Market Overview

Taro Provides Second Quarter and Fiscal Year to Date Results

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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 three and six month periods ended September 30, 2012.

Quarter ended September 30, 2012 Highlights - compared to September 30, 2011

  • Net sales of $161.0 million, increased $22.7 million, or 16.4%, however, volumes have marginally declined
  • Gross profit, as a percentage of net sales was 75.4%, compared to 67.5%
  • Research and development expenses increased 57.8% to $10.9 million
  • Selling, marketing, general and administrative expenses, which included in 2012 an $8.0 million litigation provision, increased $3.5 million
  • Operating income increased to $82.4 million, or 51.2% of net sales, compared to $61.9 million, or 44.8% of net sales
  • Net income was negatively impacted by foreign exchange (FX) expense of $1.0 million, compared to $16.1 million benefit
  • Net income attributable to Taro was $65.4 million compared to $58.9 million, resulting in diluted earnings per share of $1.46 compared to $1.32.

Six months ended September 30, 2012 Highlights - compared to September 30, 2011

  • Net sales of $320.1 million, increased $70.3 million, or 28.1%, however, volumes have marginally declined
  • Gross profit, as a percentage of net sales was 73.5%, compared to 64.2%
  • Research and development expenses increased 52.4% to $22.5 million
  • Selling, marketing, general and administrative expenses, which included in 2012 an $8.0 million litigation provision, increased $2.0 million
  • Operating income increased to $161.4 million, or 50.4% of net sales, compared to $96.1 million, or 38.5% of net sales
  • Income tax expense increased $19.3 million from $13.6 million to $32.9 million
  • Net income was negatively impacted by FX expense of $0.3 million, compared to $13.6 million benefit
  • Net income attributable to Taro was $128.3 million compared to $94.6 million, a $33.6 million increase, resulting in diluted earnings per share of $2.87 compared to $2.12.

Cash Flow and Balance Sheet Highlights

  • Cash flow provided by operations for the six months ended September 30, 2012, as compared to September 30, 2011, was $81.5 million compared to $95.5 million, primarily due to the payment of income taxes as reflected in the significant decrease in trade and other payables
  • Cash, including marketable securities, increased $84.9 million to $419.2 million from March 31, 2012.

FDA Approvals and Filings

During the quarter, the Company filed two ANDAs with the FDA. With this, ANDAs representing sixteen products as well as two NDAs await FDA approval.

Taro Special Committee Accepts $39.50 per share Offer from Sun Pharma

On August 12, 2012, Sun Pharmaceutical Industries Ltd. (Reuters: SUN.BO, Bloomberg: SUNP IN, NSE: SUNPHARMA, BSE: 524715) (“Sun Pharma”) and Taro announced that they entered into a merger agreement which provides that all shareholders of Taro, other than Sun Pharma and its affiliates, will receive a cash payment of $39.50 per share upon the closing of the merger. The merger agreement was approved by Taro's Board of Directors based upon the recommendations and approvals of the Special Committee and the Audit Committee of Taro's Board of Directors.

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 and statements 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 financial information for fiscal year 2013. 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 actions of the Company's lenders and creditors, 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 INCOME

(Unaudited)

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

       

Quarter Ended
September 30,

Year to Date
September 30,

2012

2011 2012 2011
Sales, net $160,974 $ 138,251 $320,126 $249,835
Cost of sales 39,645   44,945   84,701   89,469  
Gross Profit 121,329 93,306 235,425 160,366
 

Operating Expenses:

Research and development, net 10,943 6,934 22,468 14,741
Selling, marketing, general and administrative 27,975   24,436   51,559   49,528  
Operating income 82,411 61,936 161,398 96,097
 

Financial Expenses, net:

Interest and other financial (income) expenses, net (249 ) 1,507 141 2,131
Foreign exchange expense (income) 964 (16,072 ) 256 (13,641 )
Other income, net 227   171   591   923  
Income before income taxes 81,923 76,672 161,592 108,530
Tax expense 16,424   18,317   32,934   13,598  
Income from continuing operations 65,499 58,355 128,658 94,932
 

Net (loss) income from discontinued operations(1)

(17 ) 295  

(7

)

46  
Net income 65,482 58,650 128,651 94,978

Net income (loss) attributable to non-controlling interest(2)

132   (285 ) 391   354  
Net income attributable to Taro $ 65,350   $ 58,935   $ 128,260   $ 94,624  
 
