Ladies and gentlemen, thank you for standing by. Welcome to the TowerJazz, Second Quarter 2014 Results Conference Call. All participants are currently present in a listen-only mode. Following managements prepared statements instructions will be given for the question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded, August 4, 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 second quarter of 2014. After managements prepared remarks we will open up the call to the question-and-answer session. 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 Authorities. 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. Welcome everyone and thank you for joining us today. I will now start by providing our financial highlights. Both the P&L results and balance sheet for the second quarter of 2014, which is the first quarter in which we are including the statement of operations and P&L results of TPSCo, TowerJazz Panasonic Semiconductor Company, the company that we established as Panasonic in March 2014. The balance sheet items of TPSCo were already included in our balance sheet as of March 31, 2014, which was the transaction closing date. In terms of our P&L metrics, as compared to the second quarter of 2013, we increased our revenues from $125 million to $234 million; increased our non-GAAP net profit from $18 million to $31 million; increased our non-GAAP earnings per share from $0.47 to $0.62 per share; reduced our loss GAAP per share from $0.59 to $0.31 and increased our EBITDA from $36 million to $33 million. In addition we strengthened our balance sheet during this quarter by increasing our cash as of June 30, 2014 to $192 million, an increase of $69 million when compared to $123 million as of December 31, 2013 and a $9 million increased over the previous quarter. During the quarter we generated $41 million in positive cash flows from operations, excluding $10 million interest payment and TPSCo, The Panasonic Tower Company received a loan of $87 million from two Japanese banks, JA Mitsui and Bank of Tokyo, which has been used to repay our bridge loan that we received from Panasonic in the previous quarter. The interest rate on this JA Mitsui and Bank of Tokyo loan is TIBOR plus 1.65% and it matures in the middle of 2019. We invested $15 million net in fixed assets during this quarter and we paid…

Thank you, Oren and welcome. The second quarter has a large significance for the company. Firstly, it was the first quarter we coordinated and integrated the activities and consolidated the fill financials of the newly established TowerJazz Panasonic Semiconductor Company. As Oren discussed, the incremental addition of TPSCo placed us nicely above the $900 million annual revenue run rate. We encounter no operational surprises against our plan and better than expected business activities. Within the first three months post launching of this venture, we signed strong contracts and entered business agreements with multiple third party Image Sensor companies and top-tier integrated device manufactures, which should reach annual run rates well about $100 million of high margin revenue, on top of the previously disclosed $360 million to $420 million forecasted TPSCo annual revenues from the Panasonic business. These third party activities are just the beginning with other engagements at various stages in the sales funnel. Considering that $100 million plus incremental revenue engagements were closed within the first three month of sales activity, the value of the operation and technical offerings, as well as the strength of the TowerJazz customer base is clearly demonstrated. Let’s look now at the organic growth of the company, another area of great significant. I will refer to three things: the revenue growth from our top customers; two, the number of full mask sets or in other words products entering our factories; and three, design wins. As Oren had mentioned, our top five customers by revenue in the second quarter of 2014 grew 50% as compared to our specific revenue from them in the second quarter of 2013. The same measure for our top ten customers shows a growth of 40%. All business groups have sales and roadmap activities within the top five, as well as…

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 statement made and to be made during this call. Please note that the second quarter of 2014 financial results has been prepared in accordance with U.S. GAAP and the financial tables in today’s earning release includes financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirements is established by the Securities and Exchange Commission as they apply to our company. Namely, these results all presented financial data which is reconciled as indicated by the footnote below the table on a non-GAAP basis, after deducting, depreciation and amortization, compensation expenses in respect to options, grants and finance expenses net other than interested accrued, such that’s non-GAAP financial expenses net includes only interest accrued during the reported period. Non-GAAP financial measures should be evaluated in conjunction with and are not a substitute for GAAP financial measures. The table also contains the comparable GAAP financial measures to the non-GAAP financial measure, as well as the reconciliation between the 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 required GAAP financial measure and may not be comparable to a similarly title 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, per share data or other income or cash flow statement data 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 Cody Acree of Ascendiant Capital. Please go ahead.

