Fujitsu Annual Report 1997 - Consolidated Financial Highlights

Five-Year Summary
Financial Review:: Results of operations; Financial Position; Financial Overview of the ICL Group
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report

Five-Year Summary

	Yen
	(millions)					U.S. dollars
	(except per share data and number of employees)					(thousands)

Years ended March 31	1993	1994	1995	1996	1997	1997

Net sales	3,461,928	3,139,330	3,257,706	3,761,966	4,503,474	$36,318,339
Operating income	64,169	103,357	165,875	205,882	200,681	1,618,395
Income (loss) before income taxes	(9,758)	26,227	85,371	127,686	143,074	1,153,823
Net income (loss)	(32,602)	(37,672)	45,020	63,113	46,147	372,153

Total assets	3,775,831	3,594,743	3,713,816	4,324,490	4,727,687	38,126,508
Shareholders' equity	1,101,209	1,057,907	1,100,315	1,149,399	1,181,490	9,528,145

Amounts per share of common stock:
Basic earnings (loss)	(18.0)	(20.8)	24.8	34.5	25.1	0.202
Diluted earnings	-	-	24.2	32.5	24.0	0.193
Cash dividends	8.0	8.0	10.0	10.0	10.0	0.081
Shareholders' equity	607.2	582.4	605.6	624.2	641.6	5.174

R&D expenditure	386,890	329,916	323,900	346,389	352,818	2,845,306
Capital expenditure	184,639	184,634	234,841	403,839	435,692	3,513,645

Number of employees	162,000	164,000	164,000	165,000	167,000

Net sales by main product:
Computers & information
processing systems	2,506,193	2,140,548	2,169,753	2,456,939	2,974,948	23,991,516
Communications systems	473,428	487,942	500,664	624,705	855,049	6,895,557
Electronic devices	350,971	394,552	460,340	538,814	511,839	4,127,734
Other operations	131,336	116,288	126,949	141,508	161,638	1,303,532

Total	3,461,928	3,139,330	3,257,706	3,761,966	4,503,474	*36,318,339*

Net sales by customers' geographic location:
Japan	2,312,524	2,213,694	2,283,353	2,645,077	3,161,365	25,494,879
Asia & Oceania	169,140	184,766	201,295	218,002	251,299	2,026,605
The Americas	353,753	261,273	280,114	310,416	403,206	3,251,661
Europe	604,603	459,170	470,985	564,537	664,697	5,360,460
Africa & the Middle East	21,908	20,427	21,959	23,934	22,907	184,734

Total	3,461,928	3,139,330	3,257,706	3,761,966	4,503,474	*36,318,339*

Notes:
1. See Note 1 of Notes to Consolidated Financial Statements with respect to the calculation of basic and diluted earnings (loss) per share.
2. The U.S. dollar amounts above have been translated from yen, for convenience only, at the rate of 124 Yen = US$1.

Financial Review

Results of Operation

Net sales for the fiscal year ended March 31, 1997 grew 20% over the previous year to 4,503 billion yen ($36,318 million). Domestic sales for fiscal 1996 were up 20% to 3,161 billion yen ($25,494 million) and overseas sales increased 20% to 1,342 billion yen ($10,823 million).
Sales of computers and information processing systems increased 21% to 2,974 billion yen ($23,991 million). Sales of personal computers in Japan grew as a result of the strong demand for the FMV Series. Overseas, the increased demand for personal computers brought the impressive growth in sales of hard disk drives. Sales of services and software, which include outsourcing services, maintenance services and a group of software products such as TeamWARE, grew steadily.
Sales of communication systems increased by 37% to 855 billion yen ($6,895 million). In Japan, the rapid popularization of cellular phones and the use of high-speed leased lines increased sales of mobile communication, switching and transmission systems. Overseas, the Group enjoyed strong growth in sales of SONET optical transmission equipment to common carriers, keeping its hold on the top share in this important market.
Sales of electronic devices decreased by 5% to 511 billion yen ($4,127 million). (This was primarily due to the significant drop in memory IC prices, which persisted in fiscal 1996.) Although the demand for 16-Mbit DRAMs increased as PC sales boomed, the drop in memory IC prices negatively affected overall sales. However, the Group saw growth in the sales of flash memory and logic LSIs, microcontrollers and ASICs for multimedia applications.

