6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

For the month of July 2019 No.5

TOWER SEMICONDUCTOR LTD.

(Translation of registrant's name into English)

Ramat Gavriel Industrial Park

P.O. Box 619, Migdal Haemek, Israel 2310502

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ☒     Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ☐      No ☒

On July 30, 2019, the Registrant issued unaudited condensed interim consolidated financial statements as of June 30, 2019, and for the six and three month’s periods then ended. Attached hereto are the following exhibits.

Exhibit 99.1	Registrant’s unaudited condensed interim consolidated financial statements as of June 30, 2019 and for the six and three months periods then ended
Exhibit 99.2	Management’s Discussion and Analysis of Financial Condition and Results of Operations

 This Form 6-K, including all exhibits hereto, is hereby incorporated by reference into all effective registration statements filed by us under the Securities Act of 1933. 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: July 30, 2019
TOWER SEMICONDUCTOR LTD.
By:   /s/ Nati Somekh
 Name:  Nati Somekh  Title:  Corporate Secretary

EX-99.1

Exhibit 99.1

 TOWER SEMICONDUCTOR LTD.

 AND SUBSIDIARIES

UNAUDITED CONDENSED INTERIM

CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

INDEX TO UNAUDITED CONDENSED INTERIM

CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

	Page
BALANCE SHEETS	F - 2
STATEMENTS OF OPERATIONS	F - 3
STATEMENTS OF COMPREHENSIVE INCOME	F - 4
STATEMENT 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

(dollars in thousands)

	As of			As of
	June 30,			December 31,
	2019			2018
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	405,158		$	385,091
Short-term interest-bearing deposits		147,032			120,079
Marketable securities		146,893			135,850
Trade accounts receivable		123,789			153,409
Inventories		174,806			170,778
Other current assets		22,374			22,752
Total current assets		1,020,052			987,959
LONG-TERM INVESTMENTS		36,874			35,945
PROPERTY AND EQUIPMENT, NET		707,122			657,234
INTANGIBLE ASSETS, NET		11,279			13,435
GOODWILL		7,000			7,000
DEFERRED TAX AND OTHER LONG-TERM ASSETS, NET		89,171			88,404
TOTAL ASSETS	$	1,871,498		$	1,789,977
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of leases and debentures	$	45,173		$	10,814
Trade accounts payable		92,747			104,329
Deferred revenue and customers' advances		7,975			20,711
Employee related liabilities		57,540			50,750
Other current liabilities		8,364			17,117
Total current liabilities		211,799			203,721
LONG-TERM DEBT
Debentures		109,079			120,170
Other long-term debt		166,835			136,499
LONG-TERM CUSTOMERS' ADVANCES		27,230			28,131
EMPLOYEE RELATED LIABILITIES		14,295			13,898
DEFERRED TAX LIABILITY		46,434			50,401
OTHER LONG-TERM LIABILITIES		969			952
TOTAL LIABILITIES		576,641			553,772
THE COMPANY'S SHAREHOLDERS' EQUITY		1,301,122			1,242,966
Non-controlling interest		(6,265	)		(6,761	)
TOTAL SHAREHOLDERS' EQUITY		1,294,857			1,236,205
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,871,498		$	1,789,977

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						Three months ended
	June 30,						June 30,
	2019			2018			2019		2018
REVENUES	$	616,171		$	647,848		$	306,064	$	335,138
COST OF REVENUES		499,613			503,155			252,657		256,610
GROSS PROFIT		116,558			144,693			53,407		78,528
OPERATING COSTS AND EXPENSES:
Research and development		37,980			36,439			18,812		18,173
Marketing, general and administrative		33,479			32,109			16,838		16,115
		71,459			68,548			35,650		34,288
OPERATING PROFIT		45,099			76,145			17,757		44,240
FINANCING AND OTHER INCOME (EXPENSE), NET		1,672			(9,222	)		947		(5,453	)
PROFIT BEFORE INCOME TAX		46,771			66,923			18,704		38,787
INCOME TAX BENEFIT (EXPENSE), NET		(649	)		(3,733	)		1,018		(2,778	)
NET PROFIT		46,122			63,190			19,722		36,009
Net loss attributable to non-controlling interest		1,030			670			1,214		1,733
NET PROFIT ATTRIBUTABLE TO THE COMPANY	$	47,152		$	63,860		$	20,936	$	37,742
BASIC EARNINGS PER ORDINARY SHARE:
Earnings per share	$	0.45		$	0.65		$	0.20	$	0.38
Weighted average number of ordinary shares outstanding		105,829			98,693			106,321		98,888
DILUTED EARNINGS PER ORDINARY SHARE:
Earnings per share	$	0.44		$	0.63		$	0.20	$	0.37
Net profit used for diluted earnings per share	$	47,152		$	63,860		$	20,936	$	37,742
Weighted average number of ordinary shares outstanding
used for diluted earnings per share		107,078			101,090			107,178		101,066

See notes to consolidated financial statements.

