Financial Results for the First Half of FY ending March 31, 2006 Oct. 27, 2005 Oki Electric Industry Co., Ltd. 1 Table of Contents 1. Financial Results for the First Half of FY ending Mar. 2006 1-1 1-2 2. Segment Information Assumptions Revision of Projections 2-3 Segment Information Measures to Improve Profitability 3-1 3-2 4. 1-3 Full Year Projections for the FY ending Mar. 2006 2-1 2-2 3. Overview Profit and Loss Enhance product competitiveness and expand businesses (1) Financial System (3) Semiconductors (2) For Telecom Carriers (4) Printers Proactive Deployment of Info-Telecom Converged Business Corporate Social Responsibility Activities Appendix 2 First Half Overview While sales remained at the same level on a year-on-year basis, income decreased due to price drop in major products. No major changes from the previous projections on July 28 (Billion yen) Sept. 04 Sept. 05 Variance Previous projections 319.7 319.1 (0.6) 320.0 Operating income 1.5 (4.2) (5.7) (4.0) Recurring income (0.6) (5.7) (5.1) (7.0) Net income (2.9) (3.9) (1.0) (5.0) (4.82) yen (6.32) yen (1.50) yen - Total assets 584.6 601.6 17.0 - Shareholders’ equity 107.9 122.7 14.8 - 176.43 yen 200.69 yen 24.26 yen - 273.4 269.0 (4.4) - Net sales Net income per share Shareholders’ equity per share Interest-bearing debt 3 First Half Profit and Loss (Billion yen) Sept. 04 Net sales (Cost of sales ratio) 319.7 Sept. 05 Previous projections 320.0 (74.7%) Results Variance 3,19.1 (0.6) (77.2%) (+2.5 %) 238.7 - 246.5 7.8 79.5 - 76.8 (2.7) 1.5 (4.0) (4.2) (5.7) Other income (2.1) (3.0) (1.5) 0.6 Recurring income (0.6) (7.0) (5.7) (5.1) Cost of sales SG&A Operating income Extraordinary income 1.0 Extraordinary loss 5.1 2.1 Price drop made cost of sales ratio worse by 2.5 points Semiconductor segment retained positive in operating income Consolidated net sales Sep. 04 Info-telecom Semiconductor Printer Others 164.4 76.6 65.2 13.5 (Billion yen) Sep. 05 155.3 77.6 71.0 15.2 1.1 Consolidated operating income (0.5) 2.4 (2.7) Income before taxes (4.7) (7.5) (6.0) (1.3) Income taxes (1.8) (2.5) (2.1) (0.3) Net income (2.9) (5.0) (3.9) (1.0) Sep. 04 Info-telecom Semiconductor Printer Others Corp. & eliminates 0.2 3.4 2.1 1.2 (5.4) Variance (9.1) 1.0 5.8 1.7 (Billion yen) Sep. 05 Variance (1.6) 0.2 1.5 1.1 (5.4) (1.8) (3.2) (0.6) (0.1) 0 4 First Half Segment Information (Billion yen) 319.7 Net sales 319.1 320.0 13.5 15.2 15.0 65.2 71.0 72.0 164.4 Sept. 04 Others 77.6 77.0 Semiconductor 155.3 156.0 Info-Telecom July 28 Results projections Sept. 05 Operating income <Year-on-year comparison> <Info-Telecom Systems> - 9.1 Printer 76.6 Net sales ⁃ Sales decrease by 9.1 B yen. While sales for the financial and public sector markets decrease, sales for the telecom carrier market increase <Semiconductors> +1.0 ⁃ Increase in sales by 1.0 B yen. Acquisition of Japan TI’s driver business led to sales increase, while price drop and volume decline in PHS baseband LSIs and sound generator LSIs decreased sales <Printers> +5.8 ⁃ Increase in sales by 5.8 B yen. Price drop continued in color NIP due to fiercer competition, while shipment volume increased significantly <Others> +1.7 Operating income 1.5 (4.2) (4.0) Decrease by 5.7 B yen on a year-on-year basis due to decrease in sales for Info-Telecom, and price drop in Semiconductor and Printer segments. No significant changes from previous projections on July 28 5 Assumptions Underlying Full Year Projections <Economy outlook> - Overall economy shows recovery Several concerning factors are weak public investments and continued rise in oil price <Oki’s operating environment> - - Price drop due to digital deflation in the overall IT market Info-Telecom: Full recovery of IT investments by financial institutions begin next fiscal year Telecom carriers expand investments on optical access and IP networks Semiconductors: Overall recovery trend in volume Price pressure increases/ Shift in product model accelerates Printers: Color printer market continues to expand by 20-30% Price competition further escalates <Impact of currency on profits> First Half