RNS Number:2297M
Nippon Telegraph and Telephone Corp
12 May 2005
Consolidated Financial Results Release May 12, 2005
For the Year Ended March 31, 2005 (U.S. GAAP)
Name of registrant: Nippon Telegraph and Telephone Corporation
Code No.: 9432
Stock exchanges on which the Company's shares are listed: Tokyo, Osaka,
Nagoya, Fukuoka and Sapporo
Address of principal executive office: Tokyo, Japan
(URL http://www.ntt.co.jp/ir/)
Representative: Norio Wada, President
Contact: Shigehito Katsuki, Head of IR, Department 4/ TEL(03)5205-5581
Date of meeting of the board of directors for approval of consolidated financial
statements: May 12, 2005
Adoption of U.S. GAAP: Yes
1. Consolidated Financial Results for the Year Ended March 31, 2005
(April 1, 2004 - March 31, 2005)
Amounts are rounded off to nearest million yen throughout this report.
(1) Consolidated Results of Operations
(Millions of yen, except per share
amounts)
Operating Operating Income Income (Loss)
Revenues ----------------- before
----------------- Income Taxes
----------------
Year ended March 31, 2005 10,805,868 (2.6 %) 1,211,201 (22.4 %) 1,723,312 12.8 %
Year ended March 31, 2004 11,095,537 1.6 % 1,560,321 14.4 % 1,527,348 8.7 %
Income
(Loss)
before
Income
Taxes
ROA Margin
ROE (Ratio of (Ratio of
(Ratio of Income (Loss) Income
Earnings Diluted Net Income before (Loss)
Net Income (Loss) Earnings to Shareholders' Income Taxes before
(Loss) per share per Share Equity) to Total Income
Assets) Taxes to
Operating
Revenue
Year ended March 31, 710,184 10.3 % 45,891.26 (yen) - (yen) 10.8% 8.9% 15.9%
2005
Year ended March 31, 643,862 175.9 % 40,607.65 (yen) - (yen) 10.7% 7.8% 13.8%
2004
Notes:
1. Equity in earnings (losses) of affiliated For the year ended March 31, 2005: (8,985) million yen
For the year ended March 31, 2004: (20,323) million yen
2. Weighted average number of shares outstanding
(consolidated):
For the year ended March 31,2005: 15,475,366 shares
For the year ended March 31,2004: 15,855,684 shares
3. Change in accounting policy: No
4. Percentages above represent changes from the previous year.
(2) Consolidated Financial Position
(Millions of yen, except per share amounts)
Total Shareholders' Equity Ratio Shareholders'
Assets Equity (Ratio of Equity
Shareholders' per Share
Equity
to Total
Assets)
------------
March 31, 2005 19,098,584 6,768,603 35.4% 453,059.74 (yen)
March 31, 2004 19,434,873 6,397,972 32.9% 406,447.52 (yen)
Note: Number of shares outstanding at end of year (consolidated): March 31, 2005: 14,939,758 shares
March 31, 2004: 15,741,201 shares
-1-
--------------------------------------------------------------------------------
(3) Consolidated Cash Flows
Cash flows Cash flows Cash flows (Millions
from from from of yen)
Operating Investing Financing
Activities Activities Activities Cash and
---------- ---------- ---------- Cash
Equivalents
at End of
Year
-----------
Year ended March 31, 2005 2,829,813 (1,768,361 ) (1,111,963 ) 1,381,959
Year ended March 31, 2004 3,480,591 (2,136,810 ) (1,222,531 ) 1,431,421
(4) Numbers of Consolidated Subsidiaries and Affiliated Companies Accounted for
Under the Equity Method
The number of consolidated subsidiaries: 397
The number of unconsolidated subsidiaries accounted for under the equity method: 52
The number of affiliated companies accounted for under the equity method: 93
(5) Changes of Reporting Entities
The number of consolidated subsidiaries added: 58
The number of consolidated subsidiaries removed: 8
The number of companies accounted for under the equity method added: 15
The number of companies accounted for under the equity method removed: 42
2. Consolidated Financial Results Forecasts for the Year Ending March 31, 2006 (April 1, 2005 - March 31,
2006)
(Millions of yen)
Operating Income Net
Revenues Income
---------- before -------
Income
Taxes
---------
Year ending March 31, 2006 10,590,000 1,080,000 440,000
(Reference) Expected Earnings per Share (Year ending March 31, 2006): 29,451.61 yen
Note: With regard to the assumptions and other related matters concerning the
above estimated results, please refer to page 22.
-2-
--------------------------------------------------------------------------------
1. STATUS OF THE NTT CORPORATE GROUP
The principal businesses of Nippon Telegraph and Telephone Corporation (NTT) and
its affiliates (NTT Group) cover regional communications services, long-distance
and international communications services, mobile communications services, and
data communications services.
The business of the consolidated subsidiaries of NTT and their respective
positions in the NTT Group are as follows:
NTT DoCoMo, Inc. (NTT DoCoMo), NTT DATA Corporation (NTT DATA) and NTT URBAN
DEVELOPMENT CORPORATION (NTTUD), three consolidated subsidiaries of NTT, are
listed on the First Section of the Tokyo Stock Exchange.
(1) Regional Communications Businesses
The principal elements in these businesses are intra-prefectural communications
services and related ancillary services pertaining to domestic communications
services.
The consolidated subsidiaries in the regional communications businesses are
NIPPON TELEGRAPH AND TELEPHONE EAST CORPORATION (NTT East), NIPPON TELEGRAPH AND
TELEPHONE WEST CORPORATION (NTT West), Plala Networks Inc., NTT VIETNAM
CORPORATION, NTT DIRECTORY SERVICES Co., NTT INFRASTRUCTURE NETWORK CORPORATION,
NTT MARKETING ACT CORPORATION, NTT NEOMEIT CORPORATION, NTT BUSINESS INFORMATION
SERVICE, INC, AIREC ENGINEERING CORPORATION, NTT NEOMEIT KANSAI CORPORATION,
NTT-ME CORPORATION, NTT CARD SOLUTION Inc., NTT Solco Corporation, NTT-ME TOKYO
CORPORATION, NTT SERVICE TOKYO CORPORATION, NTT MARKETING ACT KANSAI
CORPORATION, and 122 other companies.
(2) Long-Distance and International Communications Businesses
The principal elements in these businesses are inter-prefectural communications
services, international communications services, and related ancillary services
pertaining to inter-prefectural communications services and international
communications services.
-3-
--------------------------------------------------------------------------------
The consolidated subsidiaries in the long-distance and international
communications businesses are NTT COMMUNICATIONS CORPORATION (NTT
Communications), NTT USA, Inc., Verio Inc., NTT America, Inc., NTT AUSTRALIA
PTY. LTD., NTT Europe Limited, NTT INVESTMENT SINGAPORE PTE. LTD., HKNet Company
Limited, Milletechno, Inc., NTT MSC SDN BHD, NTT PC Communications Incorporated,
NTT COM ASIA LIMITED, NTT SINGAPORE PTE. LTD., NTT Communications (Thailand)
Co., Ltd., NTT WORLD ENGINEERING MARINE CORPORATION, NTT Taiwan Ltd., NTT KOREA
Co., Ltd., PT. NTT Indonesia, NTT do Brasil Telecomunicacoes Ltda., DREAM NET
Corporation, NTT NaviSpace Corporation, and 24 other companies.
(3) Mobile Communications Businesses
The principal elements in these businesses are mobile telephone services, PHS
services, quickcast businesses (formerly, pager services), and related ancillary
services.
The consolidated subsidiaries in the mobile communications businesses are NTT
DoCoMo, Inc., NTT DoCoMo Hokkaido, Inc., NTT DoCoMo Tohoku, Inc., NTT DoCoMo
Tokai, Inc., NTT DoCoMo Hokuriku, Inc., NTT DoCoMo Kansai, Inc., NTT DoCoMo
Chugoku, Inc., NTT DoCoMo Shikoku, Inc., NTT DoCoMo Kyushu, Inc., DoCoMo Service
Inc., DoCoMo Engineering Inc., DoCoMo Mobile Inc., DoCoMo Support Inc., DoCoMo
Systems, Inc., DoCoMo Sentsu, Inc., DoCoMo Technology, Inc., and 73 other
companies.
(4) Data Communications Businesses
The principal elements in these businesses are systems integration services and
network system services.
The consolidated subsidiaries in the data communications businesses are NTT DATA
CORPORATION, NTT DATA SYSTEM TECHNOLOGIES INC., NTT DATA SYSTEM SERVICE
CORPORATION, NTT DATA FINANCIAL CORPORATION, NTT DATA TOKYO SMS CORPORATION, and
38 other companies.
-4-
--------------------------------------------------------------------------------
(5) Other Businesses
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
Other consolidated subsidiaries of NTT are NTT URBAN DEVELOPMENT CORPORATION,
NTT COMWARE CORPORATION, NTT Resonant Inc., NTT FACILITIES, INC., NTT
Electronics Corporation, NTT BUSINESS ASSOCIE Corporation, NTT LEASING CO.,
LTD., NTT ADVANCED TECHNOLOGY CORPORATION, NTT LOGISCO Inc., NTT INTERNET INC.,
NTT Software Corporation, NTT ADVERTISING, INC., NTT BUSINESS ASSOCIE TOKYO Co.
Ltd., and 68 other companies.
Group organizational chart appears on the following page.
-5-
--------------------------------------------------------------------------------
6
--------------------------------------------------------------------------------
2. BUSINESS OPERATION POLICY
(1) Basic Business Operation Policy
The accelerated growth of the information and communications market has spurred
a greater diversity and complexity in customer demands. In order to meet such
customer needs, NTT will undertake to achieve the following three management
objectives.
a) Use the combined strengths of NTT to actively build the ubiquitous broadband
market and help achieve the e-Japan Strategy and the u-Japan Initiative.
b) Build a safe, secure, and convenient communications network environment and
broadband access infrastructure, while achieving a seamless migration from fixed
line to IP telephony services and from metal wire systems to optical fiber.
c) Strive to increase corporate value and achieve sustained growth.
(2) Basic Principle concerning Profit Allocation
NTT believes it is critically important to reinforce its financial standing and
to serve the best interests of its shareholders over the long run. As such, NTT
has adopted as its basic principle the payment of stable dividends with due
regard to overall operating trends and financial situation while acting to
secure necessary levels of internal reserves.
While utilizing its internal reserves for strengthening its financial standing,
NTT intends to repurchase its own shares in order to implement a capital policy
that takes into account the supply and demand conditions of NTT's
shares.
