TSEM Tower Semiconductor Ltd

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Exhibit 99.1

Tower Semiconductor Ltd. (NASDAQ/TASE: TSEM), the leading foundry of high-value analog semiconductor solutions, provides technology, development, and process platforms for its customers in growing markets such as consumer, industrial, automotive, mobile, infrastructure, medical and aerospace and defense. Tower Semiconductor focuses on creating a positive and sustainable impact on the world through long-term partnerships and its advanced and innovative analog technology offering, comprised of a broad range of customizable process platforms such as SiGe, BiCMOS, mixed-signal/CMOS, RF CMOS, CMOS image sensor, non-imaging sensors, displays, integrated power management (BCD and 700V), photonics, and MEMS. Tower Semiconductor also provides world-class design enablement for a quick and accurate design cycle as well as process transfer services including development, transfer, and optimization, to IDMs and fabless companies. To provide multi-fab sourcing and extended capacity for its customers, Tower Semiconductor owns two facilities in Israel (150mm and 200mm), two in the U.S. (200mm), two in Japan (200mm and 300mm) which it owns through its 51% holdings in TPSCo, shares a 300mm facility in Agrate, Italy, with ST as well as has access to a 300mm capacity corridor in Intel’s New Mexico factory. For more information, please visit: www.towersemi.com.

 

This press release, including other projections with respect to our business and activities, 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 and you should not place any undue reliance on such forward-looking statements. Potential risks and uncertainties include, without limitation, risks and uncertainties associated with: (i) demand in our customers’ end markets, (ii) reliance on acquisition and/or gaining additional capacity for growth, (iii) difficulties in achieving acceptable operational metrics and indices in the future as a result of operational, technological or process-related problems, (iv) identifying and negotiating with third-party buyers for the sale of any excess and/or unused equipment, inventory and/or other assets, (v) maintaining current key customers and attracting new key customers, (vi) over demand for our foundry services resulting in high utilization and its effect on cycle time, yield and on schedule delivery, as well as customers potentially being placed on allocation, which may cause customers to transfer their business to other vendors, (vii) financial results may fluctuate from quarter to quarter making it difficult to forecast future performance, (viii) our debt and other liabilities that may impact our financial position and operations, (ix) our ability to successfully execute acquisitions, integrate them into our business, utilize our expanded capacity and find new business, (x) fluctuations in cash flow, (xi) our ability to satisfy the covenants stipulated in our agreements with our debt holders, (xii) pending litigation, (xiii) meeting the conditions set in approval certificates and other regulations under which we received grants and/or royalties and/or any type of funding from the Israeli, US and/or Japan governmental agencies, (xiv) receipt of orders that are lower than the customer purchase commitments and/or failure to receive customer orders currently expected, (xv) possible incurrence of additional indebtedness, (xvi) effect of global recession, unfavorable economic conditions and/or credit crisis, (xvii) our ability to accurately forecast financial performance, which is affected by limited order backlog and lengthy sales cycles, (xviii) possible situations of obsolete inventory if forecasted demand exceeds actual demand when we create inventory before receipt of customer orders, (xix) the cyclical nature of the semiconductor industry and the resulting periodic overcapacity, fluctuations in operating results and future average selling price erosion, (xx) obtain financing for capacity acquisition related transactions, strategic and/or other growth or M&A opportunities, including for funding Agrate fab’s significant 300mm capacity investments and acquisition or funding of equipment and other fixed assets associated with the capacity corridor transaction with Intel as announced in September 2023, in addition to other capacity expansion plans, and the possible unavailability of such financing and/or the availability of such financing on unfavorable terms, (xxi) operating our facilities at sufficient utilization rates necessary to generate and maintain positive and sustainable gross, operating and net profit, (xxii) the purchase of equipment and/or raw material (including purchase beyond our needs), the timely completion of the equipment installation, technology transfer and raising the funds therefor, (xxiii) product returns and defective products, (xxiv) our ability to maintain and develop our technology processes and services to keep pace with new technology, evolving standards, changing customer and end-user requirements, new product introductions and short product life cycles, (xxv) competing effectively, (xxvi) use of outsourced foundry services by both fabless semiconductor companies and integrated device manufacturers, (xxvii) our dependence on intellectual property rights of others, our ability to operate our business without infringing others’ intellectual property rights and our ability to enforce our intellectual property against infringement, (xxviii) the fab3 landlord’s alleged claims that the noise abatement efforts made thus far are not adequate under the terms of the amended lease that caused him to request a judicial declaration that there was a material non-curable breach of the lease and that he would be entitled to terminate the lease, as well the ability to extend such lease or acquire the real estate and obtain the required local and/or state approvals required to be able to continue operations beyond the current lease term, (xxix) retention of key employees and recruitment and retention of skilled qualified personnel, (xxx) exposure to inflation, currency rates (mainly the Israeli Shekel, the Japanese Yen and the Euro) and interest rate fluctuations and risks associated with doing business locally and internationally, as well fluctuations in the market price of our traded securities, (xxxi) meeting regulatory requirements worldwide, including export, environmental and governmental regulations, as well as risks related to international operations, (xxxii) potential engagement for fab establishment, joint venture and/or capital lease transactions for capacity enhancement in advanced technologies, including risks and uncertainties associated with Agrate fab establishment and the capacity corridor transaction with Intel as announced in September 2023, such as their qualification schedule, technology, equipment and process qualification, facility operational ramp-up, customer engagements, cost structure, required investments and other terms, which may require additional funding to cover their significant capacity investment needs and other payments, the availability of which funding cannot be assured on favorable terms, if at all, (xxxiii) potential liabilities, cost and other impact that may be incurred or occur due to reorganization and consolidation of fabrication facilities, including the impact of cessation of operations of our facilities, including with regard to our 6 inch facility, (xxxiv) potential security, cyber and privacy breaches, (xxxv) workforce that is not unionized which may become unionized, and/or workforce that is unionized and may take action such as strikes that may create increased cost and operational risks, (xxxvi) issuance of ordinary shares as a result of exercise and/or vesting of any of our employee stock options and/or restricted stock units, as well as any sale of shares by any of our shareholders, or any market expectation thereof, as well as issuance of additional employee stock options and/or restricted stock units, or any market expectation thereof, which may depress the market value of the Company and the price of the company’s ordinary shares and in addition may impair our ability to raise future capital, and (xxxvii) climate change, business interruption due to flood, fire, pandemic, earthquake and other natural disasters, the security situation in Israel, global trade “war” and the current war in Israel, including potential inability to continue uninterrupted operations of the Israeli fabs, impact on global supply chain to and from the Israeli fabs, power interruptions, chemicals or other leaks or damages as a result of the war, absence of workforce due to military service as well as risk that certain countries will restrict doing business with Israeli companies, including imposing restrictions if hostilities in Israel or political instability in the region continue or exacerbate, and other events beyond our control. With respect to the current war in Israel, if instability in neighboring states occurs, Israel could be subject to additional political, economic, and military confines, and our Israeli facilities’ operations could be materially adversely affected. Any current or future hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel, could have a material adverse effect on our business, financial condition and results of operations.

