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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Nine Entertainment Co Holdings Limited | ASX:NEC | Australian Stock Exchange | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.01 | 0.71% | 1.425 | 1.42 | 1.425 | 1.435 | 1.40 | 1.415 | 2,542,065 | 07:10:27 |
RNS Number:3842K NEC Corporation 25 April 2003 April 24, 2003 Full Year Consolidated Financial Results for the Fiscal Year Ended March 31, 2003 Consolidated Financial Results Fiscal Year Ended March Fiscal Year Ended March Increase 31, 2003 31, 2002 (Decrease) In billions of yen In billions of yen % Net sales 4,695.0 5,101.0 (8.0) Operating income (loss) 120.8 (55.5) - Income (loss) before income taxes 61.4 (461.1) - Loss before cumulative effect of (24.5) (309.4) - accounting change Net loss (24.5) (312.0) - yen yen yen Per share of common stock: Loss before cumulative effect of accounting change: Basic: (14.85) (187.06) - Diluted: (14.85) (187.06) - Net loss : Basic: (14.85) (188.63) - Diluted: (14.85) (188.63) - In billions of yen In billions of yen % Total assets: 4,103.3 5,010.8 (18.1) Number of employee: 145,807 141,909 - (Notes) 1. The consolidated financial statements of NEC are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP 2. Number of consolidated subsidiaries and affiliated companies accounted for by the equity method: Fiscal year ended March Fiscal year ended March 31, 2003 31, 2002 Consolidated subsidiaries 183 169 Affiliated companies accounted for by the 17 13 equity method -------------------------------------------------------------------------------- Background to the Financial Results for the Fiscal Year Ended March 31, 2003 1. Fundamental Management Policy In the fiscal year ended March 31, 2003, the severity of the market conditions remained severe due mainly to weak communications infrastructure equipment market and the slowdown in the domestic information technology ("IT") investment, triggered by the global effect of the long-term IT recession of the U.S. Nevertheless, we are in an age where corporate, countries and local government are implementing systems built on an Internet-based infrastructure. Moreover, the spread of Internet broadband services combined with higher performance personal computers ("PCs") and servers are enabling data to be distributed and processed in great volumes. This in turn makes it possible for consumer electronics products, cars, game machines and other consumer devices to connect each other through the Internet, and for mobile handsets to transmit and receive high-quality moving and video, as well as precise positioning data. In addition, it also becomes possible to track a product with ultra-small chip and wireless functions, creating a ubiquitous computing environment where people and things can be interconnected constantly. In this environment, NEC aims to provide a new level of integrated solutions combining IT and network technologies. 2. Mid- to Long-Term Business Strategy In April 2000, NEC began its first phase of structural reforms and introduced the in-house company system consisting of three in-house companies, each operating in accordance with its own unique criteria to provide solutions in the fields of IT, networks and electron devices. As a result of the structural reforms, NEC achieved, among other things, the elimination of "back-scratching" among its internal business units, conversion to solution-oriented operations, business restructuring, integration and reorganization of NEC's affiliated companies and the enhancement of corporate governance. During these three years, however, the external environment underwent serious changes stemming from intensified international price competition due to the rise of Chinese corporations, the development of network technology, the development of integrated technologies in IT and network, and changes in the competitive structure of the semiconductor industry. NEC responded to these business environmental changes by launching its second phase of structural reforms in May 2002. Recognizing the differences of customer needs in its fields of operation and the different approaches required to gain a competitive edge in these fields, NEC divided its business domain into two main areas: IT-Network Integrated Solutions and Semiconductor Solutions. The aim of this second phase is to realize a significant increase in the corporate value of the NEC group by concentrating management resources in each field of business. 1. IT-Network Integrated Solutions On April 1, 2003, former NEC Solutions and NEC Networks shifted from an in-house company structure to a structure based on nine business lines to promote open and flat operations and enhance IT-Network Integrated Solutions. The Domestic Sales Business line is responsible for sales in the rapidly growing IT-Network Integrated Solutions market. An executive officer has been appointed to implement an effective integrated solutions system and enhance the development of software and hardware in the area of IT-Network fusion technology. 2. Semiconductor Solutions On November 1, 2002, NEC separated its semiconductor business (except general-purpose DRAMs) to the newly established NEC Electronics Corporation ("NEC Electronics"). As a semiconductor solution specialist, NEC Electronics is aiming to satisfy customer needs through its differentiated technologies, focusing particularly on system LSIs. The purpose of this corporate separation has been to maximize the corporate value as a semiconductor solution specialist and to build a global company with a solid financial base by implementing the fund raising that suits the investment-intensive characteristics of the business. As strategic partners, NEC and NEC Electronics aim to capitalize on their synergies as strategic partners on both business and technical level. 