(3) Basic Principle and Policies concerning Reduction of Minimum Trading Lots
for Shares
-7-
--------------------------------------------------------------------------------
The reduction of minimum trading lots for shares is believed to expand the scope
of investors. NTT will decide on this matter while taking into account such
factors as shareholder composition, liquidity, and the cost of such measures.
(4) Basic Approach to Corporate Governance and Status of Corporate Governance
Policy Implementation
NTT recognizes corporate governance as an important management issue in its
practical implementation of shareholder-oriented management. NTT is striving to
enhance its corporate governance, centered around its Board of Directors and
Board of Auditors system.
a) Description of corporate organization
NTT has formed a Board of Directors with 11 members, including two outside
directors. In principle, this Board of Directors meets once per month to make
decisions and report on important management issues. The inclusion of outside
directors with independent status as members of the Board of Directors acts to
bolster capabilities for overseeing the fairness of business transactions.
NTT applies the corporate auditor scheme and has a Board of Auditors with five
members, including two outside auditors. Members of the Board of Auditors attend
meetings of the Board of Directors and other important management meetings,
implement appropriate auditing of NTT's business transactions, and have
a full-time organization and staff for these purposes. They also conduct audits
in coordination with the corporate auditors of NTT subsidiaries.
In addition to the corporate governance bodies prescribed in the Commercial Law
of Japan, NTT institutes various meetings and forms committees as necessary for
the promotion of effective group-level management in keeping with its status as
a holding company with general control and coordination responsibilities for the
NTT Group. To this end, these meetings and committees engage in ad-hoc
discussion of key issues concerning management on both the corporate and group
levels, and thereby assist appropriate decision-making.
-8-
--------------------------------------------------------------------------------
b) Preparation of the internal control system and risk management scheme
In accordance with the Internal Control-Integrated Framework advocated
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
NTT assesses the preparation and operation of internal controls for the NTT
Group as a whole, executes audit reviews to assure the correctness of these
controls, and performs a supervisory function with respect to high-risk items
common to all Group companies.
Given the huge influence of the NTT Group on Japanese society at large, NTT
recognizes that it must not only strictly observe all laws and regulations, but
also conduct its business with the highest sense of ethics. Accordingly, NTT
adheres to rigorous corporate ethics standards. More specifically, in November
2002, it drafted an "NTT Group Corporate Ethics Charter" and instituted not only
an internal system for related reporting and consultation but also an external
reporting system utilizing the services of attorneys. While working to create a
corporate climate marked by a high degree of transparency and openness through
such steps, NTT is also making continuous efforts to expand and strengthen
educational activities and internal checks.
In addition, NTT is developing appropriate management of business risks in a
rapidly changing business climate. To this end, NTT is establishing schemes for
provision against natural disasters, accidents, and other large-scale risks that
may adversely affect the entire Group, as well as for risk prevention, advance
preparations for occurrence of risks, and sure and prompt response in the event
that risks materialize.
c) Status of internal audit, corporate auditors' audit, and independent
auditor's audit
-9-
--------------------------------------------------------------------------------
The Board of Auditors of NTT has five staff members who responsibilities include
both statutory auditing and internal auditing. In the statutory audit process,
they audit the execution of the directors' duties as the need arises,
under the instruction of corporate auditors. The audit staff also strives to
enhance NTT's auditing system by constantly sharing information on audit
plans and results with independent auditors. For the internal auditing process,
NTT has implemented the internal control system and risk management scheme as
mentioned above.
In addition, in order to respond to requirements both from Japan and overseas to
further strengthen corporate governance, on May 12, 2005 NTT revised its
organization structure including through the establishment of an "Internal Audit
Office" with a full-time internal audit staff.
NTT has contracted with ChuoAoyama PricewaterhouseCoopers and KPMG AZSA & Co. as
independent auditors. The names of the certified public accountants (CPAs) who
conduct the audit services are as follows:
ChuoAoyama PricewaterhouseCoopers:
Hiroshi Ueno, Yasushi Hamada, Koji Hatsukawa
KPMG AZSA & Co.:
Masanori Sato, Hideki Amano, Sawaji Kanai
The numbers of staff members who support the audit activities are as follows:
ChuoAoyama PricewaterhouseCoopers:
19 CPAs, 14 assistant CPAs, and other 4 staff members
KPMG AZSA & Co.:
11 CPAs, 4 assistant CPAs, and other 4 staff members
(5) Matters concerning the parent company
NTT has no parent company.
-10-
--------------------------------------------------------------------------------
3. BUSINESS RESULTS AND FINANCIAL CONDITIONS
(1) Business Results
During the consolidated fiscal year ended March 31, 2005, the Japanese economy
continued on a steady path to recovery, as evidenced by a gradual increase in
personal consumption and growth in capital investment. In the second half of the
fiscal year, however, growth in personal consumption began to slow and exports
began to weaken, resulting in an uncertain outlook for some sectors of Japanese
industry.
Dramatic changes are taking place in the telecommunications market environment
due to such factors as the rapid advance of broadband communications. Fiberoptic
access services-the mainstay of the broadband business-are steadily spreading
while ADSL services are also continuing to grow in the quickly expanding and
intensifying broadband market. In the mobile communications market, growth in
the overall number of subscriptions continues to slow. However, the shift from
second-generation to third-generation mobile communications services is
accelerating, bringing about an intensification of service and fee competition.
At the same time, the market for conventional fixed-line telephone services
continues to shrink due to the accelerated expansion of fixed-rate Internet
connection services and IP telephony services. Under such circumstances, the
competitive conditions in the fixed-line sector became even more severe as other
telecommunications carriers made a full-scale entry into the basic monthly
charges market by providing direct subscriber
telephone services using dry copper lines.
Amid these conditions, the NTT Group vigorously promoted the wider use of fiber
optic access services and third-generation FOMA mobile communications services.
In order to reinforce the revenue structure of its broadband businesses, the NTT
Group made every possible effort to increase sales of ultra high-speed fiber
access services that are superior in interactivity and stability through such
measures as reduction in fees and the provision of IP telephony with the same
quality as fixed telephone lines.
-11-
--------------------------------------------------------------------------------
These initiatives were reinforced by a sales promotion campaign that included
active marketing activities to attract potential customers in condominium
complexes and limited-time discount offers. In addition, the NTT Group initiated
fixed-rate packet communication services for FOMA i-mode services, as well as
expanding and upgrading terminal services and functions. In the fixed-line
telephone market, the NTT Group sharpened its competitive edge by reducing basic
monthly charges and introducing new rate discount services to address
increasingly intensifying competition.
Continued efforts were made toward structural reform centered on NTT East and
NTT West (the East and West regional companies). Extensive cost reduction
programs were implemented to achieve further improvements in management
efficiency. Regional outsourcing companies in charge of order processing and
facilities maintenance were enlisted in efforts to actively develop new
IT-related demand in their regions.
The accelerated growth of the information and communications market has spurred
a greater diversity in customer demands. On the other hand, a number of issues
are becoming evident, including the need for secure Internet communications.
Finding solutions to these issues is essential for the ubiquitous broadband
society to develop. As these developments suggest, the information and
communications market is experiencing a period of significant transition and
change. Against this backdrop, in November 2004, the NTT Group announced
"NTT Group's Medium-Term Management Strategy" aiming to
develop a safe, secure, and convenient ubiquitous broadband service. The
Strategy outlines medium- to long-term management objectives, specific actions,
and other measures.
With regard to the personal information of customers, the NTT Group, as the
responsible corporate leader in the information and telecommunications industry,
has committed to rigorous data management, as the responsible corporate leader
in the information and telecommunications industry, in response to the April
2005 Law concerning the Protection of Personal Information, NTT took further
steps to protect the security of information by formulating the NTT Group
Information Security Policy, engaging in educational activities designed for
Group company directors and employees, and improving security manuals.
-12-
--------------------------------------------------------------------------------
As a result of these activities, for the consolidated fiscal year ended March
31, 2005, the NTT Group's consolidated operating revenues amounted to
10,805.9 billion yen (a decrease of 2.6% from the prior year). The decrease was
due to the fact that the East and West regional companies and NTT Communications
reported declining revenues as a result of continued shrinkage in the
conventional fixed-line telephone market, and NTT DoCoMo recorded decreasing
revenues due to lowered communication charges and the launch of i-mode
fixed-rate packet communication services. On the other hand, income before
income taxes amounted to 1,723.3 billion yen (an increase of 12.8 % from the
prior year), resulting from NTT DoCoMo's sales of shares in AT&T
Wireless Services, Inc. and NTT's sales of equities in NTTUD in
connection with the company's listing on the First Section of the Tokyo
Stock Exchange. Consolidated net income was 710.2 billion yen (an increase of
10.3 % from the prior year).
The business results of the principal companies of the NTT Group during the
consolidated fiscal year ended March 31, 2005 were as follows.
Nippon Telegraph and Telephone Corporation (Holding Company)
As a holding company, NTT is in charge of advancing basic R&D and promoting the
application of R&D results. Moreover, in its position of supervising and
coordinating the NTT Group, NTT is responsible for achieving effective Group
management through the formulation of strategies for the entire Group and the
re-allocation of resources to match changes in the business environment.
As a step to the realization of a plan titled "Vision for a New Optical
Generation", NTT formulated "NTT Group's Medium-Term
Management Strategy" and also engaged in creating proposals and
intermediating in the development and promotion of broadband services and
international businesses. For these management services, NTT received total
payments of 20.9 billion yen (a decrease of 0.2% from the prior year) from the
Group companies during the period under review. Other initiatives taken included
the promotion of R&D activities centered on basic technologies for the
development of next-generation network architecture, and efforts were also made
toward the development of cutting-edge basic technologies. Consequent to these R
&D activities, NTT earned 139.2 billion yen (a decrease of 5.2% from the prior
year) in basic research and development revenues.
-13-
--------------------------------------------------------------------------------
In connection with NTT DoCoMo's public repurchase of its own shares
(total of 1,912,568 shares scheduled for repurchase), NTT sold 1,748,000 NTT
DoCoMo shares, worth 319.8 billion yen, to NTT DoCoMo. NTT also sold 83,277
shares of NTTUD, worth 35.6 billion yen, in connection with NTTUD's
listing on the First Section of the Tokyo Stock Exchange in November 2004.
