TowerJazz Reports Third Quarter 2014 Results

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, F-3, F-4, S-8 and 6-K, as were filed with the Securities and Exchange Commission (the “SEC”) and the Israel Securities Authority and Jazz’s most recent filings on Forms 10-K and 10-Q, as were filed with the SEC. 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.

 
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 
      September 30,     June 30,     December 31,
2014 2014 2013
(Unaudited) (Unaudited)

ASSETS

 
CURRENT ASSETS
Cash and short-term interest bearing deposits

$

195,116

$

192,220

$

122,871

Trade accounts receivable 86,303 106,569 80,316
Other receivables 7,069 8,450 10,943
Inventories 85,175 83,689 64,804
Other current assets   20,650     38,305   11,480
Total current assets 394,313 429,233 290,414
 
LONG-TERM INVESTMENTS 13,846 14,386 14,494
 
PROPERTY AND EQUIPMENT, NET 447,597 485,177 350,039
 
INTANGIBLE ASSETS, NET 45,599 49,603 32,393
 
GOODWILL 7,000 7,000 7,000
 
OTHER ASSETS, NET   10,433     10,847   11,547
 
TOTAL ASSETS

$

918,788

 

$

996,246

$

705,887

 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES
Short term debt

$

64,708

$

97,128

$

36,441

Trade accounts payable 99,932 100,456 66,358
Deferred revenue 4,098 3,752 3,166

Employee related liabilities, including Nishiwaki retirement allowance

58,122 80,423 25,957
Other current liabilities   24,474     26,548   7,994
Total current liabilities 251,334 308,307 139,916
 
LONG-TERM DEBT 340,202 339,436 316,885
 
LONG-TERM CUSTOMERS' ADVANCES 6,389 6,572 7,187
 

EMPLOYEE RELATED LIABILITIES

15,587 16,406 65,337
 
DEFERRED TAX LIABILITY 88,667 100,135 13,611
 
OTHER LONG-TERM LIABILITIES   36,988     33,925   21,703
 
Total liabilities 739,167 804,781 564,639
 

Non controlling interest

(2,090 ) 418 --
 

Shareholders’ equity attributes to the company

  181,711     191,047   141,248
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

918,788

 

$

996,246

$

705,887

 
CONSOLIDATED CASH REPORTS (UNAUDITED)
(dollars in thousands)
 
        Nine months     Three months
ended ended
September 30, September 30,
2014 2014
Cash at beginning of the period $ 122,871 $ 192,220
 
TowerJazz Panasonic Semiconductor Co. 57,582 --
Proceeds from exercise of options and bonds issuance 13,959 2,508
Long-term loan received from JA Mitsui & Bank of Tokyo to TPSCo 85,884 --
TPSCo loan repayment to Panasonic (85,884 ) --
Investments in property, equipment and other cap-ex (73,005 ) (37,188 )
Debt repayment- principal (35,431 ) (10,000 )
Debt repayment- interest (21,334 ) (4,921 )
Proceeds from Nishiwaki's assets sale, net of employees retirement related payments 12,147 213
Cash from other operating activities   118,327     52,284  
 
Cash at end of the period $ 195,116   $ 195,116  
 
 
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
 
      Nine months ended  

Three months ended

September 30, September 30,   June 30,   September 30,
2014   2013 2014 2014 2013
GAAP GAAP GAAP GAAP GAAP
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
REVENUES

$

592,719

$

370,438

$

225,994

$

234,072

$

132,555

 
COST OF REVENUES   567,023     351,270     211,273     227,347     128,184  
 
GROSS PROFIT   25,696     19,168     14,721     6,725     4,371  
 
OPERATING COSTS AND EXPENSES
 
Research and development 37,463 25,075 15,858 14,162 8,184
Marketing, general and administrative 43,258 31,992 15,915 16,527 11,005
Nishiwaki Fab restructuring costs and impairment 75,728 -- -- 4,269 --
Amortization related to a lease agreement early termination -- 5,598 -- -- 1,866
Merger related costs   1,229     --     --     --     --  
 
  157,678     62,665     31,773     34,958     21,055  
 
 
OPERATING PROFIT (LOSS) (131,982 ) (43,497 ) (17,052 ) (28,233 ) (16,684 )
 
