Achieves Second Highest Quarterly Revenue in the Company's History of $58.1 Million Signed a Memorandum of Understanding to Reduce Debt by $250 Million and Significantly Improve Balance Sheet and Financial Position
MIGDAL HAEMEK, Israel, August 20 /PRNewswire-FirstCall/ -- Tower
Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM), an independent specialty
foundry, today announced financial results for the second quarter ended June
30, 2008.
Highlights
- Achieved revenue of $58.1 million, compared to $57.6 million
in the prior quarter and $57.1 million in the same period one year ago
- Recorded positive cash flow from operations for the seventh
consecutive quarter and positive EBITDA for the eleventh consecutive
quarter
- Decreased net loss in the first six months of 2008 by $13
million year-over-year
- Signed a Memorandum of Understanding to significantly
improve balance sheet and financial position, by lowering debt $250
million and increasing shareholders equity by a similar amount
- Announced a definitive agreement to acquire Jazz
Technologies
- Initiated cost reduction plan expected to result in
approximately $40 million of savings annually
- Announced customer engagements and production ramps,
including those with ON Semiconductor, QuickLogic, Cypress
Semiconductor and Panavision Imaging
Revenue for the second quarter of 2008 was $58.1 million, which was
slightly above the mid-point of the company's previously stated guidance
range. This compares to revenue of $57.1 million in the second quarter of
2007 and $57.6 million in the prior quarter.
Second quarter 2008 non-GAAP gross profit and operating profit, as
described and reconciled below, totaled $20.5 million and $11.6 million,
respectively, representing 35 percent gross margin and 20 percent operating
margin. Calculated in accordance with Generally Accepted Accounting
Principles (GAAP), net loss for the second quarter was $31.3 million, or
$0.25 per share, an improvement of $2.8 million when compared to $34.1
million, or $0.28 per share, for the same period in 2007.
Russell Ellwanger, Tower's chief executive officer, stated "Over the past
few years, Tower has substantially improved its revenue and operational
results as evidenced by becoming the number one revenue growth foundry for
2007 over 2005. Today's announcement of a memorandum of understanding signed
with our banks and Israel Corporation provides a much stronger corporate
capital structure from which we can continue this momentum. We expect that
these financial improvements combined with the expected closing of the Jazz
merger will maintain our growth trajectory, while substantially improving
EBITDA and cash generation in the course of transitioning into the worldwide
leading specialty foundry."
"The response from both the Jazz and Tower customers with regard to the
combined product platform offerings and roadmaps has been overwhelmingly
positive, and we have begun to leverage the cross-selling opportunities
through joint meetings with customers of both companies. Integration efforts
are well underway in anticipation of the completion of the transaction by the
end of this quarter. We have established an inter-company cross-functional
team tasked with ensuring a seamless transition, and we expect to realize
approximately $40 million in annual cost savings from the Jazz merger."
As previously disclosed, Tower announced a definitive agreement to
acquire Jazz Technologies, which will create a leading specialty pure-play
foundry with trailing twelve month revenues of approximately $440 million.
Additionally, the merger will significantly increase the Company's scale,
providing the opportunity for substantial growth in revenue, cash flow and
operating results. The proposed transaction is subject to approval by Jazz's
shareholders and other customary closing conditions. Jazz announced that
August 8, 2008 will serve as the record date for a special meeting of
shareholders, which will be convened on September 17, 2008 to vote on, adopt
and approve the proposed transaction, with the closing of the transaction
expected to occur prior to the end of the third quarter of 2008.
Second Quarter 2008 Financial Results Conference Call and Web Cast
Tower will host a conference call to discuss these results today, August
20, 2008, at 10:00 a.m. Eastern Time (ET) / 5:00 p.m. Israel time. To
participate, please call: 1-888-668-9141 (U.S. toll-free number) or
972-3-918-0691 (international) and mention ID code: TOWER. Callers in Israel
are invited to call locally by dialing 03-918-0691. The conference call will
also be Web cast live at http://www.earnings.com and at www.towersemi.com and
will be available thereafter on both Web sites for replay for 90 days,
starting at approximately 2 p.m. ET on the day of the call.
As previously announced, beginning with the fourth quarter of 2007, the
Company presents its financial statements in accordance with U.S. GAAP. All
historical amounts presented in this release, including the financial tables
below, were recast to reflect the application of U.S. GAAP.
As used in this release, the term Earnings Before Interest Tax
Depreciation and Amortization (EBITDA) consists of loss, according to U.S.
GAAP, excluding interest and financing expenses (net), tax, depreciation and
amortization and stock based compensation expenses. EBITDA is not a required
GAAP financial measure and may not be comparable to a similarly titled
measure employed by other companies. EBITDA should not be considered in
isolation or as a substitute for operating income, net income or loss, cash
flows provided by operating, investing and financing activities, or other
income or cash flow statement data prepared in accordance with GAAP.
