MEL.L Regulatory News (MEL)

27 Apr 2006 08:52

Mitsubishi Electric Corporation27 April 2006 Investor Relations Inquiries: Media Contact Yasumitsu Kugenuma Travis WoodwardCorporate Finance Department Public Relations DepartmentMitsubishi Electric Corporation Mitsubishi Electric CorporationTel: +81-3-3218-2391 Tel: +81-3-3218-3380 Cad.Irg@rk.MitsubishiElectric.co.jp Travis.Woodward@eb.MitsubishiElectric.co.jp http://global.mitsubishielectric.com/news/ MITSUBISHI ELECTRIC ANNOUNCES CONSOLIDATED AND NON-CONSOLIDATED FINANCIAL RESULTS FOR FISCAL 2006 Tokyo, April 27, 2006 - Mitsubishi Electric Corporation (President and CEO:Setsuhiro Shimomura) announced today its consolidated and non-consolidatedfinancial results for fiscal 2006 (April 1, 2005- March 31, 2006). Consolidated Financial Results Net sales: 3,604.1 billion yen (6% increase from the same period last year) Operating income: 157.7 billion yen (31% increase from the same period last year) Income before income taxes: 152.3 billion yen (49% increase from the same period last year) Net income: 95.6 billion yen (34% increase from the same period last year) Non-consolidated Financial Results Net sales: 2,217.0 billion yen (10% increase from the same period last year) Ordinary profit: 75.1 billion yen (26% increase from the same period last year) Net income: 48.5 billion yen (85% increase from the same period last year) The business environment in FY 2006 saw a general underlying strength in theglobal economy mainly in the U.S. and China, with European manufacturing andcapital investment also picking up slightly in the latter half of the fiscalyear. The Japanese economy gradually broke away from its deflationary slumpexperiencing increased demands for capital investment than initially anticipatedin addition to brisk consumer spending from continued improvements in employmentand income conditions. Meanwhile, the Mitsubishi Electric Group is involved in structural reforms thatrespond to changing operating circumstances to increase and strengthenprofitability in each business segment under its 'make strong businessesstronger' strategy. We also continue to strengthen production and sales systemsboth in domestic and overseas markets by establishing and reinforcing operatingfacilities as well as strengthening our competitive edge through businessalliances, etc. In addition, we are involved in company-wide management renewalactivities like reducing inventory and increasing productivity in addition tocontinuing our cost reducing A-Sigma program and Just In Time activities. We arealso strengthening our competitive edge through HR investments and optimizingour HR structure. CONSOLIDATED FINANCIAL RESULTS BY BUSINESS SEGMENT Energy and Electric Systems Total sales: 868.7 billion yen (10% increase from the same period last year) Operating income: 25.2 billion yen (2.8 billion yen decrease from the same period last year) The social infrastructure systems business saw increases in both orders andsales from the same period last year from reintegration of electric transmissionand distribution related business in addition to expansions in the overseasbusiness for electric equipment for rolling stock. Building system business experienced an increase in both orders and sales fromthe same period last year due to an increase in domestic large-scale orders forelevators and escalators in addition to initiatives in India and the MiddleEast. As a result, total sales for this segment increased 10% from the previous fiscalyear, and operating income decreased 2.8 billion yen from the previous fiscalyear due to price erosion, etc. Industrial Automation Systems Total sales: 860.1 billion yen (10% increase from the same period last year) Operating income: 95.9 billion yen (23.6 billion yen increase from same period last year) Factory automation systems business saw an increase in both orders and salesfrom the same period last year due to increases in investments in flat paneldisplay related investments in Japan, Korea, and Taiwan and overseas anddomestic automotive related investments, etc. The automotive equipment business saw an increase in both orders and sales fromthe same period last year with increases in alternators and starters etc. forboth domestic and overseas automotive manufacturers. As a result, total salesfor this segment increased by 10% compared to the same period last year.Operating income rose by 23.6 billion yen from the same