高塔半導體 (TSEM) 2008 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Tower Semiconductor third quarter 2008 results conference call.

All participants are currently in listen-only mode.

Following management's prepared statements, instructions will be given for the question and answer session.

(Operator instructions)

As a reminder this conference is being recorded, November 13th, 2008.

Joining us today are Mr.

Russell Ellwanger, Tower's CEO, and Mr.

Oren Shirazi, CFO.

I would like to turn the conference over to Nati Somekh Gilboa, VP, Chief Legal Officer and Corporate Secretary.

Nati, please go ahead.

Thank you, and welcome to Tower Semiconductor's financial results conference call for the third quarter of 2008.

Russell will begin with remarks about the quarter's highlights, followed by Oren with an analysis of our third quarter.

After management's prepared remarks, we will begin the question and answer session.

Before we begin, I would like to remind you that some statements made during this call may be forward-looking, and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected.

A more complete discussion of these uncertainties and risk factors is included in our most recent filings on Form 20-F, F-4, F-3, and 6-K, as were filed with the Securities and Exchange Commission, and the Israeli Securities Authority.

And Jazz's most recent filings on forms 10-K and 10-Q as were filed with the SEC.

They are also available on our respective website.

Tower and Jazz expressly disclaims any obligation to update any such forward-looking statements.

On November 3rd and 4th, Tower presented at the AeA Classic Financial Conference in San Diego, California.

An audio webcast and copy of that presentation are available on our website at www.towersemi.com.

Now I'd like to turn the call to our CEO, Russell Ellwanger.

Russell, please go ahead.

Thank you, Nati.

And welcome and thank you all very much for joining us today.

I'm very pleased to announce that the third quarter represented the second largest revenue quarter in Tower's history, and also included record revenue of $174.2 million for the first nine months of the year.

In addition to these financial achievements, the third quarter included a number of other significant accomplishments for Tower, which we believe have accelerated the pursuit of our goal of becoming the leading specialty foundry worldwide.

Most notably, on September 19th, we closed our merger with Jazz Technologies in a stock-for-stock transaction.

The synergies inherent in Tower and Jazz's post-merger are substantial, and include, first, post-merger cost savings of approximately $60 million, which also include some independent Tower and Jazz cost reductions.

The $60 million figure is a significant increase from the original estimate of $40 million of cost savings synergies that we announced in May.

We expect to begin realizing the $60 million annual run rate beginning in 2009.

Secondly, a broadened and expanded product and process portfolio, which now includes leadership positions in analog-intense mixed signal and RF, power management, CMOS image sensors, MEMS, non-volatile memory, and RFID technology.

Thirdly, significant cross-selling opportunities, which we believe will drive our top-line growth over the next several years.

The merger has significantly diversified our customer base as there was no overlap among the top 20 customers of both Tower and Jazz, and only three in the top 50.

With our newly expanded customer base and product portfolio, we now have the opportunity to significantly broaden our footprint within each individual customer's products by leveraging these existing relationships.

We're already beginning to see results.

I have met with many of the customers who are enthusiastic about the opportunities to expand our relationship.

Additionally, we have initiated a series of global technology and marketing conferences, North America, Europe, and Asia targeting existing customers of Tower and Jazz as well as new customers.

Also during the quarter, we closed a restructuring agreement with our banks and with the Israel Corporation, one of Tower's major shareholders, which resulted in a reduction in debt of approximately $250 million, and beneficial modification to the terms of our remaining debt, including the deferral of interest and principal payments.

The agreement also included an investment by the Israel Corporation of about $20 million in Tower, and a commitment to provide an additional $20 million by the end of 2009 under certain conditions.

Collectively, these transactions have significantly improved our balance sheet and provide us with the financial stability and resources we need to continue to aggressively grow our business.

As a result of these achievements, we will enter 2009 as a dramatically improved company from all perspectives.

On a 2007 pro forma basis, Tower is now the second largest pure-play specialty foundry in the world directly behind Vanguard.

