CONSOLIDATED FINANCIAL STATEMENTS March 31 ... -...
Transcript of CONSOLIDATED FINANCIAL STATEMENTS March 31 ... -...
Financial Section
TOYOBO CO., LTD.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
Disclaimer Regarding Forward-Looking StatementsThis report describes not only the past and present facts about Toyobo Co., Ltd. and its affiliates (together, the “Toyobo Group”), but also projects future business performance and forecast the future business environment. Such projections include assumptions and evaluations that were developed based on information that Toyobo was able to obtain as of the time this report was prepared, and, thus, contain unknown as well as known risks and uncertainties. Consequently, there is a possibility that these risks and uncertainties will render the projections and forecast inaccurate and result in actual future business performance and a future business environment significantly different from the projections and forecast presented in this report. Readers are thus advised to exercise caution. The projections of future business performance and forecasts of the future business environment that are found in this report were developed based on information that our corporation was able to obtain at the time the descriptions were written. These projections and forecast, therefore, contain elements of uncertainty. Moreover, there is a possibility that latent risks that have the potential of rendering such projections and forecasts inaccurate will materialize. Please be fully advised that in the future actual business performance and the actual business environment could turn out to be different from the projections and forecast presented in this report.
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CONTENTS
Management’s Discussion and Analysis 3
Consolidated Financial Highlights 9
Financial Section 10
Consolidated Balance Sheets 11
Consolidated Statements of Income 13
Consolidated Statements of Comprehensive Income 14
Consolidated Statements of Changes in Net Assets 15
Consolidated Statements of Cash Flows 17
Notes to Consolidated Financial Statements 18
Independent Auditors’ Report 45
TOYOBO CO., LTD.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
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Management’s Discussion and Analysis
Overview of Fiscal Year Ended March 31, 2014 The business environment for the Toyobo Group through the end of the fiscal 2014, ended March 31, 2014, was relatively lackluster. Overseas,
recovery trends appeared in the United States, including improvements in the employment environment, but growth in emerging countries of Asia,
including China, slowed, and stagnation in the European economies continued. In Japan, the economy showed a moderate recovery. As the high
values of the yen underwent a correction and stock prices recovered following the adoption of economic and monetary policies, recovery was
evidenced by improvement in corporate profitability, the rise in consumer spending as a consequence of the surge in demand prior to the increase
in the consumption tax and other developments.
Amid this operating environment, the Toyobo Group continued its activities aimed at becoming “The category leader, continuing to create new value
that contributes to society in the environment, life science and high-function products fields.” Accordingly, Toyobo is proceeding with activities
targeted at further growth by expanding its businesses in Japan and overseas markets through developing specialty products and increasing their
sales. During the fiscal year under review, Toyobo continued to implement strategic aimed at further expanding its businesses, including activities
characterized as “investing to expand capacity,” “accelerating overseas business development,” “developing new products” and “improving asset
efficiency.”
Specific activities in the area of “investing to expand capacity” included proceeding with the start-up of new facilities to respond to demand in the
packaging and industrial film businesses and the structuring of production systems to respond flexibly to changes in demand. In the area of
“accelerating overseas business development,” Toyobo began the production of copolyester “VYLON” at its facilities in Thailand. In addition, in
Brazil, Toyobo proceeded with construction work on a new engineering plastic production facility. In the rest of Asia and South America, Toyobo
worked to strengthen its business base. In addition, Toyobo decided to acquire a German manufacturer of yarn for airbags together with a partner
company to strengthen its supply chain with an eye to developing and expanding sales of airbag fabric to overseas automotive manufacturers.
Moreover, Toyobo acquired a Spanish producer of diagnostic reagents and systems and moved forward with initiatives to expand its bio-related
businesses in the emerging markets of Africa, Latin America and other regions.
In the field of “developing new products,” Toyobo focused on expanding sales of its super retarder film (“COSMOSHINE SRF”) for liquid crystal
displays (LCDs), which has special optical properties, and “Nerbridge,” its tube conduit for nerve regeneration. In the case of “SRF,” Toyobo
reported progress in expanding its use in TV sets. In the area of “improving asset efficiency,” Toyobo exited the polyester tire cord business as
planned and completely suspended sales.
Overall, consolidated net sales for the subject fiscal year increased ¥12.6 billion (3.7%) from the previous fiscal year to ¥351.6 billion, with operating
income up ¥3.9 billion (23.0%) to ¥21.0 billion and net income of ¥8.2 billion.
Films and Functional Polymers Within this segment, in the films business, sales in the packaging films business experienced tough conditions, but sales of industrial films held
firm, despite a deceleration in demand for LCD-related uses. In the functional plastics business, sales of materials for automotive parts and
materials, including engineering plastics, were favorable, but conditions for sales of “VYLON” were not. Nevertheless, this business reported an
overall increase in sales and higher operating income compared with the previous year.
In the films business, although sales of packaging films showed growth in volume terms, conditions were severe because of a rise in raw materials
prices. In the industrial films business, performance was influenced by the weakening of the LCD market, but sales held firm, in part because of
replacement demand for PCs. In the functional plastics business, although there was a trend toward recovery in sales of the industrial adhesive
“VYLON,” conditions were difficult for electronic component applications. Sales of engineering plastics, which are used principally in automotive
parts and materials, held firm, mainly to North America and China. As a result, sales in this segment increased ¥10.6 billion (7.7%) from the
previous fiscal year to ¥148.0 billion, while operating income was up ¥0.2 billion (2.1%) to ¥7.8 billion.
Industrial Materials Within this segment, the environment-related businesses were adversely affected by weakness in the Asian market, but sales of
products for consumer and industrial uses were favorable. In addition, Toyobo completed its withdrawal from the tire cord business,
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and this segment reported an overall decrease in sales and higher operating income compared with the previous fiscal year.
In the airbag fabrics business, although sales expanded in volume terms, performance was influenced by the rise in raw materials
prices. Sales in the tire cord business dropped sharply because of Toyobo’s withdrawal from this business. Sales of
high-performance fibers “Dyneema,” which is a product used mainly for ropes used on ships, expanded in volume terms, but sales
of “ZYLON,” for use in heat-resistant materials and other applications, experienced weakness. In the functional filters business,
operating conditions in volatile organic compound (VOC) emission treatment equipment continued to be difficult as users in the rest
of Asia postponed their investments. Among materials for consumer and industrial uses, sales of “BREATHAIR,” a functional
cushion material, showed major expansion following an increase in production capacity.
As a result, sales in this segment decreased ¥0.2 billion (0.3%) from the previous fiscal year to ¥71.7 billion, with operating income
rising ¥0.0 billion (0.9%) to ¥5.5 billion.
Life Science In this segment, conditions for sales of membranes for medical applications were difficult, but sales in the bioproducts business and
the contract manufacturing of pharmaceuticals were favorable. New product “Nerbridge” was launched as planned. As a result, this
segment reported an overall increase in sales and higher operating income compared with the previous fiscal year.
In the bioproducts business, sales of diagnostic enzymes, which are the mainstay products in this business, continued to be
favorable in Japan and overseas. In the medical products business, sales increased steadily along with the full-scale start-up of
new production facilities for contract manufacturing of pharmaceuticals, and new projects were secured. In the medical devices
business, the marketing of “Nerbridge,” a conduit tube for nerve regeneration, proceeded according to plans, and the range of
treatment applications was expanded. In the functional membrane business, conditions were challenging in the medical membrane
field overseas. However, shipments of reverse osmosis membrane elements for seawater desalination were favorable, supported
by major new projects for desalination facilities in Saudi Arabia and demand for the replacement of membranes at existing plants.
As a result, sales in this segment increased ¥2.5 billion (10.1%) from the previous fiscal year to ¥27.3 billion, while operating income
was up ¥1.0 billion (23.3%) to ¥5.1 billion.
Textiles Sales in this segment were influenced by the delay in the recovery in the domestic apparel market, but, as a result of the decline in
the value of the yen, overall segment sales showed an decrease and operating income increased compared with the previous fiscal
year. The profitability of sports apparel deteriorated because of the decline in the value of the yen, which increased the cost of
products manufactured overseas. However, among other textile products, income from textile materials for traditional Arabic
menswear increased along with the rise in export margins. Sales of acrylic fiber to China held firm. As a result, sales in this segment
decreased ¥0.1 billion (0.2%) from the previous fiscal year to ¥79.1 billion, with operating income was up ¥2.7 billion to ¥3.0 billion.
Real Estate and Other Businesses This segment includes infrastructure related businesses such as real estate, engineering, information processing services and
logistics services. Results in these businesses were in line with plans. Sales in these segments decreased ¥0.2 billion (0.9%) from
the previous fiscal year to ¥25.4 billion, with operating income down ¥0.0 billion (0.3%) to ¥2.7 billion.
Operating Income Gross profits for the subject fiscal year increased ¥5.7 billion (7.9%) from the previous fiscal year to ¥77.0 billion. Because of strong
performance in sales of packaging films and acrylic fiber, overall sales expanded. Gross profit on sales expanded along with a
decrease in the impact of foreign currency fluctuations and losses on the value of inventories. Among selling, general and
administrative expenses, R&D expenditures increased along with the costs of the start-up of new film manufacturing equipment. As
a result, operating income for the subject fiscal year increased ¥3.9 billion (23.0%) from the previous fiscal year to ¥21.0 billion.
Other Income (Expenses) The balance of other income (expenses) for the subject fiscal year yielded net other expenses of ¥25.8 billion, compared with net
other expenses of ¥15.6 billion the previous fiscal year. Extraordinary income included negative goodwill due to the purchase of
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shares of a consolidated subsidiary. Extraordinary expenses included a loss of ¥1.6 billion on the disposal of noncurrent assets due
to the disposal of fixed assets, ¥1.6 billion in legal costs incurred in connection with litigation and ¥1.1 billion in structural reform
expenses accompanying the Company’s withdrawal from the tire cord business.
Net Income For the subject fiscal year, Toyobo posted net income of ¥8.2 billion, up ¥0.5 billion from the previous fiscal year. Net income per
share for the subject fiscal year increased from ¥8.61 in the previous fiscal year to ¥9.18.
Cash Flows Net cash from operating activities amounted to ¥23.9 billion at the end of the subject fiscal year, consisting mainly of ¥13.9 billion
before income taxes; ¥14.0 billion in depreciation and amortization; and ¥2.9 billion decrease in income taxes.
Net cash used in investing activities amounted to ¥22.2 billion, consisting mainly of ¥20.3 billion in expenditures for the purchase of
property, plant and equipment and intangible assets and ¥3.2 billion in the purchase of shares of subsidiaries resulting in a change
in scope of consolidation.
Net cash used in financing activities amounted to ¥10.8 billion. This consisted mainly of ¥50.5 billion in income of long-term debt,
including ¥15.0 billion financed by a subordinated loan on March 2014, ¥23.0 billion in repayments of long-term loans payable and
¥15.3 billion in payment for retirement by preferred securities. As a result, the balance of cash and cash equivalents at the end of
the subject fiscal year (March 31, 2014) stood at ¥19.2 billion, a decrease of ¥7.3 billion from the end of the previous fiscal year
(March 31, 2013).
Assets, Liabilities and Net Assets Total assets at the end of the subject fiscal year (March 31, 2014) increased ¥8.8 billion (2.0%) from the end of the previous fiscal
year (March 31, 2013) to ¥456.3 billion. This was due mainly to an increase in machinery, equipment and vehicles, net. Total
liabilities increased ¥19.2 billion (6.6%) to ¥311.1 billion, due mainly to an increase in liabilities for retirement benefits.
Total net assets decreased ¥10.4billion (6.7%) to ¥145.1 billion, due mainly to remeasurements for retirement benefits and a
decline in minority interests in payment for retirement by preferred securities.
Forecast for Fiscal Year Ending March 31, 2015 In fiscal 2015, ending March 31, 2015, the business environment overall is viewed as likely to remain on a moderate recovery trend
as a result of the continuation of monetary easing policies. However, considerable uncertainty in conditions is forecast to prevail. In
Japan, this will be because of such factors as the rise in raw materials prices and the slump in consumer spending following the
increase in the consumption tax, and, overseas, as a result of the slowing of economic growth in emerging countries.
