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TowerJazz Announces Third Quarter 2019 Results

Presents Sequential Increase in Revenues, Gross and Operating Profit, EBITDA, Net Profit and Free Cash Flow

MIGDAL HAEMEK, Israel, Nov. 13, 2019 (GLOBE NEWSWIRE) -- TowerJazz (NASDAQ: TSEM & TASE: TSEM) reported today its results for the third quarter ended September 30, 2019.

Third Quarter Results Overview
Revenues for the third quarter of 2019 were $312 million, as compared to $306 million in the prior quarter, reflecting 4% organic growth (defined as total revenue excluding revenues from Panasonic in the TPSCo fabs and revenues from Maxim in the San Antonio fab), and compared to revenues of $323 million for the third quarter of 2018, reflecting 11% organic growth year over year.

Gross and operating profits for the third quarter of 2019 were $58 million and $23 million, respectively, an increase of $5 million as compared to $53 million and $18 million, respectively, in the prior quarter. Gross and operating profits for the third quarter of 2018 were $73 million and $39 million, respectively.

EBITDA for the third quarter of 2019 was $75 million, an increase of $5 million as compared to $70 million in the prior quarter. EBITDA for the third quarter of 2018 was $89 million.

Net profit for the third quarter of 2019 was $22 million, or $0.21 diluted earnings per share, as compared to $21 million or $0.20 diluted earnings per share in the prior quarter. Net profit for the third quarter of 2018 was $34 million, or $0.33 diluted earnings per share.

Cash flow generated from operations was $73 million as compared with $72 million in the prior quarter and $69 million in the third quarter of 2018. The company invested $43 million in fixed assets, net and retired $6 million of debt during the third quarter of 2019.

Shareholders' equity as of September 30, 2019 was a record of $1.32 billion, as compared to $1.24 billion as of December 31, 2018, reflecting 69% from total assets.

Business Outlook
TowerJazz expects revenues for the fourth quarter of 2019 of approximately $312 million, with an upward or downward range of 5%.

Mr. Russell Ellwanger, Chief Executive Officer of TowerJazz, commented, “In addition to posting solid quarter results, we made significant progress on various fronts including strong activities furthering our accretive growth strategies, and also in each of our business units – for example contracts in advanced display and micro display and 300mm CMOS industrial sensors, key end customer qualification with our SiPho platform, and continued qualifications of our RFSOI and CIS back-side illumination (BSI) 300mm and 200mm advanced roadmaps. These should bear fruits through the year 2020 and beyond. Our 300mm Uozu capacity expansion plan is on track, additionally having decided to build in-house capacity for strongly differentiated BSI and in particular BSI stacked wafer CIS processes. We look forward to 2020, during which the capacity ramp together with the aforementioned business activities and additional initiatives should come into play, resulting in growing financials.”

Teleconference and Webcast
TowerJazz will host an investor conference call today, Wednesday, November 13, 2019, at 10:00a.m. Eastern time (9:00a.m. Central time, 8:00a.m. Mountain Time, 7:00a.m. Pacific Time and 5:00p.m. Israel time). Management will discuss the Company’s financial results for the third quarter of 2019 and present its outlook.

This call will be webcast and can be accessed via TowerJazz’s website at www.towerjazz.com, or can also be accessed by calling the following numbers: U.S. Toll Free: 1-888-407-2553; Israel: 03-918-0610; International: +972-3-918-0610. The teleconference will be available for replay for 90 days.

