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Taro Provides Results for the Year Ended March 31, 2019

May 23, 2019 Off By BusinessWire

HAWTHORNE, N.Y.–(BUSINESS WIRE)–Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the
“Company”) today provided unaudited financial results for the quarter
and year ended March 31, 2019.

Quarter ended March 31, 2019 Highlights ─ compared to March 31, 2018

  • Net sales of $179.9 million increased $4.7 million, mainly driven by a
    4.1% increase in overall volumes.
  • Gross profit of $119.5 million (66.4% of net sales compared to 67.9%)
    increased $0.6 million.
  • Research and development (R&D) expenses of $20.5 million remained in
    line with prior year.
  • Selling, marketing, general and administrative expenses (SG&A) of
    $23.3 million decreased $0.5 million.
  • Operating income of $75.4 million (41.9% of net sales compared to
    42.7%) increased $0.6 million.
  • Interest and other financial income increased $2.3 million to $8.2
    million.
  • Foreign Exchange (FX) expense of $9.4 million compared to income of
    $16.0 million – an unfavorable impact of $25.4 million, principally
    the result of the weakening of the U.S. dollar vs. the Canadian
    dollar. The FX impact is mainly balance sheet driven.
  • Tax expense of $15.6 million increased $5.0 million; with the
    effective tax rate of 21.1% compared to 11.0%.
  • Net income attributable to Taro was $58.4 million compared to $86.3
    million, a $27.9 million decrease, resulting in diluted earnings per
    share of $1.52 compared to $2.17.

Year ended March 31, 2019 Highlights ─ compared to March 31, 2018

  • Net sales of $669.9 million increased $8.0 million, mainly driven by a
    7.5% increase in overall volumes.
  • Gross profit of $445.7 million (66.5% of net sales compared to 70.0%)
    decreased $17.8 million.
  • R&D expenses of $63.2 million decreased $7.2 million, principally due
    to the continuous evaluation of our portfolio and adjusting for viable
    development of products.
  • SG&A of $90.0 million increased $1.8 million.
  • Operating income of $296.2 million (44.2% of net sales compared to
    45.8%) decreased $6.8 million.
  • Interest and other financial income increased $13.6 million to $33.5
    million.
  • FX income of $25.3 million compared to FX expense of $32.5 million – a
    favorable impact of $57.8 million, principally the result of the
    strengthening of the U.S. dollar vs. the Canadian dollar. The FX
    impact is mainly balance sheet driven.
  • Tax expense of $74.7 million decreased $7.2 million; with the
    effective tax rate of 20.9% compared to 28.0%. During the third
    quarter of 2018, the Company recorded a $38.0 million expense for the
    impact of the re-measurement of the Company’s estimated net deferred
    tax asset, as a result of the Tax Cuts and Jobs Act. Excluding the
    impact from the one-time re-measurement, the tax expense would have
    been $44.0 million with an effective tax rate of 15.0%.
  • Net income attributable to Taro was $281.8 million compared to $211.2
    million, a $70.6 million increase, resulting in diluted earnings per
    share of $7.23 compared to $5.26. Excluding the impact of the one-time
    tax re-measurement, prior year net income attributable to Taro would
    have been $248.0 million, or diluted earnings per share of $6.18.

Cash Flow and Balance Sheet Highlights

  • Cash flow provided by operations for the year ended March 31, 2019 was
    $323.7, similar to the year ended March 31, 2018.
  • As of March 31, 2019, cash, including short-term bank deposits and
    marketable securities (both short and long-term) decreased $294.6
    million to $1.4 billion from March 31, 2018. The decrease reflects the
    impact from the $500.0 million special dividend paid in December 2018
    and the $88.8 million impact from the completion of the Company’s
    share repurchase program.

Mr. Uday Baldota, Taro’s CEO stated, “Despite the challenging market
conditions we face due primarily to the continuing pricing pressure, our
team has delivered a good performance. With a clearly defined strategy,
we are shaping our business and product portfolio with internal and
inorganic developments. This effort is aimed at doing more for patients
and staying relevant for our customers.”

FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug
Administration (“FDA”) for five Abbreviated New Drug Applications
(“ANDAs”): Minoxidil Topical Aerosol, 5% (for women); Clobazam Oral
Suspension, 2.5 mg/mL; Naftifine Hydrochloride Gel USP, 2%; Dapsone
Tablets USP, 25 mg and 100 mg and Deferiprone Tablets 500mg. The Company
currently has a total of twenty-six ANDAs awaiting FDA approval,
including eight tentative approvals.

Earnings Call (8:00 am ET,
May 23, 2019)

As previously announced, the Company will host an earnings call at 8:00
am ET on Thursday, May 23, 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: 8698095
  • Participant International Dial-In Number: +1 (716) 247-5800 ID: 8698095
  • Web-cast: More 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.
An audio playback will be available for ten (10) days following the call.

