Tower Semiconductor Reports Second Quarter 2009 Financial Results

Third Quarter Revenue Guidance Calls for 24 Percent Sequential Growth and 28 Percent Year-over-Year Growth

MIGDAL HAEMEK, Israel, August 12 /PRNewswire-FirstCall/ -- Tower Semiconductor Ltd. (NASDAQ: TSEM), an independent specialty foundry, today announced financial results for the second quarter ended June 30, 2009.

    Highlights

    - Achieved revenue of $60.6 million

    - Posted positive cash flow from operations for the eleventh
      consecutive quarter and positive EBITDA for the fifteenth consecutive
      quarter

    - Significant cost efficiencies across the board have enabled
      the Company to achieve improved non-GAAP gross, operating and net
      margins

    - Expects strong growth in third quarter revenues in the range
      of $73 - $77 million, representing revenue growth of 24 percent
      sequentially, substantially higher than industry weighted average,
      and 28 percent year-over-year

Second quarter 2009 revenue was $60.6 million, towards the upper-end of the Company's previously provided guidance range. This represents a 4 percent increase over first quarter 2009 revenue of $58.1 million.

Calculated in accordance with GAAP, net loss for the second quarter was $30.9 million or $0.19 per share, an improvement from $0.25 per share for the second quarter of 2008. Net loss for the first half of 2009 narrowed by $2.1 million as compared to the corresponding period in 2008.

On a non-GAAP basis, as described and reconciled below, second quarter 2009 gross profit was $15.7 million, a sequential growth of 30 percent, representing a 26 percent gross margin as compared to 21 percent in the first quarter of 2009. Non-GAAP operating profit grew sequentially by 158 percent to $3.5 million, and Non-GAAP net profit for the second quarter of 2009 improved to $5.4 million, representing 9 percent net margin.

"During the second quarter we had many achievements, including a record 83 new design wins and new collaborations, with more underway, which demonstrate the value we add to our customers with our highly advanced specialty wafer processes, designer-centric models and kits, and the realization of the successful merger with Jazz Technologies. This combination of unparalleled design enablement capabilities and the breadth and great depth of customizable CMOS specialty technologies reinforces our position as a leading global specialty foundry," commented Russell Ellwanger, Chief Executive Officer of Tower Semiconductor, Ltd. "Due to our manufacturing mix moving to more specialized products and flows, we realized a year over year average selling prices increase of approximately 35 percent."

Ellwanger further commented, "I am very confident with regard to the coming quarters. The significant effort we have put in during the past few quarters, including enhancing cost efficiencies and realizing technological synergies, has placed us in an incredible position. It has allowed us to structure ourselves for enhanced growth and enter the second half of 2009 in excellent standing, which we will discuss in detail in our conference call later today. As I look at Tower's position entering an upcycle, I am extremely optimistic and see Tower as most probably the single foundry that will exit 2009 with year over year growth."

"I'm proud of the achievements of Tower's executive team, including the quick, complete and beneficial integration of the Jazz Technologies merger, as evidenced by the increased shareholder value over the last few quarters," said Amir Elstein, Chairman of Tower's Board of Directors. "We are boldly emerging from the recent global downturn as a stronger, more efficient and leaner company, with a platform primed for long-term and profitable growth."

Tower forecasts revenue in the third quarter 2009 to range between $73 and $77 million, representing a midrange sequential revenue growth of 24 percent and a 28 percent year over year revenue growth.

Tower also announced that it has signed a definitive agreement with YA Global Master SPV Ltd., a fund managed by Yorkville Advisors ("Yorkville"), according to which Yorkville has committed to invest in Tower up to $25 million over the next 24 months by way of a standby equity-line, in consideration for ordinary shares of Tower to be issued at a 3 percent discount to the market price of the ordinary shares, as set forth in the agreement. To date, no draw downs have been made under this agreement. No warrants or any other debt or derivative instruments are issuable by Tower under this agreement. Commencement of draw downs under the standby equity line is subject to our obtaining certain regulatory approvals and approval from the Tel-Aviv Stock Exchange. Additional information regarding the agreement is included in the Company's Report on Form 6-K and prospectus supplement as filed today with the SEC and available at http://www.sec.gov.

Conference Call/ Web Cast Announcement

Tower will host a conference call to discuss second quarter 2009 results today, August 12, 2009, 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 +972-3-918-0644 (international) and mention ID code: TOWER. Callers in Israel are invited to call locally by dialing 03-918-0644. 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 2:00 p.m. ET on the day of the call.

As previously announced, beginning with the fourth quarter of 2007, the Company has been presenting its financial statements in accordance with 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 and stock based compensation expenses. 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 and amortization, (2) compensation expenses in respect of options granted to directors, officers and employees and (3) finance expenses, net other than interest paid, such that non-GAAP financial expenses, net include only interest paid during the reported period. 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 and is not necessarily consistent to the non-GAAP data presented in previous filings.

Following the merger with Jazz, the amounts presented in this release, including the financial tables below, include Jazz's results commencing September 19, 2008. Amounts presented for periods preceding the merger with Jazz reflect Tower's results only. The balance sheet as of June 30, 2009 and December 31, 2008 includes Jazz's balances as of such dates.

About Tower Semiconductor, Ltd.

Tower Semiconductor Ltd. (NASDAQ: TSEM), a global specialty foundry leader, manufactures integrated circuits with geometries ranging from 1.0 to 0.13-micron and provides complementary technical services and design support. Tower, along with its fully owned U.S. subsidiary, Jazz Semiconductor, Inc., offers a broad range of process technologies including Digital, Mixed-Signal and RFCMOS, HV CMOS, Power Management, Non-Volatile Memory (NVM), Embedded NVM, MEMS, and CMOS Image Sensors. Tower provides world-class customer service and maintains two fabrication facilities in Israel and a fab in Newport Beach, CA, with manufacturing capacity available in China through partnerships with ASMC and HHNEC. For more information, please visit http://www.towersemi.com and http://www.jazzsemi.com .

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