Projected rate Actual rate Projected rate Second Half Projections Sales in foreign Impact on operating profit by 1 yen change * currency USD 105 yen/$ 109.5 yen/$ 110 yen/$ 650 million USD 130 million yen Euro 135 yen/E 135.7 yen/E 135 yen/E 320 million Euro 150 million yen * After deducting purchase in foreign currency and exchange contract 6 Revision of Full Year Projections Net sales projected to be 710.0 B yen, a 10.0 B yen decrease from previous announcement. While broadband IP systems for telecom carriers and color NIP unit shipment grow, sales for financial institutions decreases and price for semiconductors drops, etc. Operating income projected to be 19.0 B yen, a 9.5 B yen decrease from previous projections, largely due to continuing price drops (Billion yen) Net sales Operating income Other income Recurring income Extraordinary income Income before taxes Income taxes Net income Previous projections (Apr. 27, 2005) 720.0 28.5 (7.0) 21.5 (3.0) 18.5 7.0 11.5 Projections for FY Mar. 2006 (Oct. 27) 710.0 19.0 (6.0) 13.0 (2.0) 11.0 4.5 6.5 Variances (10.0) (9.5) 1.0 (8.5) 1.0 (7.5) (2.5) (5.0) FY Mar. 2005 Results 688.5 27.2 (6.0) 21.2 (2.7) 18.5 7.3 11.2 7 Analysis of Changes in Operating Income Decline in price will enlarge by 11.0 B yen from the previous July 28 projections (For ATMs, semiconductors, printers, etc.) Deploy additional measures to reduce variable costs and fixed costs. Operating income will decrease by 9.5 B yen from previous projections Reduction in: Personnel costs (+1.0) △ Depreciation (+1.0) Other fixed costs (+2.0) Operating income Decrease 28.5 B yen in sales -2.0 Decline in price Others -11.0 +1.0 +4.0 July 28 projections Reduction in fixed cost -1.5 Operating income 19.0 B yen Currency exchange Oct. 27 projections 8 Full Year Projections: Info-Telecom Systems <Comparison from previous projections (July 28)> Sales of back office operation concentration systems and backyard systems for financial institutions falls below the previous projections Telecom carriers’ investments on broadband IP network systems remain strong Operating income decreases due to decline in sales and impact of price drops Operating income Net sales (Billion yen) 373.1 380.0 21.5 67.6 22.0 370.0 20.0 Others 73.0 73.0 Enterprises 52.6 55.0 55.0 Public sector 110.2 105.0 115.0 Telecom carriers 121.2 125.0 107.0 Financial market Mar. 05 July 28 Oct. 27 projections projections Mar. 06 (Billion yen) 15.8 Mar. 05 18.5 15.0 July 28 Oct. 27 projections projections Mar. 06 9 Full Year Projections: Semiconductors <Comparison from previous projections (July 28)> Sales for logic LSIs increases due to the effect of the acquisition of Japan TI’s driver business - Achieved world No. 1 share (13.4%) in large-scale TFT drivers Sales for system LSIs decreases due to decline in volume for PHS baseband LSIs P2ROM’s price drop reduces sales in system memories Operating income decreases due to the impact of price drops, while typhoon and earthquake impacts are minimum Operating income Net sales (Billion yen) 150.7 165.0 4.0 2.3 158.0 3.0 Optical components System memories 49.0 45.0 65.5 77.0 81.0 Logic LSIs 34.8 35.0 29.0 System LSIs 48.1 Mar. 05 July 28 Oct. 27 projections projections Mar. 06 (Billion yen) 12.0 10.0 5.5 Mar. 05 July 28 Oct. 27 projections projections Mar. 06 10 Full Year Projections: Printers <Comparison from previous projections (July 28)> Sales increases due to expansion in shipment volume for color NIP and MFP Sales for SIDM and mono NIP remains steady Due to the impact of price drops, operating income decreases against the sales increase Operating income Net sales (Billion yen) 137.7 150.0 157.0 65.0 68.0 85.0 89.0 (Billion yen) Others 7.8 8.0 6.0 74.5 63.2 Mar. 05 July 28 Oct. 27 projections projections Mar. 06 Color NIP Mar. 05 July 28 Oct. 27 projections projections Mar. 06 11 Targeting FY Mar. 2007 FY Mar. 2006: Digital deflation impacts Oki’s major products, which decreases sales by 11.0 B yen from the previous projections <Issues> Cost control ahead of price drops Improve business value by enhancing ability to create