Toshiba 1999 Annual Report Download - page 65

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63.
TOSHIBA ANNUAL REPORT 1999
15. NET INCOME PER SHARE:
For the years ended March 31, 1999 and 1998, the convertible debentures were not included in the computation of diluted EPS
because their inclusion would have resulted in an anti-dilutive effect and, consequently, basic EPS is equal to diluted EPS for
those two years. Weighted-average number of shares outstanding for both basic and diluted EPS for the years ended March 31,
1999 and 1998 were 3,218,983 thousand and 3,218,992 thousand, respectively.
16. FINANCIAL INSTRUMENTS:
The company operates internationally, giving rise to exposure to market risks from fluctuations in foreign currency exchange
and interest rates. In the normal course of its risk management efforts, the company employs a variety of derivative financial
instruments, which are comprised principally of foreign currency forward exchange contracts, interest rate swap agreements
and currency swap agreements, to reduce its exposures. The company does not hold or issue financial instruments for trading
purposes. The company does not anticipate any credit loss from nonperformance by the counterparties to foreign exchange
contracts, interest rate swap agreements and currency swap agreements.
The company and several subsidiaries have entered into forward exchange contracts with banks as hedges against assets and
liabilities denominated in foreign currencies. The forward exchange contracts related to accounts receivable and payable, and
commitments on future trade transactions denominated in foreign currencies mature primarily within a few months subsequent
to the balance sheet date. Gains and losses explicitly deferred, arising from contracts related to future trade transactions, are
insignificant. Forward exchange contracts related to indebtedness denominated in foreign currencies mature within a few months,
which correspond with the maturities of such indebtedness. As these foreign exchange forward contracts are utilized solely for
hedging purposes, the resulting gains or losses are offset against foreign exchange gains or losses on the underlying hedged
assets and liabilities. Gains and losses related to qualifying hedges of firm commitments denominated in foreign currencies are
deferred and are recognized in income when the hedged transaction occurs.
Interest rate swap agreements and currency swap agreements are used to limit the company’s exposure to losses in relation to
underlying debt instruments and a certain foreign currency denominated accounts receivable resulting from adverse fluctua-
tions in foreign currency exchange and interest rates. These agreements mature during the period 1999 to 2009. The related
differentials to be paid or received under the interest rate swaps are recognized in interest expense over the terms of the agree-
ments. Currency swaps are accounted for in a manner similar to the accounting for forward exchange contracts.
The company’s forward exchange contract amounts, the aggregate notional principal amounts of interest rate swap agree-
ments and the principal amounts of currency swap agreements outstanding at March 31, 1999 and 1998 are summarized below:
Thousands of
Millions of yen U.S. dollars
March 31 1999 1998 1999
Forward exchange contracts:
To sell foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥237,340 ¥241,779 $1,961,488
To buy foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,051 12,296 380,587
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426,965 454,349 3,528,636
Currency swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,867 137,866 858,405