Market Overview

Taro Provides Results for Year Ended March 31, 2016

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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, 2016.

Quarter ended March 31, 2016 Highlights - compared to March 31, 2015

  • Net sales of $265.1 million, increased $20.9 million, or 8.6%, on relatively flat volumes
  • Gross profit of $224.2 million increased $24.6 million, as Cost of Goods decreased $3.8 million; and as a percentage of net sales increased to 84.6% as compared to 81.8%
  • Research and development expenses decreased 16.4% to $19.9 million
  • Selling, marketing, general and administrative expenses remained relatively flat
  • Operating income increased $28.2 million to $181.7 million
  • Net Income was unfavorably impacted by an $80.0 million fluctuation in foreign exchange (FX) from income of $32.5 million in 2015 to an expense of $47.5 million in 2016, principally the result of the strength of the Canadian dollar vs. U.S. dollar
  • Tax expense decreased $13.9 million to $23.0 million resulting in an effective tax rate of 16.6% compared to 19.5%
  • Net income attributable to Taro was $115.0 million compared to $152.3 million, resulting in diluted earnings per share of $2.68 compared to $3.56

Year ended March 31, 2016 Highlights - compared to March 31, 2015

  • Net sales of $950.8 million, increased $87.8 million, or 10.2%, despite a 5% volume decline
  • Gross profit increased $102.4 million to $779.0 million and as a percentage of net sales, was 81.9% compared to 78.4%
  • Research and development expenses increased 8.6% to $71.2 million
  • Selling, marketing, general and administrative expenses increased $4.7 million to $92.4 million
  • Settlements and loss contingencies was a $1.0 million expense compared to a $4.2 million creditin 2015
  • Operating income increased $86.8 million to $614.5 million
  • FX income decreased $34.6 million to $7.1 million, principally the result of the strength of the Canadian dollar vs. U.S. dollar in the fourth quarter of 2016
  • Tax expense remained relatively flat, however the effective tax rate improved to 15.0% from 16.5%
  • Net income attributable to Taro was $540.9 million compared to $484.3 million, a $56.7 million increase, resulting in diluted earnings per share of $12.62 compared to $11.31

Cash Flow and Balance Sheet Highlights - compared to March 31, 2015

  • Cash, including marketable securities increased to $1.2 billion from $920.2 million
  • Cash provided by operations for the period ended March 31, 2016 was $395.1 million, as compared to $406.8 million
  • Debt of $5.9 million was paid-off during the year

Mr. Kal Sundaram, Taro's CEO stated, "Overall, we are pleased with our strong operating performance. Additionally, our 9% year-over-year increase in R&D demonstrates our commitment to growing our pipeline of quality products; further evidenced by ten (10) FDA filings this year. However, we continue to face broader industry challenges in the generic landscape, driven by ever-increasing competition and customer consolidation. Nevertheless, we remain cautiously optimistic about our medium and long-term growth and remain focused on strengthening our R&D pipeline and other initiatives that continue to keep us well positioned in the market."

FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug Administration ("FDA") for four Abbreviated New Drug Application ("ANDA") Naftifine Hydrochloride Cream USP, 2%, Oxiconazole Nitrate Cream, 1%, Diclofenac Sodium Gel, 2% and Fluocinolone Acetonide Topical Oil, 0.01% (Body Oil and Scalp Oil). For the year ended March 31, 2016, the total number of FDA filings was ten (10). The Company currently has a total of thirty-six ANDAs awaiting FDA approval.

Share Repurchase Program

On March 15, 2016, the Company announced that its Board of Directors approved a $250 million share repurchase of ordinary shares. Repurchases may be made from time to time at the Company's discretion, based on ongoing assessments of the capital needs of the business, the market price of its stock, and general market conditions. No time period has been set for the repurchase program, and any such program may be suspended or discontinued at any time. The repurchase authorization enables the Company to purchase its ordinary shares from time to time through open market purchases, negotiated transactions or other means, including 10b5-1 trading plans in accordance with applicable securities laws or other restrictions. The table below presents the purchase of ordinary shares as of May 24, 2016, which were acquired in accordance with a 10b5-1 program:

Period  

Total Number of
Shares Purchased
as Part of the
Current Program


 

Average
Price Paid
per Share

 

Dollar Value of
Shares that May Yet
Be Purchased Under
the Program


March 17, 2016 - March 31, 2016   67,339     $140.30      
April 1, 2016 - May 24, 2016   599,504     $135.76      
TOTAL   666,843     $136.22    

$159,165,488

 

 

Keveyis

On May 2, 2016, Taro announced it will now make Keveyis™ (dichlorphenamide) available to distributors at no cost for the treatment of primary periodic paralysis. As a result, Taro will cease commercial sales and related promotional activities for Keveyis and bear all costs associated with its manufacture. In the near term, patients will continue to receive the medicine through its specialty pharmacy partner, Diplomat as the Company evaluates the best option for keeping pharmacy dispensing fees to patients as low as possible.

Earnings Call (8:30 am EST, May 27, 2016)

As previously announced, the Company will host an earnings call at 8:30 am EST on Friday, May 27, 2016, 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: 18504447
  • Participant International Dial-In Number: +1 (716) 247-5800 ID: 18504447
  • 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 fifteen (15) days following the call.

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 2017. 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.