This release, including the financial tables below, presents other
financial information that may be considered "non-GAAP financial measures"
under Regulation G and related reporting requirements promulgated by the
Securities and Exchange Commission as they apply to our company. These
non-GAAP financial measures exclude (1) depreciation and amortization
expenses and (2) compensation expenses in respect of options granted to
directors, officers and employees. Non-GAAP financial measures should be
evaluated in conjunction with, and are not a substitute for, GAAP financial
measures. The tables also present the GAAP financial measures, which are most
comparable to the non-GAAP financial measures as well a reconciliation
between the non-GAAP financial measures and the most comparable GAAP
financial measures. The non-GAAP financial information presented herein
should not be considered in isolation from or as a substitute for operating
income, net income or loss, cash flows provided by operating, investing and
financing activities, or other income or cash flow statement data prepared in
accordance with GAAP.
About Tower Semiconductor Ltd.
Tower Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM) is an independent
specialty foundry that delivers customized solutions in a variety of advanced
CMOS technologies, including digital CMOS, mixed-signal and RF (radio
frequency) CMOS, CMOS image sensors, power management devices, and embedded
non-volatile memory solutions. Tower's customer orientation is complemented
by its uncompromising attention to quality and service. Its specialized
processes and engineering expertise provides highly flexible, customized
manufacturing solutions to fulfill the increasing variety of customer needs
worldwide. Offering two world-class manufacturing facilities with standard
and specialized process technologies ranging from 1.0- to 0.13-micron, Tower
Semiconductor provides exceptional design support and technical services to
help customers sustain long-term, reliable product performance, while
delivering on-time and on-budget results. More information can be found at
http://www.towersemi.com.
Forward Looking Statements
This press release includes forward-looking statements, which are subject
to risks and uncertainties. Actual results may vary from those projected or
implied by such forward-looking statements. Potential risks and uncertainties
include, without limitation, risks and uncertainties associated with: (i) the
completion of the equipment installation, technology transfer and ramp-up of
production in Fab 2 and raising the funds therefore, (ii) the cyclical nature
of the semiconductor industry and the resulting periodic overcapacity,
fluctuations in operating results, future average selling price erosion,
(iii) having sufficient funds to satisfy our short-term and long-term debt
obligations and other liabilities, (iv) operating our facilities at high
utilization rates which is critical in order to defray the high level of
fixed costs associated with operating a foundry and reduce our losses, (v)
our ability to satisfy the covenants stipulated in our amended credit
facility agreement, (vi) our ability to capitalize on increases in demand for
foundry services, (vii) meeting the conditions to receive Israeli government
grants and tax benefits approved for Fab2, the possibility of the government
requiring us to repay all or a portion of the grants already received and
obtaining the approval of the Israeli Investment Center for a new expansion
program, (viii) our ability to accurately forecast financial performance,
which is affected by limited order backlog and lengthy sales cycles, (ix)
maintaining existing customers and attracting additional customers, (x) not
receiving orders from our wafer partners and customers, which can result in
excess capacity, (xi) our dependence on a relatively small number of products
for a significant portion of our revenue, (xii) product returns, (xiii) our
ability to maintain and develop our technology processes and services to keep
pace with new technology, evolving standards, changing customer and end-user
requirements, new product introductions and short product life cycles, (xiv)
competing effectively, (xv) our large amount of debt and our ability to repay
our short-term and long-term debt on a timely basis, (xvi) achieving
acceptable device yields, product performance and delivery times, (xvii) our
ability to manufacture products on a timely basis and to purchase the
equipment to increase Fab2 capacity up to 30,000 wafers per month and timely
installation thereof, (xviii) our dependence on intellectual property rights
of others and our ability to operate our business without infringing others'
intellectual property rights, (xix) exposure to inflation, currency exchange
and interest rate fluctuations and risks associated with doing business
internationally and in Israel, (xx) the closing of the definitive agreement
to acquire all of the outstanding shares of Jazz, subject to the approval of
Jazz's shareholders and other customary closing conditions, (xxi) the closing
of the definitive agreement with the lender banks, Bank Hapoalim and Bank
Leumi, and Israel Corporation for the debt restructuring and investment and
(xxi) business interruption due to fire, the security situation in Israel and
other events beyond our control.
A more complete discussion of risks and uncertainties that may affect the
accuracy of forward-looking statements included in this press release or
which may otherwise affect our business is included under the heading "Risk
Factors" in our most recent filings on Forms 20-F, F-3 and 6-K, as were filed
with the Securities and Exchange Commission and the Israel Securities
Authority. Future results may differ materially from those previously
reported. The Company does not intend to update, and expressly disclaims any
obligation to update, the information contained in this release.