new products Shift business models to fit changes in markets Cultivate existing markets and develop new markets Concentrate resources on core businesses and review low profit businesses <Measures to resolve issues> 1. Enhance product competitiveness and expand businesses (1) Financial System Business - Enhance profitability and accelerate business model shift (2) Business for Telecom Carriers - Appropriate and prioritized response to the changes in market (3) Semiconductor Business - Enhance product competitiveness (price, product model change) (4) Printer Business - Expand business aggressively (new products, sales capability) 2. Proactive deployment of info-telecom converged business 12 Financial System Business 1 <Enhance profitability and accelerate business model shift> <Situation in the FY Mar. 2006> Price drop in ATM units, ATM maintenance, and back office operation concentration systems (5% in total) Misread timing of investments by financial institutions (expand proposal activities, expect growth in the coming fiscal years) - Full scale investments on securities, including personal information protection and biometric recognitions - Investments on back office operation concentration systems and backyard systems Though sales increases for e-finance* business, it does not reach original plans * e-finance: solutions and services used for sales and distribution of financial products <Measures for the FY Mar. 2007> Expand sales and shares by launching new ATM products (both domestic and overseas) Strengthen products for bank branch systems and back office operation concentration systems Capture the needs and concentrate resources on e-finance business Enhance profitability via improving efficiency of maintenance and expanding alliances Accelerate service businesses, including ATM outsource, operation outsource, and net payment, etc. 13 Financial System Business 2 ATM Business <Domestic market> Market trend: Recovery trend in the second half of the FY Mar. 2006 Full recovery from the FY Mar. 2007 Launch new products ¾ Begin sales of security-enhanced “ATM-BankIT” according to the market recovery Expect large increase in shipment volume Enhance market accessibility ¾ Enhance marketing by products ¾ Strengthen sales organization close to markets <Overseas market> Deploy business to China, Taiwan, Korea ¾ China: Rise of market is slower than expected. Direct sales began in the first half of the FY Mar. 2006. Expand in-direct sales through alliances with OEM partners ¾ Taiwan, Korea: Gain market share by introducing products developed for Japan and China 14 Financial System Business 3 e-finance solution business Opportunity to expand the business Expansion of bank business caused by deregulations Expansion of customer bases with net business companies entering financial business Linkage between net payment service and real channels, such as ATM Expansion of secured net financial call center systems to Internet-based financial institutions <Domain of Financial System Business> e-finance solution Customers ATM Operation Financial institutions concentration Retail channels system Customers Deposit Payment Pension fund Insurance companies Net payment system Products Services Customers Products Services Customers Sales of products and services Bank branch system Suppliers Govmnt Loan bond Money Investment Supply channel system order trust Trading Currency exchange biz. Net channel system Derivative Security companies Trust banks Financial info. Bonds Secured net financial call center 15 Financial System Business 4 Service business (expansion of outsourcing business and fee business) Expand net payment service business Expand outsourcing business <Situation> - Began electronic money charging service, and delivered to city banks and consumer loans - 6-folds of transaction numbers in 4 months <Future Deployment> - Expand new services according to expanding applications of “wallet-mobilephone” - Expand business that collaborates with existing financial services, according to the increasing needs for e-money charge using ATMs and