The Company presents its financial statements in accordance with U.S. GAAP. The financial information included in the tables below includes unaudited condensed financial data. Some of the financial information in this release and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, which we describe in this release as “adjusted” financial measures, is non-GAAP financial measures as defined in Regulation G and related reporting requirements promulgated by the Securities and Exchange Commission as they apply to our Company. These adjusted financial measures are calculated excluding one or more of the following: (1) amortization of acquired intangible assets and (2) compensation expenses in respect of equity grants to directors, officers and employees. These adjusted 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 adjusted financial measures, as well as a reconciliation between the adjusted financial measures and the comparable GAAP financial measures. As used and/ or presented in this release and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, as well as calculated in the tables herein, the term Earnings Before Interest Tax Depreciation and Amortization (EBITDA) consists of net profit in accordance with GAAP, excluding interest and other financing expense, net, other income, net, taxes, non-controlling interest, depreciation and amortization expense and stock-based compensation expense. EBITDA is reconciled in the tables below from GAAP operating profit. EBITDA is not a required GAAP financial measure and may not be comparable to a similarly titled measure employed by other companies. EBITDA and the adjusted financial information presented herein and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, should not be considered in isolation or as a substitute for operating profit, net profit or loss, cash flows provided by operating, investing and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP. The term Net Cash, as used and/ or presented in this release and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, is comprised of cash, cash equivalents, short-term deposits and marketable securities less debt amounts as presented in the balance sheets included herein. The term Net Cash is not a required GAAP financial measure, may not be comparable to a similarly titled measure employed by other companies and should not be considered in isolation or as a substitute for cash, debt, operating profit, net profit or loss, cash flows provided by operating, investing and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP. The term Free Cash Flow, as used and/ or presented in this release and/ or in related public disclosures or filings with respect to the financial statements and/ or results of the Company, is calculated to be cash from operating activities (in the amounts of $73 million, $72 million and $69 million for the three months periods ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively and in the amounts of $220 million and $221 million for the nine months periods ended September 30, 2019 and September 30, 2018, respectively) less cash for investments in property and equipment, net (in the amounts of $43 million, $44 million and $41 million for the three months periods ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively and in the amounts of $128 million and $121 million for the nine months periods ended September 30, 2019 and September 30, 2018, respectively). The term Free Cash Flow is not a required GAAP financial measure, may not be comparable to a similarly titled measure employed by other companies and should not be considered in isolation or as a substitute for operating profit, net profit or loss, cash flows provided by operating, investing and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP. With regards to our balance sheet as of September 30, 2019, as disclosed in Note 2Y to our annual financial statements for the year ended December 31, 2018, we implemented ASU 2016-02 “Leases” effective January 1, 2019 with regards to lease right-of-use assets and lease liabilities, which implementation resulted in our lease contracts value presentation under property and equipment, net, short-term debt and long-term debt as of September 30, 2019. In addition, short-term debt as of September 30, 2019 includes $37 million of the first and second installment payments scheduled in March and September 2020 for series G bonds.

About TowerJazz
Tower Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM) and its subsidiaries operate collectively under the brand name TowerJazz, the global specialty foundry leader. TowerJazz manufactures next-generation integrated circuits (ICs) in growing markets such as consumer, industrial, automotive, medical and aerospace and defense. TowerJazz’s advanced technology is comprised of a broad range of customizable process platforms such as: SiGe, BiCMOS, mixed-signal/CMOS, RF CMOS, CMOS image sensor, integrated power management (BCD and 700V), and MEMS. TowerJazz also provides world-class design enablement for a quick and accurate design cycle as well as Transfer Optimization and development Process Services (TOPS) to IDMs and fabless companies that need to expand capacity. To provide multi-fab sourcing and extended capacity for its customers, TowerJazz operates two manufacturing facilities in Israel (150mm and 200mm), two in the U.S. (200mm) and three facilities in Japan (two 200mm and one 300mm) through its partnership with Panasonic Semiconductor Solutions Co. LTD. For more information, please visit: www.towerjazz.com.

CONTACTS:
Noit Levy | TowerJazz | +972 4 604 7066 | Noit.levi@towerjazz.com
GK Investor Relations | Gavriel Frohwein, +1 (646) 688 3559 | towerjazz@gkir.com

