Ladies and gentlemen, thank you for standing by. Welcome to the TowerJazz Fourth Quarter and Full Year 2013 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, February 27, 2014. 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 fourth quarter and full year 2013. 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 Forms 20-F, F-4, F-3 and 6-K filed with the Securities and Exchange Commission, as well as filing 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 CFO, Mr. Oren Shirazi. Oren, please go ahead.

Thank you, Noit, and welcome, everyone. I will start by providing our P&L results highlights for the fourth quarter and fiscal year 2013, and then discuss our balance sheet. Revenues for the quarter were $135 million, a 20% improvement as compared to the first quarter of 2013, an 8% improvement as compared to the second quarter of the year and a 2% improvement as compared to the third quarter of this year. It is important to mention that this growth is in contrast to other industry players who have reported an average of 8% to 10% sequential decrease in revenues. Comparing to 2012, revenues were lower solely as a result of the winding down of the Micron committed volume agreement in our facility in Japan during 2013 as we had announced would happen. However, our core business revenues and margins for the full year for the full -- and for the fourth quarter of 2013, demonstrated organic growth of 6% and 25% respectively. On a non-GAAP basis, gross profit and operating profit for the quarter were $46 million and $28 million, respectively, representing 34% and 21% margins. This is significantly better than the $39 million and $21 million reported in the previous quarter, with margins of 30% and 16% respectively. Net profit on a non-GAAP basis for the quarter was $19 million or $0.40 per share, higher than the $12 million or $0.20 per share reported in the previous quarter. Net profit margin increased from 9% in the previous quarter to 14% in the current quarter. For the year, we reported non-GAAP gross profit and operating profit of $163 million and $90 million, respectively, representing margins of 32% and 18%. Non-GAAP net profit for the year was $56 million or $1.41 per share. Our EBITDA for the quarter was $27…

Thank you, Oren, and thank you, all, for attending the call. During this year, we achieved approximately 450 new design wins and over 16,000 new masks entered our factories, representing a year-over-year increase in masks to the factories of 25%. The photomask released to the factory is a last formal step in the design development cycle before the start of product manufacturing. The 25% year-over-year demonstrates effectiveness in realizing the customer projects and the sales revenue funnel, and provides a strong positive indication with regard to our revenue and utilization performance for this present year and the upcoming years. I'll spend a little time talking to the joint venture agreement we signed with Panasonic, which was announced on December 20, 2013. This is among the most important and strategic events in TowerJazz history. It will enhance our leadership, and I believe will create immediate value that will continue to grow over the mid- and long-term. The JV will provide us with high capacity, as well as multiple, world-leading analog platforms of the highest quality, together with advanced 300 millimeter capability and technology nodes. The JV is expected to close in April 2014. This JV will be highly accretive from day one, and is expected to provide us with a baseline of 400 million annualized Panasonic-based business. On top of which, there is substantial open capacity for external foundry customers and subsequent incremental revenue. Panasonic has committed to acquire its products from the JV with a volume agreement of at least 5 years. We will hold 51% of the JV, Panasonic 49%. For our stake we will pay Panasonic in ordinary Tower shares, valued at approximately $8 million, based on our average share price in March 2014, with Panasonic then being a minority shareholder of TowerJazz. Within the scope of the…

Thank you, Russell. 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 the statements made and to be made during this call. Please note that the fourth quarter and full year 2013 financial results have been prepared in accordance with U.S. GAAP, and the financial tables in today's earnings release includes financial information that may be considered non-GAAP financial measure under Regulation G, and related to resulting 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 a non-GAAP basis, after deducting depreciation and amortization, compensation expenses in respect to options event [ph] and finance expenses net, other than interest accrued, such as non-GAAP financial expenses net, include only interest accrued during the resulted period. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. This table also contains the comparable GAAP financial measures to the non-GAAP financial measures, as well as the reconciliation between non-GAAP financial measures and the most comparable GAAP financial measures. EBITDA, as presented, is defined in our quarterly financial release. EBITDA is not a requirement for GAAP financial measure, and may not be comparable to a 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, financial data or other income or cash flow statements, back-up [indiscernible] 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 our operator. Operator?

