NASDAQ & TASE: TSEM
2016 Annual Report
Corporate and Business Overview
A record year for TowerJazz, on all fronts.
With a proven business model and technology leadership within
multiple growth markets, we are the fastest growing foundry
in the world with strong business, operational
and financial performance.
Moving into
2017
2016
Table of Contents
Letters to Shareholders
Vision
Mission
Values
Leadership
Team
2-5
6
7
Corporate Overview
Financial Overview
Global Operations
8, 9
10, 11
12, 13
Technology
Leadershp
14
Thriving in
the IoT
Revolution
15
Radio Frequency & High
Performance Analog
CMOS Image Sensor
16, 17
18, 19
Power Management &
Mixed-Signal/CMOS
Transfer, Optimization
& development Process
Services (TOPS)
Research and Development
20, 21
22, 23
24, 25
Business Sustainability &
Social Responsibility
26, 27
2016 Q4 and Fiscal Year Financial Results Press Release
28–37
TowerJazz continues to focus on long term relationships with
customers and partners, as well as gaining new and exciting business.
The Company is well positioned to answer current and future needs driving
advanced technology in the world — and we believe another meaningful year
is ahead for us.
1
Dearest Shareholders and Friends,
It is with excitement and a high level of satisfaction that I have the
opportunity to reflect upon our achievements as shown in our 2016 results.
We are the leading global analog foundry, maintaining significant customer
engagements with the top-tier players in our chosen served markets. With
advanced technical offerings, market leadership, and an annual revenue of
$1.25 billion, we have achieved significant growth by any measure, for any
company, in any industry.
While enjoying the fruits of our success, looking ahead we are not sitting on
our laurels. We stay focused on pushing TowerJazz toward further growth.
I see this Company with very promising potential ahead which is yet to be
fully realized, with a team that is entirely capable of going from strength to
strength; attaining an even higher level of success.
Our goal remains to continue our proven successful business model,
driving analog leadership with low-cost capacity expansion, resulting in
strong increasing revenue with proportional growth in margins, profit and
free cash flow. We will always maintain a constant eye toward creating and
realizing value for you, our very loyal shareholders.
I wholeheartedly congratulate Russell and his leadership team, as well as
all the hardworking employees of TowerJazz, for their efforts, activities and
accomplishments of multiple years resulting in the record year we have just
completed in 2016. I very much look forward to another momentous year
with great achievements.
Sincerely,
Amir Elstein, Chairman of the Board
BOARD of DIRECTORS
Amir Elstein Chairman of the Board
Alex Kornhauser Chairman of the Audit Committee, Director
Ilan Flato Chairman of the Compensation Committee, Director
Iris Avner Director
Yoav Z. Chelouche Director
Russell Ellwanger Director
Dana Gross Director
Rami Guzman Director
Kalman Kaufman Director
Rony Ross Director
2
"We stay focused on
pushing TowerJazz toward
further growth. I see
this Company with very
promising potential ahead
which is yet to be fully
realized, with a team that
is entirely capable of going
from strength to strength;
attaining an even higher
level of success."
3
3
Dear Shareholders, Customers, Partners and Employees,
TowerJazz has continued its high growth rate (30% year over year) and top position as an analog pure play foundry
provider, with multiple geographic sites, advanced technology diversity and a large and growing customer base. We
continue our focus to strengthen our global corporate culture by proliferating the best core competencies of each of
our specific sites throughout the Company and to enhance our capabilities through internal and external benchmarking
with associated concrete operational flow and process development, and financial metric activities.
THE NUMBERS
2016 was an exceptional year, with the best business and financial performance in the history of the Company. We
continued to establish our position as the global specialty foundry leader, while presenting another year of record
revenues having reached $1.25 billion, record EBITDA of over $365 million and record net profit of over $200 million;
reflecting value creation in increased margin percentages for the preceding indices. This performance generated
approximately $120 million in free cash flow; an internal source to support additional opportunities and growth
initiatives.
This performance was enabled through the realization of our successful analog business model. We remained focused
on providing best in class specialty technology offerings, by providing the right platforms to support the trends that are
now driving the world. We increased our competitive advantage within existing and new markets, by being responsive
to present and future needs of our diversified customer base.
BEYOND THE NUMBERS
Our vision has not changed since 2005, when I joined Tower as CEO. Our
strategies and tactics, however, have changed multiple times in response
to customer needs, market changes and our Company’s ever increasing
capabilities. U.S. President John F. Kennedy stated, "Leadership and
learning are indispensable to each other." As long as we continue to
learn from our customers and the market itself, and have the courage and
confidence to make big and quick changes, our future will remain strong.
And this is what we intend to do.
The Fulfillment of Change
TowerJazz today is a completely different company than it was just a
decade ago. This is a result of a continual process of market evaluation
and corporate introspection that included along the years many cycles
of learning and multiple “junctures of change.” We commit to embrace
change as the enabler for strength and growth.
"As long as we continue
to learn from our customers
and the market itself,
and have the courage and
confidence to make big
and quick changes, our future
will remain strong. And this is
what we intend to do."
Aligning Want, Should and Is, and Looking in the Mirror
Self-actualization occurs when the individual’s wants strongly overlap with that which one should be doing, and is
evidenced in everyday life behaviors. Often cycles of learning to attain self-actualization require input from a trusted
and caring third party (a loving spouse or friend). The language of a person’s actions may differ vastly from his or her
intent. A third party can hold up a mirror and help translate intentions into the appropriate behavioral language.
Vision (Purpose), Mission (Wants), Values (Shoulds), Performance (Is)
An enterprise enters “prime” when these same three spaces—“Want,” “Should” and “Is”—strongly overlap. When
an enterprise proceeds without vision, or with a vision that is not aligned to a market need, or one that is incompatible
with its actions, it is ignorant of its purpose and “doom” is written on its brow. It will fail. Once the purpose is defined
and validated, the mission (wants) and values (shoulds) are established and promoted.
Customers are the best third party input of how well the enterprise has aligned the values (shoulds) with the mission
(wants) into company performance (the “is”). The overlap must continually be checked and adjusted by regular
customer feedback and honest introspection with the integrity and courage to make needed changes at all levels and
in all activities.
We have realized strong growth at TowerJazz in all aspects of our business and financials. We believe this to be a
good indicator of progress towards prime. Our present and future success is fully dependent upon our customers’ and
partners’ inputs and our ability to quickly address them. We are committed to continuous evaluations of our "want/
should/is" state and drive actions towards full overlap.
4
DRIVERS FOR SUCCESS: A Collective Culture of Innovation, Excellence and Trust
An Environment of Innovation
If innovation is simply restricted to technological innovation, it is insufficient. Innovation has to
drive through all activities, through all levels of the Company, and then technological innovation
can really take off. We align with our lead customers in specific areas in order to know what their
roadmap requirements are and, before the need arises, to have the building blocks available
while bringing out solutions that are of value to them. In this way we are successful in attracting
and becoming partners with customers that are leaders within their field.
Our innovation, then, is really driven to build trust with our customers and allow them to open
up to us on their multi-generation roadmap. We can then work on solutions from a processing
standpoint on platform development that gives them advantage on time to market.
Pursuit of Excellence
It is our goal to provide the tools and promote an
environment that impassions our worldwide employee
base to achieve excellence, e.g., first time success for
our customers. In all of our business units we continually
make strides to expand our leading capabilities.
We aim to build trust and add value to our customers,
partners, vendors and employees. We focus on
application driven
that
differentiate the Company in the specialty foundry
market and provide excellence at both national and
international levels.
research developments
"It is our goal to
provide the tools and
promote an environment
that impassions our
worldwide employee base
to achieve excellence."
We do what we say we will do
We work diligently to achieve the highest quality performance through cohesive, concerted
efforts of efficiency and align our tools, skillsets and craft to the highest level of production.
One of the major benefits that comes with maintaining global facilities is the possibility to use
best practices among our different sites, select the best ones, and improve overall efficiency
and effectiveness. The Quality Team has taken the lead on defining methodologies that will
benefit from this integration. Japanese culture inherited from TPSCo, and most importantly
Japanese view of quality, provides an excellent opportunity to improve overall quality across
the organization. We are greatly blessed to have TPSCo within our corporate family. We, as
an entity, have gained and continue to benefit as we learn, understand and implement more
of the Japanese relationship in the workplace and of their commitment to a quality standard
intrinsically tied to efficiency.
Based on that, we rooted the motto of “We do what we say we will do” across all of our sites,
while advancing quality initiatives throughout the Company that are aimed at meeting customer
needs and improving overall quality and efficiency.
WHAT IS AHEAD FOR US
As we move into 2017 and beyond, we are in a tremendous position to continue our success. By
playing in the right markets with the right technologies, we will ardently pursue future business
opportunities. Our financial position, combined with best in class technical performance and an
expanding operational footprint to fulfill our growing customer demand, should continue our
path of value creation.
Sincerely,
Russell Ellwanger
TowerJazz Chief Executive Officer
TPSCo Chairman of the Board
55
Vision
To be the world leader in specialty foundry solutions as measured by our customers,
employees and investors.
Mission
TowerJazz’s mission is to bring to market specialty foundry solutions that provide
unique value to our customers by attentively listening to and proactively providing
for their needs, through attracting and retaining the best global talent to serve them.