bank terminals <Oki’s e-money charge transaction amounts> (Billion yen)<Oki’s financial outsourcing business sales> <Situation> - Expand in number of ATMs that Oki entrusted services - Expand operation outsourcing biz. for entrusted operation and maintenance of IT systems under multi-vendor environment <Future Deployment> - Increase sales by expanding new users and improving service menus 8.0 6.0 700% 600% 500% 400% 300% 200% 100% 0% Operations & IT ATM 4.0 2.0 0.0 Mar. 03 Mar. 04 Mar. 05 Mar. 06 Apr. May Jun. Jul. Aug. 16 Business for Telecom Carriers 1 <Situation in the FY Mar. 2006> Market trend: Steady needs in broadband IP-related systems, particularly optical access Rapid increase of IP telephony according to optical access diffusion Æ Significant increase in number of broadband home routers (top share) Growth in carriers’ investments on infrastructure with traffic increase and faster speed Æ Increase in sales of optical transmission equipment for KDDI’s CDN access network, etc. <“Hikari Denwa (optical phone)” by NTT E/W> (Thousand subscribers) 1000 NTT/E NTT/W 500 Q1(2005) NTT/E: 30K NTT/W: 1K 0 04Q4 05Q1 Q4(2005) target NTT/E: 1 mil. NTT/W: 0.6 mil. 05Q2 05Q3 05Q4 （Source: NTT material, Aug. 3, 2005) 17 Business for Telecom Carriers 2 <Measures for the FY Mar. 2007> Appropriate and prioritized response to the changes in market Capture continuous expansion of investments on broadband IP network ¾ Expand sales of products with Oki’s strengths in the triple-play market ¾ Broadband home router, set-top box for video distribution ¾ Early introduction of GE-PON systems to the market Develop new technologies and products, which appropriately capture trends of next generation networks ¾ Accelerate development of products for smooth migration of existing network ¾ Enhance planning and proposals of next generation network products Retain constant profitability in the existing network infrastructure business Expand business domains and enhance capability to create new products through alliances ¾ Cultivate new markets for mobile phone carriers both in Japan and overseas through the alliance with ACCESS Concentrate resources on this business in priority to promote development of new products and technologies 18 Semiconductor Business 1 <Situation in the FY Mar. 2006> Decline of product competitiveness ¾ Cost reduction did not catch up with price drops ¾ Delay in creating attractive largevolume products <Measures for the FY Mar. 2007> Recover competitiveness of large-volume products (price, product model change) ¾ Cost reduction P2ROM, TFT driver ¾ Accelerate development of new products For wireless, digital appliances, ITS Cost reduction of large-volume products: P2ROM <P2ROM sales> (H1 of the FY Mar. 04 = 100) 250 Steadily expanding business (38% share) Significant growth in large-capacity P2ROM (256M+) ¾ Cost reduction ahead of price drops 9 Accelerate shrinkage 9 Maximize production efficiency (boost yield, effective testing) ¾ Increase product values 9 Enhance line-up of large-capacity products (512M, 1G) 9 Prepare needs for custom specifications (incorporation of custom logic, support for specific operating conditions) 1G 200 512M 150 256M 128M 100 64M 50 32M or less 0 H1 H2 Mar. 04 H1 H2 Mar. 05 H1 H2 Mar. 06 19 Semiconductor Business 2 Cost reduction of large-volume products: TFT driver (World No.1 share) Steadily expand business through acquisition of Japan TI’s driver business 9 Ensure industry top technologies through integration of Japan TI’s design capability and Oki’s highly reliable process technology 9 Deploy business to all markets (PC & TV) and customers for large TFT drivers ¾ Reduce costs ahead of price drops 9 Develop new architecture with industry top technologies 9 Accelerate shrinkage 9 Improve profitability and select production bases effectively by leveraging scale merits ¾ Increase product values 9 Increase differentiating technologies (develop new I/F, promote de-facto standards, lower power consumption, higher density) <Driver sales> (H1 of the FY Mar. 04 = 100) 500 500 Oki: 13.4% 400 400 TI