|
|||||||
Assets:
|
|||||||||
Operating lease assets (*)
|
Operating lease right-of-use assets
|
$
|
|
$
|
|
||||
Total lease assets
|
$
|
|
$
|
|
|||||
Liabilities:
|
|||||||||
Current lease liabilities
|
Accrued expenses and other liabilities
|
|
|
||||||
Long-term lease liabilities
|
Long-term operating lease liabilities
|
|
|
||||||
Total lease liabilities
|
$
|
|
$
|
|
Lease term and discount rate:
|
December 31,
2023
|
December 31,
2022
|
||||
Weighted-average remaining lease term — operating leases
|
|
|
||||
Weighted-average discount rate — operating leases
|
|
|
|
|
F - 43
U.S. dollars in thousands (except share data)
NOTE 10:- |
LEASES (Cont.)
|
b. |
The components of operating lease cost for the year ended December 31, 2023 were as follows:
|
December 31, 2023
|
December 31, 2022
|
|||||||
Operating lease cost:
|
||||||||
Operating lease expense
|
$
|
|
$
|
|
||||
Variable lease expense (*)
|
|
|
||||||
Sublease income
|
(
|
)
|
(
|
)
|
||||
Total operating lease cost
|
$
|
|
$
|
|
(*) |
Includes short-term leases, index, maintenance and variable lease costs.
|
c. |
The maturity of the Company’s operating lease liabilities for contracts with lease term greater than one year as of December 31, 2023 are as follows:
|
December 31,
|
||||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028
|
|
|||
2029 and thereafter
|
|
|||
Total future lease payments (*)
|
|
|||
Less imputed interest
|
(
|
)
|
||
Total
|
$
|
|
(*) |
Total lease payments have not been reduced by sublease rental payments of approximately $
|
d. |
For additional information regarding lease transactions between related parties, refer to Note 14.
|
F - 44
U.S. dollars in thousands (except share data)
NOTE 10:- |
LEASES (Cont.)
|
e. |
The following table presents supplemental cash flow information related to the lease costs for operating leases:
|
December 31, 2023
|
December 31, 2022
|
|||||||
Cash paid for amounts included in measurement of lease liabilities:
|
||||||||
Operating cash flows for operating leases
|
$
|
|
$
|
|
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES
|
a. |
Legal proceedings and contingencies:
|
The Company is subject to numerous claims mainly by fabricators, their employees or National Insurance Institute (the Israeli insurance institute -"NII" or Australian states workers compensation regulators), alleging that fabricators contracted illnesses, including silicosis, through exposure to silica particles during cutting, polishing, sawing, grinding, breaking, crushing, drilling, sanding or sculpting Company's products.
|
F - 45
U.S. dollars in thousands (except share data)
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
F - 46
U.S. dollars in thousands (except share data)
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
Individual claims in the U.S.:
Accordingly, the reserve for bodily injury claims in Israel and Australia (including class action) as of December 31, 2023 and 2022 totaled to $
F - 47
U.S. dollars in thousands (except share data)
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Outstanding claims, January 1,
|
|
|
|
|||||||||
New claims
|
|
|
|
|||||||||
Settled and dismissed claims
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Outstanding claims, December 31
|
|
|
|
F - 48
U.S. dollars in thousands (except share data)
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
General:
|
From time to time, the Company is involved in other legal proceedings and claims in the ordinary course of business related to a range of matters. While the outcome of these other claims cannot be predicted with certainty, the Company monitors and estimates the possible loss deriving from these claims based on new information available and based on its legal advisors, and believes that it recorded an adequate reserve for these claims in accordance with ASC 450.
|
b. |
Purchase obligation:
|
c. |
Pledges and guarantees:
|
1. |
As of December 31, 2023, the Company had outstanding guarantees and letters of credit with various expiration dates in a principal amount of approximately $
|
2. |
See also note 15.