period last year due toincrease in sales, etc. Information and Communication Systems Total sales: 644.1 billion yen (5% increase from same period last year) Operating income: 20.6 billion yen (20.4 billion yen increase from same period last year) The telecommunications equipment business saw an increase in both orders andsales due to increases in infrastructure equipment such as optical broadbandaccess system products, etc. as well as 3rd generation mobile handsets for thedomestic market. The information system service business saw an increase in sales from the sameperiod last year due to expansion in the system integration business. The electronic systems business orders increased from the same period last yeardue to orders for the Superbird 7 satellite etc., however sales remained thesame as the same period last year. As a result, total sales for this segment showed an increase of 5% from the sameperiod last year. Operating income increased by 20.4 billion yen from the sameperiod last year due to improvement in mobile handsets, etc. Electronic Devices Total sales: 170.3 billion yen (4% increase from same period last year) Operating income: 13.5 billion yen (7.4 billion yen increase from same period last year) The semiconductor business saw an increase in both orders and sales from thesame period last year due to increases in power modules for hybrid cars anddomestic industrial machinery as well as red laser diodes for recordable DVDplayers. The liquid crystal business saw a decrease in orders and sales from thesame period last year. Despite increases in small and medium sized products forindustrial use, there were decreases in large sized products for PC monitors. As a result, total sales for this segment increased by 4% from the same periodof the previous fiscal year, and operating income increased by 7.4 billion yenfrom the same period of the previous fiscal year due to increased sales, etc. Home Appliances Total sales: 896.4 billion yen (3% increase from same period last year) Operating income: 14.9 billion yen (10.7 billion yen decrease from same period last year) The home appliance business saw a 3% increase in sales from the same period lastyear due to increases in room and package air conditioners etc. for both theforeign and domestic market in addition to residential home equipment such assolar power generation systems, electric water heaters, IH cooking heaters, etc.as well as refrigerators, and LCD televisions etc. Operating income decreased by 10.7 billion yen from the same period last yeardue to price erosion, etc. Others Total sales: 603.5 billion yen (4% increase from same period last year) Operating income: 13.3 billion yen (2.7 billion yen increase from same period last year) Sales increased 4% from the same period last year mainly in our materialprocurement, engineering, etc. affiliated companies. Operating income increasedby 2.7 billion yen from the same period last year due to increased sales, etc. Dividend With our financial standing and business performance continuing to improve,Mitsubishi Electric will pay a year-end dividend of 5 yen per share for fiscal2006. Adding the interim dividend of 3 yen per share, the total annual dividendis 8 yen per share. cf. Fiscal 2005 dividend was 6 yen per share (interim dividend of 2 yen per share and a year-end dividend of 4 yen per share) FINANCIAL CONDITION (CONSOLIDATED BASIS) Assets, Liabilities, and Shareholders' Equity The company's total assets increased from the end of the previous fiscal year by151.2 billion yen to 3,313.7 billion yen. This increase is mainly attributableto such factors as increases in cash and cash equivalents by 57.9 billion yen,increases in trade receivables by 48.8 billion yen along with a 44.5 billion yenincrease in inventories in response to increased orders and sales etc. The balance of outstanding debts and corporate bonds fell by 62.6 billion yenfrom the balance as of the end of the previous fiscal year to 693.1 billion yen,resulting in a reduction of its ratio against total assets down to 20.9% (animprovement of 3.0 points compared to the end of the previous fiscal year).Retirement and severance benefits decreased 164.2 billion yen due to an increasein pension assets leading to replenishment of a shortage in pension reserve. Shareholders' equity increased 221.5 billion yen compared to the same period ofthe previous fiscal year to 942.2 billion yen. This was due to