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Published: 2023-07-27 16:03:12 ET
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TOWER SEMICONDUCTOR LTD - 928876 - 2023
Marketable securities are available-for-sale securities; the amortized cost of such marketable securities of $184,974 and $181,247 as of June 30, 2023 and December 31, 2022, respectively, is presented net of an immaterial allowance for credit losses. 0000928876 2023-01-01 2023-06-30 0000928876srt:ChiefExecutiveOfficerMembertsem:TimeVestedRestrictedStockUnitsMembertsem:TwoThousandThirteenShareIncentivePlanMemberus-gaap:SubsequentEventMember 2023-07-01 2023-07-03 0000928876srt:ChiefExecutiveOfficerMemberus-gaap:PerformanceSharesMembertsem:TwoThousandThirteenShareIncentivePlanMemberus-gaap:SubsequentEventMember 2023-07-01 2023-07-03 0000928876srt:ChiefExecutiveOfficerMemberus-gaap:RestrictedStockUnitsRSUMembertsem:TwoThousandThirteenShareIncentivePlanMemberus-gaap:SubsequentEventMember 2023-07-01 2023-07-03 0000928876 2023-07-01 2023-07-03 0000928876srt:BoardOfDirectorsChairmanMembertsem:TimeVestedRestrictedStockUnitsMembertsem:TwoThousandThirteenShareIncentivePlanMemberus-gaap:SubsequentEventMember 2023-07-01 2023-07-03 0000928876tsem:NewOtherDirectorsMembertsem:TimeVestedRestrictedStockUnitsMembertsem:TwoThousandThirteenShareIncentivePlanMemberus-gaap:SubsequentEventMember 2023-07-01 2023-07-03 0000928876tsem:NewOtherDirectorsMembertsem:TimeVestedRestrictedStockUnitsMembertsem:TwoThousandThirteenShareIncentivePlanMemberus-gaap:SubsequentEventMembertsem:FirstAnniversaryMember 2023-07-01 2023-07-03 0000928876tsem:NewOtherDirectorsMembertsem:TimeVestedRestrictedStockUnitsMembertsem:TwoThousandThirteenShareIncentivePlanMemberus-gaap:SubsequentEventMembertsem:SecondAnniversaryMember 2023-07-01 2023-07-03 0000928876tsem:TpsCoMember 2023-06-30 0000928876tsem:TpsCoMemberus-gaap:SubsequentEventMember 2023-07-01 0000928876currency:JPYtsem:TpsCoMemberus-gaap:SubsequentEventMember 2023-07-01 0000928876 2022-01-01 2022-06-30 0000928876 2023-04-01 2023-06-30 0000928876 2022-04-01 2022-06-30 0000928876 2023-06-30 0000928876 2022-12-31 0000928876 2022-06-30 0000928876us-gaap:NoncontrollingInterestMember 2022-12-31 0000928876tsem:TreasuryStocksMember 2022-12-31 0000928876us-gaap:RetainedEarningsMember 2022-12-31 0000928876us-gaap:AccumulatedTranslationAdjustmentMember 2022-12-31 0000928876tsem:AccumulatedOtherComprehensiveIncomeExcludingForeignCurrencyMember 2022-12-31 0000928876us-gaap:DeferredCompensationShareBasedPaymentsMember 2022-12-31 0000928876us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0000928876us-gaap:CommonStockMember 2022-12-31 0000928876us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-06-30 0000928876us-gaap:CommonStockMember 2023-01-01 2023-06-30 0000928876us-gaap:DeferredCompensationShareBasedPaymentsMember 2023-01-01 2023-06-30 0000928876us-gaap:NoncontrollingInterestMember 2023-01-01 2023-06-30 0000928876us-gaap:ComprehensiveIncomeMember 2023-01-01 2023-06-30 0000928876us-gaap:RetainedEarningsMember 2023-01-01 2023-06-30 0000928876us-gaap:AccumulatedTranslationAdjustmentMember 2023-01-01 2023-06-30 0000928876tsem:AccumulatedOtherComprehensiveIncomeExcludingForeignCurrencyMember 2023-01-01 2023-06-30 0000928876us-gaap:NoncontrollingInterestMember 2023-06-30 0000928876tsem:TreasuryStocksMember 2023-06-30 0000928876us-gaap:RetainedEarningsMember 2023-06-30 0000928876us-gaap:AccumulatedTranslationAdjustmentMember 2023-06-30 0000928876tsem:AccumulatedOtherComprehensiveIncomeExcludingForeignCurrencyMember 2023-06-30 0000928876us-gaap:DeferredCompensationShareBasedPaymentsMember 2023-06-30 0000928876us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0000928876us-gaap:CommonStockMember 2023-06-30 0000928876 2021-12-31 xbrli:pure xbrli:shares iso4217:USD iso4217:USDxbrli:shares iso4217:JPY
Exhibit 99.1
 

