U.S. Markets closed

Taro Provides Results for September 30, 2019

HAWTHORNE, N.Y.--(BUSINESS WIRE)--

Board of Directors Approves $300 Million Share Repurchase Program

Taro Pharmaceutical Industries Ltd. (TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three and six months ended September 30, 2019.

Quarter ended September 30, 2019 Highlights ─ compared to September 30, 2018

  • Net sales of $160.9 million increased $1.9 million, principally driven by an increase in overall volumes.
  • Gross profit of $101.6 million (63.2% of net sales compared to 68.3%) decreased $7.0 million.
  • Research and development (R&D) expenses of $15.5 million increased slightly.
  • Selling, marketing, general and administrative expenses (SG&A) of $23.7 million increased $4.5 million.
  • Settlements and loss contingencies was a $0.2 million credit, as compared to a $4.0 million credit (the result of a settlement of a patent infringement) in the prior year.
  • Operating income of $62.6 million (38.9% of net sales compared to 49.5%) decreased $16.1 million.
  • Interest and other financial income of $8.9 million remained in line with the prior year.
  • Foreign Exchange (FX) impact in the current quarter was immaterial as compared to FX expense of $6.0 million in the prior year, principally the result of the commencement of hedging accounting in accordance with ASU No. 2017-12 and our Canadian subsidiary change to the U.S. dollar as its functional currency.
  • Tax expense of $16.2 million decreased $3.0 million; with the effective tax rate of 22.4% compared to 23.5%.
  • Net income attributable to Taro was $56.2 million compared to $62.6 million, a $6.4 million decrease, resulting in diluted earnings per share of $1.46 compared to $1.60.

Six Months ended September 30, 2019 Highlights ─ compared to September 30, 2018

  • Net sales of $322.1 million increased $8.6 million, principally the result of a single digit increase in overall volumes.
  • Gross profit of $203.3 million (63.1% of net sales compared to 66.5%) decreased $5.3 million.
  • R&D expenses of $29.0 million increased $1.0 million.
  • SG&A of $43.4 million increased slightly.
  • Operating income of $131.1 million (40.7% of net sales compared to 45.2%) decreased $10.8 million.
  • Interest and other financial income of $18.5 million increased $1.6 million.
  • FX income of $7.9 million compared to $4.0 million in 2018 ─ a favorable impact of $3.9 million.
  • Tax expense of $36.7 million increased $3.4 million; with the effective tax rate of 23.1% compared to 20.4%.
  • Net income attributable to Taro was $122.4 million compared to $129.8 million, a $7.5 million decrease, resulting in diluted earnings per share of $3.17 compared to $3.31.

Cash Flow and Balance Sheet Highlights

  • Cash flow provided by operations for the six months ended September 30, 2019, was $123.4 million compared to $157.7 million for the six months ended September 30, 2018.
  • As of September 30, 2019, cash and cash equivalents and marketable securities (both short and long-term), increased $121.7 million to $1.5 billion from March 31, 2019.

Mr. Uday Baldota, Taro’s CEO stated, “As stated in the past, the challenging generic landscape continues, the impact of which is reflected in our financial performance. Our continued R&D investment is vital to our long-term growth strategy and in conjunction with the announced share repurchase program, demonstrates our commitment to creating shareholder value. Our strong balance sheet and cash flow enables us to pursue future business development opportunities.”

FDA Approvals and Filings

The Company recently received two approvals from the U.S. Food and Drug Administration (“FDA”) for the following Abbreviated New Drug Applications (“ANDAs”); Azelaic Acid Topical Gel, 15% and Clindamycin Phosphate and Benzoyl Peroxide Gel, 1.2%/2.5%. The Company currently has a total of twenty-five ANDAs awaiting FDA approval, including six tentative approvals.

$300 million Share Repurchase Approved by Board of Directors

The Taro Board of Directors approved a $300 million share repurchase of ordinary shares. The timing, amount and value of any shares repurchased will be determined based on the Company's ongoing assessments of the capital needs of the business, the market price of its stock, general market conditions and other factors. Shares will be repurchased using the Company's existing sources of liquidity and free cash flow generated in the future.