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
--------- -----------
2008 2007
---- ----
unaudited
---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $19,833$ 44,536
Trade accounts receivable 34,28644,977
Other receivables 4,428 4,748
Inventories37,43227,806
Other current assets1,017 1,580
-------- --------
Total current assets 96,996 123,647
-------- --------
LONG-TERM INVESTMENTS 16,76715,093
-------- --------
PROPERTY AND EQUIPMENT, NET 510,640 502,287
-------- --------
INTANGIBLE ASSETS, NET29,08134,711
-------- --------
OTHER ASSETS, NET 11,52111,044
-------- --------
-------- --------
TOTAL ASSETS $ 665,005$ 686,782
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of
convertible debenture $ 9,237$7,887
Trade accounts payable 50,23549,025
Deferred revenue8,182--
Other current liabilities 22,79920,024
-------- --------
Total current liabilities 90,45376,936
LONG-TERM DEBT FROM BANKS386,336 379,314
DEBENTURES 120,048 117,460
LONG-TERM CUSTOMERS' ADVANCES 14,36027,983
OTHER LONG-TERM LIABILITIES 57,64840,380
-------- --------
Total liabilities668,845 642,073
-------- --------
SHAREHOLDERS' EQUITY (DEFICIT) (3,840)44,709
-------- --------
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 665,005$ 686,782
-------- --------
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except share data and per share data)
Six months endedThree months ended
June 30, June 30,
-----------------------------------------------------
20082007 20062008 20072006
-----------------------------------------------------
GAAPGAAP GAAPGAAP GAAPGAAP
-----------------------------------------------------
REVENUES $ 115,679 $ 112,666 $ 80,430 $ 58,072 $ 57,062 $ 44,555
COST OF SALES 139,307142,931 126,49271,05271,412 65,161
-------------- ------- ------- ------- -------
GROSS LOSS (23,628) (30,265) (46,062) (12,980) (14,350) (20,606)
-------------- ------- ------- ------- -------
OPERATING COSTS
AND EXPENSES
Research and
development 6,190 6,979 6,962 3,214 3,3703,583
Marketing,
general and
administrative 14,957 15,71311,511 7,189 7,6365,662
-------------- ------- ------- ------- -------
21,147 22,69218,47310,40311,0069,245
-------------- ------- ------- ------- -------
-------------- ------- ------- ------- -------
OPERATING LOSS (44,775) (52,957) (64,535) (23,383) (25,356) (29,851)
FINANCING
EXPENSE, NET (15,611) (21,414) (23,781) (7,811) (8,704) (17,719)
OTHER INCOME
(EXPENSE), NET (529) 73 591 (101) 4 40
-------------- ------- ------- ------- -------
LOSS FOR
THE PERIOD $ (60,915) $(74,298) $(87,725) $(31,295) $(34,056) $(47,530)
-------------- ------- ------- ------- -------
BASIC LOSS
PER ORDINARY SHARE
Loss per
share$ (0.49) $ (0.65) $ (1.16) $ (0.25) $ (0.28) $ (0.60)
-------------- ------- ------- ------- -------
Weighted
average
number of
ordinary
shares
outstanding
- in
thousands 124,777113,58475,313 125,327 122,01478,716
-------------- ------- ------- ------- -------
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
RECONCILIATION OF REPORTED GAAP TO NON-GAAP
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands)
Six months ended Three months ended
June 30, 2008 June 30, 2008
----------------------------- ----------------------------
Depreciation, Depreciation,
AmortizationAmortization
and and
stock based stock based
compensation compensation
expenses expenses
non-GAAP (see a, b, c GAAPnon-GAAP (see a, b, c GAAP
below) below)
----------------------------- ----------------------------
REVENUES $ 115,679 $ -- $ 115,679 $ 58,072 $ -- $ 58,072
COST OF
SALES74,173 65,134 (a) 139,307 37,523 33,529 (a) 71,052
------ ------ ------- ------ ------ ------
GROSS PROFIT
(LOSS) 41,506 (65,134) (23,628)20,549 (33,529) (12,980)
------ ------ ------- ------ ------ ------
OPERATING
COSTS AND
EXPENSES
Research and
development 5,738 452 (b)6,190 2,994 220 (b) 3,214
Marketing,
general&
adminis-
trative 12,1632,794 (c) 14,957 5,9941,195 (c) 7,189
------ ------ ------- ------ ------ ------
17,9013,246 21,147 8,9881,415 10,403
------ ------ ------- ------ ------ ------
------ ------ ------- ------ ------ ------
OPERATING
PROFIT
(LOSS) $23,605 $(68,380)$(44,775) $11,561 $(34,944) $(23,383)
------ ------ ------- ------ ------ ------
(a) Includes depreciation and amortization expenses in the amounts of
$64,592 and $33,264 and stock based compensation expenses in the amounts of
$542 and $265 for the six and three months periods ended June 30, 2008,
respectively.
(b) Includes depreciation and amortization expenses in the amounts of
$122 and $64 and stock based compensation expenses in the amounts of $330 and
$156 for the six and three months periods ended June 30, 2008, respectively.
(c) Includes depreciation and amortization expenses in the amounts of $29
and $13 and stock based compensation expenses in the amounts of $2,765 and
$1,182 for the six and three months periods ended June 30, 2008, respectively.
Contact:
Tower Semiconductor
Limor Asif, +972-4-650 6936
Limoras@towersemi.com
or:
Shelton Group
Ryan Bright, +972-239-5119 ext. 159
rbright@sheltongroup.com
SOURCE Tower Semiconductor Ltd