As a result of these activities, NTT's operating revenues for the fiscal
year ended March 31, 2005 amounted to 323.2 billion yen (an increase of 25.2%
from the prior year) and recurring profit amounted to 151.7 billion yen (an
increase of 92.8% from the prior year). NTT's net income amounted to
455.6 billion yen (an increase of 89.6% from the prior year) due to the
recording of gains on the sale of NTT DoCoMo and NTTUD shares as special profits
of 319.1 billion yen and 31.4 billion yen, respectively.
Additionally, in accordance with a resolution passed at NTT's 19th
General Shareholders' Meeting held on June 29, 2004 authorizing NTT to
repurchase up to 1 million shares of its own common stock at a cost of up to
600.0 billion yen, NTT repurchased 800,145 of its own shares at a cost of
366,466,410,000 yen.
Nippon Telegraph and Telephone East Corporation and Nippon Telegraph and
Telephone West Corporation
During the fiscal year under review, NTT East and NTT West continued working
actively to reinforce their revenue structures by taking such measures as
expanding broadband services and adopting strategies to enhance competitiveness
in the fixed-line telephone market, and to improve management efficiency.
-14-
--------------------------------------------------------------------------------
In the field of broadband services, in order to increase the number of
subscribers to fiberoptic access services, NTT East and NTT West began providing
a high-quality "Hikari Denwa" IP Telephony Service which
provides low-priced voice transmissions with the same quality as fixed telephone
lines, first to condominiums, and then to single-family dwellings. With regard
to the Corporate IP Telephony Service introduced to respond to the growing IP
telephony demand of large corporate customers, the two companies eased usage
conditions so that corporations with fewer telephone lines can also benefit from
this service. Besides these measures, NTT East and NTT West strove to gain a
better position in the fiber access market through such measures as rate
reductions and limited-time discount offers.
With a view to spurring the demand for fiber-optic access services, NTT East and
NTT West promoted sales of a newly introduced IP video telephone terminal, while
playing an active part in the launch of video distribution services offered by
companies both inside and outside of the NTT Group. The video distribution
services will enable customers to enjoy film and music video content using home
TVs.
The fixed-line telephone sector is experiencing even harsher competition as a
result of other telecommunications carriers' full-scale entry into the
basic monthly charges market by providing direct subscriber telephone services
using dry copper lines. In order to deal with this new competition, NTT East and
NTT West worked to improve competitiveness through such measures as basic
monthly charge reductions and the provision of a new flat-rate intra-prefectural
call discount service called "Ichirittsu."
NTT East and NTT West also continued to advance their structural reforms and to
improve managerial efficiency by taking further cost reduction measures and
expanding the scope of operations entrusted to the Group's regional
outsourcing companies in order to reduce consignment costs.
Despite these managerial efforts made under difficult business conditions
exemplified by the keen competition in the broadband market and a shrinking and
intensified fixed-line market, the operating revenues at NTT East amounted to
2,180.9 billion yen, (a decrease of 3.8% from the prior year) and the operating
revenues at NTT West amounted to 2,098.0 billion yen (a decrease of 3.2% from
the prior year).
-15-
--------------------------------------------------------------------------------
NTT Communications Corporation
During the fiscal year under review, NTT Communications actively engaged in the
promotion of IP services in the global markets and at the same time strove to
strengthen the competitiveness of fixed-telephone services.
For individual customers, NTT Communications made efforts to increase the number
of IP service subscribers. Specific measures taken included the expansion of B
FLET'S-compatible OCN services and the provision of the "OCN
Music Store" music distribution service and "OCN Theater
" video distribution service.
For corporations, the company met the diverse needs of customers by launching
the ".Phone Business V" videophone service for video
communication between personal computers and FOMA mobile phones, and providing
an integrated maintenance and monitoring service made possible by effectively
combining various VPN services. NTT Communications also started offering a
security inspection service that provides constant monitoring of customers
' communication networks and reports problems based on the analysis of
such monitored data.
NTT Communications also advanced the global development of its IP services
especially in Asia, where many multinational corporations are increasing their
presence. Specifically, the company became the first Japanese communications
company to provide international IP-VPN services in India.
For fixed-line services, NTT Communications launched the "PL@TINUM LINE
" rate discount service for domestic and international calls as well as
calls to mobile phones.
-16-
--------------------------------------------------------------------------------
Despite these diverse managerial efforts made in a severe business environment,
with heightened levels of industry competition and the contraction of the
fixed-line market, NTT Communications' operating revenues for the fiscal
year ended March 31, 2005, was 1,090.0 billion yen (a decrease of 1.5% from the
prior year).
NTT DATA Corporation
During the fiscal year under review, NTT DATA set its sights on promoting new
businesses, together with its customer firms in the form of business alliances
or joint investments, and providing customer value to become number one in
customer satisfaction. With that objective in mind, it adopted policies designed
to improve its basic organizational fitness and promote further growth.
With regard to improving basic organizational fitness, the company worked to
strengthen its marketing capability and improve the business process by ensuring
that marketing managers steadily implement action plans developed based on the
results of customer satisfaction surveys. At the same time, steps have been
taken to promote effective systems development to improve competitiveness in
system integration by improving and stabilizing the R&D process, accumulating
business know-how, and creating system environments that support these
initiatives.
Concerning strategies for further growth, the company has taken steps such as
expanding its hiring of skilled and experienced personnel in an effort to
enhance its marketing and development capabilities in the enterprise systems
area. It also conducted validation tests on a tracking system for the
pharmaceutical distribution process using RFID tag technologies and developed
solutions capitalizing on open source software.
As a result of these efforts, NTT DATA's consolidated operating revenues
for the fiscal year under review amounted to 854.1 billion yen (an increase of
0.9% from the prior year).
-17-
--------------------------------------------------------------------------------
NTT DoCoMo, Inc.
During the fiscal year under review, NTT DoCoMo focused on upgrading its FOMA
and other mobile communications services by enhancing its product lineup through
the provision of terminals with superior functions and designs. The company also
worked to lower call charges and diversify its price structure by increasing the
discount rate for the "Family Discount" service and introducing
a flat-rate packet option called "Pake-Hodai" to its i-mode
services.
Also, as part of its efforts to seize profit-earning opportunities, NTT DoCoMo
initiated the "i-mode FeliCa" service that enables users to make
electronic payments and sought to expand the penetration of visual
communications using the FOMA videophone service. The company also promoted its
global operations and expanded its global i-mode service alliances.
Despite these managerial efforts made under difficult business conditions
exemplified by the keen competition in rates and services in the mobile
communications market, NTT DoCoMo's consolidated operating revenues
amounted to 4,844.6 billion yen for the period under review (a decrease of 4.0%
from the prior year).
(2) Financial Conditions
Cash flows provided by operating activities for the current fiscal year amounted
to 2,829.8 billion yen (a decrease of 650.8 billion yen, or 18.7% from the prior
year) resulting from net income and depreciation and amortization costs. The
decrease in cash flows was mainly due to a decrease in operating income and an
increase in cash paid for income taxes, net.
Cash flows used in investing activities amounted to 1,768.4 billion yen for the
current fiscal year (a decrease of 368.4 billion yen, or 17.2% from the prior
year) due to acquisition of property, plant, and equipment. One of the factors
causing the decrease in cash outflow was cash inflow from the proceeds of sales
of other investments.
-18-
--------------------------------------------------------------------------------
Cash flows used in financing activities for the current fiscal year reached
1,112.0 billion yen resulting from repayment of debts and other activities (a
decrease of 110.6 billion yen, or 9.0% from the prior year). This decrease was
due to a decrease in the amount of repayments of long-term loans, among other
factors. As a result, cash and cash equivalents at the end of the consolidated
fiscal year ended March 31, 2005, decreased by 49.5 billion yen (3.5% from the
prior year), to 1,382.0 billion yen.
(3) Fiscal Year Profit Allocation
NTT expects to offer a 3,000 yen year-end dividend. Combined with the interim
dividend already distributed, NTT thus expects to offer dividends of 6,000 yen
per share of common stock for the full year ended March 31, 2005.
(4) Projections for the Next Fiscal Year (Ending March 31, 2006)
While the Japanese economy is expected to continue to recover steadily during
the forthcoming fiscal year, due to signs of uncertainty observed in some
sectors of Japanese industry, careful attention must be paid to trends in
inventory adjustment and international conditions.
In the telecommunications market, ubiquitous broadband communications continue
to spread rapidly. The market can be expected to grow even further as evidenced
by the proliferation of network-compatible consumer electronics products and the
introduction of various solutions combining fixed-line and mobile
communications. Given the rapid pace of growth, it is expected that numerous new
participants will continue to enter this market based on a wide range of
business models. Possible alliances among companies from different industries
indicate that competition will become even more intense in the future.
-19-
--------------------------------------------------------------------------------
Meanwhile, amid the rapid penetration of communications technologies as a new
social infrastructure, including broadband and mobile communications, there are
growing social expectations that information technology will help find solutions
to such issues as the achievement of more secure and safer lifestyles.
Under these conditions, the NTT Group will continue to harness its comprehensive
strengths in accordance with "NTT Group's Medium-Term Management
Strategy" and develop and provide ubiquitous broadband services that
combine fixed-line and mobile communications. Through such undertakings, the
Group will contribute to finding solutions to social issues, including providing
enhanced support for nursing care, remote medical treatment, and preventive
medicine. The NTT Group will also put efforts into creating a framework for
achieving quality and reliable networks and guaranteeing connectivity with other
telecommunications carriers in order to construct a high-quality, flexible, and
security-assured next-generation network. By integrating this network with fiber
optic access services, the Group will provide superior and highly flexible
services that integrate the features of fixed-line networks and IP networks.
The NTT Group will continue to make an all-out effort to market its optical
access services by reinforcing its sales forces and upgrading services and
expanding service areas of the "Hikari Denwa" IP Telephony
Service, which has achieved low-priced voice transmission with the same quality
as fixed telephones. The Group will also strengthen the competitiveness of FOMA
services and, for this purpose, will provide attractive products and services,
introduce an easy-to-understand fee structure, and improve network quality.
Further efforts will be made to create a new revenue base by proposing various
ways to utilize FOMA, including i-mode FeliCa electronic payment services that
collaborate with shops and public transportation systems and the use of FOMA as
a remote monitoring device.
On the other hand, the NTT Group will continue to move forward on structural
reforms and will aim to transform its business and financial structures by
improving operating efficiency and expanding into new business fields. With
regard to the personal information of customers, the entire NTT Group will be
committed to conducting a continuous review of its personal data management
systems to ensure a rigorous framework.