Corporate Values
• Embrace a Customer Centric Mentality
• Foster a Culture Built on Mutual Trust and Respect
• Demand Quality and Excellence in Everything We Do
• Exemplify a Data Driven and Results-oriented Mindset
• Emphasize Collaboration and Innovation
• Focus on the Right Knowledge, Skills and Attitude
6
Leadership Team
Amir Elstein
Chairman of the Board
Russell Ellwanger
Chief Executive Officer, TowerJazz
Chairman, TPSCo
Executive Management
Dr. Itzhak
Edrei
President
Oren Shirazi
Chief Financial
Officer
Senior Vice
President of Finance
Rafi Mor
Chief Operating
Officer
Yossi Netzer
Senior Vice
President,
Corporate Planning
Dalit Dahan
Senior Vice
President of Human
Resources &
Information
Technology
Nati Somekh
Senior Vice
President, Chief
Legal Officer &
Corporate Secretary
Ilan Rabinovich
Vice President of
Quality & Reliability
& Vice President of
Customer Support
Business Unit General Management
Technical Fellows
Dr. Avi Strum
Senior Vice
President &
General Manager,
CMOS Image
Sensor Business
Unit
Zmira
Shternfeld-
Lavie
Senior Vice
President of Process
Engineering R&D
General Manager of
TOPS
Shimon
Greenberg
Vice President of
Power Management
& Mixed-Signal/
CMOS Business
Unit
Dr. Marco
Racanelli
Senior Vice
President & General
Manager of RF/HPA
Business Group
General Manager
of US Aerospace &
Defense Business
Group, Newport
Beach Site Manager
Dr. Yakov
Roizin
Fellow & Director
of Emerging
Technologies
Dr. David
Howard
Fellow &
Executive Director
Dr. Gurvinder
Jolly
Fellow & Vice
President, Newport
Beach Fab Process
Engineering, US
Integration
TPSCo Key Executives
Decades of Experience
Guy Eristoff
Chief Executive
Officer
Yoshihisa
Nagano
Chief Operating
Officer
Tomoyuki
Sasaki
Chief Technology
Officer, Director of
Process Technology
Center
Amit
Mappa
Chief Financial
Officer
The Management teams of TowerJazz and
TPSCo bring together many decades of
technology and leadership experience, and
by utilizing the best core-competencies
across the entire organization, have created
a leading global company that serves and
will grow the analog foundry space as no
existing single foundry company can.
77
Corporate Overview
The Global
Specialty Foundry Leader
Over the past several years, TowerJazz has presented record business and financial
results while partnering for its customers’ success. As the Company moves forward, it
continues with a strong outlook for growth through a commitment to performance and
manufacturing excellence.
geographic locations, providing over 2.3 million wafers
per year: two fabs (150mm and 200mm) located in
Migdal Haemek, Israel, one fab (200mm) located in
Newport Beach, California, USA, one fab located in
San Antonio, Texas, USA and three additional fabs
(two 200mm and one 300mm) through TowerJazz
Panasonic Semiconductor Co., Ltd. (TPSCo) located in
the Hokuriku region of Japan.
TowerJazz pursues excellence in all aspects of its
business by maintaining
industry expertise and
cultivating a collective culture of quality, innovation,
and trust. With constant growth throughout the past
years, and while continuously strengthening its margins
and balance sheet, the Company was able to create a
strong financial foundation to pursue its goals for the
future.
As TowerJazz expands its capabilities, manufacturing
capacity and global reach, it continues to build on
its market and technology leadership to maintain the
Company's position as the global specialty foundry
leader.
foundry
the global specialty
leader,
TowerJazz,
manufactures advanced analog
integrated circuits
for a diversified and strong customer base with more
than 300 customers worldwide in growing markets
such as consumer, automotive, medical, industrial, and
aerospace & defense, among others. Deeply rooted
in proven technologies, the Company continues to
drive innovation within silicon rather than by pure
technological nodal shrinkage. TowerJazz specializes in
customized analog solutions for differentiated products
and offers leading edge specialty process technologies
including Radio Frequency (RF), High Performance
integrated Power Management,
Analog
(CIS), Mixed-Signal/CMOS,
CMOS
Image Sensors
and Micro-Electro-Mechanical
(MEMS)
Systems
capabilities. In addition, TowerJazz provides world-
class design enablement and Transfer Optimization and
development Process Services (TOPS).
(HPA),
TowerJazz is geographically and culturally diverse with
broad and deep experience in manufacturing many
different types of technologies. For global capacity
assurance and operational flexibility, TowerJazz
three
operates seven manufacturing
facilities
in
8
TowerJazz at a Glance
TECHNOLOGY
GROWTH
STRONG
FINANCIALS
CAPACITY
ASSURANCE
PROMINENT
CUSTOMER BASE
SKILLED
EMPLOYEES
The fastest growing
foundry in the world
by providing a wide
range of advanced
specialty analog
technology offerings
for the right growth
markets.
Continuous revenue
growth with strong
margins and
sustainable model for
growing net profit
Seven worldwide
manufacturing
facilities providing
capacity assurance,
operational flexibility,
and dual-sourcing
capabilities with
available capacity
of over 2.3 million
wafers per year
Targeting the right
customers, the
leaders in their
respective markets,
to continue growing
a base of over 300
customers. Aligning
with customers’
technology roadmaps
to ensure long-term
business success.
Over 4,500
worldwide highly
talented and skilled
employees with
broad technology
knowledge and deep
industry expertise
We pursue excellence in all aspects
of our business by maintaining
industry expertise and cultivating
a collective culture of quality,
innovation, and trust.
9
Financial Overview
Continuous Execution and Growth
In 2016, TowerJazz achieved outstanding financial results, creating the strongest financial
position in its history.
Throughout 2016, TowerJazz implemented its successful
analog business model - an optimized cost structure,
utilizing its global strength with low cost capacity
investments. Efforts to maximize the revenue mix with
cross qualifications across its worldwide facilities and
the resultant higher levels of utilization enabled an
ongoing increase in profitability.
The aforementioned provided TowerJazz with a strong
balance sheet. Shareholders' equity as of year-end
2016 reached a record of $683 million, an increase
of 77% as compared to $386 million as of December
31, 2015. Current ratio (current assets over liabilities)
increased to 2.82 times, as compared to 2.12X as of
December 31, 2015. Finally, the Company significantly
strengthened its cash balance, reaching positive cash
balance, net of debt, of $37 million, as compared to a
negative cash balance, net of debt, of $(105) million at
the end of 2015.
Thus, ending 2016, TowerJazz has never been better
positioned financially. The Company’s financial strength
and flexibility, combined with a proven business
model, provides the best atmosphere for continued
performance and growth in the foreseeable future.
MAIN FINANCIAL PARAMETERS SUMMARY
All data in millions, except per share data
Total Revenue
$1,250
$961
$828
2016
2015
2014
EBITDA
Net Profit (Loss)
Free Cash Flow*
Diluted Earnings
(Loss) Per Share
Cash Balance
Net of Debt
$367
$204
$327
$248
$154
($30)
$170
$4
$98
$2.33
$(0.40)
$0.08
$37
$(105)
(318)
Main Financial Achievements
RECORD
REVENUE
RECORD
EBITDA
MARGINS
INCREASE
RECORD
NET PROFIT
CASH
GENERATION
Record full year
revenues of $1.25
billion, up 30% year-
over-year
Record $367 million
in EBITDA, reflecting
29% EBITDA margins
and up 48% year-
over-year
Increase in gross and
operating margins —
gross profit up from
$205 million to $303
million; operating
profit up from $82
million to $175 million
Record net profit of
$204 million and net
margin of 16% as
compared to a net
loss of $30 million in
2015
End of year net cash
balance was $389
million as compared
to $206 million at the
end of 2015, while
generating free cash
flow of $118 million
in 2016 and $327
million of cash from
operations
10
TowerJazz’s Leadership Team Ringing the Nasdaq
Stock Market Opening Bell - November 2016
2016 A Record Year
REVENUES [$ Millions]
1250
961
828
GROSS PROFIT [$ Millions]
303
205
64
2014
2015
2016
2014
2015
2016
EBITDA [$ Millions]
CASH from OPERATIONS
[$ Millions]
CASH CLOSING BALANCE
[$ Millions]
367
327
389
248
154
170
98
187
206
2014
2015
2016
2014
2015
2016
2014
2015
2016
“We remain focused on continuous profitable growth, together with a strong balance sheet
and cash creation model, creating value to both our customers and shareholders,
with careful implementation and execution of our successful business strategy.”
11
11
Oren Shirazi
Chief Financial Officer
Global Operations
Manufacturing Excellence
TowerJazz drives operational excellence to reduce complexity, maximize transparency,
shorten lead times and optimize the cost of operations to satisfy all its customers' needs.
As TowerJazz grows and matures its global operations
and presence, it is critical to leverage worldwide “bests”
corporate-wide to provide value-add capabilities that
allow the Company to exceed customer expectations.
Therefore, the Company has built global teams with
members from all its fabs in Japan, Israel and the US, in
major areas of operations such as integration, process
engineering, industrial engineering and equipment.
TowerJazz is leading the analog foundries by providing
its customers with the highest quality products and
services, as only lasting customer satisfaction will
guarantee TowerJazz success on a long-term basis.
TowerJazz is continuously adding process capabilities
into its fabs to support additional advanced and
specialized technologies such as RF SOI, MEMS, GaN,
CMOS image sensors and power management.
TowerJazz continues to work closely with its customers
to meet their growing capacity needs while focusing
on new enhancements to achieve the highest standard
of manufacturing quality. In the last three years, the
Company has
in expanding
invested significantly
capacity in its existing fabs in Japan, Israel and the US.
In 2016, TowerJazz also completed the acquisition of
the fab in San Antonio, Texas creating a total capacity
of >2.3M wafers starts per year (8" equivalent).
TowerJazz strives to utilize all its available capacity
in order to better serve its current and forecasted
strong customer demand, and to provide flexibility to
its customers. Therefore, the Company cross-qualified
major specialized technologies such as Power, CMOS
0.16, and radio frequency silicon-on-insulator (RF
SOI) at its TPSCo fabs in Japan and its San Antonio
fab in Texas. In Q1 2017, less than one year from the
acquisition, the San Antonio fab is already expected to
start ramping significant foundry business on qualified
process flows.
“TowerJazz continues to work closely
with our customers to meet their
growing capacity needs. We strive to
excel in timely delivery of quality products
to assure customer success
in their individual markets.”
Rafi Mor
Chief Operating Officer
12
Worldwide Manufacturing Capabilities
TowerJazz operates seven manufacturing facilities in three geographic regions, providing global capacity
assurance and flexibility: two fabs located in Migdal Haemek, Israel, one fab in Newport Beach, California, USA,
one fab in San Antonio, Texas, USA, and three factories in the Hokuriku region of Japan through TowerJazz
Panasonic Semiconductor Company (TPSCo), a company established with Panasonic in March 2014.