|
F - 49
U.S. dollars in thousands (except share data)
NOTE 12:- |
TAXES ON INCOME
|
a. |
Israeli taxation:
|
1. |
Corporate tax rate:
|
2. |
Foreign Exchange Regulations:
Under the Foreign Exchange Regulations, Caesarstone Ltd. calculates its tax liability in U.S. Dollars according to certain orders. The tax liability, as calculated in U.S. Dollars is translated into New Israeli Shekels according to the exchange rate as of December 31st of each year.
|
3. |
Tax benefits under Israel's Law for the Encouragement of Industry (Taxes), 1969:
|
4. |
Tax benefits under the Law for the Encouragement of Capital Investments, 1959:
|
F - 50
U.S. dollars in thousands (except share data)
NOTE 12:- |
TAXES ON INCOME (Cont.)
|
1. |
Its main field of activity is biotechnology or nanotechnology as approved by the Head of the Administration of Industrial Research and Development.
|
2. |
The industrial enterprise's sales revenues in a specific market during the tax year do not exceed 75% of its total sales for that tax year. A "market" is defined as a separate country or customs territory.
|
3. |
At least
|
The Company is eligible for a deduction of accelerated depreciation on machinery and equipment used by the Approved Enterprise or the Beneficiary Enterprise or the Preferred Enterprise at a rate of
|
F - 51
U.S. dollars in thousands (except share data)
NOTE 12:- |
TAXES ON INCOME (Cont.)
|
F - 52
U.S. dollars in thousands (except share data)
NOTE 12:- |
TAXES ON INCOME (Cont.)
|
b. |
Non-Israeli subsidiaries taxation:
|
F - 53
U.S. dollars in thousands (except share data)
NOTE 12:- |
TAXES ON INCOME (Cont.)
|
c. |
Deferred income taxes:
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Deferred tax assets:
|
||||||||
Goodwill and Intangible assets
|
$
|
|
$
|
|
||||
Other temporary differences including operating lease (1)
|
|
|
||||||
Temporary differences related to inventory (2)
|
|
|
||||||
Property and equipment
|
|
|
||||||
Carryforward losses, deductions and credits (3)
|
|
|
||||||
Less-valuation allowance
|
(
|
)
|
(
|
)
|
||||
Total deferred tax assets
|
|
|
||||||
Deferred tax liabilities:
|
||||||||
Property and equipment
|
(
|
) |
(
|
)
|
||||
Intangible Assets
|
(
|
)
|
(
|
)
|
||||
Other temporary differences including operating lease
|
(
|
)
|
(
|
)
|
||||
Total deferred tax liabilities
|
(
|
)
|
(
|
)
|
||||
Deferred tax assets, net
|
$
|
|
$
|
|
(1) |
Deriving mainly from provision for labor related, provision for loss contingencies and lease accounting in accordance with ASC842.
|
(2) |
Deriving mainly from the provision for slow moving inventory and IRS section 263(a).
|
(3) |
Parent company and certain subsidiaries have tax loss carry-forwards totaling approximately $
|
F - 54
U.S. dollars in thousands (except share data)
NOTE 12:- |
TAXES ON INCOME (Cont.)
|
d. |
A reconciliation of the Company's effective tax rate to the statutory tax rate in Israel is as follows:
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Income (loss) before taxes on income
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Statutory tax rate in Israel
|
|
%
|
|
%
|
|
%
|
||||||
Income (loss) taxes at statutory rate
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Increase (decrease) in tax expenses resulting from:
|
||||||||||||
Tax benefit arising from reduced rate as an "Preferred Enterprise"
|
|
|
(
|
)
|
||||||||
Non-deductible expenses, net
|
|
|
|
|||||||||
Increase (decrease) in taxes from prior years, also related to settlement with tax authorities |
|
(
|
)
|
(
|
)
|
|||||||
Tax adjustment in respect of foreign subsidiaries' different tax rates
|
(
|
) |
(
|
)
|
(
|
)
|
||||||
Provision for withholding tax assets |
|
|||||||||||
Uncertain tax position
|
|
|
|
|||||||||
Changes in valuation allowance
|
|
|
(
|
)
|
||||||||
Others
|
(
|
)
|
|
|
||||||||
Income tax expense
|
$
|
|
$
|
|
$
|
|
||||||
Effective tax rate
|
(
|
)%
|
(
|
)%
|
|
%
|
||||||
Per share amounts (basic and diluted) of the tax benefit resulting from an "Preferred Enterprise"
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
F - 55
U.S. dollars in thousands (except share data)
NOTE 12:- |
TAXES ON INCOME (Cont.)
