Ana fy2011_e

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Ana fy2011_e

  1. 1. Fiscal year ended March 31, 2012Consolidated financial resultsAll Nippon Airways Co., Ltd. (9202) ANA reports consolidated financial results for FY20111. Consolidated financial results for the period ended March 31, 2012(1) Consolidated financial results Yen (Millions) FY2011 Year on FY2010 Year on Apr.1 - Mar.31 Year (%) Apr.1 - Mar.31 Year (%)Operating revenues 1,411,504 4.0 1,357,653 10.5Operating income 97,022 43.1 67,808 -Recurring profit 68,455 84.9 37,020 -Net income 28,178 20.9 23,305 -Comprehensive income 33,102 (13.7) 38,377 (226.4)Net income per share 11.22 yen 9.29 yenNet income / Shareholders equity 5.3 % 4.7 %Recurring profit / Total assets 3.5 % 2.0 %Operating income / Operating revenue 6.9 % 5.0 %Gain on equity method 526 684(2) Consolidated financial positions Yen (Millions) FY2011 FY2010 as of Mar.31 as of Mar.31Total assets 2,002,570 1,928,021Total net assets 554,859 526,354Net worth / total assets 27.4 % 27.0 %Net worth per share 218.24 yen 207.35 yenNet worth 549,014 520,254(3) Consolidated cash flows Yen (Millions) FY2011 FY2010 Apr.1-Mar.31 Apr.1-Mar.31Cash flows from operating activities 214,406 203,889Cash flows from investing activities (166,323) (139,619)Cash flows from financing activities 16,171 (10,596)Cash and cash equivalents at the end of the period 265,834 201,6062. Dividends Yen End of End of End of End of FullDividends per share 1st quarter 2nd quarter 3rd quarter fiscal year fiscal yearFY2010 - - - 2.00 2.00FY2011 - - - 4.00 4.00FY2012 (Forecast) - - - 4.00 4.00 1
  2. 2. Ratio of dividends to Payout ratio Total dividends net assets (Consolidated) (Million yen) (Consolidated) (%) (%)FY2010 5,018 21.5 1.0FY2011 10,062 35.7 1.9FY2012 (Forecast) 25.2Notes: *In FY2010 total amount of dividends does not include the dividends paid to the trust account of the Employee Stock Ownership Group and affiliates of 22 million yen. This is because the Company shares held by the trust account of the Employee Stock Ownership Group and affiliates are recognized as treasury shares. *In FY2011 total amount of dividends does not include the dividends paid to the trust account of the Employee Stock Ownership Group and affiliates of 26 million yen. This is because the Company shares held by the trust account of the Employee Stock Ownership Group and affiliates are recognized as treasury shares.3. Forecast of consolidated operating results for the period ending March 31, 2013 Yen(Millions) Year on year(%)Operating revenue 1,500,000 6.3Operating income 110,000 13.4Ordinary income 70,000 2.3Net income 40,000 42.0Net income per share 15.90 yen4. Others (1) Changes of important subsidiaries during the period (changes of specific subsidiaries in accordance with changes in the scope of consolidation): Consolidated Equity method Newly added - - Excluded - - (2) Changes in accounting principles, procedures, and the method of presentation (i) Changes caused by revision of accounting standards: No (ii) Changes other than (i): No (iii) Changes in accounting estimates: No (iv) Restatement: No (3) Number of outstanding shares (Common stock) Shares FY2011 FY2010 Outstanding stock (including as of Mar.31 2,524,959,257 as of Mar.31 2,524,959,257 treasury stock) Treasury stock as of Mar.31 9,266,449 as of Mar.31 15,903,528 Average number of shares 2,511,841,390 2,507,572,204 during the period 2
  3. 3. (Reference) Summary of non-consolidated financial results(1) Non-consolidated financial results Yen (Millions) FY2011 Year on FY2010 Year on Apr.1 - Mar.31 Year (%) Apr.1 - Mar.31 Year (%)Operating revenues 1,233,839 3.5 1,191,571 11.1Operating income 88,693 47.7 60,052 -Ordinary income 60,617 91.7 31,621 -Net income 26,795 16.4 23,012 -Net income per share 10.66 yen 9.17 yen(2) Non-consolidated financial positions Yen (Millions) FY2011 FY2010 as of Mar. 31 as of Mar. 31Total assets 1,925,687 1,857,025Total net assets 515,207 486,774Net worth / total assets 26.8 % 26.2 %Net worth per share 204.72 yen 193.93 yenNet worth 515,207 486,774(3) Forecast of non-consolidated operating results for the period ending March 31, 2012 Yen(Millions) Year on year(%)Operating revenue 1,340,000 8.6Ordinary income 62,000 2.3Net income 37,000 38.1Net income per share 14.70 yen*Statement Relating to the Execution Status for Audit Procedures This financial summary falls outside the scope of audit procedures based on the stipulations of the Financial Instruments and Exchange Act. The audit procedures for financial statements based on the stipulations of said Act were not completed at the time this financial summary was disclosed.*Explanations and other special notes concerning the appropriate use of business performance forecasts The consolidated and non-consolidated business performance forecasts given in this document are based on assumptions, prospects, and future business plans, currently available on the date this document was published. Actual results may differ from these forecasts for a variety of reasons. For other matters relating to the forecasts, please refer to “1. Corporate Performance, (1) Analysis of Operating Results” on page 4 of the accompanying materials. 3
  4. 4. 1. Corporate Performance (1) Analysis of Operating Results1) Overview of current fiscal yearIn the year under review (April 1, 2011 to March 31, 2012), the economy in Japan continuedto face severe difficulties as a result of the Great East Japan Earthquake (hereafter, the"Earthquake") that occurred in March 2011. Consumer spending remained steady, however,and a number of trends such as a rally in capital investment have led to a gradual recoveryin the overall economy. The future remains uncertain, however, given the downturn inoverseas economies with the government debt crises in Europe, fluctuations in exchangerates, and soaring oil prices.Against this economic backdrop, ANA has made efforts to stimulate demand after the sharpdecline induced by the Earthquake, saving and recovering approximately ¥30 billion overthe fiscal year under its Emergency Income Recovery Plan in an effort to minimize theimpact on the balance of payments. In addition, some of the measures designed to reducecosts by approximately ¥100 billion that were due to be introduced in the next fiscal yearwere brought forward and introduced in the second half of this year.As a result, consolidated financial results for the year showed an increase on the previousyear, as follows:Operating revenues: ¥1,411.5 billion (up 4.0% year-on-year)Operating income: ¥97 billion (up 43.1% year-on-year)Recurring profit: ¥68.4 billion (up 84.9% year-on-year)Net income: ¥28.1 billion (up 20.9% year-on-year)Non-consolidated financial results also posted an increase, as follows:Operating revenues: ¥1,233.8 billion (up 3.5% year-on-year)Operating income: ¥88.6 billion (up 47.7% year-on-year)Recurring profit: ¥60.6 billion (up 91.7% year-on-year)Net income: ¥26.7 billion (up 16.4% year-on-year)A breakdown of individual segments for the fiscal year under review follows.Overview by segmentAir TransportationOperating revenues: ¥1,262.5 billion (up 3.6% year-on-year) 4
  5. 5. Operating income: ¥88.4 billion (up 46.3% year-on-year)Domestic Passenger ServicesDespite the decline in demand immediately following the Earthquake, by June businesstravel demand had recovered to the levels on par with the same period in the previous year,and as a result of measures taken to stimulate demand, the adverse impact of theEarthquake on leisure demand had been nearly eliminated by the end of the fiscal year.The route network was enhanced with the opening of the new Matsuyama - Okinawa routein October, and the new Itami - Akita route in December. Extra flights were introduced on ashort-term basis to Sendai, Fukushima and Yamagata to aid with relief efforts in the region.The number of regular flights was partially reduced,and smaller aircraft were introduced onmany routes in response to the significant fall in demand due to the impact of theEarthquake. Meanwhile, various measures to match supply with demand were initiated,including changing aircraft size to meet demand trends and introducing extra flights in timesof high demand.Additionally, on November 1 ANA introduced the world’s first scheduled flight service for theBoeing 787, flying between Haneda and Okayama/Hiroshima. This Boeing 787 service hassince been extended to flights between Haneda and Itami/Yamaguchi Ube/Matsuyama.Other measures taken to stimulate demand included the introduction of new promotionalairfares, and efforts have been made to improve convenience and comfort, such asrefurbishment of some of the airport lounges.As a result, results were only slightly down over the previous year, with domestic routescarrying 39.02 million passengers (down 3.8% year-on-year), and generating revenues of¥651.5 billion (down 0.2% year-on-year).International Passenger ServicesThe demand for international passenger services fell significantly over the one-month periodfollowing the Earthquake, but by June business demand had nearly recovered topre-Earthquake levels, and by the summer the number of passengers departing from Japanon overseas leisure flights had recovered to levels similar to the previous year. Demand forinbound tourism from overseas is continuing to show a moderate increase. 5
  6. 6. Flights were temporarily suspended and aircraft were downsized in response to the impactof the Earthquake, but larger aircraft were introduced on routes with strong demand toensure service matched demand. Several new international routes were also introduced:Narita - Chengdu from June 19, Chubu - Hong Kong from October 30, and beginningJanuary 21, Haneda - Frankfurt route commenced using the Boeing 787 aircraft.Sales activities were enhanced following the Earthquake, as ANA aimed to capture thelimited opportunities for connecting passengers’ demand between North America and Asiavia Narita, and incorporate demand in the Western Japan market. Post-June, when therecovery in demand had become pronounced, ANA introduced various discount fares in aneffort to increase demand in the summer and year-end leisure sectors. The sector hardesthit by the impact of the Earthquake was that of tourists visiting Japan from overseas, butcampaigns aimed at attracting site tours from various countries and boosting Japan’s imageresulted in a gradual revitalization in sales of tour products and promotions.Additionally, the Trans-Pacific Joint Venture was introduced from April 1, 2011. This is a jointventure between ANA, United Airlines and Continental Airlines (from March 2012 UnitedAirlines and Continental Airlines have unified their flight code to UA), and offers passengersthe ability to choose the flights they would like to use. Further, on June 1, 2011 ANA receivedapproval for antitrust immunity, which allows it to establish a joint venture with LufthansaGerman Airlines, and this starts up in FY2012.As a result, numbers were up on the previous year, with international routes carrying a totalof 5.88 million passengers (up 13.8% year-on-year). Growth is sluggish as a result of theEarthquake and fluctuations in the exchange rate, but revenues stood at ¥320 billion (up14% year-on-year).Cargo ServicesIn domestic cargo services, cargo sheds in Sendai Airport were damaged by the Earthquake,and there was a period of time when cargo could not be handled. The inoperability ofland-based cargo transport centering on the Hokkaido routes, however, led to a shift todemand for air cargo transport, and ANA was able to capture the market to supply increasednumber of parcel centering on its routes into and out of Hokkaido. Additionally, theintroduction of the Boeing 787 from November has meant that ANA has been able to meetthe increased supply needs and the transition was smooth. 6
  7. 7. As a result, the volume of domestic cargo handled in the period was 467,000 tons (up 3%year-on-year), and operating revenue was ¥33.2 billion (up 2.6% year-on-year), both ofwhich represent an increase over the previous year. The volume of domestic mailtransported was 31,000 tons (up 1.0% year-on-year) and operating revenue exceeded theprevious year at ¥3.5 billion yen (up 3.6% year-on-year).In international cargo services, there were concerns that the Earthquake would lead to anoverall decline in the demand for air cargo services, but the advantages of air cargo led toan increased demand for critical items such as medical supplies. With the yen reachinghighest levels on record, however, there was a major shift to overseas production from thesummer onwards, which led to a difficult market environment for air cargo exported fromJapan. ANA thus introduced measures to boost cargo volume capacity, including promotingthe transport of cargo between foreign countries via Japan, even where unit rates were low.Bulk shipments of new mobile devices in the latter half of February led to an increase in aircargo demand, and capacity was increased in order to meet this demand. Extra flights wereintroduced to Bangkok to deal with increased demand for emergency supplies and goods torebuild Thailand after the floods that hit the country in November, and from December,Narita - Okinawa flights were increased to 2 flights per day with the aim of enhancingOkinawa’s role as a hub airport in the cargo network.As a result, the volume of international cargo handled in the period was 570,000 tons (up2.4% year-on-year), and operating revenue was 87.9 billion yen (up 2.2% year-on-year),both of which represent an increase over the previous year. The volume of international mailtransported was 26,000 tons (up 18.1% year-on-year) and operating revenue exceeded theprevious year at 3.3 billion yen (up 5.0% year-on-year).Other in Air Transportation BusinessThe reduction in charter flights has been offset by an increase in passenger check-in andbaggage handling services outsourced to ANA on behalf of other companies, with the resultthat operating revenue from other air transportation services exceeded the previous year at162.8 billion yen (up 1.8% year-on-year). 7
  8. 8. Changes in fleet composition for the period under reviewThe following changes took place in the ANA Group’s fleet during the fiscal year ended March 2012. Sold / Aircraft Purchased Leased-in Returned Leased-out Change Reference Removed Returned: May 2011, 1 aircraftBoeing 747-400 — — 1 — 2 △3 Sold : August 2011, 1 aircraft November 2011, 1 aircraft Purchased: September 2011, 1 aircraft October 2011, 1 aircraftBoeing 787-8 6 — — — — +6 January 2012, 3 aircrafts March 2012 1 aircraft Purchased: September 2011, 1 aircraft October 2011, 1 aircraft January 2012, 1 aircraft March 2012, 1 aircraft Returned: July 2011, 1 aircraftBoeing 767-300 4 4 1 — 5 +2 Sold and Leased-in: April 2011, 1 aircraft October 2011, 2 aircrafts February 2012, 1 aircraft Sold: March 2012, 1 aircraft 8
  9. 9. Sold / Aircraft Purchased Leased-in Returned Leased-out Change Reference Removed Leased-out and Purchased: August 2011, 2 aircrafts September 2011, 2 aircrafts January 2012, 1 aircraftAirbus A320-200 7 — 9 — 1 △3 February 2012, 2 aircrafts Returned: January 2012, 1 aircraft February 2012, 1 aircraft Sold: September 2011, 1 aircraft Purchased: April 2011, 1 aircraftBoeing 737-800 2 — — — ― +2 June 2011, 1 aircraft Leased-out and Purchased:Boeing 737-500 1 — 1 — 1 △1 February 2012, 1 aircraft Sold: February 2012, 1 aircraft Purchased: May 2011, 1 aircraftBombardier DHC8-400 3 — — — — +3 October 2011, 1 aircraft March 2012, 1 aircraft Leased-out and Purchased: November 2011, 1 aircraftBombardier DHC8-300 2 — 2 — 2 △2 December 2011, 1 aircraft Sold: August 2011, 1 aircraft January 2012, 1 aircraft 9
  10. 10. Travel ServicesOperating revenue: 158.9 billion yen (down 0.3% year-on-year)Operating income: 3.9 billion yen (up 48.2% year-on-year)In domestic travel, the impact of the Earthquake led to a sharp downturn in demand for the ‘ANASky Holiday’ product for the Kanto and Tohoku regions in the first half of the period. However,increased demand for the dynamic package Tabisaku, where the traveler is free to choose acombination of flights and accommodations, meant that sales from October onwards exceededthose of the same period for the previous year, with the result that overall sales for the periodreached the same levels as the previous period.The aftermath of the Earthquake led to a sharp decline in overseas travel in the first quarter of theperiod, but the impact of the strong yen led to a recovery to pre-Earthquake levels from Julyonwards to all countries apart from China. Sales for the summer Tabidoki product within ANAsflagship ‘ANA Hallo Tours’ program remained strong, with Asia being the most populardestination. The dynamic package ‘WEB Free Plan’ designed to stimulate last-minute purchaseshas proved to be extremely popular, and combined with efforts to promote sales for year-endHonolulu charter flights, sales for overseas travel have surpassed those of the previous period.OtherOperating revenue: ¥138.4 billion (down 0.4% year-on-year)Operating income: ¥4.1 billion yen (up 14.3% year-on-year)ANA Trading Co., Ltd., which engages in trading and product sales, suffered a reduction in theretail service business as a result of the adverse impact of the Earthquake on sales at airportshops and on in-flight sales, and there was a decline in aircraft and machinery business.2) Outlook for the Next Fiscal YearThe outlook for the next fiscal year is still bleak in the aftermath of the Earthquake. Although thereare signs of a gradual recovery, the financial turmoil in Europe and the risks associated with thelong-term appreciation of the yen mean that we cannot expect high growth in the next fiscal year.Although neither Europe nor America can expect high growth rates, it is expected that China willbe able to sustain its high growth rate, and the ANA Group will therefore move forward developingthe three pillars of its FY2012-2013 ANA Group Corporate Strategy (released on February 17,2012), namely ’Establishing a Multi-Brand Strategy’, ’Group Management Restructuring’,and ’Strengthening Cost Competitiveness through Structural Reforms’, and achieving its GroupManagement Strategy to ‘become Asia’s Number One airline group providing passenger andcargo transport services to the world’. The management plan for the next fiscal year is outlinedbelow.In domestic passenger services, ANA will ensure optimal deployment of aircraft in each market tomeet conditions in that market, and will further aim to maintain and further improve ANA’scompetitiveness through effective deployment of the Boeing 787 aircraft and upgradingpassenger services. This will continue to ensure the competitiveness of ANAs business revenuebase.The route network will be further enhanced through the introduction of the new Haneda - Iwakuniroute, a Narita - Niigata route and others. In full awareness of the competition with othercompanies, ANA will also increase its use of the Boeing 787 on its routes. 10
  11. 11. In marketing, ANA will revise its promotional fares and offer a new range of domestic fares foroverseas visitors to Japan, in order to reflect customer needs and the changing competitiveenvironment. Additionally, customer satisfaction will be enhanced through improvements toservices.In international passenger services, with a view to the expected growth in Asia, ANA will build anetwork that specializes in long haul flights and connections via Japan, as it works toward furtherimprovements in profitability.In conjunction with the deployment of the Boeing 787, new routes will be introduced to connectNarita with Seattle, San Jose and Myanmar, and to strengthen the ANA route network in NorthAmerica and Asia. (Route plans are subject to the approval of the relevant authorities.)In sales, ANA will move to a fare structure that meets the customers needs, is flexible and is easyto understand. In addition to the joint venture with United Airlines, a joint venture is in place withLufthansa German Airlines, with the aim of increasing revenue.In cargo operations, given predictions that the strong yen will mean a solid recovery in exportcargo demand will take time, ANA will focus its energies on capturing the market for cargo exportsleaving Asia and China bound for North America. In particular, ANA will work to further enhancethe high-speed cargo transport and collection network in Asia, with the Okinawa cargo hubnetwork at its center, as well as promoting a value-added/differentiation strategy, all with a view ofmaximizing revenue.This year’s Aircraft Plan includes the strategic introduction of 22 new aircraft. In addition to 14Boeing 787s, 2 Boeing 777-200ERs, 4 Boeing 737-800s and 2 Bombardier DHC8-400s will beintroduced. At the same time, 17 aircraft including Boeing 747-400s will be taken out of service aspart of an ongoing process of fleet renewal.In LCC operations, AirAsia Japan will launch operations in August, and preparations are in fullswing to enable routes to operate to Chitose, Fukuoka and Naha with Narita as the hub airport.International routes are planned to start in October, with the inaugural routes flying betweenNarita and Seoul and Busan. New demand in the domestic and international markets will becreated and stimulated, and a revenue-generating model will be created in the early stages,which will in turn boost the profits of the entire group.In travel services, the intention is to further enhance internet-based sales. Taking advantage ofthe opening of Tokyo Sky Tree, emphasis in domestic travel products will be placed on expandingthe range of products targeting Tokyo. For international travel, a line of products will be createdutilizing the network of various airlines in the Star Alliance, as ANA works to enhance the HalloTour brand and strengthen sales.In other areas, there will be structural reforms to existing business units and expansion of externaltrade, with the overriding aim being to exploit the comprehensive strengths of the Group anddeliver increased profitability to the ANA Group as a whole.Over the coming year, ANA intends to focus on international routes and capture new businesschances. At the same time, it will promote cost structure reforms. Currently, the consolidatedfinancial forecast for the year ending March 31, 2013 is as follows: 11
  12. 12. Operating revenues: ¥1.5 trillion (up 6.3% year-on-year)Operating income: ¥110.0 billion (up 13.4.% year-on-year)Recurring profit: ¥70 billion (up 2.3% year-on-year)Net income: ¥40 billion (up 42% year-on-year)Further, at the time these calculations were made, the exchange rate was 80 yen to one US dollar,and the market price for aviation fuel on the Dubai market, which is an index for aviation fuel costs,was 115 US dollars in the first half of the period and 100 USD in the second half, while Singaporekerosene cost 130 USD in the first half of the period, and 120 USD in the second half par barrel.The goal of the move to a holding company structure will be to create a management structurethat will be able to adapt to the needs of a changing market, and the target date for theestablishment of the new management structure is April 2013.. 12
  13. 13. (2) Analysis of the Financial Position1 ) Financial Position Assets: Current assets increased by ¥76.5 billion from the end of FY2010, and fixed assets decreased by ¥1.6 billion from the end of the previous year, resulting in assets of ¥2,002.5 billion (¥74.5 billion year-on-year increase). Liabilities: Liabilities increased due to procurement of financing by taking out new loans, resulting in a ¥46.0 billion increase in liabilities from the end of the previous year, to ¥1,447.7 billion. Note that interest-bearing debt increased by ¥24.8 billion year-on-year. Net assets: Retained earnings were increased due to a net income for the fiscal year, net assets were ¥554.8 billion (¥28.5 billion year-on-year increase).2 ) Cash Flows Operating activities: We had a net income of ¥63.4 billion for the period before tax adjustments. Adjustment of depreciation, and other non-cash items, changes in sales-related debts and credits, and changes in taxes, cash flows from operating activities were ¥214.4 billion. Investing activities: Net cash used in investing activities totaled ¥166.3 billion. As for our investing activities, our main expenditures were from the acquisition of aircraft, parts, and the like, as well as prepayment of aircraft scheduled for delivery. As a result, free cash flows totaled ¥48.0 billion. Financing activities: While our payments include payment of loans and leases, repayment of corporate bonds, and dividend payments, we secured financing through long-term loans. As a result, net cash flows from financing activities came to ¥16.1 billion. As a result of the above, cash and cash equivalents for the fiscal year increased by ¥64.2 billion compared with the end of the previous year, and the balance was ¥265.8 billion. The trends of our groups cash-flow indicators are as follows: Category FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Net worth ratio (%) 25.4 18.3 25.5 27.0 27.4 Net worth ratio based on market prices (%) 47.9 42.4 36.0 32.3 31.4 Debt repayment period (years) 4.6 - 11.3 4.6 4.5 Interest coverage ratio 10.7 - 4.6 10.7 10.8 * Net worth ratio: Net worth / Total assets Net worth ratio based on market prices: Total market value of shares / Total assets Debt repayment period: Interest bearing debt / Cash flow from operating activities Interest coverage ratio: Cash flow from operating activities / Interest payments Notes: 1. Each indicator is calculated based on consolidated financial figures. 2. The total market value of shares is calculated based on the closing stock price at fiscal year-end, and the total number of shares issued as of the end of the fiscal year (less treasury stock). 3. The cash flow from operating activities in the consolidated statements of cash flows is used as the cash flow from operating activities. Interest-bearing debt is all the debts recorded on the consolidated balance sheet for which interests are being paid. 13
