Taro Provides Third Quarter and Fiscal Year to Date Results

Favorable Performance Over 2011 Periods Continues

HAWTHORNE, N.Y.--()--Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three and nine month periods ended December 31, 2012.

Quarter ended December 31, 2012 Highlights - compared to December 31, 2011

  • Net sales of $185.7 million, increased $37.6 million, or 25.4%, however, sales volumes have slightly declined
  • Gross profit, as a percentage of net sales was 75.4%, compared to 71.6%
  • Research and development expenses increased 33.5% to $11.8 million
  • Selling, marketing, general and administrative expenses, which included a $3.3 million litigation provision in 2012, increased $2.1 million
  • Operating income increased to $104.0 million, or 56.0% of net sales, compared to $74.5 million, or 50.3% of net sales
  • Net income attributable to Taro was $88.8 million compared to $62.4 million, resulting in diluted earnings per share of $1.98 compared to $1.40.

Nine months ended December 31, 2012 Highlights - compared to December 31, 2011

  • Net sales of $505.8 million, increased $107.9 million, or 27.1%, however, sales volumes have marginally declined
  • Gross profit, as a percentage of net sales was 74.2%, compared to 66.9%
  • Research and development expenses increased 45.3% to $34.3 million
  • Selling, marketing, general and administrative expenses, which included $11.3 million litigation provisions in 2012, increased $4.2 million
  • Operating income increased to $265.4 million, or 52.5% of net sales, compared to $170.6 million, or 42.9% of net sales
  • Income tax expense increased $33.5 million from $18.2 million to $51.7 million
  • Net income attributable to Taro was $217.0 million compared to $157.0 million, a $60.0 million increase, resulting in diluted earnings per share of $4.86 compared to $3.52.

Cash Flow and Balance Sheet Highlights

  • Cash flow provided by operations for the nine months ended December 31, 2012, as compared to December 31, 2011, was $173.1 million compared to $157.0 million, primarily due to the payment of income taxes as reflected in the significant decrease in trade and other payables
  • Cash, including marketable securities, increased $152.2 million to $486.6 million from March 31, 2012.

FDA Approvals and Filings

During the quarter, the Company filed one ANDA with the FDA. With this, ANDAs representing seventeen products as well as two NDAs await FDA approval.

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 and statements 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 financial information for fiscal year 2013. 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 actions of the Company's lenders and creditors, 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 INCOME

(Unaudited)

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

 
     

Quarter Ended

December 31,

   

Year to Date

December 31,

2012

  2011 2012   2011
Sales, net $ 185,695 $ 148,105 $ 505,821 $ 397,941
Cost of sales   45,769     42,056     130,470     131,526  
Gross Profit 139,926 106,049 375,351 266,415
 

Operating Expenses:

Research and development, net 11,838 8,867 34,306 23,609
Selling, marketing, general and administrative 24,053 21,930 75,612 71,458
Impairment   -     784     -     784  
Operating income 104,035 74,468 265,433 170,564
 

Financial Expenses, net:

Interest and other financial (income) expenses, net (581 ) 315 (440 ) 2,445
Foreign exchange (income) expense (1,992 ) 6,312 (1,736 ) (7,329 )
Other income (loss), net   1,359     (565 )   1,952     358  
Income before income taxes 107,967 67,276 269,561 175,806
Tax expense   18,779     4,584     51,713     18,183  
Income from continuing operations 89,188 62,692 217,848 157,623
 
Net loss from discontinued operations   (37 )   (344 )   (44 )   (298 )
Net income 89,151 62,348 217,804 157,325
Net income (loss) attributable to non-controlling interest   374     (52 )   765     303  
 
Net income attributable to Taro $ 88,777   $ 62,400   $ 217,039   $ 157,022  
 

Net income per ordinary share from continuing

operations attributable to Taro:

Basic $ 1.98 $ 1.41 $ 4.86 $ 3.53
Diluted $ 1.98 $ 1.41 $ 4.86 $ 3.53
 

Net loss per ordinary share from discontinued

operations attributable to Taro:

