HAWTHORNE, N.Y.--(BUSINESS WIRE)--Dec. 6, 2007--Taro
Pharmaceutical Industries Ltd. ("Taro," the "Company," Pink Sheets:
TAROF) today provided information for the year ended December 31, 2006
and for the nine months ended September 30, 2007, and provided an
update on the Company's progress in completing its financial
statements for the year ended December 31, 2006.
In providing this information, the Company cautioned that the
financial information is both unaudited and subject to further review
and possible change. Additionally, these results do not provide
complete financial information and the 2006 results are subject to
audit by the Company's outside auditors. The 2007 results have not
been and will not be subject to quarterly review procedures. However,
subject to the foregoing caveats, the Company believes that the
information below represents the best information currently available
to Taro management.
Taro also stated that it presently expects to schedule a
shareholder meeting to vote on a proposed merger with Sun
Pharmaceutical Industries Ltd. ("Sun") during the first quarter of
2008. The Company had previously stated that it hoped to hold the
meeting before the end of November 2007.
2007 Nine Months Financial Performance
The Company and its Board believe it is important to provide its
shareholders with the best financial information currently available
for 2007 and to update its shareholders regarding the financial
results of the Company, even though the information is, as stated
above, unaudited and subject to further review and change.
For the nine months ended September 30, 2007, Taro estimates net
sales of approximately $232 million, gross profit of approximately
$126 million, or 54% of sales, and net income of approximately $14
million. The Company noted that in the nine months ended September 30,
2007, there are approximately $10 million of one-time charges and
non-recurring expenses, including significantly higher professional
fees due to a restatement of 2003 and 2004 results, a related
investigation and the proposed transaction with Sun.
In May 2007, Sun made an equity investment of approximately $41
million to help the Company avoid an impending payment default on
certain of its debt obligations. In August 2007, Sun provided $18
million more to the Company through the exercise of warrants. Thus,
since May 2007, Sun has made equity investments in Taro totaling
approximately $59 million. As of September 30, 2007, Taro had $50
million in cash or cash equivalents, after making normally scheduled
and required principal debt payments of approximately $30 million
since December 2006 and sustaining a number of one time expenses. For
the remainder of the year, the Company expects to make additional
principal and interest payments of approximately $10 million. For
2008, Taro is due to make principal and interest payments totaling $42
million. In addition, the Company notes that it has a separate $28
million credit facility due in late 2008, which it expects to be able
to refinance. As of September 30, 2007, the Company's total debt was
approximately $224 million. The Company believes, in the ordinary
course, that it should have sufficient liquidity to meet its cash
requirements for the foreseeable future, subject to the continuing
support of its lenders. The Company continues to be out of compliance
with certain of its debt instruments and continues to discuss the
situation with its lenders.
Status of 2006 Financial Statements
Taro stated that the completion of its financial statements for
the year ended December 31, 2006 has been delayed because the Company
is reviewing the adequacy of estimates for accruals recorded in 2005
and prior years for sales returns, chargebacks, rebates and
administrative fees. This review is still in progress, and the
eventual outcome cannot be predicted with any certainty at this time.
Taro stated that on the basis of present information, changes in the
estimates for those years, if made, may be material. However, the
Company does not expect that any such changes would affect the results
for 2006 and prior years, when taken in the aggregate. Furthermore if
any such changes were to be made, they would likely reduce the amount
of the loss in 2006 as presented herein. The Company added that it
believes such changes would not impact the results for 2007.
Taro emphasized that its review of accruals described above has
not yet been completed, and would be subject to audit by its outside
auditors. The Company stated that, as a result of this review, it
believes it may be several months before it is in a position to issue
its 2006 audited financial statements.
2006 Financial Performance
Taro noted that in light of this delay in completing the financial
statements for 2006, the Company wanted to provide the best
information currently available to update its shareholders regarding
the financial results of the Company, even though the information is
unaudited and subject to further review and change.
