Jazz Technologies, Inc. Announces First Quarter 2008 Financial Results; Ratification of New Union Contract Proposal

Business Wire, May 7, 2008

NEWPORT BEACH, Calif. -- Jazz Technologies, Inc. (AMEX: JAZ) today announced financial results for the first quarter ended March 28, 2008.

First Quarter Financial Results

First quarter 2008 revenues were $50.8 million. Specialty process business generated $39.2 million, or 77% of total revenues. First quarter net loss was $4.0 million or $0.22 per share as compared to net loss of $4.5 million or $0.22 per share in the fourth quarter of 2007. Net loss in the first quarter 2008 and in the fourth quarter 2007 included the impact of a $0.8 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.

First quarter 2008 EBITDA, a non-GAAP measurement, was $8.5 million, compared to fourth quarter EBITDA of $8.2 million. First quarter 2008 free cash flow, also a non-GAAP measure, was $3.5 million as compared to fourth quarter free cash flow of $4.3 million. Excluding gain from the purchase of convertible senior notes, first quarter free cash flow was $2.7 million, compared to fourth quarter free cash flow of $2.4 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.

First quarter 2008 capital expenditures were approximately $2.2 million. During the quarter, Jazz Technologies had net cash interest expense of $2.8 million. First quarter 2008 depreciation and amortization expense was $9.4 million compared to $9.7 million in fourth quarter 2007.

Capacity utilization was approximately 88% during the first quarter 2008 as compared to approximately 93% during the fourth quarter 2007. Jazz Technologies estimates second quarter 2008 capacity utilization will be approximately 67%.

"Our first quarter continued to generate free cash flow despite a seasonally weaker quarter," said Gil Amelio, chairman and chief executive officer of Jazz Technologies. "We made further progress in newly entered end markets and applications during the quarter, particularly power management. Positive design win momentum in the quarter suggests we are on path to diversifying Jazz's revenue base."

Ratification of New Union Contract Proposal

On May 5, 2008, Jazz's fab employees who are members of Local Union No. 2295 of the International Brotherhood of Electrical Workers of the AFL-CIO voted to ratify a new contract proposal that will extend the IBEW collective bargaining agreement at Jazz's facility through December 18, 2009. Jazz expects the new contract to reduce costs significantly during the remainder of 2008 and in 2009.

"We want to thank the union representatives and our loyal employees for working with us in a spirit of cooperation to help keep Jazz competitive in an increasingly global economy," said Gil Amelio, chairman and chief executive officer of Jazz. "In doing so, they have helped us to protect wages and benefits for our workforce and to continue to provide good manufacturing jobs in our Southern California community."

Business Highlights

* Announced enhancements to its advanced high voltage BCD power platform including the addition of an ultra low on-resistance scalable power device. This device can enable up to a fifty percent smaller die size in certain critical power applications.

* Released advanced MOS varactor model libraries enabling faster time to market for wireless products.

* Appointed Richard Nakajima, Cubic Micro as Japan country manager. The Cubic Micro office in Japan will serve as a base to accelerate business and provide sales, marketing and customer support for Jazz's specialty process technologies to address the needs of RF, power, and high precision analog markets.

* First quarter design wins reached their highest level in any quarter in recent years, including four new design wins in the optical market.

Capital Structure

During the first quarter, the company also repurchased convertible senior notes to reduce the company's debt obligations and lower its cost of capital at a purchase price of 82% of the principal amount of the notes, paying $4.1 million to purchase $5.0 million in principal amount of notes.

As of March 28, 2008, Jazz Technologies had approximately $9.2 million in cash and cash equivalents. Total debt on the balance sheet was $138.2 million, representing $128.2 million of the convertible senior notes and $10 million drawn against the line of credit. As of March 28, 2008, Jazz had unused borrowing capacity of an additional $34.0 million under a three-year senior secured revolving credit facility with Wachovia Capital Finance Corporation.

Second Quarter 2008 Business Outlook

"Based on our backlog and utilization metrics, we expect second quarter 2008 sales in the range of $45 to $47 million. The lower revenue reflects initial indications from major customers of inventory build-up in select markets, particularly handset and wireless LAN. Despite lower revenue, we expect second quarter EBITDA and free cash flow again to be positive," said Paul Pittman, chief financial and administrative officer of Jazz Technologies.