2016 TSMC Annual Report

TSMC Annual Report > 2016 > Financial Highlights and Analysis > Financial Highlights

Financial Highlights

Condensed Balance Sheet

Condensed Balance Sheet from 2012 to 2016 (Consolidated)(Note 1)

Unit: NT$ thousands

Item	2012	2013	2014 (Adjusted)	2015	2016
Current Assets	250,325,436	358,486,654	626,565,639	746,743,991	817,729,126
Long-term Investments (Note 2)	65,717,240	89,183,810	30,056,279	34,993,583	46,153,916
Property, Plant and Equipment	617,562,188	792,665,913	818,198,801	853,470,392	997,777,687
Intangible Assets	10,959,569	11,490,383	13,531,510	14,065,880	14,614,846
Other Assets (Note 3)	16,790,075	11,228,217	6,696,857	8,244,452	10,179,727
Total Assets	961,354,508	1,263,054,977	1,495,049,086	1,657,518,298	1,886,455,302
Current Liabilities
Before Distribution	148,473,947	189,777,934	201,013,629	212,228,594	318,239,273
After Distribution	226,247,254	267,563,785	317,697,110	367,810,877	(Note 4)
Noncurrent Liabilities	89,786,655	225,501,958	247,707,125	222,655,225	178,164,903
Total Liabilities
Before Distribution	238,260,602	415,279,892	448,720,754	434,883,819	496,404,176
After Distribution	316,033,909	493,065,743	565,404,235	590,466,102	(Note 4)
Equity Attributable to Shareholders of the Parent
Capital Stock	259,244,357	259,286,171	259,296,624	259,303,805	259,303,805
Capital Surplus	55,675,340	55,858,626	55,989,922	56,300,215	56,272,304
Retained Earnings
Before Distribution	408,411,468	518,193,152	705,165,274	894,293,586	1,072,008,169
After Distribution	330,638,161	440,407,301	588,481,793	738,711,303	(Note 4)
Others	(2,780,485)	14,170,306	25,749,291	11,774,113	1,663,983
Equity Attributable to Shareholders of the Parent
Before Distribution	720,550,680	847,508,255	1,046,201,111	1,221,671,719	1,389,248,261
After Distribution	642,777,373	769,722,404	929,517,630	1,066,089,436	(Note 4)
Noncontrolling Interests	2,543,226	266,830	127,221	962,760	802,865
Total Equity
Before Distribution	723,093,906	847,775,085	1,046,328,332	1,222,634,479	1,390,051,126
After Distribution	645,320,599	769,989,234	929,644,851	1,067,052,196	(Note 4)

Note 1:	2012-2013 financial statements were prepared in accordance with 2010 Taiwan-IFRSs version, 2014-2016 financial statements were prepared in accordance with 2013 Taiwan-IFRSs version. Financial statements of 2014 were adjusted to retrospectively apply newly effected GAAP. Adjustments include a decrease of NT$84,759 thousand in total assets, a decrease of NT$737,344 thousand in total liabilities before distribution and an increase of NT$652,585 thousand in total equity before distribution.
Note 2:	Long-term investments consist of noncurrent available-for-sale financial assets, held-to-maturity financial assets, financial assets carried at cost and investments accounted for using equity method.
Note 3:	Other assets consist of deferred income tax assets, refundable deposits, and other noncurrent assets.
Note 4:	Pending for shareholders' approval.

Condensed Balance Sheet from 2012 to 2016 (Unconsolidated)(Note 1)