F - 3

 

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(dollars in thousands)

	Six months ended						Three months ended
	June 30,						June 30,
	2019			2018			2019			2018
Net profit	$	46,122		$	63,190		$	19,722		$	36,009
Other comprehensive income, net of tax:
Foreign currency translation adjustment		2,672			2,301			4,323			(5,689	)
Change in employees plan assets and benefit obligations, net of taxes		115			(435	)		172			(217	)
Unrealized gain (loss) on derivatives		1,639			(814	)		(431	)		117
Comprehensive income		50,548			64,242			23,786			30,220
Comprehensive loss (income) attributable to non-controlling interest		(496	)		(576	)		(939	)		4,768
Comprehensive income attributable to the Company	$	50,052		$	63,666		$	22,847		$	34,988

See notes to consolidated financial statements.

F - 4

 

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

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

(dollars and share data in thousands)

	THE COMPANY'S SHAREHOLDERS' EQUITY
													Accumulated			Foreign currency translation adjustments
	Ordinary		Ordinary		Additional								other														Non
	shares		shares		paid-in			Capital			Unearned		comprehensive						Accumulated			Treasury			Comprehensive		controlling
	issued		amount		capital			notes			compensation		income						deficit			stock			income		interest			Total
BALANCE AS OF JANUARY 1, 2019		105,066	$	418,492	$	1,380,396		$	20,758		$	93,226	$	(672	)	$	(22,716	)	$	(637,446	)	$	(9,072	)			$	(6,761	)	$	1,236,205
Changes during the period:
Exercise of options and RSUs		271		1,127		(730	)																								397
Capital notes converted into share capital		1,181		4,892		15,866			(20,758	)																					--
Employee stock-based compensation												7,707																			7,707
Profit																				47,152					$	47,152		(1,030	)		46,122
Foreign currency translation adjustments																	1,146									1,146		1,526			2,672
Change in employees plan assets and benefit obligations														115												115					115
Unrealized gain on derivatives														1,639												1,639					1,639
Comprehensive income																									$	50,052
BALANCE AS OF JUNE 30, 2019		106,518	$	424,511	$	1,395,532		$	--		$	100,933	$	1,082		$	(21,570	)	$	(590,294	)	$	(9,072	)			$	(6,265	)	$	1,294,857
OUTSTANDING SHARES, NET OF TREASURY STOCK AS OF JUNE 30, 2019		106,432

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,
CASH FLOWS - OPERATING ACTIVITIES	2019			2018
Net profit	$	46,122		$	63,190
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		104,867			107,470
Effect of exchange rate differences on debentures		6,205			(6,537	)
Other income, net		(445	)		(1,600	)
Changes in assets and liabilities:
Trade accounts receivable		31,271			(10,262	)
Other current assets		(5,755	)		9,083
Inventories		(3,017	)		(9,405	)
Trade accounts payable		(15,204	)		3,909
Deferred revenue and customers' advances		(13,649	)		(6,178	)
Employee related liabilities and other current liabilities		(1,846	)		9,136
Long-term employee related liabilities		39			(194	)
Deferred tax, net and other long-term liabilities		(1,564	)		(6,682	)
Net cash provided by operating activities		147,024			151,930
CASH FLOWS - INVESTING ACTIVITIES
Investments in property and equipment, net		(85,445	)		(80,195	)
Investments in deposits, marketable securities and other assets, net		(33,825	)		(30,451	)
Net cash used in investing activities		(119,270	)		(110,646	)
CASH FLOWS - FINANCING ACTIVITIES
Exercise of options		397			684
Proceeds from loans		--			99,964
Loans repayment		--			(101,314	)
Principal payments on account of capital lease obligation		(10,549	)		(1,497	)
Net cash used in financing activities		(10,152	)		(2,163	)
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE		2,465			1,798
INCREASE IN CASH AND CASH EQUIVALENTS		20,067			40,919
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		385,091			445,961
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	405,158		$	486,880

