TowerJazz Reports Fourth Quarter and Full Year 2013 Results

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 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) cancellation of orders, (iii) failure to receive orders currently expected, (iv) the cyclical nature of the semiconductor industry and the resulting periodic overcapacity, fluctuations in operating results and future average selling price erosion, (v) material amount of fixed costs, debt and other liabilities and having sufficient funds to satisfy our fixed costs, debt obligations and other short-term and long-term liabilities on a timely basis, (vi) 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, (vii) our ability to satisfy the covenants stipulated in our agreements with our lenders, banks and bond holders, (viii) our ability to capitalize on potential increases in demand for foundry services, (ix) meeting the conditions set in the approval certificates received from the Israeli Investment Center under which we received a significant amount of grants in past years, (x) our ability to accurately forecast financial performance, which is affected by limited order backlog and lengthy sales cycles, (xi) the purchase of equipment to increase capacity, the completion of the equipment installation, technology transfer and raising the funds therefor, (xii) the concentration of our business in the semiconductor industry, (xiii) product returns, (xiv) 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, (xv) competing effectively, (xvi) achieving acceptable device yields, product performance and delivery times, (xvii) possible production or yield problems in our wafer fabrication facilities, (xviii) our ability to manufacture products on a timely basis, (xix) our dependence on intellectual property rights of others, our ability to operate our business without infringing others’ intellectual property rights and our ability to enforce our intellectual property against infringement, (xxi) our ability to fulfill our obligations and meet performance milestones under our agreements, including successful execution of our agreement with an Asian entity signed in 2009, (xxiii) retention of key employees and recruitment and retention of skilled qualified personnel, (xxiv) exposure to inflation, currency exchange and interest rate fluctuations and risks associated with doing business locally and internationally, (xxv) fluctuations in the market price of our traded securities may adversely affect our reported GAAP non-cash financing expenses, (xxvi) issuance of ordinary shares as a result of conversion and/or exercise of any of our convertible securities may dilute the shareholdings of current and future shareholders, (xxvii) successfully ramping new technologies at TowerJazz's Japan fab and engaging new customers to utilize this fab at a level that will cover all of its cost to avoid negative net cash flows and cash needs to operate the Japan fab; (xxviii) meeting regulatory requirements worldwide; (xxix) successfully closing the joint venture transaction with Panasonic, including the consolidation of our Japanese business, which may include fab consolidations between our Nishiwaki facility and the joint venture’s facilities; and (xxx) business interruption due to fire and other natural disasters, 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 Tower’s most recent filings on Forms 20-F, F-3, F-4, S-8 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)
 
        December 31,     September 30,     December 31,
2013 2013 2012
(Unaudited)

ASSETS

 
CURRENT ASSETS
Cash, short-term deposits and designated deposits

 

$

122,871

 

$

141,447

 

$

133,398

Trade accounts receivable 80,316 71,664 79,354
Other receivables 10,943 11,724 5,379
Inventories 64,804 70,364 65,570
Other current assets   11,480   15,815   14,405
Total current assets   290,414   311,014   298,106
 
LONG-TERM INVESTMENTS   14,494   13,529   12,963
 
PROPERTY AND EQUIPMENT, NET   350,039   369,628   434,468
 
INTANGIBLE ASSETS, NET   32,393   36,066   47,936
 
GOODWILL   7,000   7,000   7,000
 
OTHER ASSETS, NET   11,547   11,922   13,768
 
TOTAL ASSETS

 

$

705,887

 

$

749,159

 

$

814,241

 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES
Short term debt

 

$

36,441

 

$

45,460

 

$

49,923

Trade accounts payable 66,358 63,383 81,372
Deferred revenue 3,166 2,218 1,784
Other current liabilities   33,951   39,893   36,240
Total current liabilities 139,916 150,954 169,319
 
