Ladies and gentlemen, thank you for standing by. Welcome to the TowerJazz Second Quarter 2012 Results Conference Call. All participants are currently present in a listen-only mode. Following management’s prepared statements, instructions will be given for the question-and answer-session. (Operator Instructions) As a reminder, this conference is being recorded August 9, 2012. Joining us today are Mr. Russell Ellwanger, TowerJazz’s CEO; and Mr. Oren Shirazi, CFO. I would now like to turn the conference over to Ms. Noit Levi, Director of Investor Relations and Public Communications. Ms. Levi, please go ahead.

Thank you, and welcome to TowerJazz financial results conference call for the second quarter of 2012. Russell will open the call followed by Oren with a discussion of our results in the second quarter of the year. Before we begin, I would like to remind you that some statements made during this call may be forward-looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected. These uncertainties and risk factors are fully disclosed in our Form 20-F, F-4, F-3, and 6-K, filed with the Securities and Exchange Commission, as well as filings with the Israeli Securities Authority. They are also available on our website. TowerJazz assumes no obligation to update any such forward-looking statements. Now, I’d like to turn the call to our CEO, Mr. Russell Ellwanger. Russell, please go ahead.

Thank you, Noit. Welcome to our second quarter 2012 results conference call. During the call, I’ll review our current areas of focus and why we believe these focuses will provide a base of several diversified growth engines for the future. However, I will begin by discussing the capital notes, the history and present status and then because this past month saw the one year anniversary of the Japan Nishiwaki facility acquisition and as next month is the four year anniversary of the Jazz merger, I’d like to review the activities and return on each of those. So I’ll begin with the description of the notes. In 2006 and 2008 our two lending banks, Bank Hapoalim and Bank Leumi converted debt into a vehicle of capital notes and as part of this restructuring of the bank debt the Israel Corporation invested new money into the company. In all, the three capital note holders invested 550 million in cash and/or debt conversion and received capital notes convertible post-split into 27 million shares comprised of 14 million being held by the Israel corporation and 6 million being held by each of the banks representing $20.70 price per share underlying each capital note which is more than 2x of the current stock price. For capital notes are solely an equity vehicle which each note being able to be converted into one share. There is no coupon associated with the notes nor any type of strike price. It is important to mention that under Israeli banking law, each bank has restricted to hold not more than 5% ordinary shares in a company of which it is a debt holder. Hence the banks cannot convert and hold more than 1.1 million shares underlying its notes. Bank Hapoalim and Bank Leumi asked the company to file a…

Thank you, Russell, and hello, everyone. Looking at our Q2 results it is clear that we had an outstanding quarter from many financial aspects. We significantly improved our margins as compared to the previous quarter from $10 million to $12 million range or by 5% to 7% data point across the board. We achieved $62 million EBITDA which is 28% and 42% better than the comparable periods and we achieved $42 million in positive operational cash flows or $33 million positive in cash flows net of payment associated with the Japan efficiency plan as Russell described. Our second quarter revenue grew 21% year-over-year to $169 million slightly above the mid-range guidance we provided three months ago. Revenues for the first half of 2012 grew 29% by $76 million over the first half of 2011 and even with the 7% forecasted sequential revenue reduction we’re focusing a 12% to 14% revenue increase in the first nine months of 2012 as compared to same period in 2011. We strongly improved our non-GAAP profit while reporting operating profit of $53 million of operating margin of 31%, an increase of 44% over last year and 31% over the previous quarter. On an EBITDA basis we reported $62 million which is 42% over $36 million as reported in the same quarter of last year excluding the one-time gain on acquisition, acquisition related and transaction cost and 28% over the $40 million as reported in the previous quarter. We greatly improved our margins. As compared to the previous quarter, gross margin improved from 35% to 40%. Operating margin improved from 24% to 31% and net margin improved from 20% to 27%. On a GAAP basis comparing the quarter to the same quarter last year revenue grew by $29 million, a net loss of $9 million which…