In view of this outlook for the operating environment, the Toyobo Group will continue to strengthen its earnings base to cope
successfully with changes in the external environment. The Group aims to become “the category leader that continues to create new
value that contributes to society in the environment, life science, and high-function products fields.” The Group works to further
enhance its profitability by focusing its management resources on businesses that are profitable and have high growth potential, as
it aggressively expands its business activities in Japan and overseas and improving its business portfolio, such as increasing the
efficiency of its capital and strengthening its financial position.
Considering such factors, for fiscal 2015 the Toyobo Group is forecasting consolidated net sales of ¥365.0 billion (up ¥13.4 billion
year on year), operating income of ¥24.0 billion (up ¥3.0 billion) and net income of ¥11.0 billion (up ¥2.8 billion).
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Risk Factors The Toyobo Group is exposed to the following risks that may affect its operating results and financial status. The future matters specified in the
following are based on information that was available as of the end of the subject fiscal year as well as certain assumptions that serve as the basis
for its judgments.
(1) Worsening Political & Economic Situations The Toyobo Group produces and sells in Japan and overseas a wide range of products in the films and functional polymers, industrial materials, life
science and textile fields. Political turmoil or a serious economic recession in the countries in which our production bases are located or in major
markets could seriously influence, our operating results or financial status through the impact on our production and sales.
(2) Decline in Retail Prices The wide range of products sold by the Toyobo Group in Japan and overseas in the films and functional polymers, industrial materials, life science
and textile fields are in competition with the products of other companies. Price cuts by our competitors may cause a decline in our retail prices or a
decrease in our sales volume. In our medical business, our retail prices may drop due to lower official price standards. Our operating results or
financial status may be seriously influenced by such circumstances through a sales decrease.
(3) Business Downturn or Retreat by Major Customers Although the Toyobo Group sells a wide range of products in the films and functional polymers, industrial materials, life science and textile fields to
a variety of customers both in Japan and overseas, certain products are sold to specific significant customers. In the event that such customers face
a downturn in business, retreat from business, cut back inventories significantly, demand drastic rate reductions or request substantial production
adjustments, our operating results or financial status may be seriously influenced by such events through a sales decrease.
(4) Tariff Hikes and Import Regulations in Overseas Major Markets Because the Toyobo Group sells a wide range of products in the films and functional polymers, industrial materials, life science and textile fields in
Japan and overseas, tariff hikes or import regulations on quantity limits might be imposed under antidumping laws in major overseas markets that
could seriously affect our business and financial condition.
(5) Alteration of Credit The Toyobo Group has made provisions for bad debt losses based on past default ratios and strives to minimize its credit risk under its credit
management regulations by setting credit limits for each customer and other means. However, in the event of the bankruptcy of major customers
due to economic recession or other reason, our operating results or financial status could be seriously influenced by bad debt loss that substantially
exceeds the amount of provisions made.
(6) Product Defects To prevent product defects, the Toyobo Group produces its products in the films and functional polymers, industrial materials, life science and textile
fields in accordance with specific quality control standards under the control of the Global Environment and Safety Committee and Product Liability
Prevention/Quality Assurance Committee and is covered by product liability insurance. However, we cannot guarantee that all of our products are
free from all defects, that there will be no defective products in the future or that compensatory payment would be fully covered by the insurance. In
the occurrence of material product defects, our operating results or financial status could be seriously influenced by large liability payments or loss
of credit.
(7) Purchases of Raw Materials The Toyobo Group purchases raw materials from various suppliers in order to produce its wide range of products in the films and functional polymers,
industrial materials, life science and textile fields. Although major materials are provided by a number of suppliers in part due to risk management
considerations, there remains a risk that we may not be able to purchase a sufficient volume of raw materials should suppliers fail, withdraw from the
business, etc. Even if we can purchase such materials, purchase prices may rise suddenly. In either event, our operating results or financial status
could be seriously influenced by the cost increases or production cutbacks.
(8) Intellectual Property The Toyobo Group works to actively expand the scale of its businesses for highly functional products where we enjoy a strong competitive
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advantage, drawing on our core technologies of polymerization, modification, processing and biotechnology. For this reason, we endeavor to build
and protect technology and know-how differentiated from those of our competitors’ products in fibers and textiles, polymer and bio-medical fields.
However, there is a risk in certain areas that we may not be able to prevent the production and sale of similar products, the violation of a patent or
the use of confidential business information by a third party. Although we observe the intellectual property rights of other companies, we are not free
from the possibility that we might infringe the intellectual property rights of other companies as we develop our products and technology. In the event
that our intellectual property rights are infringed or we infringe the rights of other companies, our operating results or financial status could be
seriously influenced by a sales decrease or liability payments.
(9) Development of New Products and New Uses As part of the Toyobo Group’s commitment to being a specialty business conglomerate, our research and development investment targets high
functional products for which we have a strong competitive advantage, including products in the films and functional polymers, industrial materials,
life science and textile fields, drawing on our core technologies of polymerization, modification, processing and biotechnology. However, it is not
guaranteed that our investment will always lead to the successful development of new products or new uses for existing products. Our operating
results or financial status could be seriously influenced under such unsuccessful circumstances by a decline in our future growth and profitability.
(10) Public Regulations The Toyobo Group conducts production activities and other corporate activities in various locations in Japan and abroad and operates its business
under various public regulations on business licensing, tax, environment and chemical substance related issues, etc. If water restrictions or other
regulations related to the environment become tighter in areas where our major business sites are located, substances currently being used become
prohibited or regulations regarding usage levels are implemented, our operating results or financial status could be seriously influenced by
restrictions imposed on our production activities or other corporate activities or by being forced to make large capital investments, tax payments or
other expenditures in order to comply with the regulations.
(11) Litigation The Toyobo Group conducts production activities and other corporate activities in various domestic and overseas locations. In this process, there is
a possibility that lawsuits may be brought against us in connection with product liability, the environment, labor, intellectual property or other areas.
If a lawsuit is filed against the Toyobo Group, we intend to defend ourselves properly and establish the fact that the claims against us are meritless.
However, if we or Toyobo’s U.S. subsidiary, Toyobo U.S.A., INC, loses a suit, our business and financial conditions could be seriously affected by
the compensation claims of plaintiffs.
(12) Foreign Exchange Rate Fluctuation The Toyobo Group’s operations include the production and sale of products in foreign markets and require the use of foreign currency. Substantial
fluctuations in the foreign exchange rates could negatively affect operating results or financial status by causing a sales decrease, cost increase or
a reduction in price competitiveness after a conversion to the yen.
(13) Major Interest Rate FluctuationsThe Toyobo Group strives to reduce its interest-bearing debt and arrange for borrowings at fixed interest rates. However, if interest rates rise
substantially above current levels, consequences would include a corresponding rise in interest payable. These circumstances could have a
material effect on our operating results and financial status.
(14) Substantial declines in stock prices The Toyobo Group holds a significant volume of stocks that are traded on exchange markets. If the prices of these stocks decline by a large margin,
net unrealized holding gains on securities may decrease, and losses may be recorded when these stocks are sold. These circumstances could
have a material effect on our operating results and financial status.
(15) Substantial Decline of Land Prices The Toyobo Group owns a great deal of land, most of which has already been revaluated pursuant to the Land Revaluation Law. If land prices
decline substantially, our operating results or financial status could be seriously influenced by a loss in value or losses incurred when selling.
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(16) Severance and Retirement Benefit Obligations and Expenses The Toyobo Group calculates severance and retirement benefit obligations and expenses by using various standard rates of return on pension
assets and other indicators. If assumptions for pension actuarial calculations are altered, changes could result in the market value of pension
assets, interest rates could fluctuate, changes could be made in the retirement and pension systems or other circumstances could occur. Such
changes could result in increases in severance and retirement benefit obligations and/or increases in severance and pension expenses (the portion
of actuarial differences that are treated as expenses). These circumstances could have a material effect on the Group’s operating results and
financial status.
(17) Funding and Debt RatingsThe Toyobo Group’s borrowings include syndicated loans, and these loans are subject to financial covenants. If, as a result of deterioration in Group
performance or other factors, these covenants are violated, our obligations with respect to relevant loan repayments could be accelerated upon
request from the lending financial institutions, and the circumstances could have a material effect on our operating results and financial status. In
addition, if credit rating agencies lower our credit rating(s), this could have a major effect on our ability to raise funds as well as have other
implications.
(18) Deferred Income Tax AssetsThe Toyobo Group reports certain deferred income tax assets on its balance sheets, including losses carried forward for tax purposes and
temporary differences to be deducted from tax liabilities in future periods. Deferred income tax assets are reported after consideration for the
possibility of recovery based on forecasts of future taxable income. However, when it becomes necessary to reconsider the possibility of recovery
of deferred income tax assets because of changes in the outlook for future taxable income and/or when there are revisions in the taxation system,
including changes in the tax rates, and/or deferred income tax assets are exercised to reduce tax liabilities, these circumstances could have a
material effect on our operating results and financial status
(19) Accidents and Disasters
The Toyobo Group conducts production activities and other corporate activities at various domestic and overseas locations. We carry out strict
plant control and strive to prevent damage caused by accidents and disasters at these production facilities and business sites. However, if a
massive earthquake, wind and flood damage, snow damage, other natural disaster, incidence of infectious diseases such as pandemic flu occurs
at production facilities, business sites or the site of a business partner, our operating results or financial status may be seriously influenced as
production activities may be interrupted.
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Consolidated Financial HighlightsTOYOBO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013
Note 1. The U.S. dollar amounts in this report represent translations of yen for convenience only at the rate of ¥102.92 to U.S.$1.00.
2014 2013 2014Net sales ¥351,577 ¥339,009 $3,416,022Cost of sales 274,603 267,694 2,668,121Income before income taxes 13,871 12,774 134,775Net income 8,154 7,639 79,227Total assets 456,256 447,445 4,433,113Total net assets ¥145,115 ¥155,522 $1,409,979
Net income per share ¥9.18 ¥8.61 $0.089
Millions of yen Thousands of U.S.dollars (Note 1)
Yen U.S. dollars(Note 1)
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Financial Section CONSOLIDATED FIVE-YEAR SUMMARY TOYOBO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Fiscal years ended March 31, 2014, 2013, 2012, 2011 and 2010
Millions of yen, except per share information
2014 2013 2012 2011 2010
For the year:Net sales ¥351,577 ¥339,009 ¥349,505 ¥340,573 ¥318,773
Cost of sales 274,603 267,694 274,804 264,980 253,695
Selling, general and administrative expenses 55,968 54,234 56,396 54,703 53,609
Operating income 21,006 17,081 18,306 20,890 11,469
Other expenses 7,135 4,307 7,442 15,899 11,724
Income (loss) before income taxes and minority interests 13,871 12,774 10,863 4,991 (255)
Provision for income taxes 4,721 4,398 5,142 (89) (2,612)
Net income 8,154 7,639 4,587 4,155 2,094
Comprehensive income (Note 1) ¥12,988 ¥11,097 ¥9,065 ¥5,416 -
Net income per share (yen) ¥9.18 ¥8.61 ¥5.17 ¥5.49 ¥2.88
At the end of the year: Total current assets ¥184,630 ¥184,739 ¥177,736 ¥172,001 ¥157,329
Property, plant and equipment 209,620 202,273 199,789 203,751 210,251
Total assets 456,256 447,445 437,841 443,516 438,439
Total long-term liabilities 150,558 127,093 127,267 130,299 143,788
Total net assets ¥145,115 ¥155,522 ¥147,724 ¥149,773 ¥131,097
Note 1. Effective from the year ended March 31, 2011, the Toyobo Group adopted Accounting Standards Board of Japan (ASBJ) Statement No. 25,
“Accounting Standard for Presentation of Comprehensive Income,” June 30, 2010.