Taro currently estimates its net sales to be approximately $184
million for the year ended December 31, 2006, resulting in a net loss
for the year of approximately $141 million. These results differ from
prior estimates made by the Company primarily due to increased amounts
of asset impairments. Taro currently estimates its non-cash asset
impairments will total approximately $38 million during 2006. In June
2007, the Company previously had estimated 2006 net sales in the range
of $180 to $200 million and a net loss in the range of $95 to $120
million. When it originally provided these estimates, the Company
noted that the estimates were subject to change. The magnitude of the
2006 loss resulted from a number of factors, including:
-- A decrease in sales after the Company received official
reports from wholesaler customers quantifying their
inventories. The Company eliminated promotions to and reduced
sales to those customers with the goal of reducing their
inventory levels. As a result, official reports from the
wholesaler customers reveal that inventory of Taro generic
drugs at wholesaler customers was reduced significantly during
2006.
-- Price erosion on products such as warfarin sodium tablets and
the Company's clobetasol propionate and
clotrimazole-betamethasone dipropionate topical product lines,
as well as other generic products, accounted for a substantial
decrease in sales.
-- New product introductions in 2006 did not begin to offset the
price erosion on base product sales until late in the fourth
quarter of 2006.
-- One time legal and accounting charges associated with the 2003
and 2004 restatement and an independent investigation in 2006.
-- Certain non-cash impairment of assets, including the Company's
facility in Ireland.
In addition, the Company noted that it has received final approval
from the U.S. Food and Drug Administration ("FDA") for several new
products, including Ciclopirox Topical Solution (8%), Grape Flavor
Loratadine Syrup (5mg/5mL), Terbinafine HCl cream (1%), Oxcarbazepine
Tablets (150mg, 300mg, and 600mg), Ondansetron Oral Solution USP
(4mg/5mL), and tentative approval for prescription Cetirizine HCl
Syrup (5mg/5mL). Taro currently has 24 filings at the FDA, consisting
of 23 Abbreviated New Drug Applications related to 16 chemical
entities, and a New Drug Application for which the Company has
received an approvable letter.
SAFE HARBOR STATEMENT
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, "should" happen, or similar language, and
statements with respect to the availability of financial information,
completion of the 2006 audit, estimates of financial results and
financial information for 2003-2007, review of results for prior
years, estimates of expenses and one-time charges, and the
shareholders meeting on the transaction with Sun described in this
press release. Although Taro Pharmaceutical Industries Ltd. 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 the possible unavailability of financial
information, completion of the audit of 2006, inability to conduct a
shareholders meeting on the transaction with Sun, actions of the
Company's lenders, creditors and Sun, 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 or Sun operates, litigation, regulatory actions and
legislative actions in the countries in which Taro or Sun 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 speak 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 STATEMENT OF LOSS
(US dollars in thousands, except per share data)
Unaudited and
Unreviewed
Year Ended
December 31
2006
----------------
SALES 184,122
Cost of Sales 141,938
----------------
Gross Profit 42,184
Operating Expenses:
Selling and Administrative (Note 1) 134,922
----------------
Operating Loss before Research and Development (92,738)
Research and Development 36,220
----------------
Operating Loss (128,958)
Financial Expenses 13,404
----------------
(142,362)
Tax Benefit on Loss (1,640)
----------------
NET LOSS (140,722)
================
Basic and Diluted Loss per Ordinary Share (4.80)
Weighted average number of shares-
Basic EPS 29,315,224
Diluted EPS 29,501,777
Note 1: Includes charges for asset impairment in the amount of $38
million.