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,
	2019			2018
NON-CASH ACTIVITIES:
Investments in property and equipment	$	35,529		$	33,493
Conversion of notes into share capital	$	20,758		$	--
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for interest, net	$	(1,226	)	$	2,376
Cash paid during the period for income taxes, net	$	10,178		$	2,139

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, 2019

(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”) as of June 30, 2019 include the financial statements of Tower and (i) its wholly-owned subsidiary Tower US Holdings Inc., the sole owner of: (1) Jazz US Holdings Inc. and its wholly-owned subsidiary, Jazz Semiconductor, Inc. and (2) TowerJazz Texas Inc., and (ii) its 51% owned subsidiary, TowerJazz Panasonic Semiconductor Co., Ltd. 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, 2018 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

In February 2016, the FASB issued ASU 2016-02 “Leases” (“ASU 2016-02”), which primarily changes the leases accounting for operating leases by requiring recognition of lease right-of-use assets and lease liabilities. The amendments are effective January 1, 2019, and for interim periods within that year, with early adoption permitted.  In July 2018, the FASB issued ASU 2018-10 “Codification Improvements to Topic 842, Leases,” to clarify application of certain aspects of the new leases standard and to remove inconsistencies within the guidance and ASU 2018-11 “Targeted Improvements” (“ASU 2018-11“), which provides for an alternate transition method. Specifically, ASU 2018-11 allows the new lease standard to be applied as of the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings rather than retroactive restatement of all periods presented.   The Company has identified all existing operating and financing leases and implemented the new standard accordingly. As of June 30, 2019, the present value of the new lease assets and liabilities was approximately $36,000.

F - 8

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS AS OF JUNE 30, 2019

(dollars in thousands, except per share data)

NOTE 3   -             RECENT DEVELOPMENTS

A. TPSCo new agreements

In March 2019, the Company, Panasonic Semiconductor Solutions (“PSCS”) and TPSCo signed three-year agreements, extending its previous agreements with Panasonic Semiconductor Solutions (PSCS) effective as of April 1, 2019. Under the agreements, among others, PSCS will continue to utilize TPSCo’s three manufacturing facilities in Japan for its semiconductor business. TPSCo’s wafer loading level from PSCS are expected to remain similar, with a new pricing structure, resulting in revenue reductions of approximately $20,000 per quarter.

B. Equity Grants to CEO and Directors

In June 25, 2019, the Company's shareholders approved the grant of the following Restricted Stock Units (“RSUs”) to the Company's CEO and members of the Board of Directors under the Company’s 2013 Share Incentive Plan: (i) 128,797 time vested RSUs and 128,798 performance based RSUs to the CEO, which RSUs will vest linearly over a three-year period, 33% at the end of each year of the 3 years following the grant date for a compensation value of $3,900; in this regard, the Company has adopted stock ownership guidelines whereby the CEO will be required to own a minimum value that equals at least 3 times of his annual base salary in ordinary shares of the Company and the CEO has 5 years from May 2019 to accumulate said minimum, during which  the CEO must retain at least 20% of the vested time-based RSUs that are granted to him from May 2019 and such RSUs that may be granted to him in the future until the guideline is met; (ii) 19,815 time vested RSUs to the chairman of the Board of Directors (“the Chairman”) for a total compensation value of $300, to vest linearly over a three-year period, 33% at the end of each year of the 3 years following the grant date; and (iii) 4,953 time vested RSUs to each of the 8 members of the Board of Directors (other than the Chairman and the CEO), for an aggregate compensation value of $600, with 50% vesting on the first anniversary from the date of grant and 50% on the second anniversary of the date of grant.

F - 9

EX-99.2

Exhibit 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The information contained in this section should be read in conjunction with (1) our unaudited condensed interim consolidated financial statements as of June 30, 2019 and for the six months then ended and related notes included in this report and (2) our audited consolidated financial statements and related notes included in our Annual Report on Form 20-F for the year ended December 31, 2018 and the other information contained in such annual report, particularly the information in Item 5 - “Operating and Financial Review and Prospects”. Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”).

