Fujitsu 2004 Annual Report Download - page 34

32
FINANCIAL SECTION Management’s Discussion and Analysis of Operations
increased profits in our business operations, sales of mar-
ketable securities, and gain on transfer of the substitutional
portion of the employees’ pension funds, as well as revalua-
tion at fair market value for holdings in Fanuc, which from
the third quarter was no longer treated as an equity method
affiliate.
Summary of Cash Flows
Net cash provided by operating activities during the fiscal
year was ¥304.0 billion ($2,868 million). The earnings
recovery in our business operations pushed operating cash
flow back above the 300 billion yen level, an improvement
of ¥186.2 billion compared to the prior fiscal year.
Net cash provided by investing activities was ¥67.3 bil-
lion ($636 million). In addition to reducing the outflow of
funds from investing activities due to greater selectivity in
capital expenditure, we had an inflow of funds from the sale
of marketable securities and property, plant and equipment.
Adding together cash flows from operating activities and
cash flows from investing activities, free cash flow was
strongly positive, at ¥371.4 billion ($3,504 million). A por-
tion of this was used to redeem corporate bonds and repay
borrowings. Net cash used in financing activities was ¥239.9
billion ($2,263 million).
As a result, cash and cash equivalents stood at ¥413.8
billion ($3,904 million) at the end of fiscal 2003, an increase
of ¥131.4 billion from the end of fiscal 2002.
4. Capital Expenditure
In fiscal 2003, capital expenditure, which was targeted at the
most promising growth sectors and held within the same
range as depreciation expenses, totaled ¥159.7 billion
($1,508 million). Broken out by business segment, capital
expenditure was ¥54.0 billion ($509 million) in Software &
Services, ¥32.4 billion ($306 million) in Platforms, ¥59.3
billion ($559 million) in Electronic Devices (of which ¥30.1
billion ($284 million) was for semiconductors), and ¥13.9
billion ($131 million) for general corporate and other areas.
Capital Expenditure (¥ Billions)
Increase
(Decrease)
Years ended March 31 2003 2004 rate (%)
Software & Services ................................ ¥ 38 ¥ 54 39.2%
Platforms.................................................. 36 32 (11.7)
Electronic Devices................................... 60 59 (2.6)
[Semiconductor production] ................. [38] [30] [(20.8)]
Corporate and others*............................. 11 13 25.3
Total......................................................... ¥147 ¥159 8.2%
Japan....................................................... 125 135 7.7
Overseas ................................................. 21 24 11.5
* Non-allocable capital expenditure for shared R&D and parent company manage-
ment division
5. Consolidated Subsidiaries
At the end of fiscal 2003, the Company had 455 consolidat-
ed subsidiaries, 136 in Japan and 319 overseas, representing
a decrease of 32 from last year’s total of 487. Our Flash
memory business, leasing business and FDK became equity
method affiliates. In addition, we consolidated and reorga-
nized our domestic semiconductor back-end assembly and
testing operations as well as our network development com-
panies, and we restructured our global operations,
particularly in North America. This resulted in a decrease in
the total number of subsidiary companies. From fiscal 2003,
we newly consolidated the subsidiaries of Fujitsu TEN.
The number of affiliated companies accounted for by the
equity method increased by three, to 32. This included FDK,
Fujitsu Leasing, and FASL LLC (which was renamed
Spansion LLC on June 28, 2004), while Fanuc was no
longer accounted for by the equity method.
6. Critical Accounting Policies and
Estimates
Accounting Principles and Practices
The accompanying consolidated financial statements of the
Group have been prepared in accordance with accounting
principles and practices generally accepted in Japan and the
regulations under the Securities and Exchange Law of
Japan. The accounting principles and practices adopted by
the consolidated subsidiaries outside of Japan conform to
those of their respective countries.
The preparation of the consolidated financial statements
requires management to make estimates and assumptions
that affect the amount of the assets, liabilities, contingent
assets and contingent liabilities reported at the end of the fis-
cal year as well as the amount of revenue and expenses
recognized during that term. Actual results may differ from
these estimates.
The Group is discussing the requirements for the adop-
tion of International Financial Reporting Standards
(IFRS/IAS). When these standards are adopted, it is possi-
ble that differences may arise from financial statements
prepared under Japanese standards.
Revenue Recognition
Revenue from sales of IT systems and products, including
software development contracts is recognized upon accept-
ance by the customers, whereas revenue from sales of
personal computers, other equipment and electronic devices
is recognized when the products are shipped.
Going forward, we plan to introduce the percentage-of-
completion method to thoroughly improve the visibility of
project management for software development contracts,
beginning with the initial customer contract and including
(As of March 31)
Total Assets (¥ Billions)
Total Assets Turnover Ratio (Times)
(As of March 31)
Shareholders‘ Equity (¥ Billions)
Shareholders‘ Equity Ratio (%)
(Years ended March 31)
Free Cash Flow (¥ Billions)