The Company cautions that the foregoing financial information is
unaudited and could be 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 2019. 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

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

 
Quarter Ended Year Ended
March 31, March 31,

2019

2018

2019

2018

(unaudited) (unaudited) (unaudited) (audited)
Sales, net $ 179,921 $ 175,216 $ 669,893 $ 661,913
Cost of sales   60,384     56,287     224,169     198,405  
Gross profit 119,537 118,929 445,724 463,508
 
Operating Expenses:
Research and development 20,512 20,308 63,238 70,418
Selling, marketing, general and administrative 23,321 23,775 89,971 88,196
Settlements and loss contingencies   322     24     (3,678 )   1,884  
Operating income 75,382 74,822 296,193 303,010
 
Financial (income) expense, net:
Interest and other financial income (8,241 ) (5,894 ) (33,542 ) (19,934 )
Foreign exchange expense (income) 9,397 (16,041 ) (25,309 ) 32,465
Other (loss) gain, net   (100 )   458     1,810     1,889  
Income before income taxes 74,126 97,215 356,854 292,368
Tax expense   15,649     10,691     74,732     81,954  
Income from continuing operations 58,477 86,524 282,122 210,414
Net loss from discontinued operations attributable to Taro   —     (96 )   —     (335 )
Net income 58,477 86,428 282,122 210,079
Net income (loss) attributable to non-controlling interest   42     141     345     (1,071 )
Net income attributable to Taro $ 58,435   $ 86,287   $ 281,777   $ 211,150  
 
Net income per ordinary share from continuing operations
attributable to Taro:
Basic and Diluted $ 1.52   $ 2.17   $ 7.23   $ 5.27  
 
Net loss per ordinary share from discontinued operations
attributable to Taro:
Basic and Diluted

$

—   $ (0.00 ) *

$

—   $ (0.01 )
 
Net income per ordinary share attributable to Taro:
Basic and Diluted $ 1.52   $ 2.17   $ 7.23   $ 5.26  
 
Weighted-average number of shares used to compute net income per
share:
Basic and Diluted   38,548,516     39,729,942     38,990,058     40,155,087  
 
* Amount is less than $0.01
May not foot due to rounding.
 
       
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
 
March 31, March 31,
2019 2018
ASSETS (unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 567,451 $ 576,611
Short-term and current maturities of long-term bank deposits — 296,188
Marketable securities 481,883 549,821
Accounts receivable and other:
Trade, net 237,945 206,455
Corporate tax receivable 25,969 100,380
Other receivables and prepaid expenses 21,393 22,585
Inventories   148,079   144,595
TOTAL CURRENT ASSETS 1,482,720 1,896,635
Long-term deposits and marketable securities 304,322 225,639
Property, plant and equipment, net 206,242 193,727
Deferred income taxes 110,974 87,257
Other assets   31,068   29,952
TOTAL ASSETS $ 2,135,326 $ 2,433,210
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables $ 35,060 $ 25,697
Other current liabilities   181,761   190,059
TOTAL CURRENT LIABILITIES 216,821 215,756
Deferred taxes and other long-term liabilities   7,383   7,055
TOTAL LIABILITIES 224,204 222,811
 
Taro shareholders’ equity 1,905,536 2,205,158
Non-controlling interest   5,586   5,241
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,135,326 $ 2,433,210
 
     
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S. dollars in thousands)
 
Year Ended March 31,
2019   2018
(unaudited) (audited)
Cash flows from operating activities:
Net income $ 282,122 $ 210,079
Adjustments required to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,597 16,496
Realized loss on sale of marketable securities and long-lived assets 27 275
Change in derivative instruments, net 3,115 (893 )
Effect of change in exchange rate on inter-company balances,
marketable securities and bank deposits 		(29,533 ) 34,970
Deferred income taxes, net 12,262 56,007
Increase in trade receivables, net (32,088 ) (2,297 )
Increase in inventories, net (5,515 ) (1,978 )
Decrease in other receivables, income tax receivable, prepaid
expenses and other 		74,256 12,644
Increase (decrease) in trade, income tax, accrued expenses, and
other payables 		529 (936 )
Income from marketable securities, net   (63 )   (678 )
Net cash provided by operating activities   323,709     323,689  
 
Cash flows from investing activities:
Purchase of plant, property & equipment, net (27,018 ) (26,886 )
Investment in other intangible assets (3,666 ) (2,650 )
Proceeds from short-term bank deposits, net 225,503 161,032
Proceeds from long-term deposits and other assets 70,685 396,281
Investment in marketable securities, net (8,368 ) (770,490 )
Proceeds from the sale of long-lived assets   —     1,075  
Net cash provided by (used in) investing activities   257,136     (241,638 )
 
Cash flows from financing activities:
Purchase of treasury stock (88,849 ) (106,986 )
Dividends paid   (500,000 )   —  
Net cash used in financing activities   (588,849 )   (106,986 )
 
Effect of exchange rate changes on cash and cash equivalents   (1,156 )   1,147  
Decrease in cash and cash equivalents (9,160 ) (23,788 )
Cash and cash equivalents at beginning of period   576,611     600,399  
Cash and cash equivalents at end of period $ 567,451   $ 576,611  
 
Cash Paid during the year for:
Income taxes $ 71,096   $ 55,051  
Cash Received during the year for:
Income taxes $ 69,436   $ 36,668  
Non-cash investing transactions:
Purchase of property, plant and equipment included in accounts
payable 		$ 4,740   $ 2,281  
Non-cash financing transactions:
Purchase of treasury stock $ —   $ 4,348  
Purchase of marketable securities $ 2,003   $ 3,491  

Contacts

Mariano Balaguer
VP, Chief Financial Officer
(914) 345-9001
[email protected]

William J. Coote
AVP, Business Finance, Treasurer and Investor
Relations
(914) 345-9001
[email protected]