UNAUDITED CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2022
TOWER SEMICONDUCTOR LIMITED AND SUBSIDARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2022
Page
BALANCE SHEETS
F-2
STATEMENTS OF OPERATIONS
F-3
STATEMENTS OF COMPREHENSIVE INCOME
F-4
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
F-5
STATEMENTS OF CASH FLOWS
F-6 - F-7
NOTES TO FINANCIAL STATEMENTS
F-8 - F-9
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
As of
June 30,
December 31,
2022
2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
211,177
$
210,930
Short-term deposits
468,298
363,648
Marketable securities (*)
176,487
190,068
Trade accounts receivable
170,552
142,228
Inventories
249,038
234,512
Other current assets
43,253
54,817
Total current assets
1,318,805
1,196,203
LONG-TERM INVESTMENTS
26,544
39,597
PROPERTY AND EQUIPMENT, NET
878,991
876,683
GOODWILL AND OTHER INTANGIBLE ASSETS, NET
16,217
18,820
DEFERRED TAX AND OTHER LONG-TERM ASSETS, NET
83,866
99,938
TOTAL ASSETS
$
2,324,423
$
2,231,241
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt
$
79,535
$
83,868
Trade accounts payable
127,762
78,712
Deferred revenue and customers' advances
38,632
39,992
Employee related liabilities
61,831
57,747
Other current liabilities
38,415
16,009
Total current liabilities
346,175
276,328
LONG-TERM DEBT
200,726
230,972
LONG-TERM CUSTOMERS' ADVANCES
60,600
69,968
EMPLOYEE RELATED LIABILITIES
13,962
14,622
DEFERRED TAX AND OTHER LONG-TERM LIABILITIES
14,410
23,962
TOTAL LIABILITIES
635,873
615,852
THE COMPANY'S SHAREHOLDERS' EQUITY
1,705,271
1,622,007
Non-controlling interest
(16,721
)
(6,618
)
TOTAL SHAREHOLDERS' EQUITY
1,688,550
1,615,389
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
2,324,423
$
2,231,241
(*) Marketable securities are available-for-sale securities; the amortized cost of such marketable securities of $184,257 and $189,543 as of June 30, 2022 and December 31, 2021, respectively, is presented net of an immaterial allowance for credit losses.
See notes to consolidated financial statements.

F -2

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars and shares in thousands, except per share data)

Six months ended June 30,
Three months ended June 30,
2022
2021
2022
2021
REVENUES
$
847,300
$
709,352
$
426,168
$
362,138
COST OF REVENUES
630,229
565,783
313,728
288,383
GROSS PROFIT
217,071
143,569
112,440
73,755
OPERATING COSTS AND EXPENSES:
Research and development
40,799
41,424
20,481
21,081
Marketing, general and administrative
42,538
35,662
21,285
18,671
83,337
77,086
41,766
39,752
OPERATING PROFIT
133,734
66,483
70,674
34,003
FINANCING AND OTHER EXPENSE, NET
(10,295
)
(8,326
)
(8,162
)
(484
)
PROFIT BEFORE INCOME TAX
123,439
58,157
62,512
33,519
INCOME TAX BENEFIT (EXPENSE), NET
(9,492
)
3,674
(4,339
)
(2,202
)
NET PROFIT
113,947
61,831
58,173
31,317
Net income attributable to non-controlling interest
(1,837
)
(2,643
)
(96
)
(451
)
NET PROFIT ATTRIBUTABLE TO THE COMPANY
$
112,110
$
59,188
$
58,077
$
30,866
BASIC EARNINGS PER SHARE
Earnings per share
$
1.03
$
0.55
$
0.53
$
0.29
Weighted average number of shares
109,037
107,992
109,138
108,043
DILUTED EARNINGS PER ORDINARY SHARE:
Earnings per share
$
1.01
$
0.54
$
0.53
$
0.28
Net profit used for diluted earnings per share
$
112,110
$
59,188
$
58,077
$
30,866
Weighted average number of ordinary shares outstanding used for diluted earnings per share
110,561
109,545
110,561
109,629
See notes to consolidated financial statements.