MIGDAL HAEMEK, ISRAEL
• 6" (150mm)
• CMOS, CIS, Power,
Power Discrete
• 1µm to 0.35µm
MIGDAL HAEMEK, ISRAEL
• 8" (200mm)
• CMOS, CIS, Power, Power
Discrete, MEMS
• 0.18µm to 0.13µm
NEWPORT BEACH, CA, USA
• 8" (200mm)
• CMOS, CIS, MEMS,
RF Analog
• 0.18µm to 0.13µm
SAN ANTONIO, TX, USA
• 8" (200mm)
• Power, RF Analog
• 0.18µm
ARAI, JAPAN
• 8" (200mm)
• Analog, CIS
• 0.13µm to 0.11µm
TONAMI, JAPAN
• 8" (200mm)
• Power, Power Discrete,
NVM, CCD
• 0.35µm to 0.15µm
UOZU, JAPAN
• 12" (300mm)
• CMOS, CIS, RF
• 65nm to 45nm
Focus for
2017
2017 will be focused on continuing to provide the utmost in quality and efficiency in the seven worldwide TowerJazz
manufacturing sites. TowerJazz will expand its broad capabilities to optimize capacity utilization and flexibility, enabling
the Company to increase its overall wafer shipments and serve its ever-increasing customer demand.
13
13
Technology Leadership
Offering the Right Specialized
Analog Solutions
"We continue to maintain our industry and technology leadership by targeting the right growing
markets, working with the leading companies in their respective space, and offering the unique,
differentiated and advanced specialized analog technologies.
The availability of 300mm 65nm technology has provided continuation of our technology
roadmap and additional served markets for our business units, including image sensors
(e.g. DSLR and security) and RF (e.g. breakthrough technology for next-generation smartphones and
IoT applications).
By working very closely with our customers on R&D and innovation, we provide value creation in
development of their next generation products and future growth for their business as well as for
TowerJazz."
Dr. Itzhak Edrei, President
RF & HIGH
PERFORMANCE
ANALOG
POWER
MANAGEMENT
& MIXED-SIGNAL
CMOS
CMOS IMAGE
SENSOR
AEROSPACE
& DEFENSE
TOPS
Transfer Optimization
& development Process
Services
IMAGE
SENSOR
DISCRETE
ANALOG
RF/HPA
POWER
PMIC/BMIC
AUTOMOTIVE
& INDUSTRIAL
NON-
VOLATILE
MEMORY
(NVM)
14
Market Leadership
Thriving in the IoT Revolution
Market Megatrends are driving rapid growth in
analog/mixed-signal applications
IC designs for connected, smart devices require high reliability and
low power foundry solutions creating new business opportunities for
TowerJazz and our customers.
TowerJazz is well positioned in the fastest growing markets
with long term customer relationships and roadmap alignment.
GREEN EVERYTHING
WIRELESS EVERYTHING
SMART EVERYTHING
Energy Efficiency
Seamless Connectivity
Embedded Systems
Power Management
RF &
High-Peformance Analog
Sensors
(machine vision, ambient parameters, etc.)
15
15
RF & High Performance Analog Business Unit
Enabling a New Era of Communication
TowerJazz’s advanced RF and High Performance Analog (HPA) technologies address the
exponential growth in mobile and infrastructure markets.
ACHIEVEMENTS in 2016:
• Continued growth of revenue in all segments—
both SOI and SiGe technology segments as well
as mobile and infrastructure market segments grew
year-over-year in 2016.
• Successfully transferred its most popular RF
SOI platforms to its newly acquired facility in San
Antonio to enable more capacity for customers in
this growing market.
• Announced production ramp of its SiGe PA process
with Skyworks. The process enables a front-end-
module single chip with power amplifier, low-noise-
amplifier, switch, logic and power management
functions that can all be integrated on a single die.
• Announced its latest addition to the “SiGe Terabit
Platform” with S4 at 300GHz Fmax providing high-
speed SiGe customers a next generation platform
to design higher data-rate products.
TowerJazz’s RF/HPA business unit (BU) serves two
infrastructure.
primary end-markets: mobile and
For each market, its technology offers best-in-class
performance together with accurate models and
design kits that enable its customers to bring new,
high-performance products to market faster than with
competing solutions.
For the mobile market, TowerJazz offers RF SOI for
best-in-class Ron-Coff figure of merit (sub-100fs), which
results in lower insertion loss for RF switches leading
to improved reception, faster data rates, and longer
battery life for handsets and other mobile devices. In
addition, TowerJazz’s SiGe offering is used for both
receive (low noise amplifiers) and transmit (power
amplifiers) functions in handsets and provides the best
silicon-based performance (lowest noise figure for
receivers and best power efficiency for silicon-based
power amplifiers) enabling higher data-rates, better
GPS reception, and longer battery life in handsets and
other mobile devices. Both LNA and PAs are in high
volume production and new generations of technology
are being rolled out.
For the infrastructure market, TowerJazz’s industry
leadership in high performance SiGe continues with
the announcement this year of S4 with 300GHz Fmax
complementing its production H3 process used for 10
to 100GB/s optical fiber transceivers and mmWave radar.
“In the last several years our RF business
has grown largely by providing technology
that enables higher data rates in handsets,
data centers, and networks.
As we look forward, we see the proliferation
of IoT devices, the advent of 5G cellular
service and the promise of autonomous
vehicles augmenting our RF business with
additional exiting opportunities for growth
and we are investing heavily in technology
that provides our customers a strong
advantage in these new areas.”
Dr. Marco Racanelli
Senior Vice President & General Manager of
RF/High Performance Analog Business Group
16
Main Applications
MOBILE DEVICES
In the mobile market, TowerJazz enables front-end-module components such as RF Switches
(RF SOI), low-noise amplifiers (SiGe or RF SOI) and power amplifiers (SiGe). The Company has a
large market share in these applications and serves all major mobile platforms through its many
customers. The mobile handset market continues to grow but the front-end-module market is
growing even faster as content per handset is growing rapidly to support new higher data rates
with 4G LTE, carrier aggregation, diversity receive and soon MIMO and 5G.
INFRASTRUCTURE
For the infrastructure market, TowerJazz technology enables receiver/transmitter fiber optic
components such as trans-impedance-amplifiers (TIA), laser drivers (LD), and clock-data-
recovery circuits (CDRs). TowerJazz has a large market share (estimated at larger than 60%)
serving such components and demand continues to grow fueled by the exploding need for data
traffic in data centers, cloud computing and network backbone as well as fiber-to-the-home
networks. A new application of the same HP SiGe technology is automotive radar for collision
avoidance and ultimately autonomous vehicles.
Focus for
2017
The main growth drivers for the TowerJazz
RF/HPA BU continue to be front-end-
modules for handsets and other mobile
devices, front-end components for fiber-
optic data connections in data centers and
networks, as well as automotive collision
avoidance and other radar applications.
These markets drive growth in both its RF
SOI and SiGe technology platforms.
technology,
TowerJazz is well positioned for continued
success in the RF market with industry-
leading process
strong
relationships with Tier 1 customers to
drive the Company’s roadmap, and a
demonstrated ability to bring customers
to market quickly with first-pass success
and ramp to high volumes in multiple
factories – a combination that cannot be
easily duplicated in the foundry industry.
17
17
CMOS Image Sensor Business Unit
New High-end Technology Targets
Rising Demands
TowerJazz primarily serves six different market segments within the CMOS Image
Sensor (CIS) general market: automotive, machine vision, high-end photography and
cinematography, dental and medical X-ray, 3D and AR/VR (augmented reality and virtual
reality) and security.
TowerJazz provides best in class pixel technology,
tailored for each specific sensor application area such as:
• Very high dynamic range pixels for the automotive
industry
• Unique low noise and extremely small global shutter
pixels for the fast increasing industrial vision market
• Extremely low dark current, low hot pixel count and
low noise pixels for the high end photography and
cinematography market
• Large stitched pixels for medical and dental X-ray
• Near Infrared sensitive global shutter small pixels
for 3D and AR/VR applications
• Very small, yet highly sensitive pixels for the fast
growing security market.
In addition, TowerJazz tailors the pixel layout as
well as the process parameters per each customer’s
requirement, providing silicon proven, state of the art
pixels.
ACHIEVEMENTS in 2016:
TowerJazz has developed the smallest in the world,
state of the art, 2.8 micron global shutter pixel to
support the next generation industrial and machine
vision sensor families for its customers. This is going to
ramp to production in the second half of 2017.
TowerJazz grew its market share substantially in the past
year, especially evident in the medical and industrial
market segments, by ramping to volume production
customers' new devices.
collaboration with
Through great
TowerJazz,
PIXELPLUS brought its SoC HD security sensor into
mass production. New higher resolution sensors are in
final development stages, slated for mass production
in 2017.
"Focusing on high end value-add
CIS technology has proven itself.
Our served markets are those where
technology and performance speak
— customers appreciate our excellent
technology performance, keeping us,
as well as them, in a leading position
in the market segments we serve."
Dr. Avi Strum
Senior Vice President & General Manager,
CMOS Image Sensor Business Unit
18
Main Applications
AUTOMOTIVE
The automotive market is growing very fast, driven by ADAS (Advanced Driver Assistant
Systems) and autonomous driving requirements. Expectations are for six to eight cameras
per vehicle. These are not only high dynamic range CMOS sensor based cameras, but also
SPAD based LIDARs used mainly for autonomous driving cars. TowerJazz is well-positioned
to meet the expanding needs of this market.
MACHINE VISION
Driven by the need for automation of factories, especially in the food industry, as well as
household intelligent robots (like vacuum cleaners), 2D barcode readers, traffic control
cameras and many more, the machine vision market is growing fast. The common denominator
of all these applications is the need for a very fast, high frame rate, global shutter operation.
TowerJazz is providing technology and high volume manufacturing capabilities to the leaders
in this area, such as e2v, CMOSIS, On Semi and many more.
HIGH-END PHOTOGRAPHY and CINEMATOGRAPHY
TowerJazz already has a leading position in the cinematography camera market, where a
huge amount of films, including Oscar award winners, were shot with a sensor produced
by TowerJazz. In addition, the Company is increasing very fast its market share in the still
photography area of DSLR and Mirror Less (ILC) cameras, based on its excellent state of the
art TPSCo technology on 12” wafers, 65nm process node.
