November 7, 2017-- Taro Pharmaceutical Industries Ltd.
(NYSE:TARO) (“Taro” or the “Company”) today provided unaudited
financial results for the three and six months ended September 30,
2017.
Quarter ended September 30, 2017 Highlights - compared to
September 30, 2016
- Net sales of $169.9 million decreased
$58.9 million, the result of continuing increased competition and
the challenging pricing environment; despite a slight increase in
volumes.
- Gross profit of $125.1 million
decreased $52.2 million, and as a percentage of net sales, was
73.6% compared to 77.5%.
- Research and development (R&D)
expenses increased $3.2 million to $18.0 million.
- Selling, marketing, general and
administrative expenses (SG&A) decreased $2.5 million to $18.3
million.
- Operating income of $88.8 million
decreased $52.8 million, or 52.3% of net sales compared to
61.9%.
- Net Income was unfavorably impacted by
a $46.0 million fluctuation in foreign exchange (FX) from income of
$13.4 million in 2016 to an expense of $32.6 million in 2017,
principally the result of the strength of the Canadian dollar vs.
U.S. dollar.
- Tax expense of $6.9 million decreased
$28.7 million; with the effective tax rate of 11.5% compared to
22.3%.
- Net income attributable to Taro was
$52.4 million compared to $123.7 million, a $71.3 million decrease,
resulting in diluted earnings per share of $1.30 compared to
$3.00.
Six Months ended September 30, 2017 Highlights - compared to
September 30, 2016
- Net sales of $331.2 million decreased
$131.3 million, the result of continuing increased competition and
the challenging pricing environment; despite an increase in
volumes.
- Gross profit of $241.7 million
decreased $118.4 million, and as a percentage of net sales, was
73.0% compared to 77.8%.
- R&D expenses of $32.7 million
remained in line with prior year expenses with all of our
activities, including clinical studies, proceeding according to
plan.
- SG&A remained relatively flat at
$42.6 million.
- Operating income of $166.4 million
decreased $117.8 million, or 50.2% of net sales compared to
61.4%.
- Net Income was unfavorably impacted by
a $59.7 million fluctuation in FX from income of $7.5 million in
2016 to an expense of $52.2 million in 2017, principally the result
of the strength of the Canadian dollar vs. U.S. dollar.
- Tax expense of $16.9 million decreased
$49.1 million; with the effective tax rate of 13.6% compared to
22.0%.
- Net income attributable to Taro was
$106.9 million compared to $233.6 million, a $126.7 million
decrease, resulting in diluted earnings per share of $2.65 compared
to $5.59.
Mr. Uday Baldota, Taro’s CEO stated, “We continue to navigate
the current industry challenges − increased competitive intensity,
pressures from buying consortiums, and higher ANDA approval rates
from the FDA. In order to deliver long-term performance and a
quality pipeline of products, we continue our investment in
R&D. In addition, given our strong cash position, we will
continue to explore and evaluate business development opportunities
that meet both our operational and financial targets.”
Cash Flow and Balance Sheet Highlights
- Cash flow provided by operations for
the six months ended September 30, 2017, was $138.7 million
compared to $192.7 million for the six months ended September 30,
2016.
- As of September 30, 2017, cash,
including short-term bank deposits and marketable securities (both
short and long-term), increased $83.3 million to $1.5 billion from
March 31, 2017. Cash reflects the $40.4 million impact from the
Company’s share repurchases.
FDA Approvals and
Filings
The Company recently received approval from the U.S. Food and
Drug Administration (“FDA”) for the Abbreviated New Drug
Application (“ANDA”) Dapsone Gel, 5%. The Company currently has a
total of thirty-two ANDAs awaiting FDA approval, including five
tentative approvals.
Company’s Office Holders Compensation
Policy
On February 9, 2017, the Taro Board of Directors (the “Board”),
based on the recommendation of the Compensation Committee of the
Board, and in accordance with Section 276A(c) of the Companies Law,
approved a renewed version of the Company’s Office Holders
Compensation Policy (the “Policy”). Such approval made the Policy
effective until it could be reconsidered by Taro’s shareholders at
the 2017 Annual General Meeting of Shareholders.
On November 7, 2017, the Board elected, with Taro’s Compensation
Committee recommendation, to extend its approval of the Policy
until the 2018 Annual General Meeting of Shareholders in order to
permit additional time to address feedback from various
stakeholders.
Share Repurchase Program - Returning
Capital to Shareholders
On November 23, 2016, the Company announced that its Board of
Directors approved a $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. 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
current fiscal year, through October 31, 2017, the Company has
repurchased 410,664 shares at an average price of $103.79. Under
this program, in total, the Company has repurchased 929,629
shares, with $153.1 million remaining under the authorization. On
November 7, 2017, the Board extended the share repurchase program
for one year.