Thanks for taking my questions and congratulations guys on the result. You talked a lot about the RF space being a strong driver. We’ve seen some very, very strong numbers out of that space. When you look at the growth over the next few quarters, can you just rank in order maybe your growth drivers and through the different segments?

The front end module in specific SOI based antenna switches, antenna tuners is the very, very strong growth driver for us presently and through the next quarters. On par would be what we call our TOPS business to where we have certain integrated device makers that transfer their flows or co-develop new flows with us, but those flows stay behind a firewall and are only used for those customers. They don’t become a standard foundry offering. Those are two very big growth drivers for us in the case of both. They are both represented through multiple customers, are both represented by also very large blue-chip customers, as well as a variety of others that are trying to make their way into the markets. The power management has presently a lot of traction happening within the 700 volt per LED drivers and we expect the largest order that we’ve ever received for that to be coming in within the next few weeks from a single customer. But I would say that those right now are three very, very big growth drives for us. On the other side, although on volume, may be not as large of a growth driver, but as far as the margin that’s coming out of it, what we talked about with the optical transceivers for the LTE infrastructure, that has gone up very strong, is continue to grow very strong and we have seen some year-over-year, quarter-over-quarter growth within our CMOS image sensor business, which is also a very high margin business, so within those. But the two biggest on revenue percentages will be the SOI switch and the IDM transfers. The big growth drivers as far as contributed margin is the silicon-germanium transceivers and the image sensor activities and the image sensor scans, many-many different types of applications. I had mentioned multiple during the script.

And then when you look at your market share gains. So when you are talking to customers, are you just looking at your trajectory? You’ve been gaining share for the last several years. But with the addition of the Panasonic facilities, how is that share trajectory shifted with design wins and mass coming in and may be also have you seen much of an impact from IBMs effort to exit the foundry business?

I think independent of any announcements that IBM might have made or has been assumed to have made, our growth has been very strong in all areas to where we would be competing with IBM and I think it deals with offering and service. I mean, more than that I won’t comment on anything about IBM, where they are setting on, what they will be doing with foundry or the overall semiconductor business. It’s not necessarily still clear. But where we compete with them is on the area of the front end module and very specifically within silicon germanium, and we have established ourselves quite strongly in both of those areas. As far as the TPSCo, what was your specific question there Cody?

I was probably just really trying to get to maybe a momentum, trajectory of design activity. Just customer engagement since you now have this advanced capacity of how customer engagements are going versus maybe the prior 12 months.

So where I referred to the amount of new products, this record number that we had of 242, all of that is within the standard TowerJazz facilities. That is not in relation to TPSCo at all. The basic growth that we are seeing and drive organic growth is really within our factories, and that’s the business that we’ve been building on, developing customer relationships for the past years. In the area of TPSCo, there we’ve engaged with existing customers on both the IDM activity, IDM transfer to where we have several big contracts that have been agreed and signed, as well as on very high end image sensor. In the case of the IDM transfer into TPSCo, that’s a very big business. It’s not a lot of customers by the nature of that type of a business. In the area of the image sensor, that’s been prominently in the 300 millimeter facility and that’s for very, very advanced sensors, where we talked about the 1.12 micron pixel, etcetera and in that case there is a lot of strong traction and big engagements, a lot in the pipeline. But although what has been closed in the first three months as I mentioned should easily break $100 million of high margin revenue within the next three year time period, incremental on top of what we already have within TPSCo, from a TPSCo customer being Panasonic. We are really just at the beginning there of the engagements and there’s a lot of excitement, there’s a lot of customers learning about what’s going on there and getting involved. But where the major activity from design wins, the major activity from full mask set entrances, product entrances, it’s from the organic capabilities within the company.

That’s great Russell. Thank you very much and Oren, maybe for you on the operating expense side, since we did do such a large jump, can you just give us a bit of visibility as to what you’re expecting going forward?