F -3

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(dollars in thousands)

Six months ended June 30,
Three months ended June 30,
2022
2021
2022
2021
Net profit
$
113,947
$
61,831
$
58,173
$
31,317
Other comprehensive income, net of tax:
Foreign currency translation adjustment
(25,206
)
(9,741
)
(16,921
)
1,209
Change in employees plan assets
and benefit obligations, net of taxes
(20
)
(100
)
(10
)
(50
)
Unrealized gain (loss) on derivatives
(14,922
)
(523
)
(8,151
)
1,134
Comprehensive income
73,799
51,467
33,091
33,610
Comprehensive loss (income) attributable
to non-controlling interest
(1,837
)
2,021
(96
)
(552
)
Comprehensive income attributable to the Company
$
71,962
$
53,488
$
32,995
$
33,058
See notes to consolidated financial statements.

F -4

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

(dollars and share data in thousands)

THE COMPANY'S SHAREHOLDERS' EQUITY
Accumulated
Foreign
Ordinary
Ordinary
Additional
other
currency
Non
shares
shares
paid-in
Unearned
comprehensive
translation
Accumulated
Treasury
Comprehensive
controlling
issued
amount
capital
compensation
loss
adjustments
deficit
stock
income
interest
Total
BALANCE AS OF JANUARY 1, 2022
108,970
$
435,453
$
1,389,051
$
149,906
$
(412
)
$
(27,471
)
$
(315,448
)
$
(9,072
)
$
(6,618
)
$
1,615,389
Changes during the period:
Exercise of options and RSUs
402
1,812
(1,768
)
44
Employee stock-based compensation
11,258
11,258
Other comprehensive income:
Profit
112,110
$
112,110
1,837
113,947
Foreign currency translation adjustments
(25,206
)
(25,206
)
(11,940
)
(37,146
)
Change in employees plan assets and benefit obligations
(20
) (20 ) (20 )
Unrealized loss on derivatives
(14,922
)
(14,922
)
(14,922
)
Comprehensive income
$
71,962
BALANCE AS OF JUNE 30, 2022
109,372
$
437,265
$
1,387,283
$
161,164
$
(15,354
)
$
(52,677
)
$
(203,338
)
$
(9,072
)
$
(16,721
)
$
1,688,550
OUTSTANDING SHARES, NET OF TREASURY STOCK
AS OF JUNE 30, 2022
109,285

See notes to consolidated financial statements.

F -5

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

Six months ended June 30,

2022

2021

CASH FLOWS - OPERATING ACTIVITIES

Net profit for the period

$

113,947

$

61,831

Adjustments to reconcile net profit for the period to net cash provided by operating activities:

Income and expense items not involving cash flows:

Depreciation and amortization

137,787

127,535

Effect of exchange rate differences

946

(1,994

)

Other expense (income), net

1,907

(3,227

)

Changes in assets and liabilities:

Trade accounts receivable

(31,603

)

12,722

Other current assets

10,519

(8,983

)

Inventories

(28,958

)

(15,484

)

Trade accounts payable

53,010

(14,568

)

Deferred revenue and customers' advances

(10,646

)

16,207

Employee related liabilities and other current liabilities

26,077

19,696

Long-term employee related liabilities

357

140

Deferred tax, net and other long-term liabilities

1,325

(13,212

)

Net cash provided by operating activities

274,668

180,663

CASH FLOWS - INVESTING ACTIVITIES

Investments in property and equipment, net

(130,217

)

(105,599

)

Investments in marketable securities and other assets, net

(94,745

)

(18,666

)

Net cash used in investing activities

(224,962

)

(124,265

)

CASH FLOWS - FINANCING ACTIVITIES

Exercise of options, net

44

364

Loans repayment

-

(11,163

)

Principal payments on account of capital lease obligation

(17,778

)

(17,903

)

Debentures repayment

(20,972

)

(20,078

)

Net cash used in financing activities

(38,706

)

(48,780

)

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE

(10,753

)

(3,546

)

INCREASE IN CASH AND CASH EQUIVALENTS

247

4,072

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

210,930

211,683

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

211,177

$

215,755

See notes to consolidated financial statements.