3. Growth Strategy NEC is currently grappling with the challenge of how to increase its shareholder equity. The bursting of the IT bubble left IT related companies across the globe recording huge losses. NEC was no exception; however, by decisively implementing structural reforms to eliminate the negative business practices of the past, NEC has been able to endure through the downturn, reinvigorate business, and make a return to business profitability. Nevertheless, factors such as restructuring costs, stock market downturn, and loss in weight of pension trusts assets have contributed to reducing NEC's shareholder equity. To recover and increase shareholder equity, it is firstly imperative for NEC to increase the profits obtained from ordinary business activities. Therefore, NEC intends to revitalize its business structure and to carry forward with its new business strategy for growth, to realize such strategy, and to implement innovative management ideas. First, measures for business revitalization include continued enhancement of innovations in production and supply-chain-management, as well as improved profitability and financial condition through further reductions in materials costs and reduction of assets. These measures will help to establish a healthy business from which profits can be obtained even under deflationary economic conditions, thus restoring business productivity. Next, the new emphasis on strategy for growth is based on two main concepts, the first of which is providing services that integrate the IT solution and network solution. Overlaps in the fields of IT and network have appeared due to the increasingly sophisticated use of information systems and diversification of communications services. NEC will strive to maximize its strength in both of these fields to generate new demand. Furthermore, NEC also aims to offer total solutions by providing hardware and software building network infrastructure, and developing and operating business application software. The second concept is global business expansion. One measure to achieve this concept is to strengthen the IT solution business in four global regions: Europe, China/Taiwan, Asia/Pacific, and North America, and implement a flat business management in each region. Another pillar of global expansion is the mobile terminal area of the Network Solutions business. Based on a solid domestic foundation, NEC will actively introduce its products in overseas market, focusing particularly in Europe and China. NEC intends to adopt innovative management practices to realize the foregoing concepts of strategy for growth. By creating a new management structure based on its business units, NEC aims to achieve open and flat operations that concentrate on the market and customers, making it possible to satisfy the increased market demands accompanying development of fusion of IT and network technologies. NEC's overall aim is to create a corporate spiritual climate where the guiding principles are market and customer oriented, and where customer satisfaction is the byword in all activities. Through these measures, NEC will achieve global excellence. 4. Basic Policy and Implementation Status of Plan Regarding Corporate Governance NEC believes that strong corporate governance is vital in maximizing its corporate value, which embodies the company's value for its shareholders, customers, and employees. Recognizing this, NEC aims to strengthen its corporate governance as follows, in accordance with the three principles: (i) transparency and integrity of management, (ii) clear accountability, and (iii) timely and fair disclosure. 1. Separation of supervision and execution To achieve fast decision-making and clearly delineate business responsibilities, NEC established an executive officer system in April 2000, and at the same time, reduced the number of board members from 37 to 19 (14 as of March 31, 2003). 2. Addition of outside members to board of directors To strengthen the supervisory function of the board of directors, to raise the management integrity, and to make the decision-making process more transparent, NEC plans to increase the number of independent board members to approximately five, with the aim of creating a board structure in which one third of the members are outside board members. One outside board member assumed office in fiscal 2002, bringing the total of outside board members as of March 31, 2003 to three. 3. Auditing system The corporate auditors are appointed at the shareholders meeting and independently audit the legitimacy of the duties carried out by the directors. The board of corporate auditors consists of two full-time corporate auditors and two outside auditors (as of March 31, 2003). 4. Management advisory committee In January 2001, the Management Advisory Committee was established as an advisory organization for top management. The committee consists of 11 members: five from outside, and six board members (as of March 31, 2003). The committee was held four times in fiscal 2003 to discuss the mid-term management strategy of NEC and other management matters. 5. Compensation committee In January 2001, the Compensation Committee was established to debate the appropriateness of remuneration, bonuses and stock options provided to the directors and executive officers. The Compensation Committee consists of five members, including two outside members (as of March 31, 2003). The Compensation Committee was held twice in fiscal 2003 to discuss revisions to directors' compensation levels and the compensation system. 6. Disclosure of quarterly financial results With a view to emphasizing timely and fair disclosure, NEC started publishing business results on a quarterly basis from fiscal 2002, and endeavors to announce its financial results as soon as possible following the close of each reporting period. 