The repurchase authorization enables the Company to purchase its ordinary shares from time to time through open market purchases (including 10b5-1 trading plans), privately negotiated transactions, tender offer or other means, in accordance with applicable securities laws or other restrictions. No time period has been set for the repurchase program, and any such program may be suspended or discontinued at any time.

Earnings Call (8:00 am EST, November 5, 2019)

As previously announced, the Company will host an earnings call at 8:00 am EST on Tuesday, November 5, 2019, where senior management will discuss the Company’s performance and answer questions from participants. This call will be accessible through an audio dial-in and a web-cast. Audio conference participants can dial-in on the numbers below:

  • Participant Toll-Free Dial-In Number: +1 (844) 421-0601 ID: 6684679
  • Participant International Dial-In Number: +1 (716) 247-5800 ID: 6684679
  • Audio web-cast: Details are provided on our website, www.taro.com

To participate in the audio call, please dial the numbers provided above five to ten minutes ahead of the scheduled start time. The operator will provide instructions on asking questions before the call. The transcript of the event will be available on the Company’s website at www.taro.com.

The Company cautions that the foregoing financial information is presented on an unaudited basis and is subject to change.

About Taro

Taro Pharmaceutical Industries Ltd. is a multinational, science-based pharmaceutical company, dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products. For further information on Taro Pharmaceutical Industries Ltd., please visit the Company’s website at www.taro.com.

SAFE HARBOR STATEMENT

The unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments necessary to present fairly the financial condition and results of operations of the Company. The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 20-F, as filed with the SEC.

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements that do not describe historical facts or that refer or relate to events or circumstances the Company “estimates,” “believes,” or “expects” to happen or similar language, and statements with respect to the Company’s financial performance, availability of financial information, and estimates of financial results and information for fiscal year 2020. Although the Company believes the expectations reflected in such forward-looking statements to be based on reasonable assumptions, it can give no assurances that its expectations will be attained. Factors that could cause actual results to differ include general domestic and international economic conditions, industry and market conditions, changes in the Company's financial position, litigation brought by any party in any court in Israel, the United States, or any country in which Taro operates, regulatory and legislative actions in the countries in which Taro operates, and other risks detailed from time to time in the Company’s SEC reports, including its Annual Reports on Form 20-F. Forward-looking statements are applicable only as of the date on which they are made. The Company undertakes no obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.

**Financial Tables Follow**

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(U.S. dollars in thousands, except share data)

 
Quarter Ended Six Months Ended
September 30, September 30,

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Sales, net

$

160,850

 

$

158,973

 

$

322,146

 

$

313,591

 

Cost of sales

 

59,247

 

 

50,411

 

 

118,819

 

 

104,947

 

Gross profit

 

101,603

 

 

108,562

 

 

203,327

 

 

208,644

 

 
Operating Expenses:
Research and development

 

15,539

 

 

14,655

 

 

28,982

 

 

28,000

 

Selling, marketing, general and administrative

 

23,652

 

 

19,185

 

 

43,370

 

 

42,767

 

Settlements and loss contingencies

 

(150

)

 

(4,000

)

 

(150

)

 

(4,000

)

Operating income

 

62,562

 

 

78,722

 

 

131,125

 

 

141,877

 

 
Financial (income) expense, net:
Interest and other financial income

 

(8,857

)

 

(9,109

)

 

(18,481

)

 

(16,914

)

Foreign exchange expense (income)

 

45

 

 

5,958

 

 

(7,860

)

 

(4,004

)

Other gain (loss), net

 

1,082

 

 

(90

)

 

1,676

 

 

512

 

Income before income taxes

 

72,456

 

 

81,783

 

 

159,142

 

 

163,307

 

Tax expense

 

16,246

 

 

19,235

 

 

36,691

 

 

33,331

 

Net income

 

56,210

 

 

62,548

 

 

122,451

 

 

129,976

 

Net income (loss) attributable to non-controlling interest

 

32

 

 

(12

)

 

90

 

 

139

 

Net income attributable to Taro

$

56,178

 

$

62,560

 

$

122,361

 

$

129,837

 

 
Net income per ordinary share attributable to Taro:
Basic and Diluted

$

1.46

 

$

1.60

 

$

3.17

 

$

3.31

 

 
Weighted-average number of shares used to compute net income per share:
Basic and Diluted

 

38,539,056

 

 

39,205,874

 

 

38,539,056

 

 

39,232,897

 

 
May not foot due to rounding.

