Brother International 2013 Annual Report Download - page 19

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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 sub-
sidiaries, cash and cash equivalents as of March 31, 2013, amounted to ¥55,060 million, a decrease of ¥3,672 million over a year earlier.
Outlook for Fiscal 2013
While expectations for recovery continue to grow in America and Japan, due to the ongoing effect of the debt crisis, fears remain that the sluggish economy in Europe
will continue long-term.
Amidst these conditions, however, net sales are forecasted to rise over the previous year, with increases due to exchange against the cheaper yen, continued expecta-
tions of stable demand for Brother products, especially in Printing & Solutions business, the introduction of new products, and the new consolidation of Nissei Corporation.
Despite decreases due to increased depreciation accompanying an increase in capital investments, with the increase from foreign exchange operating income is fore-
casted to rise. Net income is also forecasted to rise, due to an increase in operating income as well as improvements in loss (gain) on valuation of derivatives.
Business and Other Risk
The following items may impact the Group businesses, operating performance and financial conditions. Forward-looking statements reflect the Group’s judgment as of
March 31, 2013.
(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’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 resources is rising. In the event that ongoing recruitment and employment of skilled human resources becomes more dif-
ficult, the Group may become unable to invest sufficient resources in research and development, which could lead to lowered competitiveness and stable supply of
products caused by a workforce shortage. These factors could in turn affect Group performance adversely.
(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 counter-
feit 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 prob-
lems 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.
To reduce interest rate fluctuation risk, the Group endeavors to raise funds at fixed interest rates, and employs interest rate swaps and other financial instruments.
Nevertheless, higher market interest rates could raise fund procurement costs.
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
-20.0
-30.8
-41.8
-11.0 -14.1 -6.4
-40
-15
10
35
60 49.5
39.3 32.7
Cash Flows
(¥ billion)
Fiscal years ended March 31
201320122011
Management’s Discussion and Analysis