  14. 14. (3) Dividend Policy and Dividends for the Current and Next Fiscal PeriodsWith a comprehensive review of performance and the financial situation over the current period,and bearing in mind the business environment going forward, a dividend of 4 yen per share isproposed for the current period.ANA views the return of profits to shareholders as an important function of management, and hasalways worked to provide robust shareholder returns while maintaining a balance betweenreturns and strengthening its financial condition to support future business expansion.Regarding dividends going forward, while comprehensive consideration will be given to futuretrends in such areas as business conditions and performance results, ANA’s priority is to achievethe goals set out in the FY2012-2013 ANA Group Corporate Strategy, and therefore plans adividend of 4 yen per share for the period to come.(4) Operating RisksThe following risks could significantly affect the judgment of investors in the ANA Group. Theseforward-looking statements are being made at the determination of the ANA Group as of the endof the fiscal year under review.1) Risks accompanying delay in economic recoveryThe sluggish domestic economy may cause reduced demand for air travel due to deterioration inpersonal consumption and corporate profits. In addition, a weak international economy couldcause a decline in air passenger demand and stagnation in the distribution of goods which mayaffect the Group’s performance.2) Risks associated with the impact of the accident at the Nuclear Power PlantAlthough the accident at the Fukushimas No. 1 Nuclear Power Plant has been brought undercontrol to some degree, the reactor is not currently in a state of cold shutdown, and the possibilitytherefore remains of a similar accident occurring again in the future. Should such an accidentoccur, it is expected that the no-fly zone would be extended, which would then mean that thecurrent routes would no longer be viable, leading to the possibility of an impact on Tohoku andHokkaido routes.In addition, in the event of power supply restrictions or major power outages, maintainingoperation of essential Company systems, such as booking and flight management systems willbe impossible, which in turn may affect service provision and the maintenance of operations.3) Risks related to corporate strategies ① Risks related to fleet strategy In air transportation operations, ANA is pursuing a fleet strategy centered on the deployment of medium and small-sized aircraft, rationalization of models, and the introduction of highly economical aircraft. In line with this strategy, orders have been placed with three companies: The Boeing Company, Bombardier Inc. and Mitsubishi Aircraft Corporation. Any delays in 14
  15. 15. delivery due to financial or other factors at any of these three companies could create obstacles to the Company’s medium-to-long term operations. Further, this fleet strategy could prove ineffective due to the factors given below, significantly diminishing expected benefits. (i) Dependence on the Boeing Company As of the end of March 2011, the Company had ordered 69 aircraft from Boeing, out of the 87 aircraft purchases mandated by our fleet strategy. If Boeing were unable to fulfill its agreements to ANA due to financial or other factors, ANA would be unable to acquire aircraft according to this fleet strategy. Such circumstances could significantly affect ANA’s performance. Delivery of the Boeing 787 was delayed several times, but since the delivery of the first 787 on September 26, 2011, ANA has taken delivery of 6 additional aircraft through March 31, 2012. Should there be substantial delays to the scheduled delivery of other 787 aircraft going forward, it could adversely affect ANA’s medium-to-long term operations. (ii) Delay of aircraft development plan In accordance with its fleet strategy, ANA has decided to introduce the Mitsubishi Regional Jet (MRJ) currently being developed by Mitsubishi Aircraft Corporation but the date of delivery has been delayed by approximately 2 years. Further delays to the delivery schedule going forward could adversely affect ANA’s medium-to-long term operations.② Risks associated with arrival / departure slotsANA views the new runway at Haneda and introduction of simultaneous take-offs and landings atNarita Airport, and the resulting capacity expansion at metropolitan Tokyo airports as a majorbusiness opportunity, and has been making various investments and improvements to itsoperating structure. There has been no official announcement yet, however, regarding allocationof the second phase of slot increases amounting to 407,000 slots (annual number of slots). Thereare plans to increase the number of slots at Narita Airport by 270,000 in the summer of 2013, andeventually by a total of 300,000, but no final decision has yet been taken. In light of this situation,if the size or timing of the capacity expansion at the two metropolitan airports (Haneda and Narita)differs from assumptions made by the Company, the achievability of the Group’s Corporate Plancould be adversely affected.③ Risks associated with cargo business strategiesOur cargo business, including express operations, is highly dependent on cargo shipped to andfrom China and other Asian regions; changes to economic conditions in these regions couldtherefore lead to a decrease in the volume of cargo and a reduction in the unit price.④ Risks associated with the LCC businessANA has already invested in the LCC business and has already begun LCC business operations,but the possibility remains that the projected demand for LCC airlines will not be generated, orthat escalating competitiveness both within Japan and abroad in the LCC arena could lead to adownturn in business conditions or a withdrawal from LCC operations. The possibility exists,meanwhile, that too many passengers could transfer their business away from the Group to theLCC business, and the forecasted returns would therefore not be realized. 15
  16. 16. 4) Risks associated with fluctuations in the price of crude oilSince jet fuel is derived from crude oil, the price of jet fuel will fluctuate in conjunction with theprice of crude oil. This may affect the Group’s performance as follows:① Risks associated with an increase in the price of crude oilIf the price of crude oil increases, basically this will lead to an increase in the price of jet fuel,leading to a significant burden on the ANA Group. To reduce the risk of fluctuations in the price ofjet fuel and to stabilize associated expenses, ANA purchases crude oil and jet oil derivatives inplanned, ongoing hedging transactions for specific periods of time. ANA’s hedging transactionsare limited to a certain percentage of its aggregate domestic and overseas purchase of fuel, withplans for hedging amounts set quarterly. Individual transactions are maintained within limits thatare set in such a way as to ensure that ANA’s transactions will not affect the spot market, andmargins are adjusted monthly to avoid any physical delivery obligations.Approximately 40% of the amounts for 2012 have already been hedged. Should the price of crudeoil increase further in the future, however, hedging transaction prices will generally increase inalignment with the market. Given the limitations of the Group’s current efforts to offset high crudeoil prices through cost reductions and higher fares and surcharges, resurgent crude oil pricescould affect ANA’s performance in the mid-to-long term.