Our goal is to become the leading specialty foundry in the world within the next two or three years.

We believe this goal is within our reach based on our leading specialty processes, expanded product offerings, worldwide capacity, and broadened customer base.

To assist us with our strategic planning going forward, we have added three new highly experienced members to our board of directors who bring with them extensive industry experience.

Alex Kornhauser is the Senior Vice President and General Manager of Manufacturing at Numonyx Corporation, which was formed through the merger of Intel and STM's flash businesses.

Alex brings over 38 years of semiconductor industry experience as an Intel executive, with responsibilities including system design, chip design and Fab manufacturing.

Second, [Donna Gross] joined our Board, and was formerly Senior Vice President and Israel Country Manager for SanDisk.

Prior to SanDisk, Donna served on the board of directors and a number of senior executive roles within M-Systems prior to the acquisition by SanDisk in late 2006.

Donna's experience at M-Systems included serving as President of the Company's US subsidiary, and Chief Marketing Officer of the Company.

The lastly, Amir Elstein is Executive Vice President in the office of the CEO for Teva Pharmaceutical Industries, a $33 billion market cap Israeli-based global pharmaceutical company, and previously served on Teva's board of directors.

Prior to Teva, Amir served as Intel Electronics CEO in Jerusalem, a subsidiary of Intel Corporation.

Each of these experienced executives brings a significant amount of knowledge to Tower.

We believe they will serve as key advisors and valuable resources in the future growth and success of the Company.

Now I'd like to review our business and customer developments during the quarter.

As we have discussed in the past, one of our primary focus areas and growth initiatives is IDM transfer agreements.

As IDMs move more towards asset-like business models, it often makes financial sense for them to outsource certain manufacturing processes.

Many times these agreements also include investments by our customers in the required process tools allowing us to incrementally increase capacity without spending the capital typically required.

We believe Tower has a unique value proposition in this area due to the following facts.

First, Israel is a lower cost region than the US- or Europe-based facilities, and second, we offer IP security and protection for these customers.

We are currently working on four significant IDM transfer agreements which have the potential to add tens of millions of dollars in incremental revenue beginning in the fourth quarter of 2009, which would continue to ramp throughout 2010.

Looking at our various product lines and market segments, firstly we have extended our power management platform presence, and are now working with three major power management and analog companies on a joint development program for the next generation analogue and power platforms on our 0.18 micron process node, utilizing the advanced platform we have developed over the past two years.

Additionally, our previously announced patented Wi-Flash technology for non-volatile memory solutions for 5-volt power management and other applications is gaining significant traction in the market, and is considered to be a key differentiator for us by potential customers.

We have begun a joint development program to design special MDM modules based on the Wi-Flash technology, specifically for power management applications.

We are also continuing to make progress in the high-end CIS market with a number of customers now moving into production on high-margin customized products.

In particular, we have made substantial progress in our previously announced joint venture with CMT Medical Technologies for the development of large panel CMOS sensor based X-ray sensors for medical applications.

We have characterized the one die per wafer, 5 inch by 6 inch sensor and are pleased to announce that it is fully functional with excellent performance.

In addition, two more significant dental customers have successfully produced intraoral sensors in Fab 2's 8-inch stitching node with excellent yield.

One of them also moved to production with a large stitch die, two die per wafer for dental CT at excellent yields as well.

In other areas, we are continuing with our development in the RFID market, and won a major design during the quarter based on our patented C-Flash MDM technology.

We have also successfully developed through a joint development program with Sarnoff a device for a major IDM company withstanding 15-kilovolt human body model ESD rating.

This product is planned to ramp its production in the first quarter of next year.

Finally, we have begun several new engagements in solar energy and are gaining traction from large companies in that growing market.

In reviewing the Jazz's technical advances, we continue in the development of new generations of high performance RF silicon germanium based processes.

We released details of our next generation technology of a 270 gigahertz FT process platform at the BCTM conference in Monterey which enables higher gain margin at low power as compared to competing technologies.