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 
 
September 30, March 31,

2019

2019

ASSETS (unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents

$

560,667

$

567,451

Marketable securities

 

496,948

 

481,883

Accounts receivable and other:
Trade, net

 

247,500

 

237,945

Other receivables and prepaid expenses

 

26,312

 

47,362

Inventories

 

148,439

 

148,079

TOTAL CURRENT ASSETS

 

1,479,866

 

1,482,720

Long-term deposits and marketable securities

 

417,778

 

304,322

Property, plant and equipment, net

 

206,727

 

206,242

Deferred income taxes

 

111,809

 

110,974

Other assets

 

33,526

 

31,068

TOTAL ASSETS

$

2,249,706

$

2,135,326

 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables

$

38,409

$

35,060

Other current liabilities

 

171,092

 

181,761

TOTAL CURRENT LIABILITIES

 

209,501

 

216,821

Deferred taxes and other long-term liabilities

 

8,899

 

7,383

TOTAL LIABILITIES

 

218,400

 

224,204

 
Taro shareholders' equity

 

2,025,630

 

1,905,536

Non-controlling interest

 

5,676

 

5,586

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

2,249,706

$

2,135,326

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(U.S. dollars in thousands)

         
         
Six Months Ended September 30,

2019

2018

Cash flows from operating activities:        
Net income

$

122,451

 

$

129,976

 

Adjustments required to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization

 

10,654

 

 

8,815

 

Realized gain on sale of marketable securities  

 

18

 

Change in derivative instruments, net

 

(2,758

)

 

2,526

 

Effect of change in exchange rate on inter-company balances, marketable securities and bank deposits

 

(6,210

)

 

(11,771

)

Deferred income taxes, net

 

302

 

 

(1,705

)

Increase in trade receivables, net

 

(9,556

)

 

(17,524

)

Increase in inventories, net

 

(360

)

 

(8,475

)

Decrease in other receivables, income tax receivable, prepaid expenses and other

 

22,184

 

 

61,951

 

Decrease in trade, income tax, accrued expenses, and other payables

 

(12,139

)

 

(6,306

)

(Income) loss from marketable securities, net

 

(1,210

)

 

145

 

Net cash provided by operating activities

 

123,358

 

 

157,650

 

         
Cash flows from investing activities:        
Purchase of plant, property & equipment, net

 

(13,603

)

 

(12,135

)

Investment in other intangible assets

 

(45

)

 

(1,094

)

Proceeds from short-term bank deposits, net  

 

225,503

 

Proceeds from long-term deposits and other assets  

 

70,685

 

Investment in marketable securities, net

 

(116,494

)

 

(159,035

)

Investment in the sale of plant, property & equipment  

 

(26

)

Net cash (used in) provided by investing activities

 

(130,142

)

 

123,898

 

         
Cash flows from financing activities:        
Purchase of treasury stock  

 

(32,404

)

Net cash used in financing activities  

 

(32,404

)

         
Effect of exchange rate changes on cash and cash equivalents  

 

(155

)

(Decrease) increase in cash and cash equivalents

 

(6,784

)

 

248,989

 

Cash and cash equivalents at beginning of period

 

567,451

 

 

576,611

 

Cash and cash equivalents at end of period

$

560,667

 

$

825,600

 

         
Cash Paid during the year for:        
Income taxes

$

21,841

 

$

41,981

 

Cash Received during the year for:        
Income taxes

$

6,964

 

$

69,243

 

Non-cash investing transactions:        
Purchase of property, plant and equipment included in accounts payable

$

2,000

 

$

2,258

 

Non-cash financing transactions:        
Purchase of intangible assets

$

1,000

 

$

Purchase of treasury stock

$

$

848

 

Purchase of marketable securities

$

10,589

 

$

6,090

 

Sale of marketable securities

$

(164

)

$

(4,928

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191104006024/en/