Achieved Revenue of $58.5 Million, Second Highest Quarterly Revenue in Company's History
Highlights - Achieved revenue of $58.5 million, compared to $56.6 million in the same period one year ago - Achieved record revenue of $174.2 million for the first nine months of 2008, $5 million higher over the same period in 2007 - Completed the merger with Jazz Technologies to create a stronger financial structure and a leading specialty foundry with increased capacity and scale offering a comprehensive process portfolio and cross-selling opportunities - Recorded positive cash flow from operations for eight consecutive quarters and positive EBITDA for twelve consecutive quarters - Decreased net loss year-over-year by approximately $14 million in the third quarter and by $27 million for the first nine months of 2008 - Signed and closed a definitive agreement with the Company's lenders, which decreased debt by approximately $250 million - Initiated cost reduction plan, which is expected to result in approximately $60 million in annual run-rate beginning in 2009 - Announced with Jazz Semiconductor the initiation of a series of global technology and marketing conferences in North America, Europe and Asia targeting cross-sales opportunities - Announced two customer engagements with Panavision Imaging and Cypress Semiconductor for CMOS image sensors - Recently announced a Jazz 90nm and 65nm technology licensing to Fujitsu Microelectronics to provide time-to-market advantage for RF CMOS customers and Ubidyne selecting Jazz to develop the world's first pure digital radio system.
Tower posted revenue of $58.5 million for the third quarter of 2008 which was in the upper half of the Company's previously stated guidance range. This compares to revenue of $56.6 million in the third quarter of 2007 and $58.1 million in the prior quarter.
Third quarter 2008 non-GAAP gross profit and operating profit, as described and reconciled below, totaled $20 million and $11 million, respectively, representing 35 percent gross margin and 18 percent operating margin. Calculated in accordance with Generally Accepted Accounting Principles (GAAP), net loss for the third quarter 2008 improved by approximately $14 million year over year, from $35 million, or $0.28 per share, in the third quarter of 2007, to $21 million, or $0.17 per share. This net loss includes certain one-time items as follows: (i) $131 million of gain associated with the debt restructuring agreement with the Company's lenders; (ii) $121 million impairment of fixed assets under GAAP SFAS-144 to adjust it to prevailing market conditions; (iii) $3 million comprised of write-off in process research and development and of merger related costs.
"The third quarter of 2008 represented the second largest revenue quarter in Tower's history and record revenue of $174.2 million for the first nine months of the year. This includes a number of significant accomplishments such as the completion of our merger with Jazz Technologies and the improvement of our balance sheet through the elimination of $250 million in debt," commented Russell Ellwanger, Tower's chief executive officer. "We will enter 2009 as a dramatically improved company both financially and operationally. We now have enhanced revenue and growth opportunities driven by the synergies and cross-selling opportunities available through Tower and Jazz's expanded process portfolio and diverse customer base."
"Additionally," Ellwanger continued, "after a thorough evaluation of the cost synergies in connection with the merger, we are optimistic to exceed the $40 million announced in May 2008, and are targeting approximately $60M of annual run-rate cost reduction to be achieved beginning 2009 against the 2008 running cost. Further, we are already executing on cross-selling opportunities and initiated a series of global technology and marketing conferences in North America, Europe and Asia targeting existing customers of Tower and Jazz, as well as new customers. The combination of these significant efforts to improve our financial results and balance sheet create a more solid foundation putting us in a much better position to face the immediate world-wide economic downturn as well as to drive our future growth in line with our stated goal of becoming the number one specialty foundry in the world."
Third Quarter 2008 Financial Results Conference Call and Web Cast
Tower will host a conference call to discuss these results today, November 13, 2008, at 10:00 a.m. Eastern Time (ET) / 5:00 p.m. Israel time. To participate, please call: 1-888-407-2553 (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 http://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 applied 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, stock based compensation expenses, gain on debt restructuring, loss from impairment of fixed assets, write-off of in process research and development and merger related costs. 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, amortization and impairment expenses related to fixed assets; (2) compensation expenses in respect of options granted to directors, officers and employees; (3) write-off of in process research and development and (4) merger related costs. 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 as 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.
Following the merger with Jazz, the amounts presented in this release, including the financial tables below for the third quarter and nine months of 2008 include Jazz's results for the period between September 19, 2008 and September 30, 2008. The balance sheet as of September 30, 2008 includes jazz's balances as of such date.
About Tower Semiconductor Ltd.
Tower Semiconductor Ltd. is a pure-play independent specialty wafer foundry. Tower manufactures integrated circuits with geometries ranging from 1.0 to 0.13-micron; it also provides complementary technical services and design support. In addition to digital CMOS process technology, Tower offers advanced mixed-signal & RF-CMOS, Power Management, CMOS image-sensor and non-volatile memory technologies. Through access to the process portfolio of its wholly owned subsidiary, Jazz Semiconductor, Tower offers RF CMOS, Analog CMOS, Silicon and SiGe BiCMOS, SiGe C-BiCMOS, Power CMOS and High Voltage CMOS. To provide world-class customer service, Tower maintains two manufacturing facilities in Israel with access to Jazz Semiconductor's fab in the U.S. and manufacturing capacity in China through Jazz's partnerships with ASMC and HHNEC. For more information, please visit