TowerJazz reports its results for the second quarter ended June 30, 2017
OREANDA-NEWS. TowerJazz (NASDAQ:TSEM) (TASE:TSEM) today reported its results for the second quarter ended June 30, 2017.
Highlights of the Second Quarter of 2017
- Record revenues of $345 million, up 13% year over year
- Record gross profit of $91 million, up 25% year over year
- Record operating profit of $57 million, up 43% year over year
- Record EBITDA of $108 million, up 24% year over year
- Net profit of $50 million, up 30% year over year; Basic earnings per share of $0.52 as compared with $0.45 in the second quarter of 2016; and
- Record free cash flow of $43 million, with cash from operations of $84 million.
CEO Commentary
Mr. Russell Ellwanger, Chief Executive Officer of TowerJazz, commented, “Our second quarter of 2017 presented again strong and incremental business and financial performance, having achieved 26% year over year organic revenue growth resulting in an annual net profit run rate of $200 million. We remain focused and attentive to the needs of our broad customer base, working to provide full circle value creation built upon our market leading specialty technology offerings, and hence guide further growth for our third quarter of 2017.”
Second Quarter Results Overview
Revenues for the second quarter of 2017 were a record $345 million, reflecting 13% growth as compared to $305 million in the second quarter of 2016. For the second quarter of 2017, our organic growth, excluding Panasonic and Maxim long term committed contracts, was 26% as compared to the second quarter of 2016.
Gross profit for the second quarter of 2017 was a record $91 million, an increase of 25% as compared to $73 million in the second quarter of 2016. Operating profit was a record $57 million for the second quarter of 2017, demonstrating an increase of 43%, as compared to $40 million reported in the second quarter of 2016.
EBITDA for the second quarter of 2017 was a record $108 million, at a margin of 31%, as compared to $87 million, at a margin of 29%, in the second quarter of 2016.
Net profit for the second quarter of 2017 was $50 million, a 30% increase as compared to $38 million in the second quarter of 2016, resulting in net margin of 14.5% vs. 12.6%, respectively; $0.52 basic earnings per share vs. $0.45, respectively; and $0.49 diluted earnings per share vs. $0.40, respectively. Net profit for the second quarter of 2016 included $10 million net gain from the acquisition of the San Antonio fabrication facility and $7 million financing cost resulted from the early repayment of the Israeli banks’ loans.
Free cash flow for the quarter was a record of $43 million, with $84 million positive cash flow from operations and $41 million investments in fixed assets, net. The other main cash activities during the second quarter of 2017 were comprised of the following: $14 million received from the exercise of warrants and options and $6 million debt repayments. Cash, cash equivalents and short term deposits as of June 30, 2017 were at a record of $484 million with $341 million of debt outstanding principal amount. Net cash (cash and short-term deposits less debt par value) as of June 30, 2017, totaled to a record of $143 million as compared to net cash of $86 million as of March 31, 2017 and $37 million as of December 31, 2016.
Shareholders' equity as of June 30, 2017 was a record of $814 million, as compared to $746 million as of March 31, 2017 and to $683 million as of December 31, 2016.
As compared to the first quarter of 2017, second quarter revenues increased by $15 million, which resulted in EBITDA and net profit growth of $7 million and $5 million, respectively, representing incremental margins of 49% and 30%, respectively.
First Half Results Overview
Revenues for the 2017 first half were a record of $675 million, reflecting 16% growth as compared to $583 million for the first half of 2016.
Gross and operating profit for the first half of 2017 were a record of $176 million and $110 million, respectively, increased as compared to $134 million and $71 million, respectively, in the first half of 2016.
EBITDA for the first half of 2017 totaled to a record of $209 million, or 31% EBITDA margin, representing 27% increase as compared with $165 million, or 28% EBITDA margin, in the first half of 2016.
Net profit for the first half of 2017 was $96 million, or $1.00 in basic earnings per share. Net profit for the first half of 2016 was $104 million, or $1.22 basic earnings per share and included $51 million gain from the acquisition of San Antonio fab and $7 million non-cash financing expenses relating to the Israeli banks loans early repayment.
