UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934


 

 
For the month of February, 2019
 
 
 
 
 
Commission File Number 001-35463
 



Taro Pharmaceutical Industries Ltd.
 
(Translation of registrant’s name into English)

14 Hakitor Street, Haifa Bay 2624761, Israel
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F   ☒     Form 40-F   ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  Yes   ☐     No   ☒


 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_____.
 
Taro Pharmaceutical Industries Ltd.
c/o Taro Pharmaceuticals U.S.A., Inc.
Three Skyline Drive
Hawthorne, New York 10532
(NYSE: TARO)



FOR IMMEDIATE RELEASE

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 DECEMBER 31, 2018

Hawthorne, NY, February 6, 2019 - Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three and nine months ended December 31, 2018.

Quarter ended December 31, 2018 Highlights ─ compared to December 31, 2017
•
Net sales of $176.4 million increased $20.9 million, mainly driven by a 13% increase in overall volumes.
•
Gross profit of $117.5 million (66.6% of net sales compared to 66.2%) increased $14.6 million.
•
Research and development (R&D) expenses of $14.7 million decreased $2.7 million.
•
Selling, marketing, general and administrative expenses (SG&A) of $23.9 million increased $2.1 million.
•
Operating income of $78.9 million (44.8% of net sales compared to 39.7%) increased $17.2 million.
•
Interest and other financial income increased $3.4 million to $8.4 million.
•
Foreign Exchange (FX) income of $30.7 million increased $27.0 million, principally the result of the strengthening of the U.S. dollar vs. the Canadian dollar.  The FX impact is mainly balance sheet driven.
•
Tax expense of $25.8 million decreased $28.7 million; with the effective tax rate of 21.6% compared to 76.6%. The prior year quarter tax provision 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 in the prior year quarter would have been approximately $16.4 million with an effective tax rate of 23.1%.
•
Net income attributable to Taro was $93.5 million compared to $18.0 million, a $75.5 million increase, resulting in diluted earnings per share of $2.40 compared to $0.45.  Excluding the impact of the aforementioned one-time tax re-measurement in the prior year quarter, net income attributable to Taro would have been $54.8 million, or diluted earnings per share of $1.37.

Nine Months ended December 31, 2018 Highlights ─ compared to December 31, 2017
•
Net sales of $490.0 million increased $3.3 million, mainly driven by an 8.7% increase in overall volumes.
•
Gross profit of $326.2 million (66.6% of net sales compared to 70.8%) decreased $18.4 million.
•
R&D expenses of $42.7 million decreased $7.4 million principally due to the timing of clinical studies.
•
SG&A of $66.7 million increased $2.2 million.
•
Operating income of $220.8 million (45.1% of net sales compared to 46.9%) decreased $7.4 million.
•
Interest and other financial income increased $11.3 million to $25.3 million.
•
FX income of $34.7 million compared to FX expense of $48.5 million ─ a favorable impact of $83.2 million, principally the result of the strengthening of the U.S. dollar vs. the Canadian dollar.  The FX impact is mainly balance sheet driven.
•
Tax expense of $59.1 million decreased $12.2 million; with the effective tax rate of 20.9% compared to 36.5%.  Excluding the impact of the one-time tax re-measurement, the prior year tax expense would have been approximately $33.3 million with an effective tax rate of 17.0%.
•
Net income attributable to Taro was $223.3 million compared to $124.9 million, a $98.5 million increase, resulting in diluted earnings per share of $5.71 compared to $3.10.  Excluding the impact of the one-time tax re-measurement, prior year net income attributable to Taro would have been $161.7 million, or diluted earnings per share of $4.01.
 

- more -


Taro Pharmaceutical Industries Ltd.
Page 2 of  6

Cash Flow and Balance Sheet Highlights
•
Cash flow provided by operations for the nine months ended December 31, 2018, was $265.1 million compared to $225.8 million for the nine months ended December 31, 2017.
•
As of December 31, 2018, cash, including short-term bank deposits and marketable securities (both short and long-term) decreased $332.8 million to $1.3 billion from March 31, 2018.  The decrease reflects the impact from the $500.0 million special dividend paid in December 2018 and the $72.2 million impact from the Company’s share repurchases.

