Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three months and nine months ended December 31, 2014.
Quarter ended December 31, 2014 Highlights - compared to December 31, 2013
- Net sales of $237.7 million, increased $24.1 million, or 11.3%, with a volume decrease across all markets
- Gross profit, as a percentage of net sales, was 81.4%, compared to 80.7% — an increase of $21.0 million or 12.2%
- Research and development expenses decreased $2.3 million to $12.8 million
- Selling, marketing, general and administrative expenses of $21.3 million, remained relatively flat
- Operating income increased $24.4 million to $159.3 million, or 67.0% of net sales, compared to $134.9 million, or 63.2% of net sales — represented 18.1% growth over the same period last year
- As a result of increased sales, increased gross margins and cost containment, net income attributable to Taro was $142.5 million compared to $115.6 million, resulting in diluted earnings per share of $3.33 compared to $2.59, a 28.7% increase
Nine Months ended December 31, 2014 Highlights - compared to December 31, 2013
- Net sales of $618.8 million, increased $46.7 million, or 8.2%, with a slight decrease in volumes
- Gross profit, as a percentage of net sales was 77.1%, compared to 76.7% — an increase of $38.3 million or 8.7%
- Research and development expenses decreased $0.6 million to $41.6 million
- Selling, marketing, general and administrative expenses were relatively flat at $65.4 million
- Settlements and loss contingencies was a $4.2 million credit, the net result of two settlements which resulted in the reversal of a portion of the associated reserve on one matter, compared to a $2.6 million expense in 2013 (related to certain price reporting litigations)
- Operating income increased $45.4 million to $374.1 million, or 60.5% of net sales, compared to $328.7 million, or 57.5% of net sales. Excluding the impact from settlements and loss contingencies, this increase would have been $38.6 million or 11.6%
- Net income attributable to Taro was $332.0 million compared to $270.7 million, a $61.2 million increase, resulting in diluted earnings per share of $7.75 compared to $6.05, a 28.1% increase
Cash Flow and Balance Sheet Highlights
- Cash provided by operations for the period ended December 31, 2014 was $192.8 million, as compared to $273.7 million for the period ended December 31, 2013, the result of an increase in working capital usage (see details in Consolidated Statement of Cash Flows)
- Cash, including marketable securities of $738.0 million, increased $105.6 million from March 31, 2014
- Total debt decreased $11.8 million, the result of the Company paying-off its debentures with institutional holders
FDA Approvals and Filings
Recently, the Company received an approval for an Abbreviated New Drug Application (“ANDA”) Diclofenac Sodium Topical Solution, 1.5% and filed one ANDA with the U.S. Food and Drug Administration (“FDA”). With this, ANDAs representing thirty products await FDA approval.
Earnings Call
Consistent with the Company’s policy, Taro will conduct its next earnings call when it announces its financial results for the year-ending March 31, 2015.
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 2015. 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.
TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (U.S. dollars in thousands, except share data) | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Sales, net | $ | 237,700 | $ | 213,598 | $ | 618,764 | $ | 572,109 | ||||||||
Cost of sales | 44,206 | 41,136 | 141,814 | 133,461 | ||||||||||||
Gross Profit | 193,494 | 172,462 | 476,950 | 438,648 | ||||||||||||
Operating Expenses (Income): | ||||||||||||||||
Research and development | 12,829 | 15,124 | 41,645 |
| 42,263 | |||||||||||
Selling, marketing, general and administrative | 21,345 | 21,904 | 65,415 | 65,086 | ||||||||||||
Settlements and loss contingencies | - | 540 | (4,200 | ) | 2,590 | |||||||||||
Operating income | 159,320 | 134,894 | 374,090 | 328,709 | ||||||||||||
Financial Expenses, net: | ||||||||||||||||
Interest and other financial income, net | (2,968 | ) | (1,436 | ) | (6,590 | ) | (3.926 | ) | ||||||||
Foreign exchange income | (8,264 | ) | (2,513 | ) | (9,153 | ) | (3,221 | ) | ||||||||
Other income, net | 362 | 436 | 2,343 | 962 | ||||||||||||
Income before income taxes | 170,914 | 139,279 | 392,176 | 336,818 | ||||||||||||
Tax expense | 28,174 | 23,514 | 59,187 | 65,296 | ||||||||||||
Income from continuing operations | 142,740 | 115,765 | 332,989 | 271,522 | ||||||||||||
Net loss from discontinued operations | (126 | ) | (50 | ) | (473 | ) | (222 | ) | ||||||||
Net income | 146,614 | 115,715 | 332,516 | 271,300 | ||||||||||||
Net income attributable to non-controlling interest | 132 | 100 | 551 | 553 | ||||||||||||
