Fab2 Tape-Outs During Q2 at Record High
The 2005-second quarter loss was $47.2 million, or $0.71 per share, which represents negative $4.5 million EBITDA. This loss is compared with a loss of $55.3 million, or $0.84 per share, for the first quarter of 2005 (negative $13.7 million EBITDA), and a loss of $36.5 million, or $0.55 per share, in the second quarter of 2004 (negative $2.2 million EBITDA). In addition, for the first half of 2005 the loss was $102.6 million, or $1.56 per share, which represents negative $18.2 million EBITDA versus a loss of $75 million, or $1.16 per share for the first half of 2004 (negative $8.2 million EBITDA).
Tower expects revenues in the third quarter of 2005 to be in the range of $20 to $22 million, reflecting a modest growth over Q2 sales from manufacturing activities. In addition, Q2 had a record high number of Fab2 customer product tape-outs, exceeding the total for the full calendar year in 2004. These tape-outs are expected to materialize into revenue growth in the coming quarters and indicate the increasing traction of the Fab2 technology offering to its customer's products.
During the second quarter Tower has started shipping production wafers of 1.3 and 2.0 mega-pixel CMOS Image Sensors for cell-phone applications, utilizing the 0.18-micron manufacturing capabilities of Fab2. Included in Q2 tape-outs, a product for a leading fabless company, utilizing Tower's state of the art 0.18 micron embedded NVM solution. Tower continues to grow its mixed signal revenues in Fab2 and has attained excellent performance on an advanced RFCMOS product in the Wi-Fi space.
Tower has reached a definitive agreement with its banks, under which they will provide the company with up to approximately $30 million of additional funding to be matched by financing of $30 million to be raised by Tower. A preliminary prospectus for rights to purchase the company's convertible debentures was filed in the U.S. and Israel. All of Tower's shareholders as of the record date, yet to be determined, will be offered the opportunity to participate in this $50 million offering. Certain of Tower's major shareholders have committed to purchase from Tower $24.5 million principal amount of convertible debentures.
"I have now visited the majority of Tower's customers world wide and the overriding sentiment is confidence and satisfaction in Towers technical and operational capability and best of breed responsiveness", said Russell Ellwanger, chief executive officer, Tower Semiconductor. "With up to $60M million in additional funding from our banks and investors we will continue to build on these strengths, while setting our customers' needs at the core of our operation."
The revenue numbers below exclude the $8 million from a previously announced technology agreement.
1. Diversifying customer base
Total customer count As of end of As of end of Q2
Q2 2005 2004
95% of revenue generated 27 customers 21 customers
by:
Fab 2 production customers 9 customers 5 customers
Fab 2 pre-production 22 customers 11 customers
customers
2. Sales by customer base profile
Type of customer Q2 2005 Q1 2005 Q2 2004
Fabless 72% 76% 71%
IDM 28% 24% 29%
3. Sales by geography
Region Q2 2005 Q1 2005 Q2 2004
U.S. 68% 77% 49%
Israel 9% 5% 28%
Pacific Rim (including 8% 10% 13%
Japan)
Europe 15% 8% 10%
4. Developing specialized technology offerings
Tower continues to develop differentiated technologies, utilizing core technical knowledge in embedded NVM, CMOS image sensors, mixed-signal and RF technologies, according to its strategic roadmap.
During the second quarter, Tower increased the CMOS image sensors and the Mixed Signal shares of total revenue, as can be seen in the table below.
Technology Segment Q2 2005 Q1 2005 Q2 2004
Consolidated
Core CMOS 54% 69% 53%
Non Volatile memory 9% 8% 23%
CMOS imager sensors 18% 11% 9%
Mixed Signal, RF and Power 19% 12% 15%
Fab1
Core CMOS 31% 36% 18%
Non Volatile memory 19% 18% 41%
CMOS imager sensors 29% 20% 15%
Mixed Signal, RF and Power 21% 26% 26%
Fab2
Core CMOS 72% 92% 95%
Non Volatile memory 1% 1% 0%
CMOS imager sensors 9% 5% 3%
Mixed Signal and RF 18% 2% 2%
The company made progress in 0.13u technology, running initial shuttle with customers' test chips and several IP blocks. Tower expects that production ramp utilizing this technology will start during 2006.
5. Diversifying revenues by market segment
Tower maintains its market segment diversification.
