Taro Pharmaceutical first half 2010 net income increases to $29 million

Taro Pharmaceutical Industries Ltd. ("Taro," the "Company," Pink Sheets: TAROF) today provided preliminary, unaudited and unreviewed information on its financial performance for the first half of 2010.

Taro continues to make significant operational and financial progress.

• Sales for the first half of 2010 grew to approximately $187 million
• Net income for the first half of 2010 increased more than 24% to approximately $29 million, compared to the same period in 2009
• Cash provided by operations for the first half of 2010 nearly doubled from the prior year period, to approximately $24 million
• Cash on June 30, 2010, including restricted cash and short-term bank deposits, was approximately $118 million, an increase of over 49% from the level one year earlier
• Net debt on June 30, 2010 was approximately $23 million, nearly 74% lower than net debt one year earlier
• Taro has now completed 14 consecutive quarters of profitability
• Taro has issued audited financial statements for 2004, 2005, 2006 and 2007
• Taro continues to expect that the 2008 and 2009 audits will be completed by year-end

First Half 2010 Results

For the six months ended June 30, 2010, Taro estimates net sales of $187.3 million compared to $181.7 million in the same period of the previous year, a 3% increase. Gross profit for the first half of 2010 was $108.0 million, or 58% of net sales, compared to a gross profit of $104.4 million, or 57% of net sales for the same period in 2009. Operating income for the six months ended June 30, 2010 was $36.9 million, compared to $34.7 million for the same period in 2009, an increase of 6%. Net income increased 24% to $29.2 million, or $0.71 per diluted share, compared to $23.6 million, or $0.58 per diluted share for first half 2009.

Second Quarter 2010 Results

For the second quarter ended June 30, 2010, Taro estimates net sales of $98.0 million compared to $96.8 million in the second quarter of 2009. Gross profit for the second quarter was $56.6 million, or 58% of net sales, compared to $57.9 million, or 60% of net sales for the second quarter of 2009. The second quarter of 2009 was particularly robust as a result of the introduction of new products and pipeline fill. Operating income for the second quarter of 2010 was $19.9 million compared to $20.6 million for the second quarter of 2009. Net income increased 51% to $18.9 million, or $0.46 per diluted share, compared to $12.5 million, or $0.31 per diluted share for the second quarter of 2009.

Balance Sheet

The Company continues to strengthen its balance sheet with net debt (total debt offset by the value of hedging instruments, less cash and cash equivalents) declining from $41 million in December 2009 to $23 million in June 2010. As of June 30, 2010, Taro had $117.9 million in cash, cash equivalents, restricted cash and short-term bank deposits, after making scheduled debt payments of $14.9 million in 2010. During the first half of 2010, cash provided by operations was $24 million. Amortization and depreciation expenses were $9.3 million during the period.

Trade accounts receivable at June 30, 2010 were $76.7 million, which represents 71 days sales outstanding. Inventories were $75.3 million at June 30, 2010, compared to $65.3 million at June 30, 2009.

The Company cautioned that the financial information presented herein does not constitute complete financial information, has not been reviewed by its independent auditors and is subject to change as the Company continues to work with its auditors to complete its 2008 and 2009 audits in order to become current with its financial reporting obligations. The data presented for the second quarter of 2009 and first half of 2009 is the same as that previously reported by the Company for those periods. Audited financial statements for the full year 2009 will be reported in filings with the U.S. Securities and Exchange Commission as soon as they become available, and may differ from the information previously reported by the Company. Subject to the foregoing caveats, the information presented herein represents the best information currently available to Taro management and the Company believes that it fairly presents the Company's results of operations.