And we are continuing to work to release the 300 gigahertz platform.

This platform is specifically important for the automotive radar and high-speed optical data networks.

In addition, we continue to invest in the MEMs area, and are moving forward with a number of opportunities with close customer partnership in that growing market.

A few examples are silicon MEMs oscillators replacing the quartz oscillator, and in RF MEM, tunable capacitors which will be a disruptive element in the handset market with our customer having submitted samples to the largest cellular handset manufacturer in the world.

We announced yesterday that Jazz has licensed its RF design enablement technology to Fujitsu, which provides RF CMOS customers requiring 90-nanometer and 65-nanometer technology with a time-to-market advantage by providing state-of-the-art AIMS modeling platforms, and advanced statistical analysis tools allowing customers to optimize their design.

The agreement will result in ongoing royalty revenue for Jazz, and serves as a strong validation of Jazz advanced enablement technology.

Finally, in October, Jazz announced that Ubidyne selected Jazz semiconductor's 0.18 micron Silicon Germanium BiCMOS process to develop the world's first pure digital antenna embedded radio system for wireless communication.

Ubidyne's patent pending technology significantly improves the operating economics of wireless networks reducing energy consumption, enabling simple flexible deployment, and increasing the coverage and capacity of mobile communications networks.

Jazz's 0.18 micron Silicon Germanium BiCMOS process enables customers like Ubidyne to offer higher performance, higher precision, and more power-efficient products than were previously possible.

Now looking at our Fabs, our activity in Fab 1 was very strong during the quarter, and it continues to run at a high utilization level due to IDM transfer agreements and non-consumer high end markets.

As you may recall, last quarter we discussed two additional Siliconix Technology platforms, one of which had recently been qualified, and the other in the process of being qualified.

Since that time, the qualification of the second process is now complete.

We have ramped production of the first process to approximately 13k wafers per month.

In Tower's Fab 2 facility, we have experienced a decrease in utilization during the third quarter which has continued into the fourth.

A higher percentage of the products manufactured in Fab 2 are consumer oriented.

As we are all aware, these sectors have been impacted particularly hard by the current economic slowdown, which has resulted in the push-out of a number of orders due to inventory buildup on the part of our customers.

However, customer activity and new opportunities in the pipeline remains strong.

Based on our customer base of new projects, we are confident that Fab's utilization will return to more normal levels as the economy improves and our customers work though their inventory.

In July, we announced that Cypress Semiconductor and Panavision Imaging will begin manufacturing new products in Fab 2.

Tower and Cypress collaborated on the development of Cypress' first 0.18 micron stitched large format CIS devices, which will be manufactured utilizing Tower's latest generation of stitching technology.

Additionally, we announced that Panavision Imaging has developed the DLIS-2K and DLIS-4K reconfigurable line-scan CMOS image sensors, utilizing Tower's advanced photodiode pixel process.

The CMOS image sensor market is expected to grow from $7 billion in 2008 to $13.2 billion in 2012, and these sensors are targeted at high growth end markets such as consumer, industrial, scientific, and automotive.

Additionally, on October 2nd, we announced the production launch of Yitran's IT700 PLC Module, which is small, robust, and low-cost solution targeted at command and control applications such as remote meter management and smart home applications.

This is a large and expanding market which is expected to grow to more than 45 million units by 2010.

Looking at Jazz's Newport Beach facility, the Fab continued to run at high utilization rates including full utilization of the 0.18 micron capacity.

Design activity during the quarter was strong with 30 total wins of which approximately 50% were silicon germanium and 25% were for Jazz's BCD power technology.

Jazz also secured eight new wins in the optical space, seven of which are utilizing Jazz's 0.18 micron silicon germanium technology.

During the quarter, Jazz signed an MOU related to a technology transfer agreement with a large IDM.

The technology transfer is in progress, and a test chip has been taped in.

Now looking at the fourth quarter, we believe the Jazz merger occurred at precisely the right time as it provides us with the opportunity to achieve topline growth during a very difficult time for the industry as a result of global economic downturn.

