Forward Looking Statements
This press release includes forward-looking statements, which are subject to risks and uncertainties. Actual results, including any expected benefits and anticipated cost savings, may vary from those projected or implied by such forward-looking statements and you should not place any undue reliance on such forward-looking statements. Potential risks and uncertainties include, without limitation, risks and uncertainties associated with: (i) maintaining existing customers and attracting additional customers, (ii) not receiving orders from our wafer partners and customers, which can result in excess capacity, (iii) the cyclical nature of the semiconductor industry and the resulting periodic overcapacity, fluctuations in operating results, future average selling price erosion, (iv) having sufficient funds to satisfy our short-term and long-term debt obligations and other liabilities, (v) 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, (vi) our ability to satisfy the revised covenants stipulated in our amended credit facility agreement, (vii) our ability to capitalize on increases in demand for foundry services, (viii) 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 an expansion program, (ix) our ability to accurately forecast financial performance, which is affected by limited order backlog and lengthy sales cycles, (x) our merger with Jazz, including possible delays in the integration process, diversion of management's attention, retention of key employees and not realizing anticipated benefits, (xi) the completion of the equipment installation, technology transfer and ramp-up of production in Fab 2 and raising the funds therefor, (xii) our dependence on a relatively small number of products for a significant portion of our revenue, (xiii) a substantial portion of our revenues being accounted for by a small number of customers, (xiv) the concentration of our business in the semiconductor industry, (xv) product returns, (xvi) 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, (xvii) competing effectively, (xviii) the large amount of debt and liabilities and the ability to repay our short-term and long-term debt and liabilities on a timely basis, (xix) achieving acceptable device yields, product performance and delivery times, (xx) our ability to manufacture products on a timely basis and to purchase the equipment to increase Fab2 capacity and timely installation thereof, (xxi) our dependence on intellectual property rights of others and our ability to operate our business without infringing others' intellectual property rights, (xxii) exposure to inflation, currency exchange and interest rate fluctuations and risks associated with doing business internationally and in Israel, (xxiii) current global economic downturn, the prevailing market conditions in the semiconductor industry (including global decreased demand, reduced prices, excess inventory and unutilized capacity) and the lack of availability of funding sources in light of the prevailing financial markets situation, which may adversely affect the future financial results and position of the Company, including its ability to continue to support its operations, (xxii) pending resolution of patent infringement claim against us, and (xxiii) 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, F-4 and 6-K, as were filed with the Securities and Exchange Commission (the "SEC") and the Israel Securities Authority and Jazz's most recent filings on Forms 10-K and 10-Q, as were filed with the SEC. 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 SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
September December
30, 31,
2008 2007
unaudited
A S S E T S
CURRENT ASSETS
Cash, cash equivalents and deposits $ 38,209 $ 44,536
Trade accounts receivable 55,147 44,977
Other receivables 2,468 4,748
Inventories 45,422 27,806
Other current assets 5,700 1,580
----------- ----------
Total current assets 146,946 123,647
----------- ----------
LONG-TERM INVESTMENTS 31,676 15,093
----------- ----------
PROPERTY AND EQUIPMENT, NET 450,832 502,287
----------- ----------
INTANGIBLE ASSETS, NET 86,181 34,711
----------- ----------
GOODWILL 8,807 --
----------- ----------
OTHER ASSETS, NET 9,026 11,044
----------- ----------
TOTAL ASSETS $ 733,468 $ 686,782
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of convertible $ 9,291 $ 7,887
debenture
Short term debt 14,000 --
Trade accounts payable 61,076 49,025
Deferred revenue 6,429 --
Other current liabilities 38,251 20,024
----------- ----------
Total current liabilities 129,047 76,936
LONG-TERM DEBT FROM BANKS 200,080 379,314
DEBENTURES 219,770 117,460
LONG-TERM CUSTOMERS' ADVANCES 12,937 27,983
OTHER LONG-TERM LIABILITIES 36,244 40,380
