Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter ended June 30, 2016.

Quarter ended June 30, 2016 Highlights - compared to June 30, 2015

  • Net sales of $233.8 million, increased $18.5 million or 8.6%, with slightly decreased volumes. The 2015 net sales were negatively impacted by a $14 million provision for price protections.
  • Gross profit of $182.8 million, increased $11.0 million
  • Research and development (R&D) expenses increased 23.2% to $17.9 million
  • Selling, marketing, general and administrative expenses were slightly decreased
  • Operating income increased $8.2 million to $142.6 million
  • Tax expense of $30.4 million remained relatively flat with the effective tax rate improving to 21.7% from 22.5%
  • Net income attributable to Taro was $109.9 million compared to $103.6 million, a $6.3 million increase, resulting in diluted earnings per share of $2.59 compared to $2.42.

Cash Flow and Balance Sheet Highlights

  • Cash flow provided by operations was $56.0 million compared to $68.3 million for the three months ended June 30, 2015
  • Cash, including short-term bank deposits and marketable securities, decreased $253.7 million to $974.9 million from March 31, 2016, principally the result of the $132.5 million impact from the Company’s share repurchases, and a $168.5 million increase in long-term bank deposits.

Mr. Kal Sundaram, Taro’s CEO stated, “Overall, we are pleased with our solid operating performance. Our increased R&D investment reflects our continuing focus on developing a strong product pipeline. Sales from new products are beginning to accelerate, however we continue to experience increased competitive intensity. Delivering strong financial results, developing our pipeline, and the investment under our share repurchase program demonstrates our commitment to increasing long-term shareholder value.”

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”) Adapalene Gel, 0.3%. The Company has a total of thirty-four ANDAs awaiting FDA approval.

Share Repurchase Program

On March 15, 2016, the Company announced that its Board of Directors approved a $250 million share repurchase of ordinary shares. 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. No time period has been set for the repurchase program, and any such program may be suspended or discontinued at any time. 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. The table below presents the purchase of ordinary shares as of July 31, 2016, which were acquired in accordance with a 10b5-1 program:

Period  

Total Number of
Shares Purchased
as Part of the
Current Program

  

Average Price Paid
per Share

  

Dollar Value of
Shares that may yet
be Purchased Under
the Program

March 17, 2016 - March 31, 2016   67,339   $140.30    
April 1, 2016 - April 30, 2016   117,515   $141.46    
May 1, 2016 - May 31, 2016   552,474   $134.86    
June 1, 2016 - June 30, 2016   290,298   $142.32    
July 1, 2016 - July 31, 2016   318,080   $141.28    
TOTAL   1,345,706   $138.84   $63,168,864
 

Form 20-F Filings with the SEC

On June 9, the Company filed its Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (“SEC”) for the fiscal year ended March 31, 2016.

Officer Departures

On June 21, Taro announced the resignation of its Chief Financial Officer, Michael Kalb, who left the Company to accept the position of CFO at another public company.

On July 6, the Company announced that its’ CEO, Mr. Kal Sundaram, plans to step down as CEO by the end of the current calendar year. Mr. Sundaram will return to India, to assume an executive position at Sun Pharma’s global headquarters after the completion of his assignment at Taro at the end of 2016.

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 2017. 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 OPERATIONS

(Unaudited)

(U.S. dollars in thousands, except share data)

 
  Three Months Ended June 30,
2016   2015
Sales, net $ 233,784 $ 215,278
Cost of sales 50,885 43,474
Impairment   108     -  
Gross profit 182,791 171,804
 
Operating Expenses:
Research and development 17,920 14,540
Selling, marketing, general and administrative   22,252     22,892  
Operating income 142,619 134,372
 
Financial (income) expense, net:
Interest and other financial income (3,306 ) (3,269 )
Foreign exchange expense 5,909 4,200
Other gain, net   403     352  
Income before income taxes 140,419 133,793
Tax expense   30,425     30,089  
Income from continuing operations 109,994 103,704
Net loss from discontinued operations attributable to Taro   (101 )   (31 )
Net income 109,893 103,673
Net (loss) income attributable to non-controlling interest   (4 )   37  
Net income attributable to Taro $ 109,897   $ 103,636  
 
Net income per ordinary share from continuing operations attributable to Taro:
Basic $ 2.59   $ 2.42  
Diluted $ 2.59   $ 2.42  
 
Net loss per ordinary share from discontinued operations attributable to Taro:
Basic $ (0.00 ) * $ (0.00 ) *
Diluted $ (0.00 ) * $ (0.00 ) *
 
Net income per ordinary share attributable to Taro:
Basic $ 2.59   $ 2.42  
Diluted $ 2.59   $ 2.42  
 
Weighted-average number of shares used to compute net income per share:
Basic   42,370,644     42,833,533  
Diluted   42,370,644     42,833,533  
 
* 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)
 
  June 30,   March 31,

2016

2016

ASSETS (unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 438,732 $ 576,757
Short-term and current maturities of long-term bank deposits 532,624 648,297
Marketable securities 3,521 3,572
Accounts receivable and other:
Trade, net 289,803 238,611
Other receivables and prepaid expenses 271,443 270,724
Inventories 147,945 138,553
Long-term assets held for sale, net   1,058     1,081  
TOTAL CURRENT ASSETS 1,685,126 1,877,595
Long-term bank deposits 283,676 115,173
Property, plant and equipment, net 164,598 159,459
Other assets   34,923     35,806  
TOTAL ASSETS $ 2,168,323   $ 2,188,033  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables and other current liabilities $ 243,378   $ 245,462  
TOTAL CURRENT LIABILITIES 243,378 245,462
Deferred taxes and other long-term liabilities   5,517     5,427  
TOTAL LIABILITIES 248,895 250,889
 
Taro shareholders' equity 1,913,429 1,931,142
Non-controlling interest   5,999     6,002  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,168,323   $ 2,188,033  
 

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(U.S. dollars in thousands)

 
  Three Months Ended June 30,
2016   2015
Cash flows from operating activities:
Net income $ 109,893 $ 103,673
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,692 3,913
Impairment for long-lived assets 108 -
Realized loss on sale of marketable securities and long-lived assets - 48
Change in derivative instruments, net 2,671 (5,198 )
Effect of change in exchange rate on inter-company balances and bank deposits 4,101 1,716
Deferred income taxes, net (20,282 ) 3,329
(Increase) decrease in trade receivables, net (51,220 ) 25,809
(Increase) decrease in inventories, net (9,190 ) 1,317
Increase (decrease) in other receivables, income tax receivable, prepaid expenses and other 19,612 (9,517 )
Decrease in trade, income tax and other payables and accrued expenses   (3,420 )   (56,823 )
Net cash provided by operating activities   55,965     68,267  
 
Cash flows from investing activities:
Purchase of plant, property & equipment (9,184 ) (2,393 )
Investment in other intangible assets (11 ) (15 )
Proceeds from (investment in) short-term bank deposits 90,754 (92,124 )
Investment in long-term deposits and other assets (143,503 ) (20,000 )
Proceeds from (investment in) marketable securities, net   80     (16 )
Net cash used in investing activities   (61,864 )   (114,548 )
 
Cash flows from financing activities:
Purchase of treasury stock (132,489 ) -
Repayment of long-term debt   -     (223 )
Net cash used in financing activities   (132,489)   (223)
 
Effect of exchange rate changes on cash and cash equivalents   363     3,861  
Decrease in cash and cash equivalents (138,025 ) (42,643 )
Cash and cash equivalents at beginning of period   576,757     481,641  
Cash and cash equivalents at end of period $ 438,732   $ 438,998