Unit: NT$ thousands

Item	2012	2013	2014 (Adjusted)	2015	2016
Current Assets	205,819,614	257,623,763	370,949,497	426,913,080	443,781,164
Long-term Investments (Note 2)	139,634,200	165,545,159	242,395,596	326,330,737	397,290,976
Property, Plant and Equipment	586,636,036	770,443,494	796,684,361	831,784,912	979,401,337
Intangible Assets	6,449,837	7,069,456	8,996,810	9,391,418	10,047,991
Other Assets (Note 3)	13,597,966	7,897,131	3,935,389	5,265,368	6,816,676
Total Assets	952,137,653	1,208,579,003	1,422,961,653	1,599,685,515	1,837,338,144
Current Liabilities
Before Distribution	144,528,616	187,195,744	178,261,092	194,299,278	308,177,214
After Distribution	222,301,923	264,981,595	294,944,573	349,881,561	(Note 4)
Noncurrent Liabilities	87,058,357	173,875,004	198,499,450	183,714,518	139,912,669
Total Liabilities
Before Distribution	231,586,973	361,070,748	376,760,542	378,013,796	448,089,883
After Distribution	309,360,280	438,856,599	493,444,023	533,596,079	(Note 4)
Equity
Capital Stock	259,244,357	259,286,171	259,296,624	259,303,805	259,303,805
Capital Surplus	55,675,340	55,858,626	55,989,922	56,300,215	56,272,304
Retained Earnings
Before Distribution	408,411,468	518,193,152	705,165,274	894,293,586	1,072,008,169
After Distribution	330,638,161	440,407,301	588,481,793	738,711,303	(Note 4)
Others	(2,780,485)	14,170,306	25,749,291	11,774,113	1,663,983
Total Equity
Before Distribution	720,550,680	847,508,255	1,046,201,111	1,221,671,719	1,389,248,261
After Distribution	642,777,373	769,722,404	929,517,630	1,066,089,436	(Note 4)

Note 1:	2012-2013 financial statements were prepared in accordance with 2010 Taiwan-IFRSs version, 2014-2016 financial statements were prepared in accordance with 2013 Taiwan-IFRSs version. Financial statements of 2014 were adjusted to retrospectively apply newly effected GAAP. Adjustments include a decrease of NT$82,771 thousand in total assets, a decrease of NT$735,381 thousand in total liabilities before distribution and an increase of NT$652,610 thousand in total equity before distribution.
Note 2:	Long-term investments consist of held-to-maturity financial assets, financial assets carried at cost and investments accounted for using equity method.
Note 3:	Other assets consist of deferred income tax assets, refundable deposits, and other noncurrent assets.
Note 4:	Pending for shareholders' approval.

Condensed Statement of Comprehensive Income

Condensed Statement of Comprehensive Income from 2012 to 2016 (Consolidated) (Note 1)

Unit: NT$ thousands (Except EPS:NT$)

Item	2012	2013	2014 (Adjusted)	2015	2016
Net Revenue	506,745,234	597,024,197	762,806,465	843,497,368	947,938,344
Gross Profit	244,137,107	280,945,507	377,722,016	410,394,893	474,832,098
Income from Operations	181,176,868	209,429,363	295,870,309	320,047,775	377,957,778
Non-operating Income and Expenses	499,588	6,057,759	6,208,048	30,381,136	8,001,602
Income before Income Tax	181,676,456	215,487,122	302,078,357	350,428,911	385,959,380
Net Income	166,123,802	188,018,937	263,763,958	306,556,167	334,338,236
Other Comprehensive Income for the Year, Net of Income Tax	4,252,632	16,352,248	11,805,021	(14,714,182)	(11,067,189)
Total Comprehensive Income for the Year	170,376,434	204,371,185	275,568,979	291,841,985	323,271,047
Net Income (Loss) Attributable to:
Shareholders of the Parent	166,318,286	188,146,790	263,881,771	306,573,837	334,247,180
Noncontrolling Interests	(194,484)	(127,853)	(117,813)	(17,670)	91,056
Total Comprehensive Income (Loss) Attributable to:
Shareholders of the Parent	170,521,543	204,505,782	275,670,991	291,867,757	323,186,736
Noncontrolling Interests	(145,109)	(134,597)	(102,012)	(25,772)	84,311
Basic Earnings Per Share (Note 2)	6.42	7.26	10.18	11.82	12.89

Note 1:	2012-2013 financial statements were prepared in accordance with 2010 Taiwan-IFRSs version, 2014-2016 financial statements were prepared in accordance with 2013 Taiwan-IFRSs version. Financial statements of 2014 were adjusted to retrospectively apply newly effected GAAP. Adjustments include a decrease of NT$12,359 thousand in gross profit, a decrease of NT$19,984 thousand in income from operations, a decrease of NT$16,911 thousand in net income and a decrease of NT$46,054 thousand in total comprehensive income for the year.
Note 2:	Based on weighted average shares outstanding in each year.

