Epson 2006 Annual Report Download - page 40

Seiko Epson Annual Report 2006
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Income Taxes
Income taxes decreased ¥10,714 million to ¥9,187 million, reflecting two main factors. The first was
a temporary difference accompanying the booking of reorganization costs during the year under
review, namely from the recognition as deferred tax assets of amounts expected to be recoverable.
The second was a decrease in income taxes due to the decline in income (loss) before income taxes
and minority interest. Due to increased valuation allowances at the Company’s subsidiaries and
other factors, the effective tax rate was -45.8%, compared with 27.0% in the previous fiscal year.
Minority Interest
A loss of ¥11,317 million was recorded for minority interest in subsidiaries, an increase of ¥9,374
million from the previous year. This stemmed mainly from the interest of minority shareholders in
increased loss at the Company’s subsidiaries.
Net Income (Loss)
As a result, Epson posted net loss of ¥17,917 million, down ¥73,606 million from the previous year’s
net income.
Liquidity and Capital Resources
Cash Flow
Net cash provided by operating activities was ¥117,497 million, down ¥44,992 million from the fiscal
year ended March 31, 2005. Cash flows from operating activities decreased mainly due to the booking
of net loss of ¥17,917 million for the year under review, reversing net income of ¥55,689 million
posted for the previous fiscal year.
Net cash used in investing activities was ¥95,266 million, a decrease of ¥4,130 million compared
to the prior fiscal year. The decrease was mainly attributable to the booking as net proceeds of cash
and cash equivalents received in the Company’s business integration with the Toyo Group.
Net cash provided by financing activities was ¥19,123 million, in contrast to net cash used of
¥96,373 million in the prior fiscal year. In the year under review, this was largely due to net increases
in short-term borrowings of ¥18,471 million (versus a net decrease of ¥40,577 million a year earlier),
and the issue of ¥50,000 million in bonds, the proceeds from which were used for repayments of
long-term debt from financial institutions.
Due to these factors, cash and cash equivalents as of March 31, 2006 stood at ¥280,114 million,
an increase of ¥45,210 million from the previous fiscal year-end.
The Company has organized lines of credit with 11 banks totaling ¥80,000 million with the goal of
enabling it to procure funds with greater efficiency. As of March 31, 2006, none of this credit was
drawn on. In combination with cash and cash equivalents of ¥280,114 million at March 31, 2006,
Epson believes that it has sufficient liquidity.
Financial Condition
Total assets as at March 31, 2006 were ¥1,325,206 million, an increase of ¥27,416 million compared
to March 31, 2005.
Current assets increased ¥48,690 million, while fixed assets declined ¥21,274 million. Current
assets increased largely atop of an increase in cash and cash equivalents for the year. This was
made possible by a net increase in short-term borrowings, which enabled the Company to newly
acquire commercial paper to enhance working capital efficiency. Meanwhile, the decrease in fixed
assets was the result of efforts to restrain capital investment and impairment losses, particularly in
the electronic devices segment.