Yes, like I stated in my part of the script, we have some of the cause that we knew that exist in the Panasonic transaction. Of course the Panasonic transaction brings positive EBITDA, we did not secure much, but when we went in depth and looked at the cost, we felt that some portion of that should be allocated financially from cost of goods to R&D and M&S, G&A of course like any other company. And indeed the R&D resources invested in TPSCo and this Panasonic Tower Company is really big, is really large, so we are located from COGS to R&D and M&S -- G&A, the propel cost. And basically what you’ll see now, maybe because it’s the first quarter maybe it’s a little bit higher than usual, but basically what you see now is a good indicator for the coming quarters, which is just a classification internally between COGS and R&D, M&S. The total amount in the P&L is the same like we expected.

So this a good starting point then going forward and it looks like you’re not (inaudible).

Operator, we’re having a problem hearing.

Sorry. So you have a non-controlling interest contribution that looks like it’s largely offsetting the increase in OpEx. Is that what we should expect going forward?

No, so what I said before is what we see in the COGS front, the R&D, M&S, G&A, this is what you should expect also going forward and this is a good number. In regards to the non-controlling interest line, which is typically 49% of the profits of the Panasonic Company, the net profit base, so no. So this quarter, because it’s the first quarter we had some first time charges, cost charges, mainly amortization and depreciation. So basically for the future you should expect they are like $1 million or $2 million, not more than that, a small number, and still if you look at the P&L as a whole, from what is it driving from this Panasonic Company, JV is also considered a gain from acquisition of $15 million that you have in this specific line and also the line that you asked about, non-controlling interest, which is just accounting 49% of the net profit or loss.

And then lastly from me, you mentioned in the press release offers to restructure your debt. If you could maybe talk about what your expectations are there and how that might affect your share count going forward and obviously your interest expense?

We are looking at some ways to improve our balance sheet. Anything that would be entertained as a non-dilutive event would be exchanging shorter term debt for longer term debt and for the most part would be a wash or a betterment as far as the coupon that we’d be paying.

Are there any instruments that are convertible today than that share count you went through that could be eliminated in the kind of debt restructuring?

No, it would not I think have anything to do with. You’re referring to some of the convertible bonds.

Yes, that. So any restructuring would not impact any of the potentially dilutive instruments that are out.

No, it would not.

Okay, very good. Thank you guys and congrats.

Not to add any additional dilution.

Perfect. Thank you very much.

The next question is from Jay Srivatsa from Chardan Capital Markets. Please go ahead. Jay Srivatsa – Chardan Capital Markets: Thank for taking my questions. Congratulations on the results Russell and Oren.

Thank you, Jay. Jay Srivatsa – Chardan Capital Markets: First of all let me ask you with the outbreak of war, has there been any difference at your Fab’s and what do you foresee going forward in terms of any kind of disruptions and/or constrains as you look at how that war is progressing?

No, no impact at all. We are located in the north part of Israel and the action that has been going on is in the south part of Israel, with a little effect on the center of Israel, but no effect at all on the north part of Israel. We didn’t miss any day of shipment or production. Of course, not to mention that 70% of our employees and Fab’s are outside of Israel, but even the 30% of our employees and Fab’s which are in Israeli, they are really in the north part of Israel and they have nothing to do with this country. Jay Srivatsa – Chardan Capital Markets: Russell, can you give us an update on what’s happening …

I’m sorry for the interruption. This is the operator, can you please speak up. It’s just a little bit difficult to hear you. Jay Srivatsa – Chardan Capital Markets: I’m sorry. Is this better? I hope it is. Let me ask you Russell in terms of the India project, could you give us some update on what’s happing there. There seems to be a new administration in place, what does that do to your existing contracts and agreements that you have signed with them?