Note 1:

2012-2013 financial statements were prepared in accordance with 2010 Taiwan-IFRSs version, 2014-2016 financial statements were prepared in accordance with 2013 Taiwan-IFRSs version.
Financial statements of 2014 were adjusted to retrospectively apply newly effected GAAP. Adjustments include a decrease of NT$12,359 thousand in gross profit, a decrease of NT$19,984 thousand in income from operations, a decrease of NT$16,911 thousand in net income and a decrease of NT$46,054 thousand in total comprehensive income for the year.

Note 2:

Based on weighted average shares outstanding in each year.

Condensed Statement of Comprehensive Income from 2012 to 2016 (Unconsolidated) (Note 1)

Unit: NT$ thousands (Except EPS:NT$)

Item	2012	2013	2014 (Adjusted)	2015	2016
Net Revenue	500,369,525	591,087,600	757,152,389	837,046,888	936,387,291
Gross Profit	234,850,311	271,644,860	366,899,120	397,708,840	461,808,296
Income from Operations	176,820,141	204,653,892	290,640,302	313,408,698	369,730,533
Non-operating Income and Expenses	6,932,246	11,062,658	10,363,515	36,579,970	15,458,427
Income before Income Tax	183,752,387	215,716,550	301,003,817	349,988,668	385,188,960
Net Income	166,318,286	188,146,790	263,881,771	306,573,837	334,247,180
Other Comprehensive Income for the Year, Net of Income Tax	4,203,257	16,358,992	11,789,220	(14,706,080)	(11,060,444)
Total Comprehensive Income for the Year	170,521,543	204,505,782	275,670,991	291,867,757	323,186,736
Basic Earnings Per Share (Note 2)	6.42	7.26	10.18	11.82	12.89

Note 1:	2012-2013 financial statements were prepared in accordance with 2010 Taiwan-IFRSs version, 2014-2016 financial statements were prepared in accordance with 2013 Taiwan-IFRSs version. Financial statements of 2014 were adjusted to retrospectively apply newly effected GAAP. Adjustments include a decrease of NT$12,583 thousand in gross profit, a decrease of NT$19,356 thousand in income from operations, a decrease of NT$17,023 thousand in net income and a decrease of NT$46,150 thousand in total comprehensive income for the year.
Note 2:	Based on weighted average shares outstanding in each year.

Note 1:

2012-2013 financial statements were prepared in accordance with 2010 Taiwan-IFRSs version, 2014-2016 financial statements were prepared in accordance with 2013 Taiwan-IFRSs version.
Financial statements of 2014 were adjusted to retrospectively apply newly effected GAAP. Adjustments include a decrease of NT$12,583 thousand in gross profit, a decrease of NT$19,356 thousand in income from operations, a decrease of NT$17,023 thousand in net income and a decrease of NT$46,150 thousand in total comprehensive income for the year.

Note 2:

Based on weighted average shares outstanding in each year.

Financial Analysis

Financial Analysis from 2012 to 2016 (Consolidated) (Note 1)

