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Fiscal 2002 Consolidated Interim Financial Results
(ending March 31, 2003)
 
 
2002 (interim)
2001 (interim)
2002
Sales ¥12,585          ¥12,026          ¥24,375         
Operating income (loss) 636          (121)         43         
Ordinary profit (loss) 337          (363)         (360)        
Net income (loss) (204)         (584)         (649)        
EPS (yen) (7.10)         (20.31)         (22.57)        
 
Note: Except EPS, all figures are rounded off to millions.
2. Financial position (¥ in millions)
 
2002 (interim)
2001 (interim)
2002
Total assets ¥38,872          ¥45,690          ¥44,294         
Shareholders' equity 5,490          5,742         5,653         
Capital adequacy ratio (%) 14.1          12.6         12.8        
Shareholders' equity per share (yen) 190.86         199.58         196.51        
Shares outstanding 28,765,360         28,772,118         28,770,634        
Note: Figures in Total assets and Shareholders' equity are rounded off to million.
3. Cash flows (¥ in millions)
 
2002 (interim)
2001 (interim)
2002
Cash flows from operating activities ¥      806          ¥     669          ¥   3,156         
Cash flows from investing activities 468          (267)         (1,762)         
Cash flows from financing activities (1,516)          (603)         (1,356)        
Cash and cash equivalents at the term end ¥   1,326         ¥  1,376         ¥   1,582        
Note: All figures are rounded off to million.

4. Company forecast for consolidated results for fiscal 2002

(1) Sales: ¥25,400 million
(2) Ordinary profit: ¥900 million
(3) Net income: ¥300 million
(4) EPS: ¥10.43

5. Business policy

Adhering to its corporate commitment, TBK and its affiliated companies strive to create products that satisfy customers and benefit society. We specialize in developing, manufacturing, and selling brakes for heavy-duty vehicles; water pumps for engine cooling; and oil pumps for engine lubrication. Through these activities, we aim to become a company that serves its communities.
       To effectively meet its customers' needs, TBK must maintain high environmental, safety, and performance standards for its products. This, in turn, demands superior technical expertise. For this reason, we abide by strict quality management standards to provide durable and highly reliable products to our customers.
       TBK endeavors to develop its business and fortify its financial foundation by winning and maintaining the trust of the community and pursuing business initiatives that fulfill its social obligation as an enterprise. In so doing, we are determined to meet the expectations of our customers and the entire industry.

6. Efficient business operations

Every two weeks, the directors of TBK and its consolidated affiliates attend a meeting of the Executive Committee, which was set up to facilitate decision-making and clarify lines of authority and responsibility. The purpose of this meeting is to monitor the progress of the TBK Phoenix Plan and other business initiatives to ensure their full and proper implementation.
       To verify the reliability of our products for medium-duty trucks, we conduct grueling durability tests and other bench tests using the high-speed circuit at our Tokachi Proving Ground.

 

7. Profit appropriation policy

TBK's fundamental policy is to maintain stable dividends while retaining sufficient internal reserves to finance future business development.
       The success of this policy, however, depends crucially on our consolidated business results and our operating environment. We comprehensively monitor these factors when making decisions on cash dividend payments.

 

8. Three-year business plan

In recent years, the market for trucks has shrunk due to ongoing sluggishness in private-sector capital expenditures, as well as increasing size and longevity of the vehicles themselves. Improvements in transport infrastructure have also contributed to this shrinkage.
       To cope with these significant changes in our business environment, TBK is implementing its 8th mid-term business plan, covering the three years from April 2000 to March 2003. In addition, we are instituting the TBK Phoenix Plan, designed to reduce overall costs.
       We anticipate that committing ourselves to these business plans will help us strengthen our competitive position and return to consolidated profitability in the near future. The plans also entail structural changes that will slash our interest-bearing liabilities.
       The practical targets of these plans are to 1) reduce total costs, 2) streamline the operations of TBK Group companies in Japan, 3) beef up our product development capability, 4) increase sales in the aftermarket, 5) establish a global production network and restructure unprofitable businesses and divisions, and 6) enhance employees' incentives to work by implementing performance-oriented management.