Results of Operations

The following table sets forth certain statement of operations data as a percentage of total revenues for the periods indicated:

	Six months ended June 30,
	2019			2018
Revenues		100	%		100	%
Cost of revenues		81.1			77.7
Gross profit		18.9			22.3
Research and development expense		6.2			5.6
Marketing, general and administrative expense		5.4			5.0
Operating profit		7.3			11.7
Financing and other income (expense), net		0.3			(1.5	)
Profit before income tax		7.6			10.2
Income tax expense, net		(0.1	)		(0.6	)
Net profit		7.5			9.6
Net loss attributable to the non-controlling interest		0.2			0.1
Net profit attributable to the company		7.7	%		9.7	%

The following table sets forth certain statement of operations data for the periods indicated (in thousands):

	Six months ended June 30,
	2019			2018
Revenues	$	616,171		$	647,848
Cost of revenues		499,613			503,155
Gross profit		116,558			144,693
Research and development expense		37,980			36,439
Marketing, general and administrative expense		33,479			32,109
Operating profit		45,099			76,145
Financing and other income (expense), net		1,672			(9,222	)
Profit before income tax		46,771			66,923
Income tax expense, net		(649	)		(3,733	)
Net profit		46,122			63,190
Net loss attributable to the non-controlling interest		1,030			670
Net profit attributable to the company	$	47,152		$	63,860

Six months ended June 30, 2019 compared to six months ended June 30, 2018

Revenues. Revenues for the six months ended June 30, 2019 were $616.2 million, as compared to $647.8 million for the six months ended June 30, 2018. This reduction is attributed mainly to a $36.6 million revenue reduction from Panasonic Semiconductor Solutions (“PSCS”), mainly due to the terms of the extended agreements signed in March 2019 with PSCS, which resulted in, among others, pricing reduction for products and services provided from TPSCo to PSCS. For additional information on the terms of the extended contract, see Note 3A to the unaudited condensed interim consolidated financial statements as of June 30, 2019.

Cost of Revenues. Cost of revenues for the six months ended June 30, 2019 amounted to $499.6 million as compared to $503.2 million for the six months ended June 30, 2018. This small decrease of $3.6 million in manufacturing cost, as compared to the $31.6 million reduced revenues, attributed mainly to the above referenced TPSCo - PSCS extension agreement, according to which, revised pricing levels were established as well as to the fact that a large portion of our costs is fixed.

 Gross Profit. Gross profit for the six months ended June 30, 2019 amounted to $116.6 million as compared to $144.7 million for the six months ended June 30, 2018. The decrease in gross profit resulted directly from the $31.6 million revenue reduction described above, while the decrease in cost of revenue was $3.6 million as described above.

Research and Development. Research and development expense for the six months ended June 30, 2019, amounted to $38.0 million as compared to $36.4 million in the six months ended June 30, 2018, a 4% increase, which reflects our focus to enhance our mid-term and long-term products’ funnel, technology capabilities and future design wins.

Marketing, General and Administrative. Marketing, general and administrative expense for the six months ended June 30, 2019 amounted to $33.5 million, an increase of $1.4 million as compared to $32.1 million recorded in the six months ended June 30, 2018.

Operating Profit. Operating profit for the six months ended June 30, 2019 amounted to $45.1 million as compared to $76.1 million for the six months ended June 30, 2018. The $31.0 million decrease in operating profit resulted mainly from the $28.1 million reduction in gross profit described above.

Financing and Other Income (Expense), Net. Financing and other income, net for the six months ended June 30, 2019 amounted to $1.7 million as compared to financing and other expense, net of $9.2 million for the six months ended June 30, 2018. During the six months ended June 30, 2019, interest income was higher resulting from higher balance of interest-bearing bank deposits, and investment in marketable securities and financing expense was lower than 2018 expense mainly due to the full conversion of Jazz Notes during 2018.

Income Tax Expense, Net. Income tax expense, net for the six months ended June 30, 2019 amounted to $0.6 million as compared to $3.7 million in the six months ended June 30, 2018. The decrease in income tax expense, net in the amount of $3.1 million was mainly due to the $20.2 million lower profit before tax as described above.

 Net Profit. Net profit for the six months ended June 30, 2019 amounted to $47.2 million as compared to a net profit of $63.9 million for the six months ended June 30, 2018.  The decrease in net profit in the amount of $16.7 million was mainly due to the decrease of $31.0 million in operating profit, offset by $10.9 million increase in financing and other income, net and $3.1 million lower income tax expense, as explained above.