		2012	2013	2014 (Adjusted)	2015	2016
Capital Structure Analysis	Debts Ratio (%)	24.78	32.88	30.01	26.24	26.31
Capital Structure Analysis	Long-term Fund to Property, Plant and Equipment (%)	131.63	135.40	158.16	169.34	157.17
Liquidity Analysis	Current Ratio (%)	168.60	188.90	311.70	351.86	256.95
	Quick Ratio (%)	142.39	168.57	278.03	319.58	241.34
	Times Interest Earned (Times)	177.92	82.41	94.34	110.84	117.74
Operating Performance Analysis	Average Collection Turnover (Times)	9.64	9.11	8.12	8.37	8.78
	Days Sales Outstanding	37.86	40.06	44.95	43.61	41.57
	Average Inventory Turnover (Times)	8.38	8.39	7.42	6.49	8.18
	Average Inventory Turnover Days	43.56	43.49	49.19	56.24	44.62
	Average Payment Turnover (Times)	19.38	20.01	19.39	20.10	20.11
	Property, Plant and Equipment Turnover (Times)	0.91	0.85	0.95	1.01	1.02
	Total Assets Turnover (Times)	0.58	0.54	0.55	0.54	0.53
Profitability Analysis	Return on Total Assets (%)	19.19	17.11	19.33	19.62	19.03
	Return on Equity attributable to Shareholders of the Parent (%)	24.68	24.00	27.86	27.04	25.60
	Operating Income to Paid-in Capital Ratio (%)	69.89	80.77	114.10	123.43	145.76
	Pre-tax Income to Paid-in Capital Ratio (%)	70.08	83.11	116.50	135.14	148.84
	Net Margin (%)	32.78	31.49	34.58	36.34	35.27
	Basic Earnings Per Share (NT$)	6.42	7.26	10.18	11.82	12.89
	Diluted Earnings Per Share (NT$)	6.41	7.26	10.18	11.82	12.89
Cash flow	Cash Flow Ratio (%)	191.93	183.05	209.70	249.67	169.63
	Cash Flow Adequacy Ratio (%)	94.71	88.35	92.15	103.82	108.57
	Cash Flow Reinvestment Ratio (%)	11.46	12.16	13.04	13.76	11.51
Leverage	Operating Leverage	2.32	2.40	2.15	2.26	2.15
Leverage	Financial Leverage	1.01	1.01	1.01	1.01	1.01
Industry Specific Key Performance Indicator	Billing Utilization Rate (%) (Note 3)	91	91	97	93	92
	Advanced Technologies (28-nanometer and below) Percentage of Wafer Sales (%)	12	30	42	48	55
	Sales Growth (%)	18.7	17.82	27.77	10.58	12.38
	Net Income Growth (%)	23.9	13.12	40.25	16.18	9.03
Analysis of deviation of 2016 vs. 2015 over 20%: Current ratio (%) decreased by 27% mainly due to increase in payables to contractors and equipment suppliers and short-term loans. Quick ratio (%) decreased by 24% mainly due to increase in payables to contractors and equipment suppliers and short-term loans. Average inventory turnover (Times) increased by 26% and average inventory turnover days decreased by 21% mainly due to strong shipments of leading edge wafers during the year and improving cycle time. Cash flow ratio (%) decreased by 32% mainly due to increase in payables to contractors and equipment suppliers and short-term loans.

Note 1:	Before 2012, financial statements were prepared in accordance with R.O.C GAAP. 2012-2013 financial statements were prepared in accordance with 2010 Taiwan-IFRSs version. 2014-2016 financial statements were prepared in accordance with 2013 Taiwan-IFRSs version.
Note 2:	Capacity includes wafers committed by Vanguard and SSMC.

* Glossary

2. Liquidity Analysis
1. Capital Structure Analysis
(1)	Debt Ratio = Total Liabilities / Total Assets
(2)	Long-term Fund to Property, Plant and Equipment Ratio = (Shareholders’ Equity + Noncurrent Liabilities) / Net Property, Plant and Equipment
(1)	Current Ratio = Current Assets / Current Liabilities
(2)	Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities
(3)	Times Interest Earned = Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1)	Average Collection Turnover = Net Sales / Average Trade Receivables
(2)	Days Sales Outstanding = 365 / Average Collection Turnover
(3)	Average Inventory Turnover = Cost of Sales / Average Inventory
(4)	Average Inventory Turnover Days = 365 / Average Inventory Turnover
(5)	Average Payment Turnover = Cost of Sales / Average Trade Payables
(6)	Property, Plant and Equipment Turnover = Net Sales / Average Net Property, Plant and Equipment
(7)	Total Assets Turnover = Net Sales / Average Total Assets
4. Profitability Analysis
(1)	Return on Total Assets = (Net Income + Interest Expenses * (1 - Effective Tax Rate)) / Average Total Assets
(2)	Return on Equity Attributable to Shareholders of the Parent = Net Income Attributable to Shareholders of the Parent / Average Equity Attributable to Shareholders of the Parent
(3)	Operating Income to Paid-in Capital Ratio= Operating Income / Paid-in Capital
(4)	Pre-tax Income to Paid-in Capital Ratio = Income before Tax / Paid-in Capital
(5)	Net Margin = Net Income / Net Sales
(6)	Earnings Per Share = (Net Income Attributable to Shareholders of the Parent - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding
5. Cash Flow
(1)	Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities
(2)	Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend）
(3)	Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends)/ (Gross Property, Plant and Equipment + Long-term Investments + Other Noncurrent Assets + Working Capital)
6. Leverage
(1)	Operating Leverage = (Net Sales - Variable Cost) / Income from Operations
(2)	Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)

