Tower Semiconductor Reports First Quarter 2008 Financial Results

Achieved Revenue of $57.6 Million, Representing the Second Highest Quarterly Revenue in the Company's History

MIGDAL HAEMEK, Israel, May 19/PRNewswire-FirstCall/ -- Tower Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM), an independent
specialty foundry, today announced financial results for the first quarter
ended March 31, 2008.

Highlights

- Recorded positive cash flow from operations for the sixth
consecutive quarter and positive EBITDA for the tenth
consecutive quarter

- Decreased net loss by $10.6 million year-over-year,
representing an improvement of 26 percent

- Initiated production of N-trig's Digitizer Chips in Fab 2
targeted at the convertible notebook market

- Ramped production of Canesta's 3D Image Sensors in Fab 2
targeted at the automotive and gaming 3D camera market

- Announced plan to pursue expanded opportunities within the
European market

Revenue for the first quarter of 2008 was $57.6 million as
compared to revenue of $55.6 million in the first quarter of 2007 and $
61.6milion in the prior quarter

First quarter 2008 non-GAAP gross profit and operating profit,
as described and reconciled below, totaled $21.0 million and $12.0 million,
respectively, which represent 36.4 percent gross margin and 20.9 percent
operating margin. Calculated in accordance with GAAP, net loss for the first
quarter was $29.6 million, or $0.24 per share, an improvement of $10.6
million as compared to $40.2 million, or $0.38 per share, for the same period
in 2007.

"During the first quarter, we continued to execute on a number
of key initiatives and customer engagements that resulted in the second
largest revenue quarter in the Company's history despite the seasonality that
is typically associated with our customer base and target markets," commented
Russell Ellwanger, Chief Executive Officer of Tower Semiconductor, Ltd.
"Furthermore, in accordance with our stated IDM specialty platform strategy,
we achieved very high base line yield levels on new process platforms for two
tier-one IDM customers in our first cycle of learning. Both platforms are
expected to ramp in volume production over the next quarters. Additionally,
our CMOS Image Sensor portfolio continues to expand with the inclusion of 3D
imaging for automotive and gaming applications."

Tower expects that second quarter revenue will be in a range
of between $56 million and $60 million.

First Quarter 2008 Financial Results Conference Call and Web
Cast

Tower will host a conference call to discuss these results
today, May 20, 2008, at 10:00 a.m. Eastern Time (ET) / 5:00 p.m. Israel time.
To participate, please call: 1-888-994-4498 (U.S. toll-free number) or
972-3-918-0685 (international) and mention ID code: TOWER. Callers in Israel
are invited to call locally by dialing 03-918-0685.The conference call will
also be Web cast live at http://www.earnings.com and at www.towersemi.com and
will be available thereafter on both Web sites for replay for 90 days,
starting at approximately 2 p.m. ET on the day of the call.

As previously announced, beginning with the fourth quarter of
2007, the Company presents its financial statements in accordance with U.S.
GAAP. All historical amounts presented in this release, including the
financial tables below, were recast to reflect the application of U.S. GAAP.

As used in this release, the term Earnings Before Interest Tax
Depreciation and Amortization (EBITDA) consists of loss, according to U.S.
GAAP, excluding interest and financing expenses (net), tax, depreciation and
amortization and stock based compensation expenses. EBITDA is not a required
GAAP financial measure and may not be comparable to a similarly titled
measure employed by other companies. EBITDA should not be considered in
isolation or as a substitute for operating income, net income or loss, cash
flows provided by operating, investing and financing activities, or other
income or cash flow statement data prepared in accordance with GAAP.

This release, including the financial tables below, presents
other financial information that may be considered "non-GAAP financial
measures" under Regulation G and related reporting requirements promulgated
by the Securities and Exchange Commission as they apply to our company. These
non-GAAP financial measures exclude (1) depreciation and amortization
expenses and (2) compensation expenses in respect of options granted to
directors, officers and employees. Non-GAAP 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 non-GAAP financial measures as well a reconciliation
between the non-GAAP financial measures and the most comparable GAAP
financial measures. The non-GAAP financial information presented herein
should not be considered in isolation from or as a substitute for operating
income, net income or loss, cash flows provided by operating, investing and
financing activities, or other income or cash flow statement data prepared in
accordance with GAAP.

About Tower Semiconductor Ltd.