At the recent SEMICON West show in San Francisco, there was a joint session sponsor by SEMI and the Indian government. We were invited to join them. It was called “Connecting with India” event. The government showed very, very strong support, very strong interest. If anything, it appears that Prime Minister Modi is more aggressive to make these activities work and to drive it, than maybe previously. At the SEMICON West show which was what the, I think the second week of July on that Tuesday afternoon, I presented to a fairly large audience on behalf of our consortium, which includes IBM and JP. I participated on a panel discussion with members of the Indian government, including Dr. A.J Kumar, the Head of the Electronics Office. So, I think everything appears to be moving in a proper direction, nothing seems to be changing. Dr. Kumar did layout the Indian government plans for growing and supporting the local Indian semiconductor industry and stated strongly a cornerstone of that is the establishment of two domestic chip production facilities, one of which obviously our consortia, our consortium would be establishing. We also announced government approved special benefit package for the two consortia that won the tenders. So presently we are awaiting final approvals. From our standpoint everything is moving and if anything, it appears that Prime Minister Modi is personally very involved in very strongly directing that this goes forward. Jay Srivatsa – Chardan Capital Markets: Very good. You’ve mentioned a lot of design activity coming through the pipe. How do you hope to ramp up your capacity utilization in the Panasonic Fab, and if indeed that’s the direction you are going, when do you start to see material improvement in your gross margin profile?

That’s a two pronged answer. To begin with, as far as the front end module, in specific the SOI switch, as well as the power amplifier controllers, those are flows that are in the process of being dual qualified between Newport Beach and Migdal Haemek. We have available capacity in Migdal Haemek to allow for the growth that we expect to be having within this segment, as well as we have addition room within our 8 inch facility at Migdal Haemek to grow should we need to through some incremental CapEx investment. We have also invested in Newport Beach, specifically around the 0.18 micron to increase the amount of starts been driven by both the silicon germanium infrastructure products and the SOI products and I think by the end of September the amount of starts relevant to those specific products will have increased by about 60%, that’s three month ago. Now, one thing that we are moving on very strongly is to dual qualify the 0.18 BCD power management flow in one of the joint venture factories, that being the Tonami factory and the tactical and strategic drive that we have is in having that dual sourced to move the bulk of the BCD products into the joint venture, and then in Migdal Haemek and Newport Beach to drive the bulk of all the SOI front end module products. Incremental margins will obviously come up independent of the joint venture as the 60% start for the SOI is enabled, which again is around the end of September. So I think that you would see that as far as shipments in Q4 and Q1 and then through the increase of both capacity and utilization in Migdal Haemek. Now as far as the Panasonic in itself, I’m sorry not Panasonic, but the…

I don’t think, (inaudible).

Does that answer your question Jay? Jay Srivatsa – Chardan Capital Markets: Yes, thank you very much, I appreciate it.

That was a long answer, but I think complete. Jay Srivatsa – Chardan Capital Markets: I got it. Thank you. Good luck.

Thank you.

The next question is from Rajvindra Gill of Needham & Company. Please go ahead. Josh Buchalter - Needham & Company: Hey guys. This is Josh Buchalter in for Rajiv. Thanks for taking my questions and congrats on a good quarter.

Thank you. Josh Buchalter - Needham & Company: Again on gross margins, did you more a long term -- obviously there’s a lot of push and pulls with the Nishiwaki closure and the joint ventures. So, can you tell us how you’re thinking about that long term?

Well, I believe that what you see now in Q2 ‘14 results and mainly if you look at the non-GAAP adjustments, so you really can see it without the depreciation, you can see it will be clean, this is pretty much our reflection and the only adjustment maybe you should do for the future is just to take out Nishiwaki, because like Russell mentioned, we had in this quarter approximately a $31 million revenue from Micron associated with cost. Obviously the cost is a little bit higher than the revenue, otherwise there was no rush on us to cease the operation. And if you take out those numbers, you reached somehow improved margins $41 million after the cessation of operation and then if you look at also to the future, you then need to taking into assumption what Russell said before in the response to Jay about the improved margins from the incremental business in Panasonic JV. So in this TPSCo now, we only make basic margins, because of the committed volumes from Panasonic. To that we should add all the incremental revenue that we expect to bring as a foundry business to this TPSCo company, which should be in a very high margin, just because we’ll be associated with only the incremental variable cost and typically in our industry the variable costs are a small portion as compared to the fixed cost and to the selling price of the wafer. Josh Buchalter - Needham & Company: Okay, thank you, that’s helpful. And the Nishiwaki closing is still on track with the same timing?