Integration 300 300 200 200 100 100 0 <Driver worldwide share> (Unit base, non-captive) Oki Others: 22.2% A: 11.9% G: 4.9% F: 5.9% B: 11.9% C: E: 7.9% D: 10.0% 11.9% 0 H1 H2 Mar. 04 ０３上 ０３下 H1 H2 Mar. 05 ０４上 ０４下 H1 H2 Mar. 06 ０５上 ０５下 Techno system research (CY 2Q/2005) 20 Semiconductor Business 3 Accelerate development of new products <Sales by product segments> (Billion yen) 1750 175 150.7 1507 1580 158.0 1500 150 132.2 1322 1250 125 119.2 1192 <Products expected to change models and expand business> <<System LSIs>> (exclude P2ROM, TFT driver) [Wireless] ZigBee Expand existing 1-chip LSI, develop LSI with embedded applications PHS Develop and supply to Japan and China SOS Expand RF switch, RF-IC between roads and cars [Digital appliances] LSIs for digital TV tuner and HDD digital audio [ITS/Car electronics] 1000 100 MCU for car navigation, low-power GPS LSIs for communication between roads and cars, and among cars <<Logic LSIs>> 750 75 Sound generator: Develop and expand low-end products and 500 50 System memories DRAMs 250 25 Foundry 00 Optical Mar. 03 Mar. 2002 200304 Mar. 200405 Mar. 200506 (proj.) MP3-capable products Sound integration: Provide various solutions related to sound Organic EL: Keep No.1 position for the in-vehicle market Enter the mobile phone market SOI: Commercialize LSIs for highly-sensitive radio-wave clock and ultra-low power consumption RTC (real-time clock) Power LSI: Expand single-function LSIs, expand line-up Improve intelligence 21 Printer Business 1 <Situation in the FY Mar. 2006> <Measures for the FY Mar. 2007> Aggressive expansion of business Develop new competitive products Enhance sales force Increase in sales ¾Increase in color NIP sales unit Decline in operating income ¾Price drop in color NIP due to fiercer competition ¾Consumable sales ratio did not increase as expected ¾ Strengthen domestic sales capability ¾ Establish new overseas sales bases, and <Color NIP share by region> enhance overseas production and support functions <Color NIP sales (units)> (incl. MFP) (K units) <Growth of color NIP sales ratio> 100% 350 OTHER SIDM MONO Japan US Western Europe Worldwide 300 250 20% COLOR 200 150 40% 10% 100 20% 50 0 05/Q1 04/Q3 04/Q1 03/Q3 03/Q1 Mar.03 Mar.04 Mar.05 Mar.06 02/Q3 Mar.03 2002 Mar.04 2003 Mar.05 2004 Mar.06 2005 0% 02/Q1 0% 01/Q3 60% 30% 01/Q1 80% <Color NIP share by region> 22 Printer Business 2 Develop new competitive products Enhance cost competitiveness of color NIP, and maximize advantageous characteristics of LED tandem method Develop major products ¾ Further improve compactness, high-speed and high-resolution of color NIP with LED tandem method ¾ Short product development time with know-how of function simulation technology ¾ Enhance line-up of MFP, the market of which is expected to grow (stable start) ¾ Enhance resources for further improvement of leading technologies Control of cost ¾ By capitalizing on advantages in mechatronics technology, reduce costs by decreasing the number of parts and by using low-price parts <Stable start in MFP business> (units) <MFP sales (FY Mar. 06)> 20,000 - Smooth start for color A4-size MFP - 18% share in western Europe in Q1 of FY Mar. 06 - This year sales plan: 32,000 units (A4+A3) - Introduce to domestic market in Nov. 15,000 10,000 A3MFP A4MFP Total 5,000 0 1H Apr May Jun Jul Aug Set 2H Proj. 23 Printer Business 3 Enhance sales capability By penetrating OKI Printing Solutions, increase share and enhance added-values <Domestic market> Integrated printer sales divisions of Oki Data and Oki Customer Adtech (Oct. 2005) 30% A4 ¾ Double in sales staff and sales bases A3 70% Enhance domestic sales strategy ¾ ¾ ¾ ¾ Cultivate large SI and office machine channels Strengthen existing large-scale channels Expand consumable business to mass retailer channels Expand sales to directly sold customers Begin MFP sales in the domestic market (Nov. 2005) ¾ Expand share of high value-added products (MFP, A3 color) 20% <Color NIP share in Japan> (by A3/A4) 14.1% 15% Total 10% 5% 0% 2.4% A4 5.6% A3 Establish new overseas sales bases, and enhance overseas