Thank you, and welcome to TowerJazz Financial Results Conference Call for the first quarter of 2012. Joining us today are Mr. Russell Ellwanger, TowerJazz's CEO; and Mr. Oren Shirazi, CFO. Russell will open the call followed by Oren with the discussion of our results in the first quarter of 2012. After management's 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 Form 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 turn the call to our CEO, Mr. Russell Ellwanger. Russell, please go ahead.

Yes, thank you, Nawit. And welcome to all of you to our first quarter of 2012 results conference call. Our growing capacity sends a clear message to all our current, as well as our potential customers, that we are well-positioned to meet any and all of their growing needs for their foreseeable future. That combined with a strong and growing technical portfolio has enabled us to grow our business and market share strongly over the last year, and we recorded Q1 revenues of $168 million, growing 39% year-over-year, well ahead of our industry peer performance. The strong growth continue to cement our position as the #1 specialty foundry in the world. As stated in previous conference calls, we have a very strong customer funnel. To demonstrate this, I will talk to the increase in the number of masks that entered into our factories in Q1. Each prototype that comes into the factory has a defined amount of layers, and the layer mask count defines to a certain extent the complexity of the product flow, which is also related to price. The mask tape-out is the last stage of the customer design win cycle, that upon successful prototypes enables volume manufacturing growth. The mask sets that enter the fab today is the incremental revenue growth for 1 year from today, with the typical 2- to 3-year lifetime. If we compare the company new masks for Q1 of 2012 versus Q1 of 2011, it is up 26%, with each of the 3 factories having a record high for Q1 against the same quarter of any subsequent year. This excludes Nishiwaki, Japan, for which we have no foundry baseline for the previous years. 2009 was the first year where we fully rebuilt and rebranded ourselves after the merger with Jazz Technologies in 2008…

Thank you, Russell. And hello, everyone. Looking at our Q1 results and achievements, you can see that we improved our margins and balance sheet as evidenced by various parameters and ratios. We improved our current ratio, which is our current assets divided by our current liabilities, from 1.16 as of December 31, 2011, to be 1.61 as of March 31, 2012. And we improved our current asset, our net current assets, from $36 million to $125 million, with a net debt to EBITDA ratio of 2.1x based on current EBITDA run rate. We were successful at improving our non-GAAP growth and operating margin, as well as improving our EBITDA margins over the last quarter despite a seasonal revenue reduction of $6.6 million. Our non-GAAP gross profits were $1 million better than -- better sequentially, reflecting an improved margins of 35% versus 33% in the previous quarter. Our non-GAAP operating margins improved from 23% to 24%, and we maintained the 19% non-GAAP net margin. Last week, we received further market recognition of our balance sheet strength and business plan with the signing and closing last week with GE Capital for a new credit line for our Nishiwaki facility after a few months of in-depth due diligence done by GE. Moving into our balance sheet analysis. During the last 6 months, we made significant payments on account of our debt, totaling approximately $150 million, most of it by redeeming short-term bonds, including the redemption during Q1 of this year of Series B of the bonds issued in 2006. During 2012, we aim to continue to focus on strengthening and improving our balance sheet. As I just noted, we are excited to have engaged GE Capital for a new credit line for our Nishiwaki facility of up to JPY 4 billion, which is…

Thank you, Oren. Before we open up the call to the Q&A session, I would like now to add the general and legal statement to our results in regards to statements made and to be made during this call. Please note that the first quarter of 2012 financial results have been prepared in accordance with the U.S. GAAP, and the financial tables in today's earnings release include financial information that may be considered non-GAAP financial measures under Regulation G and related results and 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 table on a non-GAAP basis after deducting: one, depreciation and amortization; two, compensation expenses in respect to options done; and three, finance expenses net, other than interests accrued such that non-GAAP financial expenses net include on the interest accrued during the resulted period. Non-GAAP financial measures should be evaluative 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 measures, 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 required to GAAP financial measure and may not be comparable to a similarly type of measure employed by other companies. EBITDA is a non-GAAP financial information presented herein, should not be considered in a summation or as a substitute for operating income, net income or loss cash flow provided by operating, investing and financing activities, social data or other income of cash flow statement data preserved 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, there seems to be a general sense in the industry that Q1 was the bottom of the semiconductor market. And as such, many of the fab companies, including some of your peers, have guided pretty aggressively for Q2. Your guidance seems to point towards a, roughly, a flat quarter. Can you help us understand where the disconnect?

