Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the
“Company”) today provided unaudited financial results for the three
and nine months ended December 31, 2017.
Quarter ended December 31, 2017 Highlights ─ compared
to December 31, 2016
- Net sales of $155.5 million decreased
$64.9 million, the result of continuing increased competition and
the challenging pricing environment, particularly in the U.S.;
despite an increase in overall volumes.
- Gross profit of $102.9 million
decreased $64.4 million, and as a percentage of net sales was 66.2%
compared to 75.9%.
- Research and development (R&D)
expenses of $17.5 million were down slightly from the comparable
quarter.
- Selling, marketing, general and
administrative expenses (SG&A) increased $1.5 million to $21.8
million.
- Settlements and loss contingencies of
$1.9 million in 2017 related to a payroll tax settlement in
Israel.
- Operating income of $61.8 million
decreased $67.3 million and as a percentage of net sales was 39.7%
as compared to 58.5%.
- Foreign Exchange (FX) income of $3.7
million decreased $14.8 million from $18.5 million, principally the
result of the strength of the Canadian dollar vs. U.S. dollar.
- Other income of $0.6 million decreased
$8.4 million, principally due to the sale of Keveyis in December
2016.
- Tax expense increased $33.9 million to
$54.4 million resulting in an effective tax rate of 76.6% compared
to 12.8%. The tax provision for the current quarter includes a
$38.0 million expense for the estimated impact of the
re-measurement of the Company's estimated net deferred tax asset at
December 31, 2017, as a result of the Tax Cuts and Jobs Act.
Excluding the impact from the one-time re-measurement, the
Company's tax expense would be approximately $16.4 million and the
effective tax rate would be approximately 23.1% for the current
quarter.
- Net income attributable to Taro was
$18.0 million compared to $139.8 million, resulting in diluted
earnings per share of $0.45 compared to $3.42 for the same period
last year. Excluding the impact of the aforementioned one-time tax
re-measurement, net income attributable to Taro would be $54.8
million, or diluted earnings per share of $1.37.
Nine Months ended December 31, 2017 Highlights ─
compared to December 31, 2016
- Net sales of $486.7 million decreased
$196.3 million, the result of continuing increased competition and
the challenging pricing environment; despite an increase in overall
volumes.
- Gross profit of $344.6 million
decreased $182.8 million and as a percentage of net sales was 70.8%
compared to 77.2%.
- R&D expenses of $50.1 million were
down slightly from the prior year.
- SG&A expenses of $64.4 million
increased $1.0 million.
- Operating income of $228.2 million
decreased $185.0 million, and as a percentage of net sales was
46.9% as compared to 60.5%.
- Interest and other financial income of
$14.0 million, increased $3.2 million.
- FX expense of $48.5 million in 2017
compared to FX income of $26.0 million in 2016 ─ an unfavorable
impact of $74.5 million, principally the result of the strength of
the Canadian dollar vs. U.S. dollar.
- Other income of $1.4 million decreased
$9.0 million, principally due to the sale of Keveyis in December
2016.
- Tax expense decreased $15.2 million to
$71.3 million, however, the effective tax rate increased to 36.5%
from 18.8%. Excluding the impact of the one-time tax
re-measurement, tax expense would be approximately $33.3 million, a
decrease of $53.2 million, and the effective tax rate would be
17.0%.
- Net income attributable to Taro was
$124.9 million compared to $373.4 million, resulting in diluted
earnings per share of $3.10 compared to $8.99. Excluding the impact
of the one-time tax re-measurement, net income attributable to Taro
would be $161.7 million, or diluted earnings per share of
$4.01.
Mr. Uday Baldota, Taro’s CEO stated, “As is well known, and we
have continuously stated, the generic industry continues to
experience a very difficult pricing environment and competitive
pressures, which is reflected in our financial performance.
Nevertheless, we continue to invest in our R&D pipeline and
develop other initiatives that should continue to keep us well
positioned in the market.”
Cash Flow and Balance Sheet
Highlights
- Cash flow provided by operations for
the nine months ended December 31, 2017, was $225.8 million
compared to $320.5 million for the nine months ended December 31,
2016.
- As of December 31, 2017, cash,
including short-term and long-term bank deposits and marketable
securities, increased $148.6 million to $1.6 billion from March 31,
2017. Cash reflects the $54.9 million impact from the Company’s
share repurchases during the current fiscal year.
FDA Approvals and
Filings
The Company recently received approval from the U.S. Food and
Drug Administration (“FDA”) for four Abbreviated New Drug
Applications (“ANDAs”): Clindamycin Phosphate and Benzoyl Peroxide
Gel, 1.2%/5%, Butenafine Hydrochloride Cream, 1%, Fexofenadine
Hydrochloride Oral Suspension 30 mg/5 mL, and Adapalene and Benzoyl
Peroxide Gel, 0.1% / 2.5%. The Company currently has a total of
thirty ANDAs awaiting FDA approval, including six tentative
approvals.
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. On November 7,
2017, the Board extended the share repurchase program for one
year.
During the current fiscal year, through January 31, 2018, the
Company has repurchased 671,300 shares at an average price of
$104.36. In total, under this program, the Company has
repurchased 1,190,265 shares, with $125.7 million remaining
under the authorization.