Financial Analysis from 2012 to 2016 (Unconsolidated) (Note)

		2012	2013	2014 (Adjusted)	2015	2016
Capital Structure Analysis	Debts Ratio (%)	24.32.	29.88	26.48	23.63	24.39
Capital Structure Analysis	Long-term Fund to Property, Plant and Equipment (%)	137.67	132.57	156.24	168.96	156.13
Liquidity Analysis	Current Ratio (%)	142.41	137.62	208.09	219.72	144.00
	Quick Ratio (%)	117.49	118.35	171.82	186.00	128.65
	Times Interest Earned (Times)	195.42	104.10	120.82	144.41	146.73
Operating Performance Analysis	Average Collection Turnover (Times)	9.87	9.26	8.29	8.58	8.89
	Days Sales Outstanding	36.98	39.40	44.02	42.54	41.07
	Average Inventory Turnover (Times)	9.13	9.06	7.90	6.87	8.56
	Average Inventory Turnover Days	39.97	40.30	46.18	53.11	42.63
	Average Payment Turnover (Times)	18.22	18.55	18.64	19.73	19.04
	Property, Plant and Equipment Turnover (Times)	0.96	0.87	0.97	1.03	1.03
	Total Assets Turnover (Times)	0.58	0.55	0.58	0.55	0.54
Profitability Analysis	Return on Total Assets (%)	19.45	17.58	20.22	20.42	19.58
	Return on Equity (%)	24.68	24.00	27.86	27.04	25.60
	Operating Income to Paid-in Capital Ratio (%)	68.21	78.93	112.09	120.87	142.59
	Pre-tax Income to Paid-in Capital Ratio (%)	70.88	83.20	116.08	134.97	148.55
	Net Margin (%)	33.24	31.83	34.85	36.63	35.70
	Basic Earnings Per Share (NT$)	6.42	7.26	10.18	11.82	12.89
	Diluted Earnings Per Share (NT$)	6.41	7.26	10.18	11.82	12.89
Cash flow	Cash Flow Ratio (%)	189.88	179.11	230.29	264.94	172.81
	Cash Flow Adequacy Ratio (%)	93.23	86.78	90.72	102.35	107.06
	Cash Flow Reinvestment Ratio (%)	11.36	12.32	13.30	13.85	11.74
Leverage	Operating Leverage	2.37	2.46	2.19	2.31	2.19
Leverage	Financial Leverage	1.01	1.01	1.01	1.01	1.01
Analysis of deviation of 2016 vs. 2015 over 20%: Current ratio (%) decreased by 34% mainly due to increase in payables to contractors and equipment suppliers and short-term loans. Quick ratio (%) decreased by 31% mainly due to increase in payables to contractors and equipment suppliers and short-term loans. Average inventory turnover (Times) increased by 25% and average inventory turnover days decreased by 20% mainly due to strong shipments of leading edge wafers during the year and improving cycle time. Cash flow ratio (%) decreased by 35% mainly due to increase in payables to contractors and equipment suppliers and short-term loans.

Note:	Before 2012, financial statements were prepared in accordance with R.O.C GAAP. 2012-2013 financial statements were prepared in accordance with 2010 Taiwan-IFRSs version. 2014-2016 financial statements were prepared in accordance with 2013 Taiwan-IFRSs version.

