Business Context and Reporting Period
This Form 6-K, filed on June 24, 2013, by Tower Semiconductor Ltd. (TowerJazz), serves as a vehicle to attach the company's Israeli road show presentation regarding a rights offering. TowerJazz operates as a pure-play specialty foundry focusing on analog, mixed-signal, and RF technologies. The financial data presented covers the period ending March 31, 2013, with comparative data for December 31, 2012, and March 31, 2012.
Key Financial Metrics
Balance Sheet Position (as of March 31, 2013):
- Total Assets: $771 million
- Total Liabilities: $581 million
- Shareholders' Equity: $190 million
- Cash and Short-term Deposits: $120 million
- Short-term Debt: $30 million
- Long-term Debt: $306 million
- Net Current Assets: $141 million
- Current Ratio: 1.98
Historical Performance (FY 2012 Non-GAAP):
- Revenue: $639 million (2012)
- Gross Profit: $233 million (37% margin)
- Operating Profit: $165 million (26% margin)
- Net Profit: $131 million (21% margin)
- EBITDA: Greater than $150 million annually for 2010-2012
- Net Debt to EBITDA: 2.2X (based on 2012 full year results)
Material Changes and Strategic Developments
Shareholder Activity: Israel Corporation, a major shareholder, increased its holding from 5% to 38% and committed to investing an additional $17 million in the current rights offering, exercising all its rights.
Operational Growth: The company reported a consistent positive trend in net current assets, rising from $125 million in March 2012 to $141 million in March 2013. The current ratio improved from 1.61 to 1.98 over the same period.
Market Position: TowerJazz is positioned as the #1 pure-play specialty foundry by revenue growth over the past seven years. The company has secured over 50 design wins in the Front-End Module (FEM) market and is ramping volume production for high-end CMOS image sensors with partner CMOSIS.
Guidance, Outlook, and Risks
Outlook and Growth Drivers: Management forecasts wafer-based revenue to increase quarter over quarter. Key growth drivers include the transition to Silicon Radio Platforms (replacing GaAs), expansion in power management (700V technology), and the India Fab Project (transitioning to 200mm and planning a 300mm facility).
Rights Offering: The filing details a rights offering where shareholders can purchase rights on June 24, 2013, with an exercise deadline of June 27, 2013. The offering includes Series 8 Warrants at $5 and Series 9 Warrants at $7.33.
Risks and Contingencies:
- Forward-Looking Statements: The presentation contains forward-looking statements regarding the merger with Jazz, synergies, and financial guidance, which are subject to risks and uncertainties.
- India Project Uncertainty: While a binding MOU exists for a 300mm facility in India, the company states it cannot predict the outcome of the government selection process.
- Integration Risks: Risks include the inability to achieve expected synergies or successfully execute integration strategies with Jazz.
Investor Verification Checklist
- Verify the final closing amount and share count resulting from the rights offering and the subsequent impact on shareholders' equity (projected to exceed $200 million).
- Confirm the status of the Indian government approval for the 300mm facility consortium involving Jaypee Group and IBM.
- Review the detailed debt maturity schedule and conversion terms for the $306 million in long-term debt.
- Monitor the ramp-up progress of the Silicon Radio Platform (SRP) and the volume production of the 12-megapixel CMOSIS sensor.
- Assess the execution of the merger integration with Jazz Semiconductor and the realization of projected cost savings.