 

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars and share count in thousands, except per share data)

		Three months ended
		June 30,				March 31,				June 30,
		2024				2024				2023
REVENUES		$	351,181			$	327,238			$	357,191
COST OF REVENUES			264,259				254,632				270,674
GROSS PROFIT			86,922				72,606				86,517
OPERATING COSTS AND EXPENSES:
Research and development			18,994				19,951				19,452
Marketing, general and administrative			19,050				18,670				17,387
Restructuring income, net *			(6,270	)			--				(851	)
			31,774				38,621				35,988
OPERATING PROFIT			55,148				33,985				50,529
FINANCING AND OTHER INCOME, NET			7,710				3,984				3,924
PROFIT BEFORE INCOME TAX			62,858				37,969				54,453
INCOME TAX BENEFIT (EXPENSE), NET			(6,108	)			5,078				(5,747	)
NET PROFIT			56,750				43,047				48,706
Net loss (income) attributable to non-controlling interest			(3,305	)			1,587				2,484
NET PROFIT ATTRIBUTABLE TO THE COMPANY		$	53,445			$	44,634			$	51,190
BASIC EARNINGS PER SHARE		$	0.48			$	0.40			$	0.46
Weighted average number of shares			111,037				110,840				110,088
DILUTED EARNINGS PER SHARE		$	0.48			$	0.40			$	0.46
Weighted average number of shares			111,979				111,627				111,234

* Restructuring income, net resulted from the previously disclosed reorganization and restructure of our Japan operations during 2022.

RECONCILIATION FROM GAAP NET PROFIT ATTRIBUTABLE TO THE COMPANY TO ADJUSTED NET PROFIT ATTRIBUTABLE TO THE COMPANY:
GAAP NET PROFIT ATTRIBUTABLE TO THE COMPANY		$	53,445			$	44,634			$	51,190
Stock based compensation			7,781				6,761				6,923
Amortization of acquired intangible assets			448				448				491
Restructuring income, net **			(2,634	)			--				(250	)
ADJUSTED NET PROFIT ATTRIBUTABLE TO THE COMPANY		$	59,040			$	51,843			$	58,354
ADJUSTED EARNINGS PER SHARE:
Basic		$	0.53			$	0.47			$	0.53
Diluted		$	0.53			$	0.46			$	0.52

** Restructuring income, net resulted from the previously disclosed reorganization and restructure of our Japan operations during 2022, net of taxes.

