Tower Semiconductor Reports Positive EBITDA and 51% Quarter Over Quarter Revenue Growth for Q4 2005

MIGDAL HAEMEK, Israel, February 1 /PRNewswire-FirstCall/ -- Tower Semiconductor Ltd. (NASDAQ: TSEM), a pure-play independent specialty foundry, today announced fourth quarter and fiscal year 2005 results. Revenues for the fourth quarter were $31.1 million, an increase of 51% compared to revenues of $20.6 million for the third quarter of 2005, and an increase of $1 million compared to revenues for the fourth quarter of 2004. The 2005 fourth quarter loss was $45.2 million, or $0.55 per share, which included depreciation and amortization expenses of $36.8 million. The 2005 third quarter loss was $55.4 million, or $0.70 per share and the 2004 fourth quarter loss was $55.7 million, or $0.71 per share, excluding a net capital gain of $32.4 million from the previously announced sale of shares of Saifun Semiconductor. Depreciation and amortization expenses for the third quarter of 2005 and for the fourth quarter of 2004 were $36.9 million and $34.9 million, respectively.

Revenues were $102 million for the 12 months ended December 31, 2005, including $8 million from a previously announced technology-related agreement, as compared with $126.1 million in 2004, which included $1.9 million from this same agreement. Loss for fiscal 2005 was $203.1 million, or $2.55 per share, including $144.9 million depreciation and amortization expenses, as compared with a loss of $170.1 million, or $2.21 per share in 2004, including $121.1 million depreciation and amortization expenses and excluding a net capital gain of $32.4 million from the previously announced sale of shares of Saifun Semiconductor.

"The company, for the first time since the Fab 2 project was initiated, achieved positive EBITDA, as well as record quarter over quarter sales growth. Positive EBITDA was an important milestone achievement as we continue to execute our growth plan. We have stronger targets in front of us in 2006 and the rate of new product qualifications from both new and existing customers, as well as the general market indicators, provide confidence that we will achieve them", said Russell Ellwanger, chief executive officer, Tower Semiconductor. "A 50% quarter over quarter growth is no small thing in any business, and can only be achieved through performance and customer trust. We will continue to build upon this throughout 2006."

Tower expects further growth in revenues for the first quarter of 2006 over the fourth quarter of 2005, and guides revenues of $33 to $35 million.

During the quarter, Tower shipped its first 0.18-micron RF-CMOS products to a new, high profile customer. In addition, the first production lot of 0.13-micron technology was shipped with good yields, demonstrating Fab 2's readiness for the 0.13-micron ramp, expected in the second quarter of 2006.

As used in this release, the term EBITDA consists of loss, according to GAAP (Generally Accepted Accounting Principles), excluding interest and financing expenses (net), tax and depreciation and amortization expenses, as well as capital gain (net) from the sale of Saifun Semiconductor shares recorded in 2004. 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.

Tower will host a conference call to discuss these results today, February 1, 2006, at 11 a.m. Eastern time /6 p.m. Israel time. To participate, call +1-866-229-7198 (U.S. toll-free number) or +972-3-918-0609 (international) and mention ID code: TOWER. Callers in Israel are invited to call locally 03-918-0609. The conference call will also be web cast live at www.companyboardroom.com and at www.towersemi.com and will be available thereafter on both websites for replay for 90 days, starting at 2 p.m. Eastern time on the day of the call.

About Tower Semiconductor Ltd.

Tower Semiconductor Ltd. is a pure-play independent specialty foundry established in 1993. The company 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 non-volatile memory solutions, mixed-signal and CMOS image-sensor technologies. To provide world-class customer service, the company maintains two manufacturing facilities: Fab 1 has process technologies from 1.0 to 0.35-micron and can produce up to 16,000 150mm wafers per month. Fab 2 features 0.18-micron and below standard and specialized process technologies and has a current capacity of up to 15,000 200mm wafers per month. Tower's website is located at www.towersemi.com.

Safe Harbor

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. Potential risks and uncertainties include, without limitation, risks and uncertainties associated with: (i) the completion of the equipment installation, technology transfer and ramp-up of production in Fab 2, (ii) having sufficient funds to operate the company and to complete Fab 2, (iii) the cyclical nature of the semiconductor industry and the resulting periodic overcapacity, fluctuations in operating results, future average selling price erosion that may be more severe than our expectations, (iv) operating our facilities at satisfactory utilization rates which is critical in order to cover the high level of fixed costs associated with operating a foundry, (v) our ability to meet certain of the covenants stipulated in our amended facility agreement, (vi) our ability to capitalize on increases in demand for foundry services, (vii) meeting the conditions to receive Israeli government grants and tax benefits approved for Fab 2 and obtaining the approval of the Israeli Investment Center to expand the five-year investment period under our Fab 2 approved enterprise program, (viii) attracting additional customers, (ix) not receiving orders from our wafer partners, customers and technology providers, (x) failing to maintain and develop our technology processes and services, (xi) competing effectively, (xii) our large amount of debt, (xiii) achieving acceptable device yields, product performance and delivery times, (xiv) the timely development, internal qualification and customer acceptance of new processes and products, and (xv) business interruption due to terror attacks, earthquakes, and other acts of God.

