高塔半導體 (TSEM) 2008 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Tower Semiconductor Fourth Quarter and Fiscal Year 2008 Financial Results Conference Call.

All participants are currently present in a listen-only mode.

Following management's formal presentation, instructions will be given for the question-and-answer session.

(Operator Instructions).

As a reminder, this conference is being recorded February 19th, 2009.

Joining us today are Mr.

Russell Ellwanger, Tower's CEO, and Mr.

Oren Shirazi, CFO.

I'd like to turn the conference over to Noit Levi, Director of Investor Relations and Public Communications.

Ms.

Levi, please go ahead.

Thank you, and welcome to Tower Semiconductor's Financial Results Conference Call for the fourth quarter and fiscal year 2008.

Russell will begin with some announcements about the quarter and news highlights, followed by Oren, with an analysis for our fourth quarter and full-year financial results.

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.

These uncertainties and risk factors are fully disclosed in our Form 20-F, F-4, F-3 and 6-K, filed with the Securities and Exchange Commission, as well as filing with the Israeli securities authorities.

They are also available on our website.

Tower assumes no obligation to update any such forward-looking statements.

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

Please go ahead.

Welcome.

Thank you very much for joining us today.

2008 was a very successful year for Tower on multiple fronts, during which we significantly improved our position strategically, financially and operationally.

From a financial perspective, we achieved a record revenue of $251.7 million, which represents year-over-year growth of approximately 9%, two-year growth of 34% and three-year growth of 147%, making us the highest-growth foundry in the industry.

For the full year of 2008, non-GAAP gross and operating profit were $77.4 million and $36 million respectively, which represents 31% gross margin and 14% operating margin.

Notably, these results were achieved during a very challenging global economic environment during the second half of the year.

Secondly, a significant achievement during the year was our merger with Jazz Technologies in a stock-for-stock transaction.

The addition of Jazz has better positioned us for growth and to achieve our goal of becoming the leading specialty foundry in the world.

As a result of the merger, we have expanded our global operations with the addition of Jazz's foundry in Newport Beach, California, relationships with two foundries in China, combining with our existing two facilities in Israel.

As we have discussed in the past, the merger also provides us with a broadened and expanded process portfolio and allows us the ability to leverage significant cross-selling opportunities amongst the two customer bases due to the fact that there was zero overlap between the two companies' top 20 customers, which I will discuss further in a few minutes.

There was one pending issue to be resolved regarding the merger, which was a review by the Committee on Foreign Investment in the United States, commonly referred to as CFIUS, a group of US agencies that reviews foreign investments into US companies for national security reasons.

In December, we received notification from CFIUS that it had completed its review and that there were no unresolved national security concerns with respect to the merger and no further action will be taken by CFIUS.

Also during the year, we reached an agreement with our lenders and Israel Corporation, one of our major shareholders, which dramatically improved our balance sheet by reducing our debt by approximately $250 million, favorably adjusting the terms on our remaining debt and providing a $40 million cash investment in the Company by the Israel Corporation.

Finally, as a part of our integration efforts and operational efficiency review, we began to execute on a greater than $60 million annual cost reduction initiative that has already exceeded that target with a greater than $15 million quarterly cost reduction run rate in the first quarter of 2009.

This multifaceted initiative includes both cost savings through the merger of Tower and Jazz, as well as additional cost-reduction measures that include -- a reduction in materials cost through the best-of-breed Tower-Jazz contracts, as well as qualification of additional sources for lower-cost materials and spares; contract and term negotiations with suppliers, for example, a new TSP, Total Support Program, with Applied Materials, that allows us to transfer fixed costs to variable, enabling a more flexible mode of operation, which aligns cost directly to utilization; consolidating the contracts of major design environment tool suppliers, EDA tools, from the previous two contracts for each Tower and Jazz to a single contract with additional work stations; a reduction of sustained capital expenditures and headcount reductions at both manufacturing facilities in Israel and in Newport Beach, California, predominantly reducing redundancy in all support functions, whilst maintaining and enhancing core capability.