Yes, it’s very much on track, yes. Josh Buchalter - Needham & Company: Okay, great. Thanks guys and congrats again.

Thank you.

The next question is from Lisa Thompson of Zacks. Please go ahead.

Hi. I have a couple of questions. First up on Micron, could you tell us how much Micron revenues was in Q4 of the last year?

closer fit:

Last six quarters?

Yes.

Okay. So how much was Micron in 2014 and how much was it in 2013?

So it was about $30 million a quarter, so in 2013 there was four quarters, so 30X4 and in 2014 30X2.

Okay. So it was all in there, all right. Okay, that helps with the internal growth concept. Now as far as the joint venture, what percent of capacity do you think your using right now?

As it’s all Panasonic business at present, I don’t want to overstate something that would state an awful lot about Panasonic, but at the Q1 release, the COO from TPSCo actually presented and he stated below 50%. So I think more than that I would not want to state.

Okay, and if you were at a 100% capacity, where would your gross margins go?

If we were at 100% utilization at TPSCo?

Yes.

We can say that again, like Russell mentioned, we don’t want to go into the details of the business of Panasonic, because then you will know the current margins, but we are slightly below the 50%. This 100%, we indicated that we can be additional $150 million to $200 million at full capacity additional. So this, the baseline, and we said in the press release that within the coming three yields we pretty much feel secure that we have secured agreements already to utilize at least $100 million and to answer before that, the incremental margin on this additional $100 million a year, $200 million a year everybody can do this assumption, but $200 million is the maximum possible. So this will be in very high incremental margins to gather the valuable growth.

Okay, so we’re not going to have. Okay, thanks a lot. A great quarter, thank you.

Thank you.

The next question is from George Burmann of J.P. Turner. Please go ahead.

Good morning gentlemen. Can you hear me?

Very well George. How are you?

Good and wonderful. Yourself?

Thank you. Very good.

Okay, congratulations to a great quarter as usual. We’re almost use to it now. I had a quick question. Since probably what, five, six, seven, eight years ago you have consistently reported GAAP net losses. Could you remind us what your tax rate situation would look like from here on out going forward as you ramp up profits?

All right, its already in there. Okay, so we have three tax regions, Israel, U.S. and Japan. For the Israel, that region, we have -- Israeli tax laws are very convenient. In that aspect that allows you to carry forward with no any limit factor for the future, and also we have some enhanced depreciation for taxes. Meaning that whatever depreciation we are writing in the books, we are getting almost 2X that amount for taxes. So basically we accrued already more than $1 billion of accrued expenses deductable for tax against future income. So from the Israeli operation we don’t believe we will gain a situation. We will accrue more than $1 billion of net profits, only at that point, which is our future we’ll pay taxes. On the U.S. side we also have some net losses carried forward, but not in a significant amount. Meaning that you can be the U.S. – just the possibility will be fully utilized, creating a significant amount of net profit. It will be taxable, averagely 35% tax rate there and in Japan the tax is about 36%, the tax associated results about 36%, but only in regards to the profit, the net profits that the Panasonic Tower Company will make, which is like we stated before, in the first one, one and a half years its limited because of the nature of the commitment that we got from Panasonic and the margin and only after one and a half years they should ramp up to a more significant amount.

Okay. Like sometimes when companies lose money for a considerable period of time, they are basically being told you will never be able to use the NOLs. Then they turnaround and start making money and all of a sudden the NOL comes back into play. I’m showing differed tax liability on your balance sheet of now $100 million. How should we look at that?

