Tokyo Buhin Kogyo Co., Ltd. Interim Report 2005

Transcription

1 Interim Report 2005 Six-months Ended Sept. 30, 2004

2 Consolidated Financial Highlights and Consolidated Subsidiaries Six Months ended Sept. 30, 2004 and 2003 Thousands of Millions of yen U.S. dollars (Note) Six months ended Sept. 30, Net Sales... 16,902 15,807 $152,241 Operating Income... 1,373 1,349 12,371 Net Income... 1, ,301 As of Sept. 30, Shareholders' Equity... 9,021 6,954 81,258 Total Assets... 42,011 40, ,410 Per share data: (Yen or U.S. dollars) Net Income Shareholders' Equity Note: U.S. dollars amounts are translated, for convenience only, at U.S.$1= , the rate prevailing on Sept. 30, Consolidated Net Sales ( millions) Operating Income (Loss) ( millions) Net Income (Loss) ( millions) Annual Interim 32,606 Annual Interim 3,036 Annual Interim 1,527 26,238 24,739 24,375 1,255 16,902 15,807 1,650 1,349 1,650 1, ,025 12,026 12, (421) (349) (752) (649) (584) (204)

3 To Our Shareholders and Clients Business Climate and Overall TBK Results The first half of fiscal 2004 saw continued growth in exporting industries and an upturn in capital investment. Despite these encouraging factors the economy faced negative pressure from rising raw material prices including oil and steel, a buoyant yen and an increase in taxes. Truck and bus manufacturers, which are directly related to TBK's business, posted sluggish results. This was evidenced by a 14.1% decrease of newly registered vehicles with payloads of four tons and higher amounting to a total of 49,099 vehicles for the first half of fiscal These results were due to the previous demand from consumers buying new Yoshio Hara vehicles to meet regulations for exhaust gas emissions running its course. The impact of this decreased demand on TBK sales was cushioned by truck President manufacturers increasing exports to Asia. Current Business Policies TBK is placing an increased focus on the following issues during the first half of the second year of its medium term management plan, known as the TBK Rising Plan. This is in order to achieve stable, long-term corporate growth. >> Maintaining Sales TBK anticipated a slackening in sales during the period under review due to the petering out of demand from exhaust gas emission regulations. To offset this decrease in sales TBK endeavored to increase orders for truck manufacturers exporting overseas. In addition, TBK actively marketed for new business. >> Development for New Business The Development Department of TBK focused on design and development, especially for brakes and pumps, to contribute to medium-term sales. >> Ramping Up Overseas Operations The first half of 2004 saw the Group company in Thailand begin production for orders received for water and oil pumps and engine camshafts. In November 2004 TBK completed the transfer of lining production facilities to its China plant. Further preparation for brake production has progressed in the form of a joint venture with a local manufacturer. 2

4 >> Alleviation of Accumulated Losses A main focus of the medium-term plan is to alleviate accumulated losses on a consolidated basis by the end of fiscal On a non-consolidated basis TBK completed this during the first half of fiscal Performance and Financial Position As a result of these factors, TBK achieved an upturn in consolidated net sales of 6.9% from the same period of the previous year to post 16,902 million. Operating income increased by 1.8% to give 1,373 million. Net income rose by 67.9% giving 1,255 million. This increase was due to TBK adopting a system wherein taxes are paid on a consolidated basis to lighten the burden of taxation. Group sales are broken down to the two main segments of vehicle component manufacturing and the real estate lending business. Vehicle component manufacturing comprised 98.4% ( 6,632 million) of sales while the real estate business generated 1.6% of sales ( 69 million) by utilizing former plant premises as a shopping center. >> Vehicle Component Manufacturing Business In the first half of 2004 TBK saw a decrease in domestic sales with the number of newly registered and manufactured trucks slowing due to a slackening of the surge in demand from exhaust gas emission restrictions. Truck manufacturers experienced steady demand for their export models and TBK sales for this sector, especially for pumps which continued to increase. As a result, sales to this sector increased 7.0% to post 16,632 million. The Company undertook efforts to increase profitability by developing new products, reducing direct costs, augmenting overseas branches, improving the efficiency of existing facilities and providing excellent quality assurance. Despite these profit-intensive initiatives, the second half of fiscal 2003 saw raw material prices rise and personnel expenditure increase due to the expansion of production which caused operating income for the period under review to increase 5.1% to 1,720 million. >> Real Estate Lending Business The environment of the real estate lending business remained unchanged with consolidated net sales being the same as the first half of 2003 at 269 million. Operating income increased 0.6% to stand at 65 million. 3