MEDICAL and DENTAL X-RAY MARKET
TowerJazz is growing its market share substantially working with the leaders in this area.
The market is shifting from amorphous silicon to CMOS technology and the Company is
taking advantage of this by using its unique stitched technology for up to one die per wafer
(150mm x 125mm) that can be tiled into large panels by its customers. TowerJazz is now
offering this technology also on 12” wafers in its TPSCo facility in Uozu, Japan.
3D and AR/VR (AUGMENTED REALITY/VIRTUAL REALITY)
The 3D and AR/VR areas are extremely fast growing. The need for this technology can be seen
all over the place, from Google glasses to Intel’s RealSense. The technology requirements
are for very high sensitivity to Near Infrared as well as very low power. TowerJazz is working
in this area with the leaders in this industry.
SECURITY
The need for cameras at every street corner and in every building is increasing very fast and
the momentum of moving from VGA cameras to HD, Full HD and QHD (4Mp) is very high.
TowerJazz uses its state of the art pixel technology in its 12” Uozu, Japan facility to provide
the best security sensors in the market. The Company sees very fast growth of this market,
working together with Korean leader, PIXELPLUS.
Focus for
2017
19
TowerJazz witnessed several large merger and acquisitions in the sensor
market between its customers which strengthens the Company’s position
even further as TowerJazz is the major or sole supplier for these customers.
Dramatic growth is expected in all market segments, especially in the
medical X-ray market and the machine vision market. In addition, TowerJazz
sees a general growing demand for cameras everywhere.
19
Power Management & Mixed Signal Business Unit
Achieving Higher Power Efficiency
TowerJazz’s advanced Power platforms provide wide application coverage in multiple
growing end markets such as the Internet of Things (IoT), wearables, mobile, laptops,
wireless chargers, drones, home appliance products, automotive and industrial.
its
TowerJazz closely collaborates with
leading
customers to define and develop the next generation
of its platforms and devices. These collaborations yield
very high probabilities that development activities
will move to high volume production and enable
the Company’s partners early access to its future
offerings with specific features that meet their precise
requirements. This mode of operation has already yielded
developments of new advanced devices such as high
frequency LDMOS and 5V cost-effective isolations, all
for the high efficiency switched regulator market.
Based on TowerJazz’s wide offering, the Company is
achieving higher power efficiency in various markets.
For switched regulators and motor drivers markets,
TowerJazz offers a leading edge Rdson and fast
switching transistors including best in class isolations.
These ICs are used today in consumer products such as
drones, laptops and home appliance products. For the
market of wireless chargers and battery management,
TowerJazz offers the inclusion of non-volatile memories
and digital 5V and 1.8V cores as well as additional 100
devices to guarantee an optimum device selection.
Such products can be mobile wireless chargers, E-bikes
and others.
TowerJazz’s Power Management platform includes
several distinctive advantages:
• Low Rdson over a wide and scalable voltage
range enabling the highest efficiencies in the
foundry arena. TowerJazz’s LDMOS transistors are
optimized to maximize the cost/performance ratio
and minimize the footprint with very small Rdson.
• A wide range of substrate isolation types, ranging
from bulk isolation for the majority of power
management products to full dielectric isolation
using 200V SOI for enabling positive and negative
voltages on the same IC. The latter can be
particularly useful for applications such as wireless
charging, Class-D audio amplifier and automotive.
• High density logic cores both for the 1.8V and
for the 5V library and high density non-volatile
memories for applications which need high digital
density such as wireless chargers, PMIC, smart
power products, or automotive power controllers.
MIXED-SIGNAL/CMOS PLATFORMS
TowerJazz Mixed-Signal/CMOS platforms are an
optimal solution for digital, analog, radio frequency
(RF) and automotive applications.
The platforms support designers who are seeking
volume production from 0.35um down to 45nm. In
addition, they are ideal for customized designs for low
power, analog and digital designs including the latest
65nm mmWave RFCMOS modeling and 18V HVCMOS.
The advantages of TowerJazz’s Mixed-Signal/CMOS
platforms include accurate analog modeling for RF
applications up to 110GHz models. The design kit
includes sub-threshold models, accurate passive
(inductors, capacitors) with high matching and smart
tool boxes. TowerJazz’s 18V HVCMOS offers state of
the art capability to design with gate and drain voltages
up to 18V on the 0.18um process node.
“Through 2017 we will continue
to focus on providing best in class
offerings to answer our customers’
growing demands. We will also extend
our market differentiation by enabling
great technological advantages such as
lowering Rdson and supporting
high voltage full isolation.
We look forward to further enhancing
collaboration with our existing partners
in addition to new opportunities while
continuing the growth trend.”
• Smart and flexible design kit which allows designers
to reuse their designs, select the devices and
perform smart verification to reach first time success.
Shimon Greenberg
Vice President of Power Management &
Mixed-Signal/CMOS Business Unit
20
Main Applications
SMARTPHONES, TABLETS & WEARABLES
The markets of wireless chargers, mobile PMIC for the smart phone, tablets and wearables are
increasing the demand for high efficiency power converters. For these markets TowerJazz offers
its leading low Rdson, fast switching LDMOS and isolation with minimum additional layers. For
high integration needs, TowerJazz’s high density digital solutions and embedded NVM (1.8V and
5V) can be used.
AUTOMOTIVE, HOME APPLIANCES & INDUSTRIAL
TowerJazz expanded its offering to both the automotive and industrial markets to include
motor drivers for various products such as drones, power tools, and large stacks of batteries
for automotive. The technology is also suitable for DC-DC applications and electronic control
units (ECUs) in automotive applications. TowerJazz’s 200V SOI platform serves the need for high
voltage and noise immunity while keeping the core power management platform to be reused
with its 1.8V, 5V and up to 200V LDMOS.
ACHIEVEMENTS in 2016:
TowerJazz has been expanding its advanced 0.18-micron platforms, the mixed-signal and power management
process (TS18SL and TS18PM) both in technology offerings and in production sites.
During 2016, TowerJazz ramped up the Power Management and the Mixed Signal platforms at TPSCo in Japan
in record time; hundreds of products have already reached the mass production stage, enabling its customers
production flexibility using the same PDK and platform for dual source production.
Also, TowerJazz has significantly increased close collaboration with its leading power management customers
offering them first access to its leading technologies; to engage with its R&D and design resources to fast
develop and secure their future business with TowerJazz.
On top of its wide platform offering, TowerJazz is continuously investing in further expanding its offering to cover
more market segments – two additional advanced technologies were developed throughout the past year:
• TowerJazz now provides a 200V SOI technology platform
which offers its customers a state of the art full isolation
up to 200V using the standard TS18PM PDK. The 200V
SOI technology is already in use by one of TowerJazz’s
leading customers to serve the motor control, medical,
home appliances and automotive markets. Through 2017
the Company expects multiple products to be ramped up
by many of its other customers.
• The second technology significantly improves TowerJazz’s
low voltage (below 5V) power management offering
for applications like switch regulators, point of load
market, etc. This technology offers an advanced
isolation with minimum additional layers and advanced
power transistors for high frequency switching regulators.
TowerJazz released an advanced 5V digital library to
enable the integration of more controllers within 5V only
designs.
TowerJazz has also enabled an 18V HVCMOS offering to serve the needs for high voltage 0.18µm display drivers.
Also included in the Power Management and Mixed Signal offerings are dual source top thick copper capabilities
for high current applications.
Focus for
2017
During 2017 TowerJazz will continue
to expand its footprint in the power
management market with new and
advanced platforms and to enhance its
close collaboration with its partners.
TowerJazz will continue to reduce the
Rdson for voltages up to 80V, and
to focus on its core and non-volatile
21
memories to allow more integration of
control and processing within power
products, all combined with best in
class power management devices.
More engagements on the 200V SOI
will happen during 2017 to support high
voltage DC-DC converters, automotive
applications and high voltage battery
management ICs.
21
Transfer, Optimization and Development Process Services (TOPS)
Facilitating Smooth Process Transfers
and Fast Ramp to Production
The TowerJazz TOPS business unit (BU) targets integrated device manufacturers (IDMs) that
have fablight outsourcing strategies, capacity shortage with internal fabs, double source
policies, and fab closures for cost reduction activities.
The TOPS business unit (BU) targets: (1) Integrated
device manufacturers (IDMs) with fab-lite outsourcing
strategies, capacity shortage at internal fabs, double
source policies, and/or closure of underutilized fabs
for cost reduction activities, and (2) Fabless companies
that have process IP looking for a manufacturing site,
process developed at an R&D center that needs to be
transferred and optimized to production at a fabrication
facility, as well as those needing to develop from R&D
to production and those wanting to develop process IP,
process module or flow.
The main customer applications currently supported
by TOPS are discrete FETS for power applications,
non-volatile memory (NVM), and magnetic memories,
although TOPS can accommodate any customer flow.
The fab-lite strategy seems to be a dominant trend
for TOPS customers — with 5" & 6" fab closures (by
many customers), industry consolidation of fabs, and
cost reduction by moving to 8" wafers. Most TOPS
engagements with top tier IDMs involve long-life, sole
source flows. In such cases, the added value in engaging
TowerJazz is not only for manufacture of those flows,
but rather development of more advanced platforms.
After the initial base platforms are transferred and
qualified, additional advanced platforms are co-
developed at TowerJazz sites as these fabs possess
more advanced processing tools and technological
capabilities than the IDM factories. The second most
dominant trend is overflow capacity since companies
are reluctant to spend substantial funds to purchase
manufacturing equipment for capacity expansion and
prefer loading an external facility, which is much more
economically feasible.
TowerJazz uses established proven methodologies and
well-defined success criteria which lead to first time
success and record time to production.
ACHIEVEMENTS in 2016:
This past year included multiple projects in TowerJazz’s
worldwide facilities with aggressive ramping of several
large customer transfers, including the start of high
volume production after a fast ramp for one of the
Company’s key customers. During 2016, TowerJazz also
focused on qualifying process flows at its San Antonio
fab to support continuous demand from its customers.