TOWER SEMICONDUCTOR LIMITED

AND SUBSIDIARIES
 

UNAUDITED CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2023

 

 
TOWER SEMICONDUCTOR LIMITED AND SUBSIDARIES
 
INDEX TO UNAUDITED CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2023
 
 
Page
  
F-2
  
F-3
  
F-4
  
F-5
  
F-6 - F-7
  
F-8 - F-9
 
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
 
   
As of
  
   
June 30,
    
December 31,
  
   
2023
    
2022
  
ASSETS
            
             
CURRENT ASSETS
            
Cash and cash equivalents
  
$
318,195
    
$
340,759
  
Short-term deposits
    
419,528
      
495,359
  
Marketable securities (*)
    
175,872
      
169,694
  
Trade accounts receivable
    
163,293
      
152,935
  
Inventories
    
330,819
      
302,108
  
Other current assets
    
32,396
      
34,319
  
Total current assets
    
1,440,103
      
1,495,174
  
                 
LONG-TERM INVESTMENTS
    
8,829
      
8,796
  
                 
PROPERTY AND EQUIPMENT, NET
    
1,018,636
      
962,258
  
                 
GOODWILL AND OTHER INTANGIBLE ASSETS, NET
    
13,049
      
14,031
  
                 
DEFERRED TAX AND OTHER LONG-TERM ASSETS, NET
    
53,459
      
67,349
  
                 
TOTAL ASSETS
  
$
2,534,076
    
$
2,547,608
  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
                 
CURRENT LIABILITIES
                
Current maturities of long-term debt
  
$
41,300
    
$
62,275
  
Trade accounts payable
    
154,507
      
150,930
  
Deferred revenue and customers' advances
    
22,402
      
38,911
  
Employee related liabilities
    
58,399
      
58,920
  
Other current liabilities
    
25,231
      
76,352
  
Total current liabilities
    
301,839
      
387,388
  
                 
LONG-TERM DEBT
    
178,865
      
210,069
  
                 
LONG-TERM CUSTOMERS' ADVANCES
    
31,209
      
40,893
  
                 
EMPLOYEE RELATED LIABILITIES
    
8,349
      
7,711
  
                 
DEFERRED TAX AND OTHER LONG-TERM LIABILITIES
    
2,709
      
13,006
  
                 
TOTAL LIABILITIES
    
522,971
      
659,067
  
                 
TOTAL SHAREHOLDERS' EQUITY
    
2,011,105
      
1,888,541
  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
2,534,076
    
$
2,547,608
  
 
(*) Marketable securities are available-for-sale securities; the amortized cost of such marketable securities of $184,974 and $181,247 as of June 30, 2023 and December 31, 2022, respectively, is presented net of an immaterial allowance for credit losses.
 
See notes to consolidated financial statements.
 