INTEREST EXPENSES, NET (25,592 ) (24,748 ) (8,661 ) (8,818 ) (8,416 )
 
OTHER FINANCING EXPENSE, NET (38,248 ) (16,729 ) (5,855 ) (12,276 ) (9,502 )
 

GAIN FROM ACQUISITION, NET

166,404 -- -- 15,249 --
 
OTHER INCOME (EXPENSE), NET   (155 )   (524 )   (358 )   64     (465 )
 
PROFIT (LOSS) BEFORE INCOME TAX (29,573 ) (85,498 ) (31,926 ) (34,014 ) (35,067 )
 
INCOME TAX BENEFIT   24,002     7,684     9,982     11,566     3,291  
 
PROFIT (LOSS) BEFORE NON CONTROLLING INTEREST (5,571 ) (77,814 ) (21,944 ) (22,448 ) (31,776 )
 
NON CONTROLLING INTEREST   9,210     --     2,508     6,702     --  
 
NET PROFIT (LOSS)

$

3,639

 

$

(77,814

)

$

(19,436

)

$

(15,746

)

$

(31,776

)

 
 
BASIC EARNINGS (LOSS) PER ORDINARY SHARE

$

0.07

 

$

(2.11

)

$

(0.37

)

$

(0.31

)

$

(0.68

)

 

Weighted average number of ordinary shares outstanding - in thousands

  50,500     36,859     53,158     50,146     46,567  
 
 
 
DILUTED EARNINGS PER ORDINARY SHARE

$

0.06

 
 
Net profit used for diluted earnings per share

$

3,639

 

 

Weighted average number of ordinary shares outstanding - in thousands, used for diluted earnings per share

  61,717  
 
 
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
 
      Three months ended   Three months ended   Three months ended
September 30,   June 30, September 30,   June 30, September 30,   June 30,
2014 2014 2014 2014 2014 2014
non-GAAP Adjustments (see a, b, c, d, e below) GAAP
 
REVENUES $ 225,994 $ 234,072 $ -- $ -- $ 225,994 $ 234,072
 
COST OF REVENUES 158,178   171,672   53,095   (a) 55,675   (a) 211,273   227,347  
 
GROSS PROFIT 67,816   62,400   (53,095 ) (55,675 ) 14,721   6,725  
 
OPERATING COSTS AND EXPENSES
 
Research and development 15,411 13,734 447 (b) 428 (b) 15,858 14,162
Marketing, general and administrative 15,012 15,556 903 (c) 971 (c) 15,915 16,527
Nishiwaki Fab restructuring costs and impairment --   --   --   4,269   --   4,269  
 
30,423   29,290   1,350   5,668   31,773   34,958  
 
 
OPERATING PROFIT (LOSS) 37,393 33,110 (54,445 ) (61,343 ) (17,052 ) (28,233 )
 
INTEREST EXPENSES, NET (8,661 ) (8,818 ) -- (d) -- (d) (8,661 ) (8,818 )
 
OTHER FINANCING EXPENSE, NET -- -- (5,855 ) (d) (12,276 ) (d) (5,855 ) (12,276 )
 

GAIN FROM ACQUISITION, NET

-- -- -- 15,249 -- 15,249
 
OTHER INCOME (EXPENSE), NET (358 ) 64   --   --   (358 ) 64  
 
PROFIT (LOSS) BEFORE INCOME TAX 28,374 24,356 (60,300 ) (58,370 ) (31,926 ) (34,014 )
 
INCOME TAX BENEFIT (EXPENSE) -- -- 9,982 (e) 11,566 (e) 9,982 11,566
           
PROFIT (LOSS) BEFORE NON CONTROLLING INTEREST 28,374 24,356 (50,318 ) (46,804 ) (21,944 ) (22,448 )
 
NON CONTROLLING INTEREST 2,508   6,702   --   --   2,508   6,702  
 
NET PROFIT (LOSS) $ 30,882   $ 31,058   $ (50,318 ) $ (46,804 ) $ (19,436 ) $ (15,746 )
 
 
NON-GAAP GROSS MARGINS 30 % 27 %
 
NON-GAAP OPERATING MARGINS 17 % 14 %
 
NON-GAAP NET MARGINS 14 % 13 %
 
BASIC EARNINGS (LOSS) PER ORDINARY SHARE $ 0.58  
 

Weighted average number of ordinary shares outstanding - in thousands

53,158  
 
 
 
(a) Includes depreciation and amortization expenses in the amounts of $52,863 and $55,460 and stock based compensation expenses in the amounts of $232 and $215 for the three months ended September 30, 2014 and June 30, 2014, respectively.
 