inclusion oftotal net income of 95.6 billion yen for this fiscal year in addition to reduceddeductions from minimum pension liability adjustments that caused an increase instock price as well as increased unrealized gain from investment securities. Theratio of shareholders' equity to total assets was 28.4%, a 5.6-point improvementcompared to the previous fiscal year. Cash Flow Cash flows from operating activities for this financial year increased 115.9billion yen compared to the same period of the previous fiscal year to 304.8billion yen (positive) due to improved earnings. Investment cash flow increased 55.0 billion yen to 156.2 billion yen (used) dueto capital expenditures mainly in such business areas as automotive equipmentand factory automation systems as well as payment in consideration of assetspurchased for reintegration of electric transmission and distribution relatedbusinesses as a result of termination of a joint venture. Consequently, freecash flow was 148.6 billion yen (positive). Financial cash flow was 100.6 billion yen (used) due to continued debt repaymentand bond redemption in order to improve financial standing. FY'02 FY'03 FY'04 FY'05 FY'06 Debt repayment period1 13.0 years 5.7 years 4.3 years 4.4 years 2.4 years Interest coverage ratio2 4.0 times 10.0 times 17.0 times 17.6 times 31.5 times 1 Debt repayment period: interest bearing debts* divided by cash flow from operating activities 2 Interest coverage ratio: cash flow from operating activities divided by interest paid * Interest-bearing debts are calculated as an average of the year-end balances of two consecutive fiscal years (the present one and the previous one) CURRENT FORECAST FOR FISCAL 2007 The world economy is expected to slow down slightly from its recovery despitesteady undertones similar to the previous fiscal year. The Japanese economy isalso expected to slowdown slightly in the later half of fiscal 2007 from itsslight recovery centered on consumer demand. There are also concerns about theexchange rate and the direction of prices of things like oil and materials aswell as increased feelings of uncertainty as to the direction of domestic demandin consumer spending and capital expenditure. This is in addition to concernsabout the effects of increasing interest rates worldwide as well as risks from afluctuating exchange rate, creating a not necessarily optimistic managementenvironment. In the meantime, the Mitsubishi Electric Group will continue to increase andstrengthen profitability in each business segment. In addition, we are committedto implementing various company wide measures toward improving businessperformance and financial standing. The growth strategies will be steadfastlyadhered to in the interest of maintaining sustainable growth. Current forecast for fiscal 2007: consolidated Net sales 3,700.0 billion yen (3% increase from fiscal 2006) Operating income 175.0 billion yen (11% increase from fiscal 2006) Income before income taxes 160.0 billion yen (5% increase from fiscal 2006) Net income 105.0 billion yen (10% increase from fiscal 2006) Current forecast for fiscal 2007: non-consolidated Net sales 2,270.0 billion yen (2% increase from fiscal 2006) Ordinary profit 75.0 billion yen (same as fiscal 2006) Net income 50.0 billion yen (3% increase from fiscal 2006) MANAGEMENT POLICY Fundamental Management Policy Based on its corporate statement "Changes for the Better", the MitsubishiElectric Group hopes to build a better tomorrow by contributing to the creationof new societies, industries and lifestyles. Keeping this corporate approach in mind, Mitsubishi Electric will establish asolid business foundation and implement sustainable growth through a three pointbalanced management of "Growth," "Profitability & Efficiency" and "Soundness".Mitsubishi Electric will also work to further enhance its corporate value bybecoming a conglomerate of highly competitive electric-electronic businesseswith a synergistic unity, capable of responding to the expectations ofcustomers, shareholders, and all of our stakeholders. Fundamental Profit Distribution Policy With the ultimate objective of enhancing corporate value, Mitsubishi Electric'sfundamental policy is to comprehensively improve shareholder profitability bothin terms of profit distribution in response to earnings from the correspondingfiscal year and reinforcement of our financial standing by adding to ourinternal reserves. Policy on