F - 2
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars and shares in thousands, except per share data)
 
   
Six months ended June 30,
    
Three months ended June 30,
  
   
2023
    
2022
    
2023
    
2022
  
REVENUES
  
$
712,802
    
$
847,300
    
$
357,191
    
$
426,168
  
                                 
COST OF REVENUES
    
530,568
      
630,229
      
270,674
      
313,728
  
                                 
GROSS PROFIT
    
182,234
      
217,071
      
86,517
      
112,440
  
                                 
OPERATING COSTS AND EXPENSES:
                                
Research and development
    
38,783
      
40,799
      
19,452
      
20,481
  
Marketing, general and administrative
    
36,016
      
42,538
      
17,387
      
21,285
  
Restructuring gain from sale of machinery and equipment, net
    
(50,282
)
    
-
      
(1,952
)
    
-
  
Restructuring expense
    
17,776
      
-
      
1,101
      
-
  
     
42,293
      
83,337
      
35,988
      
41,766
  
                                 
OPERATING PROFIT
    
139,941
      
133,734
      
50,529
      
70,674
  
                                 
FINANCING AND OTHER INCOME (EXPENSE), NET
    
10,921
      
(10,295
)
    
3,924
      
(8,162
)
                                 
PROFIT BEFORE INCOME TAX
    
150,862
      
123,439
      
54,453
      
62,512
  
                                 
INCOME TAX EXPENSE, NET
    
(20,788
)
    
(9,492
)
    
(5,747
)
    
(4,339
)
                                 
NET PROFIT
    
130,074
      
113,947
      
48,706
      
58,173
  
                                 
Net loss (income) attributable to non-controlling interest
    
(7,482
)
    
(1,837
)
    
2,484
      
(96
)
                                 
NET PROFIT ATTRIBUTABLE TO THE COMPANY
  
$
122,592
    
$
112,110
    
$
51,190
    
$
58,077
  
                                 
BASIC EARNINGS PER SHARE
                                
Earnings per share
  
$
1.11
    
$
1.03
    
$
0.46
    
$
0.53
  
Weighted average number of shares
    
110,025
      
109,037
      
110,088
      
109,138
  
                                 
DILUTED EARNINGS PER ORDINARY SHARE:
                                
Earnings per share
  
$
1.10
    
$
1.01
    
$
0.46
    
$
0.53
  
Net profit used for diluted earnings per share
    
122,592
    
$
112,110
      
51,190
    
$
58,077
  
Weighted average number of ordinary shares outstanding
                                
used for diluted earnings per share
    
111,153
      
110,561
      
111,234
      
110,561
  
 
See notes to consolidated financial statements.
 
F - 3
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(dollars in thousands)
 
   
Six months ended June 30,
    
Three months ended June 30,
  
   
2023
    
2022
    
2023
    
2022
  
Net profit
  
$
130,074
    
$
113,947
    
$
48,706
    
$
58,173
  
                                 
Other comprehensive income, net of tax:
                                
Foreign currency translation adjustment
    
(12,818
)
    
(25,206
)
    
(11,904
)
    
(16,921
)
Change in employees plan assets and benefit obligations, net of taxes
    
185
      
(20
)
    
93
      
(10
)
Unrealized loss on derivatives
    
(2,727
)
    
(14,922
)
    
(1,964
)
    
(8,151
)
Comprehensive income
    
114,714
      
73,799
      
34,931
      
33,091
  
Comprehensive loss (income) attributable to non-controlling interest
    
(7,482
)
    
(1,837
)
    
2,484
      
(96
)
Comprehensive income attributable to the Company
  
$
107,232
    
$
71,962
    
$
37,415
    
$
32,995
  
 
See notes to consolidated financial statements.
              
 
F - 4
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(dollars and share data in thousands)
 
   
THE COMPANY'S SHAREHOLDERS' EQUITY
                    
                           
Accumulated
    
Foreign
                                
   
Ordinary
    
Ordinary
    
Additional
          
other
    
currency
     Accumulated                
Non
        
   
shares
    
shares
    
paid-in
    
Unearned
    
comprehensive
    
translation
     profit    
Treasury
    
Comprehensive
    
controlling
        
   
issued
    
amount
    
capital
    
compensation
    
loss
    
adjustments
    
(deficit)
    
stock
    
income
    
interest
    
Total
  
BALANCE AS OF JANUARY 1, 2023
    
110,041
    
$
440,150
    
$
1,384,398
    
$
174,121
    
$
(2,040
)
  
$
(45,497
)
  
$
(50,879
)
  
$
(9,072
)
        
$
(2,640
)
  
$
1,888,541
  
                                                                                       
Changes during the period:
                                                                                      
Proceeds from an investment in a subsidiary
                                                                          
1,960
      
1,960
  
Exercise of options and RSUs
    
169
      
697
      
(697
)
                                                          
-
  
Employee stock-based compensation
                            
13,495
                                                    
13,495
  
Other comprehensive income:
                                                                                      
Profit
                                                    
122,592
            
$
122,592
      
7,482
      
130,074
  
Foreign currency translation adjustments
                                            
(12,818
)
                    
(12,818
)
    
(7,605
)
    
(20,423
)
Change in employees plan assets and benefit obligations
                                    
185
                              
185
              
185
  
Unrealized loss on derivatives
                                    
(2,727
)
                            
(2,727
)
            
(2,727
)
Comprehensive income
                                                                  
$
107,232
                  
BALANCE AS OF JUNE 30, 2023
    
110,210
    
$
440,847
    
$
1,383,701
    
$
187,616
    
$
(4,582
)
  
$
(58,315
)
  
$
71,713
    
$
(9,072
)
          
$
(803
)
  
$
2,011,105
  
                                                                                         
OUTSTANDING SHARES, NET OF TREASURY STOCK
AS OF JUNE 30, 2023
    
110,123
                                                                                  
 
See notes to consolidated financial statements.
 
F - 5
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
 
   
Six months ended June 30,
  
   
2023
    
2022
  
CASH FLOWS - OPERATING ACTIVITIES
            
             
Net profit for the period
  
$
130,074
    
$
113,947
  
                 
Adjustments to reconcile net profit for the period
                
to net cash provided by operating activities:
                
Income and expense items not involving cash flows:
                
Depreciation and amortization
    
125,966
      
137,787
  
Effect of exchange rate differences and fair value adjustment
    
2,176
      
946
  
Other expense, net
    
666
      
1,907
  
                 
Changes in assets and liabilities:
                
                 
Trade accounts receivable
    
(13,828
)
    
(31,603
)
Other current assets
    
976
      
10,519
  
Inventories
    
(41,105
)
    
(28,958
)
Trade accounts payable
    
19,830
      
53,010
  
Deferred revenue and customers' advances
    
(26,193
)
    
(10,646
)
Employee related liabilities and other current liabilities
    
(50,533
)
    
26,077
  
Long-term employee related liabilities
    
638
      
357
  
Deferred tax, net and other long-term liabilities
    
(446
)
    
1,325
  
Net cash provided by operating activities
    
148,221
      
274,668
  
                 
CASH FLOWS - INVESTING ACTIVITIES
                
Investments in property and equipment, net
    
(194,678
)
    
(130,217
)
Investments in marketable securities and other assets, net
    
66,809
      
(94,745
)
Net cash used in investing activities
    
(127,869
)
    
(224,962
)
                 
CASH FLOWS - FINANCING ACTIVITIES
                
Proceeds from an investment in a subsidiary
    
1,932
      
-
  
Exercise of options, net
    
-
      
44
  
Principal payments on account of capital lease obligation
    
(20,396
)
    
(17,778
)
Debentures repayment
    
(18,493
)
    
(20,972
)
Net cash used in financing activities
    
(36,957
)
    
(38,706
)
                 
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE
    
(5,959
)
    
(10,753
)
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
(22,564
)
    
247
  
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
    
340,759
      
210,930
  
CASH AND CASH EQUIVALENTS - END OF PERIOD
  
$
318,195
    
$
211,177
  
 
See notes to consolidated financial statements.
      
 
F - 6
 
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
 
   
Six months ended June 30,
  
   
2023
    
2022
  
NON-CASH ACTIVITIES:
            
Investments in property and equipment
  
$
156,465
    
$
82,526
  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                
Cash received during the period from interest, net of interest paid
  
$
10,785
    
$
1,495
  
Cash paid for income taxes, net during the period
  
$
6,916
    
$
8,718
  
 
See notes to consolidated financial statements.
      