Discrete devices continue to lead the TOPS business
unit and long term contracts secure business for the
coming years.
“2016 was a strong year for the TOPS BU
with many projects completed and
ramped into mass production.
In 2017, we will continue to support
the strong demand from our customers,
while focusing on process flow transfers,
qualifications and development in
our worldwide facilities.”
Zmira Shternfeld-Lavie
Vice President of Process Engineering R&D
General Manager of Transfer, Optimization and
Development Process Services Business Unit (TOPS)
22
TOPS Business Models
HIGH VOLUME
PROCESS TRANSFER
IDMs
UNIQUE
PROCESS TRANSFERS
FABLESS COMPANIES
EXTERNAL
SERVICES
SPECIAL MODELS
Provides unique process tools and
processes to manufacture customers’
devices, with strong IP protection and
an experienced team that enables first
time success and fast time to market.
Full project support of technology and
management, enables cradle to cradle
success while providing TowerJazz with
capacity independent revenue growth
and high margin entry point
into
emerging markets.
to
IDMs with
Delivers fast and successful transfer
services
'fab-lite'
strategy, demand exceeding internal
fabs' capacity, double source policy
and/or underutilized
fab closure
activities. Enables secure transfer of
process IP, technical flexibility and
future generation developments.
Provides TowerJazz with long-term
utilization stability, reduced fab fixed
cost model and true partnership with
many additional opportunities.
Focus for
2017
In the TOPS BU, the team is working on ramping new technologies of Tier 1
customers to mass production mainly in the areas of discrete devices and
sensors, both in TowerJazz and TPSCo’s fabs. Existing production customers
are processing an increasing number of prototypes for new products, leading to
increased production and continued business growth.
23
23
Research & Development
An Environment of Innovation
TowerJazz has created an innovation environment based on the knowledge and skills of highly
educated staff in its US, Israeli and Japanese fabs. The Company cooperates between the sites and
utilizes the proficiency of the corresponding R&D teams in different fields of semiconductor science
and technology to greatly benefit its customers.
The research focus is on new ideas related to emerging
applications in areas such as communications, machine–
human interaction, sensors and power devices.
Besides targeting the current tasks dictated by the
expanding IoT and automotive markets as well as direct
customer demands, TowerJazz performs studies that
address future business directions and markets. In particular,
studies were performed on the feasibility of integrating non-
traditional CMOS foundry materials, devices and sensors
on novel physical principles. Combining the experience of
R&D engineers from diverse fields facilitates novel ideas that
enable breakthrough business opportunities for TowerJazz
customers.
2016 ACHIEVEMENTS and COLLABORATIONS
In 2016, R&D projects in TowerJazz Business Units (BUs) were
supported by customers, internal funding, government and
international programs:
• Pronounced advancements were achieved in lower
frequency RF (radio frequency) solutions for mobile
applications. Development of switches with record
figures of merit (FOM) below Ron x Coff = 100 femto-
seconds were performed in cooperation between the
R&D teams of the Newport Beach, CA, Migdal Haemek,
Israel and the TPSCo Japan fabs. Novel directions
of studies in the RF field include integration of SOI
elements with SiGe technologies, formation of switches
on highly isolating substrates, fabrication of switches
using novel materials for low resistance, and R&D of new
MEMS switches for advanced mobile devices.
• Within high frequency RF, in particular for wire-line and
optical communications, as well as radar, TowerJazz
announced its SiGe Terabit Platform which includes
advanced CMOS, together with low-noise, high-speed,
and high power SiGe devices and unique patented
features that enable best-in-class performance for the
most demanding ICs in high-speed communication
links. TowerJazz launched new process nodes of H5 &
H6 with > 300 GHz performance. These BiPolar devices
made with silicon-germanium based devices, operate
at speeds and performance that are the same or better
than leading edge digital CMOS.
• Joint work of the Migdal Haemek and TPSCo fabs on near-
IR CMOS image sensors (CIS) for 3D gesture recognition
systems resulted in a new generation of global shutter
pixels with record sizes (2.8µm). Among the investigated
future directions in the CIS field are sensing elements in
the back-end, imagers with avalanche photodiodes and
3D integration of imagers.
• R&D in power management was focused on development
of novel active and passive devices and specialized
non-volatile memories (NVM) for existing production
platforms. In the field of new power management
platforms, significant progress was achieved in GaN
HEMT devices fabricated on 6" GaN on Si substrates
(joint work of Fab 1 in Migdal Haemek and the TOPS BU).
• Significant achievements were demonstrated in projects
on gas sensors (TOPS and CMOS BUs), in particular in
the MEMS part of the developed embedded sensors
(membranes and supporting arms). In parallel, sensors
based on electrostatically formed nanowires (EFN) were
fabricated and extensively investigated (a project with
Tel-Aviv University; government funding).
ADVANCED TECHNOLOGIES
For next generation products
and alignment with our customers’
technology roadmaps.
NOVEL IDEAS
TowerJazz research enables
breakthrough business
for customers.
EXPERIENCED ENGINEERS
Highly educated and
experienced R&D engineers
in all our worldwide fabs.
24
• Within the “More than Moore” paradigm, activities
focused on an alternative to digital signal processing
—single Poly memristors for beyond binary code
human-like artificial intelligence were demonstrated.
The prototypes are investigated in a joint project on
neuromorphic simulations with Technion—Israel Institute
of Technology.
• Promising results were obtained in silicon photonics
projects run in the Migdal Haemek and Newport Beach
fabs. Among the achievements—Si waveguides on SOI
with 2.3 Db/cm losses supplied with modulators.
Grants and Project Wins
TowerJazz continues to work in Horizons 2020, a prestigious
program of European Union grants through GREAT, a
In this consortium,
consortium on spintronic devices.
TowerJazz activities are focused on
integrating MTJ
(magnetic tunnel junction) sensors and STT MRAMs in the
same chip. Besides that, the Company cooperates in the EU
COST Action IC1401 MemoCIS on memristors. TowerJazz
also participated
in projects associated with the US
Department of Defense (DoD), supported several programs
for the branches of the US armed services and received
funding from DARPA on a number of projects.
Press Announcements
Several R&D achievements demonstrating the leadership
position of TowerJazz in a broad range of technological
areas were announced in 2016. For example, TowerJazz and
e2v announced the world’s smallest global shutter pixel,
on a 110nm CMOS technology node with extremely high
shutter efficiency and low dark current noise. In addition,
TowerJazz announced a novel Empirical ESD simulation
flow of ESD protection circuits for reliable chip design.
TowerJazz announced its “SiGe Terabit Platform” which
included testimonials from multiple leading edge customers.
In addition, a “Viability of 5G Communications” press
announcement was released using TowerJazz technology,
with UC San Diego and Keysight. Another key TowerJazz
announcement focused on mass production of a new
Integrated SiGe-based ‘Front-End Module on a Chip,’ an RF
platform tailored to meet the challenges of the Internet of
Things.
Patents
In 2016, TowerJazz was granted 25 US patents and filed
28 new applications. The protected technologies include
original power management devices, MEMS technologies,
methods for increasing performance of analog products and
memories. Several patents were issued on SOI switches,
SiGe device and process technology, smart MTJ devices,
advanced image sensors and memristors.
Talks and Publications
TowerJazz gave nine invited talks at international conferences
and regional seminars, such as CIMTEC 2016 (MTJ integration
technology), MRS2016 in Boston (radiation sensors), IEICE (IR
sensitive pixels), and EDICON (switch and device modeling)
in Beijing. TowerJazz engineers served in Technical/Steering
Committees and as Section Chairs of IEDM, IEEE IMW, IEEE
RWW, BCTM, IMS-MTT, MRS and other highly prestigious
international venues.
Numerous research papers were published in well known
international journals and conference proceedings such as
IEEE VLSI, Microelectronics Reliability and others. Internally,
Vol. 7 of TowerJazz Technical Journal (TJ 2) was published,
featuring 18 technical papers by employees
from
TowerJazz fabs and R&D divisions. The team maintained its
internal TowerJazz Technical Forum (TTF) for senior technical
leaders, and continued TowerJazz Education Seminars
(TES) to mentor and foster engineering talent at each site.
In addition, TowerJazz R&D roadmaps were discussed at
three TowerJazz Global Symposium (TGS) sessions, and
TGS was held in conjunction with RHET (radiation hardened
electronics) for the US Aerospace & Defense community.
25
Business Sustainability & Corporate Social Responsibility
Enriching & Enhancing Society
TowerJazz aims to enrich and improve not only individuals’ lives, but develop society as
a whole and believes corporate social responsibility is imperative to the Company’s true
success. TowerJazz and its employees are involved in a wide range of health, education,
social and community activities that affect the community’s well-being by promoting
education, donating goods and through funding programs and services.
Educational and vocational development with a focus on gender equality and minority integration.
TowerJazz inspires and rewards employees for
innovation. The
outstanding achievements and
employee base is comprised of individuals from
various cultures and backgrounds with a strong
focus on gender equality. TowerJazz is an equal
opportunity employer and provides health insurance
for all employees.
The Company is committed to ensuring TowerJazz
employees act in a lawful and ethical manner. All
employees, in all of their activities, are expected to
operate in full compliance with all applicable laws,
rules and regulations.
language
responsibility principles are
TowerJazz’s social
modeled on and contain
from the
Electronic Industry Citizenship Coalition (EICC) Code
of Conduct, which establishes standards to ensure
that working conditions in the electronics industry
supply chain are safe, that workers are treated with
respect and dignity and that business operations are
environmentally responsible.
Internal and External Environment Achievements:
• Substantial reductions
in overall energy usage
without sacrificing production resulting in utility
savings. TowerJazz
to continue
improving air and water quality and is dedicated to
reducing electricity, water usage and waste water in
its 24/7 fabrication facilities.
is committed
• Established programs aligned with the internationally
for Economic
recognized OECD
Cooperation and Development) due diligence
framework to regularly evaluate its supply chain and
require suppliers to do the same.
(Organization
• TowerJazz is ISO14001 and ISO18001 certified.
TowerJazz Employee Social Responsibility Involvement:
• Tutored kids in youth clubs and volunteered in
recreational activities.