Free cash flow for the first half of 2017 was a record of $84 million, with a record $166 million positive cash flow from operations and $82 million investments in fixed assets, net. The other main cash activities during the first half of 2017 were comprised of the following: $27 million received from the exercise of warrants and options; $17 million debt repayments; a positive $4 million due to the effect of the Japanese Yen exchange rate on the cash balance; and a TPSCo dividend to Panasonic of $4 million.
Business Outlook
TowerJazz expects revenues for the third quarter of 2017 ending September 30, 2017 to be $355 million with an upward or downward range of 5%, representing 9% year over year revenue growth as compared to the third quarter of 2016.
Teleconference and Webcast
TowerJazz will host an investor conference call today, August 3, 2017, at 10:00 a.m. Eastern time (9:00 a.m. Central time, 8:00 a.m. Mountain time, 7:00 a.m. Pacific time and 5:00 p.m. Israel time) to discuss the Company’s financial results for the second quarter 2017 and its outlook. This call will be webcast and can be accessed via TowerJazz’s website at www.towerjazz.com, or by calling: 1-888-668-9141 (U.S. Toll-Free), 03-918-0609 (Israel), +972-3-918-0609 (International). For those who are not available to listen to the live broadcast, the call will be archived for 90 days.
About TowerJazz
Tower Semiconductor Ltd. (NASDAQ:TSEM) (TASE:TSEM) and its subsidiaries operate collectively under the brand name TowerJazz, the global specialty foundry leader. TowerJazz manufactures next-generation integrated circuits (ICs) in growing markets such as consumer, industrial, automotive, medical and aerospace and defense. TowerJazz’s advanced technology is comprised of a broad range of customizable process platforms such as: SiGe, BiCMOS, mixed-signal/CMOS, RF CMOS, CMOS image sensor, integrated power management (BCD and 700V), and MEMS. TowerJazz also provides world-class design enablement for a quick and accurate design cycle as well as Transfer Optimization and development Process Services (TOPS) to IDMs and fabless companies that need to expand capacity. To provide multi-fab sourcing and extended capacity for its customers, TowerJazz operates two manufacturing facilities in Israel (150mm and 200mm), two in the U.S. (200mm) and three facilities in Japan (two 200mm and one 300mm). For more information, please visit www.towerjazz.com.
(Financial tables follow)
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(dollars in thousands) | |||||||
June 30, | March 31, | December 31, | |||||
2017 | 2017 | 2016 | |||||
(unaudited) | (unaudited) | ||||||
A S S E T S | |||||||
CURRENT ASSETS | |||||||
Cash, cash equivalents and short-term deposits | $ | 483,603 | $ | 432,113 | $ | 389,377 | |
Trade accounts receivable | 150,731 | 133,539 | 141,048 | ||||
Inventories | 139,010 | 140,734 | 137,532 | ||||
Other current assets | 34,391 | 27,235 | 30,041 | ||||
Total current assets | 807,735 | 733,621 | 697,998 | ||||
LONG-TERM INVESTMENTS | 27,291 | 26,661 | 25,624 | ||||
PROPERTY AND EQUIPMENT, NET | 628,279 | 629,554 | 616,686 | ||||
INTANGIBLE ASSETS, NET | 23,848 | 26,164 | 28,129 | ||||
GOODWILL | 7,000 | 7,000 | 7,000 | ||||
OTHER ASSETS, NET | 4,355 | 4,403 | 4,447 | ||||
TOTAL ASSETS | $ | 1,498,508 | $ | 1,427,403 | $ | 1,379,884 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Short-term debt | $ | 55,295 | $ | 43,331 | $ | 48,084 | |
