SEC Filings

20-F
TOWER SEMICONDUCTOR LTD filed this Form 20-F on 04/10/2017
Entire Document
 

 
Net Profit (Loss). Loss for the year ended December 31, 2015 amounted to $29.6 million as compared to a net profit of $4.3 million for the year ended December 31, 2014. The differences, which are detailed above, are mainly resulted from: (i) $54 million increase in other financing expense net, mainly due to the non-cash accretion and amortization resulting from the conversion of debentures Series F in 2015 as detailed above; (ii) gain from the acquisition of TPSCo, net of $166 million included in 2014; (iii) Nishiwaki fab restructuring costs and impairment of $56 million; and (iv) increase in gross profit and in operating profit as detailed above.
 
Impact of Inflation and Currency Fluctuations. 
 
We operate in three different regions: Japan, the United States and Israel. The functional currency of the entities operating in the United States and Israel is USD. The functional currency of our subsidiary in Japan is the JPY. Our expenses and costs are denominated mainly in NIS, USD, and JPY, our revenues are denominated mainly in USD and JPY and our cash from operations, investing and financing activities  is denominated mainly in NIS, USD, and JPY. We are, therefore, exposed to the risk of currency exchange rate fluctuations in some of our entities.
 
The USD costs of our operations in Israel are influenced by changes in the USD to NIS exchange rate with respect to costs that are denominated in NIS. During the year ended December 31, 2016, the USD depreciated against the NIS by 1.5%, as compared to the year ended December 31, 2015 in which the USD appreciated against the NIS by 0.3%.
 
The fluctuation of USD against the NIS can affect our results of operations. Appreciation of the NIS has the effect of increasing the cost of some of our Israeli purchases and labor NIS denominated costs in USD terms, which may lead to erosion in our profit margins. We use foreign currency cylinder transactions to hedge a material portion of this currency exposure, to be contained within a pre-defined fixed range. In addition, we executed swap hedging transactions to fully hedge our exposure to the fluctuation of USD against the NIS as far as it relates to our non-convertible Series G debentures which are denominated in NIS.
 
The majority of TPSCo's 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 as the impact on the revenues will be mostly offset by the impact on the expenses. In order to mitigate the net exposure to the USD / JPY exchange rate over the net profit margins, we have  entered into cylinder hedging transactions which contain the currency’s fluctuation within a pre-defined fixed range. During the year ended December 31, 2016, the USD depreciated against the JPY by 2.8%, compared to the year ended December 31, 2015, in which the USD appreciated against the JPY by 0.8%. The effect of USD depreciation on TPSCo’s assets and liabilities is presented in the Cumulative Translation Adjustment (CTA) as part of Other Comprehensive Income (OCI).

B.     LIQUIDITY AND CAPITAL RESOURCES
 
As of December 31, 2016, we had an aggregate amount of $389.4 million in cash, cash equivalents and short term deposits, as compared to $205.6 million as of December 31, 2015. The main cash activities during the year ended December 31, 2016 included:  $327.5 million cash generated from operating activities; $169.1 million net proceeds received from issuance of non-convertible Series G debentures and from other debt; $38.8 million net proceeds received from exercise of warrants and options; $217.5 million invested in property and equipment and of $7.9 million proceeds received from sales of equipment; $132.0 million debt repaid (including the early repayment of the Israeli banks’ loans of approximately $78.1 million); $2.6 million dividend paid to Panasonic by TPSCo; $13.0 million invested in long-term deposit and other investments; and $5.6 million was the effect of JPY foreign exchange rate change (which has been mostly offset by a similar impact on the Japanese loans’ balance).
 
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