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) demand in our customers’ end markets; (ii) over demand for our foundry services and/or products that exceeds our capacity; (iii) maintaining existing customers and attracting additional customers, (iv) high utilization and its effect on cycle time, yield and on schedule delivery which may cause customers to transfer their product(s) to other fabs, (v) operating results fluctuate from quarter to quarter making it difficult to predict future performance, (vi) impact of our debt and other liabilities on our financial position and operations, (vii) our ability to successfully execute acquisitions, integrate them into our business, utilize our expanded capacity and find new business, (viii) fluctuations in cash flow, (ix) our ability to satisfy the covenants stipulated in our agreements with our lender banks and bondholders (as of September 30, 2019 we are in compliance with all such covenants included in our banks’ agreements, bond G indenture and others), (x) pending litigation, (xi) new customer engagements, qualification and production ramp-up at our facilities, including TPSCo and the San Antonio facility, (xii) 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, (xiii) receipt of orders that are lower than the customer purchase commitments, (xiv) failure to receive orders currently expected, (xv) possible incurrence of additional indebtedness, (xvi) effect of global recession, unfavorable economic conditions and/or credit crisis, (xvii) our ability to accurately forecast financial performance, which is affected by limited order backlog and lengthy sales cycles, (xviii) possible situations of obsolete inventory if forecasted demand exceeds actual demand when we manufacture products before receipt of customer orders, (xix) the cyclical nature of the semiconductor industry and the resulting periodic overcapacity, fluctuations in operating results and future average selling price erosion, (xx) the execution of debt re-financing and/or fundraising to enable the service of our debt and/or other liabilities, (xxi) operating our facilities at high utilization rates which is critical in order to cover a portion or all of the high level of fixed costs associated with operating a foundry, and our debt, in order to improve our results, (xxii) the purchase of equipment to increase capacity, the timely completion of the equipment installation, technology transfer and raising the funds therefor, (xxiii) the concentration of our business in the semiconductor industry, (xxiv) product returns, (xxv) 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, (xxvi) competing effectively, (xxvii) use of outsourced foundry services by both fabless semiconductor companies and integrated device manufacturers; (xxviii) achieving acceptable device yields, product performance and delivery times, (xxix) 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, (xxx) our fab3 landlord’s construction project adjacent to our fabrication facility, including possible temporary reductions or interruptions in the supply of utilities and/ or fab manufacturing, as well as claims that our noise abatement efforts are not adequate under the terms of the amended lease; (xxxi) retention of key employees and recruitment and retention of skilled qualified personnel, (xxxii) exposure to inflation, currency rates (mainly the Israeli Shekel and Japanese Yen) and interest rate fluctuations and risks associated with doing business locally and internationally, as well fluctuations in the market price of our traded securities, (xxxiii) issuance of ordinary shares as a result of conversion and/or exercise of any of our convertible securities, as well as any sale of shares by any of our shareholders, or any market expectation thereof, which may depress the market price of our ordinary shares and may impair our ability to raise future capital, (xxxiv) meeting regulatory requirements worldwide, including environmental and governmental regulations,; (xxxv) negotiation and closure of a definitive agreement in relation to fab establishment in China, as well as project implementation through required outside funding and resources and receipt of future proceeds therefrom, and (xxxvi) business interruption due to fire and other natural disasters, the security situation in Israel and other events beyond our control such as power interruptions.

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 and 6-K, as were filed with the Securities and Exchange Commission (the “SEC”) 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.

(Financial tables follow)


TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

September 30,

June 30,

December 31,

2019

2019

2018

(unaudited)

(unaudited)

