In fiscal 1996, ended March 31, 1996, the Japanese economy had a sluggish start, due mainly to the rapid appreciation of the yen. In the second half of the fiscal year, however, the yen weakened, the Japanese government implemented economic stimulus measures, and private-sector capital investment and personal consumption increased, resulting in a mild recovery. Overseas, economic growth slowed in the United States and Europe, while the economies of Asia continued to expand at a relatively fast pace. The domestic electronics industry benefited from healthy demand for such products as mobile communications systems and equipment, PCs, and semiconductors, centered on memory devices. Demand for electron devices remained buoyant worldwide.
Amid this environment, we endeavored to achieve further expansion in our C&C operations--which comprise communications systems and equipment, computers and industrial electronic systems, and electron devices--by developing products that accurately meet customer needs. At the same time, we worked to upgrade our manufacturing, marketing, and service structures in Japan and overseas. Moreover, we enhanced operating efficiency by such means as the promotion of overall cost reduction and the effective allocation of personnel.
Consolidated net sales for the fiscal year amounted to 4,397.2 billion yen ($41,095 million), an increase of 17 percent from the previous fiscal year. Sales in C&C operations also rose 17 percent, to 4,202.9 billion yen ($39,279 million). Sales in other operations grew 9 percent, to 194.3 billion yen ($1,816 million).
In C&C operations, sales of communications systems and equipment climbed 19 percent, to 1,227.0 billion yen ($11,467 million), due mainly to an increase in domestic sales of mobile communications systems and equipment. In computers and industrial electronic systems, such factors as higher domestic sales of PCs resulted in total sales in this area of 1,942.9 billion yen ($18,158 million), an increase of 9 percent from the previous fiscal year. Sales of electron devices jumped 33 percent, to 1,033.0 billion yen ($9,654 million), thanks primarily to the continued buoyancy of domestic and overseas sales of memory devices.
Domestic sales rose in all business areas, climbing 15 percent overall, to 3,186.9 billion yen ($29,784 million). Overseas, although sales of communications systems and equipment declined from the previous fiscal year, those of computers and electron devices grew, resulting in an overall increase of 20 percent in overseas sales, to 1,210.3 billion yen ($11,311 million).
Income before income taxes climbed 103 percent, to 151.3 billion yen ($1,414 million), while net income soared 119 percent, to 77.2 billion yen ($721 million). The principal factors behind these increases were strong sales of electron devices in both domestic and overseas markets and declines in the ratios of cost of sales and selling, general and administrative expenses to net sales, which resulted from Companywide efforts to curb costs and expenses.
As a result, net income per share of common stock was 45.21 yen ($0.423), and net income per American Depositary Share was 226 yen ($2.11).
In fiscal 1996, cash dividends per share were raised 10 percent, to 11.00 yen ($0.103), which included an interim dividend of 5.00 yen ($0.047) per share paid in December 1995.
Seeking to attain further advances in our C&C operations, we are actively engaged in the R&D of leading-edge technologies. During the fiscal year, R&D expenses increased 12 percent, to 298.7 billion yen ($2,792 million), and amounted to 7 percent of net sales.
In response to robust demand for memory devices and other semiconductors, we actively invested in facilities for the manufacture of such products. Capital expenditures rose 34 percent from the previous year, to 402.0 billion yen ($3,757 million).
At fiscal year-end, total assets stood at 4,683.1 billion yen ($43,767 million), a rise of 531.8 billion yen ($4,970 million) from the previous fiscal year-end. Despite a decline in cash and cash equivalents, total current assets grew 347.5 billion yen ($3,247 million), due mainly to a 215.1 billion yen ($2,011 million) increase in notes and accounts receivable, trade, as a result of higher sales and a rise of 173.6 billion yen ($1,622 million) in inventories in preparation for anticipated strong sales in fiscal 1997. In addition, net property, plant and equipment increased 126.0 billion yen ($1,178 million) due to higher semiconductor-related capital investment.
Total liabilities rose 440.0 billion yen ($4,112 million) from the previous fiscal year-end. Major factors contributing to this rise were a 326.1 billion yen ($3,047 million) increase in notes and accounts payable, trade, due to greater purchases of materials, and a rise of 37.0 billion yen ($346 million) in long-term debt.
The ratio of shareholders' equity to total assets edged down 0.2 percentage point, to 18.8 percent.
Net cash provided by operating activities amounted to 283.8 billion yen ($2,652 million), virtually unchanged from the previous fiscal year. Notes and accounts receivable, trade increased, as a result of higher sales, and inventories rose, offsetting an expansion in notes and accounts payable, trade and the improvement in net income.
Net cash used in investing activities climbed 102.2 billion yen ($955 million), to 356.0 billion yen ($3,327 million), due primarily to the increase in property, plant and equipment and investments in affiliated companies.
Net cash provided by financing activities declined 26.4 billion yen ($247 million), to 0.9 billion yen ($8 million), caused mainly by a decrease in funds procured through long-term debt and short-term borrowings.
As a result, cash and cash equivalents declined 65.0 billion yen ($608 million), to 381.0 billion yen ($3,561 million), at fiscal year-end.
At the end of the year under review, the number of consolidated subsidiaries was 127, the same as at the previous fiscal year-end.
The following segment information is prepared in accordance with the regulations under the Securities and Exchange Law of Japan.
NEC's principal business is C&C operations, which comprise communications systems and equipment, computers and industrial electronic systems, and electron devices. In fiscal 1995 and 1996, C&C operations represented more than 90 percent of consolidated net sales, operating profit and assets.
-----------------------------------------------------------------------------------------------------
In millions of yen
-----------------------------------------------------------
Japan Overseas Eliminations Consolidated
-----------------------------------------------------------------------------------------------------
1996
Net sales
Unaffiliated customers..................Y3,435,563 Y 961,629 Y ----- Y4,397,192
Intersegment............................ 471,135 108,724 (579,859) -----
-----------------------------------------------------------------------------------------------------
Total................................. 3,906,698 1,070,353 (579,859) 4,397,192
Operating expenses...................... 3,776,257 951,425 (578,292) 4,149,390
-----------------------------------------------------------------------------------------------------
Operating profit........................Y 130,441 Y 118,928 Y (1,567) Y 247,802
-----------------------------------------------------------------------------------------------------
Assets..................................Y4,306,232 Y 674,804 Y (297,916) Y4,683,120
-----------------------------------------------------------------------------------------------------
1995
Net sales
Unaffiliated customers..................Y3,026,732 Y 742,625 Y ----- Y3,769,357
Intersegment............................ 424,952 69,620 (494,572) -----
-----------------------------------------------------------------------------------------------------
Total................................. 3,451,684 812,245 (494,572) 3,769,357
Operating expenses...................... 3,358,479 752,921 (497,812) 3,613,588
-----------------------------------------------------------------------------------------------------
Operating profit........................Y 93,205 Y 59,324 Y 3,240 Y 155,769
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
In millions of yen Percent change Percentage of net sales
------------------------------- ------------------------ ------------------------
1994 1995 1996 1994 1995 1996 1994 1995 1996
------------------------------------------------------------------------------------------------------
Domestic.......Y2,708,653 Y2,763,937 Y3,186,913 0% 2% 15% 76% 73% 72%
Overseas....... 871,134 1,005,420 1,210,279 9 15 20 24 27 28
------------------------------------------------------------------------------------------------------
Total......Y3,579,787 Y3,769,357 Y4,397,192 2% 5% 17% 100% 100% 100%
------------------------------------------------------------------------------------------------------
