TARO - Taro Provides Results for the Year Ended March 31 2019
Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter and year ended March 31, 2019.
Quarter ended March 31, 2019 Highlights ? compared to March 31, 2018
- Net sales of $179.9 million increased $4.7 million, mainly driven by a 4.1% increase in overall volumes.
- Gross profit of $119.5 million (66.4% of net sales compared to 67.9%) increased $0.6 million.
- Research and development (R&D) expenses of $20.5 million remained in line with prior year.
- Selling, marketing, general and administrative expenses (SG&A) of $23.3 million decreased $0.5 million.
- Operating income of $75.4 million (41.9% of net sales compared to 42.7%) increased $0.6 million.
- Interest and other financial income increased $2.3 million to $8.2 million.
- Foreign Exchange (FX) expense of $9.4 million compared to income of $16.0 million - an unfavorable impact of $25.4 million, principally the result of the weakening of the U.S. dollar vs. the Canadian dollar. The FX impact is mainly balance sheet driven.
- Tax expense of $15.6 million increased $5.0 million; with the effective tax rate of 21.1% compared to 11.0%.
- Net income attributable to Taro was $58.4 million compared to $86.3 million, a $27.9 million decrease, resulting in diluted earnings per share of $1.52 compared to $2.17.
Year ended March 31, 2019 Highlights ? compared to March 31, 2018
- Net sales of $669.9 million increased $8.0 million, mainly driven by a 7.5% increase in overall volumes.
- Gross profit of $445.7 million (66.5% of net sales compared to 70.0%) decreased $17.8 million.
- R&D expenses of $63.2 million decreased $7.2 million, principally due to the continuous evaluation of our portfolio and adjusting for viable development of products.
- SG&A of $90.0 million increased $1.8 million.
- Operating income of $296.2 million (44.2% of net sales compared to 45.8%) decreased $6.8 million.
- Interest and other financial income increased $13.6 million to $33.5 million.
- FX income of $25.3 million compared to FX expense of $32.5 million - a favorable impact of $57.8 million, principally the result of the strengthening of the U.S. dollar vs. the Canadian dollar. The FX impact is mainly balance sheet driven.
- Tax expense of $74.7 million decreased $7.2 million; with the effective tax rate of 20.9% compared to 28.0%. During the third quarter of 2018, the Company recorded a $38.0 million expense for the impact of the re-measurement of the Company's estimated net deferred tax asset, as a result of the Tax Cuts and Jobs Act. Excluding the impact from the one-time re-measurement, the tax expense would have been $44.0 million with an effective tax rate of 15.0%.
- Net income attributable to Taro was $281.8 million compared to $211.2 million, a $70.6 million increase, resulting in diluted earnings per share of $7.23 compared to $5.26. Excluding the impact of the one-time tax re-measurement, prior year net income attributable to Taro would have been $248.0 million, or diluted earnings per share of $6.18.
Cash Flow and Balance Sheet Highlights
- Cash flow provided by operations for the year ended March 31, 2019 was $323.7, similar to the year ended March 31, 2018.
- As of March 31, 2019, cash, including short-term bank deposits and marketable securities (both short and long-term) decreased $294.6 million to $1.4 billion from March 31, 2018. The decrease reflects the impact from the $500.0 million special dividend paid in December 2018 and the $88.8 million impact from the completion of the Company’s share repurchase program.
Mr. Uday Baldota, Taro’s CEO stated, “Despite the challenging market conditions we face due primarily to the continuing pricing pressure, our team has delivered a good performance. With a clearly defined strategy, we are shaping our business and product portfolio with internal and inorganic developments. This effort is aimed at doing more for patients and staying relevant for our customers.”
FDA Approvals and Filings
The Company recently received approvals from the U.S. Food and Drug Administration (“FDA”) for five Abbreviated New Drug Applications (“ANDAs”): Minoxidil Topical Aerosol, 5% (for women); Clobazam Oral Suspension, 2.5 mg/mL; Naftifine Hydrochloride Gel USP, 2%; Dapsone Tablets USP, 25 mg and 100 mg and Deferiprone Tablets 500mg. The Company currently has a total of twenty-six ANDAs awaiting FDA approval, including eight tentative approvals.
Earnings Call (8:00 am ET, May 23, 2019)
As previously announced, the Company will host an earnings call at 8:00 am ET on Thursday, May 23, 2019, where senior management will discuss the Company’s performance and answer questions from participants. This call will be accessible through an audio dial-in and a web-cast. Audio conference participants can dial-in on the numbers below:
- Participant Toll-Free Dial-In Number: +1 (844) 421-0601 ID: 8698095
- Participant International Dial-In Number: +1 (716) 247-5800 ID: 8698095
- Web-cast: More details are provided on our website, www.taro.com
To participate in the audio call, please dial the numbers provided above five to ten minutes ahead of the scheduled start time. The operator will provide instructions on asking questions before the call. The transcript of the event will be available on the Company’s website at www.taro.com. An audio playback will be available for ten (10) days following the call.
