UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2013 | |
Or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 001-32832
Jazz Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-3320580 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
4321 Jamboree Road Newport Beach, California | 92660 |
(Address of principal executive offices) | (Zip Code) |
(949) 435-8000
Registrant’s telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
(Note: As a voluntary filer not subject to the filing requirements, the Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months).
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer a non-accelerated filer or a “smaller reporting company”. See definitions of “large accelerated filer” and “accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller reporting companyo |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format permitted by General Instruction H(2).
JAZZ TECHNOLOGIES, INC.
1 | |||
1 | |||
1 | |||
2 | |||
3 | |||
4 | |||
5 | |||
10 | |||
12 | |||
12 | |||
12 | |||
12 | |||
12 | |||
13 | |||
13 |
i
Jazz Technologies, Inc. (A Wholly Owned Subsidiary of
Tower Semiconductor, Ltd.) and Subsidiaries
(in thousands)
June 30, 2013 | December 31, 2012 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 46,696 | $ | 43,306 | ||||
Receivables: | ||||||||
Trade receivables, net of allowance for doubtful accounts of $0 and $67 at June 30, 2013 and December 31, 2012, respectively | 21,531 | 20,056 | ||||||
Other receivables | 3,610 | 1,727 | ||||||
Inventories | 30,110 | 24,020 | ||||||
Deferred tax asset | 4,606 | 4,606 | ||||||
Other current assets | 1,702 | 2,896 | ||||||
Total current assets | 108,255 | 96,611 | ||||||
Property, plant and equipment, net | 82,366 | 91,464 | ||||||
Intangible assets, net | 34,231 | 39,126 | ||||||
Goodwill | 7,000 | 7,000 | ||||||
Other assets – related parties | 3,272 | 4,055 | ||||||
Other assets – others | 4,977 | 1,903 | ||||||
Total assets | $ | 240,101 | $ | 240,159 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term bank debt | $ | 19,100 | $ | 19,100 | ||||
Accounts payable | 19,220 | 16,113 | ||||||
Due to related parties | 943 | 54 | ||||||
Accrued compensation and benefits | 5,867 | 6,325 | ||||||
Deferred revenues | 764 | 573 | ||||||
Other current liabilities | 4,084 | 4,579 | ||||||
Total current liabilities | 49,978 | 46,744 | ||||||
Long term liabilities: | ||||||||
Notes | 77,706 | 74,584 | ||||||
Deferred tax liability | 6,488 | 6,488 | ||||||
Employee related liabilities | 7,659 | 7,592 | ||||||
Other long-term liabilities | 12,463 | 12,602 | ||||||
Total liabilities | 154,294 | 148,010 | ||||||
Stockholders’ equity: | ||||||||
Additional paid-in capital | 63,576 | 63,576 | ||||||
Cumulative stock based compensation | 2,175 | 2,093 | ||||||
Accumulated other comprehensive earning | 127 | 1,007 | ||||||
Retained earnings | 19,929 | 25,473 | ||||||
Total stockholders’ equity | 85,807 | 92,149 | ||||||
Total liabilities and stockholders’ equity | $ | 240,101 | $ | 240,159 |
See accompanying notes.
Jazz Technologies, Inc. (A Wholly Owned Subsidiary of
Tower Semiconductor, Ltd.) and Subsidiaries
(in thousands)
Three months ended | Six months ended | |||||||||||||||
June 30, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||||
Revenues | $ | 37,407 | $ | 42,172 | $ | 74,181 | $ | 83,247 | ||||||||
Cost of revenues | 30,465 | 33,198 | 60,364 | 66,801 | ||||||||||||
Gross profit | 6,942 | 8,974 | 13,817 | 16,446 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 3,097 | 3,530 | 5,976 | 6,743 | ||||||||||||
Selling, general and administrative | 3,085 | 3,747 | 5,821 | 7,988 | ||||||||||||
Amortization related to a lease agreement early termination | 1,866 | -- | 3,732 | -- | ||||||||||||
Total operating expenses | 8,048 | 7,277 | 15,529 | 14,731 | ||||||||||||
Operating income (loss) | (1,106 | ) | 1,697 | (1,712 | ) | 1,715 | ||||||||||
Financing expense and other expenses, net | (3,562 | ) | (3,454 | ) | (7,047 | ) | (6,549 | ) | ||||||||
Net loss before income taxes | (4,668 | ) | (1,757 | ) | (8,759 | ) | (4,834 | ) | ||||||||
Income tax benefit | 1,545 | 267 | 3,215 | 1,356 | ||||||||||||
Net loss | $ | (3,123 | ) | $ | (1,490 | ) | $ | (5,544 | ) | $ | (3,478 | ) |
See accompanying notes.
2
Tower Semiconductor, Ltd.) and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
Three months ended | Six months ended | |||||||||||||||
June 30, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||||
Net loss | $ | (3,123 | ) | $ | (1,490 | ) | $ | (5,544 | ) | $ | (3,478 | ) | ||||
Change in employees plan assets and benefit obligations | (440 | ) | -- | (880 | ) | -- | ||||||||||
Comprehensive loss | $ | (3,563 | ) | $ | (1,490 | ) | $ | (6,424 | ) | $ | (3,478 | ) |
3
Jazz Technologies, Inc. (A Wholly Owned Subsidiary of
Tower Semiconductor, Ltd.) and Subsidiaries
(in thousands)
Six months ended June 30, 2013 | Six months ended June 30, 2012 | |||||||
Operating activities: | ||||||||
Net loss | $ | (5,544 | ) | $ | (3,478 | ) | ||
Adjustments to reconcile net loss for the period to net cash provided by operating activities: | ||||||||
Depreciation and amortization of intangible assets | 21,749 | 16,731 | ||||||
Notes accretion and amortization of deferred financing costs | 3,284 | 2,807 | ||||||
Stock based compensation expense | 82 | 316 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade receivables | (709 | ) | (3,913 | ) | ||||
Inventories | (6,090 | ) | 2,296 | |||||
Other receivables and assets | (5,683 | ) | 122 | |||||
Accounts payable | 4,650 | 2,479 | ||||||
Due to related parties, net | 847 | (1,151 | ) | |||||
Accrued compensation and benefits | (458 | ) | 942 | |||||
Deferred Revenue | 191 | (479 | ) | |||||
Other current liabilities | (495 | ) | (1,257 | ) | ||||
Employee related liabilities and other long-term liabilities | (72 | ) | 405 | |||||
Net cash provided by operating activities | 11,752 | 15,820 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (9,273 | ) | (10,069 | ) | ||||
Proceeds related to property and equipment | 911 | 12,152 | ||||||
Net cash provided by (used in) investing activities | (8,362 | ) | 2,083 | |||||
Financing activities: | ||||||||
Short-term debt from bank | -- | 3,800 | ||||||
Net cash provided by financing activities | -- | 3,800 | ||||||
Net increase in cash and cash equivalents | 3,390 | 21,703 | ||||||
Cash and cash equivalents at beginning of period | 43,306 | 19,471 | ||||||
Cash and cash equivalents at end of period | $ | 46,696 | $ | 41,174 | ||||
Non cash activities: | ||||||||
Investments in property, plant and equipment | $ | 2,640 | $ | 3,061 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for interest | $ | 3,756 | $ | 3,880 | ||||
Cash paid during the period for income taxes | $ | -- | $ | (1,085 | ) |
See accompanying notes.
4
Jazz Technologies, Inc.
June 30, 2013
Note 1: Business and Formation
Unless specifically noted otherwise, as used throughout these notes to the unaudited condensed consolidated financial statements, “Jazz” or the “Company” refers to the business of Jazz Technologies, Inc., and “Jazz Semiconductor” refers only to the business of Jazz Semiconductor, Inc.
The Company
Since the merger with Tower Semiconductor, Ltd. ("Tower") in 2008, the Company is a 100% subsidiary of Tower.
The Company is based in Newport Beach, California and is an independent semiconductor foundry focused on specialty process technologies for the manufacture of analog intensive mixed-signal semiconductor devices. The Company’s specialty process technologies include advanced analog, radio frequency, high voltage, bipolar and silicon germanium bipolar complementary metal oxide (“SiGe”) semiconductor processes for the manufacture of analog and mixed-signal semiconductors. Its customers’ analog and mixed-signal semiconductor devices are used in cellular phones, wireless local area networking devices, digital TVs, set-top boxes, gaming devices, switches, routers and broadband modems.
Note 2: Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The Company prepares its consolidated financial statements in accordance with SEC and U.S. generally accepted accounting principles (“US GAAP”) requirements and includes all adjustments of a normal recurring nature that are necessary to fairly present its condensed consolidated results of operations, financial position, and cash flows for all periods presented. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Interim period results are not necessarily indicative of full year results. This quarterly report should be read in conjunction with the Company’s most recent Annual Report on Form 10-K.
The condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring adjustments that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial position on June 30, 2013 and December 31, 2012, and the consolidated results of its operations and cash flows for the three months and six months ended June 30, 2013 and June 30, 2012. All intercompany accounts and transactions have been eliminated. Certain amounts have been reclassified in order to conform to 2013 presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with US GAAP. For financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities.
5
Concentrations
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and trade accounts receivable.
The Company generally does not require collateral for insurance of receivables. An allowance for doubtful accounts is determined with respect to those amounts that were determined to be doubtful of collection. The Company performs ongoing credit evaluations of its customers.
Accounts receivable from significant customers representing 10% or more of the net accounts receivable balance as of June 30, 2013 and December 31, 2012 consists of:
June 30, 2013 | December 31, 2012 | |||||||
Customer 1 | 33 | % | 24 | % | ||||
Customer 2 | 10 | * |
Net revenues from significant customers representing 10% or more of net revenues consist of:
Three months ended | Six months ended | |||||||||||||||
June 30, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||||
Customer A | 26 | % | 15 | % | 23 | % | 17 | % | ||||||||
Customer B | * | 12 | 10 | 12 | ||||||||||||
Customer C | * | * | 10 | * |
* Indicates less than 10%
As a result of the Company’s concentration of its customer base, loss or cancellation of business from, or significant changes in scheduled deliveries of products sold to these customers or a change in their financial position, could materially and adversely affect the Company’s consolidated financial position, results of operations and cash flows.
The Company operates a single manufacturing facility located in Newport Beach, California. A major interruption in the manufacturing operations at this facility would have a material adverse affect on the consolidated financial position and results of operations of the Company.
Initial Adoption of New Standards
On January 31, 2013, the FASB issued ASU 2013-01, which clarifies the scope of the offsetting disclosure requirements in ASU 2011-11. Under ASU 2013-01, the disclosure requirements would apply to derivative instruments accounted for in accordance with ASC 815, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement. The adoption of ASU 2013-01 had no impact on our financial position or results of operations.
On February 5, 2013, the FASB issued ASU 2013-02, which requires entities to disclose the following additional information about items reclassified out of accumulated other comprehensive income (AOCI):
• Changes in AOCI balances by component (e.g., unrealized gains or losses on available-for-sale securities or foreign-currency items). Both before-tax and net-of-tax presentations of the information are acceptable as long as an entity presents the income tax benefit or expense attributed to each component of OCI and reclassification adjustments in either the financial statements or the notes to the financial statements.
• Significant items reclassified out of AOCI by component either on the face of the income statement or as a separate footnote to the financial statements.
The ASU does not change the current U.S. GAAP requirements, for either public or nonpublic entities, for interim financial statement reporting of comprehensive income. That is, a total for comprehensive income must be reported in condensed interim financial statements in either (1) a single continuous statement or (2) two separate but consecutive statements. However, public entities would also need to include information about (1) changes in AOCI balances by component and (2) significant items reclassified out of AOCI in their interim reporting periods. ASU 2013-02 is effective for annual and interim reporting periods beginning after December 15, 2012. Adoption of this guidance did not have a significant impact on the determination or reporting of the Company’s financial results.
6
In July 2013, the FASB issued ASU No. 2013-11 amending requirements for the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 requires entities to present in the financial statements an unrecognized tax benefit, or a portion of an unrecognized tax benefit as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward except to the extent such items are not available or not intended to be used at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position. In such instances, the unrecognized tax benefit is required to be presented in the financial statements as a liability and not be combined with deferred tax assets. ASU No. 2013-11 is effective for annual and interim periods beginning after December 15, 2013. We do not expect the adoption of ASU No. 2013-11 to have a material impact on our financial condition, results of operations, or cash flows.