F -6

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

Six months ended June 30,

2022

2021

NON-CASH ACTIVITIES:

Investments in property and equipment

$

82,526

$

74,142

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash received during the period from interest, net

$

1,495

$

769

Cash paid during the period for income taxes, net

$

8,718

$

5,016

See notes to consolidated financial statements.

F -7

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF JUNE 30, 2022

(dollars in thousands, except per share data)

NOTE 1 - GENERAL

Basis for Presentation

The unaudited condensed interim consolidated financial statements of Tower Semiconductor Ltd. ("Tower" or "the Company") as of June 30, 2022 include the financial statements of Tower and (i) its wholly-owned subsidiary Tower US Holdings Inc., the sole owner of: (1) Tower Semiconductor NPB Holdings, Inc. and its wholly-owned subsidiary, Tower Semiconductor Newport Beach, Inc. and (2) Tower Semiconductor San Antonio, Inc. (ii) its 51% owned subsidiary, Tower Partners Semiconductor Co., Ltd. ("TPSCo") and (iii) its wholly-owned subsidiary, Tower Semiconductor Italy S.r.l. ("TSIT"). Tower and its subsidiaries are collectively referred to as the "Company".

The Company's unaudited condensed interim consolidated financial statements are presented after elimination of inter-company transactions and balances and are presented in accordance with U.S. generally accepted accounting principles ("US GAAP").

The unaudited condensed interim consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements of the Company as of December 31, 2021 and for the year then ended, including the notes thereto.

In the opinion of the Company's management, the unaudited condensed interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company's financial position as of the dates presented and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected on a full-year basis.

NOTE 2 -  INITIAL ADOPTION OF NEW STANDARDS

During the period there was no initial adoption of new accounting standards.

NOTE 3 -   RECENT DEVELOPMENTS

On February 15, 2022, Intel Corporation ("Intel") and Tower announced the signing of a definitive agreement under which Intel will acquire all of Tower's outstanding Ordinary Shares for cash consideration of $53 per share. The transaction was approved by the boards of directors of both Intel and Tower, by Tower's shareholders and is subject to certain regulatory approvals and customary closing conditions.

As part of the agreement between the Company, Nuvoton Technology Corporation Japan ("NTCJ") and TPSCo, it has been decided to re-organize and re-structure operations in Japan such that, while operations at the Uozu and Tonami facilities will remain unchanged, the Arai manufacturing factory, which manufactured products solely for NTCJ and was not serving the Company's customers, ceased operations effective June 30, 2022. The Company evaluated the need for impairment and concluded there was no material impairment to its long-lived assets as of June 30, 2022. All other restructuring related costs will be reported as incurred.

F -8

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS AS OF JUNE 30, 2022

(dollars in thousands, except per share data)

NOTE 4-   SUBSEQUENT EVENTS

On July 1, 2022, the Company's affiliates, including TPSCo, have extended their existing capital lease lines with JA Mitsui Leasing, Ltd., described in Note 11D to the Company's annual financial statements as of December 31, 2021, whereby the ability to utilize such lines was extended by one year to mature in June 2023 with an increased remaining amount available for future utilization, totaling up to approximately JPY 7 billion (approximately $50,000 as of July 1, 2022), as compared to approximately JPY 3.5 billion prior to such extension (approximately $25,000 as of June 30, 2022). The lease agreements' terms did not change and contain annual interest rates of approximately 2%.

On July 14, 2022, TSNB entered into an agreement with Wells Fargo Capital Finance, part of Wells Fargo & Company ("Wells Fargo"), under which it extended its secured asset-based revolving credit line in the total amount of up to $70,000, to mature in September 2023, under substantially similar terms as the terms and conditions of the line described in Note 11F to the Company's annual financial statements as of December 31, 2021. As of June 30, 2022, no loan amounts were outstanding under the TSNB Credit Line Agreement and the borrowing availability under the TSNB Credit Line Agreement was approximately $54,000, of which approximately $1,000 was utilized through letters of credit.

F - 9

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Tower Semiconductor Ltd. published this content on 08 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 August 2022 22:04:17 UTC.