|
e. |
Income (loss) before taxes on income is comprised as follows:
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Domestic
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Foreign
|
(
|
)
|
(
|
)
|
|
|||||||
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
f. |
Tax expenses on income are comprised as follows:
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Current taxes
|
$
|
|
$
|
|
$
|
|
||||||
Deferred taxes
|
|
(
|
)
|
(
|
)
|
|||||||
$
|
|
$
|
|
$
|
|
|||||||
Domestic
|
$
|
|
$
|
|
$
|
|
||||||
Foreign
|
|
|
|
|||||||||
$
|
|
$
|
|
$
|
|
g. |
Tax assessments:
|
F - 56
U.S. dollars in thousands (except share data)
NOTE 12:- |
TAXES ON INCOME (Cont.)
|
h. |
Uncertain tax positions:
|
Gross tax liabilities at January 1, 2021
|
$
|
|
||
Increase in tax positions for current year
|
|
|||
Gross tax liabilities at December 31, 2021
|
|
|||
Increase in tax positions for current year
|
(
|
)
|
||
Gross tax liabilities at December 31, 2022
|
|
|||
Release of tax position of prior years
|
|
|||
Gross tax liabilities at December 31, 2023
|
$
|
|
F - 57
U.S. dollars in thousands (except share data)
NOTE 13:- |
SHAREHOLDERS' EQUITY
|
a. |
The Company's share capital consisted of the following as of December 31, 2023 and 2022:
|
Authorized
|
Outstanding
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Number of shares
|
||||||||||||||||
Ordinary shares of NIS
|
|
|
|
|
|
|
|
|
b. |
Ordinary shares:
|
c. |
Dividends:
|
F - 58
U.S. dollars in thousands (except share data)
NOTE 13:- |
SHAREHOLDERS' EQUITY (Cont.)
|
d. |
Compensation plan:
|
Number
of options
|
Weighted
average
exercise
price
|
Aggregate
intrinsic
value
|
||||||||||
Outstanding - beginning of the year
|
|
|
|
|||||||||
Granted
|
|
|
||||||||||
Exercised
|
|
|
||||||||||
Forfeited
|
(
|
)
|
|
|||||||||
Outstanding - end of the year
|
|
|
|
|||||||||
Options exercisable at the end of the year
|
|
|
|
|||||||||
Vested and expected to vest
|
|
|
|
F - 59
U.S. dollars in thousands (except share data)
NOTE 13:- |
SHAREHOLDERS' EQUITY (Cont.)
|
Number
of RSUs
|
Weighted
average
fair value
|
Aggregate
intrinsic value
|
||||||||||
Outstanding - end of the year
|
|
|
|
|||||||||
Granted
|
|
|
||||||||||
Exercised
|
(
|
)
|
|
|||||||||
Forfeited
|
(
|
)
|
|
|||||||||
Outstanding - end of the year
|
|
|
|
|||||||||
RSUs exercisable at the end of the year
|
|
|
|
|||||||||
Vested and expected to vest
|
|
|
|
Awards outstanding
|
Awards exercisable
|
|||||||||||||||||||||||||
Exercise price
|
Number
of
options
|
Weighted
average
remaining
contractual
life (years)
|
Weighted
average
exercise
price
per share
|
Number
of
options
|
Weighted
average
remaining
contractual
life (years)
|
Weighted
average
exercise
price
|
||||||||||||||||||||
$
|
|
|
$
|
|
|
-
|
$
|
|
||||||||||||||||||
$
|
|
|
$
|
|
|
|
$
|
|
||||||||||||||||||
$
|
|
|
$
|
|
|
|
$
|
|
||||||||||||||||||
$
|
|
|
$
|
|
|
|
$
|
|
||||||||||||||||||
|
|
F - 60
U.S. dollars in thousands (except share data)
NOTE 13:- |
SHAREHOLDERS' EQUITY (Cont.)