Trade accounts payable | 95,328 | 104,084 | 99,262 | ||||
Deferred revenue and customers' advances | 25,689 | 24,945 | 26,169 | ||||
Other current liabilities | 78,051 | 65,469 | 73,600 | ||||
Total current liabilities | 254,363 | 237,829 | 247,115 | ||||
LONG-TERM DEBT | 297,609 | 303,152 | 296,144 | ||||
LONG-TERM CUSTOMERS' ADVANCES | 29,061 | 34,369 | 41,874 | ||||
LONG-TERM EMPLOYEE RELATED LIABILITIES | 14,652 | 14,447 | 14,176 | ||||
DEFERRED TAX LIABILITY AND OTHER LONG-TERM LIABILITIES | 88,808 | 91,715 | 97,961 | ||||
TOTAL LIABILITIES | 684,493 | 681,512 | 697,270 | ||||
TOTAL SHAREHOLDERS' EQUITY | 814,015 | 745,891 | 682,614 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,498,508 | $ | 1,427,403 | $ | 1,379,884 |
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||||||||||
(dollars and share count in thousands, except per share data) | ||||||||||||||||
T h r e e m o n t h s e n d e d | ||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||
2017 | 2017 | 2016 | ||||||||||||||
REVENUES | $ | 345,059 | $ | 330,080 | $ | 305,003 | ||||||||||
COST OF REVENUES | 253,998 | 245,312 | 232,275 | |||||||||||||
GROSS PROFIT | 91,061 | 84,768 | 72,728 | |||||||||||||
OPERATING COSTS AND EXPENSES: | ||||||||||||||||
Research and development | 16,432 | 15,768 | 16,030 | |||||||||||||
Marketing, general and administrative | 17,238 | 16,237 | 16,520 | |||||||||||||
33,670 | 32,005 | 32,550 | ||||||||||||||
OPERATING PROFIT | 57,391 | 52,763 | 40,178 | |||||||||||||
INTEREST EXPENSE, NET | (2,070 | ) | (2,211 | ) | (2,997 | ) | ||||||||||
OTHER FINANCING EXPENSE, NET | (1,053 | ) | (2,018 | ) | (7,528 | ) | (a) | |||||||||
GAIN FROM ACQUISITION, NET | -- | -- | 10,158 | (a) | ||||||||||||
OTHER INCOME, NET | 142 | 511 | 4,362 | |||||||||||||
PROFIT BEFORE INCOME TAX | 54,410 | 49,045 | 44,173 | (a) | ||||||||||||
INCOME TAX EXPENSE | (2,683 | ) | (1,999 | ) | (3,826 | ) | ||||||||||
PROFIT BEFORE NON CONTROLLING INTEREST | 51,727 | 47,046 | 40,347 | (a) | ||||||||||||
NON CONTROLLING INTEREST | (1,710 | ) | (1,537 | ) | (1,861 | ) | ||||||||||
NET PROFIT | $ | 50,017 | $ | 45,509 | $ | 38,486 | (a) | |||||||||
BASIC EARNINGS PER SHARE | $ | 0.52 | $ | 0.48 | $ | 0.45 | (a) | |||||||||
Weighted average number of shares | 96,365 | 93,900 | 86,300 | |||||||||||||
DILUTED EARNINGS PER SHARE | $ | 0.49 | $ | 0.45 | $ | 0.40 | (a) | |||||||||
Net profit used for diluted earnings per share | $ | 52,217 | $ | 47,666 | $ | 40,556 | (a) | |||||||||
Weighted average number of shares | 105,648 | 104,915 | 100,163 | |||||||||||||
(a) | Three months ended June 30, 2016 included $10,158 net gain from acquisition of TJT and $6,653 financing cost resulted from banks loans early repayment. | |||||||||||||||
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, | |||||||||||||
2017 | 2016 | ||||||||||||
REVENUES | $ | 675,139 | $ | 583,046 | |||||||||
COST OF REVENUES | 499,310 | 448,971 | |||||||||||
GROSS PROFIT | 175,829 | 134,075 | |||||||||||
OPERATING COSTS AND EXPENSES: | |||||||||||||
Research and development | 32,200 | 31,267 | |||||||||||
Marketing, general and administrative | 33,475 | 32,443 | |||||||||||
Nishiwaki Fab restructuring and impairment cost (income), net | -- | (627 | ) | ||||||||||
65,675 | 63,083 | ||||||||||||
OPERATING PROFIT | 110,154 | 70,992 | |||||||||||