Net income attributable to Taro | $ | 142,482 | $ | 115,615 | $ | 331,965 | $ | 270,747 | ||||||||
Net income per ordinary share from continuing operations attributable to Taro: | ||||||||||||||||
Basic | $ | 3.33 | $ | 2.59 | $ | 7.76 | $ | 6.06 | ||||||||
Diluted | $ | 3.33 | $ | 2.59 | $ | 7.76 | $ | 6.05 | ||||||||
Net loss per ordinary share from discontinued operations attributable to Taro: | ||||||||||||||||
Basic | ($ 0.00 | )* | ($ 0.00 | )* | ($ 0.01 | ) | ($ 0.01 | ) | ||||||||
Diluted | ($ 0.00 | )* | ($ 0.00 | )* | ($ 0.01 | ) | ($ 0.00 | )* | ||||||||
Net income per ordinary share attributable to Taro: | ||||||||||||||||
Basic | $ | 3.33 | $ | 2.59 | $ | 7.75 | $ | 6.05 | ||||||||
Diluted | $ | 3.33 | $ | 2.59 | $ | 7.75 | $ | 6.05 | ||||||||
Weighted-average number of shares used to compute net income per share: | ||||||||||||||||
Basic | 42,833,533 | 44,700,460 | 44,833,162 | 44,749,065 | ||||||||||||
Diluted | 42,833,533 | 44,703,837 | 44,833,452 | 44,752,633 | ||||||||||||
* 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, | |||||
2014 | 2014 | |||||
(unaudited) | (audited) | |||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | 283,219 | $ | 209,967 | ||
Short-term bank deposits | 451,157 | 418,946 | ||||
Restricted short-term bank deposits | 204 | 227 | ||||
Marketable securities | 3,417 | 3,255 | ||||
Accounts receivable and other: | ||||||
Trade, net | 225,653 | 138,772 | ||||
Other receivables and prepaid expenses | 262,782 | 162,392 | ||||
Inventories | 125,077 | 117,639 | ||||
Long-term assets held for sale, net | 64 | 73 | ||||
TOTAL CURRENT ASSETS | 1,351,573 | 1,051,271 | ||||
Long-term receivables and other assets | 67,976 | 52,894 | ||||
Property, plant and equipment, net | 153,488 | 151,416 | ||||
Other assets | 25,981 | 28,795 | ||||
TOTAL ASSETS | $ | 1,599,018 | $ | 1,284,376 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Current maturities of long-term debt | $ | 898 | $ | 11,974 | ||
Trade payables and other current liabilities | 265,623 | 241,330 | ||||
TOTAL CURRENT LIABILITIES | 266,521 | 253,304 | ||||
Long-term debt, net of current maturities | 5,209 | 5,888 | ||||
Deferred taxes and other long-term liabilities | 4,857 | 4,591 | ||||
TOTAL LIABILITIES | 276,587 | 263,783 | ||||
Taro shareholders’ equity | 1,316,794 | 1,015,507 | ||||
Non-controlling interest | 5,637 | 5,086 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,599,018 | $ | 1,284,376 | ||
TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (U.S. dollars in thousands) | |||||||
Nine Months Ended December 31, | |||||||
2014 | 2013 | ||||||
Operating Activities: | |||||||
Net income | $ | 332,516 | $ | 271,300 | |||
Adjustments required to reconcile net income to net cash | |||||||
provided by operating activities: | |||||||
Depreciation and amortization | 11,933 | 12,408 | |||||
Gain on sale of long-lived assets and marketable securities, net | (199 | ) | (5 | ) | |||
(Decrease) increase in long-term debt due to currency fluctuations | (1,030 | ) | 1,260 | ||||
Increase in trade receivables, net | (87,406 | ) | (7,542 | ) | |||
Change in derivative instruments, net | 4,965 | 2,426 | |||||
Increase in other receivables, prepaid expenses and other assets | (68,213 | ) | (37,741 | ) | |||
Increase in inventories, net | (9,063 | ) | (11,646 | ) | |||
Effect of exchange differences on inter-company balances | (11,436 | ) | (6,858 | ) | |||
Increase in trade and other payables and liabilities | 20,775 | 50,113 | |||||
Net cash provided by operating activities | 192,842 | 273,715 | |||||
Investing Activities: | |||||||
Purchase of property, plant & equipment | (14,019 | ) | (16,646 | ) | |||
Proceeds from (investment in) property, plant & equipment and intangible assets | 60 | (4,401 | ) | ||||
Investment in other assets | (31,050 | ) | - | ||||
Investment in long-term security deposits and other assets | (17,810 | ) | (25,076 | ) | |||
Investment in short-term bank deposits | (42,321 | ) | (56,581 | ) | |||
Proceeds from restricted bank deposits | 23 | 7,430 | |||||
Proceeds from (investment in) marketable securities | 81 | (50 | ) | ||||
Net cash used in investing activities | (105,036 | ) | (95,324 | ) | |||
Financing Activities: | |||||||
Purchase of treasury shares | - | (192,993 | ) | ||||
Excess tax benefits from share-based payment arrangements | - | 97 | |||||
Proceeds from issuance of shares, net | 26 | 1,189 | |||||
Repayments of long-term debt | (10,725 | ) | (11,668 | ) | |||
Net cash used in financing activities | (10,699 | ) | (203,375 | ) | |||
Effect of exchange rate changes | (3,855 | ) | (4,845 | ) | |||
Net increase (decrease) in cash | 73,252 | (29,829 | ) | ||||
Cash at beginning of period | 209,967 | 237,284 | |||||
Cash at end of period | $ | 283,219 | $ | 207,445 |