Mr. Uday Baldota, Taro’s CEO stated, “While we are pleased with this quarters’ results and encouraged by the increase in our overall volumes, we are cautiously optimistic about viewing this as a continuing trend because the challenging generic landscape continues.  The recently completed $250 million share repurchase program and payment of the $500 million special dividend, demonstrates our commitment to create shareholder value.”  Mr. Baldota continued, “Our strong balance sheet and operating cash flow continues to provide us with the flexibility to consider a variety of operational and strategic growth opportunities to further maximize stockholder return over the longer term.  We remain committed to maintain a disciplined capital allocation strategy.”
 
FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug Administration (“FDA”) for three Abbreviated New Drug Applications (“ANDAs”); Minoxidil Topical Aerosol, 5% (For Men), Tretinoin Cream USP, 0.1% and Tretinoin Cream USP, 0.05%.  The Company currently has a total of twenty-seven ANDAs awaiting FDA approval, including eight tentative approvals.
 
Special Dividend - Returning Capital to Shareholders
 
On November 5, 2018, the Taro Board of Directors declared a $500 million special cash dividend on Taro ordinary shares.  The special dividend was paid on December 28, 2018, to shareholders of record at the close of business on December 11, 2018.
 
Share Repurchase Program - Returning Capital to Shareholders
 
On January 15, 2019, the Company announced the completion of its $250.0 million share repurchase of ordinary shares.  The Company bought back 2,493,378 of its ordinary shares in open market transactions, in accordance with a 10b5-1 program, at an average price of $100.28 per share.  The repurchase program was announced by the Company on November 23, 2016, and was completed on January 11, 2019.
 
Taro to Discontinue Promoting U.S. Branded Products
 
The Board of Directors approved the Company to discontinue the promotion of its U.S. Branded products effective March 31, 2019.  This action is expected to have an immaterial impact on the net sales of the Company.

The Company cautions that the foregoing financial information is unaudited and could be subject to change.

************************


Taro Pharmaceutical Industries Ltd.
Page 3 of  6

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.
Page 4 of  6

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,
  
   
2018
    
2017
    
2018
    
2017
  
Sales, net
  
$
176,381
    
$
155,461
    
$
489,972
    
$
486,697
  
Cost of sales
    
58,838
      
52,545
      
163,785
      
142,118
  
Gross profit
    
117,543
      
102,916
      
326,187
      
344,579
  
                                 
Operating Expenses:
                                
   Research and development
    
14,726
      
17,457
      
42,726
      
50,110
  
   Selling, marketing, general and administrative
    
23,883
      
21,830
      
66,650
      
64,421
  
   Settlements and loss contingencies
    
—
      
1,860
      
(4,000
)
    
1,860
  
Operating income
    
78,934
      
61,769
      
220,811
      
228,188
  
                                 
Financial (income) expense, net:
                                
  Interest and other financial income
    
(8,388
)
    
(4,962
)
    
(25,302
)
    
(14,040
)
  Foreign exchange (income) expense
    
(30,702
)
    
(3,718
)
    
(34,706
)
    
48,506
  
Other gain, net
    
1,398
      
622
      
1,910
      
1,430
  
Income before income taxes
    
119,422
      
71,071
      
282,729
      
195,152
  
Tax expense
    
25,752
      
54,411
      
59,083
      
71,262
  
Income from continuing operations
    
93,670
      
16,660
      
223,646
      
123,890
  
Net loss from discontinued operations attributable to Taro
    
—
      
(47
)
    
—
      
(239
)
Net income
    
93,670
      
16,613
      
223,646
      
123,651
  
Net income (loss) attributable to non-controlling interest
    
164
      
(1,359
)
    
303
      
(1,212
)
Net income attributable to Taro
  
$
93,506
    
$
17,972
    
$
223,343
    
$
124,863
  
                                 
Net income per ordinary share from continuing operations attributable to Taro:
                                
Basic and Diluted
  
$
2.40
    
$
0.45
    
$
5.71
    
$
3.10
  
                                 
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
  
$
2.40
    
$
0.45
    
$
5.71
    
$
3.10
  
                                 
Weighted-average number of shares used to compute net income per share:
                                
Basic and Diluted
    
38,938,963
      
40,079,339
      
39,134,563
      
40,294,226
  
                                 
* Amount is less than $0.01
                                
May not foot due to rounding.
                                