Earnings Call (8:00 am EST,
November 8, 2017)
As previously announced, the Company will host an earnings call
at 8:00 am EST on Wednesday, November 8, 2017, 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: 4298818
- Participant International Dial-In
Number: +1 (716) 247-5800 ID: 4298818
- 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 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 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,
2017
2016
2017
2016
Sales, net $ 169,915 $ 228,794
$ 331,236 $ 462,578 Cost of sales
44,795 51,428 89,573 102,313 Impairment — 76
— 184
Gross profit
125,120 177,290 241,663 360,081
Operating Expenses: Research and development 17,995 14,845 32,653
32,765 Selling, marketing, general and administrative 18,342
20,886 42,591 43,137
Operating income 88,783 141,559
166,419 284,179 Financial (income) expense,
net: Interest and other financial income (4,602 ) (3,546 ) (9,078 )
(6,853 ) Foreign exchange expense (income) 32,583 (13,375 ) 52,225
(7,465 ) Other (loss) gain, net (1,310 ) 1,054
808 1,457 Income before income taxes
59,492 159,534 124,080 299,954 Tax expense 6,864
35,558 16,851 65,984
Income from continuing operations 52,628
123,976 107,229 233,970 Net loss from
discontinued operations attributable to Taro (145 )
(76 ) (192 ) (177 ) Net income 52,483 123,900 107,037
233,793 Net income attributable to non-controlling interest
90 243 147 240
Net income attributable to Taro $ 52,393
$ 123,657 $ 106,890
$ 233,553 Net income per
ordinary share from continuing operations attributable to Taro:
Basic and Diluted $ 1.30 $ 3.00 $ 2.65 $ 5.59
Net loss per ordinary share from discontinued
operations attributable to Taro: Basic and Diluted $ (0.00 ) *
$ (0.00 ) * $ (0.00 ) * $ (0.00 ) *
Net income per
ordinary share attributable to Taro:
Basic and Diluted
$ 1.30 $ 3.00 $ 2.65 $ 5.59
Weighted-average number of shares used to compute net income per
share: Basic and Diluted 40,315,991
41,300,387 40,402,257 41,832,592
* 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)
September 30, March 31,
2017 2017 ASSETS (unaudited) (audited) CURRENT
ASSETS: Cash and cash equivalents $ 503,321 $ 600,399 Short-term
and current maturities of long-term bank deposits 556,121 782,813
Marketable securities 339,444 3,548 Accounts receivable and other:
Trade, net 201,710 203,924 Other receivables and prepaid expenses
176,298 266,280 Inventories 150,191 141,045 Long-term assets held
for sale, net — 1,015
TOTAL CURRENT ASSETS
1,927,085 1,999,024 Long-term deposits and marketable
securities 141,887 70,685 Property, plant and equipment, net
187,937 180,085 Deferred income taxes 125,597 10,324 Other assets
31,311 29,635
TOTAL ASSETS $
2,413,817 $ 2,289,753 LIABILITIES
AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables
and other current liabilities $ 201,546 $ 209,837
TOTAL CURRENT
LIABILITIES 201,546 209,837 Deferred taxes and
other long-term liabilities 4,770 6,110
TOTAL
LIABILITIES 206,316 215,947 Taro
shareholders' equity 2,201,042 2,067,494 Non-controlling interest
6,459 6,312
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 2,413,817 $ 2,289,753
TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (U.S. dollars
in thousands)
Six Months
Ended September 30, 2017 2016 Cash flows from
operating activities: Net income $ 107,037
$ 233,793 Adjustments required to reconcile net
income to net cash provided by operating activities:
Depreciation and amortization 7,794 7,397 Impairment for long-lived
assets — 184 Realized loss (gain) on sale of marketable securities
and long-lived assets 125 (5 ) Change in derivative instruments,
net (4,388 ) 2,337 Effect of change in exchange rate on
inter-company balances and bank deposits 61,564 (9,034 ) Deferred
income taxes, net 15,813 (11,422 ) Decrease (increase) in trade
receivables, net 2,866 (11,285 ) Increase in inventories, net
(5,986 ) (11,611 ) (Increase) decrease in other receivables, income
tax receivable, prepaid expenses and other (37,359 ) 13,054
Decrease in trade, income tax, accrued expenses, and other payables
(7,339 ) (20,731 ) Income from marketable securities (1,430
) —
Net cash provided by operating activities
138,697 192,677
Cash flows from investing activities: Purchase of plant,
property & equipment, net (11,809 ) (19,238 ) Investment in
other intangible assets (1,554 ) (22 ) Proceeds from short-term
bank deposits 221,851 138,344 Proceeds from (investment in)
long-term deposits and other assets 75,528 (281,792 ) (Investment
in) proceeds from marketable securities, net (481,592 )
80
Net cash used in investing activities
(197,576 ) (162,628 )
Cash flows from financing activities: Purchase of
treasury stock (40,417 ) (240,618 )
Net cash used
in financing activities (40,417 )
(240,618 ) Effect of exchange rate changes
on cash and cash equivalents 2,218 (550 )
Decrease in cash and cash equivalents (97,078 ) (211,119 )
Cash and cash equivalents at beginning of period
600,399 576,757
Cash and cash equivalents
at end of period $ 503,321 $
365,638 Cash Paid during the year for:
Income taxes $ 40,183 $ 57,703
Non-cash investing
transactions: Purchase of property, plant and equipment
included in accounts payable $ 735 $ 1,272
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171107006900/en/
Taro Pharmaceutical Industries Ltd.Mariano Balaguer,
914-345-9001VP, Chief Financial
OfficerMariano.Balaguer@Taro.comorWilliam J. Coote,
914-345-9001AVP, Business Finance, Treasurer and Investor
RelationsWilliam.Coote@Taro.com
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