Regarding the guidance for the fourth quarter, we expect revenue of approximately $81 million plus or minus 5%.

As we look into 2009, we have multiple projects that are gaining traction and numerous new projects coming into our Fabs.

We are confident that diversification in our product lines, end markets and customers as part of the merger with Jazz will assist us in successfully managing through this difficult environment that we will emerge a stronger company, prepared for significant growth and the realization of our goal of becoming the leading specialty foundry in the world.

With that, I'll turn the call over to Oren for a review of our financial results.

Oren.

Thank you, Russell, and hello, everyone.

First, I would like to remind everyone that beginning with the first quarter of 2007 we now report our financial results in accordance with US GAAP.

With that being sent -- with that being said, I would like to note that the financial tables in today's earnings release include financial information that may be considered non-GAAP financial measures under Regulation G, and related reporting requirements of the SEC as they apply to our Company.

Mainly, this release also presented financial data which is reconciled as indicated by the footnotes below the table, on a non-GAAP basis after deducting, one, depreciation, amortization and impairment expenses related to our fixed assets; two, compensation expenses in respect to option grants; and three, merger related cost including write-offs of in-process R&D.

Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for GAAP financial measures.

The table will also contain the comparable GAAP financial measures to the non-GAAP financial measures, as well as the reconciliation between the non-GAAP financial measures and the most comparable GAAP financial measures.

Further, the non-GAAP financial information presented herein 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 that are prepared in accordance with GAAP.

One final comment before we discuss the financial results for the third quarter, following the merger with Jazz, the amount presented in our financial reports and in today's release for the third quarter in nine months of 2008 include Jazz's results for the period between September 19, 2008 and September 30, 2008.

The balance sheet as of September 30, 2008 includes Jazz amount as of such date.

Now, I will discuss our detailed financial results for the third quarter of 2008.

As Russell mentioned, we reported revenues of $58.5 million, an improvement when compared to revenue of $56.6 million in the same period one year ago.

For the first nine month of '08, we achieved record revenue of $174 million, which represents an improvement of $5 million compared to the same period last year.

On a non-GAAP basis, our gross profit for the third quarter of 2008 was $20 million, representing 35% gross margin which was in line with the previous quarter.

Also on a non-GAAP basis, our operating profit, or EBITDA, for the third quarter of 2008 was $11 million, representing the twelfth consecutive quarter of positive EBITDA.

Cash flow from operating activities for the third quarter was also positive for the eighth consecutive quarter, and totaled $4 million.

For the first nine months of 2008, on a non-GAAP basis, our gross profit was $62 million representing 36% gross margin, and our operating profit was $34 million, representing 20% operating margins.

In the first nine months of 2008, we improved our GAAP net loss by $27 million to $82 million, an improvement of 24% compared to the same period one year ago.

GAAP net loss for both the three and the nine months ended September 30, 2008 included certain one-time items as follows.

One, a $131 million gain associated with the debt restructuring agreement with the Company's lenders.

Two, a $121 million of impairment of fixed assets under GAAP FASB 144, to adjust our fixed assets book value to its sell value under the prevailing market conditions.

And three, a $3 million of merger related cost, including the write-off of in-process R&D.

In the third quarter of 2008, we improved our GAAP net loss by approximately $14 million from $35 million in the third quarter of 2007 to $21 million.

Total GAAP operating expenses during the first nine months of 2008 were $32 million excluding the one-time items, and represented 19% of revenue.

This is a modest improvement when compared to 20% in the same period one year ago.

Now turning to our balance sheet following the merger, we ended the third quarter with approximately $38 million of cash, and total current assets of $147 million, an increase of $23 million compared to December 31, '07.

Looking at our financial position, the merger with Jazz has significantly strengthened our balance sheet.

In particular, one, long-term investment increased to $32 million primarily due to Jazz's 10% ownership stake in HHNEC, a Chinese foundry, and majority of which is owned by the Japanese NEC.

