Income Analysis During the fiscal year under review, the slump in the Japanese economy worsened due to a fall in consumer spending and a decline in public-sector investment. The slowdown was particularly pronounced in the second half of the fiscal year as uncertainties over Japan's financial system and economic turmoil in the Asian economies became increasingly conspicuous while economic activity declined and deflationary pressures mounted. Under these conditions, despite higher revenues in the Iron and Steel Sector, lower sales in the Machinery Sector held net sales to 1,535.2 billion yen, approximately the same level as in the previous fiscal year. Operating income declined 13.5%, to 84.4 billion yen, due to such factors as deteriorating performances in the Machinery and Electronics and Information sectors. As a result, the operating margin decreased to 5.5%, from 6.4% in fiscal 1996. Sales in the Iron and Steel Sector increased 6.5%, to 601.4 billion yen. Operating income in this sector advanced 13.0%, to 60.0 billion yen, reflecting the success of efforts to reduce overall costs. In the Aluminum and Copper Sector, sales declined slightly, to 334.6 billion yen. Operating income fell 18.3%, to 16.7 billion yen, due to decreases in production and sales volume. Sales in the Machinery Sector edged down 2.8%, to 506.3 billion yen. Operating income in this sector plunged 34.2%, to 20.1 billion yen, because of the effects of decreases in sales of construction machinery and in plant projects. In the Electronics and Information Sector, sales rose 5.1%, to 80.2 billion yen. However, an operating loss of 16.8 billion yen was recorded due primarily to the effects of a sharp fall in DRAM prices. Net other expenses totaled 88.0 billion yen, and loss before income taxes amounted to 3.6 billion yen. After adjustments for income taxes, minority interests, and investment gains and losses based on the equity method, a net loss of 4.9 billion yen was recorded. Analysis of Cash Flow and Financial Position The Company's operating, investing, and financing activities during the year resulted in a 65.8% net increase in cash and cash equivalents, to 102.0 billion yen. Net cash provided by operating activities totaled 47.9 billion yen, down from 66.4 billion yen in the previous year. During the fiscal year, the Company allocated 116.7 billion yen for the purchase of plant and equipment, and 19.9 billion yen for the purchase of marketable securities, investments, and other assets. Conversely, the Company recorded a 17.9 billion yen inflow from the sale of plant and equipment and a 11.8 billion yen inflow from the sale of marketable securities, investments, and other assets. As a result, net cash used in investing activities totaled 106.8 billion yen. Net cash provided by financing activities amounted to 99.4 billion yen, compared with 36.8 billion yen in the previous fiscal year. During the fiscal year, the Company procured 207.9 billion yen through the issuance of long-term debt and corporate bonds. The Company also procured 78.6 billion yen from short-term borrowings. On the other hand, the Company repaid 187.1 billion yen in long-term debt and the redemption of bonds. Total assets at the end of fiscal 1997 amounted to 2,398.1 billion yen, a 2.6% increase from the end of the previous fiscal year-end. Total stockholders' equity at fiscal year-end was 365.3 billion yen, down 1.3% from the end of fiscal 1996. As a result, the net worth ratio was 15.2%.