Okay, so that’s two separate issues. There is no linkage between the first part of the question to the second, so I’ll address it. The first part of the question, NOLs, so like I mentioned before, the major part of the NOLs that we have are basically NOLs and they are really carried forward for the future and we for conservative reasons, to be conservative we do not present in the balance sheet the asset that can be derived from that. Because obviously if we have, let’s say $1 billion losses carried forward, maybe another company would write 1 billion times the tax rate, which is in Israel applicable for the 25%. So its $250 million of assets, that if we would not be conservative we could have write in the balance sheet against profits, but this you can only write in according to GAAP if you really believe that this $250 million you will enjoy from them in the coming future. We don’t see that we will have $1 billion of net profits in the coming year, so we don’t write it, but it’s really one of the assets that we have which is not in the balance sheet; that’s for the first part of it. The second part of the question that you asked, tax liability, in the balance sheet this is actually just – I can say theoretical book related liability adjusted for – it’s called timing GAAP, timing differences on the tax. What is that $100 million? It’s really created in this last half year from actually the positive gain from the acquisition of Panasonic, of the TPSCo. So actually as you know, we recorded in the P&L $166 million if you look at H1. $166 million of net gain from acquisition, the composition of that is about $265 million of gross gain, less $100 million provision for tax. So according to the accounting, it’s like this gain is of course not a taxable income and therefore you need to write like a liability for taxes. But nobody should be worried about it, because this liability is not really payable, because against that gain we actually recorded the fixed assets of TPSCo in the value of $250 million, which is the third party appraiser value. We described it in the last quarter and this $250 million book value granted, we’ve increased depreciation rate. So actually for the future, the increased depreciation for tax purposes will offset this theoretical tax liability and actually all what I said now results in a zero effect on tax payments.

That’s what I wanted to find out. Now it might be a good goal for the company to work on utilizing that $1 billion loss carry forward in Israel, right?

Exactly, that’s a good statement. Like I said, it’s one of the assets of the company. According to GAAP we cannot write it in the balance sheet, but for sure a upstream revenue profit that will go to the paired company tower by whatever way is really which could be actually not taxable, because we have these huge NOIs.

Okay. Next a question, you’re carrying now almost $200 million net cash on the balance sheet. What is a adequate amount of cash for you to hold. You had mentioned on previous calls that some of your customers were saying, well you don’t have enough cash; we’re kind of reluctant to give you orders. Now the cash balance has obviously significantly increased. At what point in time, looking at these still very low stock prices would you consider utilizing some of the cash maybe to buy those convertible bonds back or some of the other debt back to increase the value of your company further?

Okay, so you’re correct that the cash is very good, very big, but on the other hand we also have this right. So if you look at the balance sheet, we have $97 million short term debt, which is coming for its due date. For example we have Jazz Notes at $44 million and we have cash associated for that, so. If you look on the cash net of the short term maturities, its $192 million less $97 million, so its $95 million, which is a normal amount. I mean for us it’s a good number against the long term debt that are also in the balance sheet and so we have these Jazz Notes. We have other debt to maturities in the coming two years. So we believe this number is okay to service the debts that we have. In regards to buying back convertible bonds, it’s a very good statement what you will make and economically its very reasonable that we would do that, because for sure today the market environment enables us to pay less than 7.8% or 8% coupon that we pay and this is also what Russell related in the beginning in regards to maybe doing some refinancing that will lower the interest rate, etcetera. But in regard to specific idea that you said about buying back convertible bonds, that’s a little bit of a problem, because technically under Israeli law, there is some Israeli law that only if you have two years of consecutive net profits you can do that. So we felt in the past we did not have it. For the last two consecutive years, technically we can actually not execute on that and this is why, another reason that we need this cash in order to have it for the payment of the bonds when they come due.

A lot of them are convertible into stock though, right?

Yes.

The Jazz bonds, I think they convert into common stock. Are they in the money at the moment or are they still out?

No, so the Jazz bonds that I referred, which are short term maturities which is $44 million and for that we need cash, they are doing June 2015 and they are not convertible at all.

Okay, good.

George, you made one statement that I’m sure that I never mentioned and that was a customer complaining about our cash balance. I have never had such complaints, nor has our cash balance been in a position that they would complain. But that I’m not sure what you had referred to there.

Okay, I thought I had remembered that from a previous conference call that you were looking to increase your cash position, so that the financials look strong.