We see significant value in the 10% investment in HHNEC, which is a strong company with annual sales exceeding $300 million per year.

The investment in HHNEC is presented in the balance sheet in the amount of $70 million according to GAAP.

Two, property and equipment including -- are including $83 million of book value of Jazz's assets, mainly the equipment value located in Newport Beach, California.

Three, intangible assets grew to $86 million primarily due to Jazz intangible which includes $4 million of existing technology, $15 million of value of (inaudible) and core technology, $2 million of customer relations value, $5 million in trade name, and $34 million in facilities lease value.

On the liability side, the debentures include Tower bonds as well as Jazz notes of $128 million fair value.

In that context, we extended the Wachovia Bank credit lines and have available up to $55 million credit facility under the new agreement, of which $40 million was utilized as of September 30, 2008.

Shareholders' equity is now a positive $135 million, primarily as a result of the restructuring agreement with our lenders.

Now, looking at sales to our major customers, during the third quarter of 2008, we continued to expand our customer base.

We had a total of more than 55 customers in both Fabs.

Our leading and largest and publicly disclosed customers in 2008 continue to be Atheros Communications, SanDisk Corporation, Zoran Corp, Macronix Group, International Rectifier and SiTel, all those Fab 2.

[Airwaves], Vishay Siliconix, and ON Semiconductors in Fab 1.

We'll now open the call for question and answer session.

Operator.

Thank you.

Ladies and gentlemen, at this time we'll begin the question and answer session.

(Operator Instructions).

The first question is from John Rolfe of Argand Capital.

Please go ahead sir.

Hi, good afternoon guys.

A couple of quick questions.

Could you confirm for me -- you said that operating cash flow is about $4 million in the quarter.

Is that correct?

Yes.

And what was your CapEx in the quarter?

Just one second.

CapEx were $15 million.

15.

And what would you expect for fourth quarter on the CapEx front?

In Q3, we still had some payments for the previous ramp up that we did in the first two.

So you should expect Q4 and beyond to be stable at the run rate of $8 million to $10 million.

Okay, great.

And that $8 million to $10 million, is that what you would define as a sustaining CapEx, or how does that sort of break down?

Yes, $7 million to $8 million is sustaining, and the [remainder] is minor remainders of last milestones of equipment tools that we purchased in the quarter.

Okay, great.

And last question, could you tell me what depreciation and amortization was for the quarter?

Yes, so actually we have it also in the press release.

If you look at the last table, in the adjustment to the non-GAAP, so we excluded depreciation there, so we have a specific column.

So basically it is approximately $34 million.

This was this quarter, but due to the impairment that we did, you should expect for the future a reduction in the depreciation quarterly expenses to like $26 million-$27 million a quarter.

Okay, so of the $34 million, then about what -- sort of $7 million to $8 million of that was the impairment?

Is that correct?

Yes.

Okay, great.

Thanks very much.

Thank you.

The next question is from George Burmann of Gunn Allen Financial.

Please go ahead.

Good afternoon gentlemen.

Good afternoon.

I'm trying to consolidate the current market value of your Company in the trading activity with your results at $0.26, $0.27 a share, you're priced like a penny stock versus in your remarks you are the second largest specialty foundry in the world with massive operations worldwide.

Your guidance for the fourth quarter indicated, what, $81 million in revenues?

Yes.

And what do you foresee for the year 2009?

I'm not giving any guidance or outlook at this point for 2009.

Certainly we would see growth as compared to 2008 as we'll be a fully merged Company for all quarters.

But I'm not giving a guidance at this point.

Okay.

-- to see what's happening with the overall economy.

The gain on the debt reduction was telegraphed widely, the impairment charge was not.

What does that impairment charge incorporate?

I just didn't understand that, beginning of the sentence, about the gain of the restructuring.

You said it was what?

The gain on the restructuring of the debt was widely telegraphed, but the impairment charge sort of came out of left field here.

Is this just like an arbitrary thing where you go in and say, well, we're going to devalue the assets acquired on Jazz by $120 million?