5 >> Financial Position In the first half of fiscal 2004, current assets rose 4.7% to 13,954 million with a decrease in the balances of cash on hand offset by an increase of banks and notes and accounts receivable. Cash on hand and at banks was reduced on the back of steps taken to alleviate accumulated debt, while the increase for notes and accounts receivable was due to expanded sales in the second quarter of Tangible assets were down 351 million for the period under review to stand at 28,057 million. This decrease was from continued depreciation of buildings and structures. As a result, total assets for the first half were up 0.7% to stand at 42,011 million ($378.4 million) from previous year-end. Current liabilities were down 5,300 million to stand at 16,984 million. TBK allocated funds acquired by long-term borrowing and issuing of corporate bonds in order to reduce interest payable by repaying short-term borrowing. Non-current liabilities increased by 4,284 million to total 15,906 million. This was due to a rising balance of long-term borrowing and corporate bonds. Shareholder's equity increased 2,067 million to stand at 9,021 million due to an increase in capital surplus. >> Cash Flows As was the case in the previous term funds generated by marketing activities of the core business were allocated to investing and financial activities, causing cash and cash equivalents to be 899 million less than the start of the period totaling 2,114 million. Cash flows from operating activities saw an inflow of 1,411 million, 391 million less than the same term of the previous year. For cash flows from investing activities there was an outflow of 1,037 million, 174 million less than the same term for the previous year. For cash flows from financing activities there was an outflow of 1,272 million, 351 million less than the same term for the previous year. >> Outlook for Fiscal 2004 The second half of fiscal 2004 will see robust sales to overseas markets. Domestic demand for trucks will firm. TBK will continue to implement its medium term management plan in order to achieve strong results. This is anticipated to result in a 2.7% decrease in consolidated net sales to post 33,500 million and a 44.0% rise in net income to post 2,200 million for the year ending March 31,

6 Fundamental Business Strategy >> Basic Policy The TBK Group is a major player in the development and sales of components such as brakes, water pumps for engine cooling and oil pumps for engine lubrication. These components are essential to the safety of small to large vehicles and buses. TBK upholds its flagship policy of producing customer-oriented products while contributing to the well-being of society. Since our customers demand high levels of environmental friendliness, consumer safety and affordability, TBK realizes the need for adding value through its quality assurance policy of "providing customers with products excelling in safety and reliability." Fulfilling our corporate social responsibility allows TBK to enhance business and management. This in turn leads to stronger relationships with shareholders, customers and other stakeholders. >> Organizational Structure To facilitate fast decision-making and the transparency of managerial duties, TBK and its subsidiaries hold weekly directors' meetings that keep the Company abreast of progress and ensure the implementation of each managerial plan. TBK believes that the reliability of its products is paramount, and in order to ensure rock-solid quality the Company conducts bench testing at the developmental stage. TBK also has in place a stringent regime of performance and lifecycle testing. >> Dividend Policy In order to maintain long term growth TBK has a dividend policy of continuing with steady dividends to shareholders while maintaining adequate internal reserves. In line with this policy, when determining dividends, TBK considers the overall business environment and consolidated results for each term. >> Medium Term Management Strategy TBK has set in motion its ninth medium term management plan, the TBK Rising Plan, to unfold over the three years from fiscal 2003 through The fundamental concept of the plan is to dramatically change its profit structure while strengthening its financial position and managerial base in order to create a stable and highly profitable corporate group. In concrete terms, TBK is prioritizing an improvement in negative consolidated retained earnings and a reduction of borrowing. The Company is also augmenting overseas production centers. 5

