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CONTACTS:
Mariano Balaguer	William J. Coote
VP, Chief Financial Officer	AVP, Business Finance, Treasurer and Investor Relations
(914) 345-9001	(914) 345-9001
Mariano.Balaguer@Taro.com	William.Coote@Taro.com

 

TARO PROVIDES RESULTS FOR SEPTEMBER 30, 2018

BOARD OF DIRECTORS APPROVES $500 MILLION SPECIAL DIVIDEND

Hawthorne, NY, November 5, 2018 - Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three and six months ended September 30, 2018.

Quarter ended September 30, 2018 Highlights ─ compared to September 30, 2017

·	Net sales of $159.0 million decreased $10.9 million, the result of continuing increased competition and the challenging pricing environment despite a slight increase in overall volumes.

·	Gross profit of $108.6 million (68.3% of net sales compared to 73.6%) decreased $16.6 million.

·	Research and development (R&D) expenses of $14.7 million decreased $3.3 million.

·	Selling, marketing, general and administrative expenses (SG&A) of $19.2 million increased slightly.

·	Settlements and loss contingencies was a $4.0 million credit, the result of a settlement of a patent infringement.

·	Operating income of $78.7 million (49.5% of net sales compared to 52.3%) decreased $10.1 million.

·	Interest and other financial income increased $4.5 million to $9.1 million.

·	Foreign Exchange (FX) expense of $6.0 million compared to FX expense of $32.6 million ─ a favorable impact of $26.6 million, principally the result of the strengthening of the Canadian dollar vs. the U.S. dollar at a lower rate than in prior period.

·	Tax expense of $19.2 million increased $12.4 million; with the effective tax rate of 23.5% compared to 11.5%.

·	Net income attributable to Taro was $62.6 million compared to $52.4 million, a $10.2 million increase, resulting in diluted earnings per share of $1.60 compared to $1.30.

Six Months ended September 30, 2018 Highlights ─ compared to September 30, 2017

·	Net sales of $313.6 million decreased $17.6 million, the result of continuing increased competition and the challenging pricing environment despite a 6.5% increase in volumes.

·	Gross profit of $208.6 million (66.5% of net sales compared to 73.0%) decreased $33.0 million.

·	R&D expenses of $28.0 million decreased $4.7 million principally due to the timing of clinical studies.

·	SG&A remained flat at $42.8 million.

·	Operating income of $141.9 million (45.2% of net sales compared to 50.2%) decreased $24.5.

·	Interest and other financial income increased $7.8 million to $16.9 million.

·	FX income of $4.0 million compared to FX expense of $52.2 million ─ a favorable impact of $56.2 million, principally the result of the Canadian dollar remaining relatively flat vs. the U.S. dollar in the current year vs. strengthening in the prior year period.

·	Tax expense of $33.3 million increased $16.5 million; with the effective tax rate of 20.4% compared to 13.6%.

·	Net income attributable to Taro was $129.8 million compared to $106.9 million, a $22.9 million increase, resulting in diluted earnings per share of $3.31 compared to $2.65.

 

 

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Cash Flow and Balance Sheet Highlights

·	Cash flow provided by operations for the six months ended September 30, 2018, was $157.7 million compared to $138.7 million for the six months ended September 30, 2017.

·	As of September 30, 2018, cash, including short-term bank deposits and marketable securities (both short and long-term), increased $109.8 million to $1.8 billion from March 31, 2018.  Cash reflects the $32.4 million impact from the Company’s share repurchases.

 

Mr. Uday Baldota, Taro’s CEO stated, “Our results reflect the challenging market dynamics that persist.  We continue to maintain our market leadership position in the generic markets we serve and we believe we are well positioned to take advantage of potential opportunities.  The $500 million special dividend, in conjunction with our share repurchase program, demonstrates our commitment to creating shareholder value together with our investment in R&D that is vital to our long-term growth strategy.  In addition, given our strong balance sheet and cash position, we will continue to evaluate business development opportunities.”

FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug Administration (“FDA”) for three Abbreviated New Drug Application (“ANDA”); Clobetasol Propionate Foam, 0.05%, Adapalene and Benzoyl Peroxide Gel 0.3%/2.5%, and Clobazam Tablets, 10 mg and 20 mg.  The Company currently has a total of thirty ANDAs awaiting FDA approval, including six tentative approvals.

