Isuzu 2014 Annual Report Download - page 20

18 Isuzu Motors Limited ■ Annual Report 2014
(3) Financial conditions
1. Cash flow
Isuzu generated cash and cash equivalents (“net cash”) of
¥210.7 billion in fiscal 2014, up ¥32.8 billion from the previous
year. Net cash of ¥159.2 billion provided by operating activities
offset net cash of ¥110.3 billion used in investing activities and net
cash of ¥38.4 billion used in financing activities.
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 ¥48.8 billion (down 38.7% from
the previous year).
Cash flow from operating activities
Cash flow from operating activities rose 16.1% to ¥159.2 billion
from the previous year.
Net cash inflows of ¥188.4 billion from the effects of
accounting for income before income taxes and majority interests
and ¥42.0 billion from depreciation and amortization offset net
cash outflows of ¥55.6 billion stemming from income tax and
other payments.
Cash flow from investing activities
Net cash used in investing activities increased 92.1% to ¥110.3
billion due primarily to an increase in expenditures associated with
the purchase of fixed assets.
Cash flow from financing activities
Net cash used in financing activities fell 46.7% to ¥38.4 billion.
The change was due primarily to the Group’s repayment of
interest-bearing debt and its payment of dividends.
2. Assets
As of March 31, 2014, combined consolidated assets totaled
¥1,521.7 billion, an increase of ¥180.9 billion from the previous
year.
The figure includes ¥50.0 billion in cash and time deposits as
well as ¥71.7 billion in property, plant and equipment.
3. Liabilities
Total liabilities at March 31, 2014, increased ¥32.9 billion from
the previous year to ¥752.8 billion.
A decline in accrued retirement benefits of ¥68.7 billion
associated with the application of new accounting standards
offset an increase of ¥97.4 billion in liabilities associated with
retirement benefits.
4. Net assets
Net assets increased ¥147.9 billion in fiscal 2014 to ¥768.9
billion.
Key factors included net income of ¥119.3 billion.
As a result, Isuzu’s equity ratio improved 2.1 points from a year
earlier to 41.6%.
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, 2014).
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
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 constantly working to tighten its cash
flow management. 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, debt, 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 exchange rate 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.
4. Dependence on major customers
The Isuzu Group supplies vehicle components to General
Motors Corporation (Detroit, MI) and its affiliates as well as
to other vehicle manufacturers. Sales to these customers are
affected by fluctuations in production and sales at these customer
companies and other factors over which the Isuzu Group has no
control, and therefore they could have a negative impact on the
Group’s performance and financial position.
5. Suppliers and other providers of parts, materials, etc.
The Isuzu Group sources the raw materials, components, and
products required for production from outside suppliers. Should
supply-demand conditions significantly exceed suppliers’ capacity,