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED BALANCE SHEETS
(US dollars in thousands)
Unaudited and Unaudited and
Unreviewed Unreviewed
September 30 December 31
2007 2006
------------- -------------
Current Assets:
Cash and Cash Equivalents 50,097 16,911
Restricted Short-term Bank Deposits 41 152
Accounts Receivable - Trade 65,369 43,687
Accounts Receivable - Other and Prepaid
Expenses 15,309 15,284
Inventories 62,632 60,017
------------------------------------------------------ -------------
Total Current Assets 193,448 136,051
Long term Investments 26,967 23,390
Property, Plant and Equipment, net 216,570 226,980
Other Assets 49,466 52,467
------------------------------------------------------ -------------
TOTAL ASSETS 486,451 438,888
====================================================== =============
Liabilities and Shareholders' Equity
Current Liabilities:
Short-Term Bank Credits 105,293 110,576
Current Maturities of Long-Term
Liabilities 22,357 26,339
Accounts Payable and Accrued Expenses 73,290 87,702
------------------------------------------------------ -------------
Total Current Liabilities 200,940 224,617
Long -Term Liabilities 96,099 108,383
Deferred Taxes and Other Liabilities 7,427 7,517
------------------------------------------------------ -------------
Total Liabilities 304,466 340,517
Shareholders' Equity (Note 1) 181,985 98,371
------------------------------------------------------ -------------
486,451 438,888
====================================================== =============
Note 1: Shareholders' equity is net of $2.4 million of fees associated
with Sun's equity investment in Taro.
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENT OF INCOME
(US dollars in thousands, except per share data)
Unaudited and
Unreviewed
Nine Months
Ended
2007
--------------
SALES 231,800
Cost of Sales 105,998
--------------
Gross Profit 125,802
Operating Expenses:
Selling and Administrative (Note 1) 72,450
--------------
Operating Income before Research and Development
53,352
Research and Development 20,605
--------------
Operating Income 32,747
Financial Expenses 18,800
Other Income - Net ( Note 2) 4,520
--------------
18,467
Taxes on Income 4,229
--------------
NET INCOME 14,238
==============
Basic and Diluted Earnings per Ordinary Share 0.43
Weighted average number of shares-
Basic EPS 33,215,730
Diluted EPS 33,306,038
Note 1: Includes approximately $10 million of one-time charges and
non-recurring expenses, including professional fees
related to the Company's investigations and its proposed
transaction with Sun Pharmaceuticals Ltd.
Note 2: Includes a one time gain of approximately $4 million
resulting from the sale of a car park in Ireland.
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENT OF CASHFLOWS
(US dollars in thousands)
Unaudited and
Unreviewed
Nine Months Ended
September 30, 2007
--------------------
Operating Activities:
Net income 14,238
Adjustments required to reconcile net income to
net cash
used in operating activities:
Depreciation and amortization 19,933
Stock based compensation 203
Gain on sales of property, plant and
equipment (3,586)
Increase in fair value of derivative
instruments (3,421)
Increase in long-term debt due to currency
fluctuations 4,899
Amortization of deferred revenue (4,420)
Increase in trade receivables (21,131)
Increase in other receivables and prepaid
tax
(477)
Decrease in deferred tax asset 1,108
Decrease in inventories 77
Foreign exchange effect on intercompany
balances 5,937
Decrease in trade and other payables and
accruals (12,590)
----------------------------------------------------------------------
Net cash used in operating activities 770
Investing Activities:
Purchase of property plant & equipment, net
of related grants (3,794)
Investment in other intangible assets (296)
Proceeds from sale of marketable securities 114
Proceeds from sales of property, plant and
equipment 9,916
----------------------------------------------------------------------
Net cash provided by investing activities 5,940
Financing Activities:
Proceeds from issuance of shares, net 56,289
Repayments of long term debt (23,682)
Repayments of short-term bank debt, net (6,377)
----------------------------------------------------------------------
Net cash provided by financing activities 26,230
Effect of exchange rate changes 246
----------------------------------------------------------------------
Net increase in cash 33,186
Cash at beginning of period 16,911
----------------------------------------------------------------------
Cash at end of period 50,097
====================
CONTACT: Taro Pharmaceutical Industries Ltd.
Daniel Saks, 914-345-9000 ext. 6208
Vice President, Corporate Affairs
SOURCE: Taro Pharmaceutical Industries Ltd.