Reducing Minimum Stock Purchase Requirement Mitsubishi Electric recognizes that increasing corporate value to expand a baseof long-term and stable investors as one of the most important managerialissues. Mitsubishi Electric has been considering the effects and expensesrelated to reducing the minimum stock purchase requirement and will continue tocarefully study this issue. Criteria for Management Targets Measures to improve our business foundation and financial standing have resultedin the Mitsubishi Electric Group posting ROE of 11.5% in fiscal 2006, whichfulfilled our original management target of "10% or more". In addition, theratio of interest-bearing debts resulted in 20.9% in the Fiscal 2006, which waseffectively less than the original target of "25% or less". The Group revisedits targeted ratio of interest-bearing debts to 20% or less, and continue makeeffort to accomplish this targeted ratio of operating profit to sales as well asratio of interest-bearing debt to total assets. Management Target Ratio of operating profit to sales 5% or more ROE 10% or more Ratio of interest-bearing debt to total assets 25% or less => 20% or less Corporate Agenda Based on its three point balanced management of "Growth," "Profitability &Efficiency" and "Soundness", the Mitsubishi Electric Group will continuouslyimprove by strengthening quality, cost competitiveness, and intellectualproperty as well as productivity, R&D, and sales capabilities. We will alsostrengthen our two tiered growth strategy VI1 strategy, 'making strongbusinesses stronger', and AD1 strategy, 'reinforcing solutions businessescentered on strong businesses'. While also restructuring business segments inresponse to changing business environments, we strive to create a managementbase that will continue to strengthen and improve our business performance. Specifically, with an objective of strengthening our integrated "Craftsmanship",we will improve our research and development for software and hardware, continueto streamline our productivity with measures like Just In Time production,promote cost reduction activities such as procurement structural reform andexert quality consciousness from the very first stages of design anddevelopment. Further, we are keenly aware of that our human resources areessential in enhancing competitiveness, and we will endeavor to reallocate ourhuman resources in an appropriate and optimized organizational structure so thatwe can properly coop with the so called 'Year 2007'2 problem. We will improveour financial standing by strengthening our productivity by further pursuingsuch measures as inventory reduction etc. Also, we will further promote 'GlobalIntegration' to build an optimal business structure both in global terms and forthe entire corporate Group. In business development in overseas markets, we willpay intensive attention on managing associated risks. Finally, we will enhanceour operational structure to manage various businesses, through integration andcoordination among various aspects, including research, development,procurement, production, sales and services etc. In addition, we will be committed to enhance Corporate Social Responsibility(CSR) efforts based on the Corporate Mission3 and Seven Guiding Principles4. Wewill also improve corporate value while responding to external environmentalchanges such as legislative reforms to the Commercial Code. 1 VI, the first two letters of 'Victory'; AD, the first two letters of 'Advance',. 2 The year in which the oldest of the baby boomers who were born in 1947 will be reaching the age of 60, the mandatory retirement age in the most of Japanese companies. This is causing various concerns such as sudden reduction in the labor force, inability to pass on professional skills, and rapid drop in office space demands. 3 Corporate Mission: The Mitsubishi Electric Group will continually improve its technologies and services through creativity, and at the same time contribute to society. 