The Company cautions that the foregoing financial information is unaudited and could be subject to change.
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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 2019. 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 |
| (U.S. dollars in thousands, except share data) |
| Quarter Ended |
| Year Ended |
| March 31, |
| March 31, |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (audited) |
| Sales, net |
| $ |
| 179,921 |
| $ |
| 175,216 |
| $ |
| 669,893 |
| $ |
| 661,913 |
| Cost of sales |
| 60,384 |
| 56,287 |
| 224,169 |
| 198,405 |
| Gross profit |
| 119,537 |
| 118,929 |
| 445,724 |
| 463,508 |
| Operating Expenses: |
| Research and development |
| 20,512 |
| 20,308 |
| 63,238 |
| 70,418 |
| Selling, marketing, general and administrative |
| 23,321 |
| 23,775 |
| 89,971 |
| 88,196 |
| Settlements and loss contingencies |
| 322 |
| 24 |
| (3,678 |
| ) |
| 1,884 |
| Operating income |
| 75,382 |
| 74,822 |
| 296,193 |
| 303,010 |
| Financial (income) expense, net: |
| Interest and other financial income |
| (8,241 |
| ) |
| (5,894 |
| ) |
| (33,542 |
| ) |
| (19,934 |
| ) |
| Foreign exchange expense (income) |
| 9,397 |
| (16,041 |
| ) |
| (25,309 |
| ) |
| 32,465 |
| Other (loss) gain, net |
| (100 |
| ) |
| 458 |
| 1,810 |
| 1,889 |
| Income before income taxes |
| 74,126 |
| 97,215 |
| 356,854 |
| 292,368 |
| Tax expense |
| 15,649 |
| 10,691 |
| 74,732 |
| 81,954 |
| Income from continuing operations |
| 58,477 |
| 86,524 |
| 282,122 |
| 210,414 |
| Net loss from discontinued operations attributable to Taro |
| — |
| (96 |
| ) |
| — |
| (335 |
| ) |
| Net income |
| 58,477 |
| 86,428 |
| 282,122 |
| 210,079 |
| Net income (loss) attributable to non-controlling interest |
| 42 |
| 141 |
| 345 |
| (1,071 |
| ) |
| Net income attributable to Taro |
| $ |
| 58,435 |
| $ |
| 86,287 |
| $ |
| 281,777 |
| $ |
| 211,150 |
| Net income per ordinary share from continuing operations attributable to Taro: |
| Basic and Diluted |
| $ |
| 1.52 |
| $ |
| 2.17 |
| $ |
| 7.23 |
| $ |
| 5.27 |
| Net loss per ordinary share from discontinued operations attributable to Taro: |
| Basic and Diluted |
| $ |
| — |
| $ |
| (0.00 |
| ) |
| * |
| $ |
| — |
| $ |
| (0.01 |
| ) |
| Net income per ordinary share attributable to Taro: |
| Basic and Diluted |
| $ |
| 1.52 |
| $ |
| 2.17 |
| $ |
| 7.23 |
| $ |
| 5.26 |
| Weighted-average number of shares used to compute net income per share: |
| Basic and Diluted |
| 38,548,516 |
| 39,729,942 |
| 38,990,058 |
| 40,155,087 |
| * 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) |
| March 31, |
| March 31, |
| 2019 |
| 2018 |
| ASSETS |
| (unaudited) |
| (audited) |
| CURRENT ASSETS: |
| Cash and cash equivalents |
| $ |
| 567,451 |
| $ |
| 576,611 |
| Short-term and current maturities of long-term bank deposits |
| — |
| 296,188 |
| Marketable securities |
| 481,883 |
| 549,821 |
| Accounts receivable and other: |
| Trade, net |
| 237,945 |
| 206,455 |
| Corporate tax receivable |
| 25,969 |
| 100,380 |
| Other receivables and prepaid expenses |
| 21,393 |
| 22,585 |
| Inventories |
| 148,079 |
| 144,595 |
| TOTAL CURRENT ASSETS |
| 1,482,720 |
| 1,896,635 |
| Long-term deposits and marketable securities |
| 304,322 |
| 225,639 |
| Property, plant and equipment, net |
| 206,242 |
| 193,727 |
| Deferred income taxes |
| 110,974 |
| 87,257 |
| Other assets |
| 31,068 |
| 29,952 |
| TOTAL ASSETS |
| $ |
| 2,135,326 |
| $ |
| 2,433,210 |
| LIABILITIES AND SHAREHOLDERS' EQUITY |
| CURRENT LIABILITIES: |
| Trade payables |
| $ |
| 35,060 |
| $ |
| 25,697 |