Net income per ordinary share from continuing operations attributable to Taro:
Basic $1.46 $1.31 $2.88 $2.12
Diluted $1.46 $1.31 $2.87 $2.12
 
Net (loss) income per ordinary share from discontinued operations attributable to Taro:
Basic ($0.00)* $0.01 ($0.00)* $0.00*
Diluted ($0.00)* $0.01 ($0.00)* $0.00*
 
Net income per ordinary share attributable to Taro:
Basic $1.46 $1.32 $ 2.87 $2.13
Diluted $1.46 $1.32 $2.87 $2.12
 
Weighted-average number of shares used to compute net income per share:
Basic 44,684,715 44,534,733 44,614,149 44,523,046
Diluted 44,714,355 44,590,051 44,679,156 44,575,293

(1) In 2010, the Company closed its Ireland manufacturing facility and decided to sell the facility and has therefore classified its Irish subsidiary as discontinued operations.

(2) Represents the impact of the Company adopting FASB ASC Section 810-10-65, which requires the Company to allocate income or loss attributable to a non-controlling interest based on the respective ownership percentages.

* Amount is less than $0.01.

TARO PHARMACEUTICAL INDUSTRIES LTD.

 SUMMARY CONSOLIDATED BALANCE SHEETS

(Unaudited)

(U.S. dollars in thousands)

   

September 30,

March 31,

2012 2012
 
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 288,135 $ 238,266
Short-term bank deposits 120,570 72,440
Restricted short-term bank deposits 7,430 15,780
Marketable securities 3,110 7,835

Accounts receivable and other:

Trade, net

130,285

111,130

Other receivables and prepaid expenses 111,335 98,501
Inventories 109,891 109,638
Long-term assets held for sale, net(1) 68 71
TOTAL CURRENT ASSETS 770,824 653,661
 
Long-term receivables and other assets 18,733 19,972
Property, plant and equipment, net 146,812 150,750
Other assets 30,013 32,041
TOTAL ASSETS $ 966,382 $ 856,424
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Current maturities of long-term debt $ 10,685 $ 10,957
Trade payables and other current liabilities 161,504 187,942
TOTAL CURRENT LIABILITIES 172,189 198,899
 
Long-term debt, net of current maturities 26,961 27,949
Deferred taxes and other long-term liabilities 6,049 6,618
TOTAL LIABILITIES 205,199 233,466
 
Taro shareholders' equity 756,842 619,008
Non-controlling interest(2) 4,341 3,950

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$ 966,382 $ 856,424

(1) In 2010, the Company closed its Ireland manufacturing facility and decided to sell the facility and therefore has classified the related assets as held for sale.

(2) Represents the impact of the Company adopting FASB ASC Section 810-10-65, which requires the Company to allocate income or loss attributable to a non-controlling interest based on the respective ownership percentages.

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(U.S. dollars in thousands)

 

 Six Months Ended September 30,

2012

 

2011

 

Operating Activities

Net income $128,651 $94,978

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

Depreciation and amortization 9,038 9,461
Stock-based compensation 8 27
Capital loss on sales of assets, net 106 92
Decrease in long-term debt due to currency fluctuations (888 ) (1,840 )
Increase in trade receivables (19,040 ) (21,274 )
Change in derivative instruments, net 1,230 3,307
Increase in other receivables, prepaid expenses and other assets (11,679 ) (18,667 )
Decrease (increase) in inventories 165

(8,966

)

Foreign exchange effect on intercompany balances 1,367 (8,004 )
(Decrease) increase in trade and other payables and other liabilities (27,475 ) 46,420  
Net cash provided by operating activities 81,483   95,534  

 

Investing Activities:
Purchase of property plant & equipment (3,217 ) (2,811 )
Investment in other intangible assets (20 ) -
Proceeds from long-term security deposits and other assets 37 55
Repayment of short-term bank deposits (47,598 ) (3,536 )
Proceeds from restricted bank deposits 8,399 -
Proceeds from marketable securities 4,726   1,090  
Net cash used in investing activities (37,673 ) (5,202 )
 
Financing Activities:
Proceeds from issuance of shares 4,645 285
Repayments of long-term debt (373 ) (13 )
Repayments of short-term bank debt, net -   (4,601 )

Net cash provided by (used in) financing activities

4,272   (4,329 )
 
Effect of exchange rate changes 1,787   (3,365 )
Net increase in cash 49,869 82,638
Cash at beginning of period

238,266

  78,872  
 
Cash at end of period $288,135   $161,510  

#####

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

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