Jazz Technologies, Inc. Announces Second Quarter 2008 Financial Results

Business Wire, July 29, 2008

NEWPORT BEACH, Calif. -- Jazz Technologies, Inc. (Amex:JAZ) today announced financial results for the second quarter ended June 27, 2008.

Second Quarter Financial Results

Second quarter 2008 net revenues were $47.5 million. Specialty process business generated $35.1 million, or 74% of total net revenues. Second quarter net loss was $4.6 million or $0.24 per share compared to a net loss of $4.0 million or $0.22 per share in the first quarter. Second quarter net loss includes merger-related expenses of $1.5 million. First quarter net loss includes a $0.8 million net gain related to the purchase of a portion of Jazz Technologies' convertible senior notes at a discount to their principal amount.

Second quarter EBITDA, a non-GAAP financial measure, was $7.9 million, compared to first quarter EBITDA of $8.5 million. Second quarter free cash flow, a non-GAAP financial measure, was $3.8 million, compared to first quarter free cash flow of $3.5 million. Excluding merger-related expenses of $1.5 million in the second quarter, EBITDA was $9.4 million or 19.8% of net revenues, and free cash flow was $5.3 million. An explanation of EBITDA and free cash flow and a reconciliation of both measures to net loss are set forth at the end of this press release.

Second quarter capital expenditures were $1.4 million. During the quarter, Jazz Technologies had net cash interest expense of $2.7 million. Second quarter depreciation and amortization expense was $9.4 million, similar to the prior quarter.

Capacity utilization was approximately 67% during the second quarter, compared to approximately 88% during the first quarter.

"We exceeded the revenue outlook we had provided for the second quarter despite a challenging business environment. Our financial results reflect operational discipline, resulting in our fourth consecutive quarter of generating positive free cash flows," said Gil Amelio, chairman and chief executive officer of Jazz Technologies. "During the quarter, we also signed an agreement to merge with Tower Semiconductor in the quarter, with the goal of accelerating the future growth prospects of both companies."

Business Highlights

* On May 19, 2008, Jazz Technologies announced it had entered into a definitive agreement to merge with Tower Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM), an independent specialty wafer foundry. The merger, which is expected to close in the second half of 2008, is subject to the approval of Jazz Technologies' stockholders and other customary closing conditions. The record date for the special meeting of stockholders to consider and vote on the proposed merger has been set at August 8, 2008, but Jazz Technologies has not yet set the date for the stockholder meeting itself.

* Announced application of 0.18-micron Silicon Germanium (SiGe) BiCMOS platform (SBC18) and Vertical PNP (VPNP) module that features low capacitance, high current drive and high voltage breakdown to next generation green, energy-efficient analog ICs enabling up to 30% power savings. Jazz Technologies' modular SiGe process technology offers significant power and efficiency savings over standard CMOS for integrated wireless and networking products.

* Secured five new design wins addressing the growing 10Gbit optical market, leveraging Jazz Technologies' high speed SiGe BiCMOS platform (SBC18).

Capital Structure

As of June 27, 2008, Jazz Technologies had approximately $9.8 million in cash and cash equivalents. Total debt on the balance sheet was $137.2 million, representing $128.2 million of convertible senior notes and $9 million drawn against a line of credit. As of June 27, 2008, Jazz Technologies had unused borrowing capacity of an additional $30.0 million under a three-year senior secured revolving credit facility with Wachovia Capital Finance Corporation.

Third Quarter 2008 Business Outlook

In light of the pending merger with Tower Semiconductor, Jazz Technologies is not providing a business outlook for the third quarter of 2008.

Conference Call

Chairman and chief executive officer, Gil Amelio, and chief financial and administrative officer, Paul Pittman, will discuss the second quarter financial and operational performance during a conference call today at 2:00 p.m. PST (5:00 pm EST).

To listen to the call and have the opportunity to ask questions, please dial 866.543.6403 (domestic) or 617.213.8896 (international) five to ten minutes before the call and reference the passcode 2446-8623. A simultaneous live Webcast of the call will be available at the Investor Relations section of the Jazz Technologies website at http://www.jazztechnologies.com. An online playback of the Webcast will be available on Jazz Technologies website for at least 90 days following the call. A replay of the call can also be accessed by dialing 888-286-8010 (domestic) or 617-801-6888 (international), and referencing passcode 7787 - 8633.

Reconciliation of Second Quarter GAAP Net Loss to EBITDA and Free Cash Flow

This press release contains certain non-GAAP financial measures, including EBITDA (earnings before interest, income taxes, depreciation and amortization) and free cash flow (EBITDA minus net cash interest expense and sustaining capital expenditures). Jazz Technologies' management believes that EBITDA provides insight into the company's ability to service its indebtedness and free cash flow provides insight into the amount of cash that the company has available for discretionary uses after expenditures for interest and sustaining capital expenditures. In addition, these measures are presented because they are frequently used by securities analysts, investors and others in the evaluation of semiconductor companies.