(b) Includes depreciation and amortization expenses in the amounts of $201 and $203 and stock based compensation expenses in the amounts of $246 and $225 for the three months ended September 30, 2014 and June 30, 2014, respectively.
 
(c) Includes depreciation and amortization expenses in the amounts of $203 and $213 and stock based compensation expenses in the amounts of $700 and $758 for the three months ended September 30, 2014 and June 30, 2014, respectively.
 
(d) Non-GAAP interest expenses and other financing expense, net include only interest on an accrual basis.
 
(e) Non-GAAP income tax expense include taxes paid during the period.
 
(*)

Fully diluted earnings per share calculation and presentation are not required under GAAP for the third quarter of 2014, since the company did not have net profits. Hence, fully diluted earnings per share is not different than basic earnings per share for the third quarter of 2014. Had fully diluted earnings per share calculation and presentation been required for the third quarter of 2014, the following may have been added: 6 million shares underlying its capital notes, 5 million shares underlying options and warrants, 11 million possible shares underlying notes series F due December 2015 (unless repayable with cash), 11 million possible shares underlying notes series F due December 2016 (unless repayable with cash) and 6 million possible shares underlying Jazz notes due December 2018 (unless repayable with cash).

 
 
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands)
 
      Three months ended   Three months ended   Three months ended
September 30, September 30,

September 30,

2014 2013 2014 2013 2014   2013
non-GAAP Adjustments (see a, b, c, d, e, f below) GAAP
 
REVENUES $ 225,994 $ 132,555

 

$

-- $ -- $ 225,994 $ 132,555
 
COST OF REVENUES 158,178   93,069   53,095   (a) 35,115   (a) 211,273   128,184  
 
GROSS PROFIT 67,816   39,486   (53,095 ) (35,115 ) 14,721   4,371  
 
OPERATING COSTS AND EXPENSES
 
Research and development 15,411 8,139 447 (b) 45 (b) 15,858 8,184
Marketing, general and administrative 15,012 10,241 903 (c) 764 (c) 15,915 11,005
Amortization related to a lease agreement early termination --   --   --   1,866   (d) --   1,866  
 
30,423   18,380   1,350   2,675   31,773   21,055  
 
OPERATING PROFIT (LOSS) 37,393 21,106 (54,445 ) (37,790 ) (17,052 ) (16,684 )
 
INTEREST EXPENSES, NET (8,661 ) (8,416 ) -- (e) -- (e) (8,661 ) (8,416 )
 
OTHER FINANCING EXPENSE, NET -- -- (5,855 ) (e) (9,502 ) (e) (5,855 ) (9,502 )
 
OTHER EXPENSE, NET (358 ) (465 ) --   --   (358 ) (465 )
 
PROFIT (LOSS) BEFORE INCOME TAX 28,374 12,225 (60,300 ) (47,292 ) (31,926 ) (35,067 )
 
INCOME TAX BENEFIT (EXPENSE) --   --   9,982   (f) 3,291   (f) 9,982   3,291  
 
PROFIT (LOSS) BEFORE NON CONTROLLING INTEREST 28,374 12,225 (50,318 ) (44,001 ) (21,944 ) (31,776 )
 
NON CONTROLLING INTEREST 2,508   --   --   --   2,508   --  
 
NET PROFIT (LOSS) $ 30,882   $ 12,225  

 

$

(50,318 ) $ (44,001 ) $ (19,436 ) $ (31,776 )
 
 
(a) Includes depreciation and amortization expenses in the amounts of $52,863 and $35,000 and stock based compensation expenses in the amounts of $232 and $115 for the three months ended September 30, 2014 and September 30, 2013, respectively.
 
(b) Includes depreciation and amortization expenses in the amounts of $201 and $0 and stock based compensation expenses in the amounts of $246 and $45 for the three months ended September 30, 2014 and September 30, 2013, respectively.
 
(c) Includes depreciation and amortization expenses in the amounts of $203 and $206 and stock based compensation expenses in the amounts of $700 and $558 for the three months ended September 30, 2014 and September 30, 2013, respectively.
 
