TARO - Taro Provides Results for December 31 2020

January, 27 2021 05:46 PM Taro Pharmaceutical Industries Ltd.

Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter and nine months ended December 31, 2020.

Quarter ended December 31, 2020 Highlights ? compared to December 31, 2019

Net sales of $140.1 million decreased $7.5 million.
Gross profit of $73.2 million (52.2% of net sales compared to 63.7%) decreased $20.9 million, primarily due to continued price erosion, unfavorable impact from COVID, change in product mix, and certain one-time charges.
Research and development (R&D) expenses of $14.1 million decreased $0.9 million.
Selling, marketing, general and administrative expenses (SG&A) of $22.8 million increased $1.9 million.
Operating income of $36.3 million (25.9% of net sales compared to 39.4%) decreased $21.9 million.
Interest and other financial income of $4.0 million decreased $4.5 million, reflecting the low global interest rate environment.
Foreign Exchange (FX) expense of $2.0 million compared to FX income of $3.3 million ? an unfavorable impact of $5.3 million.
Tax expense of $6.1 million increased $3.2 million; with the effective tax rate of 15.6% compared to 4.1%. The prior year quarter reflects the impact from a non-recurring item.
Net income attributable to Taro was $32.9 million compared to $67.7 million, a $34.8 million decrease ? resulting in diluted earnings per share of $0.86 compared to $1.76.

Nine Months ended December 31, 2020 Highlights ? compared to December 31, 2019

Net sales of $400.6 million decreased $69.2 million.
Gross profit of $219.7 million (54.8% of net sales compared to 63.3%) decreased $77.7 million, primarily due to the aforementioned factors.
R&D expenses of $43.6 million were in line with the previous year.
SG&A of $69.1 million increased $4.8 million.
Settlements and loss contingencies of $478.9 million reflect the one-time settlement charge (taken in the first quarter) which consists of $418.9 million related to the global resolution of the Department of Justice (“DOJ”) investigations into the U.S. generic pharmaceutical industry and an additional provision of $60.0 million related to ongoing multi-jurisdiction civil antitrust matters; however, there can be no assurance as to the ultimate outcome.
Operating (loss) of $(371.9) million compared to operating income of $189.3 million. Excluding the settlement and loss contingencies charges, operating income was $107.0 million, a decrease of $82.3 million, and as a percentage of net sales was 26.7% compared to 40.3%.
Interest and other financial income decreased $10.0 million to $17.0 million.
FX expense of $1.2 million compared to FX income of $11.1 million ? an unfavorable impact of $12.4 million.
Tax expense of $18.5 million decreased $21.0 million. Excluding the impact from the settlement and loss contingencies charges, the effective tax rate was 14.8% compared to 17.2%.
Net (loss) attributable to Taro was $(356.9) million compared to net income of $190.0 million, resulting in diluted (loss) earnings per share of $(9.33) compared to $4.93. Excluding the impact from the settlement and loss contingencies charges, net income was $107.1 million, resulting in diluted earnings per share of $2.80.

Cash Flow and Balance Sheet Highlights

Cash flow (used in) operations for the nine months ended December 31, 2020, was $(5.3) million. Excluding the impact from the settlement and loss contingencies charges, cash flow provided by operations was $97.5 million compared to $222.0 million for the nine months ended December 31, 2019.
As of December 31, 2020, cash and cash equivalents and marketable securities (both short and long-term) of $1.55 billion decreased $18.2 million from March 31, 2020.

Mr. Uday Baldota, Taro’s CEO, stated, “While many of our products maintain their leading market share, our lower sales are principally the result of reduced U.S. volumes; a reflection of the impact related to COVID-19. Continuing our investment in R&D to build our pipeline is critical to our business growth. We continue to concentrate on creating shareholder value as demonstrated by our R&D investment, the share repurchase program, as well as continuing to explore investments in strategic opportunities.”

FDA Approvals and Filings

The Company recently received an approval from the U.S. Food and Drug Administration (“FDA”) for one Abbreviated New Drug Application (“ANDA”): Clindamycin Phosphate Gel USP, 1%. The Company currently has a total of seventeen ANDAs awaiting FDA approval, including five tentative approvals.

Share Repurchase Program - Returning Capital to Shareholders

On November 4, 2019, the Company announced that its Board of Directors approved a share repurchase of ordinary shares up to $300 million. The repurchase authorization enables the Company to purchase its ordinary shares from time to time through open market purchases (including 10b5-1 trading plans), privately negotiated transactions, tender offer or other means, in accordance with applicable securities laws and other regulations. No time period has been set for the repurchase program, and any such program may be suspended or discontinued at any time.

During the quarter, the Company repurchased 53,328 shares at an average price of $71.29.

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 2021. 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.

