Taro Provides Third Quarter and Fiscal Year to Date Results Favorable Performance Over 2011 Periods Continues Business Wire HAWTHORNE, N.Y. -- February 4, 2013 Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three and nine month periods ended December 31, 2012. Quarter ended December 31, 2012 Highlights - compared to December 31, 2011 *Net sales of $185.7 million, increased $37.6 million, or 25.4%, however, sales volumes have slightly declined *Gross profit, as a percentage of net sales was 75.4%, compared to 71.6% *Research and development expenses increased 33.5% to $11.8 million *Selling, marketing, general and administrative expenses, which included a $3.3 million litigation provision in 2012, increased $2.1 million *Operating income increased to $104.0 million, or 56.0% of net sales, compared to $74.5 million, or 50.3% of net sales *Net income attributable to Taro was $88.8 million compared to $62.4 million, resulting in diluted earnings per share of $1.98 compared to $1.40. Nine months ended December 31, 2012 Highlights - compared to December 31, 2011 *Net sales of $505.8 million, increased $107.9 million, or 27.1%, however, sales volumes have marginally declined *Gross profit, as a percentage of net sales was 74.2%, compared to 66.9% *Research and development expenses increased 45.3% to $34.3 million *Selling, marketing, general and administrative expenses, which included $11.3 million litigation provisions in 2012, increased $4.2 million *Operating income increased to $265.4 million, or 52.5% of net sales, compared to $170.6 million, or 42.9% of net sales *Income tax expense increased $33.5 million from $18.2 million to $51.7 million *Net income attributable to Taro was $217.0 million compared to $157.0 million, a $60.0 million increase, resulting in diluted earnings per share of $4.86 compared to $3.52. Cash Flow and Balance Sheet Highlights *Cash flow provided by operations for the nine months ended December 31, 2012, as compared to December 31, 2011, was $173.1 million compared to $157.0 million, primarily due to the payment of income taxes as reflected in the significant decrease in trade and other payables *Cash, including marketable securities, increased $152.2 million to $486.6 million from March 31, 2012. FDA Approvals and Filings During the quarter, the Company filed one ANDA with the FDA. With this, ANDAs representing seventeen products as well as two NDAs await FDA approval. 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 and statements 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 financial information for fiscal year 2013. 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 actions of the Company's lenders and creditors, 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 INCOME (Unaudited) (U.S. dollars in thousands, except share data) Quarter Ended Year to Date December 31, December 31, 2012 2011 2012 2011 Sales, net $ 185,695 $ 148,105 $ 505,821 $ 397,941 Cost of sales 45,769 42,056 130,470 131,526 Gross Profit 139,926 106,049 375,351 266,415 Operating Expenses: Research and 11,838 8,867 34,306 23,609 development, net Selling, marketing, 24,053 21,930 75,612 71,458 general and administrative Impairment - 784 - 784 Operating income 104,035 74,468 265,433 170,564 Financial Expenses, net: Interest and other financial (581 ) 315 (440 ) 2,445 (income) expenses, net Foreign exchange (1,992 ) 6,312 (1,736 ) (7,329 ) (income) expense Other income 1,359 (565 ) 1,952 358 (loss), net Income before 107,967 67,276 269,561 175,806 income taxes Tax expense 18,779 4,584 51,713 18,183 Income from continuing 89,188 62,692 217,848 157,623 operations Net loss from discontinued (37 ) (344 ) (44 ) (298 ) operations Net income 89,151 62,348 217,804 157,325 Net income (loss) attributable to 374 (52 ) 765 303 non-controlling interest Net income attributable to $ 88,777 $ 62,400 $ 217,039 $ 157,022 Taro Net