4 These principles are: Trust: Establish relationships with all stakeholders based on strong mutual trust and respect, Quality: Provide the best products and services with unsurpassed quality, Technology: Pioneer new markets by promoting research and development, Citizenship: As a global player, contribute to the development of communities and society as a whole, Ethics: Honor high ethical standards in all endeavors, Environment: Respect nature, and strive to protect and improve the global environment, Growth: Assure fair earnings to build a foundation for future growth. Basic Policy for Corporate Governance and its Enforcement Basic Corporate Governance Policy Mitsubishi Electric strives to pursue continuous growth, by enhancingflexibility in operations and management transparency, and at the same timeconsistently endeavors to reinforce the supervisory functions of management. Ourbasic policy consists in establishment of an efficient corporate governancestructure responsive to various expectations from various stakeholders (amongothers customers and shareholders) and, by this way, we aim further increase ofour corporate value. Current Status of Implementation of Various Measures Relating to Corporate Governance (1) Decision Making, Executive and Directorial Structure of Corporate Management and Other Corporate Governance Systems a) Company Organization and Development of Internal Control Systems In June 2003, Mitsubishi Electric reformed its management structure when itchanged to a company with committee system. The supervisory and executive powersof management were thus separated, with the board of directors handlingsupervisory decisions and executive officers handling executive decisions. The present board is comprised of twelve directors (five of whom are outsidedirectors) offering advice and supervision to management from an objectivestandpoint. The board of directors has three internal bodies: the Auditing,Nomination and Compensation Committees. Each body has five members of whichthree are outside directors. The Auditing Committee has its own dedicated,independent staff, which supports the auditors. A key feature of our management structure is the separation of the Chairman andCEO, with the Chairman as the head of the supervisory functions as a member ofthe board of directors and the President & CEO as the head of the executiveofficers. Neither the Chairman nor President is a member of the Nomination orCompensation Committees. This clear separation of supervising and executionpowers makes our corporate governance more effective. To maintain compliance and secure management efficiency, each executive officerpossesses responsibility for their individual scope of duties, with operatingconditions being audited by internal auditors (Audit Department). The internalauditors (Audit Department) and outside auditors report their audit results tothe Audit Committee and executive officers in charge. b) Development of Risk Management System The risk management system is constructed so that each executive officerpossesses responsibility for his assigned duties. In addition, importantmanagement implementations are discussed and decided by all the executiveofficers in the executive officers meetings. The synergistic effect of allexecutive officers participating in management and information creates a multi-dimensional risk management system. The following diagram outlines the corporategovernance structure of Mitsubishi Electric: General Shareholders' Meeting Reporting to Reporting to Appointment Execution Supervision Executive Officers Board of Directors President & CEO Chairman Executive Vice President Appointment/ Dismissal/ Supervision Nomination Directors Committee Senior Vice President (Outside Directors (majority) Senior Executive Officer Executive Officers Reporting to Auditing Committee Directors (Outside Directors (majority) Business/Administration Divisions Compensation Directors Committee (Outside Directors (majority) c) Internal Audit and Inspections by Audit Committee, Independent Auditors The Audit Department conducts its internal audits from a fair and impartialstandpoint by having its own dedicated staff in addition to supporting auditorsthat represent the special interests of relevant departments. The Auditing Committee consists of five directors of which three are outsidedirectors. In accordance with the policies and assignments agreed to by thecommittee, inspections are conducted by competent members, into the performanceof the directors and executive officers as well as affiliated companies. The Auditing Committee receives reports from the internal auditors (AuditDepartment) and exchanges information from one another through a series ofperiodical meetings and discussions on auditing policies. Also the AuditingCommittee has chances to discuss with independent auditors policies and methodsof audits, and