-20-
--------------------------------------------------------------------------------
NTT itself will use its status as a holding company to allocate the managerial
resources of the entire Group with flexibility and conduct basic R&D activities
to promote the Group's business operations, while providing all
necessary advice and mediation, and implementing effective fund procurement.
In the area of research and development, the NTT Group will direct all its
energies toward the creation of basic technologies for supporting the
development of safe, secure, and convenient ubiquitous broadband services. To
steadily embody the fruits of our R&D efforts in our businesses, the "
comprehensive production function" program being implemented by the
Group will be fully utilized to further accelerate the pace of commercialization
through active collaboration among NTT Group companies. NTT will also commit
itself to disseminating results of basic R&D activities, contributing further to
the creation of industry standards, and actively pursuing collaborative R&D with
other research bodies.
NTT's consolidated projections for the fiscal year ending March 31, 2006
are as follows: Operating revenues are projected to reach 10,590.0 billion yen
(a decrease of 2.0% from the prior year). Income before income taxes is
projected to amount to 1,080.0 billion yen (a decrease of 37.3% from the prior
year), while net income is expected to reach 440.0 billion yen (a decrease of
38.0% from the prior year).
NTT expects to offer dividends of 6,000 yen per share of common stock for the
full fiscal year ending March 31, 2006.
-21-
--------------------------------------------------------------------------------
(NOTE)
The forward-looking statements and projected figures on the future performance
of NTT contained in this financial report are based on the judgments,
evaluations, recognition of facts, and formulation of plans by the current
management of NTT based on the information at their disposal. The projected
figures in this report were derived using certain assumptions that are
indispensable for making projections in addition to historical facts that have
been ascertained and acknowledged accurately. In view of the element of
uncertainty inherent in future projections, the possibility of fluctuations in
its future business operations, the state of the economy in Japan and abroad,
stock markets, and other circumstances, NTT's actual results could
differ materially from the projected figures contained in this report.
-22-
--------------------------------------------------------------------------------
4. Consolidated Balance Sheets
March 31, March 31, (Millions
2004 2005 of yen)
----------- ----------- Increase
(Decrease)
----------
ASSETS
Current assets:
Cash and cash equivalents 1,431,421 1,381,959 (49,462 )
Short-term investments - 264,455 264,455
Notes and accounts receivable, trade 1,813,095 1,846,176 33,081
Allowance for doubtful accounts (40,317 ) (35,912 ) 4,405
Inventories 238,052 284,826 46,774
Prepaid expenses and other current assets 392,169 453,173 61,004
Deferred income taxes 256,719 321,936 65,217
Total current assets 4,091,139 4,516,613 425,474
Property, plant and equipment:
Telecommunications equipment 13,770,965 13,945,449 174,484
Telecommunications service lines 12,611,662 12,865,704 254,042
Buildings and structures 5,529,986 5,602,881 72,895
Machinery, vessels and tools 1,988,176 1,918,728 (69,448 )
Land 837,073 837,103 30
Construction in progress 339,023 258,455 (80,568 )
Accumulated depreciation (24,307,259 ) (24,947,768 ) (640,509 )
Total property, plant and equipment 10,769,626 10,480,552 (289,074 )
Investments and other assets:
Investments in affiliated companies 385,029 178,033 (206,996 )
Marketable securities and other investments 255,768 438,159 182,391
Goodwill, net 281,561 320,536 38,975
Other intangibles, net 1,324,804 1,329,631 4,827
Other assets 649,441 707,543 58,102
Deferred income taxes 1,677,505 1,127,517 (549,988 )
Total investments and other assets 4,574,108 4,101,419 (472,689 )
----------- ----------- ----------
TOTAL ASSETS 19,434,873 19,098,584 (336,289 )
----------- ----------- ----------
-23-
--------------------------------------------------------------------------------
March 31, March 31, (Millions
2004 2005 of yen)
---------- ---------- Increase
(Decrease)
----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 288,089 422,886 134,797
Current portion of long-term debt 877,448 779,198 (98,250 )
Accounts payable, trade 1,404,461 1,465,229 60,768
Accrued payroll 546,599 493,935 (52,664 )
Accrued interest 18,977 18,200 (777 )
Accrued taxes on income 346,103 115,084 (231,019 )
Accrued consumption tax 51,526 16,034 (35,492 )
Advances received 59,111 67,389 8,278
Other 216,531 301,624 85,093
Total current liabilities 3,808,845 3,679,579 (129,266 )
Long-term liabilities:
Long-term debt 4,756,118 4,323,751 (432,367 )
Obligations under capital leases 257,811 187,845 (69,966 )
Liability for employees' severance payments 2,023,348 1,861,073 (162,275 )
Other 577,591 548,464 (29,127 )
Total long-term liabilities 7,614,868 6,921,133 (693,735 )
Minority interest in consolidated subsidiaries 1,613,188 1,729,269 116,081
Shareholders' equity:
Common stock 937,950 937,950 -
Additional paid-in capital 2,722,092 2,799,828 77,736
Retained earnings 2,710,805 3,334,866 624,061
Accumulated other comprehensive income (loss) 27,129 63,066 35,937
Treasury stock (4 ) (367,107 ) (367,103 )
---------- ---------- ----------
Total shareholders' equity 6,397,972 6,768,603 370,631
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 19,434,873 19,098,584 (336,289 )
----------- ----------- ----------
-24-
--------------------------------------------------------------------------------
5. Consolidated Statements of Income
(Millions
of yen)
Year ended Year ended Increase
March 31, March 31, (Decrease)
2004 2005 ----------
---------- ----------
Operating revenues:
Fixed voice related services 3,882,166 3,578,092 (304,074)
Mobile voice related services 3,393,947 3,216,107 (177,840)
IP/packet communications services 1,639,591 1,772,737 133,146
Sale of telecommunications equipment 713,352 688,083 (25,269)
System integration 863,008 910,273 47,265
Other 603,473 640,576 37,103
Total operating revenues 11,095,537 10,805,868 (289,669)
Operating expenses:
Cost of services (exclusive of items shown separately below) 2,378,275 2,349,151 (29,124)
Cost of equipment sold (exclusive of items shown separately 1,245,018 1,260,252 15,234
below)
Cost of system integration (exclusive of items shown separately 522,766 592,035 69,269
below)
Depreciation and amortization 2,197,058 2,141,720 (55,338)
Impairment loss - 44,310 44,310
Selling, general and administrative expenses 3,192,099 3,207,199 15,100
Total operating expenses 9,535,216 9,594,667 59,451
Operating income 1,560,321 1,211,201 (349,120)
Other income (expenses):
Interest and amortization of bond discounts and issue costs (113,358) (93,966) 19,392
Interest income 26,661 26,288 (373)
Gains on sales of subsidiary stock - 26,984 26,984
Gains on sales of investments in affiliated company - 508,492 508,492
Other, net 53,724 44,313 (9,411)
Total other income and expenses (32,973) 512,111 545,084
Income (loss) before income taxes 1,527,348 1,723,312 195,964
Income tax expense (benefit): 603,211 713,918 110,707
Current 496,658 233,060 (263,598)
Deferred 106,553 480,858 374,305
Income (loss) before minority interest and equity in earnings 924,137 1,009,394 85,257
(losses) of affiliated companies
Minority interest in consolidated subsidiaries 259,952 290,225 30,273
Equity in earnings (losses) of affiliated companies (20,323) (8,985) 11,338
Net income (loss) 643,862 710,184 66,322
-25-
--------------------------------------------------------------------------------
6. Consolidated Statements of Shareholders' Equity
(Millions
of yen)
Year Year Increase
ended ended (Decrease)
March 31, March 31, ----------
2004 2005
--------- ---------
Common stock:
At beginning of year 937,950 937,950 -
At end of year 937,950 937,950 -
Additional paid-in capital:
At beginning of year 2,669,736 2,722,092 52,356
Increase in additional paid-in capital of an affiliate 3,087 - (3,087 )
Increase in interest of investee 49,269 77,736 28,467
At end of year 2,722,092 2,799,828 77,736
Retained earnings:
At beginning of year 2,246,996 2,710,805 463,809
Appropriations-
Cash dividends (39,831 ) (39,353 ) 478
Interim distribution-
Cash dividends (39,830 ) (47,222 ) (7,392 )
Net income (loss) 643,862 710,184 66,322
Purchase and retirement of common stock (100,392 ) - 100,392
Other - 452 452
At end of year 2,710,805 3,334,866 624,061
Accumulated comprehensive income (loss):
At beginning of year (217,083 ) 27,129 244,212
Other comprehensive income (loss) 244,212 35,937 (208,275 )
At end of year 27,129 63,066 35,937
Treasury stock, at cost
At beginning of year (4 ) (4 ) -
Net change in treasury stock - (367,103 ) (367,103 )
At end of year (4 ) (367,107 ) (367,103 )
Shareholders' equity at end of year 6,397,972 6,768,603 370,631
Summary of total comprehensive income (loss):
Net income (loss) 643,862 710,184 66,322
Other comprehensive income (loss) 244,212 35,937 (208,275 )
Comprehensive income (loss) 888,074 746,121 (141,953 )
-26-
--------------------------------------------------------------------------------
7. Consolidated Statements of Cash Flows
(Millions
of yen)
Year ended Year ended Increase
March 31, March 31, (Decrease)
2004 2005 ----------
---------- ----------
I Cash flows from operating activities:
Net income (loss) 643,862 710,184 66,322
Adjustments to reconcile net income (loss) to net cash provided
by operating activities-
Depreciation and amortization 2,197,058 2,141,720 (55,338 )
Loss on impairment of assets - 44,310 44,310
Deferred taxes 106,553 480,858 374,305
Minority interest in consolidated subsidiaries 259,952 290,225 30,273
Loss on disposal of property, plant and equipment 176,394 186,674 10,280
Gains on sales of subsidiary stock - (26,984 ) (26,984 )
Gains on sales of investments in affiliated company - (508,492 ) (508,492 )
Equity in (earnings) losses of affiliated companies 20,323 8,985 (11,338 )
(Increase) decrease in notes and accounts receivable, trade 16,480 (37,130 ) (53,610 )
(Increase) decrease in inventories (57,905 ) (46,771 ) 11,134
(Increase) decrease in other current assets 109,493 (66,897 ) (176,390 )
Increase (decrease) in accounts payable, trade and accrued (24,164 ) 29,595 53,759
payroll
Increase (decrease) in accrued consumption tax (26,935 ) (35,483 ) (8,548 )
Increase (decrease) in accrued interest (4,869 ) (782 ) 4,087
Increase (decrease) in advances received (6,589 ) 8,292 14,881
Increase (decrease) in accrued taxes on income 134,937 (231,037 ) (365,974 )
Increase (decrease) in other current liabilities 38,860 65,114 26,254
Increase (decrease) in liability for employees' (94,036 ) (95,606 ) (1,570 )
severance payments, net of deferred pension costs
Increase (decrease) in other long-term liabilities (20,046 ) (49,903 ) (29,857 )
Other 11,223 (37,059 ) (48,282 )
----------- ----------- -----------
Net cash provided by operating activities 3,480,591 2,829,813 (650,778 )
II Cash flows from investing activities:
Payments for property, plant and equipment (1,765,708 ) (1,610,991 ) 154,717