7 >> Corporate Governance and Compliance Policy TBK Group adopts a managerial system consisting of a board of directors and a board of corporate auditors. In an effort to speed up managerial decisions, TBK is undertaking the smooth execution of managerial policies and ensuring transparency in order to put in place a framework of checks and balances and eliminate behavior contrary to social norms. In order to facilitate a proactive board of directors and board of corporate auditors, third party board members and corporate auditors participate in meetings. TBK is strengthening the functionality of managing director and executive board meetings to enhance corporate governance. The Company has two external auditors to complement its one internal auditor. The auditors meet once a month and participate in monthly managing director and executive board meetings to determine compliance within corporate operations as well as auditing company progress. Operations, including those of subsidiaries, are audited on a daily basis. External auditors are completely independent with no vested interests in the Company. The TBK board of directors consists of ten members including one external board member. The board convenes once a month as well as when necessary in cases of important issues arising. The external board member is completely independent with no vested interests in the Company. The TBK Group has a three-year medium term management plan. Separate from this is the medium term corporate planning meeting held when necessary with the same participants as the board of managing directors. From this term the newly established Group management meeting will be held four times every year. Participants will include members of the board of managing directors and the presidents from overseas subsidiaries. The meeting will cover the implementation and compliance aspects of subsidiary plans. Two TBK subsidiaries acquired QS9000 with regular audits to ensure operations are in line with this accreditation. Currently TBK subsidiaries are working toward gaining ISO14001 accreditation. The president of TBK holds biannual presentations to management to explain current issues and future aspirations. Once a year, the president also talks to all TBK staff on the results of the medium term managerial plan underlining the Company's commitment to effective communication. 6

8 Major Products for the TBK Group The TBK Group produces and markets brakes essential to the safety of trucks and buses, as well as construction machinery. Other components include water and oil pumps, which have a vital impact on engine performance. TBK components boast an overwhelming market share for medium and large vehicle manufacturers in Japan. The Company is expanding operations domestically and overseas in efforts to enhance its production and supply systems. Drum Brakes In trucks, buses and construction machinery an absolutely reliable brake system is required to ensure safety. Almost all medium and large vehicle manufacturers in Japan employ TBK's drum brakes. TBK products have a leading market share indicating their excellence in quality and reliability. Another significant factor is the resounding approval manufacturers have given TBK's development policy. Specifically, manufacturers appreciate TBK's standardization efforts to make components more compatible, leading to lower costs while retaining an excellent level of quality. TBK specializes in brake and pump manufacturing for medium and large vehicles. The Company is also expanding its line to include products for small vehicle manufacturers. TBK is a company that has successfully developed unique technologies. The TBK Auto Adjuster is one such example. Used in drum brakes, the Auto Adjuster automatically regulates the space between the brake lining and brake shoe. Through such efforts TBK is consistently developing high performance products with an excellent level of safety. Air brake for heavy-duty vehicles Disc Brakes In addition to safety, recently medium and large vehicles require a better brake feeling, especially for tourist coaches and long-haul trucks. TBK's disc brakes for medium and large vehicles are highly valued for their rock-solid liability, superior heat dissipation properties and advanced brake feeling. Disc brake for heavy-duty vehicles 7

9 Retarders In addition to the conventional foot brakes, side brake, and engine brakes there is a fourth type of brake known as a retarder. Retarders utilize a noncontact system making them exempt from wear and tear. Upon installation, retarders almost never need to be replaced making them excellent for auxiliary braking applications. Retarders operate by exerting magnetic resistance on the propeller shaft, which transfers engine rotation to turn a vehicle's wheels. TBK recognized the market potential for manufacturing components essential to the safety of vehicles and began independent development from the 1960s leading to the Company's products being installed in buses and trucks. Utilizing the retarder system, TBK saw an excellent method to avoid wear and tear-inescapable in conventional drum and disk brakes. Retarder for medium- to heavy-duty vehicles Water Pumps Water pumps, used to cool engines, are essential for engine performance. It is a difficult process to ensure the engine is performing at optimal capacity by not allowing it to become too hot or cold. Water pumps are vital for keeping engine temperature at the most suitable level. TBK has developed superior performing water pumps by closely collaborating with vehicle and engine manufacturers during the development stages. TBK's water pumps are used in small to large vehicles and construction machinery. Water pumps for heavy-duty vehicles Oil Pumps Oil pumps are another type of pump that is absolutely necessary for engine performance. Oil pumps ensure engines rotate smoothly and minimize the burden on the engine. In its capacity of a specialist manufacturer, TBK has developed several technologies in this field. A technology developed by TBK, which has seen wide-ranging customer support, is seen in the Company's power-saving oil pumps. These pumps have an adjustable output which ensures appropriate oil flow volume at the right time with minimum energy consumption. Oil pumps for heavy-duty vehicles