| Other current liabilities |
| 181,761 |
| 190,059 |
| TOTAL CURRENT LIABILITIES |
| 216,821 |
| 215,756 |
| Deferred taxes and other long-term liabilities |
| 7,383 |
| 7,055 |
| TOTAL LIABILITIES |
| 224,204 |
| 222,811 |
| Taro shareholders' equity |
| 1,905,536 |
| 2,205,158 |
| Non-controlling interest |
| 5,586 |
| 5,241 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
| $ |
| 2,135,326 |
| $ |
| 2,433,210 |
| TARO PHARMACEUTICAL INDUSTRIES LTD. |
| SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS |
| (U.S. dollars in thousands) |
| Year Ended March 31, |
| 2019 |
| 2018 |
| (unaudited) |
| (audited) |
| Cash flows from operating activities: |
| Net income |
| $ |
| 282,122 |
| $ |
| 210,079 |
| Adjustments required to reconcile net income to net cash provided by operating activities: |
| Depreciation and amortization |
| 18,597 |
| 16,496 |
| Realized loss on sale of marketable securities and long-lived assets |
| 27 |
| 275 |
| Change in derivative instruments, net |
| 3,115 |
| (893 |
| ) |
| Effect of change in exchange rate on inter-company balances, marketable securities and bank deposits |
| (29,533 |
| ) |
| 34,970 |
| Deferred income taxes, net |
| 12,262 |
| 56,007 |
| Increase in trade receivables, net |
| (32,088 |
| ) |
| (2,297 |
| ) |
| Increase in inventories, net |
| (5,515 |
| ) |
| (1,978 |
| ) |
| Decrease in other receivables, income tax receivable, prepaid expenses and other |
| 74,256 |
| 12,644 |
| Increase (decrease) in trade, income tax, accrued expenses, and other payables |
| 529 |
| (936 |
| ) |
| Income from marketable securities, net |
| (63 |
| ) |
| (678 |
| ) |
| Net cash provided by operating activities |
| 323,709 |
| 323,689 |
| Cash flows from investing activities: |
| Purchase of plant, property & equipment, net |
| (27,018 |
| ) |
| (26,886 |
| ) |
| Investment in other intangible assets |
| (3,666 |
| ) |
| (2,650 |
| ) |
| Proceeds from short-term bank deposits, net |
| 225,503 |
| 161,032 |
| Proceeds from long-term deposits and other assets |
| 70,685 |
| 396,281 |
| Investment in marketable securities, net |
| (8,368 |
| ) |
| (770,490 |
| ) |
| Proceeds from the sale of long-lived assets |
| — |
| 1,075 |
| Net cash provided by (used in) investing activities |
| 257,136 |
| (241,638 |
| ) |
| Cash flows from financing activities: |
| Purchase of treasury stock |
| (88,849 |
| ) |
| (106,986 |
| ) |
| Dividends paid |
| (500,000 |
| ) |
| — |
| Net cash used in financing activities |
| (588,849 |
| ) |
| (106,986 |
| ) |
| Effect of exchange rate changes on cash and cash equivalents |
| (1,156 |
| ) |
| 1,147 |
| Decrease in cash and cash equivalents |
| (9,160 |
| ) |
| (23,788 |
| ) |
| Cash and cash equivalents at beginning of period |
| 576,611 |
| 600,399 |
| Cash and cash equivalents at end of period |
| $ |
| 567,451 |
| $ |
| 576,611 |
| Cash Paid during the year for: |
| Income taxes |
| $ |
| 71,096 |
| $ |
| 55,051 |
| Cash Received during the year for: |
| Income taxes |
| $ |
| 69,436 |
| $ |
| 36,668 |
| Non-cash investing transactions: |
| Purchase of property, plant and equipment included in accounts payable |
| $ |
| 4,740 |
| $ |
| 2,281 |
| Non-cash financing transactions: |
| Purchase of treasury stock |
| $ |
| — |
| $ |
| 4,348 |
| Purchase of marketable securities |
| $ |
| 2,003 |
| $ |
| 3,491 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190522005882/en/
Mariano Balaguer
VP, Chief Financial Officer
(914) 345-9001
Mariano.Balaguer@Taro.com
William J. Coote
AVP, Business Finance, Treasurer and Investor Relations
(914) 345-9001
William.Coote@Taro.com