TowerJazz Reports Fourth Quarter and Full Year 2013 Results

--- Signed joint venture definitive agreement with Panasonic Corporation, that will enable the company to reach $1 billion of net profitable annual revenue run rate ---

--- Margins improve and design wins continue to accelerate ---

MIGDAL HAEMEK, Israel — (BUSINESS WIRE) — February 27, 2014 — TowerJazz (NASDAQ: TSEM) (TASE: TSEM) today reports results for the fourth quarter of 2013 and full year ended December 31, 2013 – reflecting a sequential quarterly revenue growth throughout the year, strong improvement in margins and year over year substantial increase in design wins and masks entering the factories.

Financial Results Overview

Revenues for the 2013 fourth quarter of $134.6 million reflecting 20 percent growth as compared to the first quarter of the year, 8 percent as compared to the second quarter and 2 percent over the revenues reported in the previous quarter. As compared to the fourth quarter of 2012, revenues were $13 million lower, as a result of the previously announced contractual decrease in the Micron volume agreement at the Japan facility. To note, fourth quarter represented an organic revenue increase of $20 million, or 25 percent as compared to the same period last year. The planned reduction in Micron revenue is expected to be greatly surpassed through the Panasonic agreement beginning the second quarter of 2014.

On an adjusted non-GAAP basis, net income for the quarter was $19 million or 14 percent net profit margins, significantly higher than the $12 million and 9 percent in the previous quarter.

On an adjusted non-GAAP basis, gross profit for the fourth quarter of 2013 was $46 million as compared with $39 million in the third quarter of 2013 and operating profit was $28 million as compared with $21 million in the third quarter of 2013. This reflects 34 percent gross margins and 21 percent operating margins, as compared with 30 percent and 16 percent margins, respectively, in the third quarter of 2013.

EBITDA for the fourth quarter was $27 million, higher than the $21 million in the previous quarter.

Net loss on a GAAP basis for the quarter was $29.8 million, or $0.62 per share, compared with a net loss of $31.8 million or $0.68 per share in the previous quarter and $23.4 million, or $1.03 per share, in the fourth quarter of 2012. This is in line with the aforementioned decrease in revenue and is expected to be more than offset as a result of the Panasonic engagement.

For the full year of 2013, revenues were $505.0 million and net loss on a GAAP basis was $107.7 million. The lower revenues as compared to 2012 are a result of the decreasing Micron volume per their supply agreement at the Japan facility. Core business revenues for the year were 6 percent higher than the previous year.

On an adjusted Non-GAAP basis, net income for the full year was $56 million, or basic earnings of $1.41 per share, and gross profit and operating profit for 2013 were $163 million and $90 million, respectively.

During 2013, the company generated positive cash flow from operations of approximately $75 million, excluding interest payment, or $42 million, net of interest payments.

Cash and deposits at December 31, 2013 were $123 million compared with $133 million at December 31, 2012. Shareholders' equity as of December 31, 2013 was $141 million and the current ratio improved to 2.1:1 from 1.8:1 at the end of 2012.

During the fourth quarter, the company signed a definitive agreement to extend its credit line with Wells Fargo, providing a credit line of up to $70 million maturing December 2018 at a lower interest rate. As of December 31, 2013, loans outstanding under this credit line totaled $19 million.

Business Outlook

TowerJazz expects revenues for its 2014 first quarter ending March 31, 2014 to be between $130 million and $140 million. Mid-range guidance of $135 million represents a 20 percent of year over year growth.

Major Business Announcement

On December 20, 2013, TowerJazz signed a definitive agreement creating a joint venture (JV) with Panasonic Corporation. Within the scope of the JV, Panasonic will transfer its semiconductor manufacturing process and capacity tools of 8 inch and 12 inch wafers at its Hokuriku factories (Uozu, Tonami and Arai) to the JV, committing to acquire its products from the JV for a long term period of at least five years of volume production, and will transfer to TowerJazz 51% of the shares of this JV. TowerJazz’s revenue is expected to increase by approximately $400 million a year. The JV will add available capacity of approximately 800,000 wafers per year (8 inch equivalent) in three manufacturing facilities in Japan. The JV is expected to broaden TowerJazz’s technology offerings by providing multiple additional specialty flows, including Panasonic's world-class specialty flows such as High Definition FSI – a world famous CIS (CMOS Image Sensor) benchmark technology for high quantum efficiency, low dark current CIS technology, and high voltage SOI (silicon-on-insulator) based power management technologies.

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