TARO Taro Pharmaceutical Industries Ltd

Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter and nine months ended December 31, 2022.

Quarter ended December 31, 2022* Highlights ─ compared to December 31, 2021

• Net sales of $139.2 million was line with the prior year quarter. We continue to experience price pressures particularly in the U.S. generic business.
• Gross profit of $64.0 million (46.0% of net sales) compared to $76.0 million (54.7% of net sales).
• Research and development (R&D) expenses of $12.9 million decreased $1.3 million.
• Selling, marketing, general and administrative expenses (SG&A) of $49.9 million increased $25.0 million.
• Operating income of $1.3 million compared to operating income of $37.0 million. The current year quarter operating result is primarily attributable to the aforementioned price erosion, as well as the on-going impact associated with our recent acquisition.
• Interest and other financial income of $6.6 million increased $4.5 million.
• Tax expense of $1.9 million compared to $13.2 million in the prior year quarter.
• Net income attributable to Taro was $7.3 million compared to net income of $26.3 million, resulting in earnings per share of $0.19 compared to earnings per share of $0.70.

Nine Months ended December 31, 2022* Highlights ─ compared to December 31, 2021

• Net sales of $426.4 million increased $8.3 million.
• Gross profit of $192.6 million (45.2% of net sales compared to 51.6%) decreased $23.2 million.
• R&D expenses of $35.9 million decreased $3.7 million.
• SG&A of $148.2 million increased $75.7 million.
• Operating income of $8.4 million compared to $42.2 million. Excluding the $61.4 million impact from the settlement and loss contingencies charges in the prior year, operating income was $103.6 million. The current year operating income primarily reflects the six-month impact of the factors mentioned above.
• Interest and other financial income of $12.8 million increased from $7.5 million.
• Net income attributable to Taro was $18.5 million compared to $30.9 million, resulting in earnings per share of $0.49 compared to earnings per share of $0.82. Excluding the impact from the settlement and loss contingencies charges in the prior year, net income was $99.2 million, resulting in diluted earnings per share of $2.64.

Cash Flow and Balance Sheet Highlights

• Cash flow used in operations for the nine months ended December 31, 2022 was $24.9 million compared to $200.0 million for the nine months ended December 31, 2021. Excluding the impact from the settlement payments and settlement and loss contingencies charges impacting both periods, cash flow provided by operations was $50.4 million compared to $124.6 million for the nine months ended December 31, 2021.
• As of December 31, 2022, cash and cash equivalents, short-term bank deposits and marketable securities (both short- and long-term) decreased $54.6 million to $1.2 billion from March 31, 2022; principally the result of settlement payments.

* The December 31, 2022 results include nine months’ results from the February 28, 2022 acquisition of Alchemee.

The Company cautions that the foregoing 2022 financial information (including Alchemee) is unaudited 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 2023. 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 31st

December 31st

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Sales, net

$

139,202

 

$

138,984

 

$

426,365

 

$

418,083

 

Cost of sales

 

75,155

 

 

62,937

 

 

233,750

 

 

202,293

 

Impairment

 

—

 

 

13

 

 

—

 

 

13

 

Gross profit

 

64,047

 

 

76,034

 

 

192,615

 

 

215,777

 

  Operating Expenses: Research and development

 

12,907

 

 

14,201

 

 

35,937

 

 

39,648

 

Selling, marketing, general and administrative

 

49,861

 

 

24,841

 

 

148,238

 

 

72,501

 

Settlements and loss contingencies

 

—

 

 

26

 

 

—

 

 

61,446

 

Operating income *

 

1,279

 

 

36,966

 

 

8,440

 

 

42,182

 

  Financial (income) expense, net: Interest and other financial income

 

(6,592

)

 

(2,090

)

 

(12,814

)

 

(7,503

)

Foreign exchange (income) expense

 

(738

)

 

544

 

 

2,344

 

 

555

 

Other gain, net

 

563

 

 

990

 

 

1,403

 

 

3,714

 

Income before income taxes

 

9,172

 

 

39,501

 

 

20,313

 

 

52,842

 

Tax expense

 

1,907

 

 

13,188

 

 

1,781

 

 

21,980

 

Net income attributable to Taro *

$

7,265

 

$

26,313

 

$

18,532

 

$

30,862

 

  Net income per ordinary share attributable to Taro: Basic and Diluted *

$

0.19

 

$

0.70

 

$

0.49

 

$

0.82

 

  Weighted-average number of shares used to compute net income per share: Basic and Diluted

 

37,584,891

 

 

37,584,891

 

 

37,584,891

 

 

37,584,891

 

  May not foot due to rounding.