 

 

The Taro Board of Directors has declared a $500 million (or approximately $12.81* per share) special cash dividend on Taro ordinary shares.  The special dividend will be paid on December 28, 2018, to shareholders of record at the close of business on December 11, 2018.  The ex-dividend date will be December 10, 2018.

 

Dividend payments distributed by the Company to shareholders will be subject to the withholding of Israeli taxes.  Shareholders who are resident in the U.S. or another country that is party to a tax treaty with Israel may be entitled to the release of a portion or all of those Israeli tax amounts withheld.  Shareholders will be notified of the procedure to obtain refunds of withheld tax, if applicable, shortly after the record date.  Such procedures will also be available on the company’s website at www.taro.com.

 

* exact per share amount will be computed at the record date.

 

On November 23, 2016, the Company announced that its Board of Directors approved a $250 million share repurchase of ordinary shares.  Under this authorization, repurchases may be made from time to time at the Company’s discretion, based on ongoing assessments of the capital needs of the business, the market price of its stock, and general market conditions.  The repurchase authorization enables the Company to purchase its ordinary shares from time to time through open market purchases, negotiated transactions or other means, including 10b5-1 trading plans in accordance with applicable securities laws or other restrictions.

During the quarter, the Company repurchased 84,093 shares at an average price of $102.20.  Through September 30, 2018, in total under the authorization, the Company has repurchased 1,891,077 shares at an average price of $102.83; with $55.5 million remaining.  On November 5, 2018, the Board extended the share repurchase program for one year or until the completion of all purchases contemplated by the plan.

On September 28, 2018, the Company announced that it terminated the license agreement with NovaBiotics for the onychomycosis drug, Novexatin®.  The Novexatin® clinical study did not meet the main goal of a Phase IIb study under current guidelines of the FDA and did not show superiority over the placebo.

 

 

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As previously announced, the Company will host an earnings call at 8:00 am EST on Tuesday, November 6, 2018, 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:

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.

 

The Company cautions that the foregoing financial information is presented on an unaudited basis and is 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

(Unaudited)

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

 

		Quarter Ended								Six Months Ended
		September 30,								September 30,
		2018				2017				2018				2017
Sales, net		$	158,973			$	169,915			$	313,591			$	331,236
Cost of sales			50,411				44,795				104,947				89,573
Gross profit			108,562				125,120				208,644				241,663
Operating Expenses:
Research and development			14,655				17,995				28,000				32,653
Selling, marketing, general and administrative			19,185				18,342				42,767				42,591
Settlements and loss contingencies			(4,000	)			—				(4,000	)			—
Operating income			78,722				88,783				141,877				166,419
Financial (income) expense, net:
Interest and other financial income			(9,109	)			(4,602	)			(16,914	)			(9,078	)
Foreign exchange expense (income)			5,958				32,583				(4,004	)			52,225
Other (loss) gain, net			(90	)			(1,310	)			512				808
Income before income taxes			81,783				59,492				163,307				124,080
Tax expense			19,235				6,864				33,331				16,851
Income from continuing operations			62,548				52,628				129,976				107,229
Net loss from discontinued operations attributable to Taro			—				(145	)			—				(192	)
Net income			62,548				52,483				129,976				107,037
Net (loss) income attributable to non-controlling interest			(12	)			90				139				147
Net income attributable to Taro		$	62,560			$	52,393			$	129,837			$	106,890
Net income per ordinary share from continuing operations attributable to Taro:
Basic and Diluted		$	1.60			$	1.30			$	3.31			$	2.65
Net loss per ordinary share from discontinued operations attributable to Taro:
Basic and Diluted		$	—			$	(0.00	) *		$	—			$	(0.00	) *
Net income per ordinary share attributable to Taro:
Basic and Diluted		$	1.60			$	1.30			$	3.31			$	2.65
Weighted-average number of shares used to compute net income per share:
Basic and Diluted			39,205,874				40,315,991				39,232,897				40,402,257

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TARO PHARMACEUTICAL INDUSTRIES LTD.

 SUMMARY CONSOLIDATED BALANCE SHEETS

 (U.S. dollars in thousands)