ADDING AND REPLACING Tower Semiconductor Announces Fourth Quarter and Fiscal Year 2004 Results; The Company More Than Doubled its Year-to-Year Revenues in 2004.MIGDAL HAEMEK Migdal HaEmek (Hebrew: מִגְדַּל הָעֶמֶק, also officially spelt Migdal HaEmeq, Arabic: , Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. -- Tables are added to the end of release: TOWER SEMICONDUCTOR ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2004 RESULTS; THE COMPANY MORE THAN DOUBLED ITS YEAR-TO-YEAR REVENUES IN 2004 Strong Pipeline of New Projects and Customers Expected to Yield Growth in Second Half of 2005 Tower Semiconductor Ltd. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : TSEM TSEM Tower Semiconductor Ltd. (stock symbol) TSEM Transmission Scanning Electron Microscopy TSEM TOW System Evaluation Missile ; TASE TASE Tel Aviv Stock Exchange TASE The All Seeing Eye TASE Tactical Air Support Element TASE Thrust Assessment Support Environment TASE Telecontrol Application Service Elements (IEC communications protocol) : TSEM), a pure-play independent wafer (1) A small, thin continuous-loop magnetic tape cartridge that has been used from time to time for data storage and specialized applications. (2) The base unit of chip making. It is a slice taken from a salami-like silicon crystal ingot up to 12" (300mm) in diameter. foundry A semiconductor manufacturer that makes chips for third parties. It may be a large chip maker that sells its excess manufacturing capacity or one that makes chips exclusively for other companies. , today announced fourth quarter and fiscal year 2004 results, with 105% higher revenues in 2004 compared with 2003. Revenues were $126.1 million for the 12 months ended December December: see month. 31, 2004 as compared with $61.4 million in 2003. Revenues for the quarter ended December 31, 2004 were $30.1 million. On a year-over-year basis, revenues for the fourth quarter of 2004 represented an increase of 52 percent over revenues of $19.8 million in the fourth quarter of 2003. In the third quarter of 2004, the company reported revenues of $35.1 million. The 2004 fourth quarter loss was $23.3 million, or $0.36 per share, including a net capital gain of $32 million from the previously announced sale of shares of Saifun Semiconductor. This loss is compared with a loss of $46.0 million, or $0.91 per share, for the fourth quarter of 2003, and a loss of $39.4 million, or $0.60 per share, in the third quarter of 2004. For the 12 months ended December 31, 2004 the company reported a loss of $137.8 million, or $2.13 per share, including a net capital gain of $32 million from the previously announced sale of shares of Saifun Semiconductor. This is compared with a loss of $114.3 million, or $2.40 per share in 2003. This loss includes $117 million of depreciation expenses in 2004, compared to $54 million in 2003. The company experienced weaker demand due to inventory corrections by a range of customers in late 2004, and in particular, by those in the consumer market. Consumer products accounted for approximately 50 percent of Tower's revenues during the past year. Moving forward, the company expects reduced dependence on this market segment. The company expects Q-1 2005 revenues to be in the range of $23 million to $26 million due to continuing softness in the foundry industry, while Q2-2005 is expected to mark a turning point towards a stronger second half of 2005. The company expects to reach positive EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become from operating activities in the second half of 2005. Tower's banks recently agreed to waive To intentionally or voluntarily relinquish a known right or engage in conduct warranting an inference that a right has been surrendered. For example, an individual is said to waive the right to bring a tort action when he or she renounces the remedy provided by law for such the company's non-compliance with certain financial ratios and covenants for the fourth quarter of 2004 and it revised certain financial ratios and covenants for 2005. "We have a strong pipeline of new customers and projects, which we expect will begin to add revenues in late 2005," said Carmel Car·mel also Car·mel-by-the-Sea A city of western California on Carmel Bay at the southern end of the Monterey Peninsula. It is an artists' and writers' colony and a popular tourist spot. Population: 4,130. Vernia, chairman and chief executive officer of Tower. "We see traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. in key areas of our specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. technology segments such as mixed-signal, CMOS (Complementary Metal Oxide Semiconductor) Pronounced "c-moss." The most widely used integrated circuit design. It is found in almost every electronic product from handheld devices to mainframes. image-sensor technologies and RF, which could translate into higher revenues." Vernia cautioned that there might be continued slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in the first half of the year but projected significant revenue growth for the company during the second half of 2005. Tower's management has been proactive bringing its expenditures in line with current business conditions and has taken measures, in the fourth quarter, to reduce expenses and improve cash flow, which could achieve savings totaling $20 million in 2005. The company implemented an across-the-board workforce cutback cut·back n. 1. A decrease; a curtailment: "The political effects of food cutbacks could be devastating" New York Times. 2. , and also introduced other savings measures. During the last quarter Tower announced its 0.16-micron technology offering, which enables lower die cost to customers, while yielding higher wafer prices. The $200 million, multi-year project with Vishay-Siliconix is progressing according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. schedule and production is planned to begin in the second quarter of 2005. At the same time, Tower is maintaining its level of investment in key process development initiatives and is improving its unique technologies according to its strategic roadmap A roadmap may refer to:
1. Diversifying customer base ---------------------------------------------------------------------- Total customer count 2004 2003 Increase ---------------------------------------------------------------------- 95% of revenue generated by: 24 customer 19 customers 26% ---------------------------------------------------------------------- Fab 2 production customers 7 customers 4 customers 75% ---------------------------------------------------------------------- Fab 2 pre-production customers 19 customers 6 customers 217% ---------------------------------------------------------------------- 2. Customer classifications During 2004, Tower grew its fabless customer base to 75 percent of total revenues*. ---------------------------------------------------------------------- Type of customer 2004 2003 ---------------------------------------------------------------------- IDM 25 % 50% ---------------------------------------------------------------------- Fabless 75 % 50% ---------------------------------------------------------------------- * The above chart reflects Fab 2's increasing ramp up impact in 2004. 3. Expanding sales by geography While the US continues to be the main revenue market, Tower also added significant revenues from Israel in 2004. ---------------------------------------------------------------------- Region Revenues ---------------------------------------------------------------------- US 60% ---------------------------------------------------------------------- Israel 20% ---------------------------------------------------------------------- Pacific Rim (including Japan) 11% ---------------------------------------------------------------------- Europe 9% ---------------------------------------------------------------------- 4. Increasing specialized technology offerings Tower continues to develop differentiated technologies, utilizing core technical knowledge in embedded Inserted into. See embedded system. NVM (Non-Volatile RAM) See NVRAM. , CMOS image sensors A CMOS-based chip that records the intensities of light as variable charges similar to a CCD chip. Although initially used in less expensive digital cameras, the quality of CMOS sensors has improved steadily. CMOS sensors have advantages over CCDs. , mixed-signal and RF technologies, according to its strategic roadmap. During 2004, Tower: --Entered the RFID (Radio Frequency IDentification) A data collection technology that uses electronic tags for storing data. The tag, also known as an "electronic label," "transponder" or "code plate," is made up of an RFID chip attached to an antenna. market with technology development of unique technology solution to low cost RFID tags An electronic identification device that is made up of a chip and antenna. For reusable applications, it is typically embedded in a plastic housing, and for tracking shipments, it is usually part of a "smart" packaging label. with a leading RFID Tag supplier. --Provided prototype devices for a leading RF CMOS customer targeting the wireless market. --Fab 1, CMOS image sensors - Continued to develop processes targeting advanced medical imaging as well as industrial and machine vision with exceptional performance. In 2004 about 12 percent of Fab 1 revenues were generated from those market segments. --Fab 2, CMOS image sensors - Engaged in pre-production phases with multiple customers developing more than 10 different products targeting cell phone and consumer camera sensors
--Embedded NVM - Tower completed the development of 0.18-micron embedded NVM technology with initial successful customer design fully functional in record time. As can be seen in the below table, Tower's diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. to specialized technologies continues to be apparent in Fab 1 percentages and is already starting to be reflected in Fab 2 percentages. In Fab 2, Tower is initially ramping its core CMOS technology platforms. However, at the 0.18-micron node Tower's specialized technologies offering is leading edge in the industry, the company expects the specialized technology effect to materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. in this fab in the years to come. ---------------------------------------------------------------------- Technology Segment Consolidated Fab 1 Fab 2 ---------------------------------------------------------------------- Core CMOS 61% 24% 92% ---------------------------------------------------------------------- Non volatile memory 16% 32% 3% ---------------------------------------------------------------------- CMOS image sensor 8% 15% 2% ---------------------------------------------------------------------- Mixed signal 15% 29% 3% ---------------------------------------------------------------------- 5. Diversifying revenues by market segment The introduction of Fab 2 has increased Tower's presence in the consumer market. Tower expects this trend to continue during 2005, although the company anticipates that the consumer portion of its consumer segment will be reduced. ---------------------------------------------------------------------- Industry Segment Revenues ---------------------------------------------------------------------- Consumer 50% ---------------------------------------------------------------------- Communication 15% ---------------------------------------------------------------------- PC 7% ---------------------------------------------------------------------- Industrial, medical and automotive 10% ---------------------------------------------------------------------- Multi market and others 18% ---------------------------------------------------------------------- Tower will host a conference call to discuss these results on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , February February: see month. 