Isuzu 2016 Annual Report Download - page 20

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Isuzu Motors Limited
cash of ¥132.9 billion provided by operating activities offset net cash
of ¥96.7 billion used in investing activities and net cash of ¥66.6
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 ¥36.2 billion (down 33.2% from the
previous year).
Cash flow from operating activities
Cash flow from operating activities declined 12.3% from the
previous year to ¥132.9 billion.
Net cash outflows of ¥17.3 billion due to increases in receivables,
¥26.6 billion due to increases in inventory, ¥20.5 billion for lease
receivables and lease investment assets, and ¥53.4 billion for income
tax and other payments offset net cash inflows of ¥186.3 billion from
the effects of accounting for profit before income taxes and majority
interests and ¥58.6 billion from depreciation and amortization.
Cash flow from investing activities
Net cash used in investing activities decreased 0.6% to ¥96.7
billion due primarily to an increase of ¥106.2 billion in expenditures
associated with the purchase of fixed assets.
Cash flow from financing activities
Net cash used in financing activities totaled ¥66.6 billion
(compared to ¥14.5 billion provided by financing activities during the
previous year).
Net cash outflows of ¥53.3 billion for repayment of long-term
debt, ¥26.6 billion for payment of dividends, ¥49.5 billion for
payments to acquire treasury stock, and ¥22.7 billion for payments of
dividends to non-controlling interests offset net cash inflows of ¥88.0
billion from long-term borrowing.
2. Assets
As of March 31, 2016, combined consolidated assets totaled
¥1,809.2 billion, an increase of ¥7.3 billion from the previous year.
While cash and time deposits and investment securities fell ¥54.0
billion and ¥11.5 billion, respectively, lease receivables and lease
investment assets rose ¥20.5 billion; inventory, ¥16.0 billion; property,
plant and equipment, ¥26.6 billion; and deferred tax assets, ¥6.9 billion.
3. Liabilities
Total liabilities at March 31, 2016, increased ¥24.1 billion from the
previous year to ¥911.6 billion.
Principal factors in the change were an increase of ¥30.9 billion
in interest-bearing debt and a decrease of ¥3.4 billion in notes and
accounts payable.
4. Net assets
Net assets decreased ¥16.8 billion in fiscal 2015 to ¥897.6 billion.
Principal factors offsetting profit attributable to owners of parent
of ¥114.6 billion included ¥26.6 billion in retained earnings associated
with dividends, ¥49.5 billion in acquisition of treasury stock, ¥32.2
billion in foreign currency translation adjustments, and ¥13.6 billion in
non-controlling interests.
As a result, Isuzu’s equity ratio decreased 0.4 points from a year
earlier to 41.5%.
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 29, 2016).
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 its products in the form of vehicles and
vehicle components to large customers including Tri Petch Isuzu Sales
Co., Ltd., (Bangkok, Thailand) as well as General Motors Corporation
(Detroit, MI) and its affiliates. 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, or
should that capacity be dramatically reduced due to an accident or