News Releases

TOKYO—Toshiba Corporation (TOKYO: 6502) today announced a comprehensive overhaul of its budgeting process to end an over-riding emphasis of current-term profit and introduce an approach to budget and mid-term management planning that reflects operational realities and the capabilities of its in-house companies, while further promoting their autonomous operation.

Toshiba also announced a revision to the system for evaluating the performances of the in-house companies, a shift from a profit-weighted evaluation to a greater emphasis on cash flow. The new approach increases the weight given to evaluation of cash flows from 20% to 60%. By shifting the evaluation system to the point of view of medium- and long-term, the company aims to improve its financial base and improve profitability.

Toshiba will improve the budgeting process by ending evaluations that prioritize sales and operating profit, as previously practiced, in favor of prioritizing cash flows. It will also enhance management of interest-bearing debt by limiting its amount that can be held by each in-house companies. In-house companies holding debt that exceeds that limit will be required to produce an improvement plan to reduce it to within the limit, in discussion with corporate senior management.

In other moves, Toshiba will reinforce business selection and concentration through quantitative evaluation of the profitability on current business, and qualitative evaluations of future business, including objective indicators such as market volume and market share. This will allow the company to prioritize concentrated investments in growth business and to reevaluate its support for businesses where lower growth is expected.

In evaluating the medium- and long-term cash flows of the in-house companies, the highest priority will be given to cash flows, including such measures as defining operating cash flow as an evaluation criterion. This system will be implemented from FY2015 performance evaluation.

These latest moves follow on from the September 2015 introduction of a meeting for reporting performance based on financial performance and giving weight to cash flow, a step to establishing value-based reporting of operations and performance. Reports to that meeting are immediately shared with the company’s outside directors.

Toshiba continues to promote management that prioritizes cash flows, and emphasizing it as the means for rebuilding the company’s financial base. By thoroughly implementing the Toshiba Rebuilding Initiative, Toshiba will demonstrate its firm determination to promote reform, and strengthen its corporate culture, toward regaining the trust of its stakeholders.