② Risks associated with a sharp drop in the price of crude oilANA offsets the risk of fluctuations in the price of crude oil through hedging transactions.Consequently, if the price of crude oil were to drop sharply during the fiscal year, the effect of thefall in the market price might not be reflected immediately, depending on the status of the hedgingposition, and may not contribute to immediate profit.5) Risks associated with infectious diseases such as H1N1 influenzaAn outbreak of a serious, contagious disease, such as H1N1 influenza, could lead to a drasticreduction in demand, not only for international flights, but also for the Group’s entire operations.Fear would reduce the public interest in travel, and such outbreaks could lead to a suddendecrease in the number of domestic and international passengers, and could affect ANA’sprofitability.Further, ANA’s ability to carry on its business operations could be adversely affected if thenumber of employees and contractors affected by the spread of a highly infectious new strain ofinfluenza exceeded forecasts.6) Risks associated with fluctuations in foreign exchange ratesSince the purchase of jet fuel, which accounts for a significant portion of ANA’s expenses, isconducted in foreign currencies, the depreciation of the yen will always have a significant effecton ANA’s profits. Further, with increased earnings from international operations, appreciation ofthe yen has come to have a greater impact on earnings. Accordingly, to the greatest extentpossible, foreign currency taken in as revenue is used to pay expenses denominated in the sameforeign currency, thereby minimizing the risk of fluctuations in foreign exchange rates. In addition,ANA uses forward exchange agreements and currency options for its jet fuel purchases to limitthe risk of fluctuations in foreign exchange rates, and to stabilize and control payment amounts.7) Risks associated with the international situationANA’s route network currently covers North America, Europe, China and other parts of Asia.Should any political instability, conflict or large-scale terrorist attack occur in any of these regions, 16
  17. 17. ANA’s performance could be adversely affected, as there would be an accompanying decline indemand for travel to the affected region.8) Risks associated with statutory regulationsAs an airline operator, ANA undertakes operations based on the stipulations of statutoryregulations for airline operations. Further, passenger and cargo operations on international routesmust conform to the stipulations of international agreements including treaties, bilateralagreements and the decisions of IATA (the International Air Transport Association). Further, thepricing of fares and charges is constrained by the Japanese Antimonopoly Act and similar lawsand regulations in other countries.9) Risks associated with litigationANA may become involved in litigation with respect to its business activities, which could affectANA’s ability to perform. Further, ANA could be sued in the future with respect to the events listedbelow, and similar investigations could be initiated in other countries or regions.① Antitrust Law Investigations in the USAFrom February 2006, ANA has extended its full cooperation with the investigation beingconducted by the United States Department of Justice into price adjustments relating tointernational air cargo and passenger transport services. Following a comprehensive review ofthe various aspects of the situation, ANA reached a plea bargain agreement in October 2010, andsigned an agreement in November of that year. In October of that same year, a settlement withthe class action group regarding cargo transport connected to this case was agreed upon.No claim amount has been specified with regards to the class action related to air passengertransport, and it is therefore difficult to provide details or give a detailed analysis10) Risks associated with public sector feesPublic sector fees in relation to the air transportation business include aviation fuel taxes andlanding fees, and fees for the use of navigational aid facilities. The Japanese government hasintroduced time-limited measures to mitigate aviation fuel taxes and landing fees, but the ANAGroup could be adversely affected if these measures are reduced or abolished in the future.11) Risks associated with environmental regulationsAs part of efforts to protect the global environment, numerous domestic and internationalregulations have been introduced or strengthened in recent years. These have addressed suchissues as aircraft emission of greenhouse gases (CO2 etc.), the usage and treatment ofenvironmental pollutants, and energy use at major business operations. Compliance with suchstatutory regulations imposes a considerable cost burden on ANA; further expenses may beincurred should the current regulations become stricter, if new regulations such as the EuropeanUnion Emission Trading Scheme are introduced, or if various governments introduceenvironmental taxes.12) Risks associated with conditions surrounding the airline industryThe environment around the airline industry is currently undergoing sweeping changes. In theglobal airline industry, factors including progress with open skies policies, the rise of low-costcarriers, and stronger alliances between existing airlines are causing tectonic shifts in thecompetitive environment. Within Japan, ANA’s profitability could be adversely affected if there arechanges to aviation policy, major changes in the current competitive or business climate, orchanges in the management trends of our competitors, especially within Japan Airlines Co., Ltd, 17
  18. 18. which has been receiving assistance from public funds as it restructures in the process towardsre-listing.13) Competitive risksIt cannot be denied that there is a possibility ANA may incur increased expenses for its airtransportation operations as a result of such factors as increases in jet fuel prices, the cost ofraising funds or the need to implement actions to meet environmental regulations. If suchincreased expenses are incurred, ANA will have to secure income by reducing indirect fixed costs,by enhancing efficiency through the integration of aircraft, and by raising fares and fees. However,because ANA competes with other airlines in Japan and overseas, as well as with other forms oftransport such as the bullet train on certain routes, passing on costs could diminish itscompetitiveness and lead to a loss of customers to our competitors. As price competition greatlyrestricts the passing on of costs to customers, any increase in expenses could have an adverseimpact on the Group’s profitability.14) Risks associated with ineffective strategic alliancesANA enjoys various benefits from its strategic alliances, mainly through its membership in the StarAlliance. These include heightened brand recognition domestically and abroad, as well as anincreased mix of passengers and a diversification of the market. Additional benefits include thesale of code-share tickets by Alliance partners and the use of ANA flights by customers in partnermileage programs. From April 1, 2011, joint venture flights were introduced on Pacific routes incollaboration with United Airlines and Continental Airlines (from March 2012 United Airlines andContinental Airlines have unified their flight code to UA), having received approval under ATI(Antitrust Immunity). On June 1,, 2011, the Ministry of Land, Infrastructure and Transport gaveapproval under ATI (Antitrust Immunity) for Lufthansa German Airlines, and joint ventures in theJapan-Europe network have been gradually introduced commencing in the latter half of 2011.The positive impact of the alliances would be reduced, however, should a strategic partnerwithdraw from the Star Alliance, if there were a dissolution of a partnership between two of thecompanies, a downturn in performance or a restructuring, or if some external factor led to stricterregulations governing the partnerships. This in turn could affect the profitability of the Group.15) Risks associated with flight operations① Aircraft accidents, etc.Any aircraft accidents on ANA or code-share flights could cause a drop in customer confidenceand demand, creating a medium to long-term downturn that could adversely affect ANA’sperformance. On September 6, 2011, Flight 140 (operated by Air Nippon Co., Ltd.) experiencedflight instability, while the tail of the aircraft of Flight 731 (operated by Air Nippon Co., Ltd.) cameinto contact with the runway on February 5, 2012. Both of these incidents are currently underinvestigation by the Transportation Safety Board of the Ministry of Land, Infrastructure andTransport to determine the causes. Results of the investigations are due be announced.A major accident suffered by a competitor could similarly lead to a reduction in demand that couldaffect ANA’s performance. An accident would give rise to significant expenses includingcompensation for damages and the repair or replacement of aircraft. Such direct expenses wouldbe largely met through aviation insurance.② Directives to improve airworthiness, etc.In the event that an issue arises that significantly compromises the safety of an aircraft, theMinister for Land, Infrastructure and Transport is required by law to issue a directive to improve 18
