Market Overview

Taro Provides Results for Quarter Ended June 2017


Taro Pharmaceutical Industries Ltd. (NYSE:TARO) ("Taro" or the
"Company") today provided unaudited financial results for the quarter
ended June 30, 2017.

Quarter ended June 30, 2017 Highlights - compared to June 30, 2016

  • Net sales of $161.3 million, decreased $72.5 million, or 31.0%, the
    result of continuing increased competition and the challenging pricing
    environment; despite an overall increase in volumes.
  • Gross profit of $116.5 million, decreased $66.2 million and as a
    percentage of net sales, was 72.2% compared to 78.2%.
  • Research and development (R&D) expenses of $14.7 million decreased
    $3.3 million; as our R&D spending is not evenly distributed across
    quarters. R&D as a percentage of net sales increased to 9.1% from 7.7%
    in the previous year quarter.
  • Selling, marketing, general and administrative expenses of $24.2
    million increased $2.0 million.
  • Operating income of $77.6 million decreased $65.0 million and as a
    percentage of net sales was 48.1% as compared to 61.0%.
  • Foreign exchange expense of $19.6 million increased $13.7 million from
    $5.9 million, principally due to the weakening of the U.S. dollar vs.
    Canadian dollar at a higher degree than the prior year quarter.
  • Tax expense of $10.0 million decreased $20.4 million with the
    effective tax rate improving to 15.5% from 21.7%.
  • Net income attributable to Taro was $54.5 million compared to $109.9
    million, a $55.4 million decrease, resulting in diluted earnings per
    share of $1.35 compared to $2.59.

Cash Flow and Balance Sheet Highlights

  • Cash flow provided by operations was $72.7 million compared to $56.0
    million for the three months ended June 30, 2016.
  • Cash, including short-term bank deposits and marketable securities,
    increased $58.2 million to $1.4 billion.

Mr. Abhay Gandhi, Taro's interim CEO stated, "Our results reflect the
difficult generic pricing environment, particularly in the U.S., driven
by more intense competition among manufacturers, new entrants to the
market, buying consortium pressures, and a higher ANDA approval rate
from the FDA. We expect this product-specific pricing pressure to
continue into the future." Mr. Gandhi continued, "We believe our
long-term strategy is well balanced, with a leadership position in many
of our key molecules, our pipeline, our commitment to providing quality
products, and strong manufacturing and customer service capabilities."

FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug
Administration ("FDA") for four Abbreviated New Drug Applications
("ANDAs"): Children's Ibuprofen Oral Suspension USP (OTC) 100mg/5mL,
Ibuprofen Oral Suspension 100mg/5mL, Betamethasone Valerate Topical Foam
0.12%, and Felbamate Oral Suspension USP 600mg/5mL. The Company
currently has a total of thirty-three ANDAs awaiting FDA approval,
including six tentative approvals.

Share Repurchase Program - Returning Capital to

On November 23, 2016, the Company announced that its Board of Directors
approved a new $250 million share repurchase of ordinary shares. Under
this authorization, 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. During
the quarter, the Company repurchased 80,007 shares at an average price
of $106.07. Under this program, in total, the Company has
repurchased 598,972 shares, with $187.2 million remaining under the

Form 20-F Filings with the SEC

On June 21,2017, the Company filed its Annual Report on Form 20-F with
the U.S. Securities and Exchange Commission ("SEC") for the fiscal year
ended March 31, 2017.

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


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

Certain statements in this release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
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 2018.
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
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.
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**