• Funded an educational program for children with
learning disabilities.
• Participated
in teaching English to the youth,
improving their communication skills.
• Participated in teaching math to kids in elementary
school, to encourage science studies in high school.
26
• Added scrubbers and abatement systems in order
to support the fabs’ capacity increase and maintain
environment safety.
• Ergonomic support for employees' work environment.
• Upgraded dining rooms, cafeteria, and renovated
rest areas, provided better transportation service to
employees.
• Increased study funds for all employees.
• Collaborated with environmental organizations and
retirement institutions to help renovate buildings;
prepared food packages; and participated in blood
drives.
• Donated and delivered toys, books and other items
to people in need during the holidays.
Global Awareness Investigation and Action (GAIA) Project
TowerJazz continues in its eighth year of working with
the Global Awareness Investigation and Action (GAIA)
project led by Dr. Stuart Fleischer. GAIA involves middle
and high school students as “scientific researchers and
policy developers” working on environmental projects.
TowerJazz not only provides financial support, but
takes a more holistic approach by providing access
to onsite equipment in Migdal Haemek, engineering
support and collaboration on various GAIA projects,
guided tours for its participating schools, and design
and development projects.
Along with supporting GAIA’s environmental projects,
TowerJazz has made its engineers available to share
their background and passion for science and to
expose students, in particular female students, to
opportunities for careers in science and technology.
Students participating in GAIA come from many places
and school locations in the world, such as: Belgium,
China, Czech Republic, Germany, Greece, India, Israel,
Nigeria, South Korea, and the U.S.
For the 2016–2017 timeframe, TowerJazz is supporting
a number of GAIA projects including: endangered
species sanctuaries, recycling of materials to produce
quality goods, biological pest control, and hydroponic
indoor gardens.
“Our employees’ capabilities, dedication, loyalty and passion are primary factors in our
Company’s achievements. With increased employee involvement we are able to
create a better environment for our community while demonstrating our
Company’s core values and social responsibility.”
27
27
Dalit Dahan
Senior Vice President of Human Resources
& Information Technology
Fourth Quarter and Fiscal Year 2016 Financial Results Press Release
TowerJazz Reports Best Results in the
History of the Company
Full Year and Fourth Quarter of 2016 Record Revenue, EBITDA and Free Cash Flow with
Increased Margins
MIGDAL HAEMEK, ISRAEL — February 13, 2017 —
TowerJazz (NASDAQ: TSEM & TASE: TSEM) today reports
results for the fourth quarter and full year of 2016 ended
December 31, 2016.
Highlights of the Full Year 2016
• Record revenues of $1.25 billion, up 30% year over year;
• Record EBITDA of $367 million, up 48% year over year;
• Record net profit of $204 million, as compared to a
net loss of $30 million for the full year of 2015;
• Record cash from operations of $327 million and
record free cash flow of $118 million, resulting in
record cash balance and record shareholders’ equity.
Highlights of the Fourth Quarter of 2016 and First
Quarter of 2017 Guidance
• Record revenues of $340 million, up 34% year over year;
• Record gross profit of $88 million, up 36% year over year;
• Record operating profit of $55 million, up 61% year
over year;
• Record EBITDA of $105 million, up 39% year over year;
• Net profit of $48 million, up 119% year over year;
• Cash from operations of $82 million and record free
cash flow of $39 million;
• First quarter revenue guidance with mid-range of
$330 million, up 19% year over year; targeting growth
throughout the year.
Chairman and CEO End of Year Commentary
Mr. Russell Ellwanger, Chief Executive Officer of
TowerJazz, commented, “2016 was on all fronts, business,
financial, operational and technological, the best year
TowerJazz has posted. The year began with a successful
acquisition of the San Antonio facility, increasing our
capacity and operational flexibility, and ended achieving
our stated target in the fourth quarter of $100 million
annualized third party revenue at TPSCo.”
Continued Mr. Ellwanger, “Entering 2017, we focus
on utilizing the capacity of the acquired Panasonic and
Maxim fabs to meet the increasing customers’ demand
within our strong advanced analog offerings. Present
customer forecast indicates growth throughout the year
with each quarter being significantly higher year over
year. We are excited with our business and financial
position that allows us to capitalize upon new initiatives
to continue value creation.”
Mr. Amir Elstein, Chairman of the TowerJazz Board of
Directors, summarized: “2016, as a record year, is a strong
validation of the business models and the executions
behind becoming the worldwide leading specialty analog
foundry. The board and I wholeheartedly congratulate all
the dedicated employees of TowerJazz, the management
and Russell,
their efforts, activities and
accomplishments of multiple years resulting in this record
year we have just completed. We very much look forward
to another significant year with great achievements.”
for all
Fourth Quarter Results Overview
Revenues for the 2016 fourth quarter were a record $340
million reflecting 34% growth as compared to the fourth
quarter of 2015. Revenues were 4% higher than those of
the previous quarter.
Gross profit for the fourth quarter of 2016 was $88 million,
representing an increase of 36% as compared with $65
million in the fourth quarter of 2015, and an increase
of 8% as compared with $81 million gross profit in the
immediately preceding quarter.
Operating profit was $55 million for the fourth quarter of
2016, as compared with $34 million reported in the fourth
quarter of 2015 and $49 million operating profit in the
immediately preceding quarter.
Net profit for the fourth quarter of 2016 was $48 million, or
$0.53 basic earnings per share, demonstrating increased
sustainable GAAP net profit, as compared with $22 million
or $0.28 basic earnings per share in the fourth quarter
28
of 2015. Net profit for the third quarter of 2016 of $51
million, or $0.58 basic earnings per share, and included a
non-recurring $6 million of income tax benefit related to
finalization of the closure of the Japanese subsidiary that
held the fab in Nishiwaki, Japan, which ceased operations
in 2014.
On an adjusted basis, as described and reconciled in the
tables below, adjusted net profit for the fourth quarter of
2016 was $53 million, compared with $26 million for the
fourth quarter of 2015 and $49 million in the immediately
preceding quarter.
EBITDA for the fourth quarter totaled $105 million. This
represents a 39% increase as compared with $76 million in
the fourth quarter of 2015 and a 9% sequential increase as
compared with $97 million in the immediately preceding
quarter.
Cash and short term deposits on December 31, 2016
were $389 million as compared to $363 million as of
September 30, 2016. The main cash activities during the
fourth quarter of 2016 were comprised of the following:
$82 million cash generated from operating activities;
$11 million received from the exercise of warrants and
options; investments of $43 million in fixed assets, net;
$6 million debt repayments and $17 million effect of the
Japanese Yen exchange rate on cash balance.
Full Year 2016 Financial Results
Revenues for 2016 were a record $1.25 billion reflecting
30% growth as compared to 2015 revenues of $961
million.
Gross profit for 2016 was $303 million. This represents an
increase of 48% as compared with $205 million in 2015.
Operating profit was $175 million in 2016, as compared
with $82 million in 2015.
Net profit for 2016 was $204 million, or $2.33 basic
earnings per share, demonstrating increased net profit, as
compared with net loss of $30 million or $0.40 basic loss
per share in 2015. Net profit for 2016 included $50 million
gain, net, from the San Antonio acquisition and $6 million
income tax benefit related to the closure finalization of
the Nishiwaki Japanese subsidiary, which were partially
offset by $7 million non-cash financing expenses relating
to the Israeli banks’ loans early repayment. Net loss for
2015 included $81 million non-cash financing expense
associated with Series F Bonds accelerated conversion
done in 2015, $18 million income tax benefit resulting
from the expiration of statute of limitations and Japanese
income tax rate reduction.
On an adjusted basis, as described and reconciled in
the tables below, adjusted net profit for 2016 was $175
million, compared with $49 million for 2015, representing
a $126 million increased adjusted net profit derived from
the $289 million higher revenues.
EBITDA for the year was $367 million. This represents a
48% increase as compared with $248 million in 2015, or
$119 million increased EBITDA derived from the $289
million higher revenues.
Cash and short term deposits on December 31, 2016 were
$389 million as compared to $206 million on December
31, 2015. The main cash activities during 2016 were
comprised of the following: $327 million cash generated
from operating activities; $39 million received from
the exercise of warrants and options; $37 million debt
received, net of debt principal payments; and investments
of $210 million in fixed assets, net.
Shareholders' equity as of December 31, 2016 was a
record of $683 million, 77% higher than $386 million as of
December 31, 2015. Net cash as of December 31, 2016
totaled $37 million as compared to net debt of $105
million as of December 31, 2015.
Business Outlook
TowerJazz expects revenues for the first quarter of 2017
ending March 31, 2017 to be $330 million with an upward
or downward range of 5%, representing approximately
19% year over year revenue growth as compared to the
first quarter of 2016.
Teleconference and Webcast
TowerJazz will host an investor conference call today,
February 13, 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 fourth quarter and full year 2016
and its first quarter 2017 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.
The Company presents its financial statements in accordance with U.S.
GAAP. The audited financial statements in accordance with US GAAP will
be included in the 6-K to be filed with the annual financial statements and
Form 20-F. The financial information included in the tables below contain
abbreviated financial results which are not audited or in accordance with
US GAAP. Some of the financial information in this release, which we
refer to in this release as “adjusted financial measures”, are non-GAAP
financial measures as defined in Regulation G and related reporting
requirements promulgated by the Securities and Exchange Commission
as they apply to our Company. These adjusted financial measures are
calculated excluding one or more of the following: (1) amortization of
acquired intangible assets; (2) compensation expenses in respect of equity
grants to directors, officers and employees; (3) gain from acquisition,
net; (4) other non-cash financing expense, net associated with Bonds
Series F accelerated conversion; (5) non-cash financing expenses related
to bank loans early repayment; (6) non-recurring income tax benefit;
(7) Nishiwaki Fab restructuring and impairment cost (income), net; and
(8) other non-recurring items. These adjusted financial measures should
be evaluated in conjunction with, and are not a substitute for, GAAP
financial measures. The tables also present the GAAP financial measures,
which are most comparable to the adjusted financial measures as well
as reconciliation between the adjusted financial measures and the
comparable GAAP financial measures. As used in this release, the term
Earnings Before Interest Tax Depreciation and Amortization (EBITDA)
consists of profit or loss, according to U.S. GAAP, excluding gain from
acquisition, net, interest and other financing expenses (net), other
income (expense), net, taxes, non-controlling interest, depreciation and
amortization, stock based compensation expenses, acquisition related
costs and Nishiwaki Fab restructuring and impairment cost (income),
net. EBITDA is reconciled in the tables below from GAAP operating
profit. EBITDA is not a required GAAP financial measure and may not be
comparable to a similarly titled measure employed by other companies.