[Operator Instructions] The first question is from Jay Srivatsa of Chardan Capital Markets.

Russell, in the press releases, you've stated that you expect to get to $900 million in revenue -- revenue run rate by Q2, and then, surpass $1 billion dollars while getting -- while becoming GAAP profitable. Can you give us some timelines on when do you expect to get to $1 billion dollars in revenue run rate, and when you hope to be GAAP profitable in fiscal '14?

So the -- surpassing $900 million, we said, is our target for Q2, and that's as a function of the closing of the Panasonic joint venture, which is progressing extremely well. We forecast, in addition, very nice growth as I've mentioned, the 25% organic growth, Q4 '13 over Q4 '12. And within our plan this year, we should be -- while we are staying within our plan, but we're going to realize a lot of that on a continuous basis. So, we would target to get upwards to the $1 billion run rate in Q4. Will we hit it in Q4, will we hit it in Q1, now that's -- I'm not sure, but I think we'll be fairly close to hitting it in Q4 if we don't. The same thing with the GAAP net profit. I can't honestly commit at this point that we'll have GAAP net profit in Q4, but I can certainly state that we'll see a significant shift in the GAAP results over Q2, Q3 and Q4. And, we're targeting again the GAAP net profit at the earliest point, but not just as a onetime event, but as a sustainable model.

All right. Oren, in terms of gross margins, you had a nice upside in Q4. But as you look at the Panasonic business coming in, what do you expect the margin profile to look like?

That's a good question, because obviously, when Panasonic gives us a 5-year committed contract for such a big amount, of course, this is covering the fixed cost, but shouldn't be like the best margins ever. So it's a good question. However, we believe that in order to actually accomplish what Russell said, in becoming this huge amount of revenues, so our internal incremental growth of the core business will be such good margins, that together with the Panasonic lowest margins, we will actually leave the margins result -- end result [indiscernible] end result like it is today, so to maintain those margins.

So Jay, I think, in line with what Oren answered and in further answer to your question, the Panasonic agreement is a very, very good agreement that for the most part, covers -- comes close to covering fixed cost at the facilities. What that means then is that, as a joint venture, every incremental dollar that you bring in is coming in at a very high margin. The sector that I had talked about the most in the call was the high-end image sensor sector, focusing that on 300 millimeters, which itself a very high margin sector. So if you look at a high-margin sector coming into facilities, that's, have some of the costs already taken care of, then you can see that maybe the initial few quarters of the JV, although the revenue is accretive and their EBITDA, that's accretive, is not at the highest EBITDA percentage. But the base that, that allows, with probably a huge of capacity that's available to grow very nice margin on top of the base, it's really an eye-opening and an outstanding model.

Okay, understood. In terms of the Indian opportunity, looks like it seemed to be progressing pretty well here. When do you expect to -- for it to close, and when do you expect your first revenue contribution from the project. Is it a fiscal '14 event, or is it more likely in 2015?

So on the government website of a few weeks ago, they announced that the cabinet had decided that we were going to receive, our consortium was going to receive an LOI in March timeframe. And they said that the total closure was targeted for August. More than that, I can't say. When we talk about the Panasonic joint venture, the closing of that -- again there are surprises that can come up in most anything, but you have 2 partners that have developed a very strong relationship, that have a communication partner that you're dealing with, you have similar views, you have similar desires, similar goals, and you're really working with each other, with addresses that you know. Hence, when we say we're very confident about the closing of the joint venture in the April timeframe, that's something we can say with a lot of surety. On the India, Jay, it's hard for me to state exactly when it will close. I can only say, from what the government released. But beyond that, I couldn't say. If it goes by that schedule, and it does close in August, then I would think that we would start to see substantial revenues in 2015. And that revenue we would see is very high margin revenue.

Okay. And then, last question from me, in terms of Nishiwaki fab, when you acquired that, the intention was that you were going to transfer some of your process flows to it and use its capacity, but looks like from your comments, you are now thinking of divesting it, or shutting it down. Can you expand on what happened, and what prompted you to look at it that way?