No, no, not related to Jazz at all.

This is the impairment, so there is an accounting GAAP under US GAAP which is FASB 144.

This FASB requires to every quarter, do a check, an accounting check with the economical model to see whether by any chance the fair value of any asset is lower than the book value of these assets.

Now when we did this check, all the previous years, this check resulted in zero need to any impairment.

But when we did this check few weeks ago -- so due to all these worldwide downturn, as you know, a lot of semiconductor manufacturing companies are also hurt and the prices in the market of new and used manufacturing tools went down dramatically.

So basically the value -- the fair value of equipment, manufacturing tools that we have in Tower is lower than it was before this downturn of course.

This is reasonable.

Yes.

And this is the reason that we had to adjust the book value into this new reduced fair value.

Now -- and on a non-GAAP number, taking out the depreciation, you had an operating profit of $10.7 million.

Why would you not separate out the depreciation charge as so many companies do in a separate item as cost of sales?

Not cost of sales, as like a separate line item depreciation.

It seems to me that the depreciation amortization is in your cost of sales.

Correct.

So you're correct.

We can do that.

But actually what we are doing is giving additional -- separated that table which you saw, which is -- refer to the $10.7 million, and the depreciation is in a separate column.

So this is our way to show it separately.

We did not want to put this separate line of depreciation in the GAAP.

Accountants recommended not to do it this way.

But we certainly can consider it for the future if it helps.

Yes, because you're basically, if somebody doesn't look in detail at the numbers.

You look like you are hemorrhaging money, and have been hemorrhaging money for the last five years in hundreds of millions of dollars.

Yes, you are correct, that it's only from this depreciation line, which is $35 million.

This is why we give the additional table which excludes it.

But we could consider to break up -- to break the cost line into depreciation and other cost of goods expenses.

Good comment.

Yes.

Because in reality, you made $10 million in operating profits for the year quarter.

Yes.

$10.7 million, right.

Yes.

And --

For the year (Multiple speakers) it's 34 already.

The additional cost savings of $60 million going forward that you mentioned that would essentially also drop right down to the bottom line, right?

Yes.

Okay.

Well, according to your book values and everything else, you are trading at about a third of book.

Any comment on what your stock has done in the last three months?

Well, a comment on it, as far as what it should have done versus what it has done or --?

Yes.

How is that going to get you fairly valued in the marketplace?

I think to begin with, the entire market has been hit very, very strong in the past three months.

It's not solely Tower.

Secondly, at this point we've begun, as I mentioned, this worldwide technology tour to customers.

And we have non-customers showing as well at the different technology seminars.

Which by the way is also listed in the web that it's open for whoever would like to show up when we do the technology seminars.

Yes.

As well, we had our first post-merger financial conference at the AeA conference last week Monday, Tuesday.

We'll have another conference, the -- I think, it's January 5th and 6th in New York?

Yes.

At the -- it's the Needham, right?

Needham.

At the Needham conference.

So I think the thing that is warranted at this point is really for us, now that the merger is complete, to go out and publish what are the benefits of the merger --

Yes.

-- for people to see us outperforming the market through the combined offerings.

And --

Okay.

I believe that's been -- in most things time is the teller of all truth.

Right.

So the performance, we believe we'll perform.

And we let the information get out and talk to people about what we're doing, why we're doing it, what are the opportunities at hand.

Believe then the stock will show the appropriate performance.

Wait --

But in the present market condition -- when the tide goes down, all the ships go down, right?

Yes.

When the tide goes up, every ship that didn't have a hole broken by hitting a rock will go up with it.

Yes.

So we just have to make sure that our hole remains very sound, and as the tide goes up, then we go with the tide very nicely and show --

Okay.

Well, good luck to you in the future.

We'll be watching closely.

Thank you.

Thank you.

Thank you.

Your next question is from Robert Katz.

Please go ahead.

Hi Robert.

Hi Russell and Oren.

Hi.