Proceeds from sale of property, plant and equipment 79,744 54,095 (25,649 )
Payments for purchase of non-current investments (40,755 ) (195,892 ) (155,137 )
Proceeds from sale of marketable equity securities and other 33,410 776,369 742,959
investments
Payments for purchase of short-term investments - (361,850 ) (361,850 )
Proceeds from redemption of short-term investments - 113,576 113,576
Acquisition of intangible and other assets (443,501 ) (543,668 ) (100,167 )
----------- ---------- -----------
Net cash used in investing activities (2,136,810 ) (1,768,361 ) 368,449
III Cash flows from financing activities:
Proceeds from issuance of long-term debt 478,320 343,814 (134,506 )
Payments for settlement of long-term debt (1,145,167 ) (893,682 ) 251,485
Dividends paid (79,661 ) (86,575 ) (6,914 )
Purchase and retirement of common stock (100,392 ) (367,103 ) (266,711 )
Payments for acquisition of subsidiary's stocks from (205,047 ) (105,363 ) 99,684
minority shareholders
Net increase (decrease) in short-term borrowings and other (170,584 ) (3,054 ) 167,530
---------- ---------- ---------- -
Net cash provided by (used in) financing activities (1,222,531 ) (1,111,963 ) 110,568
IV Effect of exchange rate changes on cash and cash (2,895 ) 1,049 3,944
equivalents
---------- ---------- ----------
V Net increase (decrease) in cash and cash equivalents 118,355 (49,462 ) (167,817 )
VI Cash and cash equivalents at beginning of year 1,313,066 1,431,421 118,355
VII Cash and cash equivalents at end of year 1,431,421 1,381,959 (49,462 )
---------- ---------- ----------
Supplemental information
Cash paid during the year for:
Interest 117,844 94,129 (23,715 )
Income taxes, net 253,995 581,940 327,945
Noncash investing and financing activities:
Purchase of minority interests of consolidated subsidiaries 439 - (439 )
through share exchanges
Acquisition of shares from sale of an investment - 16,711 16,711
Capital lease obligations incurred during the year 13,690 18,522 4,832
-27-
--------------------------------------------------------------------------------
Significant Matters Pertaining to the Preparation of Consolidated Financial
Statements
The consolidated financial statements of NTT have been prepared in conformity
with accounting principles generally accepted in the United States of America
(Accounting Principles Board Opinions, Statements of Financial Accounting
Standards, etc.)
1. Application of New Accounting Standard
Accounting for Certain Financial Instruments with Characteristics of Liabilities
and Equity
Effective April 1, 2004, NTT Group adopted Statement of Financial Accounting
Standards No. 150 ("SFAS 150"), "Accounting for Certain
Financial Instruments with Characteristics of Liabilities and Equity."
This statement changes the accounting for certain financial instruments with
characteristics of both liabilities and equity that, under previous guidance,
could be classified as equity, by now requiring those instruments to be
classified as liabilities (or assets in some circumstances) in the balance
sheet. Further, SFAS 150 requires disclosure regarding the terms of those
instruments and settlement alternatives. The adoption of SFAS 150 did not have
an impact on the results of operations or the financial position of NTT Group.
2. Principal Accounting Policies
(1) Marketable Securities
SFAS 115, "Accounting for Certain Investments in Debt and Equity
Securities" applies.
(2) Inventories
Inventories are stated at cost, not in excess of market value. The cost of
telecommunications equipment to be sold is determined by the first-in first-out
method.
(3) Property, Plant, and Equipment and Depreciation
Property, plant, and equipment are stated at cost. Depreciation is computed
principally using the declining-balance method with the exception of buildings
for which the straight-line method.
(4) Goodwill and Other Intangible Assets
SFAS 142, "Goodwill and Other Intangible Assets" applies.
(5) Liabilities for Employees' Severance Payments
SFAS 87, "Employers' Accounting for Pensions" and SFAS
88, "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination of Benefits" apply.
(6) Derivative Financial Instruments
SFAS 133, "Accounting for Derivatives Instruments and Hedging
Activities," SFAS 138 "Accounting for Certain Derivatives
Instruments and Certain Hedging Activities, an amendment of SFAS No. 133
" and SFAS 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities" apply.
(7) Income Taxes
Income taxes are computed on income (loss) before income taxes in the
consolidated statements of income. According to the asset and liability
approach, the expected future consequences of temporary differences between the
carrying amounts and the tax basis of assets and liabilities and of operating
loss carryforward are recognized as deferred tax assets or liabilities.
-28-
--------------------------------------------------------------------------------
3. Subsequent events
In April 2005, the Board of Directors of NTT DoCoMo, Inc. ("NTT DoCoMo
"), a consolidated subsidiary of NTT, and its eight regional
subsidiaries decided to cease providing Quickcast services as of March 31, 2007
in the view that the improvement of profitability of Quickcast business is
unlikely considering downward trend in the number of subscribers.
On April 27, 2005, NTT DoCoMo entered into an agreement with Sumitomo Mitsui
Card Company, Limited ("Sumitomo Mitsui Card"), Sumitomo Mitsui
Financial Group, Inc. and Sumitomo Mitsui Banking Corporation that NTT DoCoMo
and these companies would jointly promote the new credit transaction services
which use the "Mobile Wallet" phones and NTT DoCoMo would form a
capital alliance with Sumitomo Mitsui Card. Based on the agreement, NTT DoCoMo
plans to acquire 34% of Sumitomo Mitsui Card's common shares for
approximately Y98 billion, including new shares to be issued by Sumitomo Mitsui
Card.
NTT DoCoMo agreed to sell its entire shares of Brilliant Design Limited
("BD"), which has 20% ownership of Hutchison 3G UK Holdings
Limited ("H3G UK"), to Hutchison Whampoa Limited ("HWL
") for a total consideration of #120 million in a Sale and Purchase
Agreement signed between the NTT DoCoMo and HWL. Under the terms of the
agreement, NTT DoCoMo will receive the payment in three installments, final
installment of which is expected to be made in December 2006. On May 9, 2005 NTT
DoCoMo received a notice from HWL that HWL exercises its right to accelerate
completion of the payment. In accordance with the agreement, NTT DoCoMo will
complete the sale of BD shares to HWL on June 23, 2005.
(Reference)
Details of "Operating revenues" classified by the previous year
's service categories
Year ended (Millions
of yen)
March 31, Year ended
2004 March 31,
---------- 2005
----------
Fixed voice transmission services 3,162,185 2,938,606
Mobile voice transmission services 3,328,627 3,139,023
Data transmission services 1,519,947 1,584,250
Leased circuit 455,406 434,736
Sale of telecommunications equipment 713,352 688,083
System integration 863,008 910,273
Other 1,053,012 1,110,897
---------- ----------
Total 11,095,537 10,805,868
---------- ----------
-29-
--------------------------------------------------------------------------------
8. Business Segments
(Consolidated)
1. Sales and operating revenue
Year ended (Millions
March 31, of yen)
2004 Year ended
---------- March 31,
2005
----------
Regional communications services
Customers 4,061,919 3,937,789
Intersegment 673,741 651,772
---------- - ---------- -
Total 4,735,660 4,589,561
Long-distance communications and international services
Customers 1,057,373 1,045,218
Intersegment 132,088 119,580
---------- - ---------- -
Total 1,189,461 1,164,798
Wireless services
Customers 5,022,576 4,821,941
Intersegment 25,489 22,669
---------- - ---------- -
Total 5,048,065 4,844,610
Data communications services
Customers 697,821 721,816
Intersegment 128,127 110,804
---------- - ---------- -
Total 825,948 832,620
Other
Customers 255,848 279,104
Intersegment 988,718 946,619
---------- - ---------- -
Total 1,244,566 1,225,723
---------- - ---------- -
Elimination of intersegment (1,948,163 ) (1,851,444 )
---------- - ---------- -
Consolidated total 11,095,537 10,805,868
2. Segment profit or loss
Year (Millions
ended of yen)
Year
March 31, ended
2004 March 31,
--------- 2005
---------
Operating income
Regional communications services 248,395 246,759
Long-distance communications and international services 90,524 62,329
Wireless services 1,102,918 784,166
Data communications services 38,317 36,894
Other 29,115 37,554
--------- ---------
Total 1,509,269 1,167,702
Elimination of intersegment 51,052 43,499
--------- ---------
Consolidated total 1,560,321 1,211,201
-30-
--------------------------------------------------------------------------------
3. Assets
March 31, (Millions
2004 of yen)
---------- March 31,
2005
----------
Total Assets
Regional communications services 9,093,204 8,717,070
Long-distance communications and international services 1,542,258 1,581,936
Wireless services 6,347,807 6,254,719
Data communications services 1,189,030 1,187,798
Other 10,398,513 10,230,533
---------- ----------
Total 28,570,812 27,972,056
Elimination of intersegment (9,135,939 ) (8,873,472 )
---------- ----------
Consolidated total 19,434,873 19,098,584
---------- ----------
4. Other significant items
Year (Millions
ended of yen)
Year
March 31, ended
2004
--------- March 31,
2005
---------
Depreciation and amortization
Regional communications services 1,014,847 976,092
Long-distance communications and international services 145,263 137,444
Wireless services 720,997 735,423
Data communications services 164,639 159,874
Other 155,145 126,764
--------- ---------
Total 2,200,891 2,135,597
--------- ---------
Elimination of intersegment (3,833 ) 6,123
--------- ---------
Consolidated total 2,197,058 2,141,720
--------- ---------
Capital investments for segment assets (*)
Regional communications services 813,212 830,859
Long-distance communications and international services 136,181 149,476
Wireless services 805,482 861,517
Data communications services 148,923 110,821
Other 109,800 104,728
--------- ---------
Consolidated total 2,013,598 2,057,401
--------- ---------
(*) The figures for capital investments are the accrual-based amounts required for acquisition of property, plant and
equipment, and intangibles. The differences from the figures for "Payments for property, plant and
equipment" and "Acquisition of intangible and other assets" in the consolidated
statements of cash flows are as follows:
Year ended Year ended
March 31, 2004 March 31, 2005
----------------- -----------------
Payments for property, plant and equipment 1,765,708 million 1,610,991 million
yen yen
Acquisition of intangible and other assets 443,501 million 543,668 million
yen yen
----------------- -----------------
Total 2,209,209 million 2,154,659 million
yen yen
Difference from the total of capital investments 195,611 million 97,258 million
yen yen
-31-
--------------------------------------------------------------------------------
9. Leases
(Consolidated)
In accordance with Tokyo Stock Exchange, Inc.'s rule, we would disclose
this information via EDINET (Electronic Disclosure for Investors'
Network) later.