Thank you, Oren. Before we open up the call to the Q&A session, I would like now to add the general and legal statements to our results in regards to statements made and to be made during this call. Please note that the second quarter of 2012 financial results have been prepared in accordance with the U.S. GAAP and the financial tables in today’s earnings release include financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirements as established by the Securities and Exchange Commission as they apply to our company. Namely, this release also presented financial data, which is reconciled as indicated by the footnotes below the tables on an non-GAAP basis, after deducting one, depreciation and amortization, two compensation expenses in respect to auctions, grants and three, finance expenses net other than interest accrued such that non-GAAP financial expenses net include only interest accrued during the reported period. Non-GAAP financial measures should be evaluated in conjunction with and not substitute for GAAP financial measures. The tables also contains a comparable GAAP financial measures to the non-GAAP financial measures as well as the reconciliation between the non-GAAP financial measures and the most comparable GAAP financial measures. EBITDA presented is defined in our quarterly financial release. EBITDA is not required GAAP financial measure and may not be comparable to similarly titled measure employed by other companies. EBITDA and the non-GAAP financial information presented herein should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating investing and financing activities, sales share data or other in fact on cash flow statements that are prepared in accordance with GAAP and is not necessarily consistent with the non-GAAP data presented in previous filings. I would now like to turn the call over to the operator. Operator?

Thank you. (Operator Instructions) The first question is from Jay Srivatsa of Chardan Capital Markets. Please go ahead. Jay Srivatsa – Chardan Capital Markets: Yeah, thanks for taking my question. Russell your guidance seems to reflect general sense of pull back or in the overall semiconductor market. Can you give us some sense on what’s your read in the market overall. And are you seeing specific segments pulling back or are you seeing just overall weakness related to macro conditions?

We see one specific segment that has pulled back that contributes for probably the bulk of this 7% lower mid-range guidance, and that would be within discretes. It seems that the other segments are doing very well for us. Now the thing that’s a little bit hard for me to say off of business forecast is that as mentioned previously in most all of our segments we’re growing very nicely in market share. So I can’t comment off of our forecast and POs on the overall increase, decrease, stability of the worldwide semi demand because obviously if you’re growing market share you will not see a reduced tide as quickly as others might. But in the area of discretes to where we have a good portion of business, we have seen a reduction in the forecast, reduction in POs and as well a reduction in the guidance of our specific customers themselves. Jay Srivatsa – Chardan Capital Markets: All right. In the past you’ve talked about being able to achieve a $200 million revenue run rate by end of fiscal ‘12. Given your guidance, you believe that you could be able in position to get there in Q4 or are you expecting that to be more of a fiscal ‘13 event?

So from a capability standpoint we’re able to achieve it. It’s a question really of the orders. So the products, the activities, the transfers, they’re all in line, things have happened, I, in a very serious note I’m quite convinced that we will see the $200 million, it’s not a question of if, it’s really just a question of when. From what I see presently do I think that we would have $200 million of orders in Q4, it does not appear likely, really not, but is it a possibility for Q1, Q2. At some point everything snaps back, the core snaps back and we’ll be there. We’ve continued as mentioned in multiple times to grow our market share even in the discreet area we’ve grown our market share. It just seems that for whatever reasons in that area to where we have several very large customers their business is down but our portion of that business for the most part is increasing and increasing very steadily. So as far as the target that we had given at the beginning of the year to achieve $200 million in Q4, I think at this point that’s not very realistic. At what point will we achieve it, I would believe that will be there not too far in the future, the operational capabilities there, the technical capability and the right activities are there, it’s just a question of the demand lining up with what we’ve done. Does that answer your question Jay. Jay Srivatsa – Chardan Capital Markets: Yes it did, thank you. In terms of margins, you’ve had, you’ve done a very good job of improving gross margins back up to levels that you had previously before the Nishiwaki acquisition, can you give us some sense on where things are in terms of utilization at Nishiwaki and how you see a gross margin profile expand over the next couple of quarters?

So, Nishiwaki, I won’t talk about the utilization there because it’s under contract. And if I talk about utilization you could really directly calculate what is the size of the micron business which we’re not disclosing or do we necessarily have permission to disclose the specific micron business on a quarterly basis. From the contract itself, we had several thousands of wafers per weak that was not within the contract. So, there was always the possibility of having upside on top of the contract and we are qualifying customers to get in there but overall worldwide capacity is right now about 70%. Jay Srivatsa – Chardan Capital Markets: All right. In terms of the contract with the Indian customer or we assume that this is another contract that you’ve received over the last year compared to the one you had previously or it is an extension of the existing one. And if it’s a new one, can you give us some insight into when you hope to start to see material revenues from this contract?

