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Taro Provides Results for Three Months Ended March 2012

Net Sales Increases 35%, Operating Income Increases 98%

HAWTHORNE, N.Y.--(BUSINESS WIRE)--May. 24, 2012-- Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro,” or the “Company”) today provided unaudited financial results for the three month period ended March 31, 2012.

Quarter Three Months ended March 31, 2012 Highlights - compared to the same period in 2011

  • Net sales of $145.1 million, increased $37.4 million, or 34.7%
  • Gross profit, as a percentage of net sales was 68.3%, compared to 58.6%
  • Selling, marketing, general and administrative expenses increased $0.6 million, however, as a percentage of net sales decreased to 15.9%, compared to 20.8%
  • Operating income increased 98.3% to $66.2 million, or 45.6% of net sales, compared to $33.4 million, or 31.0% of net sales
  • Net income attributable to Taro was $47.3 million compared to $25.7 million, a $21.6 million increase, resulting in diluted earnings per share of $1.06 compared to $0.58.

Cash Flow and Balance Sheet Highlights

  • Cash flow from operations was $78.1 million for the quarter ended March 31, 2012, compared to $24.4 million in the same period in 2011
  • Cash, including marketable securities, increased $75.5 million to $334.3 million from December 31, 2011.

Mr. Kal Sundaram, Taro’s recently appointed Chairman commented, “We are pleased with the quarter’s results and the consistent progress that we continue to make. As we have stated in the past, a portion of our revenue and profit growth is the result of pricing opportunities, the sustainability of which is uncertain. We intend to ramp up our R&D expenditures in order to improve and grow our pipe-line of quality products in order to remain competitive in a highly-competitive market.”

Mr. Sundaram added, “I look forward to working with the entire Taro management team as we continue to move the Company forward, and build upon the progress and success that Taro has achieved, particularly in the past eighteen months.”

FDA Approvals and Filings

During the quarter, Taro received one Supplemental New Drug Application approval from the U.S. Food and Drug Administration (“FDA”) for Daranide® (Dichlorphenamide) Tablets 50mg. Taro also received one Abbreviated New Drug Application (“ANDA”) approval in May 2012 (Escitalopram Oxalate Oral Solution, 5mg (base)/5mL). The total number of products awaiting approval at the FDA is sixteen ANDAs and one New Drug Application.

Taro Changing its Fiscal Year End to March 31

Taro’s Board of Directors approved a change in the Company’s fiscal year end from December 31 to March 31. The new fiscal year end was effectuated to align Taro's fiscal reporting period and its annual budget planning with that of its major shareholder, Sun Pharmaceutical Industries Ltd. (“Sun Pharma,” Reuters: SUN.BO, Bloomberg: SUNP IN, NSE: SUNPHARMA, BSE: 524715). A report on Form 20-F with unaudited results will be filed with the U.S. Securities and Exchange Commission (“SEC”) by the Company to cover the transition period from January 1, 2012 to March 31, 2012 (“Transition Report”).

The Company cautions that the foregoing financial information is presented on an unaudited basis and is subject to change. In addition to filing a Transition Report, final audited results for the transition period will be included in the Company’s Annual Report on Form 20-F for the fiscal period from April 1, 2012 to March 31, 2013.

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 2012. 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 the evaluation of the Sun Pharma tender offer by Taro’s Board of Directors, acceptance of the offer by Taro shareholders, approval, if any required, by regulatory authorities, 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 actions 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

 

March 31,

 

2012

 

2011

 
Sales, net

 

$ 145,141

 

$ 107,727

Cost of sales 45,971   44,617  
Gross Profit 99,170 63,110
 

Operating Expenses:

Research and development, net

9,847

7,258

Selling, marketing, general and administrative

      23,101

 

         22,460

 

Operating Income

66,222

33,392

 

Financial Expenses, net:

Interest and other financial (income) expense

      (107

)

778

Foreign exchange expense

1,107

409

 

Other (expense) income, net

(94

)

251

 

Income before income taxes

65,128

32,456

Tax expense

17,791

 

          6,368

 

Income from continuing operations

47,337

26,088

Net income (loss) from discontinued operations(1)

66

 

(135

)

Net income

47,403

25,953

Net income attributable to non-controlling interest(2)