10 Global Production and Marketing Networks Japanese vehicle manufacturers are globalizing their production and marketing networks in efforts to cut costs and bring products closer to market. TBK intends to extend the overwhelming support the company has received from existing customers in Japan by expanding its own production and marketing networks internationally. TBK is improving its domestic production systems with the aim of steadily expanding operations overseas. The Company operates pump production centers in Thailand, India and Spain with other production centers for brakes in China. These production centers are gearing up to supply vehicle manufacturers in Asia, North America and Europe. GSB-TBK Automotive Components, S.L. (Spain) TBK India Private Limited (India) Full Win Developments Limited (China) TBK America, Inc. (U.S.A.) Head Office and Domestic Network TBKK (Thailand) Co., Ltd. Full Win Developments Limited Major Products: Lining TBKK (Thailand) Co., Ltd. Major Products: Water pumps, oil pumps, drum brakes, camshafts TBK India Private Limited Major Products: Water pumps and oil pumps of vehicles and construction equipment GSB-TBK Automotive Components, S.L. Major Products: Oil and water pumps for automotives TBK America, Inc. Major Business: Sales and services of parts for vehicles such as water pumps, oil pumps, drum brakes, and disc brakes TBK M&R Co., Ltd. Fukushima Plant Major Products: Drum brakes, disc brakes, retarders Fukushima Plant TBR Co., Ltd. Tokyo Seiko Co., Ltd. Head Office and TBK Sales Co., Ltd. Tokyo Seiko Co., Ltd. Major Products: Water pumps TBR Co., Ltd. Major Products: Oil pumps, brake shoes, castings and aluminum die casting TBK Sales Co., Ltd. Business: Sales and services of parts for vehicles and construction equipments TBK M&R Co., Ltd. Business: Management and maintenance of test course, brake performance testing on contract basis

11 Consolidated Balance Sheets and Consolidated Subsidiaries As of September 30, 2004 and 2003 Millions of yen Thousands of U.S. dollars (Note) ASSETS Current Assets: Cash on hand and at bank... 2,115 1,520 $ 19,050 Notes and accounts receivable... 8,625 7,413 77,693 Inventories... 2,626 2,406 23,654 Deferred tax assets ,866 Other ,690 Reserve for possible loan losses... (29) (27) (265) Total current assets... 13,954 11, ,687 Property, Plant and Equipment: Tangible Assets: Buildings and structures... 11,462 11, ,246 Machinery and equipment... 4,750 4,659 42,790 Land... 9,614 9,614 86,598 Other... 1,453 1,567 13,086 Intangible Assets Investment and Other Assets: Investment securities ,745 Long-term lendings Others Total property, plant and equipment... 28,057 28, ,723 Total Assets... 42,011 38,718 $378,410 Note: U.S. dollar amounts represent translations from yen, for convenience only, at the rate of = U.S.$1 in effect on September 30,

12 Millions of yen Thousands of U.S. dollars (Note) LIABILITIES, MINORITY INTERESTS, AND SHAREHOLDERS EQUITY Current Liabilities: Notes and accounts payable... 5,901 5,780 $ 53,153 Current portion of corporate deventure ,206 Short-term debt... 7,663 13,162 69,025 Accrued income taxes Deffered tax liabilities... 1 Accrued bonuses ,045 Notes payable-equipment ,498 Other... 1, ,253 Total current liabilities... 16,985 21, ,989 Non-Current Liabilities: Corporate deventure... 3,200 28,824 Long-term debt... 3,896 3,206 35,095 Deffered tax liabilities... 3,226 3,103 29,059 Accrued pension and severance costs... 1,708 1,675 15,381 Accrued retirement benefits to directors Long-term prepayment ,980 Security deposits payable and other... 3,110 3,016 28,013 Total non-current liabilities... 15,907 12, ,277 Total liabilities... 32,891 33, ,265 Monority Interests in Consolidated Subsidiaries Shareholders Equity: Common stock... 4,367 4,367 39,356 Capital surplus... 4,654 4,654 41,923 Retained earnings... (40) (2,074) (356) Less: Net unrealized gain (loss) on re-valuation of other securities, land, net of taxes Treasury stock, at cost... (4) (2) (38) Total shareholders equity... 9,021 6,954 81,258 Total liabilities and shareholders equity... 42,011 40,166 $378,410 11