Note: Quarter and nine months ended December, 2022 includes results from Alchemee (acquired February 28, 2022).

* Excluding the settlement and loss contingencies charges of $61.4 million for the nine months ended December 31, 2021, Operating income was $103.6 million, Net income attributable to Taro was $99.2 million, and basic and diluted earnings per share was $2.64.

TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands)  

December 31,

March 31,

2022

2022

ASSETS (unaudited) (audited) CURRENT ASSETS: Cash and cash equivalents

$

91,973

$

251,134

Short-term bank deposits

 

169,568

 

47,586

Marketable securities

 

602,357

 

522,028

Accounts receivable and other: Trade, net

 

251,807

 

246,972

Other receivables and prepaid expenses

 

51,730

 

59,727

Inventories

 

222,675

 

210,439

TOTAL CURRENT ASSETS

 

1,390,110

 

1,337,886

Marketable securities

 

337,431

 

435,189

Property, plant and equipment, net

 

190,507

 

199,692

Deferred income taxes

 

121,100

 

124,882

Goodwill

 

12,718

 

11,820

Other assets

 

65,658

 

66,893

TOTAL ASSETS

$

2,117,524

$

2,176,362

  LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables

$

69,549

$

68,232

Other current liabilities

 

304,526

 

363,886

TOTAL CURRENT LIABILITIES

 

374,075

 

432,118

Deferred taxes and other long-term liabilities

 

23,514

 

32,799

TOTAL LIABILITIES

 

397,589

 

464,917

  Taro shareholders' equity

 

1,719,935

 

1,711,445

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

2,117,524

$

2,176,362

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

 

Nine Months Ended December 31,

2022

2021

Cash flows from operating activities: Net income

$

18,533

 

$

30,862

 

Adjustments required to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization

 

21,320

 

 

19,248

 

Realized loss on sale of long-lived assets

 

2

 

 

551

 

Change in derivative instruments, net

 

(24

)

 

(536

)

Effect of change in exchange rate on marketable securities and bank deposits

 

1,590

 

 

(39

)

Deferred income taxes, net

 

4,612

 

 

15,003

 

Increase in trade receivables, net

 

(5,168

)

 

(11,129

)

Increase in inventories, net

 

(12,361

)

 

(2,154

)

Decrease in other receivables, income tax receivables, prepaid expenses and other

 

7,287

 

 

10,973

 

Decrease in trade, income tax, accrued expenses and other payables

 

(67,938

)

 

(270,482

)

Expense from amortization of marketable securities bonds, net

 

7,247

 

 

7,734

 

Net cash used in operating activities

 

(24,900

)

 

(199,969

)

  Cash flows from investing activities: Purchase of plant, property & equipment, net

 

(11,186

)

 

(9,121

)

Investment in other intangible assets

 

(122

)

 

(120

)

Investment in short-term bank deposits, net

 

(121,982

)

 

(35,573

)

Proceeds from (investment in) marketable securities, net

 

3,060

 

 

(17,161

)

Other investments

 

(2,000

)

 

—

 

Net cash used in investing activities

 

(132,230

)

 

(61,975

)

  Cash flows from financing activities: Purchase of treasury stock

 

—

 

 

(24,934

)

Net cash used in financing activities

 

—

 

 

(24,934

)

  Effect of exchange rate changes on cash and cash equivalents

 

(2,031

)

 

(209

)

Decrease in cash and cash equivalents

 

(159,161

)

 

(287,087

)

Cash and cash equivalents at beginning of period

 

251,134

 

 

605,177

 

Cash and cash equivalents at end of period

$

91,973

 

$

318,090

 

  Cash Paid during the year for: Income taxes

$

3,415

 

$

5,667

 

Cash Received during the year for: Income taxes

$

14,156

 

$

2,351

 

Non-cash investing transactions: Purchase of property, plant and equipment included in accounts payable

$

1,260

 

$

763

 

Non-cash financing transactions: Purchase of marketable securities, net

$

2,710

 

$

—

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230124006013/en/

William J. Coote VP, CFO (914) 345-9001 William.Coote@taro.com