10. Related Party Transactions
(Consolidated)
Transactions with affiliated companies and related balances:
Year (Millions
ended of yen)
March Year
31, ended
2004
------- March 31,
2005
---------
Operating revenues 26,353 33,449
Operating expenses 184,040 226,496
March (Millions
31, of yen)
2004 March 31,
------- 2005
---------
Receivables 9,061 23,592
Payables 45,205 41,625
------- ---------
11. Income Taxes
(Consolidated)
Significant components of deferred tax assets and liabilities:
March 31, (Millions
2004 of yen)
---------
March 31,
2005
---------
Deferred tax assets:
Liability for employees' severance payments 716,743 704,743
Property, plant and equipment and intangible assets principally due to 219,095 252,314
differences in depreciation
Impairment of investments in foreign companies 797,838 401,331
Operating loss carryforwards 346,311 261,101
Other 417,595 406,792
--------- ---------
Total gross deferred tax assets 2,497,582 2,026,281
--------- ---------
Less-Valuation allowance (60,953 ) (87,618 )
--------- ---------
Total deferred tax assets 2,436,629 1,938,663
--------- ---------
Deferred tax liabilities:
Changes in interests in subsidiaries as a result of issuance of their (556,622 ) (528,062 )
common stock etc.
Foreign currency translation adjustments (37,554 ) (19,498 )
Other (82,063 ) (115,335 )
--------- ---------
Total gross deferred tax liabilities (676,239 ) (662,895 )
--------- ---------
Net deferred tax assets 1,760,390 1,275,768
--------- ---------
-32-
--------------------------------------------------------------------------------
12. Securities
(Consolidated)
1. Available-for-sale
March 31, March (Millions
2004 31, of yen)
--------- 2005 Increase
------- (Decrease)
----------
Equity securities Carrying amounts 72,104 70,352 (1,752 )
Gross unrealized gains 68,968 126,641 57,673
Gross unrealized losses 10,579 534 (10,045 )
Fair value 130,493 196,459 65,966
Debt securities Carrying amounts 89 151,271 151,182
Gross unrealized gains 1 58 57
Gross unrealized losses - 16 16
Fair value 90 151,313 151,223
2. Held-to-maturity
March March (Millions
31, 31, of yen)
2004 2005 Increase
------ ------ (Decrease)
----------
Debt securities Carrying amounts 21,659 16,271 (5,388 )
Gross unrealized gains 194 61 (133 )
Gross unrealized losses 2 0 (2 )
Fair value 21,851 16,332 (5,519 )
13. Financial Instruments
(Consolidated)
In accordance with Tokyo Stock Exchange, Inc.'s rule, we would disclose
this information via EDINET (Electronic Disclosure for Investors'
Network) later.
-33-
--------------------------------------------------------------------------------
14. Employees' Severance Payments
(Consolidated)
1. Severance Payments and Contract-type Corporate Pension Plan
(1) Benefit obligations
March 31, (Millions
2004 of yen)
---------- March 31,
2005
----------
Benefit obligation, end of year (2,580,180 ) (2,526,053 )
Fair value of plan assets, end of year 998,703 1,100,903
Funded status (1,581,477 ) (1,425,150 )
Unrecognized net actuarial loss 283,075 274,928
Unrecognized transition obligation 5,430 4,212
Unrecognized prior service cost (241,157 ) (209,796 )
Net amount recognized as recorded in the consolidated balance sheets (1,534,129 ) (1,355,806 )
Liability for employees' severance payments (1,573,970 ) (1,401,579 )
Other intangibles and other assets 4,649 3,739
Accumulated other comprehensive loss 35,192 42,034
(2) Cost for employees' severance indemnities
Year (Millions
ended of yen)
March Year
31, ended
2004 March 31,
------- 2005
---------
Service cost 99,461 89,428
Interest cost on projected benefit obligation 54,191 49,783
Expected return on plan assets (21,093 ) (26,057 )
Net amortization and deferral (13,731 ) (24,934 )
Total cost for employees' severance indemnities as recorded in 118,828 88,220
the consolidated statements of income
(3) Assumptions in determination of benefit obligations and costs
Year Year
ended ended
March March
31, 31,
2004 2005
------- -------
Discount rate Project benefit obligation 2.0 % 2.0 %
Net pension cost 2.0 % 2.0 %
Long-term rate of salary increases 1.5-3.4 % 1.5-3.4 %
Long-term rate of return on plan assets 2.5 % 2.5 %
-34-
--------------------------------------------------------------------------------
2. The NTT Kosei-Nenkin-Kikin (Welfare Pension Fund)
(1) Benefit obligations
March 31, (Millions
2004 of yen)
---------- March 31,
2005
----------
Benefit obligation, end of year (1,954,004 ) (2,002,314 )
Fair value of plan assets, end of year 1,165,712 1,211,760
Funded status (788,292 ) (790,554 )
Unrecognized net actuarial loss 473,025 410,650
Unrecognized prior service cost (40,582 ) (36,049 )
Net amount recognized as recorded in the consolidated balance sheets (355,849 ) (415,953 )
Liability for employees' severance payments (449,378 ) (459,494 )
Accumulated other comprehensive loss 93,529 43,541
(2) Cost for employees' severance indemnities
Year (Millions
ended of yen)
March Year
31, ended
2004
------- March 31,
2005
---------
Service cost 84,307 44,098
Interest cost on projected benefit obligation 36,536 39,008
Expected return on plan assets (25,002 ) (29,260 )
Net amortization and deferral 39,499 24,442
Employee contributions (15,337 ) (5,605 )
Total cost for employees' severance indemnities as recorded in 120,003 72,683
the consolidated statements of income
(3) Assumptions in determination of benefit obligations and costs
Year Year
ended ended
March March
31, 31,
2004 2005
------- -------
Discount rate Project benefit obligation 2.0 % 2.0 %
Net pension cost 2.0 % 2.0 %
Long-term rate of salary increases 2.0-4.7 % 2.0-4.7 %
Long-term rate of return on plan assets 2.5 % 2.5 %
15. Other
In accordance with the provisions of Additional Rule No.54, etc. of the Law to
Partially Amend the Japanese Welfare Pension Insurance Law (Law No. 82, 1996),
NTT Group pays contributions every year, based on notification from the Social
Insurance Agency, to cover the cost based on the Former Public Corporation
Mutual Aid Association Law, which covers pension benefits for the period of
services in and prior to June 1956 of employees who retired in July 1956 or
later from working at NTT, the Nippon Telegraph and Telephone Public
Corporation, and/or their predecessor government organizations (Ministry of
Communications (in the area of telecommunications) and the Ministry of
Telecommunications). The total amount of such contribution for the year ended
March 31, 2005 is Y71,086 million.
Since the contribution is in the nature of a contribution under a public pension
plan, the amount paid is, like insurance premiums (welfare pension insurance
premiums) under other public pension plans, recorded as the costs incurred in
each year.
-35-
--------------------------------------------------------------------------------
Non-consolidated Financial Results Release May 12, 2005
For the Year Ended March 31, 2005 (Japanese GAAP )
Name of registrant: Nippon Telegraph and Telephone Corporation
Code No.: 9432
Stock exchanges on which the Company's shares are listed: Tokyo, Osaka,
Nagoya, Fukuoka and Sapporo
Address of principal executive office: Tokyo, Japan
(URL http://www.ntt.co.jp/ir/)
Representative: Norio Wada, President
Contact: Shigehito Katsuki, Head of IR, Department 4/ TEL (03) 5205-5581
Date of the meeting of the board of directors for approval of the
non-consolidated financial statements: May 12, 2005
Interim dividends plan: Yes
Scheduled date of dividend payments: June 29, 2005
Date of the ordinary general meeting of shareholders: June 28, 2005
Adoption of the Unit Share System: No
1. Non-consolidated Financial Results for the Year Ended March 31, 2005 (April 1, 2004 - March 31, 2005)
Amounts are rounded off per 1 million yen throughout this report.
(1) Non-consolidated Results of Operations
(Millions of yen, except per share amounts)
Operating Operating Recurring
Revenues Income Profit
-------------- --------------- ---------------
Year ended March 31, 2005 323,261 25.2 % 143,709 100.0 % 151,700 92.8 %
Year ended March 31, 2004 258,104 16.2 % 71,862 633.4 % 78,664 409.7 %
Recurring
ROA Profit
ROE (Ratio of Margin
(Ratio of Recurring (Ratio of
Earnings Diluted Net Income Profit Recurring
Net Income per share Earnings to Shareholders' to Total Profit to
per Share Equity) Assets) Operating
Revenues
Year ended March 31, 2005 455,660 89.6 % 29,439.71 - (yen) 8.8 % 1.8 % 46.9 %
(yen)
Year ended March 31, 2004 240,306 196.2 % 15,150.87 - (yen) 4.7 % 0.9 % 30.5 %
(yen)
Notes: 1. Weighted average number of shares outstanding (non-consolidated):
For the year ended March 31, 2005: 15,475,366 shares
For the year ended March 31, 2004: 15,855,684 shares
2. Change in accounting policy No
3. Percentages above represent changes from the previous year.
(2) Dividends
Total Dividends per Share Yearly Payout Ratio of
---------------------------------------------- Total Ratio Dividends
to
Dividends Shareholders'
Interim Year-end Equity
Dividends Dividends -----------
per Share per Share
--------- ---------
Year ended March 31, 6,000.00 (yen) 3,000.00 (yen) 3,000.00 (yen) 92,041 20.4 % 1.8 %
2005 (Millions
of Yen)
Year ended March 31, 5,000.00 (yen) 2,500.00 (yen) 2,500.00 (yen) 79,183 33.0 % 1.5 %
2004 (Millions
of Yen)
(3) Non-consolidated Financial Position
(Millions of yen, except per share amounts)
Total Shareholders' Equity Ratio Shareholders'
Assets
--------- Equity (Ratio of Equity
------------ Shareholders' per Share
------------
Equity
to Total
Assets)
------------
March 31, 2005 8,401,448 5,170,267 61.5 % 346,069.68 (yen)
March 31, 2004 8,616,756 5,167,876 60.0 % 328,297.58 (yen)
Notes: 1. Number of shares outstanding at end of period (non-consolidated): March 31, 14,939,758
2005: shares
March 31, 15,741,201
2004: shares
2. Number of treasury stock: March 31, 801,451
2005: shares
March 31, 8 shares
2004:
2. Non-consolidated Financial Results Forecasts for the Year Ending March 31, 2006 (April 1, 2005 - March 31, 2006)
(Millions of yen, except per share amounts)
Operating Recurring Net Total
Profit Income Dividends
Revenues --------- -------
--------- per Share
---------
Year ending March 31, 2006 340,000 177,000 174,000 6,000.00 (yen)
(Reference) Expected Earnings per Share (Year ending March 31, 2006): 11,646.77
yen
With regard to the assumptions and other related matters concerning the above
estimated results, please refer to page 22.