----------- ----------
Total liabilities 598,078 642,073
----------- ----------
SHAREHOLDERS' EQUITY 135,390 44,709
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 733,468 $ 686,782
----------- ----------
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except share data and per share data)
Nine months ended Three months ended
September 30, September 30,
2008 2007 2006 2008 2007 2006
GAAP GAAP GAAP GAAP GAAP GAAP
REVENUES $ 174,206 $ 169,235 $ 131,933 $ 58,527 $ 56,569 $ 51,503
COST OF SALES 210,443 211,209 194,764 71,136 68,278 68,272
-------- -------- -------- ------- ------- -------
GROSS LOSS (36,237) (41,974) (62,831) (12,609) (11,709) (16,769)
-------- -------- -------- ------- ------- -------
OPERATING COSTS
AND EXPENSES
Research and
development 9,690 10,291 11,155 3,500 3,312 4,193
Marketing, general
and administrative 22,685 23,718 19,099 7,728 8,005 7,588
Write-off of
in-process
research and
development 2,300 -- -- 2,300 -- --
Merger related
costs 520 -- -- 520 -- --
Fixed assets
impairment 120,538 -- -- 120,538 -- --
-------- -------- -------- ------- ------- -------
155,733 34,009 30,254 134,586 11,317 11,781
-------- -------- -------- ------- ------- -------
OPERATING LOSS (191,970) (75,983) (93,085)(147,195) (23,026) (28,550)
FINANCING
EXPENSE, NET (20,374) (33,035) (39,143) (4,763) (11,621) (15,362)
GAIN ON DEBT
RESTRUCTURING 130,698 -- -- 130,698 -- --
OTHER INCOME
(EXPENSE), NET (638) 73 597 (109) -- 6
-------- -------- -------- ------- ------- -------
LOSS FOR THE
PERIOD $ (82,284)$(108,945)$(131,631)$(21,369)$(34,647)$(43,906)
-------- -------- -------- ------- ------- -------
BASIC LOSS PER
ORDINARY SHARE
loss per share $ (0.65) $ (0.93) $ (1.67) $ (0.17) $ (0.28) $ (0.52)
-------- -------- -------- ------- ------- -------
Weighted average
number of ordinary
shares
outstanding
- in
thousands 126,356 117,084 78,607 129,479 123,970 85,087
-------- -------- -------- ------- ------- -------
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED)
(dollars in thousands)
Nine months
ended
September 30,
2008
Adjustments GAAP
(see a, b, c
non-GAAP below)
REVENUES $ 174,206 $ -- $ 174,206
COST OF SALES 112,328 98,115 (a) 210,443
---------- ---------- ----------
GROSS PROFIT (LOSS) 61,878 (98,115) (36,237)
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Research and development 8,587 1,103 (b) 9,690
Marketing,
general&administrative 18,962 3,723 (c) 22,685
Write-off of in-process
research and development -- 2,300 2,300
Merger related costs -- 520 520
Fixed assets impairment -- 120,538 120,538
---------- ---------- ----------
27,549 128,184 155,733
OPERATING PROFIT
(LOSS) $ 34,329 $ (226,299) $ (191,970)
---------- ---------- ----------
NON-GAAP GROSS MARGINS 36%
----------
NON-GAAP OPERATING
MARGINS 20%
----------
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED)
(dollars in thousands)
Continued....
Three months
ended
September 30,
2008
Adjustments
(see a, b, c
non-GAAP below) GAAP
REVENUES $ 58,527 $ -- $ 58,527
COST OF SALES 38,155 32,981 (a) 71,136
---------- ---------- ----------
GROSS PROFIT (LOSS) 20,372 (32,981) (12,609)
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Research and development 2,849 651 (b) 3,500
Marketing,
general&administrative 6,799 929 (c) 7,728
Write-off of in-process
research and development -- 2,300 2,300
Merger related costs -- 520 520
Fixed assets impairment -- 120,538 120,538
---------- ---------- ----------
9,648 124,938 134,586
---------- ---------- ----------
OPERATING PROFIT
(LOSS) $ 10,724 $ (157,919) $ (147,195)
---------- ---------- ----------
NON-GAAP GROSS MARGINS 35%
----------
NON-GAAP OPERATING MARGINS 18%
----------
(a) Includes depreciation and amortization expenses in the amounts of
$97,482 and $32,890 for the nine and three months periods ended September
30, 2008, respectively and stock based compensation expenses in the
amounts of $633 and $91 for the nine and three months periods ended
September 30, respectively.
(b) Includes depreciation and amortization expenses in the amounts of
$625 and $503 for the nine and three months periods ended September 30,
2008 respectively and stock based compensation expenses in the amounts of
$478 and $148 for the nine and three months periods ended September 30,
2008 respectively.
(c) Includes depreciation and amortization expenses in the amounts of $84
and $55 for the nine and three months periods ended September 30,
respectively and stock based compensation expenses in the amounts of
$3,639 and $874 for the nine and three months periods ended September 30,
2008, respectively.
Contacts:
Tower Semiconductor
Limor Asif,
+972-4-650-6936
Limoras@towersemi.com
or:
Shelton Group
Ryan Bright,
+972-239-5119 ext. 159
rbright@sheltongroup.com