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Consolidated Balance Sheets TOYOBO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
March 31, 2014 and 2013
See accompanying Notes to Consolidated Financial Statements.
ASSETS 2014 2013 2014Current assets: Cash and cash equivalents (Note 3,11 and 18) ¥19,330 ¥26,600 $187,816 Notes and accounts receivable: Trade (Note 3) 76,826 74,598 746,463 Other 4,648 3,837 45,161 Allowance for doubtful receivables (367) (198) (3,566)
81,107 78,237 788,059 Inventories (Note 6) 75,388 71,009 732,491 Deferred income tax assets (Note 8) 4,946 6,291 48,057 Other current assets (Note 11) 3,859 2,602 37,495 Total current assets 184,630 184,739 1,793,918
Investments and other assets: Investment securities (Note 3 and 4) Unconsolidated subsidiaries and affiliates 6,926 10,478 67,295 Other 20,120 17,326 195,492 Loans 1,373 1,379 13,340 Deferred income tax assets (Note 8) 17,991 16,636 174,806 Asset for retirement benefits (Note 10) 10,255 - 99,640 Other 3,622 14,597 35,192 Allowance for doubtful accounts (1,310) (1,225) (12,728)
58,977 59,191 573,037
Property, plant and equipment (Note 7 and 11): Land (Note 16) 106,736 106,215 1,037,077 Building and structures 135,920 132,225 1,320,637 Machinery and equipment 346,489 336,468 3,366,586 Tools, furniture and fixtures 23,266 22,345 226,059 Lease assets 8,867 8,710 86,154 Construction in progress 3,605 9,303 35,027
624,883 615,266 6,071,541 Less accumulated depreciation 415,263 412,993 4,034,813
209,620 202,273 2,036,728
Other assets: Intangible assets 1,543 733 14,992 Goodwill 1,271 283 12,349 Lease assets 215 226 2,089
3,029 1,242 29,431 Total assets (Note 15) ¥456,256 ¥447,445 $4,433,113
Thousands of U.S.dollars (Note 1)
Millions of yen
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See accompanying Notes to Consolidated Financial Statements.
LIABILITIES AND NET ASSETS 2014 2013 2014Current liabilities: Short-term borrowing (Note 3 and 9) ¥45,903 ¥51,211 $446,007 Long-term debt due within one year (Note 3, 9 and 11) 31,180 31,815 302,954 Notes and accounts payable: Trade (Note 3 and 11) 50,106 48,452 486,844 Other 13,482 13,876 130,995
63,588 62,328 617,839 Employees' savings deposits 5,304 5,304 51,535 Customers' deposits (Note 11) 6,973 7,184 67,752 Accrued employees' bonuses 4,285 4,028 41,634 Accrued income taxes 1,712 1,726 16,634 Other current liabilities 1,637 1,235 15,906 Total current liabilities 160,582 164,831 1,560,260
Long-term liabilities: Long-term debt due after one year (Note 3, 9 and 11) 90,831 72,278 882,540 Deferred income tax liabilities (Note 8) 3,241 2,721 31,490 Deferred income tax liabilities on land revaluation (Note 8 and 16) 24,691 24,678 239,905 Defined benefit liability 25,227 - 245,113 Employees' retirement benefits (Note 10) - 17,576 - Directors' and statutory auditors' retirement benefits 344 379 3,342 Negative goodwill 419 1,258 4,071 Provision for environmental measures 1,577 1,771 15,323 Lease obligations 889 2,553 8,638 Other long-term liabilities 3,339 3,879 32,443 Total long-term debt 150,558 127,093 1,462,864
Contingent liabilities (Note 13)
Net assets: Common stock Authorized-2,000,000,000 shares Issued-890,487,922 shares in 2014 and 2013 51,730 51,730 502,623 Capital surplus 32,239 32,239 313,243 Retained earnings (deficit) 26,424 21,568 256,743 Less treasury stock, at cost (2,623 thousand shares in 2014 and 2,039 thousand shares in 2013) (378) (295) (3,673)
Shareholders' equity 110,015 105,242 1,068,937 Valuation difference on available-for-sale securities 3,954 2,815 38,418 Deferred losses on hedges (2) (72) (19) Land revaluation (Note 16) 41,409 41,422 402,342 Foreign currency translation adjustments (8,864) (11,384) (86,125) Accumulated remeasurements of defined benefit plans (4,202) - (40,828) Total accumulated other comprehensive income 32,295 32,781 313,787
Minority interests in consolidated subsidiaries 2,805 17,498 27,254 Total net assets 145,115 155,522 1,409,979 Total liabilities and net assets ¥456,256 ¥447,445 $4,433,113
Net assets per share ¥160.28 ¥155.35 $1,557
Thousands of U.S.dollars (Note 1)
Yen U.S. dollars
(Note 1)
Millions of yen
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Consolidated Statements of Income TOYOBO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013
See accompanying Notes to Consolidated Financial Statements.
2014 2013 2014 Net sales (Note 15) ¥351,577 ¥339,009 $3,416,022 Cost of sales 274,603 267,694 2,668,121 Gross profit 76,974 71,315 747,901 Selling, general and administrative expenses 55,968 54,234 543,801 Operating income (Note 15) 21,006 17,081 204,100
Other income (expenses) Interest income 169 140 1,642 Dividend income 577 859 5,606 Interest expense (1,583) (1,894) (15,381) Gain on sale of securities - 2,426 - Loss on sale of securities (553) - (5,373)
Foreign exchange gains 980 952 9,522 Loss on disposal of property, plant and equipment (1,625) (1,583) (15,789) Impairment loss (Note 7, 15 and 17) - (1,668) - Equity in income of unconsolidated subsidiaries and affiliates 188 657 1,827 Salaries paid to dispatched employees (890) (700) (8,647) Retirement benefits for employees for prior periods (Note 10) (1,570) (1,570) (15,255) Losses on lawsuits (1,592) (1,335) (15,468) Amortization of negative goodwill 838 946 8,142 Gain on negative goodwill 595 - 5,781 Special loss on restructuring of business (1,138) - (11,057) Other, net (1,531) (1,537) (14,876)
(7,135) (4,307) (69,326) Income before income taxes and minority interests 13,871 12,774 134,775 Provision for income taxes (Note 8) Current 2,715 2,387 26,380 Deferred 2,006 2,011 19,491
4,721 4,398 45,871 Income before minority interests 9,150 8,376 88,904 Minority interests in income of consolidated subsidiaries (996) (737) (9,677) Net income ¥8,154 ¥7,639 $79,227
Net income per share Basic (Note 2) ¥9.18 ¥8.61 $0.089 Cash dividends applicable to the year ¥3.50 ¥3.50 $0.034
Thousands of U.S.dollars (Note 1)
Yen U.S. dollars
(Note 1)
Millions of yen
14
Consolidated Statements of Comprehensive Income TOYOBO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013
2014 2013 2014Income before minority interests ¥9,150 ¥8,377 $88,904Other comprehensive income Valuation difference on available-for-sale securities 1,145 1,719 11,125 Deferred gains and losses on hedges 70 45 680 Land revaluation (13) - (126) Foreign currency translation adjustments 2,529 852 24,572
Share of other comprehensive income of associates accounted for using equity method 107 105 1,040 Total other comprehensive income 3,838 2,721 37,291 Comprehensive income 12,988 11,098 126,195 Comprehensive income attributable to Owners of the parent 11,870 10,279 115,332 Minority interests ¥1,118 ¥819 $10,863
Millions of yen Thousands of U.S.dollars (Note 1)
15
Consolidated Statements of Changes in Net Assets TOYOBO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013
See accompanying Notes to Consolidated Financial Statements.
2014 2013 2014Shareholders' equity Capital stock Balance at the beginning of current period ¥51,730 ¥51,730 $502,623 Changes in items during the period - - - Total changes in items during the period - - - Balance at the end of current period 51,730 51,730 502,623 Capital surplus Balance at the beginning of current period 32,239 32,227 313,243 Changes in items during the period Disposal of treasury stock - 12 - Total changes in items during the period - 12 - Balance at the end of current period 32,239 32,239 313,243 Retained earnings Balance at the beginning of current period 21,568 17,042 209,561 Changes in items during the period Dividends from surplus (3,110) (3,110) (30,218) Net income 8,154 7,639 79,227 Reversal of land revaluation - (10) - Change in scope of consolidation (188) 7 (1,827) Total changes in items during the period 4,856 4,526 47,182 Balance at the end of current period 26,424 21,568 256,743 Treasury stock Balance at the beginning of current period (295) (559) (2,866) Changes in items during the period Purchase of treasury stock (116) (3) (1,127) Disposal of treasury stock 5 267 49 Change in scope of consolidation 28 - 272 Total changes in items during the period (83) 264 (806)
Balance at the end of current period (378) (295) (3,673) Total shareholders' equity Balance at the beginning of current period 105,242 100,440 1,022,561 Changes in items during the period Dividends from surplus (3,110) (3,110) (30,218) Net income 8,154 7,639 79,227 Reversal of land revaluation - (10) - Change in scope of consolidation (160) 7 (1,555) Purchase of treasury stock (116) (3) (1,127) Disposal of treasury stock 5 279 49 Total changes in items during the period 4,773 4,802 46,376 Balance at the end of current period ¥110,015 ¥105,242 $1,068,937
Millions of yen Thousands of U.S.dollars (Note 1)
16
See accompanying Notes to Consolidated Financial Statements.
2014 2013 2014Accumulated other comprehensive income Valuation difference on available-for-sale securities Balance at the beginning of current period ¥2,815 ¥1,038 $27,351 Changes in items during the period Net changes in items other than shareholders' equity 1,139 1,777 11,067 Total changes in items during the period 1,139 1,777 11,067 Balance at the end of current period 3,954 2,815 38,418 Deferred gains and losses on hedges Balance at the beginning of current period (72) (117) (700) Changes in items during the period Net changes in items other than shareholders' equity 70 45 680 Total changes in items during the period 70 45 680 Balance at the end of current period (2) (72) (19) Land revaluation Balance at the beginning of current period 41,422 41,412 402,468 Changes in items during the period Net changes in items other than shareholders' equity (13) 10 (126) Total changes in items during the period (13) 10 (126) Balance at the end of current period 41,409 41,422 402,342 Foreign currency translation adjustments Balance at the beginning of current period (11,384) (12,201) (110,610) Changes in items during the period Net changes in items other than shareholders' equity 2,520 817 24,485 Total changes in items during the period 2,520 817 24,485 Balance at the end of current period (8,864) (11,384) (86,125) Remeasurements of defined benefit plans Balance at the beginning of current period - - - Changes in items during the period Net changes in items other than shareholders' equity (4,202) - (40,828) Total changes in items during the period (4,202) - (40,828) Balance at the end of current period (4,202) - (40,828) Total accumulated other comprehensive income Balance at the beginning of current period 32,782 30,132 318,519 Changes in items during the period Net changes in items other than shareholders' equity (487) 2,650 (4,732) Total changes in items during the period (487) 2,650 (4,732) Balance at the end of current period 32,295 32,782 313,787 Minority interests Balance at the beginning of current period 17,498 17,153 170,016 Changes in items during the period Net changes in items other than shareholders' equity (14,693) 345 (142,761) Total changes in items during the period (14,693) 345 (142,761) Balance at the end of current period 2,805 17,498 27,254 Total net assets Balance at the beginning of current period 155,522 147,724 1,511,096 Changes in items during the period Dividends from surplus (3,110) (3,110) (30,218) Net income 8,154 7,639 79,227 Reversal of land revaluation - (10) - Change in scope of consolidation (160) 7 (1,555) Purchase of treasury stock (116) (3) (1,127) Disposal of treasury stock 5 280 49 Net changes in items other than shareholders' equity (15,180) 2,995 (147,493) Total changes in items during the period (10,407) 7,798 (101,117) Balance at the end of current period ¥145,115 ¥155,522 $1,409,979
Millions of yen Thousands of U.S.dollars (Note 1)
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Consolidated Statements of Cash Flows TOYOBO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013
See accompanying Notes to Consolidated Financial Statements.
