Isuzu 2008 Annual Report Download - page 28

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Financial Section n Isuzu Motors Limited Annual Report 2008
E. Extraordinary gains/losses
In fiscal 2007, Isuzu posted an extraordinary loss of ¥7,213 million.
Extraordinary gains included profit from the proxy portion of returned
employees’ pension funds, while extraordinary losses included the dis-
posal of fixed assets, additional losses associated with the dismantling
of the former Kawasaki plant, and fixed asset impairment losses. In fis-
cal 2008, the extraordinary loss deteriorated ¥4,502 million to ¥11,715
million on extraordinary losses associated with the disposal of fixed as-
sets, special warranty expenses, and losses associated with the Group’s
exit from the North American SUV business.
F. Taxes
Isuzu’s net tax expense in fiscal 2007 including corporate income
taxes, municipal taxes, and business taxes as well as deferred corporate
income taxes was ¥7,819 million. In fiscal 2008, the net tax expense
was ¥22,941 million, reflecting an increase in taxes with increased
profit in ASEAN region.
G. Minority interests
Minority interests consist primarily of profits returned to the minor-
ity shareholders of Isuzu’s locally incorporated subsidiaries in the ASEAN
region and North America and its Japanese parts manufacturers.
Minority interests in fiscal 2008 increased to ¥11,641 million, compared
to ¥7,270 million in fiscal 2007.
H. Net profit
Net profit in fiscal 2008 was ¥76,012 million, a decrease of ¥16,373
million from the previous year. Earnings per share came to ¥44.60 and
fully diluted earnings per share to ¥44.36.
(3) Financial conditions
A. Cash flow
Isuzu generated consolidated-basis cash and cash equivalents (“net
cash”) of ¥149,721 million in fiscal 2008, up ¥9,358 million from the
previous year. Cash flow from operating activities provided ¥151,761
million in the face of record-setting profits, offsetting aggressive repay-
ment of interest-bearing debt and the acquisition and retirement of pre-
ferred stock.
Cash flow from operating activities
Net cash provided by operating activities increased 32.6% to
¥151,761 million, growing by ¥37,283 million compared to fiscal 2007
due to an increase in net profit before tax and other adjustments, com-
bined with higher depreciation costs and a reduction in accounts receiv-
able due to slowing sales in Japan and the United States.
Cash flow from investing activities
Net cash used in investing activities increased 42.8% to ¥48,219 mil-
lion, reflecting expenditures of ¥42,111 million for fixed asset purchases
under an aggressive program of capital investment designed to lay
the groundwork for future growth under the Mid-term Business Plan.
Expenditures associated with purchases of investment securities grew
¥4,321 million to ¥8,066 million due in part to purchases of shares in
affiliates.
Cash flow from financing activities
Net cash used in financing activities increased 85.7% to ¥91,224
million. The Company continued to repay interest-bearing debt during
fiscal 2008 using net cash provided by operating activities and spent
¥40,000 million acquiring all Class III and Class IV preferred stock.
B. Assets
As of March 31, 2008, combined consolidated assets totaled
¥1,245,947 million, an increase of ¥13,766 million from the previous
year.
The main factors contributing to this increase were cash and depos-
its (up ¥5,367 million from ¥134,136 million to ¥139,503 million) and
inventory assets (up ¥18,985 million from ¥133,083 million to ¥152,068
million). The increase in cash and deposits is primarily attributable to an
increase in cash flow from operating activities reflecting strong export
sales, which offset the acquisition and retirement of preferred stock.
The increase is primarily due to an increase in inventory assets of the
Company.
The significant decrease in notes and accounts receivable (down
¥15,352 million from ¥272,154 million to ¥256,802 million) is chiefly
the result of a contraction in accounts receivable at domestic sales sub-
sidiaries and locally incorporated subsidiaries in the ASEAN region.
C. Liabilities
Total liabilities at March 31, 2008, decreased ¥12,452 million from
the previous year to ¥830,668 million. Interest-bearing liabilities (total
of short-term borrowing, corporate bonds, and long-term borrowing)
decreased ¥40,451 million from ¥297,227 million to ¥256,776 million.
The Company continued to use net cash provided by operating activi-
ties to repay Group borrowing, particularly its own.
D. Capital
Capital (excluding minority shareholders’ equity) grew ¥18,213 mil-
lion in fiscal 2008 to ¥360,256 million.
The primary causes of this increase were net profit of ¥76,012 mil-
lion in fiscal 2008, the acquisition and retirement of preferred stock,
a reduction in the foreign exchange adjustment account due to the
strengthening of the Japanese yen against major currencies, and a de-
crease in unrealized holding gain on securities as a result of fluctuations
in the stock market.
As a result, Isuzu’s equity ratio improved 1.1 percentage points from
a year earlier to 28.9%.
The Company also acquired and retired all remaining Class III and
Class IV preferred stock that had been issued as part of its financial
restructuring program. This measure signals the completion of the
restructuring process in both name and reality.
Risks
There are certain risks that could have a significant impact on our
earnings results, financial condition, and other information contained in
the annual securities report, or share prices, and these risks are outlined
below. (The following information includes forward-looking statements
that reflect the judgment of management as of June 27, 2008.)
1. Economic situation/supply and demand trends in Isuzu’s
major markets
Vehicles account for an important portion of the Isuzu Group’s
worldwide operating revenue, and demand for these vehicles is af-
fected by the economic situation in the various countries and regions
where Isuzu sells vehicles. Therefore, economic recession and an en-
suing decline in demand in the Group’s major markets—Japan, North
America, and other Asian countries—could have a negative impact on
the Group’s performance and financial position. Price competition also
entails the risk of price fluctuation for Isuzu products.
2. Interest rate fluctuations
The Isuzu Group has tightened its cash flow management and con-
tinues to concentrate on shrinking interest-bearing debt. In fiscal 2008
Isuzu allocated profit from business operations and other funds to