Taro Pharmaceutical Industries Ltd.
Page 5 of  6

TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
 
             
   
December 31,
    
March 31,
  
   
2018
    
2018
  
ASSETS
  
(unaudited)
    
(audited)
  
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
566,469
    
$
576,611
  
Short-term and current maturities of long-term bank deposits
    
—
      
296,188
  
Marketable securities
    
488,582
      
549,821
  
Accounts receivable and other:
                
   Trade, net
    
223,791
      
206,455
  
   Corporate tax receivable
    
11,259
      
100,380
  
   Other receivables and prepaid expenses
    
23,600
      
22,585
  
Inventories
    
148,047
      
144,595
  
TOTAL CURRENT ASSETS
    
1,461,748
      
1,896,635
  
Long-term deposits and marketable securities
    
260,426
      
225,639
  
Property, plant and equipment, net
    
197,896
      
193,727
  
Deferred income taxes
    
118,915
      
87,257
  
Other assets
    
30,533
      
29,952
  
TOTAL ASSETS
  
$
2,069,518
    
$
2,433,210
  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
CURRENT LIABILITIES:
                
Trade payables
  
$
32,500
    
$
25,697
  
Other current liabilities
    
186,139
      
190,059
  
TOTAL CURRENT LIABILITIES
    
218,639
      
215,756
  
Deferred taxes and other long-term liabilities
    
5,360
      
7,055
  
TOTAL LIABILITIES
    
223,999
      
222,811
  
                 
Taro shareholders' equity
    
1,839,976
      
2,205,158
  
Non-controlling interest
    
5,543
      
5,241
  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
2,069,518
    
$
2,433,210
  


Taro Pharmaceutical Industries Ltd.
Page 6 of  6

TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(U.S. dollars in thousands)
 
             
   
Nine Months Ended Decenber 31,
  
   
2018
    
2017
  
Cash flows from operating activities:
            
Net income
  
$
223,646
    
$
123,651
  
Adjustments required to reconcile net income to net cash provided by operating activities:
                
     Depreciation and amortization
    
13,738
      
12,022
  
     Realized gain on sale of marketable securities and long-lived assets
    
18
      
96
  
     Change in derivative instruments, net
    
5,881
      
(4,641
)
     Effect of change in exchange rate on inter-company balances, marketable securities and bank deposits
    
(49,688
)
    
56,903
  
     Deferred income taxes, net
    
741
      
61,540
  
     (Increase) decrease in trade receivables, net
    
(18,439
)
    
6,704
  
     Increase in inventories, net
    
(6,795
)
    
(5,261
)
     Decrease (increase) in other receivables, income tax receivable, prepaid expenses and other
    
86,425
      
(28,957
)
     Decrease in trade, income tax, accrued expenses, and other payables
    
8,810
      
3,513
  
     Loss from marketable securities, net
    
792
      
225
  
Net cash provided by operating activities
    
265,129
      
225,795
  
                 
Cash flows from investing activities:
                
     Purchase of plant, property & equipment, net
    
(19,526
)
    
(17,742
)
     Investment in other intangible assets
    
(2,669
)
    
(1,608
)
     Proceeds from short-term bank deposits, net
    
225,503
      
225,895
  
     Proceeds from long-term deposits and other assets
    
70,685
      
187,725
  
     Proceeds from (investment in) marketable securities, net
    
24,742
   
(598,578
)
Net cash provided by (used in) investing activities
    
298,735
      
(204,308
)
                 
Cash flows from financing activities:
                
     Purchase of treasury stock
    
(72,191
)
    
(54,921
)
     Dividends paid
    
(500,000
)
    
—
  
Net cash used in financing activities
    
(572,191
)
    
(54,921
)
                 
Effect of exchange rate changes on cash and cash equivalents
    
(1,815
)
    
2,228
  
Decrease in cash and cash equivalents
    
(10,142
)
    
(31,206
)
Cash and cash equivalents at beginning of period
    
576,611
      
600,399
  
Cash and cash equivalents at end of period
  
$
566,469
    
$
569,193
  
                 
Cash Paid during the year for:
                
Income taxes
  
$
51,487
    
$
42,636
  
Cash Received during the year for:
                
Income taxes
  
$
(78,367
)
  
$
(44
)
Non-cash investing transactions:
                
Purchase of property, plant and equipment included in accounts payable
  
$
1,544
    
$
1,390
  
Non-cash financing transactions:
                
Purchase of treasury stock
  
$
4,493
    
$
781
  
Purchase of marketable securities
  
$
1,799
    
$
—
  


#####


SIGNATURES

 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date:  February 7, 2019
 
TARO PHARMACEUTICAL INDUSTRIES LTD.


By:   /s/ Uday Baldota
        Name:  Uday Baldota
        Title:    Chief Executive Officer and Director