Now, turning to our financial results for the fourth quarter, we reported revenue of $77.5 million, which included our first full quarter consolidating Jazz's results and was within our guidance range despite the continued deterioration of the global economic environment over the last two months of the quarter, which resulted in many of our competitors lowering their fourth quarter guidance.

Additionally, both cash flow from operations and EBITDA were positive for the ninth and 13th consecutive quarters, respectively.

This was the highest quarterly revenue in Tower's history and represented a quarter-over-quarter increase of 32%.

The quarter-over-quarter pro-forma, consolidating Jazz's results for both the third and fourth quarters of 2008 decreased by 23%, which outperformed all foundries that have released fourth quarter results, including the top four publicly traded foundries.

Of significance and important to note is that although pro-forma revenue decreased by approximately $15 million sequentially, net profit improved by approximately $6 million.

This bottom-line improvement is a substantial achievement for any post-merger first quarter, especially for a merger of revenue equals.

As you're all aware, the fourth quarter was a particularly difficult period for most all businesses, and the environment still remains challenging, with reduced visibility into the coming quarters.

However, we believe that the steps we have taken will allow us to emerge from the current economic crisis as a stronger company, positioned for growth by expanding our market share, process and product portfolios, as well as our customer base.

We are also taking a number of additional steps which will enhance our future opportunities and performance.

As a result of the merger with Jazz, we have acquired a 10% ownership position in HHNEC and a supply agreement with ASMC, both of which are based in China.

We are actively pursuing additional opportunities to add low-cost capacity in these regions and plan to expand production of more commodity-type products into lower-cost manufacturing regions.

Our focus remains to be the leading specialty foundry in the world, to differentiate ourselves through specialty processes and technologies and to target opportunities which may fall outside of the traditional foundry model.

As a result of our efforts in this area, we expect an increase in our average selling price of approximately 20% in the first quarter at our Israeli-based fabs and an increase of approximately 5% at our US-based fab, with about 70% of our volume being specialty CMOS products.

IDM transfer agreements, such as the multiyear agreements we currently have with Vishay-Siliconix and International Rectifier, continue to be a focus for the Company.

Under these agreements, we provide a service to specific device makers who use proprietary fabrication flows to create certain differentiated applications.

In this service, we transfer and adapt their specialized flow to our equipment set and protect their intellectual property to be used only to manufacture for that specific customer.

The current economic environment is actually providing more opportunities in this area, as IDMs attempt to reduce fixed cost by driving fab-lite outsourcing models.

This also includes our Newport Beach facility, where we have recently fabed-out wafers for high-volume qualification for a first-tier US IDM.

We are also in advanced stages of negotiations with several other IDMs for transfers to either or both of our Israeli and Newport Beach-based facilities.

Our technical capability, flexible fab model, customer focus and fab locations in regions where IP is respected, render us a primary choice for these activities.

We are exploiting the unique value proposition of the Jazz silicon germanium BiCMOS to aggressively grow this higher-value, more differentiated technology platform.

Silicon germanium allows higher performance, higher precision and more power-efficient products than traditional RF CMOS technologies.

We had above 30 silicon germanium design wins for the second half of 2008, representing about 55% of the design wins within our Newport Beach facility.

We are targeting that number to grow to represent two-thirds of the design wins for Newport Beach and to also more aggressively engage the integrated device makers, which presently account for about 80% of silicon germanium manufacturing through internal production.

The products impacts of the merger significantly expands our offering and hence enables us to continue to meet the requirements of several key Jazz customers, as well as attracts new customers which have stringent performance requirements.

We have combined the Jazz silicon germanium BiCMOS process technology with the Tower 0.13 copper back-end CMOS technology to create a roadmap solution for higher-performance RF with more highly integrated CMOS, building lower cost and smaller board space RF solutions.

This platform will be manufactured in Tower fab2, with three cross-sale customers already engaged in this program.

For power management applications, we combine the Tower non-volatile memory and the 0.18 CMOS technology in fab2 with the Jazz uniquely scalable LDMOS modeling technology to quickly place us among the leaders of next-generation high-voltage power platform technology.

Tower's Y-Flash technology is gaining traction in this fast-growing market for a 5-volt operation, zero mask adder NVN solution on a 0.18 micron platform as required to support integration of digital and power devices on a single die.