I don't believe we said anything about shutting it down. We're evaluating various options. Certainly, one has to take in consideration how much capacity do you have, and what is the fixed cost of that capacity, which is the considerations we're looking at right now. As far as the facility itself, it's been an excellent facility. And it's done a very nice job for us, with very capable engineers. We have transferred flows into it. We transferred our own, we transferred customer flows there. So -- but that's really all that we can say at this point.

The next question is from Ziv Gil of Rimon Investment Funds.

I have a continuing question on the fab -- Nishiwaki fab. I'm trying to understand the flexibility here, assuming fab 4 has low utilization rates, can you actually shift processes and flows to the Panasonic? And if so, what is required to enable you to do that financially and process-wise? And what would cause you to do that? I understand, I'm not sure you want to say a lot, but if you can just try to give us some color on it?

Sure. From the Power Management flows that are being run in Nishiwaki, those are transferred from Migdal Haemek. So, from day one, the dual sourcing of those flows was available. To transfer a customer from Nishiwaki to Migdal Haemek, is not a burden at all. There's minimal, if any cost involved, and the flow is, we've already qualified. So that itself is not an issue. We have some TOPS business that we've done in Nishiwaki, to where you've taken customer flows and have qualified those, or in the process of qualifying them in Nishiwaki. That takes a little bit more work, and a little bit more energy to transfer that elsewhere. But for the most part, the tool sets between Nishiwaki and the Panasonic Tonami factory are very similar. And after having acquired the Nishiwaki facility, the tool sets between Nishiwaki and Migdal Haemek are certainly compatible. Does that answer your question?

Partly, but I understand.

The next question is from George Berman of JP Turner.

I've got a quick question here. Your company's valuation has finally started to rise a little bit. You did a rights offering that entails the customers receiving some warrants. When are those warrants exercisable, and how much additional capital would you raise, if all of them were exercised?

Yes. So what we issued, it was a year ago, it's-- it's warrants, it's $5 million warrants at $7.33. So the total amount that the company can get from that is almost $40 million, if it's -- it's exercisable for a period of 2 years. So when -- usually, people tend to hold them and do the election is to convert in the end, but everybody can actually exercise then any minute, if you want.

So if I wanted to, I can exercise them now?

Yes, it's possible, only for cash considerations, okay? So it's not possible, again cashless or anything. It's really, cash investment in the company, at $7.33. It's somebody that holds the warrant, wants to do that, yes.

And that would be a welcome cash infusion for the growth initiatives you have.

Correct.

That would be a welcome cash infusion for further growth initiatives you have?

Yes.

Okay. Next question. The large capacity now coming on line with Panasonic, how are you situated in filling the burgeoning capacity, or demands of the Chinese market?

We've actually had very, very strong growth in China. It's, at this point, not a huge portion of our business, but I'd have to go back to the exact numbers. I think we had revenue growth of more than 2x this year, meaning in 2013, of the Chinese business. Where we're seeing the biggest traction right now in China deals with 700 volts for commercial lighting drivers, LED lights, and that is being done within our facilities in Israel. So it's going pretty nicely. But, although we have activities focused in China, the biggest areas of our engagements there, again deal with the high voltage power management, the 700 volt, and also with the Front-End Module that Ted mentioned. So we had mentioned, I think, the exact number maybe, it eludes me, but it's over 90 new parts that came in for SOI switch in 2013. There is a nice number of those that are in the China market.

Okay. Then, one more quick question. On the Panasonic deal, you said that -- in your press release, that the only payment would be x amount of shares of Tower Semiconductor issued at a price prevalent sometime in March when the deal closes. Is that still the fact?

Yes, sir.

So you basically add on all this capacity without any cash outlay.

Yes, sir.

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

Yes, certainly. Really, as always, we very much thank our customers for their trust in us, as a long-term partner, the type of business that we run, the specialty analog, a good portion of our customers use us as a sole source. And that does take faith, confidence and real partnership. So really, thanks very much to customers. We're very, very thankful for the investors that believe in us, stay with us. And we think that, at this point, we are really at the most exciting time in our recent history, and see us being, on a bottom line basis as well as top line, a very, very different company by the end of 2014. So thank you very much.

Thank you. This concludes the TowerJazz Fourth Quarter 2013 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.