Isuzu 2012 Annual Report Download - page 20

18
Financial Section
(3) Financial conditions
1. Cash flow
Isuzu generated cash and cash equivalents (“net cash”) of ¥160.6
billion in fiscal 2012, down ¥41.6 billion from the previous year.
Net cash of ¥79.5 billion provided by operating activities offset
net cash of ¥34.7 billion used in investing activities, principally
capital expenditure, and net cash of ¥82.9 billion used in financing
activities, principally repayment of interest-bearing debt.
Free cash flow, calculated by subtracting cash flow provided by
investing activities from cash flow provided by operating activities,
resulted in a net cash inflow of ¥44.7 billion (down 58.7% from
the previous year).
Cash flow from operating activities
Cash flow from operating activities fell 41.2% to ¥79.5 billion
from the previous year. Net cash inflows of ¥101.8 billion from the
effects of accounting for income before income taxes and majority
interests and ¥35.9 billion from depreciation and amortization
offset net cash outflows of ¥48.7 billion from an increase in
inventories.
Cash flow from investing activities
Net cash used in investing activities increased 28.7% to ¥34.7
billion due primarily to an increase in expenditures associated with
the purchase of fixed assets and investments.
Cash flow from financing activities
Net cash used in financing activities increased 43.6% to ¥82.9
billion.
The change was due primarily to the Group’s repayment of
interest-bearing debt.
2. Assets
As of March 31, 2012, combined consolidated assets totaled
¥1,213.4 billion, an increase of ¥100.9 billion from the previous
year.
The main factors contributing to this increase were a ¥63.7
billion increase in notes and accounts receivable due to solid
domestic sales, increased sales following the recovery from
flooding in Thailand, and a ¥53.4 billion increase in inventories,
which offset a decrease of ¥39.3 billion in cash and time deposits
due to repayment of loans.
3. Liabilities
Total liabilities at March 31, 2012, increased ¥8.3 billion from
the previous year to ¥733.7 billion.
While notes and accounts payable increased ¥77.7 billion due
to solid domestic sales and increased sales following the recovery
from flooding in Thailand, interest-bearing liabilities decreased
¥70.5 billion compared to the previous year due to steady
repayment of loans.
4. Net assets
Net assets increased ¥92.5 billion in fiscal 2012 to ¥479.6
billion.
Net income of ¥91.2 billion was offset by an ¥8.4 billion
reduction in retained earnings due to dividend payments and
a ¥5.9 billion reduction in the foreign currency translation
adjustments account. Other factors included increases of ¥4.5
billion in unrealized holding gain on securities, ¥5.8 billion in
variance of land revaluation due in part to changes in tax rates,
and ¥5.1 billion in minority interest due to an increase in net
assets held by subsidiaries.
As a result, Isuzu’s equity ratio improved 4.7 percentage points
from a year earlier to 34.2%.
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 28, 2012.)
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
affected by the economic situation in the various countries and
regions where Isuzu sells vehicles. Therefore, economic recession
and an ensuing 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 is working to tighten its cash flow
management and shrink interest-bearing debt. During the fiscal
year under review, efforts to reduce the outstanding balance
of interest-bearing debt using profits and other funds despite a
focus on assuring cash in hand to deal with the opaque financial
environment, helped drive down the interest-bearing debt balance
at the end of fiscal 2012 to ¥203.0 billion, a decrease of ¥70.5
billion from the previous year. Concerning the cost of financing,
the Group remains vulnerable to the risk of higher interest
payments having a negative impact on its performance and
financial position should market rates rise sharply.
3. Foreign exchange fluctuations
The business of the Isuzu Group includes the manufacture
and sale of products in several regions around the world. Local
currency amounts for sales, expenses, assets, and other items
are therefore converted into Japanese yen in the preparation
of Isuzu’s consolidated financial statements. Depending on the
exchange rate in effect at the time of conversion, the yen amount
for these items may change even if the underlying currency
value has not changed. Moreover, because foreign exchange
fluctuations influence the prices paid by the Group for raw
materials denominated in foreign currencies as well as the pricing
of the products the Group sells, they may have a negative impact
on the Group’s performance and financial position. Generally,
a strengthening of the yen relative to other currencies has a
negative impact on the Group’s business, and a weakening of the
yen has a positive impact.
4. Dependence on General Motors Corporation and
other major customers
The Isuzu Group supplies vehicle components to General