Could you start the question again. Jay, I maybe misheard, or I thought you said India but could you just restate it please? Jay Srivatsa – Chardan Capital Markets: Yes. I – you alluded to a contract with the Indian government for a 300 millimeter fab. I wanted to – the question was when do you expect that to start to what you call it material in terms of revenues?

So, that’s the bid that I had spoken of, it’s nothing different than what I think that we announced it with the release two quarters ago and then regarding some details on it last quarter. The government had asked for an open bid for an individual or for a group to come in to build and operate a 300 millimeter factory. In our case we joined with two other companies one is JP a very large Indian conglomerate providing power, infrastructure, and cements in India as their major businesses and with IBM. IBM would be the technology provider 45, 65, 90-nanometer digital technology. We would build the factory. We would operate the factory and nominally bring analog blocks into the 90-nanometer on platform and JP is the predominant owner of the factory. The government asked for bids. They received the first round of bids in December from ourselves and other groups as of last week we received a correspondence from the government that they reviewed everything. We will be going forward to the next round with them. They have not formally announced how many people involved in the next round, how many have been screened out or anything of the sort. It has been stated by the governments directly and/or indirectly that they would be making decisions before the end of this year, but India no different than any other government. It’s very difficult to know what timelines are going to adhere to within any process. From the time that everything is approved the timeline of the factory is as follows and that’s the only thing that I could say should we or our consortium win the bid. The factory from ground breaking would take three years to the point of having qualified silicon earnings to the factory. And that would be at a certain capacity, the ultimate capacity of the factory would be 30,000 wafer per month. So it’s three years to get started, we would build the factory contracting to build it, we would also operate the factory contracting to operate it, all agreements are with Jaypee. Again I, our thought and belief is that it will close before the end of this year, but there is no way that we can guarantee that or have any assurance that, that is the case. Hopefully that answers your question Jay. Jay Srivatsa – Chardan Capital Markets: Yes, yes it is. And in terms of the capital notes given that the registration has been approved by the SEC realistically what, what is your view on, on if and when the conversion will happen from these banks. Are you getting the sense that they are not inclined to do it or is it your sense that they will do at some point in time and not near term?

I stated in the call that the banks have not indicated that they would be doing any short-term actions in the market. I really, I am not in a position to speak for the banks as to what they would do or not do. I also stated in the call that we are still in discussions with the banks to try to come up with an alternative that would be a win for all shareholders I mean as stated as well. Now trying to sound too nippy here but being the fact that we’re not the owners of the notes, we can’t give any guarantees on any outcomes of what these discussions would lead to or not lead to and at this point they have or we have complied with their request to register with the SEC and it was about 50% of their note holdings that were registered on upon request those notes can be converted to shares and then they could be traded. As stated however, the banks cannot hold more than 5% at any given time so the amount that they would hold is somewhat small but what does, is our hope is that we would be able to come up with something that would be a win for all parties and can we give more details on that we really can’t because sorry I don’t want to set expectations that aren’t real that I don’t have direct control over. All right, how and when they would exercise again that’s something that really should be asked to the banks. I, it would be nice if I honestly could speak for them that I can make commitments but I can’t. Jay Srivatsa – Chardan Capital Markets: I understand. Last question on your long-term debt, in the past you’ve done a very good job of reducing your long-term debt, in the last few quarters it appears to be creeping up again. What is your plans with your existing cash and/or strategy to try to look at your debt long, reducing your long-term debt again.

All right Jay. Actually if you look at the net debt so it actually went down I mean on a gross sale level we increased debt by 80 million but the same amount was increased in the cash so on a net basis its stays flat and with the GE loan that we just signed and drew down $14 million so this is was just an activation of a credit line and we still have open availability both in GE credit line and Wells Fargo credit line which we don’t drove and don’t, we didn’t indicate if we intend to drove but to your question I mean the current EBITDA if you look at the run rate of 52 in this quarter so the run rate is at more than 200 million and previous EBITDA run rate was 160, 170 well I said that if we are at a ratio of net debt to EBITDA of about 2.5x up to 2.5x up to 3x this is reasonable for us currently we are even below that so we think we are in a good position. The net debt to EBITDA right now is about 2.1x so we believe that from strategy point of view we are at the right level of debt compared to EBITDA. Jay Srivatsa – Chardan Capital Markets: Thanks Oren, thanks Russell.

You are very welcome, thank you.

The next question is from (inaudible). Please go ahead.