EBITDA and the adjusted financial information presented herein should
29
in the US and is still pending in Israel; (xi) our majority stake in TPSCo
and our acquisition of the San Antonio fabrication facility by TowerJazz
Texas (“TJT”), including new customer engagements, qualification
and production ramp-up, (xii) the closure of TJP within the scope of
restructuring our activities and business in Japan, settling any future
claims or potential claims from third parties, (xiii) meeting the conditions
set in the approval certificates received from the Israeli Investment
Center under which we received a significant amount of grants in past
years, (xiv) receipt of orders that are lower than the customer purchase
commitments, (xv) failure to receive orders currently expected, (xvi)
possible incurrence of additional indebtedness, (xvii) effect of global
recession, unfavorable economic conditions and/or credit crisis, (xviii)
our ability to accurately forecast financial performance, which is affected
by limited order backlog and lengthy sales cycles, (xix) possible situations
of obsolete inventory if forecasted demand exceeds actual demand
when we manufacture products before receipt of customer orders,
(xx) the cyclical nature of the semiconductor industry and the resulting
periodic overcapacity, fluctuations in operating results and future
average selling price erosion, (xxi) the execution of debt re-financing
and/or fundraising to enable the service of our debt and/or other
liabilities, (xxii) operating our facilities at high utilization rates which is
critical in order to cover a portion or all of the high level of fixed costs
associated with operating a foundry, and our debt, in order to improve
our results, (xxiii) the purchase of equipment to increase capacity, the
timely completion of the equipment installation, technology transfer
and raising the funds therefor, (xxiv) the concentration of our business
in the semiconductor industry, (xxv) product returns, (xxvi) 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, (xxvii) competing effectively, (xxviii) use of outsourced foundry
services by both fabless semiconductor companies and integrated
device manufacturers; (xxix) achieving acceptable device yields, product
performance and delivery times, (xxx) 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, (xxxi) retention of key
employees and recruitment and retention of skilled qualified personnel,
(xxxii) exposure to inflation, currency rates (mainly the Israeli Shekel
and Japanese Yen) and interest rate fluctuations and risks associated
with doing business locally and internationally, as well fluctuations in
the market price of our traded securities, (xxxiii) issuance of ordinary
shares as a result of conversion and/or exercise of any of our convertible
securities, as well as any sale of shares by any of our shareholders, or any
market expectation thereof, which may depress the market price of our
ordinary shares and may impair our ability to raise future capital, (xxxiv)
meeting regulatory requirements worldwide, including environmental
and governmental regulations; and (xxxv) business interruption due to
fire and other natural disasters, the security situation in Israel and other
events beyond our control such as power interruptions.
A more complete discussion of risks and uncertainties that may affect
the accuracy of forward-looking statements included in this press
release or which may otherwise affect our business is included under
the heading "Risk Factors" in Tower’s most recent filings on Forms 20-F
and 6-K, as were filed with the Securities and Exchange Commission
(the “SEC”) and the Israel Securities Authority. Future results may differ
materially from those previously reported. The Company does not
intend to update, and expressly disclaims any obligation to update, the
information contained in this release.
not be considered in isolation or as a substitute for operating profit, net
profit or loss, cash flows provided by operating, investing and financing
activities, per share data or other profit or cash flow statement data
prepared in accordance with GAAP. Net cash or net debt, as presented
in this release, is comprised of the outstanding principal amount of
banks’ loans (in the amounts of approximately $166 million and $246
million as of December 31, 2016 and December 31, 2015, respectively)
and the outstanding principal amount of debentures (in the amounts
of approximately $186 million and $65 million as of December 31,
2016 and December 31, 2015, respectively), less cash and short-term
deposits (in the amounts of approximately $389 million and $206 million
as of December 31, 2016 and December 31, 2015, respectively).
leader. TowerJazz manufactures
About TowerJazz
Tower Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM)
and its fully owned U.S. subsidiaries Jazz Semiconductor,
Inc. and TowerJazz Texas Inc., operate collectively
under the brand name TowerJazz, the global specialty
foundry
integrated
circuits, offering a broad range of customizable process
technologies including: SiGe, BiCMOS, mixed-signal/
CMOS, RF CMOS, CMOS image sensor, integrated power
management (BCD and 700V), and MEMS. TowerJazz
also provides a world-class design enablement platform
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 additional facilities in Japan (two
200mm and one 300mm) through TowerJazz Panasonic
Semiconductor Co. (TPSCo), established with Panasonic
Corporation of which TowerJazz has the majority holding.
Through technologies, including the most advanced
image sensor technologies. For more information, please
visit www.towerjazz.com or www.tpsemico.com.
CONTACTS:
Noit Levi | TowerJazz
+972 4 604 7066 | Noit.levi@towerjazz.com
GK Investor Relations | Gavriel Frohwein
(646) 688 3559 | towerjazz@gkir.com
This press release 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) over demand for our foundry services and/or products that
exceeds our capacity; (iii) maintaining existing customers and attracting
additional customers, (iv) high utilization and its effect on cycle time,
yield and on schedule delivery which may cause customers to transfer
their product(s) to other fabs, (v) operating results fluctuate from quarter
to quarter making it difficult to predict future performance, (vi) impact
of our debt and other liabilities on our financial position and operations,
(vii) our ability to successfully execute acquisitions, integrate them into
our business, utilize our expanded capacity and find new business,
(viii) fluctuations in cash flow, (ix) our ability to satisfy the covenants
stipulated in our agreements with our lender banks and bondholders
(as of December 31, 2016 we are in compliance with all such covenants
included in our banks’ agreements, bond G indenture and others), (x)
pending litigation, including the shareholder class actions that were filed
against the Company, certain officers, its directors and/or its external
auditor in the US and Israel, following a short sell thesis report issued
by a short-selling focused firm, which has been dismissed and closed
30
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31, September 30, December 31,
2016
2016
2015
A S S E T S
CURRENT ASSETS
Cash and short term deposits
Trade accounts receivable
Inventories
Other current assets
Total current assets
LONG-TERM INVESTMENTS
PROPERTY AND EQUIPMENT, NET
INTANGIBLE ASSETS, NET
GOODWILL
OTHER ASSETS, NET
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Short term debt
Trade accounts payable
Deferred revenue and customers’ advances
Other current liabilities
Total current liabilities
LONG-TERM DEBT
LONG-TERM CUSTOMERS’ ADVANCES
EMPLOYEE RELATED LIABILITIES
DEFERRED TAX LIABILITY
TOTAL LIABILITIES
TOTAL SHAREHOLDERS’ EQUITY
$389,377
$362,833
$205,575
141,048
137,532
30,041
697,998
25,624
616,686
28,129
7,000
4,447
128,979
143,090
32,851
667,753
24,616
643,046
32,687
7,000
4,535
110,065
105,681
25,406
446,727
11,737
459,533
34,468
7,000
5,903
$1,379,884
$1,379,637
$965,368
$48,084
99,262
26,169
73,600
247,115
296,144
41,874
14,176
97,961
697,270
682,614
$41,646
105,745
25,878
81,248
254,517
330,526
36,547
14,169
107,843
743,602
636,035
$33,259
91,773
23,373
62,714
211,119
256,019
21,102
14,189
77,353
579,782
385,586
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$1,379,884
$1,379,637
$965,368
31
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
REVENUES
COST OF REVENUES
GROSS PROFIT
OPERATING COSTS AND EXPENSES
Research and development
Marketing, general and administrative
Nishiwaki Fab restructuring costs and impairment, net
OPERATING PROFIT
INTEREST EXPENSE, NET
OTHER NON CASH FINANCING EXPENSE, NET
OTHER INCOME (EXPENSE), NET
PROFIT BEFORE INCOME TAX
INCOME TAX BENEFIT (EXPENSE)
PROFIT BEFORE NON CONTROLLING INTEREST
NON CONTROLLING INTEREST
NET PROFIT
BASIC EARNINGS PER SHARE
Weighted average number shares
DILUTED EARNINGS PER SHARE
Net profit used for diluted earnings per share
Weighted average number of shares
Three months ended
December 31,
September 30,
December 31,
2016
GAAP
2016
GAAP
2015
GAAP
$340,379
$326,209
$254,602
252,648
87,731
244,915
81,294
190,072
64,530
15,547
16,787
—
32,334
48,960
(3,272)
(2,210)
5,081
48,559
15,704
15,478
(991)
30,191
34,339
(2,366)
(12751) (a)
70
19,292
3,459 (b)
4,779 (b)
16,320
16,209
—
32,529
55,202
(2,230)
1,215
948
53,239
(986)
52,253
(3,972)
52,018
(805)
$48,281
$51,213
$0.53
91,234
$0.58
87,821
$0.49
$50,397
103,612
$0.52
$53,318
101,805
24,071
(1,992)
$22,079
$0.28
79,607
$0.25
$22,079
88,970
(a) Three months ended December 31, 2015 included $6,998 of non-cash financing expense due to bonds series F accelerated
conversion.
(b) Three months ended September 30, 2016 included $6,472 income tax benefit due to TJP legal entity closure following Nishiwaki
Fab cessation of operation announced in 2014; three months ended December 31, 2015 included $6,389 income tax benefit due to
Japanese income tax rate reduction.
