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2013
for the year ended March 31, 2013
Annual Report

Table of contents

  • Page 1
    Annual Report for the year ended March 31, 2013 2013

  • Page 2
    ... unique and original products and services, and helps global customers achieve new lifestyles and work styles. Contents Brother at a Glance Global Network Financial Highlights Message from the Management Special Feature: Mid-term Business Strategy "CS B2015" Enters Third Year Review of Operations...

  • Page 3
    ...inkjet printer technologies. Brother's leading products include compact printers, All-in-Ones that combine printer, fax machine, copier and scanner into one unit, user-friendly labeling systems, and scanners. With these communications and printing technologies, Brother meets a wide range of customer...

  • Page 4
    ... support, M&S helps customers improve productivity and create products with added value. ・Industrial Sewing Machine ・Garment Printer ・Machine Tool 11.9% N&C Net Sales by Business Segment (FY2012) Network & Contents The Network & Contents (N&C) business provides online karaoke systems...

  • Page 5
    ... offers products and services that meet the needs of customers all over the world through our global network The Brother Group started in 1908 as the Yasui Sewing Machine Co., which operated a repair business for sewing machines. Brother Industries, Ltd. was established in 1934 as an enterprise to...

  • Page 6
    F inancial Highlights Millions of Yen Fiscal years ended March 31 2008 2009 2010 2011 2012 2013 Results of Operations: Net sales Operating income Income before income taxes and minority interests Net income Depreciation Capital expenditures Research and development costs ¥ 566,379 53,503 46...

  • Page 7
    ...and autumn in the exchange rate for yen. While the Machinery & Solution business was negatively impacted by this weak market, net sales in fiscal 2012 improved year-on-year, with items such as communications and printing equipment, home sewing machines and online karaoke machines remaining solid. We...

  • Page 8
    ... profitability Global Vision 21 become a world-class manufacturer by developing 2 To outstanding proprietary technologies embody Brother's motto, "At your side," throughout our 3 To corporate culture In fiscal 2012 we released high-end black-and-white laser models and a high-speed inkjet printer...

  • Page 9
    Special Feature Strengthening Management Foundation Following our CS B2015, we are pursuing optimal production systems in each business on a global scale. In addition to the Spring 2013 opening of the new Printing & Solutions factory in the Philippines and the Machinery & Solution factory in Xian, ...

  • Page 10
    ...Alliances In order to expand new businesses and develop new fields, Brother has executed M&As with such companies as an American venture start-up engaged in development of web conferencing, and a Japanese manufacturer of small size reducers and gears with a top-class share of the market in Japan. We...

  • Page 11
    ... 51.5% Europe 20 2.6 2.5 3.0 10 1.5 23.0% 0 2011 2012 2013 0 Line-up of products and services Printing & Solutions Personal & Home MFC-9970CDW Color laser All-in-One MFC-J4510DW Inkjet All-in-One PT-2730 Labeling system Innov-is Ie* Sewing and embroidery machine * Europe model 10

  • Page 12
    ...9 6 Asia & Others 70.0% 2011 2012 2013 Industrial sewing machines Machine tools Network & Contents (N&C) Business Net Sales (left) / Operating Income (Loss) (right) Fiscal years ended March 31 (¥ billion) 75 60 45 30 15 0 (¥ billion) 15 Net sales: ¥50,083 million New online karaoke models...

  • Page 13
    ... 4 outside directors) Auditing Internal Audit Department President Committee of Security Trade Control Product Liability Committee Information Management Committee Safety, Health and Disaster Prevention Committee Strategy Meeting Executive Officers Environmental Committee As part of the Group...

  • Page 14
    ... the execution of duties by the managing director. Having established the Internal Audit Department, the internal auditing staff (seven members) under the direction of the representative director and president, inspect riskrelated conditions affecting the headquarters, internal and Group companies...

  • Page 15
    ... previous fiscal year according to methods determined by the applicable rules. Auditor compensation is determined by the Board of Statutory Auditors in accordance with rules determined by the Company for the calculation of "basic compensation." Annual limits on "basic compensation" for directors and...

  • Page 16
    ...Dept., Parts Engineering Dept., Electronic Technology Dept., Prototype Engineering Dept. Hiroyuki Wakahara Responsible for: Personnel Dept. Mitsuyasu Kyuno President of Personal & Home Company â- Group Managing Executive Officers Shunsuke Katayama Representative Director & President of Brother Sales...