it will receive accounts on status and results of the audit aswell as mutual exchanges of opinion. KPMG AZSA & Co. has been retained as the independent auditor. KPMG AZSA & Co.appoints partners in charge, and the firm has designated Mr. Yoshihiko Nakamura,Mr. Hiroto Kaneko, and Mr. Ryoji Fujii as the partners in charge handlingauditing for Mitsubishi Electric. Support staff for handling auditing willconsist of appropriate CPA and JA from KPMG AZSA & Co. Mitsubishi Electric willmaintain an environment in which fair and impartial audits can be conducted,such as providing relevant management information to KPMG AZSA & Co. d) Detail of Remuneration Paid to Directors and Auditors (i)Detail of Remuneration Paid to Directors Description Number Paid in the current Fiscal Year Remark Directors 9 144 million yen Remuneration under the Article 21-11Officers 20 443 million yen -3-1 of Special Rules to theTotal 29 587 million yen Commercial Code Note: The above-mentioned number of payees includes 1 directors and 5 officers who have retired during the Fiscal Year 2006. 1.The number does not include 4 directors acting as officers on an interlocking basis. 2.The payment shown above does not include (i) the incentive amount of 206 million yen paid (for 20 officers) in commensuration with the operating result and (ii) the premium of retirement amounting to 154 million yen (for 1 director and 2 officers) 3.The Payment above does not include 201 million yen (including 81 million yen of bonus), which is a salary equivalent portion allocable to their functions and qualities as employee for those officers assuming certain functions as employees. (ii) Detail of Fees Paid to the Independent Auditors In the subject fiscal year, the remuneration payable by the consolidatedcorporate group of Mitsubishi Electric to KPMG AZSA & Co, along with concernedmember firms associated thereto, which is the auditing firm under Special Rulesto the Commercial Code and Security Exchange Law, has amounted 512 million yenin consideration of creating audit reports and 95 million yen in other servicesthan the audit. (2) External Special Interests with outside directors No special interest, personal, investor, trade or otherwise, exists between anyof the outside directors and the company. Additionally, outside director Minoru Makihara is the advisor to MitsubishiCorporation and Tsuneo Wakai is a special advisor to The Bank of Tokyo-Mitsubishi UFJ, and both of these companies do have a banking and operatingtrade relationship. (3) Corporate Governance reinforcement in the fiscal year 2006. In this fiscal year 2006, committees have been convened for purposes ofnominating directorial candidates as well as auditing business execution bydirectors/officers and determining remuneration of board members and executives:annual total of holding meetings by respective committee are as follows, 2 timesby the Nomination Committee, 8 times by the Auditing Committee, and 3 times bythe Compensation Committee. CONSOLIDATED AND NON-CONSOLIDATED FINANCIAL RESULTS 1. CONSOLIDATED FINANCIAL RESULTS (in billions of yen) FY'06 FY'05 A/B (A) (B) (%) Net sales 3,604.1 3,410.6 106Operating income 157.7 120.6 131Income before income taxes 152.3 102.3 149Net income 95.6 71.1 134Basic net income per share (in yen) 44.64 33.16 135 FY '06: Apr. 1, 2005 - Mar. 31, 2006 FY '05: Apr. 1, 2004 - Mar. 31, 2005 2. NON-CONSOLIDATED FINANCIAL RESULTS (in billions of yen) FY'06 FY'05 A/B (A) (B) (%) Net sales 2,217.0 2,022.0 110Ordinary profit 75.1 59.4 126 Net income 48.5 26.2 185Dividend per share (in yen)Annual dividend 8 6 133Interim dividend 3 2 Term-end biannual 5 4 dividend Net income per share (in yen) 22.26 12.22 185 FY '06: Apr. 1, 2005 - Mar. 31, 2006 FY '05: Apr. 1, 2004 - Mar. 31, 2005 CONSOLIDATED PROFIT AND LOSS STATEMENT (in millions of yen) FY '06 % of FY'05 % of Comparison A/B (A) total (B) total to previous (%) year (A - B) Net sales 3,604,185 100.0 3,410,685 100.0 193,500 106Cost of sales 2,694,985 74.8 2,559,499 75.1 135,486 105Selling general and administrative expenses 751,482 20.8 730,544 21.4 20,938 103 Operating income 157,718 4.4 120,642 3.5 37,076 131Other income 45,980 1.3 36,390 1.1 9,590 126 Interest and Dividends 9,492 0.3 7,437 0.2 2,055 128Other 36,488 1.0 28,953 0.9 7,535 126Other expenses 51,372 1.5 54,716 1.6 (3,344) 94 Interest 9,648 0.3 10,868 0.3 (1,220) 89Other 41,724 1.2 43,848 1.3 (2,124) 95Income before