production and support functions ¾ New sales bases in China, Korea, Malaysia, etc. ¾ Develop channels for the MFP and high-end markets ¾ Expand SIDM sales in China for local-tax available products and in the emerging market ¾ Local production of consumables, enhance localization support function in each area Existing bases New bases 24 Proactive Deployment of Info-Telecom Converged Business 1 Year 2010: A time when networks and services are converged to enable users to take advantage of various services without being aware of networks. Service Expansion of triple-play (integration of voice, video, data) service make services diversified and complicated Integration of networks and services (Free from networks) SOA (Integration of services) ERP/Web EAI/BPM Triple Play (Integration of app.) (Free from networks by services) VoIP (Integration of data) (Free from voice network) IPNW (Free from dedicated networks) - 2001 2002 - 2004 Convergence of networks and services expands to personal mobile terminals 2005 - 2007 2008 - 2010 25 Proactive Deployment of Info-Telecom Converged Business 2 Create new products for broadband IP services SS9100 SS9100 Launch “SS9100 Type M” as a small all-in-one model of SS9100 (began sales in Oct. 2005) Existing PBX market EX300 EX300 Launch “IPstage EX300,” targeting EX300 the 100 to 200 line market (began sales in Sept. 2005) Voice switch server SS9100-TypeM SIP-AP server New communication style realized by collaboration SIP server market AP server market (Info-telecom converged market) Deploy new business models Establishment of Oki Network Integrations (July 2005) ¾Provide one-stop solutions from consultation, design, construction and operation, through to maintenance in order to establish “reliable” and “secured” IP networks providing triple-play service Establishment of OKIACCESS Technologies (Joint venture, start in Nov. 2005) ¾Provide solutions to create triple-play applications on next generation mobile terminals (“eSound,” “eVideo (excellent video)”) ¾Aim: <<ACCESS’ strengths>> <<Oki’s strengths>> 9 Challenge to enter mobile software - Browser function - IP telephony system license business - Video distribution system - Tech to embed high function to terminal technology, know-how 9 Enhance home appliance business 9 Expand info-telecom converged solution business 26 Corporate Social Responsibility Activities Enhance corporate governance system ¾ Introduction of executive officer system （FY Mar. 01) ¾ Set external directors, management advisory committee, and compensation committee (FY Mar. 02) ¾ Established disclosure committee (FY Mar. 05) Contribute to enable enriched and comfortable living to the world Strengthen Compliance system Contribute to the e-Society through Oki, Network Solutions for a Global Society Customers Shareholders, investors Business partners Local Community Government Stakeholders ¾ Set “Charter of Oki Group Corporate Oki Group Activities Behavior” (FY Mar. 06) Regional awareness Social contribution Environmental consrv Respect for employees A better working envr. IP & info mgmt Good communication ¾ Establish CSR Promotion Div. (FY Mar. 05) NPO, NGO Business activities Corporate Governance Fair corporate activities Enhance CSR system Global environment Create economic value Costumer satisfaction ¾ Assigned Chief Compliance Officer (CCO), Compliance Committee, and Compliance and Business Ethics Div. (FY Mar. 05) Rspct. for human rights ¾ Set Oki Code of Conduct (FY Mar. 03) Compliance Employees Corporate Social Responsibilities From Oki Group CSR Report 2005 27 <Reference> First Half Balance Sheet (1) <Assets> Inventory increased by 14.6 B yen on a year-on-year basis due to expected increase in shipment volume for semiconductors and printers, and effect of yen depreciation (Billion yen) 609.6 600 584.6 608.0 601.6 55.4 41.1 46.6 31.3 155.3 121.6 146.0 132.8 139.0 148.2 149.3 162.8 30.1 33.9 33.1 33.5 119.7 128.5 126.5 125.8 Variance with Sept. 30, 2004 Cash and deposits - 9.8 Notes and accounts receivable + 11.2 400 200 110.1 111.3 106.5 Sept. 30, 04 Mar. 31, 05 + 14.6 Other