Taro Pharmaceuticals Ind (GREY:TAROF)

First Quarter 2012 Results

• Net sales of $145.1 million, increased $37.4 million, or 34.7%
• Gross profit, as a percentage of net sales was 68.3%, compared to 58.6%
• Selling, marketing, general and administrative expenses increased $0.6 million, however, as a percentage of net sales decreased to 15.9%, compared to 20.8%
• Operating income increased 98.3% to $66.2 million, or 45.6% of net sales, compared to $33.4 million, or 31.0% of net sales
• Net income attributable to Taro was $47.3 million compared to $25.7 million, a $21.6 million increase, resulting in diluted earnings per share of $1.06 compared to $0.58.

Mr. Kal Sundaram, Taro’s recently appointed Chairman commented, “We are pleased with the quarter’s results and the consistent progress that we continue to make. As we have stated in the past, a portion of our revenue and profit growth is the result of pricing opportunities, the sustainability of which is uncertain. We intend to ramp up our R&D expenditures in order to improve and grow our pipe-line of quality products in order to remain competitive in a highly-competitive market.”

Mr. Sundaram added, “I look forward to working with the entire Taro management team as we continue to move the Company forward, and build upon the progress and success that Taro has achieved, particularly in the past eighteen months.”

February 15, 2012

Board of Directors of
Taro Pharmaceutical Industries Ltd.
Euro Park (Italy Building)
Yakum Business Park, Yakum 60972, Israel

Dear Members of the Board, Audit Committee and Special Committee:

As Taro Pharmaceutical Industries Ltd. ("Taro") and Sun Pharmaceutical Industries Ltd. ("Sun") start to look more like the same company, it becomes clear that shareholders of both companies are similarly situated. For example, both Taro and Sun shareholders face the same risk in being positioned as minority shareholders susceptible to the agenda of Dilip Shanghvi, Chairman and controlling shareholder of Sun. Although Dilip Shanghvi has promised to be a steward of minority shareholder value to Taro shareholders (in Sun's Schedule 13D with respect to Taro and numerous amendments thereto filed with the U.S. Securities and Exchange Commission), there is nothing preventing him from attempting to use his power as controlling shareholder to transfer wealth from Sun and Taro minority shareholders to himself. For example, both shareholders of Taro and Sun should be concerned that Dilip Shanghvi personally invests in "...pharma entities...both listed and unlisted, in India and outside India," according to Sun's recent investor conference call. At the very least, this raises potential troubling questions of conflict of interest and loyalty. Thus, both Sun and Taro minority shareholders, including IsZo Capital, are behooved to remain vigilant in monitoring events at both companies, to ensure their respective boards of directors act to maximize value for all shareholders and do not succumb to Dilip Shanghvi's personal investing agenda.

The recently released quarterly results for Sun and Taro confirm that the two companies are in effect the same economic entity. Taro now contributes 35% to Sun's consolidated sales, 42% of EBITDA, and an astounding 48% of profit. Therefore, based on Sun's market cap of USD $11.59 billion as of February 14, 2012, Taro should be valued between $109.30 to $125.03 per share depending on whether one uses EBITDA or profits to allocate the value of Sun. In addition, Taro has roughly $5 per share in net cash giving a total value to Taro of $114.30 to $130.03 per share.

Given these facts, is there any reasonable way to justify the $24.50 offer that Sun has made to Taro shareholders? IsZo Capital doesn't believe so, although some may try to make an argument.

Full letter

Fourth Quarter 2011 Results

• Net sales of $148.1 million, increased $45.5 million, or 44.3%,
• Gross profit, as a percentage of net sales was 71.6%, compared to 59.6%, principally driven by increased selling prices on select products in the U.S. market as overall volumes were flat,
• Selling, marketing, general and administrative expenses decreased $6.2 million, or 22.0%,
• Operating income of $74.5 million, or 50.3% of net sales, compared to $21.6 million, or 21.0% of net sales,
• Net income was negatively impacted by foreign exchange (FX) expense of $6.3 million, compared to $3.7 million,
• Net income attributable to Taro was $62.4 million, compared to $16.5 million, an increase of $45.9 million, resulting in diluted earnings per share of $1.40 compared to $0.38.

Taro’s Interim Chief Executive Officer, Jim Kedrowski, stated, “We are very pleased with both 2011’s fourth quarter and full year performance. The successful execution of our strategic plans and changes we have implemented are reflected in these solid financial results. The Company’s performance across all markets was very positive, however, a significant portion of the quarter’s growth in net sales and profits was derived from price increases on select products in the U.S. market and may not be sustainable.”