You're absolutely correct. We did guide flat quarter-over-quarter. What we see is a good amount of the design wins, the tape-ins that we've talked about are in advanced stages of qualification, but not yet ready to ramp. Where we talked about the strength is in the consistency. If we look at our Q1 year-over-year against the industry, I think that of the top 3 digital providers, deep digital that present, the average was somewhere about 9% down year-over-year. And the specialty analog, that present -- we don't yet see the numbers for the #6 -- no, I'm sorry, us being #5, we don't see the numbers for the #7. But for the #6, I think that they were 20% down. So in our case, we were quite up year-over-year. I think maybe the reason that we're not seeing such a huge growth in Q2 is that we didn't see the decrease that others have seen as well. But for growth itself, the biggest strength that I can talk to is really what I stated on the amount of mask layers that have entered into the factory in Q1. And if you look at Q1 '12, and the first quarter is not the strongest quarter for prototyping coming into factories, but for Q1 '12 over Q1 '11, as mentioned, it was up 26% with each of the 3 factories having its highest ever of that respective quarter for any previous year. So we're very confident in the continued growth, very confident of where we're at, the activities that we have going. But as stated, some of the growth that we have, some of the activities we're doing take a little bit longer to get qualified. On any given quarter, to look at the incremental growth percentage, is maybe not such a good way for us to look at our market in the type of activities that we're doing. Again, if you look at the analog activities that we have, they take a little bit longer to qualify, but their staying powers stays very, very long. Hence, we did not go down when everyone else went down, or maybe not going up incrementally one quarter to the next, but it's because we didn't see the downside one quarter to the next either. Hopefully, that answers your question.

Yes. You mentioned about being bullish in the second half. In the past, you've talked about getting to an $800 million-type of run rate by end of the year. Is that something that you still believe would be achievable?

It's still our target.

Okay. In terms of margins, it looks like you had a nice pop in the margins in Q1 despite a sequentially lower revenue run rate. So I guess the question is where the incremental margin is coming from? Is it from utilization, product mix? Can you help us understand that?

It's really taken into what I stated as the efficiencies of integration, for the most part, it comes from taking best-of-class cost efficiency from different flows. Now the company has really a very, very unique position, I think. Israel has a history of knowledge from National Semiconductor, and then quite a bit of organically gained knowledge, a process transfer from Freescale, process transfer from Toshiba. For the 0.18, it was Toshiba. For the 0.13, it was Freescale. So there is quite a bit of learnings as to taking the best-of-breed capability. When we acquired Jazz, Jazz had the history from Rockwell Conexant, so a very different culture, certain things that were done much better there, some things that were maybe done better here. And then, with the acquisition of Nishiwaki, that had really 2 different regimes of history. One was Texas Instruments, the other being Micron. And in each of these cases then, to take from the learnings and to continue to integrate the best-of-class capability, both in efficiency, meaning the reduction of chemicals or gases for any given processing step, the ability to maximize the output of any given processing tool, and to make a flow more efficient and simple, that's the rationalization that we're always going after. Actually, even toward that end, we just hired someone externally, fairly high level in a different foundry, and whose role is worldwide efficiency reporting in to our head of operation. And that being the fact that now with 3 different sites and so many different learnings -- I mean 3 different geographic sites, 4 different factories, the ability and the rationalization of quickly bringing in the best-of-class across the board becomes very critical. So I think we've done a good job. Until now, that was the bulk of the 2-point improvement in the margin, and we target to be able to do much better and to continue the path, but to do better as time goes forward.

Okay. Last question for me in terms of your balance sheet. Last year, you guys did a great job in reducing a lot of your debt load. But this year, it looks like you've incurred -- you're taking on some more debt earlier in the quarter, and it looks like it's happened to some credit lines from GE. Can you help us understand what the objectives of the recent raise and the credit line is?

Yes. The credit line, you know that actually we have 3 sites, each managed as a separate entity. So although, like Russell mentioned, we enjoy all the fruits of integration and everything, we always like to keep also those entities. And for the Japan entity that we just acquired, it has no credit line and no borrowing availability for its local activities. And with that GE Capital Japan contract, we have actually access to funds if we want, when we want, when we need, of up to $30 million by June next year, and then it goes to $50 million adjusted credit line. Not necessarily we will draw down, and obviously, any drawdown is subject to many formulas, but it's very nice to have option to borrow money at a very good interest rate of LIBOR, or LIBOR plus 2.6%, once you need or want. And it's unconnected to the other item. The other item which you mentioned was the bond. So we actually prepared, like I mentioned in my part of the script, we prepaid -- we paid $150 million just in the last 2 quarters for debt payment. And this was actually for bonds that were -- that matured, that were need to be redeemed. But those bonds were mostly convertible to shares. Since the stock price was below $110 million, this was not converted into shares at $110 million and wasn't a -- not dilutive event, but on the other hand, we needed to pay this $150 million, not necessarily that we, I believed a year ago, that we will need to pay that. So we were thinking it will be in the money. So we just replenished with this $80 million of new bonds, long-term bonds, that were issued, which just 50% -- it's actually half-refinanced those $150 million that were paid. And the other is just -- we just reduce the debt and don't intend to fill it back.

The next question is from Andrew Uerkwitz of Oppenheimer.

Could you -- a couple of housekeeping questions. Could you kind of -- and one non-housekeeping. Could you kind of talk about the trends in utilization you've seen in the -- from the first quarter and then in through this first month of the second quarter? And then secondly, can you remind me how the Micron deal works? I think, remind me, just kind of go over, I think that there was guaranteed utilization or guaranteed payments there, then how that solely phased out. So could you kind of remind me there?

