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Taro Provides Results for December 31, 2021

Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter and nine months ended December 31, 2021.

Quarter ended December 31, 2021 Highlights ─ compared to December 31, 2020

  • Net sales of $139.0 million decreased $1.2 million.
  • Gross profit of $76.0 million increased $2.8 million, and as a percentage of net sales was 54.7% compared to 52.2%.
  • Research and development (“R&D”) expenses of $14.2 million were in line with the prior year quarter.
  • Selling, marketing, general and administrative expenses (“SG&A”) of $24.8 million increased $2.0 million.
  • Operating income of $37.0 million was in line with the prior year quarter, and as a percentage of net sales was 26.6% compared to 25.9%.
  • Interest and other financial income of $2.1 million decreased $1.9 million, reflecting the lower global interest rate environment.
  • Tax expense of $13.2 million increased $7.1 million. Excluding the tax impact from certain items related to the settlement and loss contingencies charges taken in prior periods, tax expense increased $0.2 million with a resulting effective tax rate of 15.8% compared to 15.6%.
  • Net income attributable to Taro was $26.3 million compared to $32.9 million, resulting in diluted earnings per share of $0.70 compared to $0.86.

Nine Months ended December 31, 2021 Highlights ─ compared to December 31, 2020

  • Net sales of $418.1 million increased $17.5 million.
  • Gross profit of $215.8 million decreased $3.9 million, and as a percentage of net sales was 51.6% compared to 54.8%.
  • R&D expenses of $39.6 million decreased $3.9 million.
  • SG&A of $72.5 million increased $3.4 million.
  • Settlements and loss contingencies of $61.4 million consist of the additional legal contingency of $60.0 million (taken in the first quarter) related to ongoing multi-jurisdiction civil antitrust matters and $1.4 million related to the aforementioned global resolution with the Department of Justice (“DOJ”) in connection with its investigations into the U.S. generic pharmaceutical industry. In the prior year, settlements and loss contingencies of $478.9 million consisted of $418.9 million related to the global resolution with the DOJ in connection with its 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 income of $42.2 million compared to operating loss of $371.9 million. Excluding the settlement and loss contingencies charges in both periods, operating income was $103.6 million compared to $107.0 million and as a percentage of net sales was 24.8% compared to 26.7%.
  • Interest and other financial income of $7.5 million decreased $9.5 million.
  • Tax expense of $22.0 million increased $3.4 million. Excluding the impact from the settlement and loss contingencies charges in both periods, tax expense decreased $3.4 million with a resulting effective tax rate of 13.2% compared to 14.8%.
  • Net income attributable to Taro was $30.9 million compared to net loss of $356.9 million, resulting in diluted earnings (loss) per share of $0.82 compared to $(9.33). Excluding the impact from the settlement and loss contingencies charges in both periods, net income was $99.2 million compared to $107.1 million, resulting in diluted earnings per share of $2.64 compared to $2.80.

Cash Flow and Balance Sheet Highlights

  • Cash flow used in operations was $200.0 million for the nine months ended December 31, 2021. Excluding the impact from the settlement and loss contingencies charges in both periods, cash flow provided by operations was $124.6 million compared to $97.5 million for the nine months ended December 31, 2020.
  • As of December 31, 2021, cash and cash equivalents and marketable securities (both short and long-term), decreased $257.4 million to $1.3 billion from March 31, 2021; reflecting the impact from payments to the DOJ of $317.6 million ─ as a result of the global resolution with the DOJ in connection with its investigations into the U.S. generic pharmaceutical industry, and share repurchases of $24.9 million.

Mr. Uday Baldota, Taro’s CEO, stated, “Despite the challenging market conditions, particularly in the U.S. generic market, we successfully defended our market share across each business. Our current quarter and nine month performance reflects this. With the intent of ever strengthening the future, we remain focused on high return R&D investments as well as the exploration of new business development opportunities.”

FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug Administration (“FDA”) for the Abbreviated New Drug Applications (“ANDAs”): Sildenafil Powder for Oral Suspension, 10 mg/mL and Adapalene Gel, USP 0.1%. The Company currently has a total of seventeen ANDAs awaiting FDA approval, including four tentative approvals.

Taro Pharmaceuticals U.S.A., Inc. (“Taro USA”) Signs Settlement Agreement with the Direct Purchaser Plaintiffs

Taro USA entered into a settlement agreement with the direct purchaser class on November 4, 2021, which, if approved by the court, will resolve all claims brought by the direct purchaser class against Taro USA and its parents, affiliates, officers and directors in the In re: Generic Pharmaceuticals Pricing Antitrust Litigation. Under the terms of the settlement agreement, Taro USA will pay a maximum of $67.6 million, subject to a reduction of up to $8.0 million depending on the decisions of certain class members to opt out of the settlement. The settlement is subject to approval by the court.