 151

 

295

 

Net income attributable to Taro

 

$ 47,252

 

 

$ 25,658

 
 

Net income per ordinary share

from continuing operations attributable to Taro:

Basic

 

$1.06

 

$0.58

Diluted

 

$1.06

 

$0.58

 

Net income (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

$1.06

$0.58

Diluted

$1.06

$0.58

 

Weighted-average number of ordinary shares used

to compute net income per ordinary share:

Basic

44,476,429

44,284,556

Diluted

44,589,007

44,447,293

 

(1)

 

In 2010, the Company closed its Ireland manufacturing facility and decided to sell the facility and has therefore classified the losses attributable to its Irish subsidiary as losses from discontinued operations.

(2)

The impact of the Company adopting FASB ASC Section 810-10-65, which requires the Company to allocate income or loss attributable to a non-controlling interest based on the respective ownership percentages.

 

*

Amount is less than $0.01.

 
       

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 

March 31,

December 31,

2012 2011
ASSETS (unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 238,266 $ 150,001
Short-term bank deposits 72,440 89,814
Restricted short-term bank deposits 15,780 16,080
Marketable securities 7,835 2,901

Accounts receivable and other:

Trade, net

111,130

120,832

Other receivables and prepaid expenses 98,501 94,344
Inventories 109,638 107,378
Assets held for sale, net(1)   71   81
TOTAL CURRENT ASSETS 653,661 581,431
 
Long-term receivables and other assets 19,972 23,131
Property, plant and equipment, net 150,750 152,532
Other assets   32,041   38,751
TOTAL ASSETS $ 856,424 $ 795,845
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
CURRENT LIABILITIES:
Current maturities of long-term debt $ 10,957 $ 17,073
Trade payables and other current liabilities   187,942   173,310
TOTAL CURRENT LIABILITIES 198,899 190,383
 
Long-term debt, net of current maturities 27,949 27,614
Deferred taxes and other long-term liabilities   6,618   6,785
TOTAL LIABILITIES 233,466 224,782
 
Taro shareholders’ equity 619,008 567,264
Non-controlling interest(2)   3,950   3,799
 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

856,424

$

795,845

 

(1)

  In 2010, the Company closed its Ireland manufacturing facility and decided to sell the facility and therefore has classified the related assets as held for sale.

(2)

The impact of the Company adopting FASB ASC Section 810-10-65, which requires the Company to allocate income or loss attributable to a non-controlling interest based on the respective ownership percentages.
 
       

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(U.S. dollars in thousands)

 

Three Months Ended March 31,

2012

2011

 

Operating Activities

Net income $ 47,403 $ 25,953
Adjustments required to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,598 4,709
Stock-based compensation - 20
Loss on sale of long-lived assets 22 -
Increase in long-term debt due to currency fluctuations 814 1,136
Decrease (increase) in trade receivables 9,879 (8,270 )
Change in derivative instruments, net (3,392 ) (831 )
Decrease in other receivables, prepaid expenses and other assets 3,268 2,531
Increase in inventories (1,583 ) (1,592 )
Foreign exchange effect on intercompany balances 2,104 (368 )
Increase in trade and other payables and accruals   14,981     1,070  
Net cash provided by operating activities   78,094     24,358  

 

Investing Activities:
Purchase of property plant & equipment, net of related grants (1,610 ) (887 )
Proceeds from long-term deposits and other assets 18 -
Proceeds from (investment in) short-term and restricted bank deposits 22,059 (10,105 )
Investment in marketable securities (4,909 ) -
Proceeds from sale of property, plant and equipment   28     -  
Net cash provided by (used in) investing activities   15,586     (10,992 )
 

Financing Activities:

Proceeds from the issuance of shares, net

7

8,554

(Repayments) proceeds of long-term debt

(6,595

)

9

Proceeds of short-term bank debt, net

 

-

   

2,428

 

Net cash (used in) provided by financing activities

 

(6,588

)

 

10,991

 
 

Effect of exchange rate changes

 

1,173

   

371

 

Net increase in cash

88,265

24,728

Cash at beginning of period

 

150,001

   

54,144

 
 

Cash at end of period

$

238,266

 

$

78,872

 
 

Source: Taro Pharmaceutical Industries Ltd.

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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