4, 2005 at 11:00 a.m. Eastern time / 18:00 p.m. Israel time. To participate, call 1-800-500-0177 (U.S. toll-free number) or 1-719-457-2679 (international) and mention ID code: TOWER. Callers in Israel are invited to call local 03-925-5910. The conference call also will be webcast live at www.companyboardroom.com and at www.towersemi.com and will be available thereafter on both Web sites for replay for 90 days, starting at 2:00 p.m. Eastern time on the day of the call and on 03-925-5947 for Israeli callers for 7 days after the call. About Tower Semiconductor Ltd. Tower Semiconductor LTD. is a pure-play independent wafer foundry established in 1993. The company manufactures integrated circuits Integrated circuits Miniature electronic circuits produced within and upon a single semiconductor crystal, usually silicon. Integrated circuits range in complexity from simple logic circuits and amplifiers, about 1/20 in. (1. with geometries ranging from 1.0 to 0.13 micron micron: see micrometer. One micrometer, which is one millionth of a meter or approximately 1/25,000 of an inch. The tiny elements that make up a transistor on a chip are measured in micrometers and nanometers. See process technology. ; it also provides complementary technical services and design support. In addition to digital CMOS process technology, Tower offers advanced non-volatile memory Refers to memory chips that hold their content without power being applied. It may refer to chips that are not changeable, such as ROMs and PROMs, or to chips that can be rewritten many times such as flash 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 wafers compressed roughage in flat plates useful for feeding to animals in transit. per month. Fab 2 features 0.18 micron and below process technologies, including foundry-standard technology. When fully equipped, Fab 2 is expected to offer full production capacity of 33,000 200mm wafers per month. Tower's Web site is located at www.towersemi.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. This press release includes forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , 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 complete the Fab 2 project, (iii) the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the semiconductor industry and the resulting periodic overcapacity o·ver·ca·pac·i·ty n. Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. , fluctuations in operating results, future average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. erosion that may be more severe than our expectations (iv) operating our facilities at satisfactory utilization rates, (v) our ability to meet certain of the covenants stipulated in our amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. facility agreement, (vi) our ability to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. 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 extend the five-year investment period under our Fab 2 approved enterprise program, (viii) attracting additional customers, (ix) not receiving orders from our wafer partners 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, (xv) business interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. due to earthquakes, terror attacks terror attack n → atentado (terrorista) terror attack n → attentato terroristico 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 Annual Report on Forms 20-F and 6-K, as were filed with the Securities and Exchange Commission and the Israel Securities Authority The Israel Securities Authority (ISA) is Israel's securities regulator. Its Chairman since 2002 is Moshe Tery. Establishment The ISA was established pursuant to the Securities Law, 5728-1968. . Future results may differ materially from those previously reported. We do not intend to update the information contained in this release.
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
As of December 31,
-------------------
2004 2003
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 27,664 $ 12,448
Designated cash and short-term
interest-bearing deposits 53,793 44,042
Trade accounts receivable 19,286 11,631
Other receivables 11,365 11,073
Inventories 25,669 19,382
Other current assets 1,818 1,729
--------- ---------
Total current assets 139,595 100,305
--------- ---------
LONG-TERM INVESTMENTS
Long-term interest-bearing deposits
designated for Fab 2 operations 5,134 4,848
Other long-term investment -- 6,000
--------- ---------
5,134 10,848
--------- ---------
PROPERTY AND EQUIPMENT, NET 609,296 568,412
--------- ---------
OTHER ASSETS, NET 93,483 108,770
--------- ---------
TOTAL ASSETS $ 847,508 $ 788,335
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 65,326 $ 40,249
Other current liabilities 10,678 9,564
--------- ---------
Total current liabilities 76,004 49,813
LONG-TERM DEBT 497,000 431,000
CONVERTIBLE DEBENTURES 26,651 25,783
LONG-TERM LIABILITY IN RESPECT
OF CUSTOMERS' ADVANCES 64,428 46,347
OTHER LONG-TERM LIABILITIES 15,445 5,935
--------- ---------
Total liabilities 679,528 558,878
--------- ---------
SHAREHOLDERS' EQUITY
Ordinary shares 16,274 13,150
Additional paid-in capital 517,476 427,881
Proceeds on account of share capital -- 16,428
Shareholder receivables (26) (26)
Accumulated deficit (356,672) (218,904)
--------- ---------
177,052 238,529
Treasury stock (9,072) (9,072)
--------- ---------
Total shareholders' equity 167,980 229,457
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 847,508 $ 788,335
========= =========
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Year ended Three months ended
December 31, December 31,
------------------ ------------------
2004 2003 2004 2003
-------- --------- -------- ---------
SALES $ 126,055 $ 61,368 $ 30,065 $ 19,823
COST OF SALES 228,410 122,395 66,168 46,579
-------- --------- -------- ---------
GROSS LOSS (102,355) (61,027) (36,103) (26,756)
-------- --------- -------- ---------
OPERATING COSTS AND EXPENSES
Research and development 17,053 20,709 5,845 8,158
Marketing, general and
administrative 21,297 22,615 5,121 5,551
-------- --------- -------- ---------
38,350 43,324 10,966 13,709
-------- --------- -------- ---------
OPERATING LOSS (140,705) (104,351) (47,069) (40,465)
FINANCING EXPENSE, NET (29,745) (9,826) (8,838) (5,533)
OTHER INCOME (EXPENSE), NET 32,682 (84) 32,574 3
======== ========= ======== =========
LOSS FOR THE YEAR $(137,768)$(114,261)$(23,333) $(45,995)
======== ========= ======== =========
BASIC LOSS PER ORDINARY SHARE
Loss per (*) share $ (2.13) $ (2.40) $ (0.36) $ (0.91)
======== ========= ======== =========
(*) Basic and diluted loss per share data in accordance with U.S. GAAP
are the same as the Isr. GAAP data for the year and three months
periods ended December 31, 2004 and 2003
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