INTEREST EXPENSE, NET | (4,281 | ) | (6,355 | ) | |||||||||
OTHER FINANCING EXPENSE, NET | (3,071 | ) | (11,497 | ) | (b) | ||||||||
GAIN FROM ACQUISITION, NET | -- | 51,298 | (b) | ||||||||||
OTHER INCOME, NET | 653 | 4,362 | |||||||||||
PROFIT BEFORE INCOME TAX | 103,455 | 108,800 | (b) | ||||||||||
INCOME TAX EXPENSE | (4,682 | ) | (3,905 | ) | |||||||||
PROFIT BEFORE NON CONTROLLING INTEREST | 98,773 | 104,895 | (b) | ||||||||||
NON CONTROLLING INTEREST | (3,247 | ) | (465 | ) | |||||||||
NET PROFIT | $ | 95,526 | $ | 104,430 | (b) | ||||||||
BASIC EARNINGS PER SHARE | $ | 1.00 | $ | 1.22 | (b) | ||||||||
Weighted average number of shares | 95,139 | 85,410 | |||||||||||
DILUTED EARNINGS PER SHARE | $ | 0.95 | $ | 1.09 | (b) | ||||||||
Net profit used for diluted earnings per share | $ | 99,883 | $ | 108,556 | (b) | ||||||||
Weighted average number of shares | 105,288 | 99,546 | |||||||||||
(b) | Six months ended June 30, 2016 included $51,298 net gain from acquisition of TJT and $6,653 financing cost resulted from banks loans early repayment. | ||||||||||||
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES | ||||||||||||
UNAUDITED RECONCILIATION OF CERTAIN FINANCIAL DATA | ||||||||||||
(dollars and share count in thousands, except per share data) | ||||||||||||
T h r e e m o n t h s e n d e d | ||||||||||||
June 30, | March 31, | June 30, | ||||||||||
2017 | 2017 | 2016 | ||||||||||
RECONCILIATION FROM GAAP NET PROFIT TO ADJUSTED NET PROFIT: | ||||||||||||
GAAP NET PROFIT | $ | 50,017 | $ | 45,509 | $ | 38,486 | ||||||
Stock based compensation | 2,319 | 2,098 | 2,532 | |||||||||
Amortization of acquired intangible assets | 2,246 | 2,336 | 2,395 | |||||||||
Financing cost resulted from banks loans early repayment | -- | -- | 6,653 | |||||||||
Gain from San Antonio acquisition, net | -- | -- | (10,158 | ) | ||||||||
ADJUSTED NET PROFIT | $ | 54,582 | $ | 49,943 | $ | 39,908 | ||||||
ADJUSTED NET PROFIT PER SHARE: | ||||||||||||
Basic | $ | 0.57 | $ | 0.53 | $ | 0.46 | ||||||
Diluted | $ | 0.54 | $ | 0.50 | $ | 0.42 | ||||||
Fully diluted, see (c) below | $ | 0.53 | $ | 0.49 | $ | 0.39 | ||||||
ADJUSTED NET PROFIT USED TO CALCULATE PER SHARE DATA: | ||||||||||||
Basic | $ | 54,582 | $ | 49,943 | $ | 39,908 | ||||||
Diluted | $ | 56,782 | $ | 52,100 | $ | 41,978 | ||||||
Fully diluted | $ | 56,782 | $ | 52,100 | $ | 41,978 | ||||||
NUMBER OF SHARES AND OTHER SECURITIES USED TO CALCULATE PER SHARE DATA: | ||||||||||||
Basic | 96,365 | 93,900 | 86,300 | |||||||||
Diluted | 105,648 | 104,915 | 100,163 | |||||||||
Fully diluted, see (c) below | 107,375 | 107,245 | 107,056 | |||||||||
EBITDA CALCULATION: | ||||||||||||
GAAP OPERATING PROFIT | $ | 57,391 | $ | 52,763 | $ | 40,178 | ||||||
Cost of revenue: | ||||||||||||
Depreciation of fixed assets | 46,360 | 43,819 | 41,910 | |||||||||
Stock based compensation | 587 | 678 | 1,160 | |||||||||
Amortization of acquired intangible assets | 2,058 | 2,148 | 2,207 | |||||||||
Research and development: | ||||||||||||
Stock based compensation | 576 | 539 | 533 | |||||||||
Marketing, general and administrative: | ||||||||||||
Stock based compensation | 1,156 | 881 | 839 | |||||||||
Amortization of acquired intangible assets | 188 | 188 | 188 | |||||||||
EBITDA | $ | 108,316 | $ | 101,016 | $ | 87,015 | ||||||