income 152,326 4.2 102,316 3.0 50,010 149taxesIncome taxes 69,701 1.9 48,170 1.4 21,531 145Equity in earnings of 13,067 0.4 17,029 0.5 (3,962) 77 affiliated companies Net income 95,692 2.7 71,175 2.1 24,517 134 FY '06: Apr. 1, 2005 - Mar. 31, 2006 FY '05: Apr. 1, 2004 - Mar. 31, 2005 CONSOLIDATED BALANCE SHEET (in millions of yen) FY'06 FY'05 (A) (B) A - B (ending (ending March 31, March 31, 2006) 2005) (Assets)Current assets 1,886,779 1,740,333 146,446Cash and cash equivalents 304,514 246,563 57,951Short-term investments 7,991 23,719 (15,728)Trade receivables 843,600 789,463 54,137Inventories 491,950 447,382 44,568 :Prepaid expenses and other current assets 238,724 233,206 5,518Long-term receivables 4,378 9,700 (5,322)Investments 584,871 483,547 101,324Net property, plant and equipment 589,998 570,660 19,338Other assets 247,716 358,232 (110,516)Total assets 3,313,742 3,162,472 151,270(Liabilities and shareholders' equity)Current liabilities 1,440,133 1,277,662 162,471Bank loans and current portion of long- term debt 247,595 234,242 13,353Trade payables 714,455 636,829 77,626Other current liabilities 478,083 406,591 71,492 Long-term debt 445,583 521,542 (75,959)Retirement and severance benefits 420,348 584,601 (164,253)Other fixed liabilities 13,081 11,307 1,774Minority interests 52,395 46,723 5,672Shareholders' equity 942,202 720,637 221,565Common Stock 175,820 175,820 -Capital surplus 210,938 210,687 251Retained earnings 528,240 447,548 80,692Accumulated other comprehensive income (loss) 27,718 (113,022) 140,740 Treasury stock at cost (514) (396) (118) Total liabilities and shareholders' equity 3,313,742 3,162,472 151,270Balance of Debt 693,178 755,784 (62,606)Accumulated other comprehensive income (loss):Foreign currency translation adjustments 9,426 (10,722) 20,148 Minimum pension liability adjustments (58,695) (138,658) 79,963Unrealized gains on securities 76,970 36,358 40,612Unrealized gains on derivative instruments 17 - 17 CONSOLIDATED CASH FLOW (in millions of yen) FY'06 FY'05 A - B (A) (B)I Cash flows from operating activities 1 Net income 95,692 71,175 24,5172 Adjustments to reconcile net income to net cash provided by operating activities(1) Depreciation of tangible fixed assets and other 135,821 111,330 24,491(2) Decrease in deferred income taxes 22,796 17,001 5,795(3) Decrease (increase) in trade receivables (19,359) (29,665) 10,306(4) Decrease (increase) in inventories (9,379) (41,223) 31,844(5) Decrease (increase) in prepaid expenses and other assets (3,308) 18,855 (22,163)(6) Increase in trade payables 60,170 14,927 45,243 (7) Increase in other liabilities 35,346 34,480 866(8) Other, net (12,938) (7,956) (4,982)Net cash provided by operating activities 304,841 188,924 115,917 II Cash flows from investing activities 1 Capital expenditure (134,413) (125,657) (8,756)2 Proceeds from sale of property, plant and equipment 5,374 16,492 (11,118)3 Purchase of short-term investments and investment securities (33,590) (52,489) 18,8994 Proceeds from sale of short-term investments and investment securities 32,937 58,978 (26,041)5 Other, net (26,517) 1,541 (28,058) Net cash used in investing activities (156,209) (101,135) (55,074)I + II Free cash flow 148,632 87,789 60,843 III Cash flows from financing activities1 Proceeds from long-term debt 62,675 49,590 13,0852 Repayment of long-term debt (100,024) (116,698) 16,6743 Increase (decrease) in bank loans, net (43,794) (94,214) 50,4204 Dividends paid (15,000) (12,877) (2,123)5 Purchase of treasury stock (4,583) (58) (4,525)6 Reissuance of treasury stock 125 50 75 Net cash provided by (used in) financing activities (100,601) (174,207) 73,606 IV Effect of exchange rate changes on cash and cash equivalents 9,920 2,385 7,535 V Net increase (decrease) in cash and cash equivalents 57,951 (84,033) 141,984 VI Cash and cash equivalents at beginning of period 246,563 330,596 (84,033) VII Cash and cash equivalents at end of period 304,514 246,563 57,951 FY '06: Apr. 1, 2005 - Mar. 31, 2006 FY '05: Apr. 1, 2004 - Mar. 31, 2005 CONSOLIDATED SEGMENT INFORMATION 1. Sales and Operating Income by Business Segment (in millions of yen) FY '06 FY '05 A/B %Business Segment Sales % of Operating Sales % of Operating (A) total income (B) total Energy and Electric Systems 868,789 21.5 25,296 791,925 20.8 28,150 110Industrial Automation Systems 860,111 21.3 95,967 781,867 20.6 72,362 110Information & Communication Systems 644,111 15.9 20,677 