Impact of Currency Fluctuations

 The Company currently operates in three different regions: Japan, the United States and Israel. The functional currency of the United States and Israel entities is the US dollar (“USD”). The functional currency of our subsidiary in Japan is the Japanese Yen (“JPY”). Our expenses and costs are denominated mainly in USD, JPY and New Israeli Shekels (“NIS”), revenues are denominated mainly in USD and JPY and our cash from operations, investing and financing activities are denominated mainly in USD, JPY and NIS. Therefore, the Company is exposed to the risk of currency exchange rate fluctuations in Israel and Japan.

The USD costs of our operations in Israel is influenced by changes in the USD to NIS exchange rate, with respect to costs that are denominated in NIS. During the six months ended June 30, 2019, the USD depreciated against the NIS by 4.9%, as compared to 5.3% appreciation during the six months ended June 30, 2018.

The fluctuation of USD against the NIS can affect our results of operations. Appreciation of the NIS has the effect of increasing the cost, in USD terms, of some of the Company’s Israeli purchases and labor NIS denominated costs, which may lead to erosion in the profit margins. The Company uses foreign currency cylinder transactions to hedge a portion of this currency exposure to be contained within a pre-defined fixed range. In addition, the Company executed swap-hedging transactions to hedge the exposure to the fluctuation of USD against the NIS to the extent it relates to non-convertible Series G debentures, which are denominated in NIS.

The majority of TPSCo revenues are denominated in JPY and the majority of the expenses of TPSCo are in JPY, which limits the exposure to fluctuations of the USD / JPY exchange rate on TPSCo’s results of operations. In order to mitigate a portion of the net exposure to the USD / JPY exchange rate, the Company has engaged in cylinder hedging transactions to contain the currency’s fluctuation within a pre-defined fixed range.

During the six months ended June 30, 2019, the USD depreciated against the JPY by 2.0%, as compared to 1.6% depreciation during the six months ended June 30, 2018. The net effect of USD depreciation against the JPY on TPSCo’s assets and liabilities denominated in JPY is presented in the Cumulative Translation Adjustment (“CTA”) as part of Other Comprehensive Income (“OCI”) in the balance sheet.

Liquidity and Capital Resources

As of June 30, 2019, the Company had an aggregate amount of $405.2 million in cash and cash equivalents, as compared to $385.1 million as of December 31, 2018. The main cash activities during the six months ended June 30, 2019 were: $147.0 million positive cash flow generated from operating activities; $85.4 million invested in property and equipment, net of proceeds received from sales of equipment; $33.8 million invested in short-term deposits, marketable securities and other assets, net; and $10.5 million debt repaid.

As included in Note 2 to the unaudited condensed interim consolidated financial statements as of June 30, 2019, the Company implemented effective January 1, 2019, the new accounting standard ASU 2016-2 “Leases” (“ASU 2016-02”), which primarily changed the leases accounting for operating leases by requiring recognition of lease right-of-use assets and lease liabilities. As of June 30, 2019, the present value of the new lease assets and liabilities was approximately $36 million, which was recorded in the balance sheet.

Short-term and long-term debt presented on the balance sheet as of June 30, 2019, including bank loans, debentures, operating leases and capital leases amounted to $45.2 million and $275.9 million, respectively. As of June 30, 2019, the aggregate principal amount of debentures was $131.2 million and its carrying amount in the balance sheet was $127.2 million, of which $18.1 million were presented as short-term liability.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2019
Document and Entity Information [Abstract]
Document Type	6-K
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Entity Registrant Name	TOWER SEMICONDUCTOR LTD
Entity Central Index Key	0000928876
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31

