Taro Reports 4th Quarter and Full Year 2004 Results.HAWTHORNE, N.Y. -- Taro Pharmaceutical Industries Ltd. ("Taro," the "Company," NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : TARO) today reported fourth quarter and full year results for 2004. Fourth Quarter 2004 Results Taro's fourth quarter sales were $77.7 million, compared with $88.6 million for the fourth quarter of 2003. Gross profit for the quarter was $42.3 million, compared with $62.1 million for the fourth quarter of 2003. Selling, general and administrative ("SGA SGA abbr. small for gestational age Small-for-gestational-age (SGA) A term used to describe newborns who are below the 10th percentile in height or weight for their estimated gestational age. ") expenses were $29.0 million, compared with $32.1 million for the year-ago quarter. R&D expenses were $9.2 million, compared with $11.1 million for the fourth quarter of 2003. Net income for the quarter was $4.8 million, or $0.16 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $16.6 million, or $0.56 per diluted share, for the fourth quarter of 2003. Sales in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. continued to increase sequentially in the fourth quarter compared with the third and second quarters of 2004. Gross margin in the fourth quarter was affected by higher unit costs as the Company decreased production in line with the inventory reduction program initiated in the third quarter, and by price erosion, which is inherent in the generic pharmaceutical industry. Cost of goods was increased by several additional factors, including the decrease in value of the U.S. dollar, the cost of transferring production from the Company's Long Island, NY facility to its Toronto facility, and costs related to a reduction in manufacturing personnel. The decrease in SGA expenses compared with the year-ago quarter and the third quarter of 2004 primarily reflects the cost reduction measures implemented by Taro in 2004. The decrease in net income compared with the year-ago quarter primarily results from the decrease in revenues, the increase in unit costs, changes in product mix, and price erosion. Full Year 2004 Results Taro's sales were $284.1 million for the year ended December 31, 2004, compared with sales of $315.5 million for 2003. Gross profit for 2004 was $164.7 million, compared with $213.0 million for 2003. SGA expenses for the year were $123.4 million, compared with $97.7 million for 2003. R&D expenses were $41.9 million, compared with $40.6 million for 2003. Net income for 2004 was $11.1 million, or $0.37 per diluted share, compared with $61.2 million, or $2.06 per diluted share, for 2003. "Taro's performance in the second half improved compared to the first half of the year. Beginning in the first half of the year, Taro experienced an unexpected shortfall in U.S. sales at a time when the Company was undertaking a major initiative in the marketing of proprietary consumer products. These factors, combined with our continuing commitment to research, led to the decline in profits," said Barrie Levitt, M.D., Chairman of the Company. "Nevertheless, the improvement we witnessed in the second half came primarily from the corrective actions A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or we took. Long-term, we continue to focus on the Company's prescription pharmaceutical business. We believe that our research and marketing initiatives, combined with our cost reduction measures, will return Taro to meaningful, sustainable and profitable growth." Prescriptions for Taro products grew more than 19 percent in the United States in 2004, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. industry sources. Balance Sheet At December 31, 2004, Taro's total assets were $695.0 million, an increase of $78.5 million, compared with $616.5 million at December 31, 2003. Included in Deferred Taxes and Other Assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. is the value of the Company's product acquisitions. Total liabilities were $326.2 million, an increase of $58.8 million, compared with $267.4 million at the end of 2003. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. was $368.1 million at December 31, 2004, an increase of $20.7 million, compared with $347.4 million at the end of 2003. Proprietary Research T2000 is the first compound in a group of long-acting, non-sedating barbiturates Barbiturates Definition Barbiturates are medicines that act on the central nervous system and cause drowsiness and can control seizures. Purpose under development at Taro. The Company is refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar the study design for its Canadian Phase III Noun 1. phase III - a large clinical trial of a treatment or drug that in phase I and phase II has been shown to be efficacious with tolerable side effects; after successful conclusion of these clinical trials it will receive formal approval from the FDA trial of T2000 in essential tremor Essential tremor An uncontrollable (involuntary) shaking of the hands, head, and face. Also called familial tremor because it is sometimes inherited, it can begin in the teens or in middle age. The exact cause is not known. . There can be no assurance that T2000, or any members of its class, will be successful in any current or future clinical trials, or will be commercialized for any indication. 4th Quarter FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. Approvals and Generic Elocon(R) Supply Agreement In the fourth quarter, Taro received final Abbreviated New Drug Application abbreviated new drug application Pharmacology An application made in the US by a pharmaceutical company requesting authority to market a 'new' drug for which both its therapeutic indications and formulation were previously approved by the FDA in another similar ("ANDA ANDA abbr. abbreviated new drug application ") approvals for five topical topical /top·i·cal/ (top´i-k'l) pertaining to a particular area, as a topical antiinfective applied to a certain area of the skin and affecting only the area to which it is applied. top·i·cal adj. products: betamethasone betamethasone /be·ta·meth·a·sone/ (ba?tah-meth´ah-son) a synthetic glucocorticoid, the most active of the antiinflammatory steroids; used topically as the benzoate, dipropionate, or valerate salts as an antiinflammatory, topically or dipropionate ointment ointment /oint·ment/ (oint´ment) a semisolid preparation for external application to the skin or mucous membranes, usually containing a medicinal substance. oint·ment n. (augmented), 0.05%, a generic version of Schering-Plough's Diprolene(R) ointment; halobetasol propionate halobetasol propionate (halōbā´t  sol prō´pē ointment, 0.05%, a generic version of Bristol-Myers
Squibb's Ultravate(R) ointment; hydrocortisone butyrate hydrocortisone butyrateLocoid Pharmacologic class: Short-acting corticosteroid Therapeutic class: Anti-inflammatory (steroidal) Pregnancy risk category C Actionointment, 0.1%, a generic version of Ferndale Laboratories' Locoid(R) ointment; and, mometasone furoate mometasone furoate Asmanex®, Nasonex®, Twisthaler® Therapeutics An inhaled steroid used for seasonal allergic rhinitis and asthma ointment, 0.1% and mometasone furoate cream, 0.1%, generic versions of Schering-Plough's Elocon(R) ointment and cream, respectively.In December 2004, Taro entered into a supply agreement with Agis Industries (1983) Ltd. ("Agis") regarding the generic Elocon(R) cream product. As part of the agreement with Taro, Agis relinquished re·lin·quish tr.v. re·lin·quished, re·lin·quish·ing, re·lin·quish·es 1. To retire from; give up or abandon. 2. To put aside or desist from (something practiced, professed, or intended). 3. its right to 180-day generic exclusivity, permitting the FDA to grant final approval for Taro's ANDA. Under the agreement, Taro is supplying the product to Agis. An Agis subsidiary, Clay Park Labs, Inc., is distributing the product in the U.S. U.S. FDA Filings During 2004, Taro filed 10 ANDAs and received approvals for 15 ANDAs and one New Drug Application. Six of the ANDA approvals were for first-to-market generics. Taro currently has 27 filings submitted to the FDA: 26 ANDAs, including two tentative approvals, plus one NDA (Non Disclosure Agreement) An agreement signed between two parties that have to disclose confidential information to each other in order to do business. In general, the NDA states why the information is being divulged and stipulates that it cannot be used for any for a NonSpil(TM)-related product. Fourteen of the filings are for topical products and 13 are for products in oral and other dosage forms A dosage form is the physical form of a dose of medication, such as a capsule or injection. The route of administration is dependent on the dosage form of a given drug. . The ANDAs address markets with annual U.S. sales of more than one billion dollars. In addition, Taro has regulatory filings in Canada, Israel and other countries. Acquisition of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Facility In February 2005, Taro completed the acquisition of 3 Skyline Drive