My question is with regard to profitability, I am looking at the GAAP figures I see that for the third quarter the profitability is about 3% and that profitability rate doesn’t make sense to me when I look at your – the competitive strength of your technology and my question is why with your technology strength aren’t you able to achieve a higher profitability, are you sacrificing profitability to get more growth? Thank you.

Can you just explain what is the 3% that you mentioned?

The operating profit for the second quarter on a GAAP basis.

Yeah, but when we look at the GAAP we have to remember that there is – there are lot of historical depreciation which is has mainly resulted from the establishment of Fab 2 which was huge 1.5 billion project, so when we analyze it we’ve exclude it in order to have an apple-to-apple data without I mean to see the continuation the ongoing operational margins and this why we have this analysis that show that actually our operating margins are 31% not 3% I mean if you include that historical accounting of what cost us to build Fab 2. If you look at our recent acquisition of Jazz in Japan to what I’ve explained the purchasing Jazz in Japan it cost us like one was $20 million the other was $55 million nothing like the $1.5 billion, so this is why you should look at the operational margin on it. So anyway the gross margin is now 40% the operational margins is 31% and the net margin is 27% I think for foundry for manufacture of chips I think is very nice profitability margins.

When do you finish preceding Fab 2?

So Fab 2 was built on, there is no like a specific date because Fab 2 was built in steps. We started it at 5k wafer per month in an investment of $800 million and then every time we had a delay, added more capacity which cost more and each such expansion of Fab 2 started seven year schedule of depreciation. So it’s going down, it should be going down quickly linearly along the coming years, every quarter, every year there is a reduction, we were in higher numbers a year ago, now we are in lower numbers, we’ll be more lower numbers next year.

Do you have an operating margin target?

Yes, the best in our industry, our field, the best in our field are reaching like 40%, 45% not like the non-GAAP operating margins or if you look at from the EBITDA point of view, we more look on the EBITDA point of view which is the same. It’s about 40%, 44% currently we are around 30%.

So, your goal is to increase by about 10%?

Yes, that’s the target going forward.

And we got realistic?

Yes. As we continue to convert the capacity in Nishiwaki to our flows, as we continue qualifying the programs we have going on in power management and in the front end module, I think it sound very realistic.

Thank you very much.

There are no further questions at this time. Mr. Ellwanger, would you like to make you concluding statements?

Certainly, as mentioned in the Japan facility, we took actions that on an ongoing basis should be able to increase the operating margin by about 10 points. That during the first year of activity, I think is a very nice stamp of approval of driving efficiencies during a time of changing a model from being part of a DRAM integrated device maker to bringing on multiple flows as a foundry. We see a lot of excitement from our customers. We have customers leader, true leaders in their segments have selected us year-over-year for Supplier of the Year Award that we’re aligned with on long-term roadmap or aligned with on short-to-medium term roadmap and for market share increases. Our belief in the future is very strong it’s very bright, I think performance of Q2 was outstanding. Q3 has a small dip in revenue we expect the margins to maintain the same trend as we saw in Q2. And where I believe strategically engaged in all the right things, tactically doing that which we need to do. We look forward to continuing over time to see improvements on all aspects. We really or none or have an incredible employee base and people that are very passionate about what they do, people that when customers visit the sites, customers leave extremely excited, extremely convinced that we are the right partner for them to have. We’ll continue to work on this, we’ll continue to listen to our customers, we’ll continue to change as per customer’s need and not to be resilient to change. Everyone needs to have strategy, everyone needs to vision, everyone needs to proper staffing. An excellent staff allows a vision to evolve, excellent people give inputs, they look at reality, they move things along. I believe that that’s what we have to have come from 100 million revenue negative 60 million cash from operations, to a run rate of about 650 million revenue consistent over 100 million cash from operations that’s a huge move in a company. I thank those that have invested that have been with us over this journey and as stated earlier I see the next few years at the end of which being a story that people will be extremely excited with as now all of the efficiencies and size that we’ve had can drive into very, very selective top line growth and very good bottom line growth. So I thank everybody as mentioned we’ll be having a symposium in Newport Beach in October, it’s an open environment, those who had wished to come are more than welcome to come, touch our technologies, touch our people, see what we have and become more convinced yourself. So thank you and till the next call.

Thank you. This concludes the TowerJazz second quarter 2012 results conference call. Thank you for your participation. You may go ahead and disconnect.