Congratulations on the Jazz closure.

Thank you.

I have a question.

What is the earnings power of the combined entity now?

You gave revenue guidance for the fourth, but what would the EBITDA guidance be on that?

The EBITDA guidance for the fourth quarter?

We don't usually give EBITDA guidance.

But you can look for the historical number.

That basically if you look at the run rate of Tower and Jazz, which is public domain in the past, so we are running at like $11 million-$12 million a quarter in the past few quarters, and Jazz, they are running in their public disclosure financials on like $8 million positive EBITDA.

So this is the actual.

And that's -- and then on top of that you say you can get, next year, an additional $60 million of synergies?

Yes, next year, yes.

What --

Yes.

But it will not start to occur in Q4.

Will not start to recognize everything in Q4, but on a quarterly run rate from Q1 '09.

All right.

And you mentioned that your Fab -- that is Fab 2, I guess, fueled I guess the cyclicality of the end markets and services.

What about Jazz, how much of that has consumer electronic focus versus more industrial or non -- whatever non-consumer?

As I mentioned, we have a very different customer base.

A lot of the Tower products right now made in Fab 2 are targeted at low-cost end-user consumer products, low-end DVD players, cordless telephones, things of that sort that are just very much sitting on the shelf at this point.

So there is not a lot of consumers that are buying that at present.

All right.

A lot of the Jazz products are aimed at high-end communications and networking, which at least in the third and fourth quarter, there has been a very strong demand that's remained there.

But I think there is still a reasonable amount of consumer products within Jazz as well.

The segments that they were hitting in consumer products remains with a strong demand, at least from their own customer base.

And we'll see what happens in the first and the second quarter.

How much of their revenue would you say is more customer focused or from a consumer basis?

I honestly am not prepared to give an accurate answer to that.

I couldn't tell you at the moment.

Okay.

And what is the new debt structure, how much debt will the Company have exiting '08?

Bank debt is $200 million.

$200 million bank, and --

And we have Jazz at 180 -- 128 million of bond, and -- which are due at December 2011, and Tower has approximately $140 million of bonds due between December 2011 until 2016.

And you said combined cash is going to be about $38 million?

It was $38 million in the end of September, yes.

And how many shares fully diluted now?

Including all the -- you have a huge, but you have a lot of warrants and bonds which are very much outside of the money.

So including all that or only what is around the money?

How much in both, in the money and out of the money?

Basically you have 160 million ordinary shares.

On top of that we have a 300 million, which is the capital note.

This is the equity vehicle which is not redeemable, not repayable, not carry interest, that was issued to the banks (inaudible).

Okay.

And what's the convert on that or what's the strike price amount?

There is no strike price.

It's like -- it's like shares.

(inaudible) but it's like shares -- like preferred shares because it does not give any voting rights or any other rights, or any rights for dividend.

So the equity vehicle like we issued in 2006.

Okay.

And how many shares does that translate into, or it doesn't?

300 million.

300 million shares.

Yes.

Okay.

Thank you very much guys.

Good luck.

Thank you.

(Operator Instruction).

Please stand by while we pool for more questions.

There are no further questions at this time.

Mr.

Ellwanger, would you like to make a concluding statement?

Certainly.

So thank you very much for participating in the conference call today.

We do encourage you to visit our website for additional details.

As mentioned, with this worldwide road show we kicked off two, two-and-a-half weeks ago in Newport Beach, 130 customers having attended.

We had yesterday a hotel event in San Jose with, I'm told, about 80 customers attended.

You'd be welcome to visit the website, look at the future events and be very welcome to attend them, ask questions.

Please follow up with us directly for any questions that you might have.

And we are very excited going into the New Year with really a new company and looking forward to capitalizing on all of the benefits that we see that we'll have, with customer synergies, with cost synergies, and with the very complimentary product portfolio.

So thank you very, very much.

Thank you.

This concludes the Tower Semiconductor's third quarter 2008 results conference call.

Thank you for your participation.

You may go ahead and disconnect.