Tower's Nishiwaki Plant Powers Growth in Asia
Ken Nagy, CFA
TOWER SEMICOND (TSEM): Free Stock Analysis
To read this article on Zacks.com click here.
On May 17, 2012,
Tower Semiconductor Ltd., (towerJazz) (
the Israel based global specialty foundry leader, reported
financial results for its first quarter, ended March 31, 2012.
The Company reported solid first quarter revenues of $168.013
million, up 39% year over year from $120.620 million but down
$6.571 million sequentially from $174.584 million for the three
months ended December 31, 2011.
It should be noted that year over year first quarter growth
significantly outperformed the foundry industry as a whole and
firmly cemented Tower as the number one specialty foundry provider.
Still, Tower reported a first quarter 2012 GAAP net loss of $19.317
million, down year over year from a net loss $5.411 million for the
first quarter 2012 and from a net loss of $16.701 million during
the fourth quarter of 2011.
The year over year decrease in GAAP net loss was primarily due to
Year over year, gross margin dropped sharply from 25.3 percent to
13.5 percent for the three months ended March 31, 2012.
Still, gross margin for the first quarter increased firmly from
10.1 percent for the three months ended December 31, 2011.
Based on a weighted average number of ordinary shares outstanding
of 318.599 million, GAAP basic net loss per share resulted in a net
loss of $0.06 per share during the first quarter of fiscal
2012. This compared to basic loss per ordinary share of $0.02
on a weighted average number of ordinary shares of 317.106 million
during the three months ended March 31, 2011.
Still, non-GAAP first quarter 2012 gross profit was $58.754 million
representing gross margin of 35 percent while non-GAAP net profit
was $32.024 million.
This compares to Non-GAAP gross margin of 44 percent and a non-GAAP
net profit of $31.524 million for the first quarter ended March 31,
Tower Semiconductor's balance sheet improved to $158.226 million in
cash, short-term deposits and designated deposits and working
capital of $124.702 million for the period ended March 31, 2012.
This compares to $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.
The increase in cash, short-term deposits and designated deposits
was driven by the creation of $34 million of positive cash flow
from operating activities (excluding debt related payments) and $80
million from long term bonds fundraising, which was offset by $27
million of debt payments on account of principal and interest and
$30 million of Cap-Ex investments.
Working capital improved mainly as a result of the $57.077 million
increase in cash, short-term deposits and designated deposits and a
$16.623 million decrease in trade accounts payable.
Similarly, the improved cash, short-term deposits and designated
deposits and decrease in trade accounts payable helped improve
Tower's current ratio to 1.61 as compared with 1.16 as of December
Likewise, it is important to note that the Company engaged GE
Capital for a $50 million credit line for the Nishiwaki, Japan
facility for loans at Libor + 2.6% per annum.
Management further stated that it continues to see increases in
The Company's Nishiwaki, Japan factory met or exceeded all of
Tower's forecasted metrics since the acquisition and management
continues to anticipate the same trend happening throughout 2012.
Furthermore, the facility greatly expands Tower's geographic reach
and distribution capabilities enabling the Company to take
advantage of increased interfab efficiencies in manufacturing which
resulted in a 2 percent sequential increase in gross margin in the
first quarter 2012 over the fourth quarter 2011.
The Nishiwaki facility has also enabled and management believes
will continue to empower significant growth throughout the Asia
In Korea, Tower has now grown from one image sensor customer in
2010 to over 40 active engagements.
In Japan, three tier-one integrated device manufacturers (IDMs) are
now actively qualifying Tower's flows in the Nishiwaki, Japan
factory with production targeted for the first half of 2013.
Along the same lines, one of these tier-one IDMs is doing multiple
Another Japanese IDM is in advanced stages of qualification at the
Migdal Haemek, Israel facility and there have been pre-wafer
engagements with a multiple number of other Japanese customers for
manufacturing in Nishiwaki, Migdal Haemek or Newport Beach,
As a result, Tower anticipates fiscal 2012 second quarter revenues
to be in the range of $163 million to $173 million.
The guidance would represent just over a 20 percent year over year
growth in revenues at the midpoint of the projected range for the
Furthermore, management foresees growing orders and strength in the
second half of the year and continues to prepare operationally for
Likewise the Company anticipates continued growth at a double digit
rate in 2012 as a whole and expects to continue to exceed industry
Similarly, the Company continues to target a $1 billion annualized
quarterly revenue run rate within the 2014 year.
Finally, management reiterated that a recently 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 the Company's proposal.