TowerJazz Targets $200 Million Quarterly Revenue Run Rate - Analyst Blog

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TowerJazz Targets $200 Million Quarterly Revenue Run Rate

Ken Nagy, CFA


On February 16, 2012, Tower Semiconductor Ltd. ( TSEM ) , the Israel based global specialty foundry leader, reported financial results for its fiscal 2011 fourth quarter and full year, ended December 31, 2011.

The Company reported fourth quarter revenues of $174.584 million, up 29% year over year but down $1.528 million sequentially from $176.112 million for the three months ended September 30, 2011.

Still, Tower reported a fourth quarter 2011 GAAP net loss of $16.701 million, down year over year from a profit of $1.296 million for the fourth quarter 2010 and from  a profit of $1.839 million during the third quarter of 2011.

The year over year decrease from net income to a net loss was primarily due to lower margins.

The sequential drop from a profit to a net loss was due to $11.962 million of financing expense, net charged in the fourth quarter of 2011 and a $14.020 million in other income, net received in the third quarter.

Year over year, gross margin dropped sharply from 24.7 percent to 10.1 percent for the three months ended December 31, 2011.

Still, gross margin for the fourth quarter increased slightly from 9.3 percent for the three months ended September 30, 2011.

Based on a weighted average number of ordinary shares outstanding of 318.255 million, GAAP basic net loss per share resulted in a net loss of $0.05 per share during the fourth quarter of fiscal 2011.  This compared to basic net income per ordinary share of $0.01 on a weighted average number of ordinary shares of 317.106 million during the three months ended September 30, 2011.

Non-GAAP fourth quarter 2011 gross profit was $57.742 million representing gross margin of 33.1 percent while net profit was $33.907 million.

For the fiscal year ended December 31, 2011, year over year revenues improved by 20 percent or $101.761 million to a record $611.023 million from $509.262 million for fiscal 2010.

The year over year revenue improvement was fueled by a long term business relationship with a new customer, Micron Technologies and the progress was a multiple times above the Company's peer group's growth.

GAAP Net loss for the twelve months improved by $23.837 million year over year to a net loss of $18.530 million for the fiscal year ended December 31, 2011. This compares to a net loss of $42.367 million for the full year fiscal 2010.

As well, gross margin for the full year decreased to 13.9 percent compared to gross margin of 21.1 percent for the fiscal year ended December 31, 2010.

Based on a weighted average number of ordinary shares outstanding of 302.065 million, GAAP basic net loss per share resulted in a net loss of $0.06 per ordinary share during the twelve months ended December 31, 2011.  This compared to a basic net loss per ordinary share of $0.18 on a weighted average number of ordinary common shares of 235.320 million during the twelve months ended December 31, 2010.

On a non-GAAP basis, net income for the fiscal year ended December 31, 2011 increased year over year by 12.9 percent to $156.061 million while non-GAAP earnings per basic share for fiscal 2011 dropped to $0.52 per basic share compared to $0.59 per basic share for the twelve months ended December 31, 2010.

Tower Semiconductor's balance sheet stayed strong with $101.149 million in cash, short-term deposits and designated deposits and working capital of $35.830 million for the period ended December 31, 2011.

Similarly, the Company reduced debt from $482 million as of December 31, 2010 to $350 million as of the end of 2011 and improved shareholders' equity to $175 million from $118 million as of the end of 2010.

It should be noted that during 2011, the Company won a new tier one customer in 2011 as well as achieved record revenues which firmly cemented Tower as the number one specialty foundry provider and expanded its revenue lead over the number two foundry leader by about $100 million.

Additionally, Tower Semiconductor was able to double its wafer capacity as compared to 2010.

The Company was able to increase its total manufacturing capacity from 850,000 wafers per year at the end of 2010 to a new capacity level of 1.7 million wafers per year in 2011.

This was achieved by its CAPEX expansions and to a greater degree by its cost effective acquisition of the 70,000 wafer per month factory in Nishiwaki Japan for $140 million in June 2011.

The newly and substantially increased capacity and technical capability should enable Tower to convert a continued strong design win momentum into products while bringing customers into volume production at a faster rate that was possible only a half year ago.

Similarly, the newly announced signed India MOU offers Tower a low cost entrance into an emerging market at the 300mm wafer size, 90nm analog technology and companion chips in deep submicron technologies (65-45nm), should the government accept this proposal.

On top of all this, management announced guidance for its fiscal 2012 first quarter.

Management anticipates fiscal 2012 first quarter revenues to be in the range of $165 million to $175 million.

The guidance would represent nearly a 41 percent year over year growth in revenues at the midpoint of the projected range for the quarter.

Furthermore, the Company continues to target a $200 million quarterly revenue run rate by year end and believes it will continue to outperform.

To view a free copy of our most recent research report on TSEM or subscribe to our daily morning email alert, visit http://scr.zacks.com/ .


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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