5. Business Results 1. Overview of the fiscal year ended March 31, 2003 and outlook for the fiscal year ending March 31, 2004 Although the world economy showed signs of a modest recovery especially in the U.S. and Asia during the first half ended September 30, 2002, uncertainty intensified in the second half ended March 31, 2003 due mainly to the aggravation of the situation in Iraq. Regarding Japans economy, exports mainly to the U.S. and Asia expanded in the first half, and personal consumption made relatively steady progress, leading the economy towards recovery. However, in the second half, concerns over the slowdown of business conditions increased, as shown by the fact that the favorable trend of exports began to slow down, the stock prices fell as uncertainty grew regarding the future of the world economy due to the disruptive situation in Iraq, and personal consumption slowed down. In the electronics industry, although demand for systems integration (SI) services and digital consumer products grew steadily, demand for PC and communication equipment remained flat and the general weakness in the market continued. Moreover, the business environment surrounding NEC changed dramatically including advancement of technology integration in the fields of IT and network, the competitive structure of the semiconductor industry, the intense price competition stemming from the rise of new Chinese companies and the development of horizontal international specialization system through providers of electronic manufacturing services (EMS). Consolidated financial results Consolidated net sales for the fiscal year ended March 31, 2003 decreased by 8%, to 4,695.0 billion yen, as compared with the previous fiscal year due mainly to decrease in sales for network infrastructure equipment and mobile terminals. Despite the decrease in consolidated net sales, as a result of restructuring measures implemented in the previous fiscal year that reduced fixed expenses and costs, NEC recorded a consolidated operating income of 120.8 billion yen (an increase of 176.4 billion yen as compared with the previous fiscal year). Income before income taxes was 61.4 billion yen (an improvement of 522.6 billion yen as compared with the previous fiscal year). NEC incurred consolidated net loss of 24.5 billion yen despite its 287.4 billion yen improvement as compared with the previous fiscal year. This was mainly due to the equity in losses of affiliated companies resulting from weak operating results of semiconductor companies and the write down of deferred income tax assets resulting from the introduction of a corporate activity tax (gaikei hyojun kazei). Regarding the fiscal year ending March 31, 2004, although NEC anticipates continuing difficult conditions for the telecommunications infrastructure business, advancing forward with its mobile handset business planned in overseas markets, NEC is aiming to slightly increase its consolidated net sales over the fiscal year ended March 31, 2003 to 4,800.0 billion yen. Due to strong achievements in company-wide restructuring and reductions in material costs, NEC plans an operating income of 45.0 billion yen for the first half ending September 30, 2003 and 180.0 billion yen for the second half ending March 31, 2004 respectively. Regarding consolidated net income, NEC plans a net income of 3 billion yen for the first half and 30.0 billion yen for the second half respectively. - Consolidated - Comparison with the fiscal year ended March 31, 2003: Net sales 4,800.0 billion yen +2% Operating income 180.0 billion yen Increased by 59.2 billion yen Income before income taxes 120.0 billion yen Increased by 58.6 billion yen Net income 30.0 billion yen Increased by 54.5 billion yen - Non-consolidated - Comparison with the fiscal year ended March 31, 2003: Net sales 2,400.0 billion yen -14% Ordinary income 35.0 billion yen Increased by 28.9 billion yen Net income 15.0 billion yen Increased by 29.9 billion yen 2. Results by operating segments (including inter-segment transactions and profit/ loss figures) Sales and segment profit or loss of NEC's main segments were as follows (figures in brackets denote increase or decrease from the previous fiscal year): IT Solutions Business Sales: 2,082.6 billion yen (-6%) Segment profit: 105.8 billion yen (+30.4 billion yen) Sales for the IT Solutions business for the fiscal year ended March 31, 2003 were 2,082.6 billion yen, a decrease of 6% as compared with the previous fiscal year. Sales of main product areas were as follows: In the area of SI services/software, sales increased by 4% to 541.7 billion yen over the previous fiscal year. This was mainly due to steady growth in sales for SI services for governments and public offices, and the electrical power and broadcast media industries that were tackling the provision of broadband services and digitalization of broadcasting. In the area of Internet services/ support services, sales increased by 4% to 350.3 billion yen over the previous fiscal year due mainly to growth in sales for BIGLOBE's value-added services. In the area of hardware, sales of servers, storage products and workstations decreased by 18% to 363.1 billion yen over the previous fiscal year, primarily due to decreased sales volumes as compared with the previous fiscal year in which NEC had large scale orders. Segment profit of IT Solutions business increased by 30.4 billion yen to 105.8 billion yen as compared with the previous fiscal year, due mainly to improved profitability resulting from structural reforms of the PC business, and increased sales for SI services/software. Network Solutions Business Sales: 1,576.3 billion yen (-20%) Segment profit: 34.2 billion yen (-19.1 billion yen) Sales for Network Solutions business decreased by 20% to 1,576.3 billion yen compared to the previous fiscal year. Regarding sales by main product areas, sales for network infrastructure decreased by 23% to 893.9 billion yen as compared with the previous fiscal year due to continuing weakness in the global telecommunications market. Sales for mobile terminals decreased by 24% to 439.2 billion yen compared to the previous fiscal year when domestic shipments were favorable. With respect to sales in the remaining business areas, an increase in shipments for domestic airborne signal digital broadcasting equipment resulted in an increase in sales of 13% to 243.2 billion yen as compared with the previous fiscal year. Despite a decrease in overall sales and an adverse business environment, segment profit of Network Solutions business was 34.2 billion yen, a decrease of 19.1 billion yen as compared with the previous fiscal year. The reduced sales were partially offset by a reduction of fixed expenses and costs, resulting from restructuring measures which NEC had been implementing