32
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars and share count in thousands, except per share data)
REVENUES
COST OF REVENUES
GROSS PROFIT
OPERATING COSTS AND EXPENSES
Research and development
Marketing, general and administrative
Nishiwaki Fab restructuring and impairment cos (Income), net
OPERATING PROFIT
INTEREST EXPENSES, NET
OTHER NON CASH FINANCING EXPENSE, NET
GAIN FROM ACQUISITION, NET
OTHER INCOME (EXPENSE), NET
PROFIT (LOSS) BEFORE INCOME TAX
INCOME TAX BENEFIT (EXPENSE)
PROFIT (LOSS) BEFORE NON CONTROLLING INTEREST
NON CONTROLLING INTEREST
NET PROFIT (LOSS)
BASIC EARNINGS (LOSS) PER ORDINARY SHARE
Weighted average number of ordinary shares
DILUTED EARNINGS PER ORDINARY SHARE
Net profit used for diluted earnings per share
Weighted average number of ordinary shares
Year ended December 31,
2015
$960,561
755,196
205,365
61,669
62,793
(991)
123,471
81,894
(13,179)
(109,930) (a)
—
(190)
(41,405)
12,278 (b)
(29,127)
(520)
$(29,647)
$0.40
74,366
2016
$1,249,634
946,534
303,100
63,134
65,439
(627)
127,946
175,154
(11,857)
(12,492)
50,471
9,322
210,598
(1,432) (b)
209,166
(5,242)
$203,924
$2.33
87,480
$2.09
$212,160
101,303
(a) Year ended December 31, 2015 included $80,815 of non-cash financing expense due to bonds series F accelerated
conversion.
(b) Year ended December 31, 2016 included $6,472 of income tax benefit in relation to TJP legal entity closure
following Nishiwaki Fab cessation of operation announced in 2014; year ended December 31, 2015 included
$11,153 income tax benefit resulting from expiration of statute of limitations and $6,389 income tax benefit of
Japanese income tax rate reduction.
33
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF CERTAIN FINANCIAL DATA
(dollars and share count in thousands, except per share data)
RECONCILIATION FROM GAAP NET PROFIT TO ADJUSTED NET
PROFIT:
GAAP NET PROFIT
Stock based compensation
Amortization of acquired intangible assets
Nishiwaki Fab restructuring and impairment cost (income), net
Financing expense, net associated with Bonds Series F
accelerated conversion
Income tax benefit, see (1) below
ADJUSTED NET PROFIT
ADJUSTED NET PROFIT PER SHARE
Basic
Diluted
Fully diluted, see (2) below
ADJUSTED NET PROFIT USED TO CALCULATE PER SHARE DATA:
Basic
Diluted
Fully diluted
NUMBER OF SHARES AND OTHER SECURITIES USED TO
CALCULATE PER SHARE DATA:
Basic
Diluted
Fully diluted, see (2) below
EBITDA CALCULATION:
GAAP OPERATING PROFIT
Cost of revenue:
Depreciation of fixed assets
Stock based compensation
Amortization of acquired intangible assets
Research and development:
Stock based compensation
Marketing, general and administrative:
Stock based compensation
Amortization of acquired intangible assets
Nishiwaki Fab restructuring and impairment cost (income), net
Three months ended
December 31,
September 30,
December 31,
2016
2016
2015
$48,281
$51,213
$22,079
2,381
2,777
—
—
—
53,439
$0.59
$0.54
$0.52
$53,439
$55,555
$55,555
91,234
103,612
107,121
2,337
2,367
—
—
6,472
49,445
$0.56
$0.51
$0.48
$49,445
$51,550
$51,550
87,821
101,805
107,146
1,975
2,374
(991)
6,998
6,389
26,046
$0.33
$0.29
$0.27
$26,046
$26,472
$28,440
79,606
91,086
103,477
$55,202
$48,960
$34,339
44,874
835
2,589
557
989
188
—
43,110
936
2,180
501
900
187
—
37,841
686
2,186
519
770
188
(991)
EBITDA
$105,234
$96,774
$75,538
(1) Three months ended September 30, 2016 included income tax benefit in relation to TJP legal entity closure following Nishiwaki Fab cessation
of operation announced in 2014; three months ended December 31, 2015 included income tax benefit due to Japanese income tax rate
reduction.
(2) Fully diluted share count includes all issued and outstanding securities; outstanding ordinary share count as of December 31, 2016 is 92,985.
34
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF CERTAIN FINANCIAL DATA
(dollars and share count in thousands, except per share data)
Year ended December 31,
2016
2015
RECONCILIATION FROM GAAP NET PROFIT TO ADJUSTED NET PROFIT:
GAAP NET PROFIT (LOSS)
Stock based compensation
Amortization of acquired intangible assets
Financing expense, net associated with Bonds Series F accelerated
conversion
Non cash financing expense related to bank loan early repayment
Gain from acquisition, net
Other non-recurring items, see (1) below
Income tax benefit, see (2) below
ADJUSTED NET PROFIT
ADJUSTED NET PROFIT PER SHARE
Basic
Diluted
Fully diluted
ADJUSTED NET PROFIT USED TO CALCULATE PER SHARE DATA:
Basic
Diluted
Fully diluted
NUMBER OF SHARES AND OTHER SECURITIES USED TO
CALCULATE PER SHARE DATA:
Basic
Diluted
Fully diluted
EBITDA CALCULATION:
GAAP OPERATING PROFIT
Cost of revenue:
Depreciation of fixed assets
Stock based compensation
Amortization of acquired intangible assets
Acquisition relatd non-recurring costs
Research and development:
Stock based compensation
Marketing, general and administrative:
Stock based compensation
Amortization of acquired intangible assets
Nishiwaki Fab restructuring and impairment cost (income), net
$203,924
9,406
9,780
—
6,653
(50,471)
2,378
(6,472)
$175,198
$2.00
$1.81
$1.71
$175,198
$183,434
$183,434
87,480
101,303
107,121
(29,647)
7,540
8,696
80,815
—
—
(991)
(17,542)
$48,871
$0.66
$0.58
$0.63
$48,871
$48,871
$65,136
74,366
84,902
103,477
$175,154
$81,894
169,958
151,221
3,920
9,029
3,005
2,119
3,367
751
(627)
2,214
7,944
—
1,905
3,421
752
(991)
EBITDA
$366,676
$248,360
(1) Year ended December 31, 2016 included mainly acquisition related costs; year ended December 31, 2015 included mainly Nishiwaki Fab
restructuring and impairment cost (income), net.
(2) Year ended December 31, 2016 included $6,472 of income tax benefit in relation to TJP legal entity closure following Nishiwaki Fab
cessation of operation announced in 2014; year ended December 31, 2015 included $11,153 income tax benefit resulting from expiration
of statute of limitations and $6,389 income tax benefit due to Japanese income tax rate reduction.
35
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONSOLIDATED SOURCES AND USES REPORT
(dollars in thousands)
Three months ended
Cash and short-term deposits - beginning of period
Cash from operations
Investments in property and equipment, net
Exercise of warrants and options, net
Debt received (repaid), net
Effect of Japanese Yen exchange rate change over cash balance
(17,353)
TPSCo dividend to Panasonic
Long-term deposits and investments
—
—
December 31, September 30, December 31,
2016
2016
2015
$362,833
$311,062
$155,348
81,835
(42,929)
10,644
30,041
86,410
(54,947)
21,918
32,851
2,336
—
(12,500)
53,180
(58,291)
4,168
25,406
154
(1,570)
—
Cash and short-term deposits - end of period
$389,377
$362,833
$205,575
Cash and short-term deposits - beginning of period
Cash from operations
Investments in property and equipment, net
Exercise of warrants and options, net
Debt received (repaid), net
Effect of Japanese Yen exchange rate change over cash balance
TPSCo dividend to Panasonic
Long-term deposits and investments
Nishiwaki employees retirement related payments in connection with its
operation cessation
Year ended
December 31, December 31,
2016
2015
$205,575
327,468
(209,624)
38,803
37,091
5,635
(2,563)
(13,008)
—
$187,167
195,213
(165,489)
14,424
903
(166)
(1,570)
—
(24,907)
Cash and short-term deposits - end of period
$389,377
$205,575
36
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
CASH FLOWS - OPERATING ACTIVITIES
Net profit (loss) for the period
Adjustments to reconcile net profit (loss) for the period
to net cash provided by operating activities:
Income and expense items not involving cash flows:
Depreciation and amortization
Financing expense associated with debentures series F
Effect of indexation, translation and fair value measurement on debt
Other expense (income), net
Gain from acquisition
Changes in assets and liabilities:
Trade accounts receivable
Other current assets
Inventories
Trade accounts payable
Deferred revenue and customers' advances
Other current liabilities
Long-term employee related liabilities
Deferred tax liability, net
Nishiwaki employee related retirement payments in connection
with its operation cessation
Year ended December 31,
2016
2015
$209,166
$(29,127)
197,606
150
8,292
(9,322)
(50,471)
(30,104)
(265)
(22,069)
5,550
(23,581)
(145)
(798)
(3,703)
—
168,032
87,973
16,078
190
—
(11,115)
(14,978)
(17,908)
(26,163)
32,725
8,454
(2,036)
(16,912)
(24,907)
Net cash provided by operating activities
327,468
170,306
CASH FLOWS - INVESTING ACTIVITIES
Investments in property and equipment, net
Long-term deposits and investments, net
Net cash used in investing activities
CASH FLOWS - INVESTING ACTIVITIES
Debt received, net of repayment
Exercise of warrants and options, net
Dividend payment to Panasonic
Net cash provided by financing activities
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS - END OF PERIOD
Short-term deposits
CASH AND SHORT TERM DEPOSITS - END OF PERIOD
(209,624)
(17,101)
(226,725)
37,091
38,803
(2,563)
73,331
5,635
179,709
175,575
355,284
34,093
389,377
(165,489)
(30,000)
(195,489)
903
14,424
(1,570)
13,757
(166)
(11,592)
187,167
175,575
30,000
205,575
37
TOWERJAZZ WORLD HEADQUARTERS
Tower Semiconductor Ltd.
Ramat Gavriel Industrial Park
20 Shaul Amor Avenue
P.O. Box 619
Migdal Haemek 23105 Israel
Phone: +972-4-6506611
Fax: +972-4-6547788
INVESTOR RELATIONS &
CORPORATE COMMUNICATIONS
Noit Levy-Karoubi, Vice President
Phone: +972-4-6047066
E-mail: noit.levi@towerjazz.com