When combined with Tower's excellent modular power management platform on the 0.18 technology node, which has LDMOS transistors and breakdown voltages of above 90-volt, this places Tower in a very competitive position within the power management market.

We have recently announced a joint development program with Triune Systems of Richardson, Texas, for the design and development of zero mask adder non-volatile memory blocks based on Tower's patented Y-Flash technology, suitable specifically for 5-volt operation on high-voltage power platforms in the 0.18 mode.

This program is progressing according to our plan and a variety of modules will be released to customers during 2009.

As a result, we are engaged in deep evaluations with five of the top power IDMs in the industry to manufacture their future 0.18 micron power devices.

We are quietly emerging as a major differentiated MEMS supplier and working to leverage our MEMS capabilities with multiple leading and emerging companies in this area.

According to iSuppli, MEMS are making major inroads into the consumer and mobile electronics market and global MEMS revenue is expected to grow to $2.6 billion by 2012.

One MEMS customer, WiSpry, achieved a major performance milestone with their cell phone customer that raises the probability of multi-million-dollar MEMS wafer revenue for us in the second half of 2009.

Another MEMS customer, Si-Time, has effectively brought its MEMS oscillator products to market, demonstrating our industrial scaling of MEMS and our volume CMOS specialty fab.

Our customers' innovation is alive and well in MEMS.

It requires deep commitment and know-how by the foundry, as well as deep commitment to a customer partnership to unleash that innovation.

For example, we are actively quoting a new innovative MEMS application for cell phone laser projection, in which the three laser beams are merged and rastered through advanced MEMS technology.

The merger with Jazz creates new possibilities for enhancing our MEMS technology capabilities in silicon and RF MEMS.

We also continue to pursue joint ventures similar to the CMT Medical Technology partnership, where we receive an ownership interest, as well as the revenue associated with manufacturing the products.

The CMT partnership, which is focused on large CMOS-based flat panels for medical X-ray applications, is progressing well.

Comparative results of a one-die-per-wafer sensor with the current state-of-the-art panels showed substantial improvement across the board in all performance parameters.

Specifically critical were resolution, sensitivity, frame rate and power consumption.

Our results were presented at the annual Radiological Society of North America meeting in Chicago last November and we received great interest and follow-ups from potential customers.

We are particularly excited about the Thales Group recent announcement to acquire CMT.

The Thales Group, a more than $15 billion per year company, is one of the leading providers of X-ray flat panels to the medical market.

In addition, Thales owns 51% of Trixell, which provides thin-films transistors X-ray panels to two additional industry leaders, Phillips and Siemens.

Cooperation with Thales and Trixell can place Tower as one of the leading providers of next-generation CMOS-based sensors to the medical market.

We are also maintaining leadership in CMOS imaging medical applications, which is experiencing substantial growth despite the worldwide economy.

As a result, our first quarter 2009 forecast for these applications areas is up 80% over the prior quarters.

Finally, we are working to expand our global sales channels, particularly in Asia.

We recently reached volume production for our first silicon germanium BiCMOS customer in China in the rapidly growing mobile TV market.

In January, we announced the appointment of a country manager for Korea to increase our opportunities there, mainly in the areas of power management, analog mixed signals, image sensors and RF.

Additionally, we are actively working to expand our channels in Japan and have plans to conduct a customer road show and participate in local industry conferences in Japan in the coming months.

Before I discuss our outlook for the first quarter, in my role as a board director and the senior spokesman of the Company, I would like to note that we have recently added two new members to our Board of Directors and have appointed a new Chairman.

On January 6th, we announced that Amir Elstein had been appointed to serve as our Chairman, succeeding Dov Moran, who will continue to serve on the Board of Directors.

Amir is currently a member of the Board of Directors of Teva Pharmaceutical Industries and Israel Corporation, one of Tower's major shareholders.

He recently served as the Executive Vice President in the Office of the CEO for Teva and was responsible for global resources.

Prior to Teva, Amir served as the General Manager of Intel Electronics Ltd., an Israeli subsidiary of Intel Corporation.

He is a semiconductor industry veteran with more than 28 years of global business experience, the vast majority of them in the semiconductor industry.

Additionally, I am pleased to announce that today Rami Guzman and Ilan Flato have been nominated to our Board of Directors.

Prior to his retirement, Rami most recently served as the Vice President of Motorola and a Director of Motorola Israel and also previously served as the Chief Financial Officer of Motorola Israel.

Ilan is a Director of Emblaze Ltd.

and previously served as the Chief Economist of United Mizrahi Bank.

We are excited to enter into our next phase of growth with Amir's Board leadership.

In the past half year, we have added five highly capable independent directors in addition to the core Tower Board, which helped facilitate 147% growth over the past three years (Company corrected after the conference call).

I am confident that our Board, with Amir as Chairman, will continue to help facilitate our growth and add valuable knowledge and experience to a very capable Tower management team and will assist us in capitalizing on the many opportunities that the present worldwide economic situation offers to the bold.

Now, looking at the first quarter of 2009, as we have mentioned, the worldwide outlook for the first quarter remains weak across multiple industries, geographies and markets.

As a result, we are projecting revenue to be in the range between $56 million and $60 million, or about a 25% quarter-over-quarter reduction against a weighted industry average reduction of about 44%.

In summary, we have continued to outperform the industry, have been among the top three revenue growth foundries in each of the past three years and the number one growth foundry over the past three years.

The merger with Jazz has given us substantial strength that we expect will help us not just weather the present worldwide economic situation, but allow us to have entered it with a great momentum, as evidenced in an actual and substantial fourth quarter increase in design and prototype activities and hence to emerge as a specialty market leader.

I am truly thrilled with the composition, energy, knowledge and aggressive makeup of the Tower Board.

We have numerous substantial opportunities with which we are engaged at various degrees towards closure and look forward to updating you throughout the year on our achievements.

Thank you.

I'll turn the time over now to our CFO, Oren Shirazi.

Thank you, Russell, and hello, everyone.

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

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

Namely, this release also presented financial data which is reconciled as indicated by the footnotes below the tables on a non-GAAP basis after deducting -- A, depreciation, amortization and impairment expenses related to our fixed assets; B, compensation expenses in respect to option grants; and C, manager related costs.

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

The table also contains 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 data prepared in accordance with GAAP.

One final comment before we discuss the financial results for the fourth quarter and the year.

Following the merger with Jazz, the amounts presented in our financial results and in today's release, including restatements, include Jazz results commencing September 19th, 2008.

The balance sheet as of December 31, 2008, includes Jazz's amounts as of such date.

Now, turning to our results.

As Russell mentioned we reported fourth quarter revenue of $77.5 million, including the first full quarter results from Jazz Technologies, following the close of the merger on September 19th.

This is compared to revenue of $61.6 million the same period one year ago and $58.5 million in the third quarter of 2008.

For the full year of 2008, we achieved annual revenue of $251.7 million, which is a 9% increase as compared to 2007 earnings.

On a non-GAAP basis, our gross profit for 2008 was $77 million, representing 31% gross margin and our operating profit on a non-GAAP basis was $36 million, or 14% of revenue.

EBITDA for the fourth quarter of 2008 was positive for the 13th consecutive quarter and totaled $36 million for the full year of 2008.

Cash flow from operating activities for the fourth quarter was also positive for the ninth consecutive quarter and totaled $13 million for the full year.

For the full year of 2008, we improved our GAAP net loss by $28 million, an improvement of 21% compared to the previous year.

The 2008 GAAP net loss included certain one-time items, as follows -- A, a $131 million gain associated with the debt restructuring agreement with the Company's lenders; B, a $121 million impairment of fixed assets under GAAP of 144 to adjust our fixed assets book value to its fair value under the prevailing market conditions; and C, a $2 million charge of merger-related costs.

Total GAAP operating expenses for the fourth quarter were $15 million, which represents 20% of revenue.

For the full-year total GAAP operating expenses, excluding one-time items, were $48 million, or 19% of revenue, which is a modest improvement when compared to 20% of revenues for the full year of 2007.

Additionally, in the fourth quarter of 2008, we recorded a gain of $3 million on financing income net, mainly due to lower interest rates in force and beneficial exchange rates.

Full-year 2008 financing expenses improved by $17 million, as compared to 2007 financing expenses.

Now, turning to our balance sheet, we ended 2008 with $35 million in cash and our current ratio is positive at 1.21.

Our shareholders' equity is a positive $110 million as of December 31, 2008, which is an improvement of $65 million as compared to $45 million as of December 31, 2007.

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

In particular -- A, long-term investments increased to $29.5 million, primarily due to Jazz's 10% ownership stake in HHNEC, a Chinese foundry, majority of which is owned by the Japanese company NEC.

We see significant value in our investment in HHNEC, which is a strong company with annual sales exceeding $300 million.

The investment in HHNEC is presented in the balance sheet in the amount of $17 million, according to GAAP; B, total fee and equipment, including $94 million of Jazz assets at book value, mainly it's equipment value located in Newport Beach, California; C, intangible assets grew to $81 million, primarily due to Jazz intangibles, which include $1 million of existing technology, $15 million of patent and core technology, $3 million in customer relations, $5 million in trade names and $34 million in facilities value.

On the liability side, the debentures include Tower's bonds and Jazz's bonds of $128 million par value.

We made payments during the month of December 2008 and January 2009 for principal and interest earned by the bond holders of Jazz and Tower on or before their due dates and are in full compliance with all the financial covenants of the indentured.

The net principal payment on the debentures is not due before the end of 2011.

In addition, we extended Jazz's Wachovia Bank credit line and continue to work with them under the same terms, following Wachovia Bank's acquisition in December 2008 by Wells Fargo.

Under this agreement, we have a total credit line of up to $55 million, of which $27 million were utilized as of December 2008.

Further, we reached a debt restructuring agreement with Tower's lenders to improve our balance sheet, financial position, financing expenses and cash flow through a $250 million reduction of debt, $250 million increasing shareholders' equity and up to $40 million of new cash investments by the Israel corp., of which $20 million were invested in Tower during September '08 and an additional $20 million in January 2009.

Also, we continued to aggressively pursue the $45 million in grants from the Israeli government through the investment center, which were promised and not received.

It is our hope that the recent elections in Israel will result in a government more likely to settle this matter quickly and to our benefit.

Now, looking at sales to our major customers, the merger with Jazz is resulting in a doubling of our worldwide customer base, with increasing cross-selling opportunities and substantial cost-saving synergies, and during the fourth quarter of 2008, we continued to expand our customer base.

Tower's leading and largest publicly disclosed customers in 2008 were SanDisk Corporation, Atheros Communications, Marconix Group, Zoran, International Rectifier and Sitel in Fab2, Vishay-Siliconix and on semiconductor in Fab1.

Jazz's leading and largest publicly disclosed customers in 2008 were RFMD, Skyworks, Conexant and Entropic.

We will now open the call for questions and answers session.

Operator?

Thank you.

(Operator Instructions).

The first question is from George Burmann of GunnAllen Financial.

Please go ahead, sir.

Good morning, gentlemen.

I guess congratulations are in order, surviving the bad times here.

Thank you very much.

I've got a quick question on your Company's valuation in the marketplace.

With the non-GAAP financials showing a $36 million profit basically for the year, the Company had a run rate of between $250 million and $350 million in revenues, as you say, one of the largest specialty fabs in the world.

If I take an average share count, say, $150 million shares at $0.20, it gives me a valuation of $30 million.

I find it hard to explain to customers how you value the Company here.

Well, that isn't how I value the Company.

But -- so we went into a very, very harsh economic decline worldwide.

Our stock price got hit by it very strong.

I think post-merger the market is really waiting to see what do we do with it, how do we move things along.

And I believe time is the teller of all truths and the stock price will reflect our performance.

Is it this quarter, will it be next quarter, will it be the quarter after?

The old statement, when times are bad, the tide goes down, all ships go down, but only the strong ones can make it when the tide is down, not hitting rocks.

When the tide goes back up, they come up much stronger and there's fewer of them there.

It's definitely within our horizon, within our plans, within our beliefs, that we'll be one of those that will rise when the tide goes up and our activities now we think will accelerate our market share during this portion that the tide is down.

We just have to continue to our plans, to work diligently on it, and then, as I'd mentioned, and it is the case, time is the teller of all truths, the share price will reflect what we do in the Company.

Okay, then I've got a follow-up.

On the funds that you are expected to receive from the Israeli government, is this something that is coming for sure or was promised or is it an if come back?

Yes, so now in Israel we have experienced last week an election, so there's supposed to be a new government, so under the previous government, as we said, we aggressively pursued this.

Actually, there are $45 million which are overdue, and this is the bureaucratically procedures, so it's very hard to comment on this from not being inside the government.

It's something between the Ministry of Industry in Israel and the Ministry of Finance.

Basically, we have filed a request for an approved plan.

Such plan was initially approved and then, we needed to complete the investment in Fab2 in a certain amount of time and since the worldwide conditions were not in an up cycle in this period of establishment, it took us two or three more years.

And then according to commitments, governmental commitments and agreements and the meetings held with very senior officials in the states and in the government, we filed another plan in order to -- actually a completion to the plan in order to get grants on the same original amount.

Such plan has been reviewed by a bank - It's called the Industrial Bank, which is a subsidiary, an affiliate, of the Ministry of Industry, came out to be very positive.

It came out that Tower has an NPV of and an ROI of $380 million positive to the national economy, so there was a positive recommendation to approve that, but since there were certain political situations in Israel with elections that were in the past, it got stuck in the process.

And now, we are trying to, again, aggressively pursue that and we truly hope that now it is the correct environment to support industry for manufacturing, so it could be that now is the correct time to get this approval.

So, this is essentially a grant by the Israeli government that, if granted, would exceed the entire market value of the Company, no?

No, it was also related to the previous question to Russell.

When you think about the market value of Tower, you only take into account I guess the shares outstanding, divide them by the price in the market.

When you do evaluation of the Company, you should also first refer to the capital notes, which are of the banks in Israel Corp., and also to the debt.

So, if you do this calculation, the EV, the valuation of the Company is in the range of $500 million or more.

The capital notes, though, have no repayment or interest rate terms, right?

Yes, the capital notes are an equity vehicle.

They are not debt at all.

They don't carry interest.

They are not linked to any index.

They are not repayable, not redeemable.

They are like a warrant with no consideration.

Right.

And I asked this on the last conference call.

When you show your GAAP numbers and you show revenues of X amount and the cost of sales hugely above that, someone looking at the Company just on the face of it, not looking at the depreciation and amortization, which is substantial, they would be out of their mind to put a dollar in the firm, because you are on the face of it losing massive amounts of money.

Wouldn't it be more prudent to separate out your depreciation and amortization charges under the cost of goods sold?

Yes, so it's a good point.

I remember you mentioned that.

We checked it with Deloitte, the auditors, and they do not support to do that in the face of the P&L report, but they supported that we will add another report, which is an adjustment between the GAAP and non-GAAP, and there in the middle column you can see the adjustment, which is mainly this depreciation and amortization amount.

So, anybody can see that, for example in the press release.

There's a huge difference in the numbers.

Correct, correct.

And this is why also in the press release and in the script, we mentioned the operational margin and the gross margin without the depreciation and we showed this in a table, in the last table in the press release, that cost of goods with the depreciation is almost $300 million, without the depreciation, it's $170 million.

So, a very good comment.

Yes.

Okay, good luck for the future.

Thank you very much.

Good questions.

Thank you.

The next question is from John Rolf of Augen Capital.

Please go ahead.

Hi.

Good morning, good afternoon.

A few questions for you.

Could you tell me what the operating cash flow was for the quarter and what the CapEx was for the quarter, as well?

Just one moment.

For Q4, cash from operations was positive $2 million and CapEx for the quarter was $16 million.

And what -- if -- from where you sit today, if there's not a material change in the environment for 2009, what would you expect total CapEx for fiscal 2009?

It should be like $7 million or $8 million, per quarter.

Per quarter.

Yes, that's it.

Okay.

So -- and that's more or less a sustaining rate.

Is that correct?

Yes.

Yes.

Would you expect in the first quarter with the given revenue range to be operating cash flow positive?

Usually, we do not guide on expectations for cash flow from operations or EBITDA.

We just guide on the revenues also, and also this is only one quarter ahead, so I cannot share that.

Okay, well, let me ask the question this way.

Last quarter, in the third quarter, where you had Jazz for part of the quarter, you had a revenue number of $58.5 million, which falls into that $56 million to $60 million range, and you generated I think about $3.6 million of operating cash flow.

Now that Jazz -- you have it onboard for the full period of time, is there any reason to expect, outside of working capital movement, that the cost structure of the business is materially different than it was in the third quarter?

My understanding is you've done additional cost cutting since then.

So, if anything, the cost structure would have improved.

Is that not correct?

Yes, so there is a reason to expect -- we announced on, I believe December 1st, about a cost reduction plan of $60 million, which will come into full effect from Q1 '09.

So from Q1 '09, there is a 15% reduction in the baseline of the expenses of the cost structure of the Company, which is mainly due to cost reduction synergies and others.

Now, even before that, if you look at Q4 and you compare it to Q3, or to Q4 of last year, you can see the benefit from previous cost-reduction measures that were done.

For example, if you compare this Q4 of '08 to the pro-forma number as if it was consolidated in Q4 '07, you see that revenues were reduced by $15 million, but the bottom-line net profit improved by approximately $6 million.

So, it is $21 million apple-to-apple of improvement in the cost structure already in Q4 '08, before the commencement of the new cost reduction plan.

Okay, okay, very good.

Thanks very much.

Thank you.

Thank you.

The next question is from Jordan Rosenberg of Meserau Financial.

Please go ahead.

First off, congratulations on the quarter, gentlemen.

Certainly encouraging to hear such a positive tone during these trying times.

Thank you.

My question addresses Tower's market value.

Have there been any efforts to monitor and manage Tower's listing status on the NASDAQ as the temporary suspension of bid price and market value requirements expires on April 19th?

Not yet, because first we don't know -- I mean, our counsels say that it could be further extended beyond April.

Anyway, even if it will end on April, on April we only start the count of the previous period that we got, so I believe it is until July.

And from July, July is the date, but until such date we need to file a plan and notify the NASDAQ that we want to just continue to be traded instead of the NASDAQ Capital Markets in the NASDAQ Global Market, or maybe I confuse the names.

So, from the point of view of the shareholder, it's the same as if we were today.

So, we can say that until January 2010 for sure, there is not any change in the eyes of the shareholder.

This is apart from the fact that our counsels believe that anyway NASDAQ will extend this period, because as of today so many companies are below $1 that were above $1 before all this worldwide recession.

So, we believe NASDAQ does not want to lose all these membership fees from all the companies, so we believe it will be continued.

But, again, worst-case scenario it is January 2010.

And of course, we continue to drive activities that should drive value into the Company and value in the eyes of shareholders and those trading the stock.

Great, I couldn't agree with you more.

Thank you for answering that.

Thank you very much.

There are no further questions at this time.

Mr.

Ellwanger, would you like to make a concluding statement?

Certainly.

To close, the Jazz merger was strategic and, as it turns out, extremely timely.

With it, we entered this present economic environment as a Company with strong momentum, as evidenced by an increase in customer design and tape-out activities, improved top and bottom-line performance, multiple not-yet-released initiatives in various stages of closure and the extremely capable and motivated employee base and management teams.

I truly believe we'll emerge from this down economy as a recognized industry specialty leader with top and bottom-line results that will speak for themselves.

I very much look forward to keeping you updated over the next months and quarters as we move towards our plans and as we execute against what we have presented to our Board.

So, I thank you all very much for your interest and, again, look forward to keeping you updated and contacting with you any time you might have questions.

Please, again, contact us directly.

Thank you very much.

Thank you.

This concludes the Tower Semiconductor Fourth Quarter and Fiscal Year 2008 Financial Results Conference Call.

Thank you for your participation.

You may go ahead and disconnect.