(d) Non cash amortization recorded in 2013 as a result of an early termination of an office building lease contract.
 
(e) Non-GAAP interest expenses and other financing expense, net include only interest on an accrual basis.
 
(f) Non-GAAP income tax expense include taxes paid during the period.
 
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
 
 
 
 
      Nine months ended   Nine months ended   Nine months ended
September 30,

September 30,

September 30,

2014 2013 2014 2013 2014 2013
non-GAAP Adjustments (see a, b, c, d, e, f below) GAAP
 
REVENUES $ 592,719 $ 370,438 $ -- $ -- $ 592,719 $ 370,438
 
COST OF REVENUES 418,012   253,220   149,011   (a) 98,050   (a) 567,023   351,270  
 
GROSS PROFIT 174,707   117,218   (149,011 ) (98,050 ) 25,696   19,168  
 
OPERATING COSTS AND EXPENSES
 
Research and development 36,300 24,742 1,163 (b) 333 (b) 37,463 25,075
Marketing, general and administrative 40,434 30,115 2,824 (c) 1,877 (c) 43,258 31,992
Nishiwaki Fab restructuring costs and impairment -- -- 75,728 -- 75,728 --
Amortization related to a lease agreement early termination -- -- -- 5,598 (d) -- 5,598
Merger related costs --   --   1,229   --   1,229   --  
 
76,734   54,857   80,944   7,808   157,678   62,665  
 
 
OPERATING PROFIT (LOSS) 97,973 62,361 (229,955 ) (105,858 ) (131,982 ) (43,497 )
 
INTEREST EXPENSES, NET (25,592 ) (24,748 ) -- (e) -- (e) (25,592 ) (24,748 )
 
OTHER FINANCING EXPENSE, NET -- -- (38,248 ) (e) (16,729 ) (e) (38,248 ) (16,729 )
 

GAIN FROM ACQUISITION, NET

-- -- 166,404 -- 166,404 --
 
OTHER EXPENSE, NET (155 ) (524 ) --   --   (155 ) (524 )
 
PROFIT (LOSS) BEFORE INCOME TAX 72,226 37,089 (101,799 ) (122,587 ) (29,573 ) (85,498 )
 
INCOME TAX BENEFIT (EXPENSE) --   --   24,002   (f) 7,684   (f) 24,002   7,684  
 
PROFIT (LOSS) BEFORE NON CONTROLLING INTEREST 72,226 37,089 (77,797 ) (114,903 ) (5,571 ) (77,814 )
 
NON CONTROLLING INTEREST 9,210   --   --   --   9,210   --  
 
NET PROFIT (LOSS) $ 81,436   $ 37,089   $ (77,797 ) $ (114,903 ) $ 3,639   $ (77,814 )
 
BASIC EARNINGS (LOSS) PER ORDINARY SHARE $ 1.61  

 

Weighted average number of ordinary shares outstanding - in thousands

50,500  
 
 
(a) Includes depreciation and amortization expenses in the amounts of $148,267 and $97,701 and stock based compensation expenses in the amounts of $744 and $349 for the nine months ended September 30, 2014 and September 30, 2013, respectively.
 
(b) Includes depreciation and amortization expenses in the amounts of $433 and $43 and stock based compensation expenses in the amounts of $730 and $290 for the nine months ended September 30, 2014 and September 30, 2013, respectively.
 
(c) Includes depreciation and amortization expenses in the amounts of $616 and $570 and stock based compensation expenses in the amounts of $2,208 and $1,307 for the nine months ended September 30, 2014 and September 30, 2013, respectively.
 
(d) Non cash amortization recorded in 2013 as a result of an early termination of an office building lease contract.
 
(e) Non-GAAP interest expenses and other financing expense, net include only interest on an accrual basis; GAAP financing expense, net, includes (i) in 2014 - one-time non-cash charges of $10 million resulted from the Jazz Notes exchange deal dated March 2014 and $10 million acceleration of financing expenses relating to debentures series F conversion, offset by $11 million financing income from the banks' loan contract announced October 2014; and (ii) in 2013 - financing income of $6.5 million from the banks' extension contract signed in March 2013.
 
(f) Non-GAAP income tax expenses include taxes paid during the period
 

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