  19. 19. airworthiness. In some cases, all aircraft of the same model are grounded until the aircraft’ssafety has been confirmed. Even when the law does not require a directive to be issued, in somecases when safety cannot be confirmed, operation of the same model is voluntarily suspended inaccordance with in-house regulations. Any such situation would have an adverse impact of theGroup’s profitability.16) Risks associated with leaked customer informationANA holds a huge amount of customer information, including personal data on approximately 23million AMC members (as of March 31, 2012). The proper management of such personalinformation is now dictated by a strengthened Personal Information Protection Law. The Grouphas stated its privacy policy, apprised customers of the policy, and established full measures toensure information security, including in its IT systems. In addition, work procedures andinformation systems are continuously monitored and revised when needed to eliminate anypotential security gaps. Despite these precautions, a major leak of personal information causedby unauthorized access or some other unforeseen factor could still occur and carry significantcost, in terms of both compensation and loss of public confidence, which could significantly affectANA’s performance.17) Risks associated with disastersANA’s data center is located near Haneda Airport, while operational control of its domestic andinternational flights is conducted at Haneda Airport. 60% or more of the Group’s passengers ondomestic routes use Haneda Airport. A major disaster such as an earthquake in the Tokyo areaor a fire at the above-mentioned facilities could lead to a long-term shutdown of the Group’sinformation systems and/or operational control functions that could significantly affect itsperformance.Further, disasters such as earthquakes, tsunami, typhoons, heavy snow or volcanic eruptions inareas other than Tokyo—in Japan as well as abroad—could force the closure of the affectedairports and lead to the suspension of flights, which could also affect ANA’s performance.18) Risks associated with cost structureFixed costs such as aircraft and personnel costs account for a high share of ANA’s expenses,constraining it from adjusting the scale of operations to meet a given financial situation.Consequently, any decrease in the number of passengers or in cargo volume could have asignificant impact on the Group’s profits.19) Risks related to IT systemsAir transportation operations are highly dependent on information systems for critical functions incustomer services and operations such as reservations and sales, boarding procedures, andoperational control and management. Any system failure, including in telecommunicationsnetworks, would make it difficult to maintain customer service and operations, and would result ina loss of public confidence, which could affect ANA’s performance. The Group’s informationsystems are also used by ANA’s partner airlines, so the impact would not be confined to theGroup.Furthermore, in the event of a large scale electricity outage, or a drive to conserve electricity,there are concerns that there would not be sufficient power to supply ANA’s essential informationsystems, such as booking and operations management systems, which may affect maintenanceof system operations.20) Risks associated with finance 19
  20. 20. ① Increase in the cost of procuring funds The Group acquires aircraft through bank loans, capital increases and bond issuances. Anyfuture disruption in financial markets, reorganization of government financial agencies, ordowngrading of ANA’s credit rating may make it difficult or even impossible to raise funds onterms advantageous to the Group, increasing the cost of such fund-raising. Such circumstancescould significantly affect ANA’s performance.② Risks related to asset impairmentIf the profitability of various operations deteriorates, or an asset is sold off, ANA may be requiredto recognize asset impairment losses in the future.2. Management Policy (1) Fundamental Management PolicyThe ANA Group Safety Principles state that “Safety is our promise to the public and thefoundation of our business.” Indeed, safety is our duty as a provider of public transportation and isalways at the forefront of our operations. While giving top priority to the safe operation of Groupairlines, we aim to gain and maintain the confidence of customers and shareholders by raising thequality of our air transportation services and by improving the profitability of the ANA Group as awhole. (2) Medium and Long Term Management StrategiesAgainst a backdrop of inherent concerns regarding the impact of the Earthquake and thedownturn of the global economy with mounting government debt crises in Europe, and despite anuncertain future with soaring oil prices and fluctuations in the exchange rate, the Group is stillstriving to achieve its management vision of “Becoming Asia’s Number One airline group”. Assuch, it has entered the LCC business, introduced the world’s first commercial Boeing 787 flights,and is making preparations for its merger with Air Nippon Co., Ltd (April 1, 2012).The airline industry has reached a major turning point, with the expansion of airport capacity inthe Tokyo metropolitan area, further developments in liberalizing airline business, and a spate ofnew LCCs being established. Under these circumstances, ANA will need to engage in full-fledgedcompetition with the major carriers in Asia, Europe and America and the LCCs, as well as theexisting Japanese carriers, Besides, competition with other modes of transport is likely to intensify,with extensions to the bullet train, for example, already in the pipeline.In this era of aggressive competition, ANA intends to make the most of the opportunitiespresented by the progress that has been made since 2010 in converting Haneda to aninternational airport and in the successive expansion of capacity at Narita airport. It will furthercapitalize on the introduction of the Boeing 787 and the joint ventures it has established toenhance its network of international routes. At the same time, ANA intends to consolidate itsmanagement base, always aiming for the ’Establishing a Multi-Brand Strategy’, ’ GroupManagement Restructure’ and ’Strengthening Cost Competitiveness through Structural Reforms’,and under our banner of ’Reborn– With Strength’, the Group will continually strive to maintain itsposition as the airline group of choice for the consumer, and achieving its Group ManagementStrategy of ’Becoming Asia’s Number One airline group’. 1) ANA Group Business Strategy ~ Growth with a focus on international routesWhile responding to significant changes in the competitive environment as we move forward, theANA Group will strive to be a network carrier that maintains an expanding network combining 20
