Business Wire | Jul 29, 2020 05:00PM EDT

Taro Provides Results for Quarter Ended June 30, 2020

Jul. 29, 2020

HAWTHORNE, N.Y.--(BUSINESS WIRE)--Jul. 29, 2020--Taro Pharmaceutical Industries Ltd. (NYSE: TARO) ("Taro") today provided unaudited financial results for the quarter ended June 30, 2020.

Quarter ended June 30, 2020 Highlights - compared to Quarter ended June 30, 2019

* Net sales of $117.6 million, decreased $43.7 million. * Gross profit of $64.9 million decreased $36.8 million, and as a percentage of net sales was 55.2% compared to 63.1%. * Research and development expenses of $12.9 million decreased slightly from the prior year. * Selling, marketing, general and administrative expenses of $22.2 million, which includes the impact of COVID-19 related expenses and higher legal expenses, increased $2.5 million. * Settlements and loss contingencies of $478.9 million reflect the one-time settlement charge of $418.9 million related to the global resolution of the Department of Justice investigations into the U.S. generic pharmaceutical industry. An additional provision of $60.0 million has been taken for the related ongoing multi-jurisdiction civil antitrust matters; however, there can be no assurance as to the ultimate outcome. * Operating (loss) income was $(449.2) million. Excluding the settlement and loss contingencies charges, operating income was $29.8 million, a decrease of $38.8 million, and as a percentage of net sales was 25.3% as compared to 42.5%. * Interest and other financial income decreased $2.3 million to $7.3 million, reflecting the lower global interest rate environment. * Foreign Exchange income of $0.2 million compared to $7.9 million in the comparable quarter an unfavorable impact of $7.7 million. * Tax expense of $8.9 million compared to a tax expense of $20.4 million a favorable impact of $11.5 million. Excluding the impact from the settlement and loss contingencies charges, the effective tax rate for the quarter was 23.4% as compared to 23.6%. * Net (loss) income attributable to Taro was $(434.9) million. Excluding the settlement and loss contingencies charges, net income was $29.0 million compared to $66.2 million. Diluted (loss) per share for the quarter was $(11.37). Excluding the settlement and loss contingencies charges, diluted earnings per share was $0.76 compared to $1.72.

Cash Flow and Balance Sheet Highlights

* Cash flow provided by operations was $64.1 million compared to $82.6 million for the three months ended June 30, 2019. * As of June 30, 2020, cash, including short-term and long-term marketable securities, increased $64.4 million to $1.63 billion from March 31, 2020.

Mr. Uday Baldota, Taro's CEO stated, "Regarding our results - they reflect the challenging times that we are facing, not only due to the continuing uncertainty of the duration and impact of the COVID19 pandemic, but also in the overall U.S. generic industry - which we believe will continue in the foreseeable future. We are happy to have reached a resolution with the DOJ, so that we can move forward and sharpen our focus on growing our business."

FDA Approvals and Filings

Taro recently received approvals from the U.S. Food and Drug Administration ("FDA") for three Abbreviated New Drug Applications ("ANDAs"): Betamethasone Dipropionate Spray, 0.05%, Doxepin Hydrochloride Capsules USP, and Butalbital, Acetaminophen and Caffeine Capsules USP. Taro currently has a total of nineteen ANDAs awaiting FDA approval, including five tentative approvals.

Taro Achieves Global Resolution of DOJ Antitrust Investigations

On July 23, 2020, Taro Pharmaceuticals U.S.A., Inc. ("Company"), globally resolved all matters related to the Company in connection with the multi-year investigations by the Department of Justice, Antitrust Division and Civil Division ("DOJ") into the U.S. generic pharmaceutical industry. Under a Deferred Prosecution Agreement reached with DOJ Antitrust, the DOJ will file an Information for conduct that took place between 2013 and 2015. If the Company adheres to the terms of the agreement, including the payment of $205.7 million, the DOJ will dismiss the Information at the end of a three-year period. The Company has also reached a framework understanding with DOJ Civil, subject to final agreement and agency authorization, in which the Company has agreed to pay $213.3 million to resolve all claims related to federal healthcare programs. Accordingly, a charge of $418.9 million is taken in the current quarter and shown as Settlements and loss contingencies.

Form 20-F Filings with the SEC

On June 19, 2020, Taro filed its Annual Report on Form 20-F with the U.S. Securities and Exchange Commission ("SEC") for the fiscal year ended March 31, 2020.