LONG-TERM DEBT 316,885 305,929 288,954
 
LONG-TERM CUSTOMERS' ADVANCES 7,187 7,209 7,407
 

EMPLOYEE RELATED LIABILITIES

65,337 76,013 77,963
 
DEFERRED TAX LIABILITY 13,611 15,145 26,405
 
OTHER LONG-TERM LIABILITIES   21,703   22,314   24,168
 
Total liabilities   564,639   577,564   594,216
 
SHAREHOLDERS' EQUITY   141,248   171,595   220,025
 
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

705,887

 

$

749,159

 

$

814,241

 
 
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
 
    Three months ended     Three months ended     Three months ended
December 31,   September 30, December 31,     September 30, December 31,     September 30,
2013 2013 2013 2013 2013 2013
non-GAAP Adjustments (see a, b, c, d, e, f below) GAAP
   
REVENUES

 

$

134,571

 

$

132,555

 

$

--

 

$

--

 

$

134,571

 

$

132,555

 
COST OF REVENUES   88,635     93,069     36,995   (a)   35,115   (a)   125,630     128,184  
 
GROSS PROFIT   45,936     39,486     (36,995 )   (35,115 )   8,941     4,371  
 
OPERATING COSTS AND EXPENSES
 
Research and development 7,801 8,139 188 (b) 45 (b) 7,989 8,184
Marketing, general and administrative 10,368 10,241 556 (c) 764 (c) 10,924 11,005
Amortization related to a lease agreement early termination   --     --     1,866   (d)   1,866   (d)   1,866     1,866  
 
  18,169     18,380     2,610     2,675     20,779     21,055  
 
OPERATING PROFIT (LOSS) 27,767 21,106 (39,605 ) (37,790 ) (11,838 ) (16,684 )
 
INTEREST EXPENSES, NET (8,223 ) (8,416 ) -- (e) -- (e) (8,223 ) (8,416 )
 
OTHER FINANCING EXPENSE, NET -- -- (11,109 ) (e) (9,502 ) (e) (11,109 ) (9,502 )
 
OTHER EXPENSE, NET   (380 )   (465 )   --     --     (380 )   (465 )
 
PROFIT (LOSS) BEFORE INCOME TAX 19,164 12,225 (50,714 ) (47,292 ) (31,550 ) (35,067 )
 
INCOME TAX BENEFIT   --     --     1,704   (f)   3,291   (f)   1,704     3,291  
 
NET PROFIT (LOSS) FOR THE PERIOD

 

$

19,164

 

 

$

12,225

 

 

$

(49,010

)

 

$

(44,001

)

 

$

(29,846

)

 

$

(31,776

)

 

Loss per ordinary share*

$

0.62

$

0.68

 
(a)   Includes depreciation and amortization expenses in the amounts of $36,747 and $35,000 and stock based compensation expenses in the amounts of $248 and $115 for the three months ended December 31, 2013 and September 30, 2013 respectively.
 
(b) Includes depreciation and amortization expenses in the amounts of $(49) and $(62) and stock based compensation expenses in the amounts of $237 and $107 for the three months ended December 31, 2013 and September 30, 2013 respectively.
 
(c) Includes depreciation and amortization expenses in the amounts of $205 and $206 and stock based compensation expenses in the amounts of $351 and $558 for the three months ended December 31, 2013 and September 30, 2013 respectively.
 
(d) Non cash amortization related to an early termination of an office building lease contract.
 
(e)

Non-GAAP interest expenses and other financing expenses, net includes only interest on an accrual basis.

 
(f) Non-GAAP income tax expenses include taxes paid during the period.
 
(*) Basic earnings per ordinary share according to non-GAAP results is $0.40 and $0.26 for the three months ended December 31, 2013 and September 30, 2013, respectively and the weighted average number of ordinary shares outstanding is 47.9 million and 46.6 million for these periods.
 