  21. 21. strength with efficiency. ① International operations (i) Strengthen the business model of being a network carrier that attaches importance to long-haul flights and ease of connecting flights. (ii) Achieve an overall increase of 22% (compared to FY2011) by FY2013 in international route volume (seat km). This will be achieved by: Expanding and enhancing the international long-haul network through such measures as deploying the Boeing 787 on routes between Narita and Seattle and Narita and San Jose; and expanding the Asian route network with the deployment of medium-sized aircraft. ② Domestic OperationsImprove competitiveness. This will be achieved by: Qualitative enhancement by ensuringflexibility so that supply and demand can be met; and by the full-scale deployment of Boeing 787aircraft.③ Cargo OperationsExpansion of international services. This will be achieved by: Maximum utilization of the Okinawahub by enhancing the efficiency of aircraft operations.④ Alliance StrategyStrengthening the global network in the Asian, North American and European markets throughjoint ventures.⑤ LCC Strategy (AirAsia Japan)Service planned to launch in August 2012, with a successive increase in the number of routesand number of flights2) Strengthening the management base -- ’Reborn – With Strength’ The existing ANA brand and the LCC brand will be leveraged to form a ’Multi-Brand Strategy’. This double-pronged approach will stimulate demand in a market that is not currently covered by the ANA brand. It will also increase the ANA Group’s share of the market, leading to an enhancement of corporate value. Additionally, ANA aims to position itself as ’Always the airline of choice– winning in the era of mega-competition’. The Group will therefore begin working out the details of the move to a ’holding company structure’ that can deliver a flexible structure able to meet the needs of a ’multi-brand strategy’. In parallel, the Group will strive to deliver approximately ¥100 billion in savings by 2014 through structural reforms that have been up and running since 2011. This will enhance its competitiveness and make the Group more resilient against risk.① Establishing a ’Multi-Brand Strategy’ (i) Work to expand the international network, while establishing ANAs brand as a full service carrier/network carrier distinct from the LCC. (ii) The new LCC business model will deliver a thoroughly low-cost operating system, and maximize revenues by tapping in to a new market and creating new demand.② Group Management Restructure (i) Separating management and executive powers, the holding company will plan corporate strategy and allocate corporate resources from an overall, optimal perspective. (ii) The delegation of authority and responsibility to each unit within the Group will enable optimal delivery of operations in a speedy, cost-effective manner as there will be an accurate understanding of customer needs. 21
  22. 22. (iii) Allowing each operating company to concentrate on the execution of its own business operations will optimize the multi-brand strategy and maximize profitability.③ Strengthening Cost Competitiveness through Structural Reforms (i) Innovation in business process and flattening of the organizational structure will lead to optimization of facilities, IT and indirect staff. (ii) A global comparison of standards highlighting the productivity of direct staff will pavethe way for the transformation to a competitive operational structure3) A foundation to support the implementation of the Corporate Strategy: A solid corporateplatform.In accordance with the ’ANA GROUP SAFETY PLINCIPLES’ and the ’Course of ANA GroupSafety Action’, safety is the foundation of our business, and we strive to achieve the world’shighest level of safety. As embodied in the concept ’values that cannot be copied, creatingdiverse people who are ready to face life’s challenges’, ANA devotes its efforts to encouraging anattitude where diverse people will continue to rise to the challenge. By gaining a preciseunderstanding of what people expect and require of the ANA Group, as a global company, werespect international standards and are committed to CSR.① Safety Each and every Group employee should reliably carry out each and every task and action, one by one. That is how we can develop people who enhance safety and reinforce a system that promotes safety.② Human ResourcesANA will continue to develop and enhance human resource development, as a foundation onwhich it can build an international network that is supported by people who are fully capable ofrepresenting the Group on the global stage in all their actions.③ CSR ANA will implement initiatives aimed at making the ANA Group the leading environmental airline. 4) Products and Service: Achieving an ANA Brand that is No. 1 in AsiaThe LCC marks a clear departure for ANA in terms of products and service. ANA will push forwardwith promoting the brand strategy People x Products and Service, with the aim of increasing thevalue of customer contacts and establishing our position as No. 1 in Asia for quality & customersatisfaction.① The world’s highest level of customer satisfaction (i) To provide a ’people service’ by always looking at things from the customer’s perspective, by being one step ahead of the expectations of our customers, and to provide top quality products, including the popular Inspiration of Japan, and the highest level of service to our customers worldwide. (ii) To earn and maintain a 5 star ranking, the highest possible ranking in the SKYTRAX Airline Ranking② The world’s best punctuality record (i) In order to meet the discerning needs of the customer, as a network carrier ANA insists that all its employees be acutely aware of the value of time, and maintains an impeccable punctuality record. (ii) We aim to claim the top spot in the Flight Stats On-time Performance Service Award run by Conductive Technology throughout the period this campaign is running. 22
  23. 23. 3. Consolidated Financial Statements(1) Consolidated Balance Sheets Yen (Millions) FY2011 FY2010Assets as of Mar.31 as of Mar.31Current assets 548,719 472,187Cash and deposits 41,867 36,956Trade accounts receivable 124,028 95,756Marketable securities 237,104 173,874Inventories (Merchandise) 4,924 5,445Inventories (Supplies) 44,935 50,014Deferred income taxes - current 30,269 38,618Other 66,752 72,766Allowance for doubtful accounts (1,160) (1,242)Fixed assets 1,453,675 1,455,318Tangible fixed assets 1,219,875 1,189,200 Buildings and structures 112,028 117,775 Flight equipment 751,108 714,572 Machinary, equipment and vehicles 21,255 25,457 Tools and fixtures 9,817 11,486 Land 56,545 57,279 Leased assets 27,305 35,904 Construction in progress and 241,817 226,727  advance payment on aircraft purchase contractsIntangible fixed assets 71,846 74,403Investments and others 161,954 191,715  Investment in securities 58,586 51,079  Long-term loans receivables 4,488 5,075  Deferred income taxes – non-current 68,887 93,116  Other 31,068 43,329  Allowance for doubtful accounts (1,075) (884)Deferred assets 176 516Total assets 2,002,570 1,928,021 23
  24. 24. FY2011 FY2010Liabilities as of Mar.31 as of Mar.31Current liabilities 461,045 447,591Trade accounts payable 180,804 160,755Short-term debt - 166Current portion of long-term debt 115,962 115,036Current portion of bonds payable - 20,000Lease obligation 11,443 11,193Accrued income tax 3,912 4,787Accrued bonuses to employees 30,841 27,683Provision for potential loss on antitrust proceedings 116 116Asset retirement obligations 1,146 1,614Other 116,821 106,241Long-term liabilities 986,666 954,076Bonds payable 95,000 95,000Long-term debt payable 716,663 665,161Lease obligation 24,589 32,263Deferred income taxes - non-current 1,787 1,951Accrued bonuses to employees 2,382 2,132Accrued employees’ retirement benefits 126,075 123,400Retirement benefit for directors and corporate auditors 591 569Asset retirement obligations 1,027 977Consolidation adjustment account - 392Other 18,552 32,231Total liabilities 1,447,711 1,401,667Net assetsShareholders’ equity 540,637 516,803Common stock 231,381 231,381Capital surplus 195,723 196,330Retained earnings 117,622 94,892Treasury stock (4,089) (5,800)Other accumulated comprehensive income 8,377 3,451Valuation difference on available-for-sale securities (140) (810)Deferred gains or losses on hedges 9,334 5,010Foreign currency translation adjustment (817) (749)Minority interests 5,845 6,100Total net assets 554,859 526,354Total liabilities and net assets 2,002,570 1,928,021 24