XML

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
CURRENT ASSETS
Cash and cash equivalents	$ 405,158	$ 385,091
Short-term interest-bearing deposits	147,032	120,079
Marketable securities	146,893	135,850
Trade accounts receivable	123,789	153,409
Inventories	174,806	170,778
Other current assets	22,374	22,752
Total current assets	1,020,052	987,959
LONG-TERM INVESTMENTS	36,874	35,945
PROPERTY AND EQUIPMENT, NET	707,122	657,234
INTANGIBLE ASSETS, NET	11,279	13,435
GOODWILL	7,000	7,000
DEFERRED TAX AND OTHER LONG-TERM ASSETS, NET	89,171	88,404
TOTAL ASSETS	1,871,498	1,789,977
CURRENT LIABILITIES
Current maturities of leases and debentures	45,173	10,814
Trade accounts payable	92,747	104,329
Deferred revenue and customers' advances	7,975	20,711
Employee related liabilities	57,540	50,750
Other current liabilities	8,364	17,117
Total current liabilities	211,799	203,721
LONG-TERM DEBT
Debentures	109,079	120,170
Other long-term debt	166,835	136,499
LONG-TERM CUSTOMERS' ADVANCES	27,230	28,131
EMPLOYEE RELATED LIABILITIES	14,295	13,898
DEFERRED TAX LIABILITY	46,434	50,401
OTHER LONG-TERM LIABILITIES	969	952
TOTAL LIABILITIES	576,641	553,772
THE COMPANY'S SHAREHOLDERS' EQUITY	1,301,122	1,242,966
Non-controlling interest	(6,265)	(6,761)
TOTAL SHAREHOLDERS' EQUITY	1,294,857	1,236,205
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 1,871,498	$ 1,789,977

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
REVENUES	$ 306,064	$ 335,138	$ 616,171	$ 647,848
COST OF REVENUES	252,657	256,610	499,613	503,155
GROSS PROFIT	53,407	78,528	116,558	144,693
OPERATING COSTS AND EXPENSES:
Research and development	18,812	18,173	37,980	36,439
Marketing, general and administrative	16,838	16,115	33,479	32,109
TOTAL OPERATING COSTS AND EXPENSES	35,650	34,288	71,459	68,548
OPERATING PROFIT	17,757	44,240	45,099	76,145
FINANCING AND OTHER INCOME (EXPENSE), NET	947	(5,453)	1,672	(9,222)
PROFIT BEFORE INCOME TAX	18,704	38,787	46,771	66,923
INCOME TAX BENEFIT (EXPENSE), NET	1,018	(2,778)	(649)	(3,733)
NET PROFIT	19,722	36,009	46,122	63,190
Net loss attributable to non-controlling interest	1,214	1,733	1,030	670
NET PROFIT ATTRIBUTABLE TO THE COMPANY	$ 20,936	$ 37,742	$ 47,152	$ 63,860
BASIC EARNINGS PER ORDINARY SHARE:
Earnings per share	$ 0.20	$ 0.38	$ 0.45	$ 0.65
Weighted average number of ordinary shares outstanding	106,321	98,888	105,829	98,693
DILUTED EARNINGS PER ORDINARY SHARE:
Earnings per share	$ 0.20	$ 0.37	$ 0.44	$ 0.63
Net profit used for diluted earnings per share	$ 20,936	$ 37,742	$ 47,152	$ 63,860
Weighted average number of ordinary shares outstanding used for diluted earnings per share	107,178	101,066	107,078	101,090

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net profit	$ 19,722	$ 36,009	$ 46,122	$ 63,190
Other comprehensive income, net of tax:
Foreign currency translation adjustment	4,323	(5,689)	2,672	2,301
Change in employees plan assets and benefit obligations, net of taxes	172	(217)	115	(435)
Unrealized gain (loss) on derivatives	(431)	117	1,639	(814)
Comprehensive income	23,786	30,220	50,548	64,242
Comprehensive loss (income) attributable to non-controlling interest	(939)	4,768	(496)	(576)
Comprehensive income attributable to the Company	$ 22,847	$ 34,988	$ 50,052	$ 63,666

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CONDENSED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) - 6 months ended Jun. 30, 2019 - USD ($) shares in Thousands, $ in Thousands	Ordinary shares [Member]	Additional paid-in capital [Member]	Capital notes [Member]	Unearned compensation [Member]	Accumulated other comprehensive income [Member]	Foreign currency translation adjustment [Member]	Accumulated deficit [Member]	Treasury stock [Member]	Comprehensive income [Member]	Noncontrolling interest [Member]	Total
BALANCE at Dec. 31, 2018	$ 418,492	$ 1,380,396	$ 20,758	$ 93,226	$ (672)	$ (22,716)	$ (637,446)	$ (9,072)		$ (6,761)	$ 1,236,205
BALANCE, SHARES at Dec. 31, 2018	105,066
Changes during the period:
Exercise of options and RSUs	$ 1,127	(730)									397
Exercise of options and RSUs, shares	271
Capital notes converted into share capital	$ 4,892	15,866	(20,758)
Capital notes converted into share capital, shares	1,181
Employee stock-based compensation				7,707							7,707
Other comprehensive income:
Profit							47,152		$ 47,152	(1,030)	46,122
Foreign currency translation adjustments						1,146			1,146	1,526	2,672
Change in employees plan assets and benefit obligations					115				115		115
Unrealized gain on derivatives					1,639				1,639		1,639
Comprehensive income									$ 50,052		50,052
BALANCE at Jun. 30, 2019	$ 424,511	$ 1,395,532		$ 100,933	$ 1,082	$ (21,570)	$ (590,294)	$ (9,072)		$ (6,265)	$ 1,294,857
BALANCE, SHARES at Jun. 30, 2019	106,518
OUTSTANDING SHARES, NET OF TREASURY STOCK at Jun. 30, 2019	106,432