Fully diluted earnings per share according to non-GAAP results would be $0.34 and $0.22 for the three months ended December 31, 2013 and September 30, 2013, respectively, and the weighted average number of shares outstanding would be 56.4 million and 55.6 million for these periods; fully diluted earnings results and quantities of number of shares outstanding exclude 23.2 million for the three months ended December 31, 2013 and September 30, 2013, of securities that carry exercise price or conversion ratios, which are above the average price of the company’s stock during these periods.
 
 
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
 
    Three months ended     Three months ended    

Three months ended

 

December 31,

December 31,

December 31,

2013     2012 2013     2012 2013     2012
non-GAAP Adjustments (see a, b, c, d, e, f below) GAAP
   

 

REVENUES

 

$

134,571

 

$

147,587

 

$

--

 

$

--

 

$

134,571

 

$

147,587

 
COST OF REVENUES   88,635     98,279     36,995   (a)   40,738   (a)   125,630     139,017  
 
GROSS PROFIT   45,936     49,308     (36,995 )   (40,738 )   8,941     8,570  
 
OPERATING COSTS AND EXPENSES
 
Research and development 7,801 7,138 188 (b) 194 (b) 7,989 7,332
Marketing, general and administrative 10,368 9,737 556 (c) 1,018 (c) 10,924 10,755
Amortization related to a lease agreement early termination   --     --     1,866   (d)   --     1,866     --  
 
  18,169     16,875     2,610     1,212     20,779     18,087  
 
OPERATING PROFIT (LOSS) 27,767 32,433 (39,605 ) (41,950 ) (11,838 ) (9,517 )
 
INTEREST EXPENSES, NET (8,223 ) (8,647 ) -- (e) -- (e) (8,223 ) (8,647 )
 
OTHER FINANCING EXPENSE, NET -- -- (11,109 ) (e) (7,614 ) (e) (11,109 ) (7,614 )
 
OTHER INCOME (EXPENSE), NET   (380 )   78     --     --     (380 )   78  
 
PROFIT (LOSS) BEFORE INCOME TAX 19,164 23,864 (50,714 ) (49,564 ) (31,550 ) (25,700 )
 
INCOME TAX BENEFIT (EXPENSE)   --     (1,937 )   1,704   (f)   4,248   (f)   1,704     2,311  
 
NET PROFIT (LOSS) FOR THE PERIOD

 

$

19,164

 

 

$

21,927

 

 

$

(49,010

)

 

$

(45,316

)

 

$

(29,846

)

 

$

(23,389

)

 

Loss per ordinary share*

$

0.62

$

1.03

 
(a)   Includes depreciation and amortization expenses in the amounts of $36,747 and $40,539 and stock based compensation expenses in the amounts of $248 and $199 for the three months ended December 31, 2013 and December 31, 2012 respectively.
 
(b) Includes depreciation and amortization expenses in the amounts of $(49) and $33 and stock based compensation expenses in the amounts of $237 and $161 for the three months ended December 31, 2013 and December 31, 2012 respectively.
 
(c) Includes depreciation and amortization expenses in the amounts of $205 and $208 and stock based compensation expenses in the amounts of $351 and $810 for the three months ended December 31, 2013 and December 31, 2012 respectively.
 
(d) Non cash amortization related to an early termination of an office building lease contract.
 
(e)

Non-GAAP interest expenses and other financing expenses, net includes only interest on an accrual basis.

 
(f) Non-GAAP income tax expenses include taxes paid during the period.
 
(*) Basic earnings per ordinary share according to non-GAAP results is $0.40 and $0.96 for the three months ended December 31, 2013 and December 31, 2012, respectively and the weighted average number of ordinary shares outstanding is 47.9 million and 22.8 million for these periods.
 
Fully diluted earnings per shares according to non-GAAP results would be $0.34 and $0.44 for the three months ended December 31, 2013 and December 31, 2012, respectively, and the weighted average number of shares outstanding would be 56.4 and 49.5 million for these periods; fully diluted earnings results and quantities of number of shares outstanding exclude 23.2 million and 22.7 million for the three months ended December 31, 2013 and December 31, 2012, respectively, of securities that carry exercise price or conversion ratios, which are above the average price of the company’s stock during these periods.
 