614,091 16.2 238 105Electronic Devices 170,394 4.2 13,531 164,383 4.3 6,130 104Home Appliances 896,437 22.2 14,958 866,428 22.8 25,692 103Others 603,585 14.9 13,342 581,685 15.3 10,597 104Subtotal 4,043,427 100.0 183,771 3,800,379 100.0 143,169 106Eliminations and other (439,242) - (26,053) (389,694) - (22,527) -Total 3,604,185 - 157,718 3,410,685 - 120,642 106 *Note: Inter-segment sales are included in the above chart. FY '06: Apr. 1, 2005 - Mar. 31, 2006 FY '05: Apr. 1, 2004 - Mar. 31, 2005 2. Sales and Operating Income by Location (in millions of yen) FY '06 FY '05 A/B (%)Location Sales (A) Operating Sales (B) Operating income (loss) income (loss)Japan 3,131,472 123,578 2,927,605 93,118 107North America 251,717 (4,100) 217,369 (1,006) 116Asia (excluding Japan) 430,976 29,205 459,363 29,277 94Europe 228,993 8,148 235, 188 2,334 97Others 27,567 945 23,255 767 119Subtotal 4,070,725 157,776 3,862,780 124,490 105Eliminations (466,540) (58) (452,095) (3,848) -Total 3,604,185 157,718 3,410,685 120,642 106*Note: Inter-segment sales are included in the above chart. FY '06: Apr. 1, 2005 - Mar. 31, 2006 FY '05: Apr. 1, 2004 - Mar. 31, 2005 3. Overseas Sales (in millions of yen) FY '06 FY '05 A/B (%)Location Sales (A) % of Sales (B) % of total net sales total net salesNorth America 281,502 7.8 318,376 9.3 88Asia (excluding Japan) 426,579 11.9 380,544 11.2 112Europe 270,761 7.5 263,417 7.7 103Others 69,727 1.9 73,335 2.2 95Total overseas sales 1,048,569 29.1 1,035,672 30.4 101 FY '06: Apr. 1, 2005 - Mar. 31, 2006 FY '05: Apr. 1, 2004 - Mar. 31, 2005 Cautionary StatementThe expectation of operating results herein and any associated statement to be made orally with respect to theCompany's current plans, estimates, strategies and beliefs and any other statements that are not historical facts areforward-looking statements. Words such as "expects", "anticipates", "plans", "believes", "scheduled", N"estimated", "targeted" along with any variations of these words and similar expressions are intended to identifyforward-looking statements which include but are not limited to projections of revenues, earnings, performanceand production. While the statements herein are based on certain assumptions and premises that the Companytrusts and considers to be reasonable under the circumstances to the date of announcement, you are requested tokindly take note that actual operating results are subject to change due to any of the factors as contemplatedhereunder and/or any additional factor unforeseeable as of the date of this announcement. Such factors materiallyaffecting the expectations expressed herein shall include but are not limited to the following: (1) Any change in worldwide economic and social conditions as well as laws, regulations, taxation and other legislation(2) Changes in foreign currency exchange rates, especially yen/dollar rates(3) Changes in stock markets, especially in Japan(4) Changes in balance of demand and supply of products that may affect prices and volume, as well as material procurement conditions(5) Changes in the ability to acquire financing, especially in Japan(6) Changes in any patent and its licensing, including any dispute involving patent infringement, that may affect operations(7) Technological change, the development of products using new technology, manufacturing and time-to-market(8) Business restructuring(9) Damage from earthquakes, typhoons, tsunami, fires and other large scale disasters(10) Social and political tumult caused by terrorism or war, etc. About Mitsubishi ElectricWith over 80 years of experience in providing reliable, high-quality products to both corporate clients and general consumers all over the world, Mitsubishi Electric Corporation (TSE:6503) is a recognized world leader in the manufacture, marketing and sales of electrical and electronic equipment used in information processing and communications, space development and satellite communications, consumer electronics, industrial technology, energy, transportation and building equipment. The company recorded consolidated group sales of 3,604 billion yen (US$ 30.8billion*) in the fiscal year ended March 31, 2006. For more information visit http://global.mitsubishielectric.com*At an exchange rate of 117 yen to the US dollar, the rate given by the Tokyo Foreign Exchange Market on March 31, 2006. This information is provided by RNS The company news service from the London Stock Exchange