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Cost of revenues
|
$
|
|
$
|
|
||||
Research and development expenses
|
|
|
||||||
Marketing and selling expenses
|
|
|
||||||
General and administrative expenses
|
|
|
||||||
Total
|
$
|
|
$
|
|
NOTE 14:- |
TRANSACTIONS WITH RELATED PARTIES
|
a. |
Manpower agreement with the Kibbutz:
|
F - 61
U.S. dollars in thousands (except share data)
NOTE 14:- |
TRANSACTIONS WITH RELATED PARTIES (Cont.)
|
F - 62
U.S. dollars in thousands (except share data)
NOTE 14:- |
TRANSACTIONS WITH RELATED PARTIES (Cont.)
|
b. |
Services from the Kibbutz:
|
F - 63
U.S. dollars in thousands (except share data)
NOTE 14:- |
TRANSACTIONS WITH RELATED PARTIES (Cont.)
|
c. |
Land Use Agreement with the Kibbutz:
|
F - 64
U.S. dollars in thousands (except share data)
NOTE 14:- |
TRANSACTIONS WITH RELATED PARTIES (Cont.)
|
d. |
Financing liability of land:
|
F - 65
U.S. dollars in thousands (except share data)
NOTE 14:- |
TRANSACTIONS WITH RELATED PARTIES (Cont.)
|
d. |
Financing liability of land (cont.):
|
|
F - 66
U.S. dollars in thousands (except share data)
NOTE 14:- |
TRANSACTIONS WITH RELATED PARTIES (Cont.)
|
e. |
Details on transactions and balances with related parties and other loan:
|
1. |
The Company has, from time to time, entered into transactions with its shareholders (the Kibbutz). The following table summarizes such transactions:
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Cost of revenues
|
$
|
|
$
|
|
$
|
|
||||||
Research and development
|
$
|
|
$
|
|
$
|
|
||||||
Selling and marketing
|
$
|
|
$
|
|
$
|
|
||||||
General and administrative
|
$
|
|
$
|
|
$
|
|
||||||
Finance expenses, net
|
$
|
|
$
|
(
|
)
|
$
|
|
2. |
Balances with related party and other loan:
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Related party balances (1)
|
$
|
|
$
|
|
||||
Other loans(2)
|
$
|
|
$
|
|
1. |
Related to the above mentioned agreements with related party.
|
2. |
During 2021, the Company assumed
|
F - 67
U.S. dollars in thousands (except share data)
NOTE 15:- |
LONG-TERM BANK LOAN
|
a. |
As part of the Lioli’s acquisition in 2020, Lioli assumed also a bank loan from commercial banks in India. The loan agreement includes certain covenants that Lioli is required to meet. As of December 31, 2023 and 2022 the covenants are met and the loan is presented under long-term bank loan (see also Note 8). |
b. |
During 2022, lioli refinanced its old loan and signed on a new loan agreement with HDFC Bank. The new loan is denominated in Indian rupee and as of December 31, 2023 t
|
c. |
The loan is secured by creating charge on Lioli’s land, building and plant and machineries and current assets including stock, receivables and other current assets. The Company has also provided the stand by letter of credit as a security.
|
NOTE 16:- |
MAJOR CUSTOMER AND GEOGRAPHIC INFORMATION
|
a. |
The Company manages its business on the basis of
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
USA
|
$
|
|
$
|
|
$
|
|
||||||
Canada
|
|
|
|
|||||||||
Latin America
|
|
|
|
|||||||||
Australia
|
|
|
|
|||||||||
Asia
|
|
|
|
|||||||||
EMEA
|
|
|
|
|||||||||
Israel
|
|
|
|
|||||||||
$
|
|
$
|
|
$
|
|
F - 68
U.S. dollars in thousands (except share data)
NOTE 16:- |
MAJOR CUSTOMER AND GEOGRAPHIC INFORMATION (Cont.)