Gross margin rose 7% to 1,353 billion yen ($10,918 million). Gross margin percentage to net sales was 30%, a decrease of 4%, primarily due to the drop in memory IC prices. Under such circumstances, to decrease the operating costs and improve gross margin percentage to net sales, the Group continued to focus on products with high added value and to streamline its management overall.

Selling, general and administrative expenses increased 9% to 1,153 billion yen ($9,299 million). The percentage to sales decreased 2% to 26%. Research and development expenditure increased 2% to 352 billion yen ($2,845 million). The Group believes that research and development activities are critical to its medium-term and long-term growth in the IT industry.

Interest and dividend income decreased by 1.2 billion yen ($9 million) primarily due to lower interest rates in Japan and interest charges increased 0.7 billion yen ($5 million) mainly attributable to the increase in interest charges on bonds issued in May and December 1996. The balance of interest and dividend income less interest expenses resulted in net interest payments of 39.5 billion yen ($318 million), a deterioration of 1.9 billion yen ($15 million) from the previous year.

As a result of the factors described above, income before income taxes increased 12% to 143 billion yen ($1,153 million). Equity in earnings of affiliates, net decreased 69% to 3.7 billion yen ($30 million), primarily due to special charges such as those associated with inventory adjustments relating to Amdahl Corporation's new model introduction. Net income decreased 27% to 46 billion yen ($372 million) and basic earnings per share decreased by 9.4 yen to 25.1 yen ($0.202).

Financial position

Total assets as of March 31, 1997 were up 9% to 4,727 billion yen ($38,126 million). The increase in receivables, trade and inventories resulting from the increase in sales and the increase in property, plant and equipment attributable to the increase in capital expenditure are the principal factors in the growth. Current liabilities increased 15% to 2,244 billion yen ($18,098 million), and long term liabilities increased 7% to 1,134 billion yen ($9,149 million). The company issued 220 billion yen ($1,774 million) in bonds in fiscal 1996 for the purpose of capital expenditure. Shareholders' equity at March 31, 1997 was up 3% to 1,181 billion yen ($9,528 million). Shareholders' equity per share increased 3% to 641.6 yen ($5.174).

Capital expenditure during the year increased 8% to 435 billion yen ($3,513 million), which included 219 billion yen ($1,773 million) for expanding electronic device facilities and 150 billion yen ($1,214 million) for computers and information processing system facilities. In the fiscal year ending March 31, 1998, the Group plans to maintain steady capital expenditure, which includes investment in memory IC product facilities in Japan and in the U.S., and in small magnetic disk drive facilities in Asian countries.

Financial Overview of the ICL Group

In fiscal 1996, ICL focused on its core businesses by divesting operations not core to systems and services.
ICL consolidated certain operations into those of Fujitsu Limited in order to benefit from the worldwide strength and position of Fujitsu. These divestments included Volume Products business and operations in Spain and Asia.
In addition, ICL divested D2D, its contract manufacturing business, and the Medical and Access Manager businesses to third parties.
ICL's sales in 1996 were 2,917 million Pounds, a 6% decrease from the previous year. Sales by ICL's continuing businesses in 1996 totaled 2,438 million Pounds, a slight decline from the 2,483 million Pounds of continuing operations in the previous year. The loss before tax was reduced to 3 million Pounds, compared with a 1995 loss of 188 million Pounds, after reflecting exceptional credits of 13 million Pounds in 1996 and exceptional charges associated with restructuring costs of 152 million Pounds in 1995.
In financing activities, a 200 million Pounds rights issue of ordinary shares fully underwritten by Fujitsu was completed in June 1996. The proceeds from the issue were used to strengthen ICL's capital base.

ICL Group (Summary of Performance)
	Stg. Pounds (millions)

Years ended December 31	1995	1996

Net sales	3,114	2,917
Loss before income taxes	(188)	(3)
Net loss for the year	(194)	(23)

R&D expenditure	142	105

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