Taro Provides Results for December 31, 2017
(3 months ago)
HAWTHORNE, N.Y., United States : Taro Pharmaceutical Industries Ltd. (NYSE:TARO) ("Taro" or the "Company") today provided unaudited financial results for the three and nine months ended December 31, 2017.
Quarter ended December 31, 2017 Highlights ─ compared to December 31, 2016
*Net sales of $155.5 million decreased $64.9 million, the result of continuing increased competition and the challenging pricing environment, particularly in the U.S.; despite an increase in overall volumes.
*Gross profit of $102.9 million decreased $64.4 million, and as a percentage of net sales was 66.2% compared to 75.9%.
*Research and development (R&D) expenses of $17.5 million were down slightly from the comparable quarter.
*Selling, marketing, general and administrative expenses (SG&A) increased $1.5 million to $21.8 million.
*Settlements and loss contingencies of $1.9 million in 2017 related to a payroll tax settlement in Israel.
*Operating income of $61.8 million decreased $67.3 million and as a percentage of net sales was 39.7% as compared to 58.5%.
*Foreign Exchange (FX) income of $3.7 million decreased $14.8 million from $18.5 million, principally the result of the strength of the Canadian dollar vs. U.S. dollar.
*Other income of $0.6 million decreased $8.4 million, principally due to the sale of Keveyis in December 2016.
*Tax expense increased $33.9 million to $54.4 million resulting in an effective tax rate of 76.6% compared to 12.8%. The tax provision for the current quarter includes a $38.0 million expense for the estimated impact of the re-measurement of the Company's estimated net deferred tax asset at December 31, 2017, as a result of the Tax Cuts and Jobs Act. Excluding the impact from the one-time re-measurement, the Company's tax expense would be approximately $16.4 million and the effective tax rate would be approximately 23.1% for the current quarter.
*Net income attributable to Taro was $18.0 million compared to $139.8 million, resulting in diluted earnings per share of $0.45 compared to $3.42 for the same period last year. Excluding the impact of the aforementioned one-time tax re-measurement, net income attributable to Taro would be $54.8 million, or diluted earnings per share of $1.37.
Nine Months ended December 31, 2017 Highlights ─ compared to December 31, 2016
*Net sales of $486.7 million decreased $196.3 million, the result of continuing increased competition and the challenging pricing environment; despite an increase in overall volumes.
*Gross profit of $344.6 million decreased $182.8 million and as a percentage of net sales was 70.8% compared to 77.2%.
*R&D expenses of $50.1 million were down slightly from the prior year.
*SG&A expenses of $64.4 million increased $1.0 million.
Operating income of $228.2 million decreased $185.0 million, and as a percentage of net sales was 46.9% as compared to 60.5%.
*Interest and other financial income of $14.0 million, increased $3.2 million.
*FX expense of $48.5 million in 2017 compared to FX income of $26.0 million in 2016 ─ an unfavorable impact of $74.5 million, principally the result of the strength of the Canadian dollar vs. U.S. dollar.
*Other income of $1.4 million decreased $9.0 million, principally due to the sale of Keveyis in December 2016.
*Tax expense decreased $15.2 million to $71.3 million, however, the effective tax rate increased to 36.5% from 18.8%. Excluding the impact of the one-time tax re-measurement, tax expense would be approximately $33.3 million, a decrease of $53.2 million, and the effective tax rate would be 17.0%.
*Net income attributable to Taro was $124.9 million compared to $373.4 million, resulting in diluted earnings per share of $3.10 compared to $8.99. Excluding the impact of the one-time tax re-measurement, net income attributable to Taro would be $161.7 million, or diluted earnings per share of $4.01.
Mr. Uday Baldota, Taro's CEO stated, "As is well known, and we have continuously stated, the generic industry continues to experience a very difficult pricing environment and competitive pressures, which is reflected in our financial performance. Nevertheless, we continue to invest in our R&D pipeline and develop other initiatives that should continue to keep us well positioned in the market."
Cash Flow and Balance Sheet Highlights
*Cash flow provided by operations for the nine months ended December 31, 2017, was $225.8 million compared to $320.5 million for the nine months ended December 31, 2016.
*As of December 31, 2017, cash, including short-term and long-term bank deposits and marketable securities, increased $148.6 million to $1.6 billion from March 31, 2017. Cash reflects the $54.9 million impact from the Company's share repurchases during the current fiscal year.
FDA Approvals and Filings
The Company recently received approval from the U.S. Food and Drug Administration ("FDA") for four Abbreviated New Drug Applications ("ANDAs"): Clindamycin Phosphate and Benzoyl Peroxide Gel, 1.2%/5%, Butenafine Hydrochloride Cream, 1%, Fexofenadine Hydrochloride Oral Suspension 30 mg/5 mL, and Adapalene and Benzoyl Peroxide Gel, 0.1% / 2.5%. The Company currently has a total of thirty ANDAs awaiting FDA approval, including six tentative approvals.
Share Repurchase Program - Returning Capital to Shareholders
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. On November 7, 2017, the Board extended the share repurchase program for one year.
During the current fiscal year, through January 31, 2018, the Company has repurchased 671,300 shares at an average price of $104.36. In total, under this program, the Company has repurchased 1,190,265 shares, with $125.7 million remaining under the authorization.