|
b. |
The following table presents total long-lived assets as of December 31, 2023 and 2022:
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
USA
|
$
|
|
$
|
|
||||
Canada
|
|
|
||||||
Australia
|
|
|
||||||
Asia
|
|
|
||||||
EMEA
|
|
|
||||||
Israel
|
|
|
||||||
$
|
|
$
|
|
NOTE 17:- |
SELECTED SUPPLEMENTARY STATEMENTS OF INCOME DATA
|
a. |
Finance (income) expense, net:
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Finance expenses:
|
||||||||||||
Interest in respect credit cards and bank fees
|
$
|
|
$
|
|
$
|
|
||||||
Interest in respect of loans
|
|
|
|
|||||||||
Amortization/accretion of premium/discount on marketable securities
|
|
|
|
|||||||||
Realized gain/loss from marketable securities, net
|
|
|
|
|||||||||
Changes in derivatives fair value
|
|
|
|
|||||||||
Foreign exchange transactions losses
|
|
|
|
|||||||||
|
|
|
||||||||||
Finance income:
|
||||||||||||
Interest in respect of cash and cash equivalent and short-term bank deposits
|
|
|
|
|||||||||
Changes in derivatives fair value
|
|
|
|
|||||||||
Interest income from marketable securities
|
|
|
|
|||||||||
Foreign exchange transactions gains
|
|
|
|
|||||||||
|
|
|
||||||||||
Finance expenses (income), net
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
F - 69
U.S. dollars in thousands (except share data)
NOTE 17:- |
SELECTED SUPPLEMENTARY STATEMENTS OF INCOME DATA (Cont.)
|
b. |
Net earnings (loss) per share:
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Net income (loss) attributable to controlling interest, as reported
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Adjustment to redemption value of non-controlling interest
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Numerator for basic and diluted net income (loss) per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Year ended December 31,
|
||||||||||||
2023
|
2022
|
2021
|
||||||||||
Denominator for basic income (loss) per share
|
|
|
|
|||||||||
Effect of dilutive stock based awards
|
|
|
|
|||||||||
Denominator for diluted income (loss) per share
|
|
|
|
Basic and diluted earnings (loss) per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
- - - - - - - - - - -
F - 70
• |
Obtaining an understanding, evaluating the design and operating effectiveness of the controls around the goodwill impairment process;
|
• |
Assessing the reasonableness of management’s determination of the reporting unit and the allocation of goodwill;
|
• |
Assessing management’s impairment model for compliance with ASC 350 and ASC 820;
|
• |
Obtaining an understanding of the significant inputs and assumptions in management’s model, and assessing for reasonableness including:
|
o |
Reviewing the key inputs of the model and corroborating key assumptions against supporting documentation;
|
o |
Assessing the appropriateness of revenue growth assumptions in management’s forecast of cash flows in the current operating environment;
|
o |
Engaging our internal valuation specialists to assess the appropriateness of the impairment model as a fair value approach consistent with ASC 820;
|
o |
Engaging our internal valuation specialists to develop a range of independent estimates of the discount rate and comparing those to the discount rate selected by management;
|
o |
Performing sensitivity analysis on the significant inputs and assumptions made by management in preparing the valuation model; and
|
• |
Assessing the adequacy of disclosures in the financial report.
|
• |
Obtaining an understanding, evaluating the design and operating effectiveness of the controls around the recognition and measurement of the liability;
|
• |
Inquiring directly with all the Company’s attorneys utilized throughout the year;
|
• |
Obtaining an understanding of the significant inputs and assumptions in management’s estimate of the liability and assessing for reasonableness including:
|
o |
Inquiring with the Company’s attorneys and management regarding the status of open legal claims, relevant claim amounts, and other key assumptions and judgements;
|
o |
Assessing the reasonableness of assumptions by reference to historical settlement amounts;
|
o |
Recalculating the estimated claim liability; and
|
• |
Assessing the adequacy of disclosures in the financial report.
|