income per ordinary share from continuing operations attributable to Taro: Basic $ 1.98 $ 1.41 $ 4.86 $ 3.53 Diluted $ 1.98 $ 1.41 $ 4.86 $ 3.53 Net loss per ordinary share from discontinued operations attributable to Taro: Basic ($0.00)* ($0.01) ($0.00)* ($0.01) Diluted ($0.00)* ($0.01) ($0.00)* ($0.01) Net income per ordinary share attributable to Taro: Basic $ 1.98 $ 1.40 $ 4.86 $ 3.53 Diluted $ 1.98 $ 1.40 $ 4.86 $ 3.52 Weighted-average number of shares used to compute net income per share: Basic 44,725,898 44,474,727 44,651,534 44,527,689 Diluted 44,740,427 44,550,022 44,699,715 44,587,620 * Amount is less than $0.01. May not foot due to rounding. TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY CONSOLIDATED BALANCE SHEETS (Unaudited) (U.S. dollars in thousands) December 31, March 31, 2012 2012 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 276,995 $ 238,266 Short-term bank deposits 198,973 72,440 Restricted short-term bank 7,430 15,780 deposits Marketable securities 3,172 7,835 Accounts receivable and other: Trade, net 134,590 111,130 Other receivables and prepaid 109,711 98,501 expenses Inventories 110,732 109,638 Long-term assets held for sale, 69 71 net TOTAL CURRENT ASSETS 841,672 653,661 Long-term receivables and other 27,929 19,972 assets Property, plant and equipment, 145,762 150,750 net Other assets 29,945 32,041 TOTAL ASSETS $ 1,045,308 $ 856,424 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Current maturities of long-term $ 11,086 $ 10,957 debt Trade payables and other current 162,756 187,942 liabilities TOTAL CURRENT LIABILITIES 173,842 198,899 Long-term debt, net of current 17,244 27,949 maturities Deferred taxes and other 6,116 6,618 long-term liabilities TOTAL LIABILITIES 197,202 233,466 Taro shareholders’ equity 843,391 619,008 Non-controlling interest 4,715 3,950 TOTAL LIABILITIES AND $ 1,045,308 $ 856,424 SHAREHOLDERS’ EQUITY TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (U.S. dollars in thousands) Nine Months Ended December 31, 2012 2011 Operating Activities: Net income $ 217,804 $ 157,325 Adjustments required to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,493 14,021 Impairment of long-lived assets - 784 Share-based compensation expense 8 39 Loss on sale of long-lived assets 106 571 and marketable securities, net Decrease in long-term debt due to (23 ) (2,971 ) currency fluctuations Increase in trade receivables, net (23,417 ) (39,295 ) Change in derivative instruments, 1,048 6,070 net Increase in other receivables, (10,622 ) (23,544 ) prepaid expenses and other assets Increase in inventories, net (1,021 ) (22,872 ) Effect of exchange differences on 367 (2,881 ) inter-company balances (Decrease) increase in trade and (24,647 ) 69,802 other payables and liabilities Net cash provided by operating 173,096 157,049 activities Investing Activities: Purchase of property, plant & (6,183 ) (5,406 ) equipment Investment in other intangible (765 ) - assets (Investment in) proceeds from long-term security deposits and (5,289 ) 1,127 other assets Investment in short-term bank (126,415 ) (49,928 ) deposits Proceeds from (investment in) 8,350 (15,562 ) restricted bank deposits Proceeds from sale of long-lived 1 431 assets Net cash used in investing (130,301 ) (69,338 ) activities Financing Activities: Proceeds from issuance of shares, 5,877 296 net Repayments of long-term debt (10,554 ) (12,907 ) Repayments of short-term bank debt, - (2,428 ) net Net cash used in financing (4,677 ) (15,039 ) activities Effect of exchange rate changes 611 (1,543 ) Net increase in cash 38,729 71,129 Cash at beginning of period 238,266 78,872 Cash at end of period $ 276,995 $ 150,001 Contact: Taro Pharmaceutical Industries Ltd. Michael Kalb, 914-345-9001 GVP, CFO Michael.Kalb@taro.com or William J. Coote, 914-345-9001 VP, Treasurer William.Coote@taro.com
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