Third Quarter 2011 Results

• Net sales of $138.3 million, increased $35.2 million or 34.1%,
• Gross profit, as a percentage of net sales was 67.5%, compared to 60.1%,
• Selling, marketing, general and administrative expenses decreased $3.2 million, and as a percentage of net sales decreased to 17.7%, compared to 26.9%,
• Operating income of $61.9 million, or 44.8% of net sales, compared to $24.7 million, or 24.0% of net sales,
• Net income was favorably impacted by foreign exchange (FX) income of $16.1 million, compared to an FX expense of $2.1 million—an $18.2 million benefit,
• Net income attributable to Taro was $58.9 million, compared to $18.5 million, an increase of $40.4 million, resulting in diluted earnings per share of $1.32 compared to $0.45.

Taro’s Interim Chief Executive Officer, Jim Kedrowski, commented, “The third quarter, which is typically our strongest, was a very good quarter for Taro as illustrated by these financial results. Progress continues on all fronts as demonstrated by our top-line growth, the reduction in SG&A expenses and improved manufacturing performance. However, a portion of this revenue growth is attributable to our ability to capitalize on current market opportunities which may not be sustainable. In addition, Taro's product pipeline has not developed as quickly as we expected as evidenced by the level of our R&D expenses and by the relatively low number of product filings and approvals.”

Mr. Kedrowski continued, “Our majority shareholder, Sun Pharma, has made an offer to purchase all of the issued and outstanding shares of Taro. While a special committee of the Independent Directors has been formed to evaluate the proposal, Taro Management remains focused on our core business in order to finish the year on a strong note.”

Sun Pharma Proposes to Acquire Taro Shares at $24.50 per Share
As announced October 19, 2011, the Company’s Board of Directors received a letter from Sun Pharmaceutical Industries Ltd. (Reuters: SUN.BO, Bloomberg: SUNP IN, NSE: SUNPHARMA, BSE: 524715) (together with its subsidiaries and affiliates, “Sun Pharma”) making a non-binding proposal for the acquisition of all of the issued and outstanding shares of Taro, not currently held by Sun Pharma, at a price of $24.50 per share, in cash; representing a 25.96% premium over Taro’s closing price on October 17, 2011.

On October 18, 2011, Sun Pharmaceutical Industries Ltd (together with its subsidiaries & affiliates, "Sun Pharma") delivered a letter to Sun Pharma's Israeli subsidiary, Taro Pharmaceutical Industries Ltd's Board of Directors proposing acquisition by Sun Pharma, of all of the outstanding shares of Taro not held by Sun Pharma for per share consideration of US $ 24.50 in cash representing a 25.96% premium over the most recent closing price of Taro common stock. This offer Is subject to the approval of Taro Board and such other authorities as may be required and subject to completion of necessary cornpllances/formalities as may be required.

The GeoTeam will begin to actively track the TAROF story as the company moves forward with its restructuring plans:

Hawthorne, NY, May 26, 2011 - Taro Pharmaceutical Industries Ltd. (“Taro,” or the “Company,” Pink Sheets: TAROF) today provided unaudited financial results for the quarter ended March 31, 2011.

First Quarter 2011 Highlights

● Net sales of $107.7 million, increased $18.7 million, or 21.0%, over the first quarter of 2010.

● Gross profit, as a percentage of sales was 58.6%, compared to 59.7% in the first quarter of 2010.

● Selling, general and administrative expenses decreased $2.4 million, and as a percentage of net sales decreased to 20.8%, compared to 28.0% in the first quarter of 2010.

● Operating income increased 84.4% to $33.4 million, or 31.0% of net sales, compared to $18.1 million, or 20.3% of net sales, in 2010.

● Net income attributable to Taro was $25.7 million compared to $8.6 million in the first quarter of 2010, a $17.1 million increase resulting in diluted earnings per share of $0.58 compared to $0.21 in the first quarter of 2010.

Cash Flow and Balance Sheet Highlights

● Cash flow from operations was $24.4 million compared to $15.8 million in the same period a year ago.

● Cash, including marketable securities, increased $34.8 million to $123.7 million from December 2010.

 
Jim Kedrowski, Taro’s Interim Chief Executive Officer commented, “While continual progress is being made, our focus is to ensure that this improvement is sustainable.  Considerable effort will continue to be concentrated on improving our processes to deliver quality products on-time, and build our pipeline, through R&D, in order to meet the growing customer demand.  As the Taro management team moves the company forward, the progress in our performance is expected to be consistent and gradual.”