Basic ($0.00)* ($0.01) ($0.00)*

($0.01)

Diluted ($0.00)* ($0.01) ($0.00)*

($0.01)

 
Net income per ordinary share attributable to Taro:
Basic $ 1.98 $ 1.40 $ 4.86 $ 3.53
Diluted $ 1.98 $ 1.40 $ 4.86 $ 3.52
 

Weighted-average number of shares used to compute

net income per share:

Basic 44,725,898 44,474,727 44,651,534 44,527,689
Diluted 44,740,427 44,550,022 44,699,715 44,587,620
 

* Amount is less than $0.01.
May not foot due to rounding.

   
 

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED BALANCE SHEETS

(Unaudited)

(U.S. dollars in thousands)

             

December 31,

March 31,

2012

2012
 
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 276,995 $   238,266
Short-term bank deposits 198,973 72,440
Restricted short-term bank deposits 7,430 15,780
Marketable securities 3,172 7,835

Accounts receivable and other:

Trade, net

134,590

111,130

Other receivables and prepaid expenses 109,711 98,501
Inventories 110,732 109,638
Long-term assets held for sale, net   69     71
TOTAL CURRENT ASSETS 841,672 653,661
 
Long-term receivables and other assets 27,929 19,972
Property, plant and equipment, net 145,762 150,750
Other assets   29,945     32,041
TOTAL ASSETS $ 1,045,308 $   856,424
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
CURRENT LIABILITIES:
Current maturities of long-term debt $ 11,086 $ 10,957
Trade payables and other current liabilities   162,756     187,942
TOTAL CURRENT LIABILITIES 173,842 198,899
 
Long-term debt, net of current maturities 17,244 27,949
Deferred taxes and other long-term liabilities   6,116     6,618
TOTAL LIABILITIES 197,202 233,466
 
Taro shareholders’ equity 843,391 619,008
Non-controlling interest   4,715     3,950

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$ 1,045,308 $   856,424
 
 

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(U.S. dollars in thousands)

             

Nine Months Ended December 31,

2012

2011

Operating Activities:

Net income $ 217,804 $ 157,325
Adjustments required to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,493 14,021
Impairment of long-lived assets - 784
Share-based compensation expense 8 39
Loss on sale of long-lived assets and marketable securities, net 106 571
Decrease in long-term debt due to currency fluctuations (23 ) (2,971 )
Increase in trade receivables, net (23,417 ) (39,295 )
Change in derivative instruments, net 1,048 6,070
Increase in other receivables, prepaid expenses and other assets (10,622 ) (23,544 )
Increase in inventories, net (1,021 ) (22,872 )
Effect of exchange differences on inter-company balances 367 (2,881 )

(Decrease) increase in trade and other payables and liabilities

  (24,647 )   69,802  
Net cash provided by operating activities   173,096     157,049  

 

Investing Activities:

Purchase of property, plant & equipment

(6,183 ) (5,406 )
Investment in other intangible assets (765 ) -
(Investment in) proceeds from long-term security deposits and other assets (5,289 ) 1,127
Investment in short-term bank deposits (126,415 ) (49,928 )
Proceeds from (investment in) restricted bank deposits 8,350 (15,562 )
Proceeds from sale of long-lived assets   1     431  
Net cash used in investing activities   (130,301 )   (69,338 )
 
Financing Activities:
Proceeds from issuance of shares, net 5,877 296
Repayments of long-term debt (10,554 ) (12,907 )
Repayments of short-term bank debt, net   -     (2,428 )
Net cash used in financing activities   (4,677 )   (15,039 )
 
Effect of exchange rate changes   611     (1,543 )
Net increase in cash 38,729 71,129
Cash at beginning of period  

238,266

    78,872  
 
Cash at end of period $ 276,995   $ 150,001  
 

Contacts

Taro Pharmaceutical Industries Ltd.
Michael Kalb, 914-345-9001
GVP, CFO
Michael.Kalb@taro.com
or
William J. Coote, 914-345-9001
VP, Treasurer
William.Coote@taro.com

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