2014 2013 2014Cash flows provided by operating activities: Income before income taxes and minority interests ¥13,871 ¥12,774 $134,775 Depreciation and amortization 14,039 13,246 136,407 Amortization of negative goodwill (1,433) (946) (13,923) Allowance for doubtful receivables, net 48 (187) 466 Retirement benefits, net - 819 - Increase (decrease) in net defined benefit liability 908 - 8,822 Interest and dividend income (747) (999) (7,258) Interest expense 1,583 1,894 15,381 Equity in losses of unconsolidated subsidiaries and affiliates (188) (657) (1,827) Impairment loss - 1,668 - Loss on sale and disposal of property, plant and equipment, net 1,626 1,432 15,799 Write-down and gain on sale of securities 528 (2,200) 5,130 Special loss on restructuring of businesses 1,138 - 11,057 Losses related to lawsuits 1,592 1,335 15,468 Decrease (increase) in trade notes and accounts receivable (100) 1,710 (972) Decrease (increase) in inventories (2,133) 6,203 (20,725) Increase (decrease) in trade notes and accounts payable 171 (272) 1,661 Increase in prepaid pension costs - (311) - Increase (decrease) in net defined benefit asset (543) - (5,276) Other, net (1,925) (2,561) (18,704) Total 28,435 32,948 276,283
Payments related to lawsuits (1,632) (1,430) (15,857) Income taxes paid (2,876) (1,163) (27,944) Other, net - - - Net cash flows provided by (used in) operating activities 23,927 30,355 232,482 Cash flows provided by (used in) investing activities: Purchase of property, plant and equipment and intangibles (20,346) (16,475) (197,688) Proceeds from disposal of property, plant and equipment and intangibles 177 622 1,720 Purchase of investment securities (35) (33) (340) Proceeds from sale of investment securities 1,417 3,903 13,768 Payments for investments in capital (1,016) (403) (9,872) Purchase of shares of subsidiaries resulting in change in scope of consolidation (3,243) - (31,510) Proceeds from demerger 739 - 7,180 Purchase of securities of consolidated subsidiaries (107) (1,730) (1,040) Proceeds from sale of securities of consolidated subsidiaries 12 1,630 117 Interest and dividend income excluding from unconsolidated subsidiaries and aff iliates 747 963 7,258 Dividend income from equity method affiliates 12 60 117 Other, net (575) 169 (5,587) Net cash flows provided by (used in) investing activities (22,218) (11,294) (215,876)Cash flows provided by (used in) financing activities: Cash dividends (3,110) (3,096) (30,218) Cash dividends to minority interests (666) (600) (6,471) Decrease (increase) in short-term bank loans (5,820) (637) (56,549) Proceeds from long-term debt 50,460 20,285 490,284 Repayment of long-term debt (22,969) (29,280) (223,173) Payment for retirement by preferred securities (15,330) - (148,951) Proceeds from issuance of bonds - 15,000 - Payment of bonds (10,000) - (97,163) Payment of interest (1,801) (1,897) (17,499) Payment for purchase of treasury stock (8) (3) (78) Proceeds from sale of treasury stock 5 287 49 Repayments of finance lease obligations (1,600) (2,694) (15,546) Net cash flows provided by (used in) financing activities: (10,839) (2,635) (105,315)Adjustments for foreign currency translation 697 226 6,772 Net increase (decrease) in cash and cash equivalents (8,433) 16,652 (81,937)Cash and cash equivalents at beginning of year 26,467 9,481 257,161 Increase resulting from changes in consolidated subsidiaries 1,103 334 10,717 Increase in cash and cash equivalents resulting from merger w ith unconsolidated subsidiaries 40 - 389 Cash and cash equivalents at end of year (Note 18) ¥19,177 ¥26,467 $186,329
Millions of yen Thousands of U.S.dollars (Note 1)
18
Notes to Consolidated Financial Statements TOYOBO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
1. BASIS OF PRESENTING FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Toyobo Co., Ltd. (the "Company") and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards.
Prior to the year ended March 31, 2009, the accounts of consolidated overseas subsidiaries were based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective countries of domicile. The accounts of major consolidated overseas subsidiaries for the years ended March 31, 2013 and 2014 were prepared in accordance with either International Financial Reporting Standards or U.S. generally accepted accounting principles for consolidation purposes, with adjustments for the specified five items as applicable in compliance with ASBJ Practical Solution No. 18, “Tentative Treatment of Accounting for Foreign Subsidiaries in Preparing Consolidated Financial Statements.” If other GAAP are used in preparing other foreign subsidiaries financial statements for consolidation purposes, appropriate modifications are also made. The accompanying consolidated financial statements have been restructured and translated into English, with some expanded descriptions, from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. Some supplementary information included in the corporate Japanese language consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements. Certain reclassifications have been made in the previous consolidated financial statements to conform to the current presentation.
Translations of the Japanese yen amounts into U.S. dollar amounts were included solely for the convenience of readers outside Japan, using the prevailing exchange rate at March 31, 2014, which was ¥102.92 to U.S. $1.00. These translations should not be construed as representations that the Japanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or any other rate of exchange.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its 57 significant, substantially controlled subsidiaries.
Investments in 9 affiliates over which the Company has significant influence are accounted for using the equity method. Intercompany transactions
and accounts have been eliminated upon consolidation. Any significant difference between the cost of an investment in a consolidated subsidiary
and the equity in the net assets at the date of acquisition is amortized over five years. In the elimination of investments in subsidiaries, the assets
and liabilities of the subsidiaries, including the portion attributable to minority stockholders, are evaluated using the fair value at the time the
Company acquired control of the respective subsidiary.
For the year ended March 31, 2014, the accounts of 19 consolidated subsidiaries were included based on a fiscal year that ended on December 31
and 1 on a fiscal year that ended January 31. Except for one such subsidiary, TC Preferred Capital Limited, these subsidiaries did not prepare for
consolidation purposes financial statements that corresponded with the fiscal year of the Company. Although the fiscal year-end of TC Preferred
Capital Limited is January 31, the subsidiary provided financial statements based on a provisional statement of accounts as of March 31, 2014 to
facilitate the preparation of the consolidated financial statements of the Company. For the other consolidated subsidiaries with a fiscal year-end
different from that of the Company, if significant transactions occurred between their fiscal year-end and that of the Company, necessary
adjustments were made to reflect the transactions in the consolidated financial statements.
Securities
Available-for-sale securities with available fair market values are stated at fair market value. Unrealized gains and losses on these securities are
reported, net of applicable income taxes, as a separate component of net assets. Realized gains and losses on the sale of such securities are
calculated using moving average cost. Other securities with no available fair market value are stated at moving average cost.
Inventories
Inventories are principally stated at the lower of weighted average cost or net realizable value at the fiscal year-end.
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Property, plant and equipment
The Company and its consolidated subsidiaries use the straight-line method for the depreciation of property, plant and equipment.
Lease assets
Lease assets under finance lease transactions that transfer ownership of the lease assets are amortized based on the same depreciation method
applied to tangible fixed assets.
Lease assets under finance lease transactions that do not transfer ownership of the lease assets are amortized using the straight-line method over
the lease term, assuming that the useful life coincides with the lease term and the residual value is zero. Finance lease transactions that do not
transfer ownership are accounted for as operating leases if the inception of the lease was on or before March 31, 2008
Intangible assets
Other intangible assets, including software, are amortized using the straight-line method over the estimated useful life of five years.
Bond issuance costs
Bond issuance costs are recorded at total cost when expended.
Research and development expenses
Expenses related to research and development are charged to income as incurred. Research and development expenses were ¥10,474 million
($101,768 thousand) and ¥9,966 million for the years ended March 31, 2014 and 2013, respectively.
Allowance for doubtful receivables
With respect to normal trade accounts receivable, an allowance for doubtful receivables is stated based on the actual rate of historical bad debts.
For certain other doubtful receivables, the uncollectible amount is individually estimated.
Retirement benefits accounting
1. Attribution method for estimated amount of retirement benefits
The straight-line method is used for attributing estimated amount of retirement benefits to the current period in calculating projected benefit
obligations.
2. Amortization method for differences due to changes in accounting standards, prior service costs and actuarial differences
Net transition obligation is amortized over 15 years. However, amortization is accelerated in cases in which a large number of eligible employees
who were employed at the time of the change resigned.
Prior service costs are amortized using the straight-line method over a certain period within the average remaining years of service of the eligible
employees (ten years) at the time of recognition.
Actuarial differences are amortized using the straight-line method over a certain period within the average remaining years of service of the eligible
employees (ten years) at the time of recognition and allocated proportionately from the year following the respective year of recognition.
Retirement benefits for directors, operating officers and corporate auditors
Some consolidated subsidiaries accrue estimated amounts of retirement benefits for directors, operating officers and corporate auditors equal to
management’s estimate of the amounts that would be payable at the balance sheet date if they retired at that date. Amounts payable to directors
and corporate auditors upon retirement are subject to the approval of the stockholders of the subsidiaries.
Provision for environmental measures
In order to prepare for expenditures related to environmental measures such as the removal of hazardous substances required by laws and
regulations, the Company and some consolidated subsidiaries reserve the amount expected to be incurred in future periods.
Translation of foreign currencies
Accounts denominated in foreign currencies, namely cash, receivables and payables are translated at year-end exchange rates. The assets and
20
liabilities in the financial statements of the foreign consolidated subsidiaries are translated into Japanese yen at year-end exchange rates. Income
and expenses are translated at the average exchange rates prevailing during the year. Resulting translation adjustments are reflected in the
consolidated financial statements as “Foreign currency translation adjustments” and in minority interests.
Derivatives and hedge accounting
Derivative financial instruments are stated at fair value, and changes in the fair value are recognized as gain or loss unless the derivative financial
instrument is used for hedging purposes. If derivative financial instruments are used as hedges and meet certain hedging criteria, the Company and
its consolidated subsidiaries defer recognition of gain or loss resulting from a change in the fair value of the derivative financial instrument until the
related loss or gain on the hedged item is recognized. However, when forward foreign exchange contracts are used as hedges and meet certain
hedging criteria, the foreign exchange forward contracts and hedged items are accounted for in the following manner:
1. If a foreign exchange forward contract is executed to hedge an existing foreign currency receivable or payable,
(a) the difference, if any, between the Japanese yen amount of the hedged foreign currency receivable or payable (translated using the spot rate at the inception date of the contract) and the book value of the receivable or payable is recognized in the statement of income in the period which includes the inception date, and
(b) the discount or premium on the contract (the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.
2. If a foreign exchange forward contract is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be
recorded using the contracted forward rate, and no gain or loss on the forward foreign exchange contract will be recognized.
Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received under the interest
rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed.
The following lists the hedging derivative financial instruments used by the Company and its consolidated subsidiaries and the corresponding items
hedged:
Hedging instruments: Hedged items:
Foreign exchange forward contracts Future transactions denominated in foreign currencies
Foreign currency receivables and payables
Interest rate swap contracts Interest expense on borrowings
The Company and certain consolidated subsidiaries evaluate hedge effectiveness semiannually by comparing the cumulative changes in cash
flows or the changes in fair value of the hedged items and the corresponding changes in the hedging derivative instruments.
Amortization of goodwill
Goodwill is amortized using the straight-line method over five years.
Impairment of fixed assets
In accordance with the “Accounting Standards for Impairment of Fixed Assets ” issued by the Business Accounting Council in Japan, fixed assets
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability is measured by comparing the carrying amount of an asset or group of assets to the estimated undiscounted future cash flows
expected to be generated by the asset or group of assets. If the carrying amount exceeds the estimated future cash flows, an impairment charge is
recognized for the amount by which the carrying amount exceeds the greater of net realizable value or value in use.