Note 3: Other Balance Sheet Details
Inventories
Inventories, net of reserves, consist of the following on June 30, 2013 and December 31, 2012 (in thousands):
June 30, 2013 | December 31, 2012 | |||||||
Raw material | $ | 5,417 | $ | 4,144 | ||||
Work in process | 15,989 | 9,366 | ||||||
Finished goods | 8,704 | 10,510 | ||||||
$ | 30,110 | $ | 24,020 |
Property, Plant and Equipment
Property, plant and equipment consist of the following on June 30, 2013 and December 31, 2012 (in thousands):
Useful life (in years) | June 30, 2013 | December 31, 2012 | |||||||||
Building improvements | 10-12 | $ | 25,633 | $ | 25,237 | ||||||
Machinery and equipment | 3-7 | 181,961 | 176,294 | ||||||||
207,594 | 201,531 | ||||||||||
Accumulated depreciation | (125,228 | ) | (110,067 | ) | |||||||
$ | 82,366 | $ | 91,464 |
Intangible Assets
Intangible assets consist of the following on June 30, 2013 (in thousands):
Useful life (in years) | Cost | Accumulated Amortization | Net | ||||||||||||
Technology | 4;9 | $ | 3,300 | $ | 1,722 | $ | 1,578 | ||||||||
Patents and other core technology rights | 9 | 15,100 | 8,031 | 7,069 | |||||||||||
In-process research and development | -- | 1,800 | 1,800 | -- | |||||||||||
Customer relationships | 15 | 2,600 | 830 | 1,770 | |||||||||||
Trade name | 9 | 5,200 | 2,766 | 2,434 | |||||||||||
Facilities lease | 1,19 | 33,500 | 12,120 | 21,380 | |||||||||||
Total identifiable intangible assets | $ | 61,500 | $ | 27,269 | $ | 34,231 |
7
Intangible assets consist of the following on December 31, 2012 (in thousands):
Useful life (in years) | Cost | Accumulated Amortization | Net | ||||||||||||
Technology | 4;9 | $ | 2,300 | $ | 1,400 | $ | 900 | ||||||||
Patents and other core technology rights | 9 | 15,100 | 7,192 | 7,908 | |||||||||||
In-process research and development | -- | 1,800 | 1,800 | -- | |||||||||||
Customer relationships | 15 | 2,600 | 743 | 1,857 | |||||||||||
Trade name | 9 | 5,200 | 2,477 | 2,723 | |||||||||||
Facilities lease | 1,19 | 33,500 | 7,762 | 25,738 | |||||||||||
Total identifiable intangible assets | $ | 60,500 | $ | 21,374 | $ | 39,126 |
Note 4: Credit Facility
Borrowing availability under the facility as of June 30, 2013, was $26.7 million. Outstanding borrowings were $19.1 million and $0.9 million of the facility supporting outstanding letters of credit on that date. As of June 30, 2013, the Company was in compliance with all of the covenants under this facility.
Note 5: Notes
In 2006, the Company privately placed convertible notes which bore interest at a rate of 8% per annum payable semi-annually, and were scheduled to mature in December, 2011 (“Old Notes”). In October 2011, the Company completed a voluntary transaction to redeem early the entire remaining outstanding amount of the Old Notes.
In July 2010, the Company, together with its domestic subsidiaries and its parent, Tower, entered into an exchange agreement (the “Exchange Agreement”) with certain note holders (the “Participating Holders”) holding approximately $79.6 million principal amount of the Old Notes. In the exchange, the Participating Holders exchanged their Old Notes for newly-issued 8% non-convertible notes of the Company due June 2015 (the “New Notes”) at an exchange ratio of $1.175 face amount of New Notes for each $1 face amount of Old Notes.
In addition, the Participating Holders received approximately 25.3 million warrants (“Warrants J”) with an exercise price of $1.70, exercisable until June 30, 2015 for 1/15 ordinary share of Tower.
Interest on the New Notes at a rate of 8% per annum is payable semiannually. As of June 30, 2013, approximately $93.6 million in principal amount of New Notes remained outstanding.
The New Notes constitute unsecured obligations of the Company, rank on parity in right of payment with all other indebtedness of the Company, are effectively subordinated to all secured indebtedness of the Company to the extent of the value of the collateral securing such indebtedness and are not guaranteed by Tower. The New Notes shall rank senior to all future indebtedness of the Company to the extent the future indebtedness is expressly subordinated to the New Notes. The New Notes are jointly and severally guaranteed on a senior unsecured basis by the Company’s domestic subsidiaries.
Beginning July 1, 2013, the Company may redeem some or all of the New Notes for cash at a redemption price equal to par plus accrued and unpaid interest plus a redemption premium equal to 4% if redemption occurs prior to July 1, 2014 and 2% if redemption occurs between July 1, 2014 and maturity.