 

9. Short-term business targets

TBK's current business tasks are summarized as follows:

(1) Fully implement the TBK Phoenix Plan;
(2) Secure orders from truck manufacturers and increase sales in wedge brakes and      water and oil pumps for new truck models;
(3) Form a new corporate organization consisting of one headquarters and three      plants;
(4) Increase sales in the market for complementary products.
 

10. Results of operations

During the interim consolidated period under review, the Japanese economy suffered from continuous deflationary pressure. In addition, the stock market remained slack, and domestic demand was subdued.
       In the domestic truck industry, customers' incentives to purchase were extremely weak as capital expenditure dwindled and exhaust gas regulations, scheduled to take effect in the near future, made customers more cautious when buying new cars.
       During the interim period, the domestic market for new medium-duty trucks (with payloads of more than four tons) reported sales of 35,042 units, down 8.1 percent from the previous corresponding year. Sales of heavy-duty trucks, where TBK has a large market share, dropped 12.6 percent, to 16,463 units.
       Confronted with this severe business climate, we took various initiatives to revamp our earnings power. These included 1) implementing the TBK Phoenix Plan, 2) increasing sales momentum, 3) expanding and invigorating overseas operations, and 4) stabilizing real estate lending activities.
       Thanks to these efforts, interim net sales amounted to ¥12,585 million, up ¥558 million, or 4.6 percent, year-on-year. Owing to reduction of cost of sales and general, administrative, and selling expenses, we reported ¥636 million in operating income and ¥337 million in ordinary profit, returning to profitability for the first time in four years. In contrast, we suffered a net loss of ¥204 million. This resulted from a ¥139 million devaluation loss on investment securities and a ¥296 million actuarial loss on our retirement benefit obligation.
       Interim sales of TBK's automotive components rose 5.8 percent, to ¥12,306 million, due mainly an all-out effort to export brakes and pumps to China and Southeast Asia and to enhance the pump manufacturing capabilities of our overseas subsidiaries. The successful marketing activities of our domestic sales subsidiaries in the complementary market also contributed to this increase.
       In the interim period under review, personnel expenses at our domestic manufacturing subsidiaries fell significantly, while selling, general, and administrative expenses at the headquarters also declined. These improvements stemmed largely from our corporate restructuring, aimed at creating an organization of one headquarters and three plants. Progress in implementing the TBK Phoenix Plan also helped. Reflecting these improvements, operating income from our automotive components business skyrocketed 438.9 percent, to ¥923 million.
       In our real estate lending business, consolidated interim sales fell 29.2 percent, to ¥279 million, and operating income dropped 45.1 percent, to ¥73 million.

 

11. Financial position

Cash and cash equivalents at the end of the period stood at ¥1,326 million, a decline of ¥255 million from the beginning of the term.
       Net cash provided by operating activities amounted to ¥806 million, a year-on-year increase of ¥136 million. Factors in this change included a ¥190 million loss before income taxes, a ¥963 million depreciation expense, a ¥139 million devaluation loss on investment securities, and a ¥441 million increase in the reserve for employees' retirement benefits.
       Net cash provided by investing activities totaled ¥468 million, up ¥735 million. Leasehold deposits of ¥3,000 million, purchase of tangible fixed assets of ¥3,051 million, and other factors contributed to this result.
       Net cash used in financing activities was ¥1,516 million, up ¥913 million. During the term, we allocated the proceeds from operating and investing activities to reduce short- and long-term debt.

 

12. Forecast for fiscal 2003

Recently, signs of a further economic downturn in Japan have appeared as exports have begun tapering off. The outlook is further clouded by concerns over the future of overseas economies, especially in the United States, and other factors, such as depressed stock prices and the lingering non-performing loan problem in Japan.
       Amid such economic uncertainty, sales competition continues to intensify, highlighting concerns about the business environment of the truck industry. Moreover, the effect of pending regulations on exhaust gas emissions is unpredictable as the implementation of such regulations faces further delays.
       Nevertheless, we will reassert our commitment to the TBK Phoenix Plan and other management initiatives to rationalize our business operations. We also will concentrate on achieving our short-term business targets and improving profitability while sharpening our competitive edge.
       For the entire fiscal 2003 year, we estimate ¥25,400 million in consolidated net sales, ¥900 million in ordinary profit, and ¥300 million in net income.

 
For more information: fqa@tbk-jp.com
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