  25. 25. (2) Consolidated Statements of Income and Comprehensive IncomeConsolidated Statements of Income Yen (Millions) FY2011 FY2010 Apr.1 - Mar.31 Apr.1 - Mar.31Operating revenues and expenses Operating revenues 1,411,504 1,357,653 Operating expenses 1,086,670 1,071,003 Sales, general and administrative expenses 227,812 218,842 Operating income 97,022 67,808Non-operating income and expenses Non-operating income 10,695 9,096 Interest income 857 994 Dividnds income 1,595 1,603 Foreign exchange gain - 1,437 Gain on sale of assets 3,347 414 Equity in income of affiliates 526 684 Other 4,370 3,964 Non-operating expenses 39,262 39,884 Interest expenses 19,578 19,314 Foreign exchange loss 192 - Loss on sale of assets 1,541 2,197 Loss on disposal of assets 5,868 6,872 Provision for accrued employees retirement benefits 6,396 6,425 Other 5,687 5,076Ordinary income 68,455 37,020Extraordinary gains 1,581 16,882 Gain on sales of noncurrent assets 819 - Subsidy 440 2 Reversal of provision for loss on antitrust proceedings - 16,729 Gain on transfer of benefit obligation relating to employees pension - 38 fund Income from compensation - 76 Other 322 37Extraordinary losses 6,605 18,844 Loss on sale of noncurrent assets 1,209 - Loss on retirement of non-current assets - 3,047 Impairement loss 1,746 315 Loss on sale of investment securities 282 - Valuation loss on investment securities 10 3,536 Special retirement benefits 2,442 192 Settlement package - 6,835 Loss on adjustment for changes of accounting standard - 2,130 for asset retirement obligations Expense reletad to antitrust proceedings - 693 Other 916 2,096Net income before taxes 63,431 35,058Income taxes current 4,967 4,657Income taxes deferred 30,283 7,377Minority interests (loss) 3 (281)Net income (loss) 28,178 23,305 25
  26. 26. Consolidated Statements of Comprehensive Income Yen (Millions) FY2011 FY2010 Apr.1 - Mar.31 Apr.1 - Mar.31Income before minority interests 28,181 23,024 Valuation difference on available-for-sale securities 658 (2,350) Deferred gains or losses on hedges 4,324 18,222 Foreign currency translation adjustment (69) (492) Share of other comprehensive income of associates accounted 8 (27) for using equity methodOther comprehensive income 4,921 15,353Comprehensive income 33,102 38,377 Comprehensive income attributable to owners of the parent 33,104 38,662 Comprehensive income attributable to minority interests (2) (285) 26
  27. 27. (3) Consolidated Statements of Changes in Net Assets Yen (Millions) FY2011 FY2010 Apr.1 - Mar.31 Apr.1 - Mar.31Shareholders equity Common stock Balance at the end of previous period 231,381 231,381 Balance at the end of the period 231,381 231,381  Capital surplus Balance at the end of previous period 196,330 196,635 Changes of items during the period Disposal of treasury stock (607) (305) Total changes during the period (607) (305) Balance at the end of the period 195,723 196,330 Retained earnings Balance at the end of previous period 94,892 64,510 Changes of items during the period Dividends from surplus (5,018) - Net income 28,178 23,305 Change of scope of equity method (430) 7,077 Total changes during the period 22,730 30,382 Balance at the end of the period 117,622 94,892  Less treasury common stock Balance at the end of previous period (5,800) (7,016) Changes of items during the period Purchase of treasury stock (25) (56) Disposal of treasury stock 1,721 1,373 Change of scope of equity method 15 (101) Total changes during the period 1,711 1,216 Balance at the end of the period (4,089) (5,800)  Total shareholders equity Balance at the end of previous period 516,803 485,510 Changes of items during the period Dividends from surplus (5,018) - Net income 28,178 23,305 Purchase of treasury stock (25) (56) Disposal of treasury stock 1,114 1,068 Change of scope of equity method (415) 6,976 Total changes during the period 23,834 31,293 Balance at the end of the period 540,637 516,803 27
  28. 28. FY2011 FY2010 Apr.1 - Mar.31 Apr.1 - Mar.31Other accumulated comprehensive income Valuation difference on available-for-sale securities Balance at the end of previous period (810) 1,516 Changes of items during the period Change of scope of equity method - 52 Net changes of items other than shareholders equity during the period 670 (2,378) Total changes during the period 670 (2,326) Balance at the end of the period (140) (810) Deferred gaines or losses on hedges Balance at the end of previous period 5,010 (13,212) Changes of items during the period Net changes of items other than shareholders equity during the period 4,324 18,222 Total changes during the period 4,324 18,222 Balance at the end of the period 9,334 5,010 Foreign currency translation adjustment and others Balance at the end of previous period (749) (262) Changes of items during the period Net changes of items other than shareholders equity during the period (68) (487) Total changes during the period (68) (487) Balance at the end of the period (817) (749) Total valuation, translation adjustments and others Balance at the end of previous period 3,451 (11,958) Changes of items during the period Change of scope of equity method - 52 Net changes of items other than shareholders equity during the period 4,926 15,357 Total changes during the period 4,926 15,409 Balance at the end of the period 8,377 3,451Minority interest on consolidated subsiduaries Balance at the end of previous period 6,100 6,537 Changes of items during the period Net changes of items other than shareholders equity during the period (255) (437) Total changes during the period (255) (437) Balance at the end of the period 5,845 6,100Total net assets Balance at the end of previous period 526,354 480,089 Changes of items during the period Dividends from retained earnings (5,018) - Net income (loss) 28,178 23,305 Purchase of treasury stock (25) (56) Disposal of treasury stock 1,114 1,068 Change of scope of equity method (415) 7,028 Net changes of items other than shareholders equity during the period 4,671 14,920 Total changes during the period 28,505 46,265 Balance at the end of the period 554,859 526,354 28
  29. 29. Note: Type and number of outstanding shares (Thousands shares) FY2010 Increase Decrease FY2011 As of Mar.31 FY2011 FY2011 As of Mar.31Issued StockCommon Stock 2,524,959 - - 2,524,959Total 2,524,959 - - 2,524,959Treasury StockCommon Stock 15,903 103 6,740 9,266Total 15,903 103 6,740 9,266 29
  30. 30. (4) Consolidated Statements of Cash Flows Yen (Millions) FY2011 FY2010 Apr.1 - Mar.31 Apr.1 - Mar.31I. Cash flows from operating activitiesIncome (loss) before income taxes and minority interests 63,431 35,058Depreciation and amortization 119,268 118,440Impairment loss 1,746 315Loss on adjustment for changes of accounting standard - 2,130for asset retirement obligationsSettlement package - 6,835Loss (gain) on disposal and sale of fixed assets 4,789 11,749Loss (gain) on valuation and sale of securities 134 3,536Increase (decrease) in allowance for doubtful accounts 210 153Increase (decrease) in accrued employees’ retirement benefit 2,212 4,517Interest and dividend income (2,452) (2,597)Interest expense 19,578 19,314Exchange loss (gain) (333) 359Special reteirement benefit 2,442 192Decrease (increase) in notes and accounts receivable-trade (28,756) 1,088Decrease (increase) in other receivable (6,197) 14,835Increase (decrease) in notes and accounts payable-trade 20,049 9,738Other, net 42,209 6,297Subtotal 238,330 231,959 Interest and dividends received 3,220 2,235 Interest paid (19,866) (19,137)Payments for special retirement payments (1,979) (791)Settlement package paid - (6,985)Income taxes (paid) refund (5,299) (3,392)Net cash provided by (used in) operating activities 214,406 203,889II. Cash flows from investing activities Payment for purchase of short-term investment securities (231,730) (106,460)Proceeds from sale of short-term investment securities 227,770 142,860Payment for purchase of tangible fixed assets (181,196) (188,113)Proceeds from sale of tangible fixed assets 40,577 38,190Payment for purchase of intangible fixed assets (15,685) (23,585)Payment for acquisition of investments in securities (7,059) (20)Proceeds from sale of investments in securities 602 502Payment for loan receivable (108) (3,126)Proceeds from collection of loan receivable 956 765Other, net (450) (632)Net cash provided by (used in) investing activities (166,323) (139,619) 30
  31. 31. FY2011 FY2010 Apr.1 - Mar.31 Apr.1 - Mar.31III. Cash flows from financing activities Increase (decrease) in short-term loans, net (166) (28,930) Proceeds from long-term debt 180,481 161,504 Repayment of long-term debt (128,053) (109,736) Proceeds from issuance of bonds - 19,909 Redemption of bonds (20,000) (40,000) Repayment of finance lease obligation (11,950) (14,269) Decrease (increase) in treasury stock 1,084 1,012Cash dividends paid (5,018) - Other, net (207) (86)Net cash provided by (used in) financing activities 16,171 (10,596)IV. Effect of exchange rate changes on cash and cash equivalents (26) (257)V. Net increase (decrease) in cash and cash equivalents 64,228 53,417VI. Cash and cash equivalents at the beginning of the period 201,606 148,189VII. Cash and cash equivalents at the end of the period 265,834 201,606 31

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