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Taro Provides Results for September 30, 2014

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Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three months and six months ended September 30, 2014.

Quarter ended September 30, 2014 Highlights – compared to September 30, 2013

  • Net sales of $250.8 million, increased $45.5 million, or 22.2%, with a decrease in volumes
  • Gross profit, as a percentage of net sales, was 79.0% compared to 77.7%
  • Research and development expenses decreased $1.1 million to $13.8 million
  • Selling, marketing, general and administrative expenses decreased $0.5 million to $21.7 million
  • Settlements and loss contingencies of $2.3 million compared to $2.1 million
  • Operating income increased $40.0 million to $160.3 million, or 63.9% of net sales, compared to 58.6% of net sales
  • Net income attributable to Taro was $143.4 million compared to $96.3 million, resulting in diluted earnings per share of $3.35 compared to $2.15

Six Months ended September 30, 2014 Highlights – compared to September 30, 2013

  • Net sales of $381.1 million, increased $22.6 million, or 6.3%, with a slight decrease in volumes
  • Gross profit, as a percentage of net sales, was 74.4% compared to 74.2%
  • Research and development expenses increased 6.2% to $28.8 million, remaining flat at 7.6% of net sales
  • Selling, marketing, general and administrative expenses increased $0.9 million to $44.1 million, however, as a percentage of net sales decreased from 12.0% to 11.6%
  • Settlements and loss contingencies was a $4.2 million credit, the net result of two settlements which resulted in the reversal of a portion of the associated reserve on one matter, offset by this quarter’s expense, compared to a $2.1 million expense in 2013 (related to certain price reporting litigations)
  • Operating income increased $21.0 million to $214.8 million, or 56.4% of net sales, compared to 54.1% of net sales
  • Net income attributable to Taro was $189.5 million compared to $155.1 million, a $34.4 million increase, resulting in diluted earnings per share of $4.42 compared to $3.46

Cash Flow and Balance Sheet Highlights

  • Cash provided by operations for the period ended September 30, 2014 was $96.2 million, as compared $159.7 million at September 30, 2013
  • Cash, including marketable securities, increased $50.1 million to $682.5 million from March 31, 2014

FDA Approvals and Filings

The Company recently received approval from the U.S. Food and Drug Administration (“FDA”) for an Abbreviated New Drug Application (“ANDA”) for Desonide Lotion, 0.05%. With this, ANDAs representing thirty products await FDA approval.

Earnings Call (8:30 am EST, Monday, November 10, 2014)

As previously announced, the Company will host an earnings call at 8:30 am EST on Monday, November 10, 2014, 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: 25505207
  • Participant International Dial-In Number: +1 (716) 247-5800 ID: 25505207
  • 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.

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 2015. 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.

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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

Quarter Ended

Six Months Ended

September 30,

September 30,

2014

2013

2014

2013
Sales, net $ 250,834 $ 205,316 $ 381,064 $ 358,511
Cost of sales 52,745 45,845 97,608 92,325
Gross Profit 198,089 159,471 283,456 266,186

Operating Expenses (Income):

Research and development 13,828 14,927 28,816 27,139
Selling, marketing, general and administrative 21,684 22,229 44,070 43,182
Settlements and loss contingencies 2,300 2,050 (4,200 ) 2,050
Operating income 160,277 120,265 214,770 193,815

Financial Expenses, net:

Interest and other financial income, net (2,054 )

(1,325

)

(3,622

)

(2,490 )
Foreign exchange (income) expense (6,131 ) 285 (889 ) (708 )
Other income, net 1,575 130 1,981 526
Income before income taxes 170,037 121,435 221,262 197,539
Tax expense 26,110 24,747 31,013 41,782
Income from continuing operations 143,927 96,688 190,249 155,757
Net loss from discontinued operations (223 ) (49 ) (347 ) (172 )
Net income 143,704 96,639 189,902 155,585
Net income attributable to non-controlling interest 319 303 419 453
Net income attributable to Taro $ 143,385 $ 96,336 $ 189,483 $ 155,132
Net income per ordinary share from continuing operations attributable to Taro:
Basic $ 3.35 $ 2.15 $ 4.43 $ 3.46
Diluted $ 3.35 $ 2.15 $ 4.43 $ 3.46
Net loss per ordinary share from discontinued operations attributable to Taro:
Basic ($0.00)* ($0.00)* ($ 0.01 ) ($0.00)*
Diluted ($0.00)* ($0.00)* ($ 0.01 ) ($0.00)*
Net income per ordinary share attributable to Taro:
Basic $ 3.35 $ 2.15 $ 4.42 $ 3.46
Diluted $ 3.35 $ 2.15 $ 4.42 $ 3.46
Weighted-average number of shares used to compute net income per share:
Basic 42,833,299 44,776,535 42,832,976 44,773,501
Diluted 42,833,493 44,780,246 42,833,411 44,777,164

* 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)

September 30,

March 31,

2014 2014
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $

258,615

$

209,967

Short-term bank deposits 420,333 418,946
Restricted short-term bank deposits 215 227
Marketable securities 3,364 3,255

Accounts receivable and other:

Trade, net

178,732

138,772

Other receivables and prepaid expenses 227,659 162,392
Inventories 125,778 117,639
Long-term assets held for sale, net 67 73
TOTAL CURRENT ASSETS 1,214,763 1,051,271
Long-term receivables and other assets 52,088 52,894
Property, plant and equipment, net 154,199 151,416
Other assets 26,873 28,795
TOTAL ASSETS $ 1,447,923 $ 1,284,376
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 11,478 $ 11,974
Trade payables and other current liabilities 223,206 241,330
TOTAL CURRENT LIABILITIES 234,684 253,304
Long-term debt, net of current maturities 5,439 5,888
Deferred taxes and other long-term liabilities 4,864 4,591
TOTAL LIABILITIES 244,987 263,783
Taro shareholders’ equity 1,197,431 1,015,507
Non-controlling interest 5,505 5,086

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$ 1,447,923 $ 1,284,376

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(U.S. dollars in thousands)

Six Months Ended September 30,

2014

2013

Operating Activities:

Net income $ 189,902 $ 155,585

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

Depreciation and amortization 7,986 8,342
(Gain) loss on sale of long-lived assets and marketable securities, net (118 ) 15
(Decrease) increase in long-term debt due to currency fluctuations (523 ) 1,050
Increase in trade receivables, net (40,092 ) (7,608 )
Change in derivative instruments, net 2,057 (741 )
Increase in other receivables, prepaid expenses and other assets (31,641 ) (26,059 )
Increase in inventories, net (8,613 ) (2,858 )
Effect of exchange differences on inter-company balances (1,524 ) (1,843 )
(Decrease) increase in trade and other payables and liabilities (21,278 ) 33,800
Net cash provided by operating activities 96,156 159,683
Investing Activities:
Purchase of property, plant & equipment (10,520 ) (6,747 )
Proceeds from sale of property plant & equipment and intangible assets 57
Investment in other assets (31,050 )
Investment in short-term bank deposits (3,479 ) (45,980 )
Proceeds from restricted bank deposits 13 7,430
Proceeds from (investment in) marketable securities 41 (73 )
Net cash used in investing activities (44,938 ) (45,370 )
Financing Activities:
Excess tax benefits from share-based payment arrangements 80
Proceeds from issuance of shares, net 26 711
Repayments of long-term debt (422 ) (397 )
Net cash (used in) provided by financing activities (396 ) 394
Effect of exchange rate changes (2,174 ) (1,380 )
Net increase in cash 48,648 113,327
Cash at beginning of period 209,967 237,284
Cash at end of period $ 258,615 $ 350,611

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