  • Page 17
    ....brother.com Foundation 65 Number of Group Employees 31,694 Stock Exchange Listings 1908 Date of Incorporation Tokyo, Nagoya Transfer Agent January 15, 1934 Paid-in Capital Mitsubishi UFJ Trust and Banking Corporation 1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212, Japan Independent Accountants...

  • Page 18
    ... & Solution business due to a weak market, demand for communications and printing equipment, home sewing machines and online karaoke machines remained solid. We also experienced an increase due to exchange primarily against the US dollar. As a result, net sales at Brother Group rose by 3.8% year-on...

  • Page 19
    ...current market share, adversely affecting Group's performance. (2) Acquisition of Human Resources The Brother Group works to secure needed human resources for each function related to global expansion in projects, development, design, manufacturing, sales and services. However, competition for human...

  • Page 20
    ... returns on investment, which could adversely affect Group performance and financial conditions. (11) Natural Disasters and Other Threats The majority of the Brother Group's manufacturing and sales facilities is located overseas. Our main manufacturing facilities are in China, Malaysia and Vietnam...

  • Page 21
    ...Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 2013 ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 17) Time deposits Marketable securities (Notes 5 and 17) Receivables (Note 17): Trade notes and accounts Unconsolidated subsidiaries and associated companies...

  • Page 22
    ... in 2013 and 2012 Capital surplus Stock acquisition rights (Note 13) Retained earnings (Note 21) Treasury stock, at cost 2013 - 10,925,903 shares 2012 - 9,866,643 shares Accumulated other comprehensive income: Unrealized gain on available-for-sale securities Deferred loss under hedge accounting...

  • Page 23
    ... Year ended March 31, 2013 NET SALES COST OF SALES (Note 15) Gross profit SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 15) Operating income OTHER INCOME (EXPENSES): Interest and dividend income Interest expense Sales discount Loss on sales and disposals of property, plant and equipment...

  • Page 24
    ...Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 NET INCOME BEFORE MINORITY INTERESTS OTHER COMPREHENSIVE INCOME (LOSS) (Note 20): Unrealized gain (loss) on available-for-sale securities Deferred loss on derivatives under hedge accounting Foreign currency translation...

  • Page 25
    ... Year ended March 31, 2013 Millions of Yen Accumulated other comprehensive income (loss) Unrealized Gain (Loss) on Available-forsale Securities Deferred Loss Under Hedge Accounting Foreign Currency Translation Adjustments Common Stock Capital Surplus Stock Acquisition Rights Retained Earnings...

  • Page 26
    ... Year ended March 31, 2013 2013 OPERATING ACTIVITIES: Income before income taxes and minority interests Adjustments for: Income taxes - paid Depreciation and amortization Loss on impairment of long-lived assets Amortization of goodwill Loss on sales and disposals of property, plant and equipment...

  • Page 27
    ...Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 FORWARD FINANCING ACTIVITIES: Increase (decrease) in short-term borrowings, net Proceeds from long-term debt Repayment of bonds Repayments of lease obligations Cash dividends paid Decrease (increase) in treasury stock...

  • Page 28
    ... BROTHER INDUSTRIES, LTD. (the "Company") is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥94 to $1, the approximate rate of exchange at March 31, 2013...

  • Page 29
    .... Brother Corporation (Asia) Ltd. Brother Industries Technology (Malaysia) Sdn. Bhd. Brother International (Aust.) Pty. Ltd. Brother International Singapore Pte. Ltd. Brother Machinery Xian Co., Ltd. Brother Industries (Shenzhen), Ltd. Brother (China) Ltd. 100.0 % 100.0 99.9 - 100.0 100.0 60.2 100...

  • Page 30
    ... of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and...

  • Page 31
    ... by a charge to income. (9) Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is mainly computed by the declining-balance method. Effective April 1, 2012, as a result of the revision of Japanese corporate tax law, the Company and its domestic consolidated...

  • Page 32
    ... and Audit & Supervisory Board Members Bonuses to directors and Audit & Supervisory Board Members are accrued at the end of the year to which such bonuses are attributable. (14) Warranty Reserve The Group provided a warranty reserve for repair service to cover all repair expenses based on the...