 
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
 
    Year ended     Year ended     Year ended
December 31,

December 31,

December 31,

2013     2012 2013     2012 2013     2012
non-GAAP Adjustments (see a, b, c, d, e, f, g below) GAAP
   
REVENUES

 

$

505,009

 

$

638,831

 

$

--

 

$

--

 

$

505,009

 

$

638,831

 
COST OF REVENUES   341,855     405,398     135,045   (a)   154,648   (a)   476,900     560,046  
 
GROSS PROFIT   163,154     233,433     (135,045 )   (154,648 )   28,109     78,785  
 
OPERATING COSTS AND EXPENSES
 
Research and development 32,543 29,075 521 (b) 2,018 (b) 33,064 31,093
Marketing, general and administrative 40,483 39,171 2,433 (c) 5,242 (c) 42,916 44,413
Reorganization costs -- -- -- 5,789 (d) -- 5,789
Amortization related to a lease agreement early termination   --     --     7,464   (e)   --     7,464     --  
 
  73,026     68,246     10,418     13,049     83,444     81,295  
 
OPERATING PROFIT (LOSS) 90,128 165,187 (145,463 ) (167,697 ) (55,335 ) (2,510 )
 
INTEREST EXPENSES, NET (32,971 ) (31,808 ) -- (f) -- (f) (32,971 ) (31,808 )
 
OTHER FINANCING EXPENSE, NET -- -- (27,838 ) (f) (27,583 ) (f) (27,838 ) (27,583 )
 
OTHER EXPENSE, NET   (904 )   (1,042 )   --     --     (904 )   (1,042 )
 
PROFIT (LOSS) BEFORE INCOME TAX 56,253 132,337 (173,301 ) (195,280 ) (117,048 ) (62,943 )
 
INCOME TAX BENEFIT (EXPENSE)   (190 )   (852 )   9,578   (g)   (6,474 ) (g)   9,388     (7,326 )
 
NET PROFIT (LOSS) FOR THE PERIOD

 

$

56,063

 

 

$

131,485

 

 

$

(163,723

)

 

$

(201,754

)

 

$

(107,660

)

 

$

(70,269

)

 

Loss per ordinary share*

$

2.72

$

3.17

 
(a)   Includes depreciation and amortization expenses in the amounts of $134,448 and $153,746 and stock based compensation expenses in the amounts of $597 and $902 for the year ended December 31, 2013 and December 31, 2012, respectively.
 
(b)

Includes depreciation and amortization expenses in the amounts of $(6) and $1,304 and stock based compensation expenses in the amounts of $527 and $714 for the year ended December 31, 2013 and December 31, 2012, respectively.

 
(c) Includes depreciation and amortization expenses in the amounts of $775 and $1,121 and stock based compensation expenses in the amounts of $1,658 and $4,121 for the year ended December 31, 2013 and December 31, 2012, respectively.
 
(d) Includes reorganization costs.
 
(e) Non cash amortization related to an early termination of an office building lease contract.
 
(f)

Non-GAAP  interest expenses and other financing expense, net include only interest on an accrual basis.

 
(g) Non-GAAP income tax expenses include taxes paid during the period.
 
(*) Basic earnings per ordinary share according to non-GAAP results is $1.41 and $5.93 for the year ended December 31, 2013 and December 31, 2012, respectively and the weighted average number of ordinary shares outstanding is 39.6 million and 22.2 million for these periods.
 
Fully diluted earnings per shares according to non-GAAP results would be $1.06 and $2.65 for the year ended December 31, 2013 and December 31, 2012, respectively, and the weighted average number of shares outstanding would be 52.9 and 49.6 million for these periods; fully diluted earnings results and quantities of number of shares outstanding exclude 23.2 million and 7.4 million for the year ended December 31, 2013 and December 31, 2012, respectively, of securities that carry exercise price or conversion ratios, which are above the average price of the company’s stock during these periods.

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