Sure. So our utilization numbers, in reporting them, one has to take into account that we're continually growing capacity. But the utilization was plus-minus around 70%. The load is going up in really all of our factories at this point. So we see increased load now. We do have very nice indications of an increase in the industry in the third and fourth quarter. But the utilization rates, I think, back of envelope, one would take it about 70% throughout the company. As far as the Micron deal, the contract is a 3-year take-or-pay agreement, meaning that they have a certain amount of volume that they must take at any given quarter. Either the wafer is purchased or money is remitted if the wafers aren't taken. They have a right for an increased amount above the minimal take-or-pay agreement, and we have to guarantee that they can have that upside. Even with the upside, there's a free portion of the factory that we would have for ourself. For the first 18 months, that agreement, in and of itself, would allow us to have the factory at a cash positive situation according to the models that we had used. Now I believe that we have expressed before, I know we've expressed before, that we've outdone those models. And then for the second 18 months, the utilization is decreasing, and it would be necessary to bring on additional business into the factories in order to maintain positive cash from the factory. Does that answer your question, Andrew?

It's perfect. I have always appreciated your candidness. And then just housekeeping -- or give a follow-on would be how the design win's looking for that capacity? I know you have some time left to get there. And then housekeeping for Oren, could you remind what the CapEx is for the rest of the year?

So I had mentioned that we right now have 3 strong tier 1 IDMs in Japan that are actively transferring flows into that factory. That is a good activity, driving into the -- sorry, I had -- driving revenue in the first half of 2013, which is when it would be needed. We additionally have a very large customer, really one of our top 3, that has a program going on with us in Japan that has kicked off that will also be bringing in revenue there. And we have a variety of these 40 activities in Korea that are going directly into Japan. So I believe everything looks very strong, looks very good. There's always the point of question. Ultimately, is the qualification on schedule? Is there a second rev of the mask spin? Is there a third rev required? But things look very good. We're not dependent on any single customer in order to fill up the delta as the Micron agreement starts to decrease. And having several handfuls of customers, I think, is a -- really with active engagements, silicon engagements, it's a very strong base to be dealing, offered at the moment. I'm sorry now, I believe that, that was your first question. The second part of it's what?

If your -- your projected CapEx then for the rest of the year? Housekeeping question.

So we've never given a projection on CapEx.

The next question is from Phelps Hoyt of Principal.

It seems like everything's pretty much on track here. Can you give me the -- I guess several questions here -- the actual debt balance at the end of the quarter? The pro forma sales without Nishiwaki from the prior year, when you expect to receive proceeds from the Japanese government regarding the Nishiwaki improvements you're making? And then I also had CapEx guidance but I guess it sounds like you're not going to give that. But for the first quarter, the actual $30 million, was there any proceeds from grants included and netted out of that?

There was not any grants from that. I'm sorry, the first part of the question was what?

Sorry, just for the actual debt balance was at the end of the quarter?

It's a -- what you'll see in the balance sheet, you'll see a line of $385 million, then another line of $42 million on the short-term. So total is $427 million. However, this is in all kinds of rules of get rules. So it's all kind of discount rates, so you -- and mark-to-market, so you cannot really, from that, understand. You can -- and I can tell you the number, which is $490 million, this is the number, the principal amount of debt which comprised of $250 million of bond, in a -- of bond traded in Tel-Aviv Stock Exchange, plus the $94 million of the bonds issued by Jazz in 2010, plus $130 million, which is the bank debt to Hapoalim and Leumi. And apart from that, we only have the Wells Fargo credit line. From that, we used approximately $50 million, one part.

Excellent. That's very helpful. And then, the Japanese government support for Nishiwaki?

So that has been released as up to 30% of CapEx expenditure would come back into the company. We have not yet purchased any capital equipment in Nishiwaki, so we don't have anything coming in, in any short-term. We do have plans to purchase equipment in Nishiwaki as we start to ramp the logic flows. That will happen in the third and fourth quarter. And how long it takes, I honestly don't know how long it takes to get a reimbursement from the Japanese government. We did get finally nice reimbursement from the Israel government, and that took us many years. So I really don't know. I assume that it will go quickly, but I don't have a history to talk to.

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

Yes, I would. Thank you. So as always, we really thank our customers for their trust in us as a long-term partner. Our business model really does necessitate that customers have trust in us because almost every product that we make, we're the sole source for that skill, and that does take very strong trust. So we appreciate that very much, continue to thank our investors for their belief in the management and our business model and what we're doing in the company, employees for being extremely capable and dedicated and really for their passion, which has driven us to be the #1 specialty foundry in the world. I do continue to -- I do look forward to continue to update you on progress over the coming quarters, over the coming years. And in the meantime, really invite you all to visit our website, as well as to attend our Technology Global Symposium, either in Korea in June 16, upcoming in the U.S. or in Japan. Please visit the website, it details very specifically when each of these conferences are. It gives the agenda, locations. And as investors, you'd be more than welcome to come. It would give you a more of a close feeling for what we're doing technically, and I think even a stronger feeling of the type of relationship and interaction we have with our customers. So again, thank you, very, very much.