After several quarters' delay, Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF.PK) provided financial information for the year ended December 31, 2006 and for the nine months ended September 30, 2007, and provided an update on its progress in completing its financial statements for the year ended December 31, 2006.
The financial data released by the company is unaudited, so investors still await audited financial statements for the year of 2006 as well as for the first three quarters of 2007. The company itself noted that "these results do not provide complete financial information"
Taro also stated that it expects to schedule a shareholder meeting to vote on a proposed merger with Sun Pharmaceutical Industries Ltd. the first quarter of 2008. Taro had previously stated that it hoped to hold the meeting before the end of November 2007.
Taro currently estimates its revenue for the year of 2006 to be approximately $184 million, with a net loss for the year of approximately $140.7 million. In June, Taro had estimated 2006 net sales in the range of $180 to $200 million and a net loss in the range of $95 to $120 million. When it originally provided these estimates, Taro noted that the estimates were subject to change.
The firm attributed the higher than previously estimated 2006 loss primarily to a higher level of asset impairments. Taro currently estimates that charges for non-cash asset impairments, which it listed with sales and administrative expenses, will total approximately $38 million during 2006
A second item affecting its results was a desire by Taro to decrease its inventories at some if its wholesaler customers based on levels reported by those customers, so it reduced sales and cut promotions to them. While the cutbacks did reduce inventory levels of Taro generic products, it also resulted in lower sales.
Other factors were dropping prices for some of Taro's drugs, which resulted in what the company termed a "substantial" reduction in revenue, and one time legal and accounting charges associated with the 2003 and 2004 restatement and an independent investigation in 2006.
While Taro did not release third quarter results, it did provide estimates of financial results for the nine months ended September 30, 2007. Taro estimated revenue of approximately $232 million, gross profit of approximately $126 million, and net income of approximately $14 million. Taro noted that in the nine months ended September 30, 2007, there are approximately $10 million of one-time charges and non-recurring expenses, including significantly higher professional fees due to a restatement of 2003 and 2004 results, a related investigation and the proposed transaction with Sun.
In May of this year, Sun made an equity investment of approximately $40.7 million to help Taro avoid an impending payment default on certain of its debt obligations. The investment was based on a price of $6 per share, which major Taro shareholders, such as Templeton investments, felt considerably undervalued the company. In August 2007, Sun provided $18 million more to Taro through the exercise of warrants. Thus, since May 2007, Sun has made equity investments in Taro totaling approximately $59 million.
As of September 30, 2007, Taro's total debt was approximately $224 million. Taro noted that it continues to be "out of compliance with certain of its debt instruments and continues to discuss the situation with its lenders."
Taro attributed the delay of its financial statements for the year ended December 31, 2006 to company reviews of the adequacy of estimates for accruals recorded in 2005 and prior years for sales returns, chargebacks, rebates and administrative fees. Taro warned that the review "is still in progress, and the eventual outcome cannot be predicted with any certainty at this time."
Taro shares closed yesterday at $7.40.
Published by Globes [online], Israel business news - www.globes-online.com - on December 6, 2007
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