since the previous fiscal year. Electron Devices Business Sales: 936.7 billion yen (+11%) Segment loss: 2.2 billion yen (improved by 145.8 billion yen) Sales for Electron Devices business for the fiscal year ended March 31, 2003 were 936.7 billion, an 11% increase as compared with the previous fiscal year. Regarding sales by main product areas, sales for semiconductors increased by 10% to 706.7 billion yen as compared with the previous fiscal year due to the steady growth especially in semiconductors for consumer electronic products, mobile handsets and automobiles. In the area of displays, although shipments increased for plasma display panels, (i) the reduction in business for color liquid crystal displays ("LCDs") for commodity PCs where there was rapid price decline and poor profitability and (ii) the shift to LCDs used in industrial applications resulted in sales of 97.9 billion yen, a 4 % decrease compared to the previous fiscal year. Sales for electronic components and others increased by 34% to 132.1 billion yen as compared with the previous fiscal year, mainly due to the new consolidation of NEC Tokin Corporation as a result of business integration of the NEC's electronic components businesses into NEC Tokin Corporation. Segment loss of Electron Devices business was 2.2 billion yen, an improvement of 145.8 billion yen as compared with the previous fiscal year. This was due to (i) the restructuring measures that reduced fixed expenses, (ii) the strengthening of the profit base by withdrawal from certain unprofitable product lines and shifting to high value-added products, and (iii) an increase in shipments of semiconductors and plasma display panels. 6. Financial Condition Net cash provided by operating activities for the fiscal year ended March 31, 2003 was 247.5 billion yen. Despite the consolidated net loss of 24.5 billion yen, this result was achieved through reductions in inventories and accounts receivable by further promotion of asset efficiency. This result was an improvement of 110.8 billion yen as compared with the previous fiscal year, mainly due to a large decrease in the consolidated net loss. Net cash used in investment activities was 11.5 billion yen, a decrease of 191.9 billion as compared with the previous fiscal year. This was principally due to a decrease in expenditures relating to the purchase of fixed assets as a result of selective and focused capital expenditures, and an increase in proceeds from the sale of marketable securities fading in importance of holding. As a result, the free cash flows (the total of cash flows from operating activities and cash flows from investing activities) were cash in flow of 235.9 billion yen, an improvement of 302.8 billion yen as compared with the previous fiscal year. Net cash used in financing activities was 262.7 billion yen due to the redemption of corporate bonds and a decrease in commercial paper. Cash and cash equivalents amounted to 344.3 billion yen, a decrease of 33.4 billion yen as compared with the end of the previous fiscal year. The balance of interest-bearing debt amounted to 1,487.0 billion yen, a decrease of 772.6 billion yen as compared with the end of the previous fiscal year mainly due to the fact that free cash flows were improved and that NEC Leasing, Ltd. became NEC's affiliated company accounted for by the equity method. Debt equity ratio was 4.15 times (an increase of 0.15 points as compared with the end of the previous fiscal year) mainly due to a decrease in shareholders' equity due to an increase in the amount of minimum pension liability adjustment resulting from the change in discount rate. Each Index Fiscal Year 2001 Fiscal Year 2002 Fiscal Year 2003 Shareholders' equity 19.0% 11.3% 8.7% ratio Shareholders' equity 68.6% 35.5% 15.7% ratio on market value basis Redemption years 5.1 years 14.4 years 7.6 years Interest coverage ratio 5.6 2.9 8.2 Calculation methods for each of the above indices: Shareholders' equity ratio: Shareholders' equity at the end of each period / total assets at the end of each period Shareholders' equity ratio on market value basis: Aggregated market value of shares at the end of each fiscal year / total assets at the end of each period Redemption years: Interest-bearing debt / cash flows from operating activities * Interest-bearing debt = (Interest-bearing debt at the beginning of the fiscal year + Interest-bearing debt at the end of the fiscal year) /2 Interest coverage ratio: Cash flows from operating activities / interest paid The indices above were calculated based on consolidated financial figures. (Note 1.) On April 1, 2001, NEC adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB statement No. 133." These statements require an entity to recognize all derivatives as either assets or liabilities in the balance sheet and to measure those instruments at fair value. The cumulative effect from the adoption of these standards is disclosed as "cumulative effect of accounting change, net of tax" in the condensed consolidated statements of operations. (Note 2.) For the third quarter of the fiscal year ended March 31, 2003, as a result of the establishment of NEC Electronics Corporation by corporate separation, NEC Electron Devices no longer exists as NEC's in-house company. Therefore, the segment name was changed from NEC Electron Devices to Electron Devices business. The business structure of Electron Devices business is the same as that of the former NEC Electron Devices. Additionally, from April 1, 2003, in line with the termination of the in-house company system, the segment names of NEC Solutions and NEC Networks have been changed as below. Previous segment name New segment name NEC Solutions IT Solutions business NEC Networks Network Solutions business *The business structure of each segment remains the same as the former in-house company structure. Operating income (loss) set forth above is a measure commonly used by companies reporting in accordance with accounting principles generally accepted in Japan. Management believes this measure is useful to investors in comparing NEC's results of operations to other Japanese companies. This measure, however, should