Fujitsu 2014 Annual Report Download - page 109

billion ($2,149 million), a decrease of ¥9.6 billion compared to the
previous year. The decrease was primarily a result of increased devel-
opment efficiency in mobile phones and the effects of selling the
microcontroller and analog device businesses in the LSI device busi-
ness. R&D spending increased in the Technology Solutions segment,
with a primary focus on network products. The ratio of R&D expenses
to net sales was 4.6%.
As a result, operating income amounted to ¥142.5 billion
($1,384 million), an increase of ¥54.2 billion compared to fiscal
2012. The operating income margin was 3.0%, a rise of 1.0 percent-
age point, mainly because of profit margin improvements due to
lower fixed costs in the LSI device business and higher Systems
Integration sales.
Operating income in the Technology Solutions segment
increased continuously from the first to third quarters, but declined in
the fourth quarter due to measures to enhance products for the next
fiscal year and declining profitability in certain projects in services
businesses outside Japan. The Technology Solutions segment posted
operating income of more than ¥200.0 billion for fiscal 2013, an
increase of more than 20% from the previous fiscal year. Meanwhile,
the Ubiquitous Solutions segment, which involves PCs, mobile
phones and so forth, recorded successive operating losses up until
the third quarter, due to a sharp decline in mobile phone sales
volume and cost outlays for quality improvement measures. However,
the Ubiquitous Solutions segment returned to profitability in the
fourth quarter atop an increase in enterprise PC sales on higher
demand for replacements as a consequence of the ending of support
for an operating system product. Since returning to profitability in the
fourth quarter of the previous fiscal year, the Device Solutions seg-
ment was profitable in each quarter of fiscal 2013, delivering higher
operating income year on year.
The Group strives to minimize the impact of currency exchange
rate fluctuations on earnings. During fiscal 2013, fluctuations in
currency exchange rates had the effect of raising operating income by
approximately ¥5.0 billion relative to the previous year. Losses in the
LSI device and electronic components businesses improved as the yen
weakened against the US dollar; however, profitability was negatively
impacted in the PC, mobile phone, server, and other businesses that
procure US dollar-denominated materials. Furthermore, the deprecia-
tion of the yen against the euro had the effect of increasing the profits
of European subsidiaries when translated into Japanese yen, while
the appreciation of the euro against the US dollar reduced the pro-
curement cost of US dollar-denominated materials at European sub-
sidiaries. For fiscal 2013, an appreciation of one yen (¥1) in the
currency exchange rate translated into an impact on operating
income of approximately ¥0.3 billion for the US dollar, negative ¥0.2
billion for the euro, and ¥0.0 billion for the British pound.
Other Income (Expenses), Net Income and
Comprehensive Income
Other income (expenses) amounted to a net loss of ¥49.6 billion
($482 million), an improvement of ¥90.7 billion from the previous
fiscal year. Fujitsu recorded a ¥6.8 billion gain on sales primarily of
available-for-sale securities and a ¥4.7 billion gain on sales of prop-
erty, plant and equipment and intangible assets. The Company
recorded restructuring charges of ¥31.1 billion, a loss on the reversal
of foreign currency translation adjustments of ¥21.6 billion, which
stemmed from the liquidation of US subsidiary Fujitsu Management
Services of America, Inc., and an impairment loss of ¥6.4 billion
recorded under other expenses, relating to operational assets of
manufacturing subsidiaries.
The restructuring charges mainly consisted of ¥21.0 billion ($204
million) for the LSI device business, ¥4.9 billion ($48 million) for the
mobile phone business, and ¥4.2 billion ($41 million) for business
outside Japan. In the LSI device business, the charges were mainly
attributable to the system LSI (SoC: System on a Chip) business, which
is scheduled to be integrated, and consisted of the costs for settling
retirement benefit liabilities and losses on the disposal of assets.
There were also charges stemming from the cost of restructuring the
production lines for standard logic devices as well as losses on the
disposal of assets. In the mobile phone business, the charges
stemmed from losses on the disposal of assets in the process of
integrating production sites as well as expenses incurred in reallocat-
ing personnel. The charges for businesses outside of Japan were
primarily in the Nordic region and consisted of workforce rationaliza-
tion expenses.
Consolidated net income for fiscal 2013 was ¥48.6 billion ($472
million), representing a year-on-year improvement of ¥128.5 billion.
Income before income taxes and minority interests amounted to
¥92.9 billion ($902 million), an improvement of ¥145.0 billion com-
pared to the previous fiscal year. However, income taxes increased
¥12.8 billion year on year to ¥37.0 billion. The ratio of income taxes
to income before income taxes and minority interests was 39.9%. The
Group’s tax burden was higher than the standard effective income tax
rate, mainly because of the amortization of goodwill for which tax
effects cannot be recognized, and the inclusion in income before
income taxes of the amortization of unrecognized obligation for
retirement benefits at overseas consolidated subsidiaries, for which
the recording of deferred tax assets is restricted. Income taxes
included a reduction of approximately ¥13.0 billion in the company’s
tax burden in connection with the liquidation of US subsidiary Fujitsu
Management Services of America, Inc., and a one-time increase in tax
expenses of approximately ¥4.0 billion due to the early termination of
the Special Reconstruction Corporation Tax. In addition, minority
interests in income of consolidated subsidiaries was ¥7.2 billion ($71
million), a year-on-year improvement of ¥3.7 billion, as there was a
rebound in the financial performance of a listed subsidiary in the
electronic components business.
The Group views profitability and efficiency of invested capital in
businesses as important management indicators. For fiscal 2013, the
return on equity, calculated by dividing net income by average
owners’ equity, was positive 8.1%, a change from negative 11.8% in
the previous fiscal year.
Other comprehensive income totaled ¥49.0 billion ($476 million),
primarily as a result of an improvement in foreign currency translation
adjustment stemming from the ongoing depreciation of the yen. There
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS
107
FUJITSU LIMITED ANNUAL REPORT 2014
MANAGEMENT FACTS & FIGURESRESPONSIBILITYPERFORMANCE