Board of Directors Approves $500 Million
Special Dividend
Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the
“Company”) today provided unaudited financial results for the three
and six months ended September 30, 2018.
Quarter ended September 30, 2018 Highlights ─ compared to
September 30, 2017
- Net sales of $159.0 million decreased
$10.9 million, the result of continuing increased competition and
the challenging pricing environment despite a slight increase in
overall volumes.
- Gross profit of $108.6 million (68.3%
of net sales compared to 73.6%) decreased $16.6 million.
- Research and development (R&D)
expenses of $14.7 million decreased $3.3 million.
- Selling, marketing, general and
administrative expenses (SG&A) of $19.2 million increased
slightly.
- Settlements and loss contingencies was
a $4.0 million credit, the result of a settlement of a patent
infringement.
- Operating income of $78.7 million
(49.5% of net sales compared to 52.3%) decreased $10.1
million.
- Interest and other financial income
increased $4.5 million to $9.1 million.
- Foreign Exchange (FX) expense of $6.0
million compared to FX expense of $32.6 million ─ a favorable
impact of $26.6 million, principally the result of the
strengthening of the Canadian dollar vs. the U.S. dollar at a lower
rate than in prior period.
- Tax expense of $19.2 million increased
$12.4 million; with the effective tax rate of 23.5% compared to
11.5%.
- Net income attributable to Taro was
$62.6 million compared to $52.4 million, a $10.2 million increase,
resulting in diluted earnings per share of $1.60 compared to
$1.30.
Six Months ended September 30, 2018 Highlights ─ compared to
September 30, 2017
- Net sales of $313.6 million decreased
$17.6 million, the result of continuing increased competition and
the challenging pricing environment despite a 6.5% increase in
volumes.
- Gross profit of $208.6 million (66.5%
of net sales compared to 73.0%) decreased $33.0 million.
- R&D expenses of $28.0 million
decreased $4.7 million principally due to the timing of clinical
studies.
- SG&A remained flat at $42.8
million.
- Operating income of $141.9 million
(45.2% of net sales compared to 50.2%) decreased $24.5.
- Interest and other financial income
increased $7.8 million to $16.9 million.
- FX income of $4.0 million compared to
FX expense of $52.2 million ─ a favorable impact of $56.2 million,
principally the result of the Canadian dollar remaining relatively
flat vs. the U.S. dollar in the current year vs. strengthening in
the prior year period.
- Tax expense of $33.3 million increased
$16.5 million; with the effective tax rate of 20.4% compared to
13.6%.
- Net income attributable to Taro was
$129.8 million compared to $106.9 million, a $22.9 million
increase, resulting in diluted earnings per share of $3.31 compared
to $2.65.
Cash Flow and Balance Sheet Highlights
- Cash flow provided by operations for
the six months ended September 30, 2018, was $157.7 million
compared to $138.7 million for the six months ended September 30,
2017.
- As of September 30, 2018, cash,
including short-term bank deposits and marketable securities (both
short and long-term), increased $109.8 million to $1.8 billion from
March 31, 2018. Cash reflects the $32.4 million impact from the
Company’s share repurchases.
Mr. Uday Baldota, Taro’s CEO stated, “Our results reflect the
challenging market dynamics that persist. We continue to maintain
our market leadership position in the generic markets we serve and
we believe we are well positioned to take advantage of potential
opportunities. The $500 million special dividend, in conjunction
with our share repurchase program, demonstrates our commitment to
creating shareholder value together with our investment in R&D
that is vital to our long-term growth strategy. In addition, given
our strong balance sheet and cash position, we will continue to
evaluate business development opportunities.”
FDA Approvals and
Filings
The Company recently received approvals from the U.S. Food and
Drug Administration (“FDA”) for three Abbreviated New Drug
Application (“ANDA”); Clobetasol Propionate Foam, 0.05%, Adapalene
and Benzoyl Peroxide Gel 0.3%/2.5%, and Clobazam Tablets, 10 mg and
20 mg. The Company currently has a total of thirty ANDAs awaiting
FDA approval, including six tentative approvals.
Special Dividend Approved by Board of
Directors
The Taro Board of Directors has declared a $500 million (or
approximately $12.81* per share) special cash dividend on Taro
ordinary shares. The special dividend will be paid on December 28,
2018, to shareholders of record at the close of business on
December 11, 2018. The ex-dividend date will be December 10,
2018.
Dividend payments distributed by the Company to shareholders
will be subject to the withholding of Israeli taxes. Shareholders
who are resident in the U.S. or another country that is party to a
tax treaty with Israel may be entitled to the release of a portion
or all of those Israeli tax amounts withheld. Shareholders will be
notified of the procedure to obtain refunds of withheld tax, if
applicable, shortly after the record date. Such procedures will
also be available on the company’s website at www.taro.com.
* exact per share amount will be computed at the record
date.
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 quarter, the Company repurchased 84,093 shares at an
average price of $102.20. Through September 30, 2018, in total
under the authorization, the Company has repurchased 1,891,077
shares at an average price of $102.83; with $55.5 million
remaining. On November 5, 2018, the Board extended the share
repurchase program for one year or until the completion of all
purchases contemplated by the plan.
Taro Terminates Agreement with
NovaBiotics
On September 28, 2018, the Company announced that it terminated
the license agreement with NovaBiotics for the onychomycosis drug,
Novexatin®. The Novexatin® clinical study did not meet the main
goal of a Phase IIb study under current guidelines of the FDA and
did not show superiority over the placebo.