The indenture of the New Notes contains certain covenants including covenants restricting the Company’s ability and the ability of its subsidiaries to, among other things, incur additional debt, incur additional liens, make specified payments and make certain asset sales.
Holders of the New Notes are entitled, subject to certain conditions and restrictions, to require the Company to repurchase the New Notes at par plus accrued interest and a 1% redemption premium in the event of certain change of control transactions.
The Company’s obligations under the New Notes are guaranteed by the Company’s wholly owned domestic subsidiaries. The Company has not provided condensed consolidated financial information for such subsidiaries because the Company has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several, and subsidiaries of the Company other than the subsidiary guarantors are minor. Other than the restrictions in abovementioned credit facility, there are no significant restrictions on the ability of the Company and its subsidiaries to obtain funds from their subsidiaries by loan or dividend.
8
Note 6: Income Taxes
In June 2013, the U.S. tax authorities commenced an audit of the Company’s 2011 tax returns, and asked the Company for certain reports and data in connection with said year’s tax returns. There is no indication to date whether the Company will be required to pay any additional taxes pursuant to said audit.
Note 7: Employee Benefit Plans
The pension and other post retirement benefit plans amount to $0.4 million income and $0.1 million expense for the three months ended June 30, 2013 and 2012, respectively. For the six months ended June 30, 2013 and 2012 amounts were $0.8 million income and $0.2 million expense, respectively.
Note 8: Employee Stock Option Expense
During the six months ended June 30, 2013, Tower awarded 1,000 non-qualified stock options (*) exercisable for Tower’s ordinary shares to the Company’s employees. The Company recorded immaterial amount as income and $0.2 million of compensation expenses relating to options granted to employees for the three months ended June 30, 2013 and 2012, respectively. The Company recorded $0.1 million and $0.3 million of compensation expenses relating to options granted to employees for the six months ended June 30, 2013 and 2012, respectively.
(*) Reflects the effect of Tower’s reverse stock split done in August 2012.
Note 9: Related Party Transactions
Related Party Transactions consist of the following (in thousands):
As of June 30, 2013 | As of December 31, 2012 | |||||||
Due from related parties (included in the accompanying balance sheets) | $ | 5,287 | $ | 6,100 | ||||
Due to related parties (included in the accompanying balance sheets) | $ | 943 | $ | 54 |
Related parties balances are with Tower and TowerJazz Japan Ltd. (“TJP”) and are mainly for purchases and payments on behalf of the other party, tools sale, tools lease and service charges.
Note 10: Commitments and Contingencies
Leases
Since 2002, the Company has leased its fabrication facilities, land and headquarters from Conexant under non-cancelable operating leases through March 2017. In December 2010, Conexant sold the Company’s fabrication facilities, land and headquarters. In connection with the sale, the Company negotiated amendments to its operating leases that confirm the Company’s ability to remain in the fabrication facilities through 2017 and the Company’s unilateral options to extend the terms of each of these leases for two consecutive five-year periods. Under our amended leases with the new owner, the Company’s rental payments consist of fixed base rent and fixed management fees and our pro rata share of certain expenses incurred by the landlord in the ownership of these buildings, including property taxes, building insurance and common area maintenance. These lease expenses are included in operating expenses in the accompanying consolidated statements of operations. Under the lease amendments, the landlord may terminate the lease for the Company’s headquarters building, no earlier than January 2014. Under the amended leases, the landlord notified the Company at the end of 2012 that it is exercising its right to terminate the lease for the Company’s headquarters building, effective January 1, 2014. The landlord does not have a corresponding right to terminate the lease for the Company’s fabrication facility.
9
The following discussion and analysis should be read in conjunction with the financial statements and related notes contained elsewhere in this report. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and subsequent quarterly reports filed with the Securities and Exchange Commission for information regarding certain risk factors known to us that could cause reported financial information not to be necessarily indicative of future results.
FORWARD LOOKING STATEMENTS
This report on Form 10-Q may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Report Act of 1995. These statements, which represent our expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or other words indicating future results. Such statements may include but are not limited to statements concerning the following:
· | anticipated trends in revenues; |
· | growth opportunities in domestic and international markets; |
· | new and enhanced channels of distribution; |
· | customer acceptance and satisfaction with our products; |
· | expected trends in operating and other expenses; |
· | purchase of raw materials at levels to meet forecasted demand; |
· | anticipated cash and intentions regarding usage of cash; |
· | changes in effective tax rates; and |
· | anticipated product enhancements or releases. |
This report, including these forward-looking statements, are subject to risks and uncertainties, including those risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and subsequent quarterly reports filed with the Securities and Exchange Commission, that could cause actual results to differ materially from those anticipated as of the date of this report. We assume no obligation to update any forward-looking statements to reflect events or circumstances arising after the date of this report.