13 Consolidated Statements of Income and Consolidated Subsidiaries For the six-months ended September 30, 2004 and 2003 Thousands of Millions of yen U.S. dollars (Note) Net sales... 16,902 15,807 $152,241 Cost of sales... 14,209 13, ,986 Gross profit... 3,8842,693 2,602 24,256 Selling, general and administrative expenses... 1,319 1,253 11,885 Operating income... 1,373 1,349 12,371 Other income (expenses): Interest and dividend income Interest expenses... (232) (247) (2,087) Foreign exchange gain Loss on sale of shares subsidiary and affiliates... (16) Cost of issuing corporate bond... (75) (673) Loss on sale/disposal of property, plant and equipment, net... (7) (38) (61) Revaluation loss of investment securities... (64) (573) Others, net (157) 174 Total... (355) (450) (3,195) Interim income before income taxes and minority interests... 1, ,176 Income taxes: Current Deferred... (318) (63) (2,866) Minority interests Interim net income... 1, $ 11,301 12

14 Consolidated Statements of Cash Flows and Consolidated Subsidiaries For the six-months ended September 30, 2004 and 2003 Millions of yen Thousands of U.S. dollars (Note) Cash flows from operating activities: Income before income taxes... 1, $ 9,176 Adjustment Depreciation ,531 Amortization of goodwill... Devaluation of marketable securities and investments in securities Decrease (increase) in allowance for employee bonuses... (11) 55 (101) Increase in allowance for severance indemnities, less payments ,189 Increase in allowance for board of directors retirement bonuses... (1) (45) (10) Interest and dividend income... (1) (5) (8) Interest expenses ,087 Cost of issuing corporate bond... (75) (673) Equity in loss of affiliates Loss on sales of investment securities... (0) Loss (gain) on sales and of property, plant and equipment Changes in assets and liabilities: (Increase) Decrease in receivables... (1,123) (1,344) (10,114) (Increase) Decrease in inventories... 9 (152) 77 Increase (Decrease) in notes and accounts payable ,091 2,841 Others, net Sub-total... 1,693 2,052 15,254 Interest and dividend received Interest paid... (191) (246) (1,721) Income tax paid... (91) (9) (822) Net cash provided by operating activiteis... 1,412 1,803 12,718 Cash flows from investing activities: Payment for purchases of property, plant and equipment... (1,066) (853) (9,601) Proceed from sales of property, plant and equipment Payment for purchases of intangible assets... (1) (2) (8) Payment for perchase of investments in securities... (67) (12) (606) Proceed from collection of security deposit receivable Increase of loans Decrease of loans... (0) (5) (4) Others, net... (1) 1 (1) Net cash used in investing activiteis... (1,038) (863) (9,347) Cash flows from financing activities: (Decrease) increase in short-term loans, net... (6,126) 330 (55,178) Proceed from long-trem loans... 2, ,946 Repayment of long-term loans... (1,045) (1,367) (9,416) Proceed from issuing of corporate bond... 3,925 35,356 Others, net... (130) (0) (1,174) Net cash used in financing activiteis... (1,273) (921) (11,466) Effect of exchange rate changes on cash and cash equivalents... (1) (0) (11) Net (decrease) increase in cash and cash equivalents... (900) 18 (8,105) Cash and cash equivalents at beginning of the year... 3,015 1,470 27,155 Cash and cash equivalents at end of year... 2,115 1,470 $ 19,050 13

15 Corporate Information , Minami Naruse, Machida, Tokyo , Japan Tel: Fax: Capital: 4,367 ($41,322 thousands) URL: mail: Fukushima Plant 304-7, Miyanomae, Kawanobe, Tamagawa-mura, Ishikawa-gun, Fukushima , Japan Subsidiaries: Tokyo Seiko Co., Ltd. 393, Miyanomae, Kawanobe, Tamagawa-mura, Ishikawa-gun, Fukushima , Japan TBR Co., Ltd , Takarada, Tsuruoka, Yamagata , Japan TBK Sales Co., Ltd , Minami Naruse, Machida, Tokyo , Japan TBK M&R Co., Ltd. (Tokachi Proving Ground) Iwanai-cho, Nishi 3 Sen, Obihiro, Hokkaido , Japan Overseas Group Companies: TBKK (Thailand) Co., Ltd. 700/34 MOO 6T Nhongmaidaeng A Muang, Cholburi 20000, Thailand Full Win Developments Limited 7A Wing Hong Center, 18 Wing Hong St., Cheung Sha Wan, Kowloon, Hong Kong, China TBK India Private Limited S-114, M.I.D.C., Bhosari, Pune , India GSB-TBK Automotive Components, S.L. Vilanova I la Geltru (Barcelona), in Catalonia, Spain TBK America, Inc Morenci Trail, Suite 230 Indianapolis IN 46268, U.S.A.