A S S E T S

CURRENT ASSETS

Cash and cash equivalents

$

417,636

$

405,158

$

385,091

Short-term deposits

159,230

147,032

120,079

Marketable securities

146,264

146,893

135,850

Trade accounts receivable

123,519

123,789

153,409

Inventories

187,902

174,806

170,778

Other current assets

21,571

22,374

22,752

Total current assets

1,056,122

1,020,052

987,959

LONG-TERM INVESTMENTS

36,662

36,874

35,945

PROPERTY AND EQUIPMENT, NET

703,569

707,122

657,234

INTANGIBLE ASSETS, NET

10,800

11,279

13,435

GOODWILL

7,000

7,000

7,000

DEFERRED TAX AND OTHER LONG-TERM ASSETS, NET

90,269

89,171

88,404

TOTAL ASSETS

$

1,904,422

$

1,871,498

$

1,789,977

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Short-term debt

$

64,774

$

45,173

$

10,814

Trade accounts payable

104,366

92,747

104,329

Deferred revenue and customers' advances

6,539

7,975

20,711

Other current liabilities

59,065

65,904

67,867

Total current liabilities

234,744

211,799

203,721

LONG-TERM DEBT

254,683

275,914

256,669

LONG-TERM CUSTOMERS' ADVANCES

32,843

27,230

28,131

LONG-TERM EMPLOYEE RELATED LIABILITIES

13,818

14,295

13,898

DEFERRED TAX AND OTHER LONG-TERM LIABILITIES

45,598

47,403

51,353

TOTAL LIABILITIES

581,686

576,641

553,772

TOTAL SHAREHOLDERS' EQUITY

1,322,736

1,294,857

1,236,205

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,904,422

$

1,871,498

$

1,789,977

current ratio

4.50

4.82

4.85

net current assets

821,315

808,253

784,238


TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars and share count in thousands, except per share data)

Three months ended

September 30,

June 30,

September 30,

2019

2019

2018

REVENUES

$

312,122

$

306,064

$

322,596

COST OF REVENUES

253,841

252,657

249,975

GROSS PROFIT

58,281

53,407

72,621

OPERATING COSTS AND EXPENSES:

Research and development

18,722

18,812

18,236

Marketing, general and administrative

16,840

16,838

15,826

35,562

35,650

34,062

OPERATING PROFIT

22,719

17,757

38,559

FINANCING AND OTHER INCOME (EXPENSE), NET

(426

)

947

(2,497

)

PROFIT BEFORE INCOME TAX

22,293

18,704

36,062

INCOME TAX BENEFIT (EXPENSE), NET

61

1,018

(2,388

)

PROFIT BEFORE NON CONTROLLING INTEREST

22,354

19,722

33,674

NON CONTROLLING INTEREST

(166

)

1,214

(28

)

NET PROFIT

$

22,188

$

20,936

$

33,646

BASIC EARNINGS PER SHARE

$

0.21

$

0.20

$

0.34

Weighted average number of shares

106,644

106,321

100,158

DILUTED EARNINGS PER SHARE

$

0.21

$

0.20

$

0.33

Net profit used for diluted earnings per share

$

22,188

$

20,936

$

33,646

Weighted average number of shares

107,601

107,178

102,083

RECONCILIATION FROM GAAP NET PROFIT TO ADJUSTED NET PROFIT:

GAAP NET PROFIT

$

22,188

$

20,936

$

33,646

Stock based compensation

3,775

3,884

2,710

Amortization of acquired intangible assets

492

494

1,627

ADJUSTED NET PROFIT

$

26,455

$

25,314

$

37,983

ADJUSTED EARNINGS PER SHARE:

Basic

$

0.25

$

0.24

$

0.38

Diluted

$

0.25

$

0.24

$

0.37


TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars and share count in thousands, except per share data)

Nine months ended

September 30,

2019

2018

REVENUES

$

928,293

$

970,444

COST OF REVENUES

753,454

753,130

GROSS PROFIT

174,839

217,314

OPERATING COSTS AND EXPENSES:

Research and development

56,702

54,675

Marketing, general and administrative

50,319

47,935

107,021

102,610

OPERATING PROFIT

67,818

114,704

FINANCING AND OTHER INCOME (EXPENSE), NET

1,247

(11,719

)

PROFIT BEFORE INCOME TAX

69,065

102,985

INCOME TAX EXPENSE, NET

(588

)

(6,121

)

PROFIT BEFORE NON CONTROLLING INTEREST

68,477

96,864

NON CONTROLLING INTEREST

864

642

NET PROFIT

$

69,341

$

97,506

BASIC EARNINGS PER SHARE

$

0.65

$

0.98

Weighted average number of shares

106,103

99,186

DILUTED EARNINGS PER SHARE

$

0.65

$

0.96

Net profit used for diluted earnings per share

$

69,341

$

97,506

Weighted average number of shares

107,252

101,424

RECONCILIATION FROM GAAP NET PROFIT TO ADJUSTED NET PROFIT:

GAAP NET PROFIT

$

69,341

$

97,506

Stock based compensation

11,482

8,755

Amortization of acquired intangible assets

2,627

4,940

ADJUSTED NET PROFIT

$

83,450

$

111,201

ADJUSTED EARNINGS PER SHARE:

Basic

$

0.79

$

1.12

Diluted

$

0.78

$

1.10


TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

RECONCILIATION FROM GAAP OPERATING PROFIT TO EBITDA (UNAUDITED)

(dollars in thousands)

Three months ended

September 30,

June 30,

September 30,

2019

2019

2018

GAAP OPERATING PROFIT

$

22,719

$

17,757

$

38,559

Depreciation of fixed assets

48,355

47,966

46,172

Stock based compensation

3,775

3,884

2,710

Amortization of acquired intangible assets

492

494

1,627

EBITDA

$

75,341

$

70,101

$

89,068


TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONSOLIDATED SOURCES AND USES REPORT (UNAUDITED)

(dollars in thousands)

Three months ended

September 30,

June 30,

September 30,

2019

2019

2018

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

$

405,158

$

408,098

$

486,880

Net cash provided by operating activities

72,735

72,156

69,471

Investments in property and equipment, net

(43,017

)

(43,727

)

(40,892

)

Exercise of options, net

43

--

21

Debt repaid, net

(5,606

)

(7,475

)

(43,078

)

Effect of Japanese Yen exchange rate change over cash balance

(104

)

3,205

(3,057

)

Investments in short-term deposits, marketable securities and other assets, net

(11,573

)

(27,099

)

(4,899

)

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

417,636

$

405,158

$

464,446

FREE CASH FLOW

$

29,718

$

28,429

$

28,579

Nine months ended

September 30,

September 30,

2019

2018

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

$

385,091

$

445,961

Net cash provided by operating activities

219,759

221,401

Investments in property and equipment, net

(128,462

)

(121,087

)

Exercise of options, net

440

705

Debt repaid, net

(16,155

)

(45,925

)

Effect of Japanese Yen exchange rate change over cash balance

2,361

(1,259

)

Investments in short-term deposits, marketable securities and other assets, net

(45,398

)

(35,350

)

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

417,636

$

464,446

FREE CASH FLOW

$

91,297

$

100,314


TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

Three months ended

September 30,

June 30,

September 30,

2019

2019

2018

CASH FLOWS - OPERATING ACTIVITIES

Net profit for the period

$

22,354

$

19,722

$

33,674

Adjustments to reconcile net profit for the period

to net cash provided by operating activities:

Income and expense items not involving cash flows:

Depreciation and amortization

53,203

52,853

52,764

Effect of exchange rate differences on debentures

3,095

2,204

788

Other income, net

(266

)

(428

)

--

Changes in assets and liabilities:

Trade accounts receivable

(496

)

12,665

(3,767

)

Other assets

(1,978

)

(2,050

)

(919

)

Inventories

(13,276

)

378

(7,237

)

Trade accounts payable

12,110

(12,553

)

(2,652

)

Deferred revenue and customers' advances

4,178

(2,964

)

35

Other current liabilities

(6,494

)

2,957

(2,764

)

Long-term employee related liabilities

(32

)

(29

)

(240

)

Deferred tax, net and other long-term liabilities

337

(599

)

(211

)

Net cash provided by operating activities

72,735

72,156

69,471

CASH FLOWS - INVESTING ACTIVITIES

Investments in property and equipment, net

(43,017

)

(43,727

)

(40,892

)

Investments in deposits, marketable securities and other assets, net

(11,573

)

(27,099

)

(4,899

)

Net cash used in investing activities

(54,590

)

(70,826

)

(45,791

)

CASH FLOWS - FINANCING ACTIVITIES

Debt repaid, net

(5,606

)

(7,475

)

(43,078

)

Exercise of options

43

--

21

Net cash used in financing activities

(5,563

)

(7,475

)

(43,057

)

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE

(104

)

3,205

(3,057

)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

12,478

(2,940

)

(22,434

)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

405,158

408,098

486,880

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

417,636

$

405,158

$

464,446