Earnings Call (8:00 am EST,
November 6, 2018)
As previously announced, the Company will host an earnings call
at 8:00 am EST on Tuesday, November 6, 2018, 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: 2871389
- Participant International Dial-In
Number: +1 (716) 247-5800 ID: 2871389
- 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 2019. 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,
2018
2017
2018
2017
Sales, net $ 158,973 $ 169,915
$ 313,591 $ 331,236 Cost of sales
50,411 44,795 104,947
89,573
Gross profit 108,562
125,120 208,644 241,663 Operating
Expenses: Research and development 14,655 17,995 28,000 32,653
Selling, marketing, general and administrative 19,185 18,342 42,767
42,591 Settlements and loss contingencies (4,000 ) —
(4,000 ) —
Operating income
78,722 88,783 141,877 166,419
Financial (income) expense, net: Interest and other financial
income (9,109 ) (4,602 ) (16,914 ) (9,078 ) Foreign exchange
expense (income) 5,958 32,583 (4,004 ) 52,225 Other (loss) gain,
net (90 ) (1,310 ) 512 808
Income before income taxes 81,783 59,492 163,307 124,080 Tax
expense 19,235 6,864 33,331
16,851
Income from continuing
operations 62,548 52,628 129,976
107,229 Net loss from discontinued operations attributable
to Taro — (145 ) — (192 )
Net income 62,548 52,483 129,976 107,037 Net (loss) income
attributable to non-controlling interest (12 ) 90
139 147
Net income
attributable to Taro $ 62,560 $
52,393 $ 129,837 $
106,890 Net income per ordinary share from
continuing operations attributable to Taro: Basic and Diluted $
1.60 $ 1.30 $ 3.31 $ 2.65
Net
loss per ordinary share from discontinued operations attributable
to Taro: Basic and Diluted
$ — $ (0.00 ) *
$ — $ (0.00 ) *
Net income per
ordinary share attributable to Taro: Basic and Diluted $ 1.60
$ 1.30 $ 3.31 $ 2.65
Weighted-average number of shares used to compute net income per
share: Basic and Diluted 39,205,874
40,315,991 39,232,897 40,402,257
* 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, 2018
2018 ASSETS (unaudited) (audited) CURRENT ASSETS:
Cash and cash equivalents $ 825,600 $ 576,611 Short-term and
current maturities of long-term bank deposits — 296,188 Marketable
securities 596,744 549,821 Accounts receivable and other: Trade,
net 224,007 206,455 Corporate tax receivable 34,628 100,380 Other
receivables and prepaid expenses 30,918 22,585 Inventories
153,107 144,595
TOTAL CURRENT ASSETS 1,865,004
1,896,635 Long-term deposits and marketable securities
335,710 225,639 Property, plant and equipment, net 198,097 193,727
Deferred income taxes 126,755 87,257 Other assets 29,940
29,952
TOTAL ASSETS $ 2,555,506
$ 2,433,210 LIABILITIES AND SHAREHOLDERS'
EQUITY CURRENT LIABILITIES: Trade payables $ 30,207 $ 25,697
Other current liabilities 172,852 190,059
TOTAL
CURRENT LIABILITIES 203,059 215,756 Deferred
taxes and other long-term liabilities 4,658 7,055
TOTAL LIABILITIES 207,717 222,811 Taro
shareholders' equity 2,342,409 2,205,158 Non-controlling interest
5,380 5,241
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 2,555,506 $ 2,433,210
TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
Six Months
Ended September 30, 2018 2017 Cash flows from
operating activities: Net income $ 129,976
$ 107,037 Adjustments required to reconcile net
income to net cash provided by operating activities:
Depreciation and amortization 8,815 7,794 Realized gain on sale of
marketable securities and long-lived assets 18 125 Change in
derivative instruments, net 2,526 (4,388 ) Effect of change in
exchange rate on inter-company balances, marketable securities and
bank deposits (11,771 ) 61,564 Deferred income taxes, net (1,705 )
15,813 (Increase) decrease in trade receivables, net (17,524 )
2,866 Increase in inventories, net (8,475 ) (5,986 ) Decrease
(increase) in other receivables, income tax receivable, prepaid
expenses and other 61,951 (37,359 ) Decrease in trade, income tax,
accrued expenses, and other payables (6,306 ) (7,339 )
Loss (Income) from marketable securities,
net
145 (1,430 )
Net cash provided by operating
activities 157,650 138,697
Cash flows from investing activities: Purchase
of plant, property & equipment (12,135 ) (11,809 ) Investment
in other intangible assets (1,094 ) (1,554 ) Proceeds from
short-term bank deposits, net 225,503 221,851 Proceeds from
long-term deposits and other assets 70,685 75,528 Investment in
marketable securities, net (159,035 ) (481,592 ) Proceeds from the
sale of property, plant and equipment (26 ) —
Net cash provided by (used in) investing activities
123,898 (197,576 )
Cash flows from financing activities: Purchase of treasury
stock (32,404 ) (40,417 )
Net cash used in
financing activities (32,404 )
(40,417 ) Effect of exchange rate changes
on cash and cash equivalents (155 ) 2,218
Increase (decrease) in cash and cash equivalents 248,989
(97,078 )
Cash and cash equivalents at beginning of period
576,611 600,399
Cash and cash
equivalents at end of period $ 825,600
$ 503,321 Cash Paid during the year
for: Income taxes $ 41,981 $ 40,183
Cash
Received during the year for: Income taxes $ (69,243 ) $ —
Non-cash investing transactions: Purchase of
property, plant and equipment included in accounts payable $ 2,258
$ 735
Non-cash financing transactions:
Purchase of treasury stock $ 848 $ — Purchase of
marketable securities $ 6,090 $ — Sale of marketable
securities $ (4,928 ) $ —
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181105005948/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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