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,
2016 2015 2016   2015
(unaudited) (unaudited) (unaudited) (audited)
Sales, net $ 265,073 $ 244,180 $ 950,751 $ 862,944
Cost of sales 40,749 44,545 169,743 186,359
Impairment   95     -     2,042     -  
Gross profit 224,229 199,635 778,966 676,585
 
Operating Expenses:
Research and development 19,948 23,865 71,160 65,510
Selling, marketing, general and administrative 22,561 22,229 92,365 87,644
Settlements and loss contingencies   -     -     973     (4,200 )
Operating income 181,720 153,541 614,468 527,631
 
Financial (income) expense, net:
Interest and other financial income (2,896 ) (3,087 ) (12,604 ) (9,677 )
Foreign exchange expense (income) 47,478 (32,481 ) (7,068 ) (41,634 )
Other gain, net   860     395     2,680     2,738  
Income before income taxes 137,999 189,504 636,820 581,680
Tax expense   22,950     36,872     95,313     96,059  
Income from continuing operations 115,049 152,632 541,507 485,621
Net loss from discontinued operations attributable to Taro   (34 )   (314 )   (236 )   (787 )
Net income 115,015 152,318 541,271 484,834
Net income attributable to non-controlling interest   65     26     339     577  
Net income attributable to Taro $ 114,950   $ 152,292   $ 540,932   $ 484,257  
 
Net income per ordinary share from continuing operations attributable to Taro:
Basic $ 2.68   $ 3.56   $ 12.63   $ 11.32  
Diluted $ 2.68   $ 3.56   $ 12.63   $ 11.32  
 
Net loss per ordinary share from discontinued operations attributable to Taro:
Basic $ (0.00 ) * $ (0.00 ) * $ (0.01 ) $ (0.01 )
Diluted $ (0.00 ) * $ (0.00 ) * $ (0.01 ) $ (0.01 )
 
Net income per ordinary share attributable to Taro:
Basic $ 2.68   $ 3.56   $ 12.62   $ 11.31  
Diluted $ 2.68   $ 3.56   $ 12.62   $ 11.31  
 
Weighted-average number of shares used to compute net income per share:
Basic   42,828,338     42,833,533     42,832,241     42,833,533  
Diluted   42,828,338     42,833,533     42,832,241     42,833,750  
 
* 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,

2016

2015

ASSETS (unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 576,757 $ 481,641
Short-term and current maturities of long-term bank deposits 648,297 434,899
Restricted short-term bank deposits - 199
Marketable securities 3,572 3,458
Accounts receivable and other:
Trade, net 238,611 222,427
Other receivables and prepaid expenses 270,724 250,911
Inventories 138,553 120,272
Long-term assets held for sale, net   1,081     -  
TOTAL CURRENT ASSETS 1,877,595 1,513,807
Long-term bank deposits 115,173 30,175
Property, plant and equipment, net 159,459 153,045
Other assets   35,806     40,718  
TOTAL ASSETS $ 2,188,033   $ 1,737,745  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ - $ 912
Trade payables and other current liabilities   245,462     309,093  
TOTAL CURRENT LIABILITIES 245,462 310,005
Long-term debt, net of current maturities - 4,976
Deferred taxes and other long-term liabilities   5,427     5,381  
TOTAL LIABILITIES 250,889 320,362
 
Taro shareholders' equity 1,931,142 1,411,720
Non-controlling interest   6,002     5,663  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,188,033   $ 1,737,745  
 

TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
 
  Year Ended March 31,
2016   2015
(unaudited) (audited)
Cash flows from operating activities:
Net income $ 541,271 $ 484,834
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,848 15,798
Impairment for long-lived assets 2,042 90
Realized loss (gain) on sale of marketable securities and long-lived assets 74 (209 )
Change in derivative instruments, net (6,137 ) 5,483
Effect of change in exchange rate on inter-company balances (2,268 ) (18,167 )
Foreign exchange effect of bank deposits (5,510 ) -
Decrease in long-term debt due to currency fluctuations - (1,030 )
Deferred income taxes, net (11,976 ) (70,387 )
Increase in trade receivables, net (16,386 ) (85,277 )
Increase in inventories, net (19,013 ) (7,027 )
(Decrease) increase in other receivables, income tax receivable, prepaid expenses and other (42,858 ) 14,359
(Decrease) increase in trade, income tax and other payables and accrued expenses   (58,959 )   68,321  
Net cash provided by operating activities   395,128     406,788  
 
Cash flows from investing activities:
Purchase of plant, property & equipment (18,972 ) (19,997 )
(Investment in) proceeds from other intangible assets and long-lived assets (134 ) 59
Proceeds from (investment in) other assets 35,000 (31,050 )
Investment in short-term bank deposits (220,102 ) (43,344 )
Proceeds from restricted bank deposits 199 28
(Investment in) proceeds from long-term deposits and other assets (80,587 ) 2,112
(Investment in) proceeds from marketable securities, net   (135 )   111  
Net cash used in investing activities   (284,731 )   (92,081 )
 
Cash flows from financing activities:
Proceeds from issuance of shares, net - 26
Purchase of treasury stock (9,450 ) -
Repayment of long-term debt   (5,888 )   (10,944 )
Net cash used in financing activities   (15,338 )   (10,918 )
 
Effect of exchange rate changes on cash and cash equivalents   57     (32,115 )
Increase in cash and cash equivalents 95,116 271,674
Cash and cash equivalents at beginning of period   481,641     209,967  
Cash and cash equivalents at end of period $ 576,757   $ 481,641  

Taro Pharmaceutical Industries Ltd.
Michael Kalb, 914-345-9001
GVP, CFO
Michael.Kalb@taro.com
or
William J. Coote, 914-345-9001
William.Coote@taro.com





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