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS - OPERATING ACTIVITIES
Net profit	$ 46,122	$ 63,190
Income and expense items not involving cash flows:
Depreciation and amortization	104,867	107,470
Effect of exchange rate differences on debentures	6,205	(6,537)
Other income, net	(445)	(1,600)
Changes in assets and liabilities:
Trade accounts receivable	31,271	(10,262)
Other current assets	(5,755)	9,083
Inventories	(3,017)	(9,405)
Trade accounts payable	(15,204)	3,909
Deferred revenue and customers' advances	(13,649)	(6,178)
Employee related liabilities and other current liabilities	(1,846)	9,136
Long-term employee related liabilities	39	(194)
Deferred tax, net and other long-term liabilities	(1,564)	(6,682)
Net cash provided by operating activities	147,024	151,930
CASH FLOWS - INVESTING ACTIVITIES
Investments in property and equipment, net	(85,445)	(80,195)
Investments in deposits, marketable securities and other assets, net	(33,825)	(30,451)
Net cash used in investing activities	(119,270)	(110,646)
CASH FLOWS - FINANCING ACTIVITIES
Exercise of options	397	684
Proceeds from loans		99,964
Loans repayment		(101,314)
Principal payments on account of capital lease obligation	(10,549)	(1,497)
Net cash used in financing activities	(10,152)	(2,163)
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE	2,465	1,798
INCREASE IN CASH AND CASH EQUIVALENTS	20,067	40,919
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	385,091	445,961
CASH AND CASH EQUIVALENTS - END OF PERIOD	405,158	486,880
NON-CASH ACTIVITIES:
Investments in property and equipment	35,529	33,493
Conversion of notes into share capital	20,758
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for interest, net	(1,226)	2,376
Cash paid during the period for income taxes, net	$ 10,178	$ 2,139

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GENERAL

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

GENERAL

NOTE 1   -            GENERAL

Basis for Presentation

The unaudited condensed interim consolidated financial statements of Tower Semiconductor Ltd. (“Tower”) as of June 30, 2019 include the financial statements of Tower and (i) its wholly-owned subsidiary Tower US Holdings Inc., the sole owner of: (1) Jazz US Holdings Inc. and its wholly-owned subsidiary, Jazz Semiconductor, Inc. and (2) TowerJazz Texas Inc., and (ii) its 51% owned subsidiary, TowerJazz Panasonic Semiconductor Co., Ltd. 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, 2018 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.

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INITIAL ADOPTION OF NEW STANDARDS

6 Months Ended

Jun. 30, 2019

Accounting Changes and Error Corrections [Abstract]

INITIAL ADOPTION OF NEW STANDARDS

NOTE 2   -             INITIAL ADOPTION OF NEW STANDARDS

In February 2016, the FASB issued ASU 2016-02 “Leases” (“ASU 2016-02”), which primarily changes the leases accounting for operating leases by requiring recognition of lease right-of-use assets and lease liabilities. The amendments are effective January 1, 2019, and for interim periods within that year, with early adoption permitted.  In July 2018, the FASB issued ASU 2018-10 “Codification Improvements to Topic 842, Leases,” to clarify application of certain aspects of the new leases standard and to remove inconsistencies within the guidance and ASU 2018-11 “Targeted Improvements” (“ASU 2018-11“), which provides for an alternate transition method. Specifically, ASU 2018-11 allows the new lease standard to be applied as of the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings rather than retroactive restatement of all periods presented.   The Company has identified all existing operating and financing leases and implemented the new standard accordingly. As of June 30, 2019, the present value of the new lease assets and liabilities was approximately $36,000.