not be construed as an alternative to "income (loss) before income taxes" or "net income (loss)" as determined in accordance with U.S. GAAP. Please refer to the condensed consolidated statement of operations for the calculation of the operating income (loss). *** -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Millions of yen, millions of U.S. dollars) Fiscal (% of net Fiscal (% of net Increase Fiscal 2003 sales) 2002 sales) (decrease) 2003 JPY JPY Net sales 4,695,035 (100.0) 5,101,022 (100.0) (JPY 405,987) $39,788 Cost of sales 3,453,010 (73.5) 3,919,268 (76.8) (466,258) 29,263 Selling, general and administrative expenses 1,121,136 (23.9) 1,237,276 (24.3) (116,140) 9,501 Operating income (loss) 120,889 (2.6) (55,522) (-1.1) 176,411 1,024 Non-operating income 153,597 (3.3) 110,390 (2.2) 43,207 1,302 Interest and dividends 18,396 15,754 2,642 156 Other 135,201 94,636 40,565 1,146 Non-operating expenses 212,990 (4.6) 516,051 (10.1) (303,061) 1,805 Interest 30,218 46,673 (16,455) 256 Other 182,772 469,378 (286,606) 1,549 Income (loss) before income taxes 61,496 (1.3) (461,183) (-9.0) 522,679 521 Provision (benefit) for income taxes 58,714 (1.3) (178,173) (-3.5) 236,887 498 Minority interest in income of consolidated 6,896 (0.1) 2,574 (0.1) 4,322 58 subsidiaries Equity in losses of affiliated companies (20,444) (-0.4) (23,841) (-0.5) 3,397 (173) Loss before cumulative effect of accounting (24,558) (-0.5) (309,425) (-6.1) 284,867 (208) change,net of tax Cumulative effect of accounting change, net - - (2,595) (0.0) 2,595 - of tax Net loss (JPY 24,558) (-0.5) (JPY 312,020) (-6.1) JPY 287,462 $(208) (Note) US dollar amounts are translated from yen, for convenience only, at the rate of US$1 = 118 yen. CONDENSED CONSOLIDATED BALANCE SHEETS (Millions of yen, millions of U.S.dollars) March 31, March 31, Increase March 31, 2003 2002 (decrease) 2003 Current assets JPY 1,920,042 JPY 2,405,036 (JPY 484,994) $16,271 Cash and cash equivalents 344,345 377,772 (33,427) 2,918 Notes and accounts receivable, trade 821,985 905,069 (83,084) 6,966 Current portion of investment in leases - 251,947 (251,947) - Inventories 553,820 650,043 (96,223) 4,693 Other current assets 199,892 220,205 (20,313) 1,694 Long-term assets 2,183,258 2,605,847 (422,589) 18,503 Long-term receivables, trade 33,073 45,073 (12,000) 280 Investments and advances 433,027 576,005 (142,978) 3,670 Investment in leases - 254,814 (254,814) - Property, plant and equipment 838,341 959,577 (121,236) 7,105 Other assets 878,817 770,378 108,439 7,448 Total assets JPY 4,103,300 JPY 5,010,883 (JPY 907,583) $34,774 Current liabilities JPY 1,774,224 JPY 2,210,341 (JPY 436,117) $15,036 Short-term borrowings and current portion of long-term 483,306 760,827 (277,521) 4,096 debt Notes and accounts payable, trade 875,018 938,955 (63,937) 7,415 Other current liabilities 415,900 510,559 (94,659) 3,525 Long-term liabilities 1,737,219 2,005,610 (268,391) 14,722 Long-term debt 1,003,787 1,498,878 (495,091) 8,507 Accrued pension and severance costs 705,551 467,561 237,990 5,979 Other 27,881 39,171 (11,290) 236 Minority shareholders' equity in consolidated 135,613 132,817 2,796 1,149 subsidiaries Preferred securities issued by a subsidiary 97,800 97,200 600 829 Common stock 244,726 244,726 - 2,074 Additional paid-in capital 358,568 359,501 (933) 3,039 Retained earnings 41,567 66,125 (24,558) 352 Accumulated other comprehensive income (loss) (286,417) (105,437) (180,980) (2,427) Total shareholders' equity 358,444 564,915 (206,471) 3,038 Total liabilities and shareholders' equity JPY 4,103,300 JPY 5,010,883 (JPY 907,583) $34,774 CONDENSED CONSOLIDATED BALANCE SHEETS ( SUPPLEMENTARY INFORMATION ) (UNAUDITED) (Millions of yen, millions of U.S.dollars) March 31, March 31, Increase March 31, 2003 2002 (decrease) 2003 Current assets JPY 1,920,042 JPY 2,125,329 (JPY 205,287) $16,271 Cash and cash equivalents 344,345 348,021 (3,676) 2,918 Notes and accounts receivable, trade 821,985 938,179 (116,194) 6,966 Inventories 553,820 650,043 (96,223) 4,693 Other current assets 199,892 189,086 10,806 1,694 Long-term assets 2,183,258 2,338,542 (155,284) 18,503 Long-term receivables, trade 33,073 45,950 (12,877) 280 Investments and advances 433,027 595,007 (161,980) 3,670 Property, plant and equipment 838,341 939,470 (101,129) 7,105 Other assets 878,817 758,115 120,702 7,448 Total assets JPY 4,103,300 JPY 4,463,871 (JPY 360,571) $34,774 Current liabilities JPY 1,774,224 JPY 2,061,102 (JPY 286,878) $15,036 Short-term borrowings and current portion of long-term 483,306 577,105 (93,799) 4,096 debt Notes and accounts payable, trade 875,018 985,326 (110,308) 7,415 Other current liabilities 415,900 498,671 (82,771) 3,525 Long-term liabilities 1,737,219 1,623,442 113,777 14,722 Long-term debt 1,003,787 1,119,634 (115,847) 8,507 Accrued pension and severance costs 705,551 466,475 239,076 5,979 Other 27,881 37,333 (9,452) 236 Minority shareholders' equity in consolidated 135,613 117,212 18,401 1,149 subsidiaries Preferred securities issued by a subsidiary 97,800 97,200 600 829 Common stock 244,726 244,726 - 2,074 Additional paid-in capital 358,568 359,501 (933) 3,039 Retained earnings 41,567 66,125 (24,558) 352 Accumulated other comprehensive income (loss) (286,417) (105,437) (180,980) (2,427) Total shareholders' equity 358,444 564,915 (206,471) 3,038 Total liabilities and shareholders' equity JPY 4,103,300 JPY 4,463,871 (JPY 360,571) $34,774 (Note) In the condensed consolidated balance sheets at the end of March 31, 2002 on this page, the investment in a leasing subsidiary is accounted for by the equity method. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of yen, millions of U.S.dollars) Fiscal Fiscal 2002 Increase Fiscal 2003 (decrease) 2003 I. Cash flows from operating activities: Net loss (JPY 24,558) (JPY 312,020) JPY 287,462 $(208) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 195,594 234,738 (39,144) 1,658 Equity in losses of affiliated companies, net of dividends 22,006 28,030 (6,024) 186 Decrease in notes and accounts receivable 116,340 169,628 (53,288) 986 Decrease in inventories 79,343 216,062 (136,719) 672 Decrease in notes and accounts payable (109,387) (178,878) 69,491 (927) Other, net (31,835) (20,923) (10,912) (270) Net cash provided by operating activities 247,503 136,637 110,866 2,097 II. Cash flows from investing activities: Proceeds from sales of fixed assets 99,722 56,094 43,628 845 Additions to fixed assets (210,261) (295,585) 85,324 (1,782) Proceeds from sales of marketable securities 71,919 21,017 50,902 609 Purchase of marketable securities (2,277) (2,482) 205 (19) Other, net 29,311 17,420 11,891 249 Net cash used in investing activities (11,586) (203,536) 191,950 (98) Free cash flows (I + II) 235,917 (66,899) 302,816 1,999 III. Cash flows from financing activities: Net repayment of bonds and borrowings (272,448) (37,007) (235,441) (2,309) Proceeds from preferred securities issued by a subsidiary - 97,000 (97,000) - Dividends paid (7,291) (15,948) 8,657 (62) Other, net 16,990 11,609 5,381 144 Net cash provided by (used in) financing activities (262,749) 55,654 (318,403) (2,227) Effect of exchange rate changes on cash and cash equivalents (6,595) 2,182 (8,777) (55) Net decrease in cash and cash equivalents (33,427) (9,063) (24,364) (283) Cash and cash equivalents at beginning of year 377,772 386,835 (9,063) 3,201 Cash and cash equivalents at end of year JPY 344,345 JPY 377,772 (JPY 33,427) $2,918 SEGMENT INFORMATION 1.Operating Segment Information (1) Net Sales (Including internal sales to other segments) (Millions of yen, millions of U.S. dollars) Fiscal 2003 (% of total) % change Fiscal 2002 (% of total) Fiscal 2003 IT Solutions business JPY 2,082,624 (44.4) -5.7 JPY 2,209,093 (43.3) $17,649 Network Solutions business 1,576,333 (33.6) -19.5 1,957,169 (38.4) 13,359 Electron Devices business 936,719 (20.0) +11.1 842,878 (16.5) 7,938 Others 661,694 (14.0) +4.2 634,778 (12.4) 5,608 Eliminations (579,867) (-12.4) - (589,132) (-11.5) (4,915) Electronics business total 4,677,503 (99.6) -7.5 5,054,786 (99.1) 39,639 Leasing business 38,222 (0.8) -46.7 71,759 (1.4) 324 Eliminations (20,690) (-0.4) - (25,523) (-0.5) (175) Consolidated total JPY 4,695,035 (100.0) -8.0 JPY 5,101,022 (100.0) $39,788 (2) Segment Profit or Loss (Millions of yen, millions of U.S. dollars) Fiscal 2003 (% of profit on Increase Fiscal 2002 (% of profit on Fiscal sales) (decrease) sales) 2003 IT Solutions business JPY 105,815 (5.1) JPY 30,425 JPY 75,390 (3.4) $897 Network Solutions business 34,284 (2.2) (19,163) 53,447 (2.7) 291 Electron Devices business (2,282) (-0.2) 145,877 (148,159) (-17.6) (19) Others 14,838 (2.2) 11,850 2,988 (0.5) 125 Eliminations 156 - 3,513 (3,357) - 1 Unallocated corporate expenses* (38,486) - 1,264 (39,750) - (326) Electronics business total 114,325 (2.4) 173,766 (59,441) (-1.2) 969 Leasing business 8,154 (21.3) 1,848 6,306 (8.8) 69 Eliminations (1,590) - 797 (2,387) - (14) 120,889 (2.6) 176,411 (55,522) (-1.1) 1,024 Other income 153,597 43,207 110,390 1,302 Other expenses (212,990) 303,061 (516,051) (1,805) Consolidated income(loss) before JPY 61,496 JPY 522,679 (JPY 461,183) $521 income taxes (Notes) * Corporate expenses include general corporate expenses and research and development expenses at NEC Corporation which are not allocated to any operating segment. (3) Net Sales to External Customers(Unaudited) (Billions of yen, millions of U.S. dollars) Fiscal 2003 % change Fiscal 2002 Fiscal 2003 IT Solutions business JPY 1,911.3 -6.9 JPY 2,053.5 $16,197 Domestic 1,647.7 -6.2 1,756.4 13,964 Overseas 263.5 -11.3 297.0 2,233 Network Solutions business 1,473.2 -21.1 1,866.6 12,485 Domestic 1,094.0 -18.2 1,337.9 9,271 Overseas 379.2 -28.3 528.7 3,214 Electron Devices business 842.4 +21.3 694.5 7,139 Domestic 527.3 +32.3 398.7 4,469 Overseas 315.1 +6.5 295.8 2,670 Others 437.2 +3.1 423.9 3,706 Domestic 344.7 -3.1 355.7 2,922 Overseas 92.4 +35.7 68.1 784 Electronics business total 4,664.2 -7.4 5,038.6 39,527 Domestic 3,613.8 -6.1 3,848.8 30,626 Overseas 1,050.3 -11.7 1,189.8 8,901 Leasing business 30.7 -50.6 62.3 261 Domestic 30.7 -50.6 62.3 261 Overseas - - - - Consolidated total JPY 4,695.0 -8.0 JPY 5,101.0 $39,788 Domestic 3,644.6 -6.8 3,911.1 30,887 Overseas 1,050.3 -11.7 1,189.8 8,901 (4) Net Sales by Products and Services (Including internal sales to other segments)(Unaudited) (Billions of yen, millions of U.S. dollars) Fiscal 2003 % change Fiscal 2002 Fiscal 2003 IT Solutions business JPY 2,082.6 -5.7 JPY 2,209.0 $17,649 Systems Integration Services /Software 541.7 +4.1 520.3 4,591 Internet Services/Support Services 350.3 +4.3 336.0 2,969 Servers/Storage Products/Workstations 363.1 -18.1 443.5 3,077 Personal Products 683.4 -7.3 737.1 5,792 Other Hardware 144.1 -16.3 172.1 1,220 Network Solutions business JPY 1,576.3 -19.5 JPY 1,957.1 $13,359 Network Infrastructure 893.9 -23.4 1,167.6 7,575 Mobile Terminals 439.2 -23.5 573.8 3,722 Other 243.2 +12.7 215.7 2,062 Electron Devices business JPY 936.7 +11.1 JPY 842.8 $7,938 Semiconductors 706.7 +9.9 642.9 5,989 Displays 97.9 -3.5 101.5 830 Electronic Components 132.1 +34.2 98.4 1,119 2. Geographic Segment Information (1) Net Sales (Millions of yen, millions of U.S. dollars) Fiscal 2003 (% of total) % change Fiscal 2002 (% of total) Fiscal 2003 Japan JPY 3,879,454 (82.6) (-8.3) JPY 4,230,278 (82.9) $32,877 Overseas 815,581 (17.4) (-6.3) 870,744 (17.1) 6,911 Consolidated JPY 4,695,035 (100.0) (-8.0) JPY 5,101,022 (100.0) $39,788 (2) Geographic Profit or Loss Fiscal (% of profit on Increase Fiscal (% of profit on Fiscal 2003 sales) (decrease) 2002 sales) 2003 Japan JPY 118,277 (3.0) JPY 135,131 (JPY 16,854) (-0.4) $1,002 Overseas 2,612 (0.3) 41,280 (38,668) (-4.4) 22 120,889 (2.6) 176,411 (55,522) (-1.1) 1,024 Other income 153,597 43,207 110,390 1,302 Other expenses (212,990) 303,061 (516,051) (1,805) Consolidated income(loss) before JPY 61,496 JPY 522,679 (JPY 461,183) $521 income taxes 3. Sales by Market (Unaudited) Fiscal 2003 % change Fiscal 2002 Fiscal 2003 Japan JPY 3,644,673 (-6.8) JPY 3,911,173 $30,887 Overseas 1,050,362 (-11.7) 1,189,849 8,901 Consolidated JPY 4,695,035 (-8.0) JPY 5,101,022 $39,788 FINANCIAL INSTRUMENTS (1) Fair value of derivative financial instruments Contract or notional principal amounts, carrying amounts and estimated fair value are summarized as follows:- (Millions