Fujitsu 2005 Annual Report Download - page 36

34 Fujitsu Limited
Cost of Sales, Selling, General & Administrative
Expenses, and Operating Income
In fiscal 2004, the cost of sales rose ¥51.6 billion to ¥3,512.5 billion
($32,828 million), while selling, general and administrative
(SG&A) expenses declined ¥65.5 billion to ¥1,090.0 billion
($10,187 million).
The cost of sales ratio deteriorated by 1.2 percentage points
from the prior fiscal year to 73.8%, while the ratio of SG&A
expenses to net sales improved by 1.4 percentage points to 22.8%
as a result of increased efficiency, benefits from restructuring
carried out primarily at overseas operations and the reclassifica-
tion of certain subsidiaries as equity method affiliates. As a result
of the foregoing, the overall operating income margin rose by 0.2
percentage points.
Operating income was ¥160.1 billion ($1,497 million), up ¥9.8
billion over the previous fiscal year. Although operating income
was adversely impacted by lower prices and losses on projects with
deteriorating profitability in the Software & Services segment, in
the Platforms and Electronic Devices segments, despite intense
price competition, operating income grew as a result of increased
sales, progress on cost-cutting and expense controls.
■ Operating Income and Operating Income Margin
Other Income (Expenses) and Net Income
Other income, net of other expenses, totaled ¥63.3 billion ($592
million). Net interest, comprising interest and dividend income
and interest charges, resulted in a loss of ¥9.6 billion ($90 million),
an improvement of ¥7.0 billion mainly owing to a decrease in
interest-bearing loans. Equity in earnings of affiliates, net was ¥3.6
billion ($34 million), an increase of ¥4.5 billion from a loss posted
last year. Amortization of unrecognized obligation for retirement
benefits was ¥39.2 billion ($367 million), an improvement of ¥17.6
billion due to an increase in stock prices last year and the transfer
of the substitutional portion of employees’ pension funds.
Besides the previously mentioned items, other income
(expenses), during fiscal 2004 included gains from the sales of
marketable securities to bolster our financial position, as well as
on the transfer of the PDP business. Details are as follows:
· Gain on sales of marketable securities
· · · · · · · · · · · · · · · ¥133.2 billion ($1,246 million)
Sales of part of our holdings in Fanuc Ltd. and Advantest
Corporation on February 22 and 23, 2005 (¥129.2 billion) were
recorded as gain on sales of marketable securities.
· Gain on business transfer
· · · · · · · · · · · · · · · · · · ¥36.5 billion ($341 million)
A formal agreement was reached on March 25, 2005 for the
transfer of our PDP business to joint venture partner Hitachi,
Ltd. We recognized proceeds from this and other business trans-
fers as gain on business transfer.
· Restructuring charges
· · · · · · · · · · · · · · · · · · ¥20.0 billion ($188 million)
Restructuring charges were recorded as expenses relating to
reductions and relocation of personnel and disposal of assets pri-
marily at domestic manufacturing subsidiaries.
· Real estate valuation losses
· · · · · · · · · · · · · · · · · · ¥15.2 billion ($143 million)
Valuation losses on idle property holdings were reported.
We recognized ¥185.5 billion ($1,734 million) as income
taxes, which combines current and deferred income taxes, against
¥223.5 billion ($2,089 million) of income before income taxes and
minority interests. The income taxes included a valuation allow-
ance of ¥93.5 billion ($874 million) for deferred tax assets, in
addition to normal tax expenses.
Having significant tax loss carryforwards from the restruc-
turing of operations since fiscal 2001, we calculated deferred tax
assets at fiscal year-end based on projected future taxable income.
At that time, in light of the delayed recovery of taxable income
primarily from the Company’s business operations, we recorded
a valuation allowance to cover the amount in excess of what we
were likely to recover, as based on estimates of the next fiscal year’s
taxable income.
After deducting minority interests of ¥6.0 billion ($57
million), net income for the year was ¥31.9 billion ($298 million),
a decrease of ¥17.7 billion from the prior fiscal year.
2005
2004
2003
2002
2001 244
4.4
(1.5)
2.2
3.2
3.4
(74)
100
150
160
Operating Income (¥ Billions)
Operating Income Margin (%)
(Years ended March 31)