Brother International 2011 Annual Report Download - page 17

Cash flows from investment activities
Net cash used in investing activities amounted to ¥20,043 million, ¥1,982 million more than ¥18,061 million used in the previous year,
reflecting an increase in disbursement for purchases of property, plant and equipment.
Cash flows from financing activities
Net cash used in financing activities totaled ¥10,950 million, ¥21,223 million less than ¥32,173 million used in the previous year. Interest-
bearing debt resulted in ¥2,536 million in disbursements, ¥24,429 million less than in the previous year. Cash dividends paid used ¥5,912
million, ¥537 million more than in the previous year.
As a result of these activities, as well as the exchange rate fluctuations affecting the yen conversion value of cash and cash equivalents of
overseas consolidated subsidiaries, cash and cash equivalents as of March 31, 2011, amounted to ¥65,101 million, an increase of ¥16,070
million over a year earlier.
Outlook for Fiscal 2011
We expect the business environment in fiscal 2011 to stay uncertain due to the anticipated lingering impact of the Great East Japan
Earthquake despite gradual growth expectations of developed economies on top of the robust growth of emerging economies.
Despite these conditions, the Brother Group will aim for growth in fiscal 2011, the first year of the new mid-term business strategy
“CS B2015.” We expect net sales to increase over the previous year given strong demand for our products, but we are likely to see lower
profits than the previous year. Although the earthquake caused no direct damage to the Group, we expect to feel the impact on the
production of some of our products associated with difficulty in procuring parts and components and also the effect on the online
karaoke business in Japan of shorter operating hours at stores owing to power-saving requirements. Though the business outlook going
forward still involves opaque factors, the Brother Group as a whole will exert efforts to keep the impact of these factors to a minimum.
Business and Other Risk
The following items may impact Group businesses, operating performance and financial conditions. Forward-looking statements reflect
the Group’s judgment as of March 31, 2011.
(1) Market Competition
In printing and other operations, the Brother Group cultivates business in many markets where it faces stiff competition. Competitors
could allocate more management resources to their business than the Group does, new competitors could enter the market and
competition could intensify as a result of alliances or collaboration among competitors. As a result, the Group may be unable to maintain
its current market share, adversely affecting Group performance.
(2) Acquisition of Human Resources
The Brother Group places a special emphasis on research and development, aiming to differentiate its products from its competitors’
through the accumulation of technology and expertise. However, competition for human resources is rising. In the event that ongoing
recruitment and employment of skilled human resources becomes more difficult, the Group may become unable to deploy sufficient
human resources in research and development, which could lower the competitiveness of its products, adversely affecting Group
performance.
(3) Intellectual Property Rights
We conduct business operations by concluding license agreements with other companies on patents and other intellectual property
rights as necessary. The balance of royalty revenues and payments based on such license agreements could cause fluctuations in the
Group’s operating performance and also become constraints on business operations depending on the terms of such agreements.
Furthermore, there are limits to the degree to which proprietary technology acquired through research and development can be
protected, and the potential exists for third parties to infringe upon our intellectual property rights and manufacture and sell counterfeit
products. Other companies may file lawsuits against the Group with regard to intellectual property rights, which could affect the Group’s
performance. The Group provides appropriate rewards to in-house inventors based on the Invention Incentive Scheme. Despite this, there
is the possibility of litigation with inventors over compensation.
(4) Product Quality Control
To provide high-quality, attractive products, the Group has established a production management system with rigorous product quality
control standards. However, not all products are free from defects, and there is no guarantee that no problems will arise as a result of
product safety or quality issues. In the event that significant problems arise, substantial costs may be incurred, brand image and reputation
may deteriorate, and customer willingness to purchase Group products may fall, adversely affecting Group’s performance.
(5) Exchange and Interest Rates
The Brother Group conducts a high percentage of its manufacturing and sales overseas, and exchange rate fluctuations could affect
foreign currency transactions. To reduce this risk and improve the link between foreign currency transaction receipts and payments, the
Group utilizes forward exchange contracts and other instruments to reduce short-term risk. However, currency appreciation in China,
Southeast Asia or other regions where the Group operates major manufacturing facilities could cause procurement and production costs
to rise, and mid- to long-term exchange rate fluctuations could affect its financial condition.
15
Brother Annual Report 2011