  • Page 33
    ... Statements Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 (ii) Retirement Benefits for Directors and Audit & Supervisory Board members Certain domestic consolidated subsidiaries provide retirement allowances for directors and Audit & Supervisory Board members...

  • Page 34
    ...enacted tax laws to the temporary differences. (21) Foreign Currency Transactions All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the consolidated balance sheet date. The foreign exchange gains...

  • Page 35
    ..., those statements are restated. (26) Consolidated corporate tax system The Company applied a consolidated corporate tax system from the year ended March 31, 2013. (27) New Accounting Pronouncements Accounting Standard for Retirement Benefits-On May 17, 2012, the ASBJ issued ASBJ Statement No. 26...

  • Page 36
    ... on production and sales of reducers and gears. This acquisition was made to advance the strategy of expanding the industrial part business outside Japan through its global network and to strengthen the research and development of new business through the Company and Nissei Corporation's technology...

  • Page 37
    ... and aggregate fair values of marketable and investment securities at March 31, 2013 and 2012, were as follows: Millions of Yen Unrealized Gains Unrealized Losses Fair Value March 31, 2013 Securities classified as: Available-for-sale: Equity securities Government and corporate bonds Other Held-to...

  • Page 38
    ... $ 123,968 107,202 9,851 56,223 The information of the available-for-sale securities which were sold during the years ended March 31, 2013 and 2012, was as follows: Millions of Yen March 31, 2013 Available-for-sale: Equity securities ¥ Proceeds Realized Gains Realized Losses 2,660 ¥ 1,724...

  • Page 39
    ... and rental assets were measured at the net selling price at disposition. The discount rates used for computation of the present value of future cash flows were 12.6% and 8.1% for the years ended March 31, 2013 and 2012, respectively. 8. Investment Property In November 2008, the ASBJ issued ASBJ...

  • Page 40
    ... Statements Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 9. Short-term Borrowings and Long-term Debt Short-term borrowings at March 31, 2013 and 2012, consisted of the following: Millions of Yen Thousands of U.S. Dollars 2013 Loans principally from banks with...

  • Page 41
    ... 31, 2013 and 2012, respectively. Retirement Allowances for Directors and Audit & Supervisory Board members Retirement allowances for directors and Audit & Supervisory Board members are paid subject to approval of the shareholders in accordance with the Companies Act of Japan (the "Companies Act...

  • Page 42
    ... obligations for the years ended March 31, 2013 and 2012, were as follows: Millions of Yen Thousands of U.S. Dollars 2013 Balance at beginning of year Additional provisions associated with purchases of property, plant and equipment Reconciliation associated with passage of time Reduction associated...

  • Page 43
    ... Year ended March 31, 2013 (a) Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders' meeting. For companies that meet certain criteria such as (1) having a Board of Directors...

  • Page 44
    ...the year ended March 31, 2013 Non-vested April 1, 2012 - Outstanding Granted Canceled Vested March 31, 2013 - Outstanding Vested April 1, 2012 - Outstanding Vested Exercised Canceled March 31, 2013 - Outstanding Exercise price Average stock price at exercise Fair value price at grant date (directors...

  • Page 45
    ... at March 31, 2013 and 2012, were as follows: Millions of Yen Thousands of U.S. Dollars 2013 Deferred Tax Assets: Inventories Accrued bonuses Accrued expenses Allowance for doubtful accounts Warranty reserve Employees' retirement benefits Write-down of investment securities Depreciation Tax loss...

  • Page 46
    ... was not presented for the year ended March 31, 2013. On December 2, 2011, new tax reform laws were enacted in Japan, which changed the normal effective statutory tax rate from approximately 40% to 38% effective for the fiscal years beginning on or after April 1, 2012 through March 31, 2015, and...

  • Page 47
    ... of the Group, are exposed to the risk of market price fluctuations. Payment terms of payables, such as trade notes and trade accounts, are less than one year. Payables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates. Bank loans are mainly used...

  • Page 48
    ... of financial instruments Millions of Yen March 31, 2013 Cash and cash equivalents Marketable securities Receivables Investment securities Total Short-term borrowings Current portion of long-term debt Payables Income taxes payable Long-term debt Total ¥ ¥ Carrying Amount Fair Value Unrealized...