Industry Segment Q2 2005 Q1 2005 Q2 2004
Consumer 29% 48% 49%
Communication 20% 18% 15%
PC 6% 2% 5%
Industrial, medical and 21% 12% 12%
automotive
Multi market and others 24% 20% 19%
Tower will host a conference call to discuss these results on August 2, at 10a.m. Eastern time/5 p.m. Israel time. To participate, call +1-866-229-7198 (U.S. toll-free number) or +972-3-918-0610 (international) and mention ID code: TOWER. Callers in Israel are invited to call locally 03-918-0610. The conference call will also be webcast 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 1 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 the Fab 2 project, (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) the successful completion of the rights offering (vi) our ability to meet certain of the covenants stipulated in our amended facility agreement, (vii) the closing of the definitive amendment to the facility agreement and the receipt and consummation of the investors' commitments to invest at least $23.5 million, (viii) our ability to capitalize on increases in demand for foundry services, (ix) 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 extend or to expand the five-year investment period under our Fab 2 approved enterprise program, (x) attracting additional customers, (xi) not receiving orders from our wafer partners and technology providers, (xii) failing to maintain and develop our technology processes and services, (xiii) competing effectively, (xiv) our large amount of debt, (xv) achieving acceptable device yields, product performance and delivery times, (xvi) the timely development, internal qualification and customer acceptance of new processes and products, and (xvii) 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-2 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
or
Pacifico Inc.
PR Agency Contact
Mary Curtis
+1-408-293-8600
Email Contact
or
Fusion IR & Communications
Investor Relations Contact
Sheldon Lutch
+1-212-268-1816
Email Contact
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
2005 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 23,459 $ 27,664
Designated cash and short-term
interest-bearing deposits 16,953 53,793
Trade accounts receivable 10,853 19,286
Other receivables 8,862 11,365
Inventories 17,058 25,669
Other current assets 1,310 1,818
Total current assets 78,495 139,595
LONG-TERM INVESTMENTS
Long-term interest-bearing deposits
designated for Fab 2 operations -- 5,134
PROPERTY AND EQUIPMENT, NET 562,962 609,296
OTHER ASSETS, NET 86,519 93,483
TOTAL ASSETS $ 727,976 $ 847,508
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 59,640 $ 65,326
Current maturities of convertible
debentures 6,331 --
Other current liabilities 8,467 10,678
Total current liabilities 74,438 76,004
LONG-TERM DEBT 497,000 497,000
CONVERTIBLE DEBENTURES 18,992 26,651
LONG-TERM LIABILITY IN RESPECT
OF CUSTOMERS' ADVANCES 62,007 64,428
OTHER LONG-TERM LIABILITIES 9,175 15,445
Total liabilities 661,612 679,528
SHAREHOLDERS' EQUITY
Ordinary shares 16,408 16,274
Additional paid-in capital 518,286 517,476
Shareholder receivables -26 -26
Accumulated deficit -459,232 -356,672
75,436 177,052
Treasury stock -9,072 -9,072
Total shareholders' equity 66,364 167,980
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 727,976 $ 847,508
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data and per share data)
Six months ended Three months ended
June 30, June 30,
2005 2004 2005 2004
REVENUES
Sales $ 42,375 $ 58,955 $ 19,208 $ 33,652
Revenues related
to a joint development
agreement 8,000 1,944 8,000 --
50,375 60,899 27,208 33,652
COST OF SALES 122,468 104,399 61,254 54,250
GROSS LOSS -72,093 -43,500 -34,046 -20,598
OPERATING COSTS AND EXPENSES
Research and
development 8,649 7,256 3,886 3,751
Marketing, general
and administrative 8,766 11,021 4,238 5,430
17,415 18,277 8,124 9,181
OPERATING LOSS -89,508 -61,777 -42,170 -29,779
FINANCING EXPENSE,
NET -15,528 -13,340 -7,353 -6,809
OTHER INCOME, NET 2,476 94 2,283 56
LOSS FOR THE
PERIOD $ -102,560 $ -75,023 $ -47,240 $ -36,532
BASIC LOSS PER ORDINARY SHARE
Loss per sh(*) $ -1.56 $ -1.16 $ -0.71 $ -0.55
Loss used to compute
basic loss per
share $ -102,560 $ -75,009 $ -47,240 $ -36,525
Weighted average
number of ordinary
shares outstanding -
in thousands 65,946 64,812 66,190 66,632
(*)Basic and diluted loss per share in accordance with U.S. GAAP are the
same as the Isr. GAAP data for the six and three months periods ended
June 30, 2005 [$1.18 ans $0.56 in the six and three months periods
ended June 30, 2004]
CONTACT: Tower Semiconductor, Ilanit Vudinsky, +972-4-650-6434,
Email Contact, Pacifico Inc., PR Agency Contact, Mary Curtis,
+1-408-293-8600,
Email Contact, Fusion IR & Communications, Investor
Relations Contact, Sheldon Lutch, +1-212-268-1816,
Email Contact