* Glossary

2. Liquidity Analysis
1. Capital Structure Analysis
(1)	Debt Ratio = Total Liabilities / Total Assets
(2)	Long-term Fund to Property, Plant and Equipment Ratio = (Shareholders’ Equity + Noncurrent Liabilities) / Net Property, Plant and Equipment
(1)	Current Ratio = Current Assets / Current Liabilities
(2)	Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities
(3)	Times Interest Earned = Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1)	Average Collection Turnover = Net Sales / Average Trade Receivables
(2)	Days Sales Outstanding = 365 / Average Collection Turnover
(3)	Average Inventory Turnover = Cost of Sales / Average Inventory
(4)	Average Inventory Turnover Days = 365 / Average Inventory Turnover
(5)	Average Payment Turnover = Cost of Sales / Average Trade Payables
(6)	Property, Plant and Equipment Turnover = Net Sales / Average Net Property, Plant and Equipment
(7)	Total Assets Turnover = Net Sales / Average Total Assets
4. Profitability Analysis
(1)	Return on Total Assets = (Net Income + Interest Expenses * (1 - Effective Tax Rate))/ Average Total Assets
(2)	Return on Equity = Net Income / Average Shareholders’ Equity
(3)	Operating Income to Paid-in Capital Ratio= Operating Income / Paid-in Capital
(4)	Pre-tax Income to Paid-in Capital Ratio = Income before Tax / Paid-in Capital
(5)	Net Margin = Net Income / Net Sales
(6)	Earnings Per Share = (Net Income - Preferred Stock Dividend) /Weighted Average Number of Shares Outstanding
5. Cash Flow
(1)	Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities
(2)	Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend）
(3)	Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends)/ (Gross Property, Plant and Equipment + Long-term Investments + Other Noncurrent Assets + Working Capital)
6. Leverage
(1)	Operating Leverage = (Net Sales - Variable Cost) / Income from Operations
(2)	Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)

Auditors' Opinions from 2012 to 2016

Year	CPA	Audit Opinion
2012	Hung-Peng Lin, Shu-Chieh Huang	An Unqualified Opinion
2013	Yih-Hsin Kao, Hung-Wen Huang	An Unqualified Opinion
2014	Yih-Hsin Kao, Hung-Wen Huang	An Unqualified Opinion
2015	Yih-Hsin Kao, Hung-Wen Huang	An Unqualified Opinion
2016	Yih-Hsin Kao, Yu-Feng Huang	An Unmodified Opinion (Note)

Note:	Starting in 2016, the new auditing standard of the Republic of China requires “An Unqualified Opinion” be replaced by “An Unmodified Opinion”.

Deloitte & Touche
12F, No. 156, Sec. 3, Min-Sheng E. Rd., Taipei, Taiwan, R.O.C.
Tel: 886-2-2545-9988

Audit Committee’s Review Report

The Board of Directors has prepared the Company's 2016 Business Report, Financial Statements, and proposal for allocation of earnings. The CPA firm of Deloitte & Touche was retained to audit TSMC's Financial Statements and has issued an audit report relating to the Financial Statements. The Business Report, Financial Statements, and earnings allocation proposal have been reviewed and determined to be correct and accurate by the Audit Committee members of Taiwan Semiconductor Manufacturing Company Limited. According to relevant requirements of the Securities and Exchange Act and the Company Law, we hereby submit this report.

Taiwan Semiconductor Manufacturing Company Limited

Chairman of the Audit Committee: Sir Peter Leahy Bonfield

The signature of Sir Peter Leahy Bonfield (image)

February 14, 2017

Financial Difficulties

The Company should disclose the financial impact to the Company if the Company and its affiliated companies have incurred any financial or cash flow difficulties in 2016 and as of the date of this Annual Report: None

Consolidated Financial Statements and Independent Auditors’ Report along with Parent Company Only Financial Statements and Independent Auditors’ Report

Please refer to Annual Report , Financial Statements.