 
F - 7

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF JUNE 30, 2023
(dollars in thousands, except per share data)

 

NOTE 1      -  GENERAL
 
Basis for Presentation
 
The unaudited condensed interim consolidated financial statements of Tower Semiconductor Ltd. (“Tower” or “the Company”) as of June 30, 2023 include the financial statements of Tower and (i) its wholly-owned subsidiary Tower US Holdings Inc., the sole owner of: (1) Tower Semiconductor NPB Holdings, Inc. and its wholly-owned subsidiary, Tower Semiconductor Newport Beach, Inc. and (2) Tower Semiconductor San Antonio, Inc. (ii) its 51% owned subsidiary, Tower Partners Semiconductor Co., Ltd. (“TPSCo”) and (iii) its wholly-owned subsidiary, Tower Semiconductor Italy S.r.l. (“TSIT”). Tower and its subsidiaries are collectively referred to as the “Company”.
 
The Company’s unaudited condensed interim consolidated financial statements are presented after elimination of inter-company transactions and balances and are presented in accordance with U.S. generally accepted accounting principles (“US GAAP”).
 
The unaudited condensed interim consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements of the Company as of December 31, 2022 and for the year then ended, including the notes thereto.
 
In the opinion of the Company's management, the unaudited condensed interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial position as of the dates presented and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected on a full-year basis.

NOTE 2   -  INITIAL ADOPTION OF NEW STANDARDS

 

During the period there was no initial adoption of new accounting standards.

 

F - 8

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS AS OF JUNE 30, 2023

(dollars in thousands, except per share data)

NOTE 3      -  SUBSEQUENT EVENTS
 
In July 2023, the Company’s affiliates, including TPSCo, extended their existing capital lease lines with JA Mitsui Leasing, Ltd., described in Note 11D to the Company’s annual financial statements as of December 31, 2022, whereby the availability period of such lines was extended to June 2024 with an updated remaining amount available for future utilization, totaling up to approximately JPY 6.5 billion (approximately $45,000 as of July 1, 2023). The lease agreements’ terms did not change and contain annual interest rates of approximately 2%.
 
On July 3, 2023, the Company's shareholders approved the following RSU awards to the CEO and members of the Board of Directors of the Company under the Company’s 2013 Plan:
 
(i) 75.8 thousand time-vested RSUs and 125.1 thousand performance RSUs (“PSUs”) subject also to time-vesting, to the CEO, with 33% of such RSUs and PSUs to vest at the end of each year for 3 years following the grant date for a total compensation value of approximately $7,500. The grant also includes a provision requiring the CEO to own, commencing May 2024, ordinary shares of the Company at a minimum value that equals at least three times his annual base salary as of May 2024 (the “Minimum Holding”). The CEO has until May 2024 to accumulate the Minimum Holding (whether by conversion of RSUs to ordinary shares or by purchase of ordinary shares), and during such period, until he accumulates the Minimum Holding, he must retain at least 20% of the vested time-based RSUs granted to him on or after May 2019;
 
(ii) 8.0 thousand time-vested RSUs to the chairman of the Board of Directors (“the Chairman”) for a total compensation value of $300, to vest 33% at the end of each year following the grant date; and
 
(iii) 3.3 thousand time-vested RSUs to each of the seven members of the Board of Directors then serving (other than to the Chairman and the CEO), for an aggregate compensation value of $875, vesting over a two-year period, with 50% vesting at the first anniversary of the date of grant and 50% on the second anniversary of the date of grant.
 
The Chairman and the members of the Board will have to own, commencing July 2025, ordinary shares of the Company at a minimum value that equals at least 50% of their annual cash compensation (the “BOD Minimum Holding”). The Chairman and the members of the Board have until July 2025 to accumulate the BOD Minimum Holding (whether by conversion of RSUs to ordinary shares or by purchase of ordinary shares), and during such period, until they accumulate the BOD Minimum Holding, they must retain at least 20% of the vested time-based RSUs granted to them on or after July 2020.
 
 

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