That might always be the case, but certainly it’s not because the customer had complained about our cash balance.

Okay. Sorry for that indication there. Other than that I think you guys are pulling all the right levers and look forward to further growth in the company and hopefully in the value of your company in the market.

Thank you very much George. I appreciate it. Thank you.

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

Good morning, good afternoon gentlemen. First question, regarding the Nishiwaki Fab, my understanding is the operating cost all total from that Fab were about $130 million per year. So what I’m just trying to clarify, is when one looks at the income statement today, that would suggest on a quarterly basis, that about $32 million of operating cost by the December quarter will not be there versus what you just reported in June. Is that correct?

It’s practically correct. The $130 million is the fixed cost, only the fixed cost of the Nishiwaki which is the majority of the cost and this is what we said, is we’re saving from a savings operation, because this is fixed cost. In addition to that we have the variable cost, I mean when we manufacture there. So just for an example, basing on the previous numbers of $30 million revenue a quarter, so against that you have approximately $10 million of variable cost plus the $32 million fixed cost that you mentioned. So the total is $42 million actually.

Okay. But as the Nishiwaki products are transferred over to your other Fab’s, that $10 million of variable cost is basically just being transferred from one location to another. So when we look in the December quarter, the difference in December versus the June quarter just reported will be that $130 million run-rate; is that correct?

Yes.

Okay, so I mean I’m stating something obvious, but basically as of the December quarter going forward your recorded gross margins will be maturely higher, because you are going to be having $130 million of annual cost that will no longer be reflected going forward.

Yes.

Okay, fine. And then just a second question, regarding going forward, because you are a larger company now, can you just kind of clarity what you expect to be your annual depreciation, amortization going forward and your annual capital expenditures that will be required?

Okay. So basically it’s a good question, because the Q2 number are not clearing that because it both includes Panasonic and also includes Nishiwaki and also includes some one-time there of cost. But you can look at the Q2 number, which is high, again because it also includes Nishiwaki of about $8 million and deduct it, so you’ll have like $47 million, $45 million a quarter of depreciation on the P&A. Okay, so $45 million for quarter should be the run rate in the coming quarters including Nishiwaki, until let’s say Q1, 2015 and from Q1 2015 there is like a gradual reduction and not that high, but there is some step function that is bringing it down. The final level that it will reach will be about $20 million to $25 million a quarter. So from $45 million to $20 million to $25 million, but this will take several other yields. So you can assume a linear reduction for the coming three years let’s say. This is because of the big investments we have made in Fab 2 in the past and which are more than the sustained costs that we spend now on TowerJazz. So it was Fab 2 was built in stages and in steps, so whenever once seven yields are completed from certain stage, so the depletion goes down. So to conclude, if you take $45 million base line over three years, do some linear reduction towards $25 million, you are on the conservative side. In regards to the CapEx payments. So we said I think in the past that we expect about $20 million a quarter. It could be maybe in quarters that we have a material amount of investments, $25 million, but this should be the range, much lower of course than the depreciation, because of the reason I’ve specified before. This quarter by the way was and also previous quarter we were very low. We were really doing some savings here. So it was good results, but for the future we didn’t change the guidance that it’s about $20 million.

Thank you and then one final question then. Regarding the numbers you are disclosing on the new mask sets entering the Fab’s, which is appreciated. What is the best way to asset the potential sales of those mask sets that will be able to provide, let’s say in four quarters. Because I understand each mask set could provide a different amount of revenue. But when you show, let’s say that your mask sets entering the Fab’s were 242 in the current quarter, up about 85% year-over-year, are we to presume that the sales benefit could be also about 85% or is the number dramatically different, because we are talking about mask sets individual that represent greater or lower amounts of revenues now versus in the past.