  • Page 49
    ... Consolidated Subsidiaries Year ended March 31, 2013 Millions of Yen March 31, 2012 Cash and cash equivalents Marketable securities Receivables Investment securities Total Short-term borrowings Current portion of long-term debt Payables Income taxes payable Long-term debt Total ¥ Carrying Amount...

  • Page 50
    ... because neither the risk free rate nor the Group's credit profile has changed significantly since the date of lease inception. Income taxes payable The carrying values of income taxes payable approximate fair value because of their short maturities. Derivatives The information of the fair value for...

  • Page 51
    ... Statements Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 Thousands of U.S. Dollars March 31, 2013 Cash and cash equivalents Marketable securities Receivables Investment securities: Held-to-maturity securities Total Please see Note 9 for annual maturities...

  • Page 52
    ... transactions to which hedge accounting is not applied at March 31, 2013 and 2012 At March 31, 2013 Foreign currency forward contracts: Selling: U.S. Dollars Euro Pound Sterling Thailand Baht Yen Mexican Peso Korean Won Indonesia Rupiah Taiwan Dollars India Rupee Philippine Peso Buying: U.S. Dollars...

  • Page 53
    ... Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 Millions of Yen At March 31, 2012 Foreign currency forward contracts: Selling: U.S. Dollars Euro Pound Sterling Thailand Baht Yen Mexican Peso Korean Won Indonesia Rupiah Taiwan Dollars India Rupee Philippine...

  • Page 54
    ... Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 Thousands of U.S. Dollars At March 31, 2013 Foreign currency forward contracts: Selling: U.S. Dollars Euro Pound Sterling Thailand Baht Yen Mexican Peso Korean Won Indonesia Rupiah Taiwan Dollars India Rupee Philippine...

  • Page 55
    ... transactions to which hedge accounting is applied at March 31, 2013 and 2012 Millions of Yen Contract Amount Due after One Year At March 31, 2013 Foreign currency forward contracts: Selling: Euro Pound Sterling Yen Korean Won Indonesia Rupiah Taiwan Dollars India Rupee Philippine Peso Hedged Item...

  • Page 56
    ...for the years ended March 31, 2013 and 2012, were as follows: Millions of Yen Millions of Yen Thousands of U.S. Dollars 2013 Unrealized gain (loss) on available-for-sale securities: Gains (losses) arising during the year Reclassification adjustments to profit or loss Amount before income tax effect...

  • Page 57
    ... 72.85 22. Subsequent Events Appropriation of Retained Earnings The following appropriation of retained earnings at March 31, 2013, was approved at the Company's board of directors' meeting held on May 14, 2013: Millions of Yen Thousands of U.S. Dollars Year-end cash dividends of ¥12 ($0.13) per...

  • Page 58
    .... "Personal & Home" consists of sales and production of home sewing machines. "Machinery & Solution" consists of sales and production of industrial sewing machines and machine tools. "Network & Contents" consists of sales and production of online karaoke system, and of contents distribution services...

  • Page 59
    ... Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 Reportable segment Printing & Solutions Personal & Home Machinery & Solution Network & Contents Others Total Reconciliations Consolidated Millions of Yen 2012 Sales Sales to external customers Intersegment sales...

  • Page 60
    ...Sales are classified in countries or regions based on locations of customers. (b) Property, plant and equipment Millions of Yen 2013 Japan China Vietnam Americas Europe Asia and others Total ¥ 55,368 ¥ 11,983 ¥ 9,243 ¥ 6,075 Millions of Yen ¥ 3,901 ¥ 2,019 ¥ 88,589 2012 Japan...

  • Page 61
    ... Consolidated Financial Statements Brother Industries, Ltd. and Consolidated Subsidiaries Year ended March 31, 2013 5. Information about Impairment Losses of Assets by Reportable Segment Millions of Yen 2013 Printing & Solutions Personal & Home Machinery & Solution Network & Contents Others Total...

  • Page 62
    ... Disclosures Transactions of the Company with an unconsolidated subsidiary, Brother Industries (Philippines), Inc. for the year ended March 31, 2013 was as follows: Millions of Yen Thousands of U.S. Dollars Subscription for new shares of Brother Industries (Philippines), Inc. ¥ 6,441 $ 68,521...

  • Page 63
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