Tower Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM) is an
independent specialty foundry that delivers customized solutions in a variety
of advanced CMOS technologies, including digital CMOS, mixed-signal and RF
(radio frequency) CMOS, CMOS image sensors, power management devices, and
embedded non-volatile memory solutions. Tower's customer orientation is
complemented by its uncompromising attention to quality and service. Its
specialized processes and engineering expertise provides highly flexible,
customized manufacturing solutions to fulfill the increasing variety of
customer needs worldwide. Offering two world-class manufacturing facilities
with standard and specialized process technologies ranging from 1.0- to
0.13-micron, Tower Semiconductor provides exceptional design support and
technical services to help customers sustain long-term, reliable product
performance, while delivering on-time and on-budget results. More information
can be found at http://www.towersemi.com.

Forward Looking Statement

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. Potential risks and
uncertainties include, without limitation, risks and uncertainties associated
with: (i) the completion of the equipment installation, technology transfer
and ramp-up of production in Fab 2 and raising the funds therefore, (ii) the
cyclical nature of the semiconductor industry and the resulting periodic
overcapacity, fluctuations in operating results, future average selling price
erosion, (iii) having sufficient funds to satisfy our short-term and
long-term debt obligations and other liabilities, (iv) operating our
facilities at high utilization rates which is critical in order to defray the
high level of fixed costs associated with operating a foundry and reduce our
losses, (v) our ability to satisfy the covenants stipulated in our amended
credit facility agreement, (vi) our ability to capitalize on increases in
demand for foundry services, (vii) meeting the conditions to receive Israeli
government grants and tax benefits approved for Fab2, the possibility of the
government requiring us to repay all or a portion of the grants already
received and obtaining the approval of the Israeli Investment Center for a
new expansion program, (viii) our ability to accurately forecast financial
performance, which is affected by limited order backlog and lengthy sales
cycles, (ix) maintaining existing customers and attracting additional
customers, (x) not receiving orders from our wafer partners and customers,
which can result in excess capacity, (xi) our dependence on a relatively
small number of products for a significant portion of our revenue, (xii)
product returns, (xiii) 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, (xiv) competing effectively, (xv) our large amount
of debt and our ability to repay our short-term and long-term debt on a
timely basis, (xvi) achieving acceptable device yields, product performance
and delivery times, (xvii) our ability to manufacture products on a timely
basis and to purchase the equipment to increase Fab2 capacity beyond 24,000
wafers per month and timely installation thereof, (xviii) our dependence on
intellectual property rights of others and our ability to operate our
business without infringing others' intellectual property rights, (xix)
exposure to inflation, currency exchange and interest rate fluctuations and
risks associated with doing business internationally and in Israel and (xx)
business interruption due to fire, the security situation in Israel and other
events beyond our control.

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 our most recent filings on Forms 20-F, F-3 and 6-K,
as were filed with the Securities and Exchange Commission 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.

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)

March 31, December 31,
_________ ____________
2008 2007
_________ ____________
unaudited
_________
A S S E T S

CURRENT ASSETS
Cash and cash equivalents $ 32,374 $ 44,536
Trade accounts receivable 42,185 44,977
Other receivables 3,805 4,748
Inventories 34,398 27,806
Other current assets 1,347 1,580
_______ ______
Total current assets 114,109 123,647
------- ------- LONG-TERM INVESTMENTS 14,984 15,093
------- ------- PROPERTY AND EQUIPMENT, NET 520,518 502,287
------- ------- INTANGIBLE ASSETS, NET 31,855 34,711
------- ------- OTHER ASSETS, NET 10,652 11,044
------- ------- TOTAL ASSETS $ 692,118 $ 686,782
======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Current maturities of
convertible debenture $ 8,426 $ 7,887
Trade accounts payable 55,988 49,025
Deferred revenue 9,935 -- Other current liabilities 17,926 20,024
______ ______
Total current
liabilities 92,275 76,936

LONG-TERM DEBT FROM BANKS 390,210 379,314

DEBENTURES 116,618 117,460

LONG-TERM CUSTOMERS' ADVANCES 16,059 27,983

OTHER LONG-TERM LIABILITIES 59,793 40,380
_______ _______
Total liabilities 674,955 642,073
------- ------- SHAREHOLDERS' EQUITY 17,163 44,709
_______ _______
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 692,118 $ 686,782
======== ====== -- --

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars in thousands, except share data and
per share data)

Three months
ended
March 31,
______________________________
2008 2007 2006
______________________________
GAAP GAAP GAAP
______________________________

REVENUES $ 57,607 $ 55,604 $ 35,875

COST OF SALES 68,255 71,519 61,331
________ ________ ________
GROSS LOSS (10,648) (15,915) (25,456)
-------- -------- -------- OPERATING COSTS AND EXPENSES

Research and
development 2,976 3,609 3,379
Marketing, general and
administrative 7,768 8,077 5,849
________ ________ ________
10,744 11,686 9,228
-------- -------- -------- ________ ________ ________

OPERATING LOSS (21,392) (27,601) (34,684)