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RECENT DEVELOPMENTS

6 Months Ended

Jun. 30, 2019

RECENT DEVELOPMENTS [Abstract]

RECENT DEVELOPMENTS

NOTE 3   -             RECENT DEVELOPMENTS

A. TPSCo new agreements

In March 2019, the Company, Panasonic Semiconductor Solutions (“PSCS”) and TPSCo signed three-year agreements, extending its previous agreements with Panasonic Semiconductor Solutions (PSCS) effective as of April 1, 2019. Under the agreements, among others, PSCS will continue to utilize TPSCo’s three manufacturing facilities in Japan for its semiconductor business. TPSCo’s wafer loading level from PSCS are expected to remain similar, with a new pricing structure, resulting in revenue reductions of approximately $20,000 per quarter.

B. Equity Grants to CEO and Directors

In June 25, 2019, the Company's shareholders approved the grant of the following Restricted Stock Units (“RSUs”) to the Company's CEO and members of the Board of Directors under the Company’s 2013 Share Incentive Plan: (i) 128,797 time vested RSUs and 128,798 performance based RSUs to the CEO, which RSUs will vest linearly over a three-year period, 33% at the end of each year of the 3 years following the grant date for a compensation value of $3,900; in this regard, the Company has adopted stock ownership guidelines whereby the CEO will be required to own a minimum value that equals at least 3 times of his annual base salary in ordinary shares of the Company and the CEO has 5 years from May 2019 to accumulate said minimum, during which  the CEO must retain at least 20% of the vested time-based RSUs that are granted to him from May 2019 and such RSUs that may be granted to him in the future until the guideline is met; (ii) 19,815 time vested RSUs to the chairman of the Board of Directors (“the Chairman”) for a total compensation value of $300, to vest linearly over a three-year period, 33% at the end of each year of the 3 years following the grant date; and (iii) 4,953 time vested RSUs to each of the 8 members of the Board of Directors (other than the Chairman and the CEO), for an aggregate compensation value of $600, with 50% vesting on the first anniversary from the date of grant and 50% on the second anniversary of the date of grant.

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GENERAL (Details)	Jun. 30, 2019
TowerJazz Panasonic Semiconductor Co., Ltd [Member]
Business Acquisition [Line Items]
Percentage of subsidiary owned	51.00%

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INITIAL ADOPTION OF NEW STANDARDS (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Accounting Changes and Error Corrections [Abstract]
Lease assets and liabilities	$ 36,000

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RECENT DEVELOPMENTS (TPSCo new agreements) (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Recent Developments [Line Items]
Estimated quarterly revenue reductions from change in pricing structure	$ 20,000

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RECENT DEVELOPMENTS (Equity Grants to CEO and Directors) (Details) - 2013 Plan [Member] - USD ($) $ in Thousands	1 Months Ended
	Jun. 25, 2019	May 31, 2019
Performance based RSUs [Member]
Recent Developments [Line Items]
Compensation cost	$ 3,900
Chief Executive Officer [Member] | Time Vested Restricted Shares Units [Member]
Recent Developments [Line Items]
Non-option equity awards granted	128,797
Vesting period		5 years
Vesting percentage		20.00%
Chief Executive Officer [Member] | Time Vested Restricted Shares Units [Member] | Minimum [Member]
Recent Developments [Line Items]
Vesting period	5 years
Vesting percentage	20.00%
Chief Executive Officer [Member] | Performance based RSUs [Member]
Recent Developments [Line Items]
Non-option equity awards granted	128,798
Vesting period	3 years
Vesting percentage	33.00%
Chairman of the Board of Directors [Member] | Time Vested Restricted Shares Units [Member]
Recent Developments [Line Items]
Non-option equity awards granted	19,815
Vesting period	3 years
Vesting percentage	33.00%
Compensation cost	$ 300
Members of Board of Directors [Member] | Time Vested Restricted Shares Units [Member]
Recent Developments [Line Items]
Non-option equity awards granted	4,953
Compensation cost	$ 600
Members of Board of Directors [Member] | Time Vested Restricted Shares Units [Member] | First anniversary [Member]
Recent Developments [Line Items]
Vesting percentage	50.00%
Members of Board of Directors [Member] | Time Vested Restricted Shares Units [Member] | Second anniversary [Member]
Recent Developments [Line Items]
Vesting percentage	50.00%