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 Nine Months Ended December
31, December 31, 2017
2016 2017
2016 Sales, net $ 155,461
$ 220,395 $ 486,697 $
682,973 Cost of sales 52,545 53,053 142,118 155,366
Impairment — — —
184
Gross profit 102,916 167,342
344,579 527,423 Operating Expenses: Research
and development 17,457 18,001 50,110 50,766 Selling, marketing,
general and administrative 21,830 20,312 64,421 63,450 Settlements
and loss contingencies 1,860 —
1,860 —
Operating income 61,769
129,029 228,188 413,207 Financial
(income) expense, net: Interest and other financial income (4,962 )
(3,961 ) (14,040 ) (10,814 ) Foreign exchange (income) expense
(3,718 ) (18,533 ) 48,506 (25,998 ) Other gain, net 622
9,009 1,430 10,466
Income before income taxes 71,071 160,532 195,152 460,485 Tax
expense 54,411 20,483 71,262
86,467
Income from continuing
operations 16,660 140,049 123,890
374,018 Net loss from discontinued operations attributable
to Taro (47 ) (137 ) (239 ) (314 ) Net
income 16,613 139,912 123,651 373,704 Net (loss) income
attributable to non-controlling interest (1,359 ) 94
(1,212 ) 334
Net income attributable
to Taro $ 17,972 $ 139,818
$ 124,863 $ 373,370
Net income per ordinary share from continuing
operations attributable to Taro: Basic and Diluted $ 0.45
$ 3.42 $ 3.10 $ 9.00
Net loss
per ordinary share from discontinued operations attributable to
Taro: Basic and Diluted $ (0.00 ) * $ (0.00 ) * $ (0.00 ) * $
(0.01 )
Net income per ordinary share attributable to
Taro: Basic and Diluted $ 0.45 $ 3.42 $ 3.10
$ 8.99
Weighted-average number of shares
used to compute net income per share: Basic and Diluted
40,079,339 40,961,015 40,294,226
41,541,010 * 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)
December 31,
March 31, 2017 2017 ASSETS (unaudited)
(audited) CURRENT ASSETS: Cash and cash equivalents $ 569,193 $
600,399 Short-term and current maturities of long-term bank
deposits 419,324 782,813 Marketable securities 403,261 3,548
Accounts receivable and other: Trade, net 197,799 203,924 Other
receivables and prepaid expenses 168,160 266,280 Inventories
149,186 141,045 Long-term assets held for sale, net —
1,015
TOTAL CURRENT ASSETS 1,906,923 1,999,024
Long-term deposits and marketable securities 214,226 70,685
Property, plant and equipment, net 190,468 180,085 Deferred income
taxes 79,643 10,324 Other assets 30,629 29,635
TOTAL ASSETS $ 2,421,889 $
2,289,753 LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES: Trade payables $ 23,885 $ 16,394 Other current
liabilities 189,688 193,443
TOTAL CURRENT
LIABILITIES 213,573 209,837 Deferred taxes and
other long-term liabilities 4,842 6,110
TOTAL
LIABILITIES 218,415 215,947 Taro
shareholders' equity 2,198,374 2,067,494 Non-controlling interest
5,100 6,312
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 2,421,889 $ 2,289,753
TARO PHARMACEUTICAL
INDUSTRIES LTD. SUMMARY CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) (U.S. dollars in thousands)
Nine
Months Ended December 31, 2017 2016 Cash flows
from operating activities: Net income $
123,651 $ 373,704 Adjustments required to
reconcile net income to net cash provided by operating
activities: Depreciation and amortization 12,022 11,067
Impairment for long-lived assets — 184 Realized loss (gain) on sale
of marketable securities and long-lived assets 96 (8,517 ) Change
in derivative instruments, net (4,641 ) 4,501 Effect of change in
exchange rate on inter-company balances and bank deposits 56,903
(30,017 ) Deferred income taxes, net 61,540 (13,138 ) Decrease
(increase) in trade receivables, net 6,704 (13,411 ) Increase in
inventories, net (5,261 ) (9,120 ) (Increase) decrease in other
receivables, income tax receivable, prepaid expenses and other
(28,957 ) 16,744 Increase (decrease) in trade, income tax, accrued
expenses, and other payables 3,513 (11,542 ) Loss from marketable
securities, net 225 —
Net cash
provided by operating activities 225,795
320,455 Cash flows from investing
activities: Purchase of plant, property & equipment, net
(17,742 ) (26,377 ) (Investment in) proceeds from other intangible
assets (1,608 ) 955 Proceeds from short-term bank deposits 225,895
250,854 Proceeds from (investment in) long-term deposits and other
assets 187,725 (301,616 ) (Investment in) proceeds from marketable
securities, net (598,578 ) 95
Net cash used
in investing activities (204,308 )
(76,089 ) Cash flows from financing
activities: Purchase of treasury stock (54,921 )
(269,712 )
Net cash used in financing activities
(54,921 ) (269,712 )
Effect of exchange rate changes on cash and cash equivalents
2,228 (1,765 )
Decrease in cash and cash
equivalents (31,206 ) (27,111 )
Cash and cash equivalents at
beginning of period 600,399 576,757
Cash and cash equivalents at end of period $
569,193 $ 549,646 Cash
Paid during the year for: Income taxes $ 42,592 $ 76,772
Non-cash operating transactions: Sale of intangible
asset $ — $ 7,500
Non-cash investing
transactions: Purchase of property, plant and equipment
included in accounts payable $ 1,390 $ 354
Non-cash financing transactions: Purchase of treasury stock
$ 781 $ 3,602
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version on businesswire.com: http://www.businesswire.com/news/home/20180207006325/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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