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 2022. 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,

2021

 

2020

 

2021

 

2020

Sales, net

$

138,984

 

$

140,145

 

$

418,083

 

$

400,622

 

Cost of sales

 

62,937

 

 

66,957

 

 

202,293

 

 

180,900

 

Impairment

 

13

 

 

 

 

13

 

 

 

Gross profit

 

76,034

 

 

73,188

 

 

215,777

 

 

219,722

 

 
Operating Expenses:
Research and development

 

14,201

 

 

14,081

 

 

39,648

 

 

43,565

 

Selling, marketing, general and administrative

 

24,841

 

 

22,798

 

 

72,501

 

 

69,121

 

Settlements and loss contingencies

 

26

 

 

 

 

61,446

 

 

478,924

 

Operating income (loss) *

 

36,966

 

 

36,309

 

 

42,182

 

 

(371,888

)

 
Financial income, net:
Interest and other financial income

 

(2,090

)

 

(4,001

)

 

(7,501

)

 

(16,989

)

Foreign exchange expense

 

544

 

 

2,036

 

 

555

 

 

1,207

 

Other gain, net

 

990

 

 

863

 

 

3,714

 

 

2,792

 

Income (loss) before income taxes

 

39,501

 

 

39,137

 

 

52,842

 

 

(353,313

)

Tax expense

 

13,188

 

 

6,101

 

 

21,980

 

 

18,545

 

Net income (loss)

 

26,313

 

 

33,036

 

 

30,862

 

 

(371,858

)

Net income (loss) attributable to non-controlling interest

 

 

 

117

 

 

 

 

(14,991

)

Net income (loss) attributable to Taro *

$

26,313

 

$

32,919

 

$

30,862

 

$

(356,867

)

 
Net income (loss) per ordinary share attributable to Taro:
Basic and Diluted *

$

0.70

 

$

0.86

 

$

0.82

 

$

(9.33

)

 
Weighted-average number of shares used to compute net income (loss) per share:
Basic and Diluted

 

37,584,891

 

 

38,254,231

 

 

37,659,478

 

 

38,256,963

 

 
May not foot due to rounding.

* Excluding the settlement and loss contingencies charges of $61.4 million and $478.9 million for the nine months ended December 31, 2021 and 2020, Operating income was $103.6 million and $107.0 million, Net income attributable to Taro was $99.2 million and $107.1 million, and basic and diluted earnings per share was $2.64 and $2.80, respectively.

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

December 31,

 

December 31,

2021

 

2020

ASSETS

(unaudited)

 

(audited)

CURRENT ASSETS:
Cash and cash equivalents

$

318,103

$

605,177

 

Short-term and current maturities of long-term bank deposits

 

35,573

 

 

Marketable securities

 

433,403

 

418,480

 

Accounts receivable and other:
Trade, net

 

224,666

 

213,539

 

Other receivables and prepaid expenses

 

43,047

 

53,347

 

Inventories

 

182,446

 

180,292

 

TOTAL CURRENT ASSETS

 

1,237,238

 

1,470,835

 

Marketable securities

 

536,348

 

557,209

 

Property, plant and equipment, net

 

193,995

 

205,508

 

Deferred income taxes

 

125,659

 

142,007

 

Other assets

 

29,779

 

31,314

 

TOTAL ASSETS

$

2,123,019

$

2,406,873

 

 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables

$

43,685

$

61,166

 

Other current liabilities

 

351,108

 

615,135

 

TOTAL CURRENT LIABILITIES

 

394,793

 

676,301

 

Deferred taxes and other long-term liabilities

 

31,672

 

35,115

 

TOTAL LIABILITIES

 

426,465

 

711,416

 

 
Taro shareholders' equity

 

1,696,554

 

1,703,649

 

Non-controlling interest

 

 

(8,192

)

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

2,123,019

$

2,406,873

 

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

Nine Months Ended December 31,

2021

 

2020

Cash flows from operating activities:
Net income (loss)

$

30,862

 

$

(371,858

)

Adjustments required to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization

 

19,248

 

 

17,337

 

Impairment of long-lived assets

 

13

 

 

 

Realized loss on sale of long-lived assets

 

551

 

 

 

Change in derivative instruments, net

 

(536

)

 

(390

)

Effect of change in exchange rate on marketable securities and bank deposits

 

(39

)

 

(4,288

)

Deferred income taxes, net

 

15,003

 

 

(31,877

)

(Increase) decrease in trade receivables, net

 

(11,129

)

 

6,395

 

Increase in inventories, net

 

(2,154

)

 

(16,454

)

Decrease (increase) in other receivables, income tax receivables, prepaid expenses and other

 

10,973

 

 

(11,962

)

(Decrease) increase in trade, income tax, accrued expenses and other payables

 

(270,482

)

 

405,233

 

Expense from amortization of marketable securities bonds, net

 

7,734

 

 

2,579

 

Net cash used in operating activities

 

(199,956

)

 

(5,285

)

 
Cash flows from investing activities:
Purchase of plant, property & equipment, net

 

(9,121

)

 

(14,210

)

Investment in other intangible assets

 

(120

)

 

(117

)

Investment in short-term bank deposits, net

 

(35,573

)

 

 

(Investment in) proceeds from marketable securities, net

 

(17,161

)

 

60,122

 

Net cash (used in) provided by investing activities

 

(61,975

)

 

45,795

 

 
Cash flows from financing activities:
Purchase of treasury stock

 

(24,934

)

 

(3,243

)

Net cash used in financing activities

 

(24,934

)

 

(3,243

)

 
Effect of exchange rate changes on cash and cash equivalents

 

(209

)

 

2,297

 

(Decrease) increase in cash and cash equivalents

 

(287,074

)

 

39,564

 

Cash and cash equivalents at beginning of period

 

605,177

 

 

513,354

 

Cash and cash equivalents at end of period

$

318,103

 

$

552,918

 

 
Cash Paid during the year for:
Income taxes

$

5,667

 

$

24,169

 

Cash Received during the year for:
Income taxes

$

2,351

 

$

4,093

 

Non-cash investing transactions:
Purchase of property, plant and equipment included in accounts payable

$

763

 

$

453

 

Non-cash financing transactions:
Purchase of treasury stock

$

 

$

559

 

Purchase of marketable securities, net

$

 

$

580

 

 

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