of yen) March 31, 2003 March 31, 2002 Contract or Carrying Estimated Contract or Carrying Estimated notional amounts amounts fair value notional amounts amounts fair value Derivatives: Forward exchange contracts:* JPY 21,902 (JPY 458) (JPY 458) (JPY 24,332) (JPY 1,352) (JPY 1,352) Fiscal 2002 Purchase of foreign currency 78,705 the equivalent of yen Sale of foreign currency the 54,373 equivalent of yen Fiscal 2003 Purchase of foreign currency 45,571 the equivalent of yen Sale of foreign currency the 67,473 equivalent of yen Interest rate and currency 405,414 (10,479) (10,479) 1,082,486 (24,957) (24,957) swap agreements *Contract or notional amounts of forward exchange contracts are net amount of "sale" minus "purchase". (2) Marketable securities The cost, fair value and net unrealized holding gains/losses for marketable securities by major security type are summarized as follows:- (Millions of yen) March 31, 2003 March 31, 2002 Available-for-sale: Equity securities Cost JPY 111,192 JPY 177,855 Fair value 111,983 255,096 Net unrealized holding gains 791 77,241 Debt securities Cost 4,231 8,348 Fair value 4,110 7,983 Net unrealized holding losses (121) (365) (3) Investments in affiliated companies The carrying amount and market value of stocks of affiliated companies accounted for by the equity method which have quoted market values are summarized as follows:- (Millions of yen) March 31, 2003 March 31, 2002 Carrying amount JPY 97,123 JPY 110,072 Market value 87,661 130,174 LEASING ARRANGEMENTS (1) Leasing of computer equipment For NEC's leasing business for computer and others, future minimum lease payments from non-cancelable leases under operating leases at March 31, 2003 and March 31, 2002 are as follows:- (Millions of yen) March 31, 2003 March 31, 2002 Within one year JPY 4,093 JPY 7,648 Over one year 199 431 (2) Lease of facilities and equipment for company's use NEC leases certain facilities and equipment for its own use. Future minimum rental payments under non-cancelable operating leases at March 31, 2003 and March 31, 2002 are as follows:- (Millions of yen) March 31, 2003 March 31, 2002 Within one year JPY 40,875 JPY 48,888 Over one year 124,689 91,985 PENSION AND SEVERANCE PLANS NEC Corporation and the subsidiaries in Japan have severance indemnity plans and non-contributory defined benefit funded pension plans, or only severance indemnity plans, covering substantially all of their employees who meet eligibility requirements of the retirement regulations. Under the plans, employees whose service with the company is terminated are, under most circumstances, entitled to lump-sum severance indemnities and/or pension payments, determined by reference to current basic rate of pay, length of service and conditions under which the termination occurs. The funding policy is to make contributions that can be deducted for Japanese income tax purposes. NEC Corporation and certain subsidiaries in Japan also have contributory defined benefit pension plans, covering substantially all of their employees, including the governmental welfare pension benefit plan (substitutional portion) which would otherwise be provided by the Japanese government. The pension benefits are determined based on years of service and the compensation amount as stipulated in the regulations. The contributions to the contributory and the-contributory pension plans are placed into trusted pension funds. On April 1, 2002, the Defined Benefit Corporate Pension Law was enforced, and some contributory defined benefit plans of NEC Corporation and certain subsidiaries in Japan have received the approval of exemption from the obligation for benefits related to future employee service under the substitutional portion from the Japanese government. After approval, NEC Corporation and certain subsidiaries in Japan make pension insurance payments directly to the government instead of contributing to the plans for the substitutional portion. The weighted-average assumptions used in the accounting for the plans are as follows:- March 31, 2003 March 31, 2002 Discount rate 3.0% 3.5% Rate of increase in future compensation level 1.7% - 3.8% 1.7% - 3.8% Expected long-term rate of return on plan assets 4.0% 4.0% NET LOSS PER SHARE A reconciliation of the numerator and the denominators of the basic and diluted per share computations for net loss is as follows: (Millions of yen) Fiscal 2003 Fiscal 2002 Net loss available to common shareholders (JPY 24,558) (JPY 312,020) Effect of dilutive securities - - Diluted net loss (JPY 24,558) (JPY 312,020) (Number of shares) Weighted-average number of shares of common stock 1,653,389,121 1,654,131,607 outstanding for the year Effect of dilutive securities - - Weighted-average number of shares of diluted common stock 1,653,389,121 1,654,131,607 outstanding for the year Net Loss Per Share: (Yen) Basic (JPY 14.85) (JPY 188.63) Diluted (14.85) (188.63) Securities that could potentially dilute basic EPS in the future that were not included in the fully diluted computation because they would have been antidilutive were as follows: (Number of shares) Convertible debt 220,562,540 220,562,540 Stock options 966,000 608,000 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Millions of yen, millions of U.S. dollars) Three months ended March 31 2003 (% of net 2002 (% of net Increase 2003 sales) sales) (decrease) Net sales JPY 1,452,870 (100.0) JPY 1,507,913 (100.0) (JPY 55,043) $12,312 Cost of sales 1,107,328 (76.2) 1,200,672 (79.6) (93,344) 9,384 Selling, general and administrative 274,638 (18.9) 303,854 (20.2) (29,216) 2,327 expenses Operating income 70,904 (4.9) 3,387 (0.2) 67,517 601 Non-operating income 44,970 (3.1) 30,159 (2.0) 14,811 381 Interest and dividends 5,666 1,524 4,142 48 Other 39,304 28,635 10,669 333 Non-operating expenses 76,933 (5.3) 207,415 (13.7) (130,482) 652 Interest 6,107 7,891 (1,784) 52 Other 70,826 199,524 (128,698) 600 Income (loss) before income taxes 38,941 (2.7) (173,869) (-11.5) 212,810 330 Provision (benefit) for income taxes 49,241 (3.4) (57,476) (-3.8) 106,717 417 Minority interest in income of consolidated 6,378 (0.4) 3,545 (0.2) 2,833 54 subsidiaries Equity in losses of