-36-
--------------------------------------------------------------------------------
1. Non-Consolidated Comparative Balance Sheets
(Millions of yen)
March 31, March 31, Increase
2004 2005 (Decrease)
--------- --------- ----------
ASSETS
Current assets:
Cash and bank deposits 29,907 115,802 85,894
Accounts receivable, trade 1,705 1,567 (138 )
Supplies 240 213 (26 )
Advance payment 878 906 28
Deferred income taxes - 5,400 5,400
Short-term loan receivable 475,058 426,792 (48,266 )
Accounts receivable, other 128,919 106,596 (22,322 )
Other current assets 41,729 11,135 (30,593 )
Total current assets 678,439 668,415 (10,023 )
Fixed assets:
Property, plant and equipment
Buildings 162,655 159,645 (3,010 )
Structures 6,939 6,690 (249 )
Machinery, equipment and vehicles 725 611 (114 )
Tools, furniture and fixtures 18,011 18,296 285
Land 31,479 31,443 (35 )
Construction in progress 1,779 743 (1,036 )
Total property, plant and equipment 221,591 217,430 (4,160 )
Intangible fixed assets 24,755 20,892 (3,863 )
Investments and other assets
Investment securities 34,165 35,089 924
Investments in subsidiaries and affiliated companies 4,772,634 4,785,083 12,448
Investment in capital 145 - (145 )
Long-term loan receivable to subsidiaries 2,827,125 2,617,890 (209,234 )
Deferred income taxes 56,861 55,129 (1,732 )
Other investments 876 865 (11 )
Total investments and other assets 7,691,809 7,494,057 (197,751 )
Total fixed assets 7,938,156 7,732,381 (205,774 )
Deferred assets:
Discount on bonds payable 160 652 491
--------- --------- ---------- -
TOTAL ASSETS 8,616,756 8,401,448 (215,307 )
--------- --------- ---------- -
-37-
--------------------------------------------------------------------------------
(Millions of yen)
March 31, March 31, Increase
2004 2005 (Decrease)
--------- --------- ----------
LIABILITIES
Current liabilities:
Accounts payable, trade 1,914 1,135 (778 )
Current portion of corporate bonds 200,000 162,685 (37,314 )
Current portion of long-term borrowings 286,896 256,244 (30,652 )
Accounts payable, other 108,205 130,186 21,980
Accrued expenses 13,881 12,170 (1,711 )
Accrued taxes on income - 18,197 18,197
Deferred tax liabilities 3,200 - (3,200 )
Advance received 1,043 1,049 5
Deposit received 208 181 (26 )
Unearned revenue - 1 1
Other current liabilities 5,835 3,218 (2,616 )
Total current liabilities 621,185 585,071 (36,114 )
Long-term liabilities:
Corporate bonds 1,639,563 1,614,827 (24,735 )
Long-term borrowings 1,158,215 1,001,578 (156,637 )
Liability for employees' severance payments 29,493 29,299 (194 )
Other long-term liabilities 420 404 (15 )
Total long-term liabilities 2,827,693 2,646,110 (181,583 )
--------- - --------- - ---------- -
TOTAL LIABILITIES 3,448,879 3,231,181 (217,697 )
--------- - --------- - ---------- -
SHAREHOLDERS' EQUITY
Common stock 937,950 937,950 -
Capital surplus
Additional paid-in capital 2,672,826 2,672,826 -
Total capital surplus 2,672,826 2,672,826 -
Earned surplus
Legal reserve 135,333 135,333 -
Voluntary reserve
Reserve for special depreciation 5,551 2,394 (3,157 )
Other reserve 1,131,000 1,131,000 -
Unappropriated retained earnings for the year 279,323 651,486 372,163
Total earned surplus 1,551,207 1,920,214 369,006
Net unrealized gains (losses) on securities 5,897 6,384 486
Treasury stock (4 ) (367,107 ) (367,102 )
--------- - --------- - ---------- -
TOTAL SHAREHOLDERS' EQUITY 5,167,876 5,170,267 2,390
--------- - --------- - ---------- -
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 8,616,756 8,401,448 (215,307
)
--------- - --------- - ---------- -
-38-
--------------------------------------------------------------------------------
2. Non-Consolidated Comparative Statements of Income
(Millions
of yen)
Year Year Increase
ended ended
March March 31, (Decrease)
31, 2005 ----------
2004 ---------
-------
Operating revenues: 258,104 323,261 65,157
Dividends received 71,577 144,067 72,489
Revenues from Group management 20,983 20,931 (52 )
Revenues from basic R&D 146,867 139,234 (7,632 )
Other services 18,675 19,027 352
Operating expenses: 186,241 179,551 (6,689 )
Administration 20,393 19,178 (1,214 )
Experiment and research 120,040 124,969 4,929
Depreciation and amortization 40,389 29,480 (10,909 )
Retirement of fixed assets 2,310 1,520 (790 )
Miscellaneous taxes 3,107 4,402 1,294
Operating income 71,862 143,709 71,847
Non-operating revenues: 74,259 69,483 (4,776 )
Interest income 56,767 51,374 (5,393 )
Lease income 13,974 13,636 (338 )
Miscellaneous income 3,517 4,472 954
Non-operating expenses: 67,457 61,492 (5,965 )
Interest expenses 19,982 17,915 (2,066 )
Corporate bond interest expenses 39,535 35,794 (3,741 )
Lease expenses 6,651 6,555 (96 )
Miscellaneous expenses 1,287 1,226 (61 )
Recurring profit 78,664 151,700 73,036
Special Profits: 189,572 350,659 161,087
Gains on sales of investments in affiliated companies 189,572 350,659 161,087
Special Losses: 12,143 - (12,143 )
Write-off of investments in affiliated companies 12,143 - (12,143 )
Income before income taxes 256,093 502,360 246,267
Corporation, inhabitant, and enterprise taxes (913 ) 53,900 54,813
Deferred tax expenses (benefits) 16,700 (7,200 ) (23,900 )
Net income 240,306 455,660 215,354
Unappropriated retained earnings brought forward 179,238 243,048 63,810
Retirement of treasury stock 100,391 - (100,391 )
Interim dividends 39,830 47,222 7,391
Unappropriated retained earnings for the year 279,323 651,486 372,163
-39-
--------------------------------------------------------------------------------
3. Proposal for Appropriation of Unappropriated Retained Earnings
(Millions of yen)
Year ended Year ended
March 31, March 31,
2004 2005
------------- -------------
Unappropriated retained earnings for the year 279,323 651,486
Return of reserve for special depreciation to retained earnings 3,157 1,863
Total 282,480 653,350
Proposal of appropriation:
Cash dividends 39,353 44,819
(Y2,500 per ) (Y3,000 per )
share share
Bonuses paid to directors and corporate auditors 78 70
(Portion paid to corporate auditors) (18 ) (19 )
Unappropriated Retained earnings carried forward 243,048 608,461
Note: Interim dividends of Y47,222 million (Y3,000 per share) was paid to
shareholders on December 7, 2004.
-40-
--------------------------------------------------------------------------------
4. Non-Consolidated Comparative Statements of Cash Flows
Year Year (Millions
ended ended of yen)
March
March 31, 2005
31, 2004 --------
-------- Increase
(Decrease)
----------
I Cash flows from operating activities:
Income before income taxes 256,093 502,360 246,267
Depreciation and amortization 43,732 32,823 (10,908 )
Loss on disposal of property, plant and equipment 2,281 1,682 (598 )
Dividends received (71,577 ) (144,067 ) (72,489 )
Gains on sales of investments in affiliated companies (189,572 ) (350,659 ) (161,087 )
Increase (decrease) in liability for employees' severance (529 ) (194 ) 335
payments
(Increase) decrease in accounts receivable 21,565 19,011 (2,553 )
Increase (decrease) in accounts payable and accrued expenses (33,014 ) (15,866 ) 17,148
Increase (decrease) in accrued consumption tax (123 ) (990 ) (867 )
Other 13,757 (2,981 ) (16,738 )
-------- - -------- - ---------- -
Sub-total 42,611 41,118 (1,492 )
Interest and dividends received 130,176 196,270 66,094
Interest paid (61,378 ) (55,060 ) 6,317
Income taxes received (paid) (115,525 ) 3,121 118,646
-------- - -------- - ---------- -
Net cash provided by (used in) operating activities (4,116 ) 185,449 189,566
II Cash flows from investing activities:
Payments for property, plant and equipment (23,068 ) (22,357 ) 710
Proceeds from sale of property, plant and equipment 553 617 64
Acquisition of investments (29,801 ) (17,348 ) 12,453
Proceeds from sale of investments 190,718 355,623 164,905
Payments for long-term loans (229,541 ) (216,733 ) 12,807
Proceeds from long-term loans receivable 660,250 470,058 (190,192 )
Other (4,964 ) 5,011 9,975
-------- - -------- - ---------- -
Net cash provided by (used in) investing activities 564,146 574,871 10,724
III Cash flows from financing activities:
Proceeds from issuance of long-term debt 221,291 236,148 14,857
Payments for settlement of long-term debt (607,264 ) (486,896 ) 120,367
Dividends paid (79,661 ) (86,575 ) (6,913 )
Purchase and retirement of common stock (100,391 ) (367,102 ) (266,711 )
-------- - -------- - ---------- -
Net cash provided by (used in) financing activities (566,025 ) (704,426 ) (138,400 )
IV Net increase (decrease) in cash and cash equivalents (5,995 ) 55,894 61,890
V Cash and cash equivalents at beginning of year 65,903 59,907 (5,995 )
-------- - -------- - ---------- -
VI Cash and cash equivalents at end of year 59,907 115,802 55,894
-------- - -------- - ---------- -
-41-
--------------------------------------------------------------------------------
Significant Matters Pertaining to the Preparation of Non-Consolidated Financial
Statements
1. Securities
(1) Investments in subsidiaries and affiliated companies
Investments in subsidiaries and affiliated companies are stated at cost, which
are determined by the moving average method.