(U.S. dollars in thousands, except share data)
Three Months Ended June 30,
  2017     2016  
Sales, net $ 161,321 $ 233,784
Cost of sales 44,778 50,885
Impairment       108  
Gross profit 116,543 182,791
Operating Expenses:
Research and development 14,658 17,920
Selling, marketing, general and administrative   24,249     22,252  
Operating income 77,636 142,619
Financial (income) expense, net:
Interest and other financial income (4,476 ) (3,306 )
Foreign exchange expense 19,642 5,909
Other gain, net   2,119     403  
Income before income taxes 64,589 140,419
Tax expense   9,987     30,425  
Income from continuing operations 54,602 109,994
Net loss from discontinued operations attributable to Taro   (47 )   (101 )
Net income 54,555 109,893
Net income (loss) attributable to non-controlling interest   58     (4 )
Net income attributable to Taro $ 54,497   $ 109,897  
Net income per ordinary share from continuing operations
attributable to Taro:
Basic $ 1.35   $ 2.59  
Diluted $ 1.35   $ 2.59  
Net loss per ordinary share from discontinued operations
attributable to Taro:
Basic $ (0.00 ) * $ (0.00 ) *
Diluted $ (0.00 ) * $ (0.00 ) *
Net income per ordinary share attributable to Taro:
Basic $ 1.35   $ 2.59  
Diluted $ 1.35   $ 2.59  
Weighted-average number of shares used to compute net income per
Basic   40,489,470     42,370,644  
Diluted   40,489,470     42,370,644  
* Amount is less than $0.01
May not foot due to rounding.
(U.S. dollars in thousands)
June 30, March 31,
  2017   2017
ASSETS (unaudited) (audited)
Cash and cash equivalents $ 430,713 $ 600,399
Short-term and current maturities of long-term bank deposits 806,558 782,813
Marketable securities 207,712 3,548
Accounts receivable and other:
Trade, net 185,881 203,924
Other receivables and prepaid expenses 157,755 266,280
Inventories 144,354 141,045
Long-term assets held for sale, net   1,083   1,015
TOTAL CURRENT ASSETS 1,934,056 1,999,024
Long-term deposits and marketable securities 71,376 70,685
Property, plant and equipment, net 183,415 180,085
Deferred income taxes 137,706 10,324
Other assets   31,094   29,635
TOTAL ASSETS $ 2,357,647 $ 2,289,753
Trade payables and other current liabilities $ 205,767 $ 209,837
Deferred taxes and other long-term liabilities   5,995   6,110
TOTAL LIABILITIES 211,762 215,947
Taro shareholders' equity 2,139,515 2,067,494
Non-controlling interest   6,370   6,312
(U.S. dollars in thousands)
Three Months Ended June 30,
  2017     2016  
Cash flows from operating activities:
Net income $ 54,555 $ 109,893
Adjustments required to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,775 3,692
Impairment for long-lived assets 108
Realized gain on sale of marketable securities and long-lived assets (247 )
Change in derivative instruments, net (3,093 ) 2,671
Effect of change in exchange rate on inter-company balances and bank
22,078 4,101
Deferred income taxes, net 4,825 (20,282 )
Decrease (increase) in trade receivables, net 18,270 (51,220 )
Increase in inventories, net (2,114 ) (9,190 )
(Increase) decrease in other receivables, income tax receivable,
prepaid expenses and other
(21,483 ) 19,612
Decrease in trade, income tax, accrued expenses, and other payables (3,377 ) (3,420 )
Income from marketable securities   (521 )    
Net cash provided by operating activities   72,668     55,965  
Cash flows from investing activities:
Purchase of plant, property & equipment, net (4,557 ) (9,184 )
Investment in other intangible assets (2,056 ) (11 )
Proceeds from short-term bank deposits 46,940 90,754
Investment in long-term deposits and other assets (143,503 )
(Investment in) proceeds from marketable securities, net   (275,128 )   80  
Net cash used in investing activities   (234,801 )   (61,864 )
Cash flows from financing activities:
Purchase of treasury stock   (8,489 )   (132,489 )
Net cash used in financing activities   (8,489 )   (132,489 )
Effect of exchange rate changes on cash and cash equivalents   936     363  
Decrease in cash and cash equivalents (169,686 ) (138,025 )
Cash and cash equivalents at beginning of period   600,399     576,757  
Cash and cash equivalents at end of period $ 430,713   $ 438,732  
Cash paid during the quarter for:
Income taxes $ 29,595   $ 37,721  
Non-cash investing transactions:
Purchase of property, plant and equipment included in accounts


1,180   $ 617  
Non-cash financing transactions:
Purchase of treasury stock


  $ 8,341  

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