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-1, F-3 and 6-K, as were filed with the Securities and Exchange Commission and the Israel Securities Authority. Future results may differ materially from those previously reported. We do not intend to update the information contained in this release.

    Tower Semiconductor
    Ilanit Vudinsky
    +972-4-650-6434
    
Email Contact

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                   TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
                        CONSOLIDATED BALANCE SHEETS
                          (dollars in thousands)

                                                  As of December 31,

                                                2005                2004

               A S S E T S

         CURRENT ASSETS
            Cash and cash equivalents             $      7,337                $    27,664
                        Designated  cash  and  short-term
                        interest-bearing  deposits                        31,661                      53,793
                        Trade  accounts  receivable                        16,776                      19,286
                        Other  receivables                                          9,043                      11,365
                        Inventories                                                    24,376                      25,669
                        Other  current  assets                                    1,048                        1,818
                                            Total  current  assets              90,241                    139,595

                  LONG-TERM  INVESTMENTS
                        Long-term  interest-bearing
                                  deposits
                                  designated  for  Fab  2                            --                            5,134
                                  operations

                  PROPERTY  AND  EQUIPMENT,  NET                        510,645                    609,296

                  OTHER  ASSETS,  NET                                              77,800                      93,483

                                                TOTAL  ASSETS                  $    678,686                $  847,508

            LIABILITIES  AND  SHAREHOLDERS'
            EQUITY

                  CURRENT  LIABILITIES
                        Current  maturities  of
                        long-term  debt                                      $      21,103                $        --
                        Current  maturities  of
                        convertible  debentures                                6,453                          --
                        Trade  accounts  payable                              59,741                      65,326
                        Other  current  liabilities                          8,972                      10,678
                                    Total  current  liabilities            96,269                      76,004

                  LONG-TERM  DEBT                                                  497,000                    497,000

                  CONVERTIBLE  DEBENTURES                                    19,358                      26,651

                  LONG-TERM  LIABILITY  IN
                  RESPECT  OF  CUSTOMERS'  ADVANCES                    59,621                      64,428

                  OTHER  LONG-TERM  LIABILITIES                          11,012                      15,445

                                                    Total  liabilities          683,260                    679,528

                  CONVERTIBLE  DEBENTURES                                    25,493                            --

                  SHAREHOLDERS'  EQUITY                                      -30,067                    167,980
                  (DEFICIT)

                                            TOTAL  LIABILITIES            $    678,686                $  847,508
                                            AND  SHAREHOLDERS'
                                            EQUITY




                                          TOWER  SEMICONDUCTOR  LTD.  AND  SUBSIDIARY
                                            CONSOLIDATED  STATEMENTS  OF  OPERATIONS
                      (dollars  in  thousands,  except  share  data  and  per  share  data)

                                                                                Year  ended              Three  months  ended
                                                                                December  31,                  December  31,

                                                                            2005                2004            2005            2004

        REVENUES                                                  101,991          126,055        31,063        30,065

        COST  OF  SALES                                        238,358          228,410        58,760        66,168

                        GROSS  LOSS                            -136,367        -102,355      -27,697      -36,103

        OPERATING  COSTS  AND  EXPENSES

                        Research  and  development      16,029          17,053          3,180          5,845
                        Marketing,  general
                        and  administrative                  17,418          21,297          3,937          5,121

                                                                              33,447          38,350          7,117        10,966

                        OPERATING  LOSS                      -169,814      -140,705      -34,814      -47,069

            FINANCING  EXPENSE,  NET                    -35,651        -29,745      -10,223        -8,838

            OTHER  INCOME  (EXPENSE),  NET              2,383          32,682            -135        32,574

                              LOSS  FOR  THE  YEAR      $  -203,082  $  -137,768  $  -45,172      -23,333

            BASIC  LOSS  PER  ORDINARY  SHARE

            Loss  per        (*)  (**)                  $      -2.55    $        -1.79  $      -0.55          -0.30
            share

            Loss  used  to
            compute  basic
            loss  per  share                              $  -203,082  $  -137,768    $  -45,172      -23,333


            Weighted  average  number  of
            ordinary  shares  outstanding
            -  in  thousands  (**)                            79,675          77,071          82,196        78,223

 


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