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Tower's management presented a financial update to mark the first anniversary of the acquisition of Jazz Semiconductor Inc.
Ellwanger's comment was in response to a question from the audience. He said that Tower would shortly publish its guidance for the fourth quarter and financial report for the third quarter. If his prediction comes true, the company will be exempt from income taxes on up to $1 billion in profits to offset previous losses.
Tower is perennially optimistic and it was on display at the conference. "I'm pleased to see so many people here, four times more than at our previous conference," Ellwanger said. He added that Tower was now a much stronger company than before its acquisition of Jazz.
"Tower and Jazz each had $200 million in annual revenue, and there was no overlap of large customers, so that the diversification of our portfolio as a result of the merger was good and effective. In the second quarter of 2009, our average price of sale of products was 34 percent higher than in the corresponding quarter of last year."
Ellwanger also mentioned Tower's targets for 2012. The company plans $280 million in CMOS processor sales, and $230 million in AIMS sales, for total sales of $510 million. He also spoke about South Korea, a target market for the company, where it has signed a series of contracts with fabless semiconductor companies in the past couple of months.
Ellwanger said, "Korea is special because LG and Samsung get government incentives, and are responsible for 25 percent of the global semiconductor industry. Our target is $410 million in sales to Korea in 2012. It's an important growth opportunity for the company. If we don't have sufficient production capacity, we have the option to outsource production at reasonable prices."
A year after the Jazz acquisition, Tower has signed 14 new contracts and production at its fab is up to 70 percent of capacity from 45 percent at the peak of the crisis. Production at Jazz's US fab is believed to operating the highest capacity of Tower's fabs, at about 90 percent.
Tower's weak point is its financial situation and debt structure. Shareholder Israel Corporation (TASE: ILCO) injected $40 million into the company during the crisis, and Tower rescheduled its $400 million with Bank Hapoalim (TASE: POLI) and Bank Leumi (TASE: LUMI). Half the debt was converted into capital notes convertible into equity, and Tower has to begin repaying the other half in late 2011.
Sources at Tower say that there is no danger of the capital notes being converted into shares because the US Securities and Exchange Commission (SEC) does not recognize the capital notes.
Tower also has $200 million in bonds, half of which are Jazz bonds, convertible into Tower shares at $4 per share, nearly quadruple the current share price. The other $100 million are convertible to shares at $1.12 per share, and are now within the money, following the latest rise in the share.
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