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars and share count in thousands, except per share data)

		Six months ended
		June 30,
		2024				2023
REVENUES		$	678,419			$	712,802
COST OF REVENUES			518,891				530,568
GROSS PROFIT			159,528				182,234
OPERATING COSTS AND EXPENSES:
Research and development			38,945				38,783
Marketing, general and administrative			37,720				36,016
Restructuring income, net *			(6,270	)			(32,506	)
			70,395				42,293
OPERATING PROFIT			89,133				139,941
FINANCING AND OTHER INCOME, NET			11,694				10,921
PROFIT BEFORE INCOME TAX			100,827				150,862
INCOME TAX EXPENSE, NET			(1,030	)			(20,788	)
NET PROFIT			99,797				130,074
Net income attributable to non-controlling interest			(1,718	)			(7,482	)
NET PROFIT ATTRIBUTABLE TO THE COMPANY		$	98,079			$	122,592
BASIC EARNINGS PER SHARE		$	0.88			$	1.11
Weighted average number of shares			110,938				110,025
DILUTED EARNINGS PER SHARE		$	0.88			$	1.10
Weighted average number of shares			111,964				111,153

* Restructuring income, net resulted from the previously disclosed reorganization and restructure of our Japan operations during 2022.
RECONCILIATION FROM GAAP NET PROFIT ATTRIBUTABLE TO THE COMPANY TO ADJUSTED NET PROFIT ATTRIBUTABLE TO THE COMPANY:
GAAP NET PROFIT ATTRIBUTABLE TO THE COMPANY		$	98,079			$	122,592
Stock based compensation			14,542				13,371
Amortization of acquired intangible assets			896				990
Restructuring income, net **			(2,634	)			(11,224	)
ADJUSTED NET PROFIT ATTRIBUTABLE TO THE COMPANY		$	110,883			$	125,729
ADJUSTED EARNINGS PER SHARE:
Basic		$	1.00			$	1.14
Diluted		$	0.99			$	1.13

** Restructuring income, net resulted from the previously disclosed reorganization and restructure of our Japan operations during 2022, net of taxes.

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONSOLIDATED SOURCES AND USES REPORT (UNAUDITED)

(dollars in thousands)

		Three months ended
		June 30,				March 31,				June 30,
		2024				2024				2023
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		$	260,497			$	260,664			$	304,934
Net cash provided by operating activities			113,085				110,038				75,494
Investments in property and equipment, net			(112,615	)			(98,018	)			(89,433	)
Debt repayment			(10,439	)			(8,409	)			(10,093	)
Effect of Japanese Yen exchange rate change over cash balance			(2,658	)			(2,665	)			(5,322	)
Deposits and marketable securities, net			17,443				(1,113	)			42,615
CASH AND CASH EQUIVALENTS - END OF PERIOD		$	265,313			$	260,497			$	318,195

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

		Three months ended
		June 30,				March 31,				June 30,
		2024				2024				2023
CASH FLOWS - OPERATING ACTIVITIES
Net profit for the period		$	56,750			$	43,047			$	48,706
Adjustments to reconcile net profit for the period
to net cash provided by operating activities:
Income and expense items not involving cash flows:
Depreciation and amortization *			65,567				59,544				63,579
Effect of exchange rate differences and fair value adjustment			625				227				3,102
Other expense (income), net			--				5,993				(149	)
Changes in assets and liabilities:
Trade accounts receivable			(7,227	)			(6,716	)			(21,241	)
Other assets			3,141				(13,454	)			2,114
Inventories			17,744				(23,703	)			16,315
Trade accounts payable			(19,741	)			32,559				(24,712	)
Deferred revenue and customers' advances			(2,091	)			(1,931	)			(10,723	)
Other current liabilities			274				16,868				(5,479	)
Other long-term liabilities			(1,957	)			(2,396	)			3,982
Net cash provided by operating activities			113,085				110,038				75,494
CASH FLOWS - INVESTING ACTIVITIES
Investments in property and equipment, net			(112,615	)			(98,018	)			(89,433	)
Deposits and marketable securities, net			17,443				(1,113	)			42,615
Net cash used in investing activities			(95,172	)			(99,131	)			(46,818	)
CASH FLOWS - FINANCING ACTIVITIES
Debt repayment			(10,439	)			(8,409	)			(10,093	)
Net cash used in financing activities			(10,439	)			(8,409	)			(10,093	)
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE			(2,658	)			(2,665	)			(5,322	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			4,816				(167	)			13,261
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD			260,497				260,664				304,934
CASH AND CASH EQUIVALENTS - END OF PERIOD		$	265,313			$	260,497			$	318,195

* Includes amortization of acquired intangible assets and stock based compensation in the amounts of $8,229, $7,209 and $7,414 for the 3 months periods ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively.