Jazz Technologies, Inc. Announces Fourth Quarter 2007 Financial Results

Business Wire, Feb 13, 2008

NEWPORT BEACH, Calif. -- Jazz Technologies, Inc. (Amex:JAZ) today announced unaudited financial results for the fourth quarter and year ended December 28, 2007.

Fourth Quarter Financial Results

Fourth quarter 2007 revenues were $54.8 million. Specialty process business generated $41.9 million, or 76.5% of total revenues. Fourth quarter preliminary net loss is estimated to be $4.6 million or $0.23 per diluted share as compared to net loss of $3.0 million or $0.13 per diluted share in the third quarter of 2007. Net loss in the third quarter and estimated net loss in the fourth quarter included the impact of a $2.7 million and a $1.9 million net gain, respectively, relating to the purchase of a portion of Jazz Technologies' convertible senior notes at a discount to their principal amount. As explained below, the fourth quarter net loss figure is a preliminary estimate and may change due to the final impact on depreciation and amortization, and income and other taxes, that may result from a yet-to-be completed analysis of Jazz Semiconductor's ownership change under Internal Revenue Code ("IRC") Section 382 and related purchase accounting effects in connection with the acquisition of Jazz Semiconductor.

Fourth quarter 2007 EBITDA, a non-GAAP measurement, was $8.2 million, compared to third quarter EBITDA of $10.5 million. Fourth quarter 2007 free cash flow, also a non-GAAP measure, was $4.3 million as compared to third quarter free cash flow of $4.4 million. Excluding gain from the purchase of the convertible senior notes, fourth quarter free cash flow was $2.4 million, compared to third quarter free cash flow of $1.7 million. Fourth quarter 2007 EBITDA and free cash flow also included an R&D expense for in process research and development expense of $1.3 million.

An explanation of EBITDA and free cash flow and a reconciliation of both measures to net loss is set forth at the end of this press release.

Fourth quarter 2007 capital expenditures were approximately $1.1 million. During the quarter, Jazz Technologies had net cash interest expense of $2.8 million. Fourth quarter estimated depreciation and amortization expense was $9.6 million.

Capacity utilization was approximately 93% during the fourth quarter of 2007 as compared to approximately 88% during the third quarter. Jazz Technologies estimates first quarter 2008 capacity utilization will be approximately 85%.

"I am pleased with our execution in the fourth quarter, which reflected our continuing focus on scale, technology leadership and financial discipline," said Gil Amelio, chairman and chief executive officer of Jazz Technologies. "We delivered sequential revenue growth and generated strong free cash flows. During the quarter we made initial forays into new end markets, including bio-medical, and new applications including MEMS and power management. We believe that over time, this will lead to greater revenue diversification and margin expansion."

Business Highlights

* Secured a MEMS design win with a provider targeting the instrumentation area of the biomedical market, a new market for the company.

* Announced an early adopter for Jazz's revolutionary single chip radio platform for mobile devices, SiComm.

* Announced design win and began production with Averna that will incorporate Jazz RFCMOS technology into a semiconductor chip for wireless speakers, microphones, headphones and headsets for higher-quality radio interface than currently is available through Blue Tooth technology.

* Began volume production for MEMS application targeting wireless handset market with WiSpri, a leader in the field of tunable Radio Frequency technology.

* Solidified presence in the defense market by ramping production volumes for a large supplier of defense electronic systems to the US government.

Capital Structure

During the fourth quarter, the company also repurchased convertible senior notes to reduce the company's debt obligations and lower its cost of capital. Jazz negotiated discounted purchase prices ranging from 82 to 83 percent of the principal amount of the notes, and incurred $11.1 million to purchase $13.0 million in principal amount of notes.

As of December 28, 2007, Jazz Technologies had approximately $10.6 million in cash and cash equivalents. Total debt on the balance sheet was $141.2 million, representing $133.2 million of the convertible senior notes and $8 million drawn against the line of credit. Jazz has unused capacity of $37.1 million under a three-year senior secured revolving credit facility with Wachovia Capital Finance Corporation.

First Quarter 2008 Business Outlook

"Based on our backlog and utilization metrics, we expect first quarter 2008 sales in the range of $50 to $51 million. This reflects the typical first quarter seasonality amplified by inventory build-up in select markets. We expect first quarter EBITDA and free cash flow again to be positive," said Paul Pittman, chief financial and administrative officer of Jazz Technologies.

Conference Call

Chairman and chief executive officer, Gil Amelio, and chief financial and administrative officer, Paul Pittman, will discuss the fourth quarter performance along with the outlook for the first quarter of 2008, during a conference call today at 2:00 p.m. PST (5:00 pm EST).