current assets - 0.4 Propety, plant and equipment - 2.7 Investments and other assets + 4.1 115.4 0 Mar. 31, 04 Inventories Sept. 30, 05 28 <Reference> First Half Balance Sheet (2) <Liabilities and Shareholders’ Equity> Interest-bearing debt decreased by 4.4 billion yen on a year-on-year basis Both interest-bearing debt ratio and shareholders’ equity ratio improved (Billion yen) 609.6 600 135.8 400 127.6 601.6 144.5 133.9 Variance with Sept. 30, 2004 Notes and accounts payable + 6.3 Short-term borrowings - 17.3 - 6.3 139.8 135.3 122.5 28.8 24.0 22.5 Other current liabilities 161.7 133.7 129.9 146.6 Bond and long-term debts + 12.9 40.7 46.8 49.5 53.4 + 6.6 110.5 107.9 124.8 122.7 Other fixed liabilities and minority interests 129.8 31.1 200 584.6 608.0 Shareholders' equity 0 + 14.8 Mar. 31, 04 Sept. 30, 04 Mar. 31, 05 Sept. 30, 05 Bonds due within a year and commercial paper are included in bond and long-term debt, and short-term borrowings respectively. 29 <Reference> First Half Cash Flows Increase in working capital, including notes and accounts receivable and inventory, worsened free cash flows by 23.6 billion yen on a year-on-year basis (Billion yen) Sept. 04 Sept. 05 Variance Income before income taxes 30.8 (4.7) (4.3) (6.0) (35.1) (1.3) Depreciation & amortization 15.7 16.2 0.5 Changes in working capital 18.0 (8.4) (26.4) 1.8 (28.5) (22.0) (6.1) (17.0) (16.3) (7.9) 11.5 5.7 (6.5) 2.3 (15.7) (10.0) (0.7) (21.3) 5.8 (10.0) 5.8 (23.6) 21.5 0 (5.7) (13.4) 45.3 15.8 (15.5) 35.3 21.5 (2.1) (10.0) I. Cash flows from operating activities Others II. Cash flows from investing activities Purchases of property, plant & equipment Others Free cash flows (I+II) III. Cash flows from financing activities Redemption of bonds Changes in other interest bearing debts, etc. Net cash flow (I+II+III) IV. Cash and cash equivalents at the period end Notes <Changes in working capital> Sept. 04 Receivables 35.4 Inventories (8.4) Payables (9.0) Total 18.0 Sept. 05 14.1 (12.9) (9.6) (8.4) 30 <Reference> Full Year Cash Flows Projection Increase in working capital worsens free cash flows by 14.8 billion yen on a year-on-year basis (Billion yen) Mar. 05 Mar. 06 Variance Income before income taxes 59.3 18.5 52.0 11.0 (7.3) (7.5) Depreciation & amortization 34.2 38.0 3.8 Changes in working capital 11.7 (9.0) (20.7) (5.1) (41.5) (33.9) 12.0 (49.0) (37.0) 17.1 (7.5) (3.1) (12.0) 3.0 (6.8) Bond issuance (7.6) 17.8 (26.9) 20.0 (4.4) (14.8) 20.1 (20.0) Redemption of bonds (15.0) (10.0) 5.0 Changes in other interest bearing debts, etc. (31.9) (9.1) 49.4 3.2 (3.8) 45.6 35.1 5.3 (3.8) I. Cash flows from operating activities Others II. Cash flows from investing activities Purchases of property, plant & equipment Others Free cash flows (I+II) III. Cash flows from financing activities Net cash flow (I+II+III) IV. Cash and cash equivalents at the period end Notes <Changes in working capital> Mar. 05 Mar. 06 Receivables 13.6 Inventories (9.0) Payables 7.1 11.7 Total (4.0) 3.0 (8.0) (9.0) 31 Glossary P4 SG&A Selling, General and Administrative expense P21 SOS Silicon on Sapphire P5 PHS Personal Handy-phone System RF Radio Frequency LSI Large Scale Integration RF-IC Radio Frequency Integrated Circuit NIP Non-Impact Printer HDD Hard Disk Drive P6 IP Internet Protocol MCU Microcontroller P8 ATM Automated Teller Machine GPS Global Positioning System P10 TFT Thin Film Transistor LED Light-Emitting Diode P2ROM Production Programmed Read Only Memory P24 SI System Integrator MFP Multi Function Printer ERP Enterprise Resource Planning SIDM Serial Impact Dot Matrix IPNW IP Network P17 CDN Content Delivery Network EAI Enterprise Application Integration P18 GE-PON Giga-bit Ethernet Passive Optical Network BPM Business Process Management P19 ITS Intelligent Transport System VoIP Voice over Internet Protocol P20 I/F InterFace SOA Service Oriented Architecture PBX Private Branch eXchange P11 P23 P25 P26 * The projections and plans on this material are subject to change depending upon the changes of business environments and other conditions. Printed by Oki’s color LED printer 32