10
RESULTS OF OPERATIONS
For the six months ended June 30, 2013, we had a net loss of $5.5 million compared to a net loss of $3.5 million for the six months ended June 30, 2012.
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, 2013 | June 30, 2012 | |||||||
Net revenues | 100 | % | 100 | % | ||||
Cost of revenues | 81.4 | 80.2 | ||||||
Gross profit | 18.6 | 19.8 | ||||||
Operating expenses: | ||||||||
Research and development | 8.1 | 8.1 | ||||||
Selling, general and administrative | 7.8 | 9.6 | ||||||
Amortization related to a lease agreement early termination | 5 | -- | ||||||
Total operating expenses | 20.9 | 17.7 | ||||||
Operating income (loss) | (2.3 | ) | 2.1 | |||||
Financing expense and other expenses, net | (9.5 | ) | (7.9 | ) | ||||
Income tax benefit | 4.3 | 1.6 | ||||||
Net loss | (7.5 | )% | (4.2 | )% |
Comparison of Six Months Ended June 30, 2013 and June 30, 2012
Revenues
Our net revenues for the six months ended June 30, 2013 amounted to $74.2 million as compared to $83.2 million for the corresponding period in 2012.The revenue decrease is mainly attributable to the approximately 14% decrease of quantities sold during the six months ended June 30, 2013.
Cost of Revenues
Our cost of revenues was $60.4 million for the six months ended June 30, 2013 as compared to $66.8 million for the corresponding period in 2012. The decrease in cost of revenues was mainly due to the decrease in quantities of wafers shipped, as described above.
Gross Profit
Our gross profit amounted to $13.8 million in the six months ended June 30, 2013 as compared to $16.4 million in the corresponding period in 2012. Such reduction was mainly attributed to the decrease in revenues and cost of goods sold described above.
Operating Expenses
Operating expenses for the six months ended June 30, 2013 amounted to $15.5 million, as compared to $14.7 million in the six months ended June 30, 2012. The increase in operating expenses for the six months ended June 30, 2013 is due to $3.7 million amortization related to an early termination of an office building lease contract offset by the effect of the lower revenues.
Financing Expense and Other Expenses, Net
Financing expense and other expenses, net for the six months ended June 30, 2013 amounted to $7.0 million, as compared to $6.5 million in the corresponding period in 2012.
11
Income Tax Benefit
Income tax benefit amounted to $3.2 million in the six months ended June 30, 2013, as compared to income tax benefit of $1.4 million in the six months ended June 30, 2012.
Net loss
Net loss for the six months ended June 30, 2013 amounted to $5.5 million as compared to net loss of $3.5 million in the six months ended June 30, 2012. The decrease is mainly due to the decrease in gross profit offset with the tax effect of such decrease.
Disclosure Controls and Procedures
Based on the evaluation as of the end of the period covered by this report, our principal executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of the end of the period covered by this report.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our principal executive officer and our principal financial officer have concluded that these controls and procedures are effective at the “reasonable assurance” level. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or any of our property is subject.
In addition to the other information contained in this Form 10-Q, you should carefully consider the risk factors associated with our business previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Our business, financial condition and/or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.
Number | Description | |
31.1 | Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a). | |
31.2 | Principal Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a). | |
32.1 | Principal Executive Officer Certification required by Section 1350. | |
32.2 | Principal Financial Officer Certification required by Section 1350. | |
101 | Financial information from the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL |
12
Pursuant to the requirements of Section 13 or 15(d) 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: August 20, 2013 | JAZZ TECHNOLOGIES, INC. | ||
By: | /s/ NABIL ALALI | ||
General Manager and Site Manager (Principal Executive Officer) | |||
By: | /s/ RONIT VARDI | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
Number | Description | |
31.1 | Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a). | |
31.2 | Principal Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a). | |
32.1 | Principal Executive Officer Certification required by Section 1350. | |
32.2 | Chief Financial Officer Certification required by Section 1350. | |
101 | Financial information from the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL |
13