Annual Report 2012


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EACHSECTORANDBYDIFFERENCESINCOMPETITIVENESSSUCHASCOSTSANDTECHNOLOGIES.INTHEHIGHLYCOMPETITIVEENVIRONMENTOFTHECONTAINERSHIPSECTOR,THEGROUPISSTRIVINGTOMAINTAINANDIMPROVETHECOM-PETITIVENESSOFITSSERVICESBYPARTICIPATINGINALLIANCESWITHFOREIGNMARINETRANSPORTATIONCOMPANIES.HOWEVER,FACTORSOVERWHICHTHE“K”LINEGROUPHASNOCONTROL,SUCHASOTHERCOMPANIESDE-CIDINGONTHEIROWNTOENDALLIANCES,COULDHAVEANEGATIVEIMPACTONTHEGROUP’SMARKETINGACTIVITIES,fiNANCIALSITUATIONANDOPERAT-INGRESULTS.7.NATURALDISASTERSTHE“K”LINEGROUPMUSTBEABLETOMAINTAINBUSINESSOPERATIONSINTHEEVENTOFANATURALDISASTER,ASWEPROVIDEAVITALROLEFORSOCIETY,ANDBECAUSEDOINGSOISCRITICALTOTHEEXISTENCEOFOURCOMPANY.IFAMAJOREARTHQUAKEWERETOOCCURATTHEHEARTOFTHETOKYOMETRO-POLITANAREA,THEEFFECTONBUILDINGS,TRANSPORTATIONANDOTHERLIFE-LINESISEXPECTEDTOBEIMMENSE.THEREAREALSOCONCERNSTHATIFAHIGHLY-VIRULENTNEWFORMOFINflUENZAEMERGEDANDSPREADGLOBALLY(BECOMINGAPANDEMIC)ITWOULDHAVEDEVASTATINGEFFECTS,AFFECTINGTHEHEALTHOFCOUNTLESSPEOPLE.INADDITION,THEREARECONCERNSRE-GARDINGTHESPREADOFHARMFULRUMORSFOLLOWINGANATURALDISASTERORASECONDARYDISASTER.ALTHOUGHTHE“K”LINEGROUPHASDRAWNUPBUSINESSCONTINUITYPLANSFORTHESECONTINGENCIES,ANDOURGOALISTOMAINTAINOPERATIONSTOTHEGREATESTDEGREEPOSSIBLE,THEREISAPOS-SIBILITYOFCONSIDERABLEADVERSEEFFECTSTOOUROVERALLBUSINESSINTHEEVENTTHATANATURALDISASTEROCCURS.8.BUSINESSPARTNERS’FAILURETOPERFORMCONTRACTSWHENPROVIDINGSERVICESORCHOOSINGBUSINESSPARTNERS,WHEREVERPOSSIBLETHE“K”LINEGROUPLOOKSINTOTHERELIABILITYOFTHEOTHERPARTY.HOWEVER,AFULLORPARTIALBREACHOFACONTRACTCANSUBSE-QUENTLYOCCURFORREASONSSUCHASTHEWORSENINGfiNANCIALPOSITIONOFTHEBUSINESSPARTNER.ASARESULT,THEfiNANCIALPOSITIONANDOP-ERATINGRESULTSOFTHE“K”LINEGROUPMAYBEADVERSELYAFFECTED.9.NON-ACHIEVEMENTOF“K”LINEMEDIUM-TERMMANAGEMENTPLANTHE“K”LINEGROUPREVIEWEDTHE“K”LINEVISION100:NEWCHAL-LENGESMEDIUM-TERMMANAGEMENTPLANANDINAPRIL2012FORMU-LATEDANEWPLAN,“K”LINEVISION100:BRIDGETOTHEFUTURE.GOINGFORWARD,THEGROUPWILLMAKEEVERYEFFORTTOCARRYOUTTHEMEDIUM-TERMMANAGEMENTPLAN.NONETHELESS,ITISPOSSIBLETHATTHEMEASURESFORCARRYINGOUTTHEMEDIUM-TERMMANAGEMENTPLANWILLBEAFFECTEDBYTHEVARIOUSEXTERNALFACTORSDISCUSSEDABOVEANDTHEGROUPMAYNOTBEABLETOACHIEVETHEGOALSOFTHATPLAN.10.NON-ACHIEVEMENTOFINVESTMENTPLANSTHE“K”LINEGROUPISMAKINGPLANSFORTHEINVESTMENTSNECESSARYTOUPGRADEITSflEET.IF,HOWEVER,OWINGTOFUTURETRENDSINSHIPPINGMARKETSANDOFfiCIALREGULATIONS,PROGRESSISNOTMADEINACCOR-DANCEWITHTHEPROJECTIONSINTHEPLANS,THEfiNANCIALPOSITIONANDOPERATINGRESULTSOFTHE“K”LINEGROUPMAYBEADVERSELYAFFECTED.THE“K”LINEGROUP’SfiNANCIALPOSITIONANDOPERATINGRESULTSMAYBEADVERSELYAFFECTEDBYCANCELLATIONOFCONSTRUCTIONCONTRACTSBE-FOREDELIVERYOFNEWBUILDINGS.MOREOVER,THEGROUP’SfiNANCIALPOSI-TIONANDOPERATINGRESULTSMAYALSOBEADVERSELYAFFECTEDIF,ATTHETIMETHENEWBUILDINGSAREDELIVERED,THEDEMANDFORCARGOTRANS-PORTFALLSBELOWPROJECTIONS.11.LOSSESFROMDISPOSALOFVESSELS,ETC.THE“K”LINEGROUPENDEAVORSTOIMPLEMENTflEETUPGRADESTHATAREflEXIBLEANDAPPROPRIATETOTHEMARKET.THEREARETIMES,HOWEVER,WHENWEDISPOSEOFOURVESSELSBECAUSEOFAWORS-ENINGINTHESUPPLY-DEMANDBALANCEOROBSOLESCENCEDUETOTECHNOLOGICALINNOVATION,ASWELLASTHECASEWHEREACHARTERCONTRACTFORACHARTEREDVESSELISTERMINATEDEARLY,ANDSUCHCASESMAYADVERSELYAFFECTTHE“K”LINEGROUP’SfiNANCIALPOSI-TIONANDOPERATINGRESULTS.12.FIXEDASSETIMPAIRMENTLOSSESWITHRESPECTTOfiXEDASSETSSUCHASVESSELSOWNEDBYTHE“K”LINEGROUP,RECOVERYOFTHEAMOUNTINVESTEDMAYNOTBEPOS-SIBLEDUETOADOWNTURNINPROfiTABILITY.THE“K”LINEGROUP’SfiNAN-CIALPOSITIONANDOPERATINGRESULTSMAYBEADVERSELYAFFECTEDWHENSUCHASSETIMPAIRMENTLOSSESAREREALIZED.INADDITION,WITHREGARDTOVALUATIONMETHODFORMARKETABLESECURITIES,THE“K”LINEGROUPUSESTHEMARKETVALUEMETHODBASEDONMARKETPRICESOFONTHELASTBUSINESSDAYOFTHEfiSCALYEARFORINVESTMENTSINSECURITIESWITHQUOTEDMARKETPRICES.ASARESULT,STOCKMARKETflUCTUATIONSMAYADVERSELYAFFECTTHE“K”LINEGROUP’SfiNANCIALPOSITIONANDOPERATINGRESULTS.13.REVERSALOFDEFERREDTAXASSETSBASEDONESTIMATEDFUTURETAXABLEINCOME,THE“K”LINEGROUPASSESSESTHEPOSSIBILITYOFRECOGNITIONOFDEFERREDTAXASSETS.WHENACONCLUSIONISREACHEDTHAT,DUETOADECLINEINEARNINGCAPACITY,ITCANNOTBEGUARANTEEDTHATTHEREWILLBESUFfiCIENTTAXABLEINCOMEINTHEFUTURE,DEFERREDTAXASSETSAREREVERSEDANDATAXEXPENSEINCURRED.THISMAYADVERSELYAFFECTTHE“K”LINEGROUP’SfiNANCIALPOSITIONANDOPERATINGRESULTS.NOTE:MATTERSREFERRINGTOTHEFUTUREAREASJUDGEDBYTHE“K”LINEGROUPATTHEISSUEDATEOFfiNANCIALSTATEMENTSOFJUNE26,2012.INADDITION,THEITEMSDISCUSSEDHEREDONOTNECESSARILYREPRESENTEVERYRISKTOTHE“K”LINEGROUP.45ANNUALREPORT2012


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