affiliated companies (4,355) (-0.3) (7,117) (-0.5) 2,762 (37) Net loss (JPY 21,033) (-1.4)(JPY 127,055) (-8.4) JPY 106,022 $(178) SEGMENT INFORMATION (UNAUDITED) Operating Segment Information (1) Net Sales (Including internal sales to other segments) (Millions of yen, millions of U.S. dollars) Three months ended March 31 2003 (% of total) % change 2002 (% of total) 2003 IT Solutions business JPY 656,219 (45.2) -12.3 JPY 748,002 (49.6) $5,561 Network Solutions business 533,327 (36.7) +11.9 476,821 (31.6) 4,520 Electron Devices business 230,793 (15.9) +6.5 216,660 (14.4) 1,956 Others 211,290 (14.5) +4.0 203,082 (13.4) 1,790 Eliminations (182,588) (-12.6) - (152,959) (-10.1) (1,548) Electronics business total 1,449,041 (99.7) -2.9 1,491,606 (98.9) 12,279 Leasing business 9,283 (0.6) -52.6 19,572 (1.3) 79 Eliminations (5,454) (-0.3) - (3,265) (-0.2) (46) Consolidated total JPY 1,452,870 (100.0) -3.7 JPY 1,507,913 (100.0) $12,312 (2) Segment Profit or Loss (Millions of yen, millions of U.S. dollars) Three months ended March 31 2003 (% of profit on Increase 2002 (% of profit on 2003 sales) (decrease) sales) IT Solutions business JPY 57,097 (8.7) JPY 8,724 JPY 48,373 (6.5) $484 Network Solutions business 14,647 (2.7) 16,696 (2,049) (-0.4) 124 Electron Devices business 3,123 (1.4) 40,598 (37,475) (-17.3) 27 Others 5,920 (2.8) (1,644) 7,564 (3.7) 51 Eliminations 982 - 2,719 (1,737) - 8 Unallocated corporate expenses* (13,449) - (1,002) (12,447) - (114) Electronics business total 68,320 (4.7) 66,091 2,229 (0.1) 580 Leasing business 2,643 (28.5) 1,043 1,600 (8.2) 22 Eliminations (59) - 383 (442) - (1) 70,904 (4.9) 67,517 3,387 (0.2) 601 Other income 44,970 14,811 30,159 381 Other expenses (76,933) 130,482 (207,415) (652) Consolidated income(loss) before JPY 38,941 JPY 212,810 (JPY 173,869) $330 income taxes (Notes) * Corporate expenses include general corporate expenses and research and development expenses at NEC Corporation which are not allocated to any operating segment. (3) Net Sales to External Customers (Billions of yen, millions of U.S. dollars) Three months ended March 31 2003 % change 2002 2003 IT Solutions business JPY 600.3 -14.7 JPY 703.5 $5,087 Domestic 536.2 -15.5 634.6 4,544 Overseas 64.0 -6.9 68.8 543 Network Solutions business 502.1 +12.0 448.3 4,255 Domestic 375.7 +10.2 341.1 3,185 Overseas 126.3 +17.9 107.1 1,070 Electron Devices business 201.4 +5.3 191.3 1,707 Domestic 116.0 -0.7 116.9 983 Overseas 85.3 +14.7 74.4 724 Others 142.2 -3.8 147.8 1,206 Domestic 114.3 -10.2 127.2 969 Overseas 27.8 +35.5 20.5 237 Electronics business total 1,446.1 -3.0 1,491.0 12,255 Domestic 1,142.3 -6.4 1,220.0 9,681 Overseas 303.7 +12.1 271.0 2,574 Leasing business 6.7 -59.8 16.8 57 Domestic 6.7 -59.8 16.8 57 Overseas - - - - Consolidated total JPY 1,452.8 -3.7 JPY 1,507.9 $12,312 Domestic 1,149.1 -7.1 1,236.8 9,738 Overseas 303.7 +12.1 271.0 2,574 (4) Net Sales by Products and Services (Including internal sales to other segments) (Billions of yen, millions of U.S. dollars) Three months ended March 31 2003 % change 2002 2003 IT Solutions business JPY 656.2 -12.3 JPY 748.0 $5,561 Systems Integration Services /Software 216.8 +2.7 211.0 1,837 Internet Services/Support Services 96.9 -5.3 102.3 821 Servers/Storage Products/Workstations 106.0 -44.0 189.2 898 Personal Products 178.5 -6.2 190.3 1,513 Other Hardware 58.1 +5.3 55.2 492 Network Solutions business JPY 533.3 +11.9 JPY 476.8 $4,520 Network Infrastructure 296.3 +2.2 289.9 2,511 Mobile Terminals 143.8 +49.5 96.2 1,219 Other 93.2 +2.8 90.7 790 Electron Devices business JPY 230.7 +6.5 JPY 216.6 $1,956 Semiconductors 176.0 +5.8 166.4 1,492 Displays 20.1 -28.5 28.1 170 Electronic Components 34.7 +57.0 22.1 294 CAUTIONARY STATEMENTS: The statements in this press release with respect to the plans, strategies and forecasts of NEC Corporation and its consolidated subsidiaries (collectively "NEC") are forward-looking statements involving risks and uncertainties. NEC cautions you in advance that actual results could differ materially from such forward-looking statements due to several factors. The important factors that could cause actual results to differ materially from such statements include, but are not limited to, general economic conditions in NEC's markets, which are primarily Japan, North America, Asia and Europe; demand for, and competitive pricing pressure on, NEC's products and services in the marketplace; NEC's ability to continue to win acceptance of its products and services in these highly competitive markets; and movements in currency exchange rates, particularly the rate between the yen and the U.S. dollar. Among other factors, a worsening of the world economy resulting from the downturn in the IT and telecommunications industries, a worsening of financial conditions in the world markets, and a deterioration in the domestic and overseas stock markets, would cause actual results to differ from the projected results forecast. In cases where the information contained in this press release falls within the definition of "Material Information" under Paragraph 2 of Article 166 of the Securities and Exchange Law of Japan, if you (and directors or employees of your company if the content of this press release comes to their knowledge in connection with their duty) read this press release before the time of "Publication" (which is defined under the Securities and Exchange Law of Japan and its Enforcement Ordinance as twelve hours after its release; i.e., approximately 3:30 am on April 25, 2003 (JST)), you (and directors or employees of your company if the content of this press release comes to their knowledge in connection with their duties) may be prohibited from purchasing, selling, or making other transactions of shares of stock or other securities of NEC before the time of Publication. -------------------------------------------------------------------------------- Media Contacts: Chris Shimizu, Daniel Mathieson Corporate Communication Division NEC Corporation TEL: +81-3-3798-6511 This information is provided by RNS The company news service from the London Stock Exchange END FR EAFLSAEPDEFE
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