It’s a very good question. I would say that not every mask set that’s entering has the same exact value. Some of them have extremely high value that there would be substantial growth that comes off of it. I would think that that’s a reasonable assumption. How much growth that comes of it, again I’m not trying to be allusive, but we have not provided really long term guidance and we provide targets. But I would think that the 80% first half versus first half type of a number, 70% first half versus first half number should be able to growth full utilization of our factories and full utilization of our factories would put us probably somewhere organically at a – this is without any offloading into the TPSCo, but could put us somewhere organically of $160 million a quarter organic run rate.

Right. So when the non-Panasonic Fab’s are full, they are doing $160 million of revenue per quarter and your thinking that possibility for reaching that level of revenue would be how far away?

Again, we don’t provide long term guidance. But as I stated, that those masks would be reaching their peak volumes in the, you know it’s 2015, 2016 timeframe. I would assume that I will be at our target anyway. It’s to be running at full utilization in the Q1, Q2 timeframe of next year.

Got it, and one last thing. Regarding engaging new customers, obviously you did a splendid job here after three months of integrating Panasonic. Is there reason to expect that there’s plenty of additional potential customers to talk to, so that signing agreements with additional customers to bring in another $100 million of potential revenue in the future is also very doable in the near future or do you really think that most of the new customers who are interested you kind of signed up already.

Definitely the former. I think right now most customers are very, very interested, specifically at what is the offering. Each quarter we have what we call a TowerJazz Technical Symposium in a different region. On July 24 we had it at Shanghai, China. Had a very, very good representation of a variety of different segments of the Chinese market and part of the presentation there was the CEO of TPSCo and then they held a booth that they had very good action at and activity, where different customers came, potential customers came to understand what the offering was. On I think September 18 we have the same activity in Amsterdam. I believe that there will be a very strong interest, to understand in particular the high voltage power capabilities of TPSCo as far as the foundry offering, looking at what is some strong segments within Europe. So the initial activities, again they were strong and I think very quickly completed. The IDM transfer type of activities with its existing customers that we were able to get interested and were interested in the activities to move into the factories there. On the image senor side it was customers that knew of our reputation in image sensor, which is really, quite, quite strong. And then in and of themselves, knowing the capabilities of Panasonic’s image senor products, were very interested themselves in getting involved and really more of less solicited us. So the image sensor really dealt with our reputation and customers then saying, Wow! This is going to be a foundry offering. We really want to get involved in that factory and contacting us for that type of an activity, and that is just the first front of that. So right now our task and activity is training the sales force worldwide as to not just the continuous training of what we have organically with TowerJazz, but what is offered through TPSCo as a foundry offering and then having them engage with customers on it. That activity from the direct sales force really hasn’t started yet.

Got it. There’s clearly an opportunity there, great. Well, I thank you very much and best of luck with this ongoing combination.

Thank you very much.

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

Yes certainly, thank you very much. So as always, thank you very much for you interest in the company. We have enjoyed, we look forward to continuing to update on the different progresses that the company is making; where we are going, what we are doing. At stated, our strategy has been to align with customers that are leaders within their specific segments, perform for them in current products and be aligned on a multi-generation roadmap to where we are their partner, to add or enable differentiation for future generations and future products. The amount of tape outs coming into the factory from top customers I think really does show that that strategy is working. One of the questions is to when will that and how much does that accrete into revenue. I think the organic growth that we are showing shows that it’s accreting real time as we speak. The micron revenue that had been at about $30 million $31 million quarterly run rate will be supplanted very shortly through our organic business. On top of that we have the TPSCo business through Panasonic, all of the added capacity and new engagements that we have done and will continue to do there and just continue our outlook. We had a very successful conference in China and a lot of activity going on there. I think as most know, a lot of growth happening in China within electronics, within semiconductor and I think we’ve been chosen as the foundry partner of choice for many analog applications. On September 18 we’ll be in Amsterdam presenting to we believe a large group of big cross section of fabless and fab-lite semiconductor companies in Europe. Anyone that would have the opportunity to be there, you’d be invited. We’d very much enjoy hosting you as an investor at any of our TGS functions. That being said, again thank you for following us, and we look forward to update you on many exciting things as time goes on. Thank you very much.

Thank you. This concludes the TowerJazz, Second Quarter 2014 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.