Skyline Drive is a 105 mile (169 km) road that runs the entire length of the National Park Service's Shenandoah National Park in , the 124,000 square foot building in which the Company had initially acquired a 32% interest in 2002. The Company is consolidating its New York operations into this laboratory and office building. Conference Call The Company will conduct a conference call to discuss fourth quarter and year-end results on Thursday, February 24, 2005 at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). The call will be available live via the Internet by accessing www.taro.com. Online and telephone replays of the call will be available from approximately 1:00 p.m. on February 24th through March 3, 2005. The online replay can be accessed at www.taro.com. The telephone replay can be heard by dialing 888-286-8010 (domestic U.S.) or +617-801-6888 (international) and providing the passcode 77052125 when prompted. Taro 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 Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. STATEMENT Certain statements in this release are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or the Company "believes" may happen. Although Taro Pharmaceutical Industries Ltd. 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 economic conditions, industry and market conditions, slower than anticipated penetration of new markets, changes in the Company's financial position, regulatory actions and legislative actions in the countries in which Taro operates, future demand and market size for products under development, marketplace acceptance of new or existing products, either generic or proprietary, 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 speak 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 BALANCE SHEETS
(US dollars in thousands)
DECEMBER DECEMBER
31, 31,
2004 2003
--------- ---------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 98,630 $ 159,121
Restricted short-term bank deposits 6,598 2,518
Accounts Receivable - Trade 122,847 120,522
Accounts Receivable - Other and
prepaid expenses 16,621 17,046
Inventories 86,591 84,486
------------------------------------- --------- ---------
Total Current Assets 331,287 383,693
Long Term Investments 19,836 2,888
Property, Plant and Equipment, net 241,966 182,306
Deferred Taxes and Other Assets 101,930 47,636
------------------------------------- --------- ---------
TOTAL ASSETS $ 695,019 $ 616,523
===================================== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-Term Bank Credits $ 64,961 $ 19,124
Current Maturities of Long-Term
Liabilities 16,944 24,420
Accounts Payable and Accrued Expenses 47,796 60,194
------------------------------------- --------- ---------
Total Current Liabilities 129,701 103,738
Long-Term Liabilities 187,346 156,937
Other Liabilities 9,159 6,737
------------------------------------- --------- ---------
TOTAL LIABILITIES 326,206 267,412
Minority Interest 694 1,711
Shareholders' Equity 368,119 347,400
------------------------------------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 695,019 $ 616,523
===================================== ========= =========
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(US dollars in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
-------- -------- --------- ---------
SALES $ 77,668 $ 88,621 $ 284,130 $ 315,458
Cost of Sales 35,334 26,561 119,404 102,454
-------- -------- --------- ---------
Gross Profit 42,334 62,060 164,726 213,004
Operating Expenses:
Selling and
Administrative 29,036 32,097 123,387 97,718
-------- -------- ---------- ---------
Operating Income
before Research
and Development 13,298 29,963 41,339 115,286
Research and
Development 9,211 11,062 41,943 40,601
-------- -------- ---------- ---------
Operating Income
(loss) 4,087 18,901 (604) 74,685
Financial and Other
Expenses - net 684 561 6,329 1,729
-------- -------- ---------- ---------
3,403 18,340 (6,933) 72,956
Taxes on Income (1,340) 1,730 (16,991) 11,475
-------- -------- ---------- ---------
4,743 16,610 10,058 61,481
Minority Share in
Profit (Loss) of
Subsidiary (43) (3) (1,017) 326
-------- -------- ---------- ---------
NET INCOME $ 4,786 $ 16,613 $ 11,075 $ 61,155
======== ======== ========== =========
Earnings per Ordinary
Share $ 0.16 $ 0.57 $ 0.38 $ 2.12
Diluted Earnings per
Ordinary Share $ 0.16 $ 0.56 $ 0.37 $ 2.06
Weighted Average
Number of Shares
BASIC EPS 29,146,349 28,934,811 29,057,564 28,872,839
DILUTED EPS 29,618,811 29,817,095 29,657,486 29,674,148
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