Taro 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 2021. 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 OPERATIONS

(Unaudited)

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

Quarter Ended June 30, 2020 2019

Sales, net $ 117,634 $ 161,296

Cost of sales 52,688 59,572

Gross profit 64,946 101,724

Operating Expenses:Research and development 12,932 13,443

Selling, marketing, general and administrative 22,248 19,718

Settlements and loss contingencies 478,924 -

Operating (loss) income * (449,158 ) 68,563

Financial income, net:Interest and other financial income (7,310 ) (9,624 )

Foreign exchange income (197 ) (7,905 )

Other gain, net 549 594

(Loss) income before income taxes (441,102 ) 86,686

Tax expense 8,854 20,445

Net (loss) income (449,956 ) 66,241

Net (loss) income attributable to (15,038 ) 58 non-controlling interestNet (loss) income attributable to Taro * $ (434,918 ) $ 66,183

Net (loss) income per ordinary shareattributable to Taro:Basic and Diluted * $ (11.37 ) $ 1.72

Weighted-average number of shares used tocompute net (loss) income per share:Basic and Diluted 38,258,337 38,539,056

May not foot due to rounding.

* Excluding the settlement and loss contingencies charges of $478.9 million, for the quarter ended June 30, 2020, Operating income was $29.8 million, Net income attributable to Taro was $29.0 million, and Basic and diluted earnings per share was $0.76.

TARO PHARMACEUTICAL INDUSTRIES LTD.SUMMARY CONSOLIDATED BALANCE SHEETS(U.S. dollars in thousands) June 30, March 31,

2020 2020

ASSETS (unaudited) (audited)

CURRENT ASSETS:Cash and cash equivalents $ 532,044 $ 513,354

Marketable securities 590,286 595,383

Accounts receivable and other:Trade, net 189,301 235,221

Other receivables and prepaid expenses 45,082 35,567

Inventories 166,223 153,073

TOTAL CURRENT ASSETS 1,522,936 1,532,598

Marketable securities 510,397 459,639

Property, plant and equipment, net 209,228 209,961

Deferred income taxes 105,389 106,693

Other assets 31,743 32,361

TOTAL ASSETS $ 2,379,693 $ 2,341,252

LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Trade payables $ 36,302 $ 28,858

Other current liabilities 560,185 193,873

TOTAL CURRENT LIABILITIES 596,487 222,731

Deferred taxes and other long-term liabilities 109,068 8,762

TOTAL LIABILITIES 705,555 231,493

Taro shareholders' equity 1,683,279 2,103,864

Non-controlling interest (9,141 ) 5,895

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,379,693 $ 2,341,252



TARO PHARMACEUTICAL INDUSTRIES LTD.SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(U.S. dollars in thousands) Three Months Ended June 30, 2020 2019

Cash flows from operating activities:Net (loss) income $ (449,956 ) $ 66,241

Adjustments required to reconcile net income to netcash provided by operating activities:Depreciation and amortization 5,571 5,071

Change in derivative instruments, net (923 ) (2,421 )

Effect of change in exchange rate on inter-company (1,728 ) (5,624 )balances, marketable securities and bank depositsDeferred income taxes, net (2,367 ) 2,930

Decrease in trade receivables, net 45,921 24,431

Increase in inventories, net (13,150 ) (205 )

(Increase) decrease in other receivables, income tax (3,462 ) 15,671 receivable, prepaid expenses and otherIncrease (decrease) in trade, income tax, accrued 483,957 (22,965 )expenses, and other payablesLoss (income) from marketable securities, net 247 (525 )

Net cash provided by operating activities 64,110 82,604

Cash flows from investing activities:Purchase of plant, property & equipment, net (5,133 ) (7,969 )

Investment in other intangible assets (63 ) (30 )

Investment in marketable securities, net (40,825 ) (9,070 )

Net cash used in investing activities (46,021 ) (17,069 )

Cash flows from financing activities:Net cash used in financing activities - -

Effect of exchange rate changes on cash and cash 601 - equivalentsIncrease in cash and cash equivalents 18,690 65,535

Cash and cash equivalents at beginning of period 513,354 567,451

Cash and cash equivalents at end of period $ 532,044 $ 632,986

Cash Paid during the year for:Income taxes $ 7,119 $ 10,432

Cash Received during the year for:Income taxes $ - $ 7,128

Non-cash investing transactions:Purchase of property, plant and equipment included in $ 1,304 $ 2,317 accounts payableNon-cash financing transactions:(Sale) purchase of marketable securities $ (745 ) $ 2,436

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CONTACT: Daphne Huang VP, CFO (914) 345-9001 Daphne.Huang@taro.com

CONTACT: William J. Coote AVP, Business Finance, Treasurer and Investor Relations (914) 345-9001 William.Coote@taro.com