**Financial Tables Follow**


TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(U.S. dollars in thousands, except share data)









Quarter Ended

Nine Months Ended

December 31,

December 31,


2020



2019



2020



2019

Sales, net
$
140,145


$
147,683


$
400,622


$
469,829

Cost of sales

66,957



53,557



180,900



172,375

Gross profit

73,188



94,126



219,722



297,454









Operating Expenses:







Research and development

14,081



14,996



43,565



43,978

Selling, marketing, general and administrative

22,798



20,932



69,121



64,302

Settlements and loss contingencies

—



—



478,924



(150
)
Operating income (loss)

36,309



58,198



(371,888
)


189,324









Financial (income) expense, net:







Interest and other financial income

(4,001
)


(8,531
)


(16,989
)


(27,012
)
Foreign exchange expense (income)

2,036



(3,287
)


1,207



(11,147
)
Other gain, net

863



534



2,792



2,211

Income (loss) before income taxes

39,137



70,550



(353,313
)


229,694

Tax expense

6,101



2,874



18,545



39,565

Net income (loss)

33,036



67,676



(371,858
)


190,129

Net income (loss) attributable to non-controlling interest

117



(6
)


(14,991
)


84

Net income (loss) attributable to Taro
$
32,919


$
67,682


$
(356,867
)

$
190,045









Net income (loss) per ordinary share attributable to Taro:







Basic and Diluted
$
0.86


$
1.76


$
(9.33
)

$
4.93









Weighted-average number of shares used to compute net income per share:







Basic and Diluted

38,254,231



38,502,440



38,256,963



38,526,806









May not foot due to rounding.

TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)





December 31,

March 31,


2020


2020
ASSETS
(unaudited)

(audited)
CURRENT ASSETS:



Cash and cash equivalents
$
552,918


$
513,354
Marketable securities

521,041



595,383
Accounts receivable and other:



Trade, net

228,825



235,221
Other receivables and prepaid expenses

49,963



35,567
Inventories

169,527



153,073
TOTAL CURRENT ASSETS

1,522,274



1,532,598
Marketable securities

476,248



459,639
Property, plant and equipment, net

206,296



209,961
Deferred income taxes

134,799



106,693
Other assets

32,207



32,361
TOTAL ASSETS
$
2,371,824


$
2,341,252




LIABILITIES AND SHAREHOLDERS' EQUITY



CURRENT LIABILITIES:



Trade payables
$
45,409


$
28,858
Other current liabilities

538,668



193,873
TOTAL CURRENT LIABILITIES

584,077



222,731
Deferred taxes and other long-term liabilities

37,174



8,762
TOTAL LIABILITIES

621,251



231,493




Taro shareholders' equity

1,759,668



2,103,864
Non-controlling interest

(9,095
)


5,895
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
2,371,824


$
2,341,252

TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)





Nine Months Ended December 31,


2020



2019

Cash flows from operating activities:



Net (loss) income
$
(371,858
)

$
190,129

Adjustments required to reconcile net income to net cash provided by operating activities:



Depreciation and amortization

17,337



16,101

Change in derivative instruments, net

(390
)


(3,395
)
Effect of change in exchange rate on marketable securities, bank deposits and inter-company balances

(4,288
)


(11,061
)
Deferred income taxes, net

(31,877
)


(2,076
)
Decrease in trade receivables, net

6,395



10,618

Increase in inventories, net

(16,454
)


(9,796
)
(Increase) decrease in other receivables, income tax receivables, prepaid expenses and other

(11,962
)


27,407

Increase in trade, income tax, accrued expenses and other payables

405,233



5,263

Loss (income) from marketable securities, net

2,579



(1,182
)
Net cash (used in) provided by operating activities

(5,285
)


222,008





Cash flows from investing activities:



Purchase of plant, property & equipment, net

(14,210
)


(19,350
)
Investment in other intangible assets

(117
)


(1,016
)
Proceeds from (investment in) marketable securities, net

60,122



(233,393
)
Net cash provided by (used in) investing activities

45,795



(253,759
)




Cash flows from financing activities:



Purchase of treasury stock

(3,243
)


(26,827
)
Net cash used in financing activities

(3,243
)


(26,827
)




Effect of exchange rate changes on cash and cash equivalents

2,297



488

Increase (decrease) in cash and cash equivalents

39,564



(58,090
)
Cash and cash equivalents at beginning of period

513,354



567,451

Cash and cash equivalents at end of period
$
552,918


$
509,361





Cash Paid during the year for:



Income taxes
$
24,169


$
38,773

Cash Received during the year for:



Income taxes
$
4,093


$
24,819

Non-cash investing transactions:



Purchase of property, plant and equipment included in accounts payable
$
453


$
1,479

Non-cash financing transactions:



Purchase of intangible assets
$
—


$
750

Purchase of treasury stock
$
559


$
—

Purchase (sale) of marketable securities
$
580


$
(145
)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210127006007/en/

Daphne Huang
VP, Chief Financial Officer
(914) 345-9000
Daphne.Huang@taro.com

William J. Coote
AVP, Treasurer and Investor Relations
(914) 345-9000
William.Coote@taro.com

Company Name:	Taro Pharmaceutical Industries Ltd.
Stock Symbol:	TARO
Market:	NYSE
Website:	taro.com

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