FINANCING
EXPENSE, NET (7,800) (12,710) (6,062)

OTHER INCOME
(EXPENSE), NET (428) 69 551
________ ________ ________

LOSS FOR THE PERIOD $ (29,620) $ (40,242) $ (40,195)
============ =========== ==========
BASIC LOSS PER
ORDINARY SHARE

Loss per share $ (0.24) $ (0.38) $ (0.56)
============ =========== ==========
Weighted average
number of ordinary
shares outstanding - in
thousands 124,228 105,060 71,872
============ =========== ==========

TOWER SEMICONDUCTOR LTD. AND
SUBSIDIARY
RECONCILIATION OF REPORTED GAAP TO NON-GAAP CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands)

Three months ended
March 31, 2008
_____________________________________
Depreciation,
Amortization
and
stock based
compensation
expenses
non-GAAP (see a, b, c below) GAAP
_____________________________________

REVENUES $ 57,607 $ -- $ 57,607

COST OF SALES 36,650 31,605 (a) 68,255
_________ _______ _________
GROSS PROFIT (LOSS) 20,957 (31,605) (10,648)
--------- ------- --------- OPERATING COSTS AND EXPENSES

Research and development 2,744 232 (b) 2,976
Marketing,
general & administrative 6,169 1,599 (c) 7,768
_________ _______ _________
8,913 1,831 10,744
--------- ------- --------- _________ _______ _________

OPERATING PROFIT (LOSS) $ 12,044 $ (33,436) $ (21,392)
========= ========== =========
(a) Includes depreciation and amortization expenses in the
amount of $31,328 and stock based compensation expenses
in the amount of $277.
(b) Includes depreciation and amortization expenses in the amount
of $58 and stock based compensation expenses in the amount of
$174.
(c) Includes depreciation and amortization expenses in the amount
of $14 and stock based compensation expenses in the amount of
$1,585.

Three months ended
March 31, 2007
_____________________________________
Depreciation,
Amortization
and
stock based
compensation
expenses
non-GAAP (see d, e, f below) GAAP
_____________________________________

REVENUES $ 55,604 $ -- $ 55,604

COST OF SALES 34,711 36,808 (d) 71,519
_________ _______ _________
GROSS PROFIT (LOSS) 20,893 (36,808) (15,915)
--------- ------- ---------
OPERATING COSTS AND EXPENSES

Research and development 2,752 857 (e) 3,609
Marketing,
general & administrative 6,310 1,767 (f) 8,077
_________ _______ _________

9,062 2,624 11,686
--------- ------- --------- _________ _______ _________
OPERATING PROFIT (LOSS) $ 11,831 $ (39,432) $ (27,601)
========= ========== =========
(d) Includes depreciation and amortization expenses in the amount
of $36,647 and stock based compensation expenses in the amount
of $161.
(e) Includes depreciation and amortization expenses in the amount
of $705 and stock based compensation expenses in the amount of
$152.
(f) Includes stock based
compensation expenses.

Three months ended
March 31, 2006
_____________________________________
Depreciation,
Amortization
and
stock based
compensation
expenses
non-GAAP (see g, h, i below) GAAP
_____________________________________
REVENUES $ 35,875 $ -- $ 35,875

COST OF SALES 23,297 38,034 (g) 61,331
_________ _______ ________
GROSS PROFIT (LOSS) 12,578 -38,034 -25,456
--------- ------- -------- OPERATING COSTS AND EXPENSES

Research and development 2,227 1,152 (h) 3,379
Marketing,
general & administrative 5,155 694 (i) 5,849
_________ _______ ________
7,382 1,846 9,228
--------- ------- -------- _________ _______ _________
OPERATING PROFIT (LOSS) $ 5,196 $ (39,880) $ (34,684)
========= ========== =========
(g) Includes depreciation and amortization expenses in the amount
of $37,835 and stock based compensation expenses in the amount
$199.
(h) Includes depreciation and amortization expenses in the amount
of $1,055 and stock based compensation expenses in the amount
of $97.
(i) Includes depreciation and amortization expenses in the amount
of $11 and stock based compensation expenses in the amount of
$683.

Contact:

Tower Semiconductor
Limor Asif, +972-4-650-6936
Limoras@towersemi.com

or:

Shelton Group
Ryan Bright, +972-239-5119 ext. 159
rbright@sheltongroup.com

Source: Tower Semiconductor Ltd

Contact: Tower Semiconductor, Limor Asif, +972-4-650-6936, Limoras@towersemi.com or Shelton Group, Ryan Bright, +972-239-5119 ext. 159, rbright@sheltongroup.com

2008-05-19 18:36:08 0365752 PRNEWSWIRE