Income taxes
The Company and its consolidated subsidiaries provide for income taxes at the amounts currently payable and for deferred income taxes pertaining
to loss carryforwards, temporary differences between financial and tax reporting and temporary differences in respect to the elimination of
unrealized intercompany profits and other adjustments for consolidation purposes. The asset-liability method is used to recognize deferred income
tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
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Net income per share
Computations of net income per share of common stock are based on the weighted average number of shares outstanding during each period.
Diluted net income per share is not disclosed because the Company had no dilutive shares outstanding.
Reconciliation of the differences between basic and diluted net income per share for the years ended March 31, 2014 and 2013 was as follows.
Millions of yen Thousands of shares Yen U.S. dollars
Net income Weighted average number
of shares Net income per share
For the year ended March 31, 2014:
Basic
Net income available to common stockholders ¥8,154 888,545 ¥9.18 $0.089
Millions of yen Thousands of shares Yen
Net income Weighted average number
of shares Net income per share
For the year ended March 31, 2013:
Basic
Net income available to common stockholders ¥7,639 886,957 ¥8.61
Changes in accounting policy
The Company adopted “Accounting Standard for Retirement Benefits” (the Accounting Standards Board of Japan (“ASBJ”) Statement No. 26, May
17, 2012) and the “Guidance on the Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012), except for the treatment
allowed by the main clause of Section 35 of the standard and main clause of Section 67 of the guidance, from the end of the year ended March 31,
2014. Consequently, the difference between projected benefit obligations and assets was recorded as net defined benefit asset and net defined
benefit liability, and net transition obligation, unrecognized prior service costs and unrecognized actuarial differences were recorded in net defined
benefit liability. With regards to the application of the retirement benefits accounting standards and related guidance, the effect resulting from this
change was included in accumulated remeasurements of defined benefit plans in accumulated other comprehensive income at March 31, 2014 in
accordance with the transitional treatment stipulated in section 37 of the standard. As a result, defined benefit assets of ¥10,255 million ($99,640
thousand) and defined benefit liability of ¥25,227 million ($245,113 thousand) were recorded at March 31, 2014. Also, accumulated other
comprehensive income decreased by ¥4,203 million ($40,838 thousand). The effect on net assets per share is disclosed in “Net income per share”.
Accounting standards issued but not yet effective
Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012) and the Guidance on Account Standard for Retirement
Benefits (ASBJ Guidance No. 25, May 17, 2012) have been issued, but the Company has not yet applied such standards and related guidance as
of March 31, 2014. Summaries of the standards are as follows:
1. Overview
The accounting treatment for unrecognized prior service costs and unrecognized actuarial differences, the method of calculating projected benefit
obligation and service costs and the enhancement of disclosure and others have been revised.
2. Effective date
The Company will adopt the revised method of calculating projected benefit obligation and service costs from the beginning of the year ending
March 31, 2015. This accounting standard and guidance are not applied to prior consolidated financial statements since the transitional treatment
is prescribed.
3. Impact of applying accounting standard
At the time the consolidated financial statements were prepared, the Company was still assessing the impact of adopting this standard and the
related guidance.
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Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September 13, 2013), the Guidance on Accounting Standard for
Business Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10, September 13, 2013), and Accounting
Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, September 13, 2013)
1.Overview
Major changes are as follows:
- The difference arising from the change in the parent's ownership interest in its subsidiary shall be accounted for as capital surplus as long as the
parent retains control over its subsidiary. “Minority interest” under the current accounting standard will be changed to “noncontrolling interest” under
the revised accounting standard.
-Acquisition related costs for business combinations shall be accounted for as expenses in the years in which the costs are incurred.
-If the provisional accounting treatment for a business combination is completed in the year following the year in which the business combination
occurs, when the acquirer presents the consolidated financial statements for the year in which the business combination occurs along with the
consolidated financial statements for the next year following the year of the business combination, the allocation of acquisition costs resulting from
completion of the provisional accounting treatment shall be adjusted in the year in which the business combination occurs.
- “Income before minority interest” under the current accounting standard will be changed to “net income” under the revised accounting standard. As
a result, “net income” under the current accounting standard will be changed to “net income attributable to owners of the parent” under the revised
accounting standard.
2. Effective date
The Company expects to apply these accounting standards and related guidance from the beginning of the year beginning on or after April 1, 2015.
With regards to the accounting treatment for provisional accounting procedures, the Company expects to apply for business combinations which
will occur on or after April 1, 2015.
3. Effect of applying these accounting standards and related guidance
At the time the consolidated financial statements were prepared, the effect on the consolidated financial statements was unknown.
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3. FINANCIAL INSTRUMENTS
1. Overall status of financial instruments
(1) Policy for the use of financial instruments
In the Toyobo Group, cash is managed only in the form of short-term instruments after ensuring the collectibility of the principal and
sufficient liquidity. Funds are raised through both direct access to capital markets such as through the issuance of bonds and through
indirect financing in the form of borrowings from banks. As a policy, the Company uses derivative financial instruments only for the purpose
of hedging the risk of exchange rate and interest rate fluctuation in the normal course of the Company’s business and does not engage in
highly leveraged transactions or speculative transactions using these instruments.
(2) Type and risk of financial instruments and related risk management system
Notes and accounts receivable-trade arising in the normal course of the Company’s business are exposed to the credit risk of customers.
This risk is managed through the monitoring of due dates and balances by customer and by examining the credit standing of major
customers in each fiscal period in accordance with the credit management rules of the Company. Most notes and accounts payable-trade
arising in the normal course of the Company’s business are due in less than one year.
Trade receivables and payables denominated in foreign currencies are exposed to the risk of exchange rate fluctuation. In principle, they
are hedged for the net position risk remaining after cross currency netting by using derivative instruments such as foreign exchange
forward contracts.
Investment securities consist mainly of stocks of our customers and suppliers held in connection with our ongoing business relationships
and are exposed to the risk of market price fluctuations. The Company and its consolidated subsidiaries regularly monitor the current
market price of these stocks and the financial conditions of the issuers, i.e., our customers and suppliers, and review the status of our stock
holdings on an ongoing basis, taking into consideration our relationship with these customers and suppliers.
Short-term borrowing is used mainly to finance operating transactions. Long-term debt and corporate bonds are used mainly to finance
capital improvements, other investments and lending. For debt exposed to the risk of interest rate fluctuations, derivatives (mainly interest
rate swaps) are used as hedging instruments on an individual contract basis to avoid the risk of changes in interest payments. The hedging
instruments, hedged items, hedging policy and the method used to assess hedge effectiveness in relation to hedge accounting are
described in the Note 2, “Significant Accounting Policies.”
In accordance with the internal rules of the Toyobo Group, derivative transactions are executed and managed under a system that
segregates functions and promotes mutual checking, including (1) the establishment of risk management policies by the director in charge
of finance, (2) the execution of transactions and management of positions by the Finance Department and (3) the valuation of and
accounting for financial instruments by the Accounting and Control Department. Overall derivative positions across the Toyobo Group are
managed by the Finance Department and reported to the director in charge of finance. The Company and its consolidated subsidiaries
deal with highly rated financial institutions as counterparties to these transactions and no counterparty default is expected.
Trade payables and interest bearing debt such as borrowings create exposure to liquidity risk. The liquidity risk arising from these liabilities
is managed at the individual company level based on cash flow projections prepared by each group company. In addition, the liquidity risk
of the domestic subsidiaries is managed centrally by the Group’s finance subsidiary using a cash management system.
(3) Supplementary explanation on disclosure about fair value of financial instruments
In addition to the fair values determined by market price, the fair value of financial instruments includes a reasonably determined value if
no market price is available. Certain assumptions used for such determinations are subject to change. Accordingly, the results of such
valuations could change if different assumptions were used. Furthermore, the contractual and other amounts of derivative transactions
included in Note 5, “Derivatives and hedge accounting,” do not reflect the market risk associated with these derivative transactions
themselves.
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2. Disclosure about fair value, etc. of financial instruments
The following table summarizes the carrying amounts and the estimated fair values of financial instruments as of March 31, 2014 and 2013.
Note that the following table does not include unlisted equity securities and certain other securities whose fair value is extremely difficult to
estimate.
Millions of yen Thousands of U.S. dollars
Book value Fair value Book value Fair value
For the year ended March 31, 2014:
(1) Cash and cash equivalents ¥19,330 ¥19,330 $187,816 $187,816
(2) Notes and accounts receivable - trade 76,826 76,826 746,463 746,463
(3) Investment securities
Held-to-maturity investments 25 26 243 253
Available-for-sale-securities 17,834 17,834 173,280 173,280
Total assets ¥114,016 ¥114,017 $1,107,812 $1,107,822
(1) Notes and accounts payable - trade ¥50,106 ¥50,106 $486,844 $486,844
(2) Short-term borrowing 45,903 45,903 446,007 446,007
Long-term debt
(3) Corporate bonds 20,000 20,191 194,326 196,182
(4) Long-term loans 102,011 102,185 991,168 992,859
Total liabilities ¥218,020 ¥218,385 $2,118,344 $2,121,891
Derivatives (*) (¥38) (¥38) ($369) ($369)
(*) Derivative assets and liabilities are presented on a net basis, and an amount enclosed in parentheses ( ) indicates a net liability position.
Millions of yen
Book value Fair value
For the year ended March 31, 2013:
(1) Cash and cash equivalents ¥26,600 ¥26,600
(2) Notes and accounts receivable - trade 74,598 74,598
(3) Investment securities
Held-to-maturity investments 31 33
Available-for-sale-securities 16,124 16,124
Total assets ¥117,353 ¥117,355
(1) Notes and accounts payable - trade ¥48,452 ¥48,452
(2) Short-term borrowing 51,211 51,211
Long-term debt
(3) Corporate bonds 30,000 30,255
(4) Long-term loans 74,094 74,624
Total liabilities ¥203,757 ¥204,542
Derivatives (*) (¥213) (¥213)
(*) Derivative assets and liabilities are presented on a net basis, and an amount enclosed in parentheses ( ) indicates a net liability position.
(Note 1) Methods used to determine the fair value of financial instruments and matters concerning marketable securities and derivatives
Assets
(1) Cash and cash equivalents and (2) Notes and accounts receivable-trade
As these items are settled within a short-term period, their fair value is nearly equal to the carrying amount. Therefore, for these items,
the carrying amount is reported as the fair value.
25
(3) Investment securities
The fair value of held-to-maturity securities is calculated as the present value of expected receipts from redemption discounted at an
interest rate applicable to safe investments. The fair value of available-for-sale securities is determined based on the price quoted on
the exchange (for stocks) or the published net asset value per unit (for investment trusts). For investments in investment partnerships
that are deemed to be securities, the proportional equity share in the value of the partnership assets is reported as the fair value. See
Note 4, ”Securities,” section for notes on securities categorized by the purpose for which they are held.
Liabilities
(1) Notes and accounts receivable - trade and (2) Short-term borrowing
As these items are settled within a short-term period, their fair value is nearly equal to the carrying amount. Therefore, for these items,
the carrying amount is reported as the fair value.
(3) Corporate bonds
The fair value of corporate bonds is based on the market price.
(4) Long-term loans
The fair value of long-term loans is determined by discounting the sum of the principal and interest payments at an interest rate that is
estimated to be applicable to newly arranged debts of similar quality. For variable-rate long-term loans, the carrying amount is
reported as fair value as it is considered to be a reasonable approximation of fair value because such loans reflect the market interest
rates in a short-term period and there has been no significant change in the creditworthiness of the Company. However, the fair value
of certain variable-rate long-term loans that qualify for the special treatment of interest rate swaps is determined by discounting the
sum of the principal and interest payments net of any cash flows from the interest rate swap at an interest rate that is reasonably
estimated to be applicable to similar fixed rate debt.
Derivative transactions
Refer to the Note 5, “Derivatives and hedge accounting.”
(Note 2) Financial instruments whose fair value is extremely difficult to estimate
Millions of yen
Thousands of
U.S.dollars
2014 2013 2014
Non-listed equity securities ¥1,116 ¥1,155 $10,843
For the financial instruments shown in the above table, quoted market price was not available. Therefore, the fair value was
considered to be extremely difficult to estimate and was not included in “Investment securities” in the above table summarizing the
carrying amounts and estimated fair values of financial instruments.
