TBK Co., Ltd. Financial Report 2005

Transcription

1 Financial Report 2005 Year Ended March 31, 2005

2 Consolidated Financial Highlights Tokyo Buhin Kogyo Co., Ltd. and Consolidated Subsidiaries For the years ended March 31, 2005 and 2004 Thousands of Millions of yen U.S. dollars (Note) For the years ended March 31, Net Sales... 35,350 32,606 $329,175 Operating Income... 3,178 3,036 29,602 Net Income... 3,910 1,527 36,418 As of March 31, Shareholders' Equity... 11,570 7, ,746 Total Assets... 43,149 41, ,802 Per share data: (Yen or U.S. dollars) Net Income Shareholders' Equity Cash Dividends (Non-Consolidated) Key ratios (%): Shareholders' Equity to Total Assets Net Income to Shareholders' Equity Note: U.S. dollars amounts are translated, for convenience only, at U.S.$1= , the rate prevailing on March 31, Consolidated Net Sales ( millions) Operating Income (Loss) ( millions) Net Income (Loss) ( millions) 32,607 35,350 3,036 3,178 3,910 24,739 24,375 26,238 1,650 1, (421) 43 (649)

3 To Our Shareholders and Clients Business Climate and Overall TBK Results Fiscal 2004, ended March 31, 2005, saw export related industries such as the automobile industry and steel post favorable results while capital investment was vibrant. Sales increased dramatically during the previous year on the back of buoyant demand for consumers replacing vehicles to comply with the introduction of stringent restrictions placed on gas emissions of heavy-duty vehicles. The year under review saw a leveling-off of that demand as consumers met compliance obligations. This led to a total of 99,539 newly registered four-ton trucks, a 15.0% decrease on the previous year. Against this backdrop sales and profits were above targets set out in the Company's medium term management plan, the TBK Rising Plan (to be carried out from April 2003 through March 2006) enabling the Company to reach its targets in the first two years of the plan. Major management strategies will be implemented as follows: Yoshio Hara President Current Business Policies TBK listed in First Section of the Tokyo Stock Exchange TBK has long been listed on the Second Section of the Tokyo Stock Exchange. However, as of March 1, 2005 the Company has upgraded to the First Section. >> Acquiring New Orders TBK is focusing efforts on increasing orders from domestic truck manufacturers-tbk's historical customer base. However, since the truck industry can be volatile, with changes in the industry impacting on TBK's performance, the Company is strengthening marketing of nontruck components and the year under review saw positive results emerge from these efforts. 2

4 >> Ramping Up Overseas Operations TBK is expanding sales to Japanese and locally owned automobile manufacturers in Thailand and China. In addition TBK has stepped up marketing its water and oil pumps to European automobile manufacturers. TBK's Thailand subsidiary, TBKK (Thailand) Co., Ltd. began receiving orders and making deliveries for components for Isuzu Motor's new engine. In China, TBK has successfully transferred its brake lining production line to Full Win Developments Ltd. and the plant has commenced operating. These innovations have led to Thailand and China dramatically increasing profitability. * Development Teams in Place for New Business TBK's development teams are developing new brakes and pumps for the latest truck models. The teams are also active in development and conducting trials for new business from within Japan and overseas. * Trial Course Partially Sold Since usage of TBK's vehicle trial course was low, and in order to effectively utilize the equity tied up in the idle asset TBK has sold unused parts of the course. * Uniform labor framework for TBK Group During the previous TBK merged the personnel and pension systems of its two domestic subsidiaries, binging them in line with the parent company. Labor times and systems were also made the same. 3

5 Performance and Financial Position As a result of these factors, TBK achieved an upturn in consolidated net sales of 8.4% from the same period of the previous year to post 35,350 million ($329.2 million). Operating income increased by 4.7% to give 3,179 million ($29.6 million). Net income rose by 156.0% giving 3,911 million ($36.4 million). This increase was due to the partial selling of TBK's trial course and adjustments made for corporate tax. Performance was robust with year-on-year increased earnings across the board. 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% ( 34,911 million) of sales while the real estate business generated 1.5% of sales ( 538 million) by utilizing former plant premises as a shopping center. >> Vehicle Component Manufacturing Business During the previous year the brake business experienced a dramatic increase in domestic sales due to consumers replacing vehicles to comply with the exhaust gas emission restrictions. The year under review, however, saw a slackening of this surge in demand causing the brake business posted sales 3.2% lower than last year. Sales for the pump business increased 14.8% on the back of a buoyant Southeast Asian market. The Company's medium term business plan highlights the need to diversify in order to retain a stable financial base in a market that is slowly shaking off its reliance on Japanese automobile business. In line with this, TBK made headway in expanding its product line-up for construction machinery. As a result, sales to this sector increased 8.6% to post 34,811 million ($324.2 million). Although raw material prices rose, especially steel an essential material for TBK the Company was successful in increasing new overseas orders to achieve strong earnings for its overseas businesses. The Company undertook efforts to increase profitability by developing new products, reducing costs, augmenting overseas branches, improving the efficiency of existing facilities and providing excellent quality assurance. As a result operating income increased 7.1% to 3,906 million ($36.4 million). 4

6 >> Real Estate Lending Business The environment of the real estate lending business remained mostly unchanged with consolidated sales at 538 million ($5.0 million) and consolidated operating income at 131 million ($1.2 million). >> Financial Position Current assets at the end of the year rose 16.6% to 15,543 million due to an increase of notes and accounts receivable and deferred tax assets while cash and deposits decreasing to pay off interest-bearing debts. Property, plant and equipment at year end was 2.8% less or 27,607 million. A significant factor was the sale of part of the proving ground causing a 566 million decrease. Current liabilities were down 32.7% to 15,007 million. A major contributing factor was the allocation of 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 41.2% to total 11,570 million. This was due to a rising balance of long-term borrowing and corporate bonds. Shareholders' equity increased 49.3% to stand at 11,570 million due to an increase in retained earnings from a higher net income. 5

7 >> Cash Flows Since funds generated by marketing activities of the core business were allocated to investing and financing activities, cash and cash equivalents at year end were 1,486 million less than the start of the of the year under review totaling 1,527 million. Cash flows from operating activities saw an inflow of 3,652 million. This was due to a large increases of income before income taxes, depreciation, disposal of property, plant and equipment, notes and accounts payable stand at 1,750 million. Cash flows from investing activities there was an inflow of 1,070 million more than the previous year. A major factor was an outflow due to capital investment by the core business. Net cash used in financing activities lead to inflow on last year to stand at 4,071 million at year end. A contributing factor was the allocation of cash gained by issuing corporate bonds and long-term borrowing to repayment of short-term debt. The following financial indicators can be drawn as a result of the above Shareholders' equity ratio (%) Shareholders' equity ratio on a market value basis (%) Years to maturity (years) Interest coverage ratio (times) Notes: * Shareholders' equity ratio: Shareholders' equity / Total assets * Shareholders' equity ratio on a market value basis: Total market value of shares / Total assets * Years to maturity: Interest-bearing debt / Cash flow from operating activities * Interest coverage ratio: Cash flow from operating activities / Interest expenses >> Capital Investment and Fund Procurement Capital investment for the year under review was 1,590 million, which has been allocated to owned funds. 6

8 >> Outlook for Fiscal 2005 The outlook for fiscal 2005 will see robust demand for trucks from Japan and overseas. Gains from this market will be offset to some extent by rising raw material costs. In accordance with the TBK Rising Plan the Company will focus efforts on acquiring domestic orders for new products and use this as a springboard to expand the business into overseas markets. With this background TBK forecasts the following results. Consolidated net sales: 37,000 million Net Income: 1,600 million 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 create a stable and highly profitable corporate group by strengthening product competitiveness in order to bolster the Company's financial position and improve its profit structure. To this end, the following strategies are being carried out 1. For the domestic market, strengthen new orders for products in new fields 2. Ramp up the speed of expanding the overseas business 3. Increase retained earnings to become a company that pays consistent dividends 4. Lower the ratio of interest-bearing debt to less than 30% of net sales The entire Group will endeavor to accomplish these tasks it has set itself. 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. TBK is actively endorsing a proactive board of directors and board of corporate auditors and strengthening the functionality of managing director and executive board meetings to enhance corporate governance. 7

9 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 are engine components such as water and oil pumps, and other engine components which have a vital impact on engine performance. TBK components boast an overwhelming market share for medium- and heavy-duty vehicle manufacturers in Japan. The Company is expanding operations domestically and overseas in efforts to enhance its production and supply systems. BRAKES 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 8

10 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 ENGINE COMPONENTS Water Pumps for Vehicle Engines 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. Oil Pumps for Vehicle Engines 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. Water pumps for heavy-duty vehicles Oil pumps for heavy-duty vehicles 9

11 Pumps for Construction Machine Engines Water pumps for cooling engines and lubricating oil pumps are vital for obtaining optimal performances from construction machines that use engines as their power source. Applying the highly reliable technologies we have accumulated over the years to the development and manufacture of pumps for vehicle engines, we now make and supply products for engines used in a variety of other equipment. Other Engine Components Over the years, TBK has built up a high level of technological expertise and reliability in manufacturing various kinds of pumps and brake systems for both vehicle and engine manufacturers. We are applying these strengths to expand our product lineup, which now includes engine camshafts, turbocharger bearing housings, cylinder heads, and cylinder blocks. 10

12 Consolidated Balance Sheets Tokyo Buhin Kogyo Co., Ltd. and Consolidated Subsidiaries As of March 31, 2005 and 2004 Millions of yen Thousands of U.S. dollars (Note) ASSETS Current Assets: Cash on hand and at bank... 1,527 3,014 $ 14,227 Notes and accounts receivable... 9,478 7,504 88,267 Inventories... 2,813 2,635 26,199 Deferred tax assets ,810 Other... 1, ,567 Reserve for possible loan losses... (36) (29) (340) Total current assets... 15,542 13, ,730 Property, Plant and Equipment: Tangible Assets: Buildings and structures... 10,702 11,753 99,656 Machinery and equipment... 4,873 4,965 45,386 Land... 9,545 9,609 88,889 Other... 1,620 1,346 15,090 Intangible Assets Investment and Other Assets: Investment securities ,639 Long-term lendings Others ,226 Total property, plant and equipment... 27,607 28, ,072 Total Assets... 43,149 41,739 $401,802 Note: U.S. dollar amounts represent translations from yen, for convenience only, at the rate of = U.S.$1 in effect on March 31,

13 Millions of yen Thousands of U.S. dollars (Note) LIABILITIES, MINORITY INTERESTS, AND SHAREHOLDERS EQUITY Current Liabilities: Notes and accounts payable... 6,571 5,591 $ 61,197 Short-term debt... 4,779 13,604 44,509 Corporate bond due within one year ,753 Accrued income taxes ,694 Accrued bonuses ,554 Notes payable-equipment ,077 1,969 Other... 1,726 1,458 16,074 Total current liabilities... 15,007 22, ,751 Non-Current Liabilities: Corporate bond... 3,360 31,288 Long-term debt... 3,761 3,026 35,026 Deffered tax liabilities... 3,560 3,202 33,156 Accrued pension and severance costs... 1,821 1,575 16,963 Accrued retirement benefits to directors ,085 Long-term prepayment ,059 Security deposits payable... 3,138 3,035 28,646 Total non-current liabilities... 16,409 11, ,799 Total liabilities... 31,416 33, ,550 Minority Interests in Consolidated Subsidiaries ,505 Shareholders Equity: Common stock... 4,367 4,367 40,686 Capital surplus... 4,654 4,654 43,340 Retained earnings... 2,435 (1,294) 22,691 Less: Net unrealized gain on re-valuation of other securities, land, net of taxes ,135 Treasury stock, at cost... (8) (2) (81) Total shareholders equity... 11,570 7, ,746 Total liabilities and shareholders equity... 43,149 41,739 $401,802 12

14 Consolidated Statements of Income Tokyo Buhin Kogyo Co., Ltd. and Consolidated Subsidiaries For the years ended March 31, 2005 and 2004 Thousands of Millions of yen U.S. dollars (Note) Net sales... 35,350 32,606 $329,175 Cost of sales... 29,378 27, ,568 Gross profit... 3,8845,971 5,600 55,007 Selling, general and administrative expenses... 2,792 2,564 26,004 Operating income... 3,178 3,036 29,602 Other income (expenses): Interest and dividend income Interest expenses... (427) (494) (3,985) Bond issue cost... (89) (836) Foreign exchange income (loss) (67) 187 Loss on sale of shares subsidiary and affiliates... (84) Reserve for retirement benefit... (447) Disposal / loss on sale of property, plant and equipment, net (104) 8,152 Loss on sales of investment securities, net... (39) Revaluation loss of investment securities... (63) (36) (593) Others, net... (38) (22) (354) Total (1,287) 3,305 Income before income taxes and minority interests... 3,533 1,749 32,907 Income taxes: Current ,450 Deferred... (614) 92 (5,722) Minority interests Net income... 3,910 1,527 $ 36,418 13

15 Consolidated Statements of Cash Flows Tokyo Buhin Kogyo Co., Ltd. and Consolidated Subsidiaries For the years ended March 31, 2005 and 2004 Millions of yen Thousands of U.S. dollars (Note) Cash flows from operating activities: Income before income taxes... 3,534 1,750 $ 32,907 Adjustment Depreciation... 1,919 1,901 17,873 Amortization of goodwill Devaluation of marketable securities and investments in securities Increase in allowance for employee bonuses ,264 Increase in allowance for severance indemnities, less payments ,291 Increase (Decrease) increase in allowance for board of directors retirement bonuses (30) 119 Interest and dividend income... (2) (10) (20) Interest expenses ,985 Bond issuing cost Equity in loss of affiliates Loss on sales of investment securities Income from disposal of property, plant and equipment... (875) 105 (8,152) Gain from changes of equity method of affiliates... (37) Changes in assets and liabilities: (Increase) in receivables... (1,959) (1,462) (18,249) (Increase) in inventories... (174) (394) (1,620) Increase in notes and accounts payable ,842 Others, net... (217) 320 (2,023) Sub-total... 4,150 3,908 38,648 Interest and dividend received Interest paid... (355) (492) (3,314) Income tax paid... (144) (8) (1,342) Net cash provided by operating activiteis... 3,652 3,418 34,013 Cash flows from investing activities: Proceed from refunding of time deposits Payment for purchases of property, plant and equipment... (1,875) (1,623) (17,468) Proceed from sales of property, plant and equipment ,185 Payment for purchases of intangible assets... (1) (2) (18) Payment for perchase of investments in securities... (45) (22) (421) Proceed from sales of investment securities Proceed from collection of security deposit receivable Payment for additional common stock in subsidiaries... (88) Increase of loans... (0) (6) (6) Decrease of loans Others, net... 6 (1) 64 Net cash used in investing activiteis... (1,070) (1,612) (9,972) Cash flows from financing activities: Increase (decrease) in short-term loans, net... (8,703) 687 (81,041) Proceed from corporate bonds... 4, ,742 Proceed from long-trem loans... 2,809 1,229 26,163 Repayment of long-term loans... (2,204) (2,554) (20,527) Others, net... (583) 409 (5,428) Net cash used in financing activiteis... (4,071) (228) (37,910) Effect of exchange rate changes on cash and cash equivalents... 2 (14) 24 Net (decrease) increase in cash and cash equivalents... (1,486) 1,563 (13,846) Cash and cash equivalents at beginning of the year... 3,014 1,451 28,072 Cash and cash equivalents at end of year... 1,527 3,014 $ 14,227 14

16 Global Production and Marketing Networks Japanese truck 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 TBK Automotive Parts Co., Ltd. (China) Changchun TBK-Shili Auto Parts Co., Ltd. (China) TBK America, Inc. (U.S.A.) Head Office and Domestic Network Hangzhou TBK-APG Brake Co., Ltd. (China) TBKK (Thailand) Co., Ltd. TBKK (Thailand) Co., Ltd. Major Products: Water pumps, oil pumps, drum brakes, camshafts Full Win Developments Limited Major Products: Lining TBK Automotive Parts Co., Ltd. Major Products: Linings Hangzhou TBK-APG Brakes Co., Ltd. Major Products: Brakes 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 Changchun TBK-Shili Auto Parts Co., Ltd. Major Products: Linings Tokachi Proving Gound TBR Co., Ltd. Fukushima Plant Kagami-Ishi Plant Tokyo Seiko Co., Ltd. Head Office and TBK Sales Co., Ltd. Fukushima Plant Major Products: Drum brakes, disc brakes, retarders Kagami-Ishi Plant Major products: Camshufts and other engine components Tokachi Proving Ground Management and maintenance of test track, brake and pumps performance testing 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 15

17 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 Kagami-Ishi Plant 113, Sakai, Kagami-Ishi Cho, Iwase-Gun, Fukushima , Japan Tokachi Proving Ground Iwanai-cho, Nishi 3 Sen, Obihiro, Hokkaido , 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 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 Automotive Parts Co., Ltd. No. 3 Industrial Zone, Jiangbei Village, Wusha, Chang'an Town, Dongguan, Guangdong, China Hangzhou TBK-APG Brakes Co., Ltd. Shiyan, District Xiaoshan, Hangzhou, Zhejiang Province , China Changchun TBK-Shili Auto Parts Co., Ltd. Changchun National High-Tech Industries Development Area, Changchun City, Jilin Province, 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. 16