Yamaha 2008 Annual Report Download - page 57

55Annual Report 2008
Non-Operating Income and Expenses
In fiscal 2008, non-operating income decreased ¥15,142 million
year on year, from ¥21,334 million to ¥6,192 million. This mainly
reflects a decline in equity in earnings of unconsolidated subsid-
iaries and affiliates of ¥17,619 million, from ¥17,764 million to
¥145 million, resulting from the exclusion of Yamaha Motor Co.,
Ltd. from the scope of consolidation under the equity method
following the sale of a portion of Yamaha’s equity holdings in the
company. Interest and dividend income increased by ¥2,841
million to ¥3,924 million compared to ¥1,083 million the previous
fiscal year. This primarily reflected ¥1.7 billion in dividend income
received, eliminated in the consolidated financial statements up
to and including fiscal 2007, following the exclusion of Yamaha
Motor Co., Ltd. from the scope of consolidation under the equity
method. Other non-operating income decreased by ¥365 million
year on year, from ¥2,485 million to ¥2,120 million.
Non-operating expenses increased by ¥60 million year on
year, from ¥6,393 million to ¥6,453 million. Interest expense
increased ¥96 million year on year, from ¥972 million to ¥1,068
million. Cash discounts due to early payment declined from
¥4,371 million to ¥4,105 million, a decrease of ¥266 million in
year-on-year terms. Other non-operating expenses rose from
¥1,048 million to ¥1,278 million, a ¥230 million increase.
Extraordinary Income and Losses
Extraordinary income for fiscal 2008 was ¥32,725 million, up by
¥32,119 million from ¥606 million the previous fiscal year. This
primarily reflects ¥29,756 million posted as gain on sales of invest-
ments in subsidiaries and affiliates from the sale of a portion of the
Company’s equity holdings in Yamaha Motor Co., Ltd. Net gain on
sales or disposal of property, plant and equipment and sales of
investment securities also increased year on year.
Extraordinary losses were down by ¥7,331 million year on
year, to ¥2,799 million from ¥10,130 million. This resulted from
the absence of the loss on impairment of fixed assets (¥4,728
million) and structural reform expenses (¥3,146 million) posted in
the previous fiscal year.
Income Before Income Taxes and Minority Interests
As a result of the significant increase in operating income and
extraordinary income in fiscal 2008, income before income taxes
and minority interests increased by ¥29,409 million, from ¥33,101
million to ¥62,510 million year on year. The ratio of income before
income taxes and minority interests to net sales climbed from
6.0% to 11.4%, a year-on-year increase of 5.4 points.
Current Income Taxes and Deferred Income Taxes
Current and deferred income taxes, comprising corporation tax,
inhabitants’ taxes and enterprise tax, rose by ¥17,522 million on a
year-on-year basis, increasing to ¥22,263 million from ¥4,741
million the previous year due to the sale of a portion of the Com-
pany’s equity holdings in Yamaha Motor Co., Ltd. Until fiscal 2007,
the income tax burden ratio had been low, in part because income
before income taxes and minority interests included equity in
earnings of unconsolidated subsidiaries and affiliates not subject to
taxation. In fiscal 2008, the actual effective tax rate rose to 35.6%,
due to the exclusion of Yamaha Motor Co., Ltd. from the scope of
consolidation under the equity method, among other factors.
Minority Interests
Minority interests in fiscal 2008 were ¥689 million, an increase
of ¥196 million compared to the ¥493 million recorded in the
previous year.
Net Income
As a result of the foregoing, net income for the year ended March
31, 2008 increased by ¥11,692 million, climbing from ¥27,866
million to ¥39,558 million. The ratio of net income to net sales rose
to 7.2%, up 2.1 points from 5.1% in the previous year. Net income
per share equaled ¥191.76, compared with ¥135.19 in fiscal 2007.
Fluctuation in Foreign Exchange Rates and
Risk Hedging
Sales at overseas consolidated subsidiaries are calculated using
the average exchange rates recorded during the year. On this
basis, in fiscal 2008, the yen rose by ¥3 against the U.S. dollar
compared with the previous year, to ¥114 per U.S.$1. The year-
on-year effect of this change was a decrease of ¥2.1 billion in
sales at overseas consolidated subsidiaries. The yen depreciated
by ¥12 against the euro year on year for an average exchange
rate of ¥162 to €1, resulting in a gain of ¥5.6 billion in sales.
Overall, the net effect on sales of foreign exchange rate move-
ments, including fluctuations of the yen against such other cur-
rencies as the Australian and Canadian dollars, was a gain of
¥6.8 billion compared with fiscal 2007.
In operating income, the average yen settlement rate against
the U.S. dollar during the year under review was ¥116 to U.S.$1,
representing an appreciation of ¥1 relative to the previous year
and a loss of ¥100 million. The average settlement rate against
the euro was ¥159 to €1, a depreciation of ¥15. The effect of
this on operating income was a gain of ¥6.2 billion. Including the
effects of other currencies, the net effect on operating income of
exchange rate movements was a gain of ¥6.7 billion compared
with the previous fiscal year.
Yamaha undertakes most of its hedging operations against
currency risks in Japan. U.S.-dollar-related currency fluctuation
risks are hedged by marrying risk associated with dollar receipts
from exports with risk associated with dollar payments for
imported products. The Company hedges the value of risks
associated with the euro and the Australian and Canadian dol-
lars by projecting related export revenues and purchasing rel-
evant three-month currency forwards.