(Note 3) Stocks of subsidiaries and affiliates are also not included in “Investment securities” in the above table summarizing the carrying
amounts and estimated fair values of financial instruments. For stocks of listed subsidiaries and affiliates, the carrying amount was ¥2,268
million ($22,037 thousand) and ¥4,135 million for the years ended March 31, 2014 and 2013, respectively, and the fair value was ¥710 million
($6,899 thousand) and ¥2,114 million for the years ended March 31, 2014 and 2013, respectively, with the difference being a negative ¥1,558
million ($15,138 thousand) and ¥2,021 million for the years ended March 31, 2014 and 2013, respectively. The carrying amount of stocks of
unlisted subsidiaries and affiliates was stated at ¥4,072 million ($39,565 thousand) and ¥5,497 million for the years ended March 31, 2014 and
2013, respectively.
26
4. SECURITIES
The following tables summarize book values and fair values of held-to-maturity investments with available fair values as of March 31, 2014 and
2013:
Held-to-maturity investments
Millions of yen
2014 2013
Book value Fair value Difference Book value Fair value Difference
Held-to-maturity investments with fair value exceeding book value:
Government bonds - - - - - -Corporate bonds ¥25 ¥26 ¥1 ¥31 ¥33 ¥2Other - - - - - -
¥25 ¥26 ¥1 ¥31 ¥33 ¥2 Total
Held-to-maturity investments with fair value not exceeding book value:
Government bonds - - - - - -Corporate bonds - - - - - -Other - - - - - -
Total - - - - - -
Thousands of U.S. dollars
2014
Book value Fair value Difference
Held-to-maturity investments with fair value exceeding book value:
Government bonds - - -Corporate bonds $243 $253 $10 Other - - -
Total $243 $253 $10
Held-to-maturity investments with fair value not exceeding book value:
Government bonds - - -Corporate bonds - - -Other - - -
Total - - -
27
The following tables summarize acquisition cost and book value (fair value) of securities with available fair values as of March 31, 2014 and 2013:
Available-for-sale securities
Millions of yen
2014 2013
Acquisition cost Book value Difference Acquisition
cost Book value Difference
Securities with book value exceeding acquisition cost:
Equity securities ¥9,754 ¥16,453 ¥6,699 ¥9,162 ¥14,340 ¥5,178
Bonds - - - - - -
Other 6 9 3 7 7 1¥9,760 ¥16,462 ¥6,702 ¥9,169 ¥14,347 ¥5,179
Securities with book value not exceeding acquisition cost:
Equity securities ¥1,805 ¥1,353 (¥452) ¥2,365 ¥1,757 (¥608)
Other 19 19 - 19 19 -
Total ¥1,824 ¥1,372 (¥452) ¥2,384 ¥1,776 (¥608)
Thousands of U.S. dollars
2014
Acquisition cost Book value Difference
Securities with book value exceeding acquisition cost:
Equity securities $94,773 $159,862 $65,089
Bonds - - -
Other 58 87 29
$94,831 $159,949 $65,118
Securities with book value not exceeding acquisition cost:
Equity securities $17,538 $13,146 ($4,392)
Other 185 185 -
Total $17,723 $13,331 ($4,392)
The following table summarizes sales of available-for-sale securities and the related gains and losses for the years ended March 31, 2014 and
2013:
Millions of yen Thousands of U.S. dollars
2014 2013 2014 Total sales of available-for-sale securities ¥1,398 ¥3,840 $13,583Related gains 25 2,233 243Related losses ¥553 ¥9 $5,373
Amount of write-down of investment securities was ¥216 million for the year ended March 31, 2013.There was no write-down for the year ended
March 31, 2014.
28
5. DERIVATIVES AND HEDGE ACCOUNTING
The Company and some of its consolidated subsidiaries use derivatives to manage risks related to foreign currencies and interest rates. Details of
these derivatives are as follows.
Currency related transactions not designated as hedging transactions at March 31, 2014 and 2013 consisted of the following:
Millions of yen
2014 2013 Contract amount Fair value Revaluation
gain (loss)Contract amount Fair value Revaluation
gain (loss)
Over the counter
Forward Sold ¥2,730 (¥35) (¥35) ¥2,352 (¥97) (¥97) Bought 238 - - 11 - -
Total ¥2,968 (¥35) (¥35) ¥2,363 (¥97) (¥97)
Thousands of U.S. dollars
2014 Contract amount Fair value Revaluation
gain (loss)
Over the counter Forward Sold $26,525 ($340) ($340) Bought 2,312 - -
Total $28,838 ($340) ($340)
Note: The fair values of the transactions are provided by financial institutions.
Currency related transactions designated as hedging transactions at March 31, 2014 and 2013 consisted of the following:
Millions of yen
2014 2013 Contract amount
Fair valueContract amount
Fair valueMajor hedged items Total Maturity
over 1 year Total Maturity over 1 year
Deferral hedge accounting (Note 1) Forward Sold Accounts receivable - trade ¥96 - (¥0) ¥98 - (¥1) Bought Accounts payable - trade 768 - 10 452 - 9 Alternative method (Note 2) Forward Sold Accounts receivable - trade 168 - (Note 2) 250 - (Note 2) Bought Accounts payable - trade 160 - (Note 2) 26 - (Note 2)
Total ¥1,192 - ¥9 ¥826 - ¥8
Thousands of U.S. dollars
2014 Contract amount
Fair valueMajor hedged items Total Maturity
over 1 year
Deferral hedge accounting (Note 1) Forward Sold Accounts receivable - trade $933 - ($0) Bought Accounts payable - trade 7,462 - 97Alternative method (Note 2) Forward Sold Accounts receivable - trade 1,632 - (Note 2) Bought Accounts Payable - trade 1,555 - (Note 2)
Total $11,582 - $87
29
Note: 1. The fair value of the transactions are determined by the forward exchange rate.
2. Foreign monetary obligations denominated in foreign currencies for which foreign exchange forward contracts are used to hedge foreign
currency fluctuation are translated at the contracted rate if the forward contracts qualify for hedge accounting.
3. For certain accounts receivable - trade and accounts payable - trade denominated in foreign currencies for which foreign exchange
forward contracts are used to hedge foreign currency fluctuations, the fair value of the derivative financial instrument is included in fair
value of the account receivable - trade or account payable - trade as a hedged item.
Interest rate related transactions designated as hedging transactions at March 31, 2014 and 2013 consisted of the following:
Millions of yen
2014 Contract amount
Fair value Major hedged items Total Maturity
over 1 year
Deferral hedge accounting of interest rate swaps (Note 1) Long-term debt
Receive - float / pay – fixed ¥15,000 ¥15,000 (¥13)Special treatment of interest rate swaps Long-term debt Receive - float / pay – fixed 7,560 2,100 (Note 2)
Total ¥22,560 ¥17,100 (¥13)
Millions of yen
2013 Contract amount
Fair value Major hedged items Total Maturity
over 1 year
Deferral hedge accounting of interest rate swaps (Note 1) Short-term borrowing and long-term debt
Receive - float / pay - fixed ¥12,000 ¥9,000 (¥125)Special treatment of interest rate swaps Long-term debt
Receive - float / pay - fixed 8,051 5,980 (Note 2)
Total ¥20,051 ¥14,980 (¥125)
Thousands of U.S. dollars
2014 Contract amount
Fair value Major hedged items Total Maturity
over 1 year
Deferral hedge accounting of interest rate swaps (Note 1) Long-term debt
Receive - float / pay - fixed $145,744 $145,744 ($126)Special treatment of interest rate swaps Long-term debt Receive - float / pay - fixed 73,455 20,404 (Note 2)
Total $219,199 $166,148 ($126)
Note: 1. The fair value of the transactions is provided mainly by financial institutions.
2. As interest rate swaps subject to the special treatment of interest rate swaps are accounted for as a single item with the underlying
long-term debt, which are the hedged items, their fair value is included in the long-term debt.
30
6. INVENTORIES
Inventories at March 31, 2014 and 2013 consisted of the following:
Millions of yen Thousands of U.S. dollars
2014 2013 2014
Finished goods ¥45,681 ¥43,073 $443,850Work-in-process 14,816 14,179 143,956Raw materials 9,035 8,909 87,787Supplies 5,856 4,848 56,899
¥75,388 ¥71,009 $732,491
7.IMPAIRMENT LOSS
The Company and its domestic consolidated subsidiaries recorded impairment loss on the following asset groups for the year ended March 31,
2013.
For the year ended March 31, 2013
Location Usage Type
Toyobo Co., Ltd. (Tsuruga, Fukui)
Business assets Buildings and structures Machinery and equipment Tangible assets and other Intangible assets and other
Toyobo Real Estate Co., Ltd. (Tsuruga, Fukui)
Idle assets Land
The Toyobo Group’s business assets are classified in administrative accounting and idle assets are grouped together on an individual basis.
Since the business assets shown above reported losses for more than the past two years and since the fall of current price among idle assets,
the book value of these assets has been marked down to the recoverable value. This write-down was treated as an impairment loss amounting
to ¥1,668 million and included among extraordinary losses. The breakdown of this loss was as follows.
Millions of yen
Buildings and structure ¥352
Machinery and equipment 1,301
Land 4
Tangible assets and other 8
Intangible assets and other 3
In calculating the recoverable value of these assets, the recoverable value of land was adjusted by methods making use of values assessed for
fixed asset taxes. For the other assets, the estimated net sale value was used to make a reasonable estimate of the recoverable value.
31
8. INCOME TAXES
Significant components of the Companies and consolidated subsidiaries deferred income tax assets and liabilities as of March 31, 2014 and 2013
are set forth below.
Deferred income tax liabilities on land revaluation of ¥24,691 million ($239,905 thousand) and ¥24,678 million for the years ended March 31, 2014
and 2013, respectively, were recognized in long-term liabilities.
2014 2013 2014Deferred income tax assets: Accrued employee bonuses ¥1,707 ¥1,677 $16,586 Devaluation loss on inventories 741 996 7,200 Defined benefit liability 7,867 - 76,438 Employees' severance and retirement benefits - 4,263 - Allowance for doubtful receivables 439 71 4,265 Impairment loss 1,231 1,376 11,961 Write-down of investment securities 660 814 6,413 Tax losses carried forward 13,174 16,579 128,002 Unrealized gains 8,526 8,197 82,841 Securities acquired through merger 235 236 2,283 Other 2,374 2,207 23,066Subtotal deferred income tax assets 36,954 36,416 359,056Valuation allowance (7,146) (7,059) (69,433)Net deferred income tax assets 29,808 29,357 289,623
Deferred income tax liabilities: Reserve for deferred gain on sale of property (3,329) (3,339) (32,346) Undistributed earnings of overseas subsidiaries and affiliates (598) (361) (5,810) Consolidation adjustment of allowance for doubtful receivables (3) (5) (29) Valuation difference of subsidiaries (1,874) (1,710) (18,208) Tax deferred gains on assets transferred to a new company (1,589) (1,589) (15,439) Tax deferred gains on spin-off (577) (577) (5,606) Valuation difference on available-for-sale securities (2,141) (1,570) (20,803)Total deferred income tax liabilities (10,112) (9,151) (98,251)Net deferred income tax assets ¥19,696 ¥20,206 $191,372
2014 2013 2014 Current assets ¥4,946 ¥6,291 $48,057 Investments and noncurrent assets 17,991 16,636 174,806 Current liabilities (0) (0) (0) Long-term liabilities (3,241) (2,721) (31,490)Total ¥19,696 ¥20,206 $191,372
Millions of yen Thousands ofU.S. dollars
32
The effective rate for the years ended March 31, 2014 and 2013 differ from statutory tax rate as follows:
2014 2013 Statutory tax rate 38.0% 38.0%Expenses not deductible for tax purposes 0.9 1.1Nontaxable dividend income (1.2) (1.9)Tax losses carried forward (3.6) (1.6)Valuation allowance 6.3 1.5Equity in income of unconsolidated subsidiaries and affiliates (2.4) (1.8)Unrealized gain (0.1) 2.0Adjustment of deferred income tax assets by change in tax rate 2.1 2.8Retained earnings of entities such as overseas subsidiaries 1.7 0.4Difference in tax rate (3.6) (3.1)Goodwill 0.6 0.2Negative goodwill (4.0) (2.8)Other (0.8) (0.4)Effective tax rate 34.0% 34.4%
Adjustments of deferred income tax assets and liabilities due to change in income tax rate
On March 31, 2014, the “Act on Partial Revision of the Income Tax Act” was promulgated, and as a result the special reconstruction surtax will no
longer be imposed from years beginning on or after April 1, 2014. Accordingly, the statutory tax rate used to calculate deferred income tax assets
and deferred income tax liabilities was changed from 38.0% to 36.0% for temporary differences expected to be realized in the years beginning on
April 1, 2014.As a result of this change in tax rate, deferred income tax assets, net of deferred income tax liabilities, decreased by ¥343 million
($3,333 thousand) and provision for income taxes – deferred increased by the same amount for the year ended March 31, 2014.
9. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2014 and 2013 consisted of short-term notes generally due within one year bearing interest at an average rate
of 0.77% and 0.81%, respectively.
Long-term debt at March 31, 2014 and 2013 consisted of the following:
Millions of yen Thousands of U.S. dollars
2014 2013 2014 Unsecured: 1.78% bonds due 2013 ¥- ¥10,000 $- 2.06% bonds due 2015 5,000 5,000 48,581 0.48% bonds due 2015 5,000 5,000 48,581 0.69% bonds due 2017 10,000 10,000 97,163Long-term loans, principally maturing through 2074, at the weighted average interest rate of 1.15% as of March 31, 2014 Secured 334 332 3,245 Unsecured 101,677 73,761 987,923Lease obligations maturing serially through 2019 2,807 4,125 27,274Total 124,817 108,218 1,212,757Less amount due within one year 33,098 33,387 321,590
¥91,719 ¥74,831 $891,168
The aggregate annual maturities of long-term debt outstanding as of March 31, 2014 were as follows:
Millions of yen Thousands of U.S. dollars Year ending March 31
2015 ¥33,098 $321,590 2016 24,226 235,3872017 18,585 180,5772018 16,441 159,7452019 15,403 149,660Thereafter 17,065 165,808
¥124,817 $1,212,757
The Company has credit commitments from four banks in order to secure financing. The total unused credit available to the Company at March 31,
2014 was ¥21,000 million ($204,042 thousand).
33
10. EMPLOYEES SEVERANCE AND RETIREMENT BENEFITS
Overview of defined benefit plans
The Company and certain consolidated subsidiaries have established funded and unfunded defined benefit plans and defined contribution plans.
Under the defined benefit corporate pension plan and lump-sum severance payment plan, a lump-sum payment or pension payment based on
payroll and length of service is provided. In certain cases, the Company pays employees who are retiring additional retirement benefits that are not
considered to be retirement benefit obligations as calculated under actuarial methods according to retirement benefit accounting principles.
Defined benefit plans
Reconciliation of the beginning balance and the ending balance of retirement benefit obligation
(Note) The above table includes retirement benefit obligations of the consolidated subsidiaries applying the simplified method.
Reconciliation of the beginning balance and the ending balance of plan assets
Reconciliation of retirement benefit obligations and plan assets and net defined benefit liability and net defined benefit asset recorded on the
consolidated balance sheet
Millions of yen Thousands ofU.S. dollars
2014 2014¥60,064 $583,599
1,912 18,5781,105 10,736(290) (2,818)
(3,966) (38,535)217 2,108178 1,729
¥59,220 $575,398Retirement benefit obligations at end of year
Retirement benefits paidActuarial dif ferences incurred
Changes due to effect of business combinationOther
Retirement benefit obligations at beginning of yearService costsInterest costs
Millions of yen Thousands ofU.S. dollars
2014 2014¥39,937 $388,039
1,369 13,3022,938 28,5462,277 22,124
(2,273) (22,085)¥44,248 $429,926
Expected return on plan assetsActuarial dif ferences incurredEmployer’s contributionRetirement benefits paidPlan assets at end of year
Plan assets at beginning of year
Millions of yen Thousands ofU.S. dollars
2014 2014¥55,860 $542,752(44,248) (429,926)
11,612 112,8253,360 32,647
14,972 145,47225,227 245,113
(10,255) (99,640)¥14,972 $145,472
Funded retirement benefit obligationsPlan assets
Unfunded retirement benefit obligationsDifference between liability and asset recorded on the consolidated balance sheetDefined benefit liabilityDefined benefit assetDifference between liability and asset recorded on the consolidated balance sheet
34
Profits or losses related to retirement benefit expenses
(Note) Profits or losses related to retirement benefit expenses of the consolidated subsidiaries applying the simplified method are included in
service costs and amortization of net transition obligation.
Remeasurements of defined benefit plans, before tax effect
Plan assets
Components of plan assets by main categories are as follows:
(Note) 20% of the total plan assets is used to fund a retirement benefit trust established for corporate pension plans.
Method determining expected long-term rate of return on plan assets
Expected long-term rate of return on pension plan assets is based on the current and expected allocation of plan assets and the current and
expected long-term rate of return on the various plan assets.
Assumptions used for actuarial calculation
The assumptions used for actuarial calculation at the end of the year ended March 31, 2014 were as follows:
Discount rates Mainly 2.0%
Expected rates of return on plan assets Mainly 3.5%
Defined contribution plans
The total amount contributed to defined contribution plans for the year ended March 31, 2014 was ¥222 million ($2,157thousand).
Multi-employer type employee pension fund plans
The total amount contributed to multi-employer type employee pension fund plans, which are calculated in a same way as defined contribution
plans for the year ended March 31, 2014 was ¥115 million ($1,117thousand).
Employees’ severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2013 consisted of
the following:
Millions of yen Thousands ofU.S. dollars
2014 2014¥1,912 $18,5781,105 10,736
(1,369) (13,302)1,570 15,255
76 7381,071 10,406
320 3,109¥4,684 $45,511
Expected return on plan assetsAmortization of net transition obligationAmortization of prior service costsAmortization of actuarial dif ferencesAdditional retirement benefitsRetirement benefit expenses for def ined benefit plans
Service costs – benefits earned during the yearInterest cost on projected benefit obligation
Millions of yen Thousands ofU.S. dollars
2014 2014¥1,575 $15,303
533 5,1794,373 42,489
¥6,481 $62,971
Unrecognized net transition obligationUnrecognized prior service costsUnrecognized actuarial dif ferences
Total
2014Debt securities 29 %Equity securities 27General accounts 19Cash and deposits 18Other 7
Total 100 %
35
Note: 1. The amount was due to the integration in March 2011 of the corporation pension plan and lump-sum retirement plan of the Company with
those of the former Toyo Kasei Kogyo Co., Ltd., which merged with the Company in March 2010.
2. Some subsidiaries have adopted a simplified method in calculating retirement benefit obligations.
Severance and retirement benefit expenses included in the consolidated statements of income for the years ended March 31, 2013 comprised
the following:
Note: 1. In addition to the retirement benefit expenses stated above, premium severance pay amounting to ¥210 million was paid.
2. Employee contributions to the welfare pension fund are deducted.
3. This amount was due mainly to the integration in March 2011 of the corporation pension plan and lump-sum retirement plan of the
Company with those of the former Toyo Kasei Kogyo Co., Ltd., which merged with the Company in March 2010.
4. Premium payment to the defined contribution system
5. Retirement benefit expenses of consolidated subsidiaries which adopted the simplified method are stated in "Service costs" and
“Amortization of net transition obligation."
The discount rates used by the Company and its domestic consolidated subsidiaries were mainly 2.0% for the year ended March 31, 2013. The rate
of expected return on plan assets used by the Company and its domestic consolidated subsidiaries was mainly 3.5% for the year ended March 31,
2013. The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally to each service year using the
estimated total number of service years. Past service costs are recognized as expense in equal amounts over ten years, and actuarial gains and
losses are recognized in the consolidated statements of income using the straight-line method over ten years.
Millions of yen2013
¥60,064(33,815)(6,122)(3,150)(8,501)
(612)7,8649,712
¥17,576Accured retirement benefits
Projected benefit obligationFair value of pension assetsEmployee retirement benefit trustUnrecognized net transition obligationUnrecognized actuarial differencesUnrecognized prior service costs (Note 1)Employees' severance and retirement benefitsPrepaid pension cost
Millions of yen2013
¥2,3031,140
(1,157)1,5701,799
765,731
315¥6,046
Other (Note 4)Total
Service costs – benefits earned during the year (Note 2)Interest cost on projected benefit obligationExpected return on plan assetsAmortization of net transition obligationAmortization of actuarial dif ferencesAmortization of prior service costs (Note 3)Employees' severance and retirement benef it expenses
36
11. ASSETS PLEDGED AS COLLATERAL
At March 31, 2014 and 2013, assets pledged as collateral for secured long-term debt of ¥334 million ($3,245 thousand) and ¥332 million,
respectively, customers’ deposits of ¥298 million ($2,895 thousand) and ¥341 million, respectively, and accounts payable of ¥34 million ($330
thousand) and ¥33 million, respectively, were as follows:
Millions of yen Thousands of U.S. dollars
2014 2013 2014
Cash and cash equivalents ¥36 ¥35 $350
Property, plant and equipment ― net of accumulated depreciation 1,123 1,217 10,911
¥1,159 ¥1,252 $11,261
12. NET ASSETS
The consolidated financial statements have been reported in accordance with the provisions set forth in the Japanese Companies Act (the
“Companies Act”). The significant provisions of the Companies Act that affect financial and accounting matters are summarized below:
(i) Dividends: The Companies Act allows Japanese companies to pay dividends at any time during the fiscal year, in addition to the year-end
dividend, upon resolution at the stockholders meeting. For Japanese companies that meet certain criteria such as having a board of
directors, independent auditors, a board of corporate auditors and one-year terms of service for directors rather than the two-year normal
term provided by the articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) if the company
has prescribed so in its articles of incorporation. The Companies Act permits Japanese companies to distribute dividends-in-kind (non-cash
assets) to stockholders subject to certain limitations and additional requirements. The Companies Act provides certain limitations on the
amounts available for dividends and the purchase of treasury stock. The maximum amount that the Company can distribute as dividends is
determined based on the nonconsolidated financial statements of the Company in accordance with the Companies Act and regulations.
(ii) Increases/decreases in and transfers of common stock, reserve and surplus: The Companies Act requires that an amount equal to 10% of
dividends must be appropriated as a legal reserve (of retained earnings) or as additional paid-in capital (of capital surplus), depending on
the equity account charged upon the payment of such dividends, until the total aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock. Under the Companies Act, all additional paid-in capital and all legal earnings reserve may be
transferred to other capital surplus and retained earnings, respectively, and are potentially available for dividends. The Companies Act also
provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among
the accounts under certain conditions upon resolution of the stockholders.
(iii) Treasury stock: The Companies Act provides for Japanese companies to repurchase or dispose of treasury stock. The amount of treasury stock
purchased, however, cannot exceed the amount available for distribution to the stockholders, an amount which is determined by a specific
formula.
13. CONTINGENT LIABILITIES
At March 31, 2014 and 2013, the Company and certain consolidated subsidiaries were contingently liable for the following:
Millions of yen Thousands of U.S. dollars
2014 2013 2014
As endorser of notes discounted ¥32 ¥31 $311
As guarantor of indebtedness
Unconsolidated subsidiaries and affiliates 2,939 3,674 28,556
Employees housing loans 87 101 845
¥3,026 ¥3,775 $29,401
37
14. LEASES
Lease payments for finance leases which do not transfer ownership of the lease assets and do not have bargain purchase provisions were ¥78
million ($758 thousand) and ¥164 million for the years ended March 31, 2014 and 2013, respectively. Future minimum lease payments for the
remaining lease periods as of March 31, 2014 and 2013, including interest, were ¥59 million ($573 thousand) and ¥79 million, respectively, for
payments due within one year and ¥247 million ($2,400 thousand) and ¥298 million, respectively, for payments due beyond one year.