(2) Other securities
(1) Marketable securities
The securities whose fair values are readily determinable are stated at fair
value as of balance sheet date with unrealized gains and losses directly
reported as a separate component of shareholders' equity. The cost of
securities sold is determined by the moving average method.
(2) Non-marketable securities
The securities whose fair values are not readily determinable are stated at
cost, which are determined by the moving average method.
2. Supplies
Supplies are stated at cost, which are determined by the last purchase cost
method.
3. Depreciation and amortization of fixed assets
Property, plant, and equipment are depreciated by using the declining-balance
method with the exception of buildings for which the straight-line method is
used. Intangible assets are amortized on a straight-line basis. Their estimated
useful lives and residual value are determined on the basis provided by the
Corporate Income Tax Laws.
Buildings, after having been depreciated over the depreciable periods based on
the Corporate Income Tax Laws, keep depreciated up to the end of their actual
useful lives.
Internal-use software is amortized on a straight-line basis over their estimated
useful lives within five years.
4. Deferred Assets
Discount on bonds payable is amortized on a straight-line basis over the
redemption period. As to bond issue cost, its total amount is expensed at the
time of payment.
5. Allowances
(1) Allowance for doubtful accounts
To cover expected losses from bad debts, estimated amounts to be uncollectible
are accrued, for general claims, computing on historical bad-debt ratios, and
for specific claims including doubtful accounts, considering their own
recoverability.
No allowance is accrued as of this year-end.
(2) Liability for employees' severance payments
To provide for employees' pension benefits, benefit obligations and plan
assets are estimated and accrued as of this year-end.
-42-
--------------------------------------------------------------------------------
Prior service cost is amortized on a straight-line basis over the average
remaining service periods at the time of recognition.
Actuarial net gain or loss is amortized on a straight-line basis over the
average remaining services periods at the time of recognition.
6. Leases
Finance leases other than those deemed to transfer the title of leased assets to
lessees are accounted for in a similar manner as operating leases.
7. Hedging Activities
(1) Accounting for Hedging Activities
Hedging activities are principally accounted for under the "deferral
hedge accounting." Designation ("Furiate-shori") is
applied to forward exchange contracts and other foreign exchange contracts, and
designated "exceptional accounting" ("Tokurei-shori
") to interest-rate swaps that qualify for "exceptional
accounting" (Footnote 14, Accounting Standards for Financial
Instruments).
(2) Hedging Instruments and Hedged Items
(1) Hedging Instruments
Hedging instruments include forward exchange contracts, currency swaps, coupon
swaps (i.e. currency swap of interest portion only), interest-rate swaps,
interest-rate options, and the combinations of the above.
(2) Hedged Items
Hedged items are assets (securities, loans, receivables, etc.) and liabilities
(corporate bonds, borrowings, payables, etc.) exposed to variability of fair
value or future cash flows derived from fluctuations of the exchange rate,
interest rate, etc.
(3) Hedging Policy
To hedge the foreign exchange risks regarding assets and liabilities exposed to
foreign exchange risks, forward exchange contracts, currency swaps, and other
instruments are employed in compliance with internal rules.
To hedge the interest-rate risks regarding assets and liabilities exposed to
interest-rate risks, interest-rate swaps and other instruments are employed in
compliance with internal rules.
(4) Assessment of Hedge Effectiveness
At the end of each quarter, hedge effectiveness is assessed on each hedging
transaction. This quarterly assessment excludes any transaction where important
terms and conditions such as principal, interest-rate, duration are identical
between hedging instruments and hedged items.
8. Consumption Taxes
Consumption taxes are separately accounted for by excluding it from each
transaction amounts.
-43-
--------------------------------------------------------------------------------
Notes to Non-Consolidated Balance Sheets
1. Accumulated depreciation on property, plant and equipment:
March 31, 2005: 218,677 million yen
March 31, 2004: 207,819 million yen
2. In compliance with the provisions of Article 9 of the Law Concerning Nippon Telegraph and Telephone Corporation,
Etc., the total assets of NTT have been pledged as general collateral for corporate bonds issued. In accordance
with the provisions of Article 9 of the Supplementary Provisions to the Law Concerning Partial Revision to the
Nippon Telegraph and Telephone Corporation Law (law No. 98 of 1997), NTT is jointly responsible with Nippon
Telegraph and Telephone East Corporation, Nippon Telegraph and Telephone West Corporation, and NTT Communications
Corporation for corporate bonds issued prior to June 30, 1999 and the total assets of the four companies above
have been pledged as general collateral for the said bonds.
3. Outstanding guarantees:
March 31, 2005: 87,800 million yen
March 31, 2004: 102,950 million yen
Notes to Non-Consolidated Statements of Income
Research & Development expenses included in operating expenses:
Year ended March 31, 2005: 146,979 million yen
Year ended March 31, 2004: 154,043 million yen
- 44 -
--------------------------------------------------------------------------------
5. Leases
In accordance with Tokyo Stock Exchange, Inc.'s rule, we would disclose
this information via EDINET (Electronic Disclosure for Investors'
Network) later.
6. Securities
March 31, 2004
Marketable investments in subsidiaries
Amount included Fair value Difference
in the ----------------- -----------------
balance sheet
-----------------
Investments in subsidiaries 20,170 million 7,777,460 million 7,757,289 million
yen yen yen
Investments in affiliated companies 9,603 million yen 9,786 million yen 183 million yen
----------------- ----------------- -----------------
Total 29,773 million 7,787,246 million 7,757,472 million
yen yen yen
March 31, 2005
Marketable investments in subsidiaries and affiliated companies
Amounts included Fair value Difference
in the ----------------- -----------------
balance sheet
------------------
Investments in subsidiaries 41,742 million yen 6,027,946 million 5,986,204 million
yen yen
Investments in affiliated companies 9,603 million yen 8,012 million yen (1,591 million
yen)
------------------ ----------------- -----------------
Total 51,345 million yen 6,035,958 million 5,984,613 million
yen yen
7. Income Taxes
Breakdown of deferred tax assets and liabilities:
March (Millions
31, of yen)
2004
------ March 31,
2005
---------
Deferred tax assets:
Liability for employees' severance payments 11,463 11,645
Depreciation 38,722 37,389
Other 12,551 16,229
------ - --------- -
Total gross deferred tax assets 62,737 65,264
------ - --------- -
Deferred tax liabilities:
Reserve for special depreciation (1,639 ) (363 )
Enterprise tax receivable (3,251 ) -
Net unrealized gains/losses on securities (4,038 ) (4,370 )
Other (146 ) (1 )
------ - --------- -
Total gross deferred tax liabilities (9,075 ) (4,734 )
------ - --------- -
Net deferred tax assets 53,661 60,529
------ - --------- -
-45-
--------------------------------------------------------------------------------
8. NTT's New Board of Directors
(1) Candidates for Director
Satoshi Miura (President, NTT East)
Akira Arima (Senior Vice President, NTT East)
Kiyoshi Kousaka (Senior Vice President, NTT West)
(2) Candidates for Corporate Auditor
Johji Fukada (Former Secretary General of the Board of Audit)
(3) Directors scheduled to retire from office
Toyohiko Takabe (Scheduled to join NTT East as President)
Masaki Mitsumura (Scheduled to join NTT Communications as Senior Executive Vice President)
(4) Corporate Auditor scheduled to retire from office
Takao Nakajima (Full-time Corporate Auditor)
(5) Candidate scheduled to take office as Representative Director
Senior Executive Vice Satoshi Miura (President, NTT East)
President
- 46 -
--------------------------------------------------------------------------------
(6) New Executive Positions and Organizational Responsibilities
New Position(s) and Name Current Position(s) and
-------------------
Organizational Responsibilities Organizational Responsibilities
---------------------------------------------
--------------------------------------
Representative Director, Satoshi Miura
Senior Executive Vice President
Director of Corporate Management
Strategy Division
In charge of business strategy
Director, Hiroo Unoura Director,
Senior Vice President Senior Vice President
Director of Department V Director of Department I
Director of Business Process
Innovation Office
Director, Akira Arima
Senior Vice President
Corporate Management Strategy Division
Director, Kiyoshi Kousaka
Senior Vice President
Director of Department I
(Notes) Toyohiko Takabe, Masaki Mitsumura and Takao Nakajima are scheduled to relinquish their director seats at the
20th Regular General Meeting of Shareholders (scheduled to be held on June 28, 2005).
Johji Fukada, a candidate for appointment as corporate auditor, has met the requirements for external
auditor.
- 47 -
--------------------------------------------------------------------------------
(Reference) Executive Positions and Organizational Responsibilities
In connection with revisions to NTT's organization structure effective
May 12, some Directors' Organizational Responsibilities were changed as
follows.
May 12, 2005
New Position(s) and Name Current Position(s) and
-------------------
Organizational Responsibilities Organizational Responsibilities
---------------------------------------------
--------------------------------------
Representative Director, Toyohiko Takabe Representative Director,
Senior Executive Vice President Senior Executive Vice President
Director of Corporate Management Strategy In charge of business strategy
Division
In charge of business strategy
Director, Shin Hashimoto Director,
Senior Vice President Senior Vice President
Director of Department II Director of Department II
Director of Next Generation
Network Promotion Office
Director, Masaki Mitsumura Director,
Senior Vice President Senior Vice President
Director of Department V Director of Department V
Director of Business Process
Innovation Office
- 48 -
--------------------------------------------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
MORE TO FOLLOW
FR GUUPUAUPAGPP
Nippon Tel.& T. (LSE:NPN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Nippon Tel.& T. (LSE:NPN)
Historical Stock Chart
From Jul 2023 to Jul 2024