(c) | Fully diluted share count as of June 30, 2017 presented above includes all issued and outstanding securities; outstanding ordinary share count as of June 30, 2017 is 97,893 thousands. |
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED SOURCES AND USES REPORT (UNAUDITED) | |||||||||||||||
(dollars in thousands) | |||||||||||||||
Six months ended | T h r e e m o n t h s e n d e d | ||||||||||||||
June 30, | June 30, | June 30, | March 31, | June 30, | |||||||||||
2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||
Cash and short-term deposits - beginning of period | $ | 389,377 | $ | 205,575 | $ | 432,113 | $ | 389,377 | $ | 244,577 | |||||
Cash from operations | 166,434 | 159,223 | 84,294 | 82,140 | 81,781 | ||||||||||
Investments in property and equipment, net | (81,660 | ) | (111,856 | ) | (41,312 | ) | (40,348 | ) | (54,323 | ) | |||||
Exercise of warrants and options, net | 27,010 | 6,241 | 14,254 | 12,756 | 360 | ||||||||||
Debt received (repaid), net | (17,460 | ) | 34,190 | (5,655 | ) | (11,805 | ) | 27,444 | |||||||
Effect of Japanese Yen exchange rate change over cash balance | 4,280 | 20,252 | (91 | ) | 4,371 | 11,223 | |||||||||
TPSCo dividend to Panasonic | (4,378 | ) | (2,563 | ) | -- | (4,378 | ) | -- | |||||||
Cash and short-term deposits - end of period | $ | 483,603 | $ | 311,062 | $ | 483,603 | $ | 432,113 | $ | 311,062 | |||||
Free Cash Flow | $ | 84,774 | $ | 47,367 | $ | 42,982 | $ | 41,792 | $ | 27,458 |
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
(dollars in thousands) | ||||||||
Three months ended | ||||||||
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
CASH FLOWS - OPERATING ACTIVITIES | ||||||||
Net profit for the period | $ | 51,727 | $ | 40,347 | ||||
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 | 52,389 | 48,117 | ||||||
Effect of indexation, translation and fair value measurement on debt | 4,873 | 6,700 | ||||||
Other income, net | (142 | ) | (4,362 | ) | ||||
Gain from acquisition, net | -- | (10,158 | ) | |||||
Changes in assets and liabilities: | ||||||||
Trade accounts receivable | (17,242 | ) | (1,916 | ) | ||||
Other current assets | (7,307 | ) | (5,476 | ) | ||||
Inventories | 1,688 | (6,300 | ) | |||||
Trade accounts payable | (6,530 | ) | 130 | |||||
Deferred revenue and customers' advances | (4,564 | ) | 8,294 | |||||
Other current liabilities | 12,866 | 11,194 | ||||||
Long-term employee related liabilities | (234 | ) | (143 | ) | ||||
Deferred tax liability, net | (3,230 | ) | (4,646 | ) | ||||
Net cash provided by operating activities | 84,294 | 81,781 | ||||||
CASH FLOWS - INVESTING ACTIVITIES | ||||||||
Investments in property and equipment, net | (41,312 | ) | (54,323 | ) | ||||
Deposits and other long-term investments, net | -- | 19,600 | ||||||
Net cash used in investing activities | (41,312 | ) | (34,723 | ) | ||||
CASH FLOWS - FINANCING ACTIVITIES | ||||||||
Debt received (repaid), net | (5,655 | ) | 27,444 | |||||
Exercise of warrants and options, net | 14,254 | 360 | ||||||
Net cash provided by (used in) financing activities | 8,599 | 27,804 | ||||||
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE | (91 | ) | 11,623 | |||||
INCREASE IN CASH AND SHORT-TERM DEPOSITS | 51,490 | 86,485 | ||||||
CASH AND SHORT-TERM DEPOSITS - BEGINNING OF PERIOD | 432,113 | 224,577 | ||||||
CASH AND SHORT-TERM DEPOSITS - END OF PERIOD | $ | 483,603 | $ | 311,062 |
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