Original lease obligations, accumulated payments and remaining payments on leased properties as of March 31, 2014 and March 31, 2013 were as
follows:
Millions of yen Thousands of
U. S. dollars
2014 2013 2014
Machinery and equipment: Original lease obligations ¥589 ¥589 $5,723 Payments made 293 236 2,847
Remaining payments ¥296 ¥353 $2,876
Tools, furniture and fixtures Original lease obligations ¥21 ¥122 $204 Payments made 11 108 107
Remaining payments ¥10 ¥14 $97
Intangible assets Original lease obligations ¥- ¥72 $- Payments made - 61 -
Remaining payments ¥- ¥11 $-
Future minimum lease receipts as lessor under operating leases for the remaining lease periods as of March 31, 2014 and 2013 were ¥2,913 million
($28,304 thousand) and ¥2,433 million, respectively, of which ¥304 million ($2,954 thousand) and ¥298 million, respectively, was due within one
year.
15. SEGMENT INFORMATION
1. Overview of reportable segments
Toyobo’s reportable segments allow it to acquire financial data that can be separated into various components of the corporate group. The scope of
the segments is reviewed on a regular basis in order to allow the highest decision making body to determine the allocation of management resources
and evaluate earnings performance. Toyobo’s basic organization comprises business headquarters and business divisions within the head office
separated by the type, nature and market for products and services. Each business headquarters and business division formulates comprehensive
strategies for its domestic and overseas operations and conducts business activities.
Accordingly, Toyobo organizes business segments by product and service. Its five reportable segments are “Films and Functional Polymers,”
“Industrial Materials,” “Life Science,” “Textiles” and “Real Estate.” The “Films and Functional Polymers” segment manufactures and sells packaging
films, industrial films, industrial adhesives, engineering plastics, optical function materials, photo-sensitive printing plates and other products. The
“Industrial Materials” segment manufactures and sells fiber materials for automotive applications, high-performance fibers, functional filters,
non-woven fabrics and other products. The “Life Science” segment manufactures and sells bio-products such as enzymes for diagnostics, contract
manufacturing of pharmaceuticals, medical-use membranes, medical equipment and equipment devices, water treatment membranes and other
products. The “Textiles” segment manufactures and sells functional textiles, apparel products, apparel textiles, apparel fibers and other products.
The “Real Estate” segment leases and manages real estate.
2. The methods of accounting for business segments are the same as those stated in Note 2, “Significant Accounting Policies.” Income of the
reporting segments is operating income. Transfers among segments are based on market prices.
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Note: 1. Other includes design and construction of buildings, equipment, etc., information services, logistics services and other items.
2. (a) Elimination or Corporate includes segment income adjustment of ¥-3,113 million ($-30,247 thousand), eliminations of intersegment
transactions of ¥-393 million ($-3,818 thousand) and companywide expenses that are not allocated across reporting segments of
¥-2,720 million ($-26,428 thousand). The principal components of companywide expenses are those related to basic research and
development.
(b) The intersegment adjustment of ¥65,210 million ($633,599 thousand) is included in companywide assets that are not allocated across
reporting segments and amount to ¥88,020 million ($855,227 thousand).
(c) The increase in the adjustment of tangible and intangible fixed assets of ¥1,308 million ($12,709 thousand) is the amount of capital
investment related to research and development
3. Segment income has been adjusted with operating income on the consolidated financial statements.
Net sales Intersegment Depreciation
Year ended to external net sales and Segment Identifiable and Loss on Capital
March 31, 2014 customers transf er amounts income assets amortization impairment expenditure
Industrial Materials 71,704 283 71,987 5,501 67,420 2,041 - 3,618
Life Science 27,344 83 27,427 5,140 30,619 1,774 - 3,044
Textiles 79,089 180 79,269 2,952 73,225 1,938 - 2,096
Real estate 3,670 1,224 4,894 1,722 47,210 439 - 322
329,806 1,799 331,606 23,109 371,671 12,935 - 18,322
Other businesses 21,770 14,499 36,269 1,010 19,374 349 - 445
Total 351,577 16,298 367,875 24,119 391,046 13,284 - 18,766
Elimination or Corporate - (16,298) (16,298) (3,113) 65,210 754 - 1,308Consolidated ¥351,577 ¥- ¥351,577 ¥21,006 ¥456,256 ¥14,038 ¥- ¥20,074
Net sales Intersegment Depreciation
Year ended to external net sales and Segment Identifiable and Loss on Capital
March 31, 2014 customers transf er amounts income assets amortization impairment expenditure
Industrial Materials 696,696 2,750 699,446 53,449 655,072 19,831 - 35,154
Life Science 265,682 806 266,489 49,942 297,503 17,237 - 29,576
Textiles 768,451 1,749 770,200 28,682 711,475 18,830 - 20,365
Real estate 35,659 11,893 47,551 16,731 458,706 4,265 - 3,129
3,204,489 17,480 3,221,978 224,534 3,611,261 125,680 - 178,022
Other businesses 211,524 140,876 352,400 9,813 188,243 3,391 - 4,324
Total 3,416,022 158,356 3,574,378 234,347 3,799,514 129,071 - 182,336
Elimination or Corporate - (158,356) (158,356) (30,247) 633,599 7,326 - 12,709Consolidated $3,416,022 $- $3,416,022 $204,100 $4,433,113 $136,397 $- $195,045
Millions of yen
Net sales
Films andFunctional Polymers
¥148,000 ¥29 ¥148,029 ¥7,794 ¥153,197 ¥6,744 ¥9,242
Films andFunctional Polymers
$1,438,010 $282 $1,438,292 $89,798
Thousands of U.S. dollars
¥-
Net sales
$75,729 $1,488,506 $65,527 $-
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Note: 1. Other includes design and construction of buildings, equipment, etc., information services, logistics services and other items.
2. (a) Elimination or Corporate includes segment income adjustment of ¥-3,128 million, eliminations of intersegment transactions of ¥-323
million and companywide expenses that are not allocated across reporting segments of ¥-2,805 million. The principal components of
companywide expenses are those related to basic research and development.
(b) The intersegment adjustment of ¥69,908 million is included in companywide assets that are not allocated across reporting segments
and amount to ¥92,574 million.
(c) The increase in the adjustment of tangible and intangible fixed assets of ¥755 million is the amount of capital investment related to
research and development
3. Segment income has been adjusted with operating income on the consolidated financial statements.
Principal countries and areas in each segment are:
Southeast Asia: China, Korea, Taiwan, Malaysia, Indonesia, Thailand, etc.
Other areas: America, Germany, Brazil, Saudi Arabia, etc.
Net sales Intersegment Depreciation
Year ended to external net sales and Segment Identif iable and Loss on Capital
March 31, 2013 customers transf er amounts income assets amortization impairment expenditure
Industrial Materials 71,891 197 72,088 5,453 70,293 2,471 1,664 3,311
Life Science 24,839 90 24,930 4,170 27,307 1,414 - 3,636
Textiles 79,211 221 79,432 213 71,980 1,708 - 1,733
Real estate 3,741 1,312 5,053 1,680 44,925 671 4 295
317,076 1,820 318,897 19,149 356,039 12,099 1,668 16,739
Other businesses 21,932 12,073 34,005 1,060 21,499 507 - 548
Total 339,008 13,893 352,902 20,209 377,538 12,606 1,668 17,286
Elimination or Corporate - (13,893) (13,893) (3,128) 69,908 641 - 755Consolidated ¥339,008 ¥- ¥339,009 ¥17,081 ¥447,445 ¥13,246 ¥1,668 ¥18,041
Films andFunctional Polymers
¥137,394 ¥1 ¥137,395 ¥5,834 ¥- ¥7,764
Millions of yen
Net sales
¥7,634 ¥141,534
Sales in Japan, Southeast Asia and other areas are as follows:Thousands ofU.S. dollars
2014 2013 2014Japan ¥257,996 ¥259,831 $2,506,763Southeast Asia 57,128 48,016 555,072Other areas 36,453 31,162 354,188
Total ¥351,577 ¥339,009 $3,416,022
Millions of yen
Impairment loss for each segmentThousands ofU.S. dollars
2014 2013 2014
Films and Functional Polymers ¥- ¥- $-
Industrial Materials - 1,664 -Life Science - - -Textiles - - -Real estate - 4 -Other businesses - - -Total - 1,668 -Elimination or Corporate - - -Consolidated ¥- ¥1,668 $-
Millions of yen
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Amortization and balance of goodwill at March 31, 2014
Year ended March 31, 2014Films and Functional Polymers ¥164 ¥120 $1,593 $1,166Industrial Materials - - - -Life Science 115 1,152 1,117 11,193Textiles - - - -Real estate - - - -Other businesses - - - -
Total 279 1,272 2,711 12,359Elimination or Corporate - - - -Consolidated ¥279 ¥1,272 $2,711 $12,359
Year ended March 31, 2014Films and Functional Polymers ¥- ¥- $- $-Industrial Materials - - - -Life Science - - - -Textiles - - - -Real estate 838 419 8,142 4,071Other businesses - - - -
Total 838 419 8,142 4,071Elimination or Corporate - - - -Consolidated ¥838 ¥419 $8,142 $4,071
Amortization and balance of goodwill at March 31, 2013
Year ended March 31, 2013Films and Functional Polymers ¥164 ¥283Industrial Materials - -Life Science - -Textiles - -Real estate 8 -Other businesses - -
Total 171 283Elimination or Corporate - -Consolidated ¥171 ¥283
Year ended March 31, 2013Films and Functional Polymers ¥- ¥-Industrial Materials - -Life Science - -Textiles 108 -Real estate 838 1,258Other businesses - -
Total 946 1,258Elimination or Corporate - -Consolidated ¥946 ¥1,258
Millions of yen Thousands of U.S. dollarsBalance ofgoodwill
Amortizationof goodwill
Balance ofgoodwill
Amortizationof goodwill
Amortization and balance of negative goodwill due to business combinationbefore April 1, 2010 at March 31, 2013
Millions of yenAmortizationof negative
goodwill
Balance ofnegative goodwill
Amortization and balance of negative goodwill due to business combination before April 1, 2010 at March 31, 2014
Millions of yenAmortizationof goodwill
Balance ofgoodwill
Millions of yen Thousands of U.S. dollarsAmortizationof goodwill
Balance ofgoodwill
Amortizationof goodwill
Balance ofgoodwill
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Gain on Negative Goodwill by Reporting Segment
In the Films and Functional Polymers segment, the Company reported negative goodwill of ¥304 million ($2,954 thousand) due to the purchase of
shares of a consolidated subsidiary. Also, in the Textiles segment, the Company showed negative goodwill of ¥290 million ($2,818 thousand) owing
to the purchase of a portion of the shares of a consolidated subsidiary.
16. LAND REVALUATION
Applying the law on revaluation of land, the Company, a consolidated subsidiary and an affiliate accounted for using the equity method revaluated
land for business use on March 31, 2002 and included the increase, net of income taxes and minority interests, in net assets. As of March 31, 2014
and 2013, respectively, the fair value of land was ¥32,421 million ($315,012 thousand) and ¥30,069 million lower than book value. Another
consolidated subsidiary revaluated its land for business use on March 31, 2000 and included the increase, net of income taxes and minority
interests, in net assets. As of March 31, 2014 and 2013, respectively, the fair value of land was ¥3,087 million ($29,994 thousand) and ¥2,923
million lower than book value.
17. INVESTMENT AND RENTAL PROPERTY
The Company and some of its consolidated subsidiaries hold investment and rental office buildings (including land) located in Osaka and other
areas. For the fiscal years ended March 31, 2014 and 2013, the rental income on these real estate properties was ¥2,122 million ($20,618
thousand) and ¥1,976 million (principal rental income is recorded in sales and principal rental expenses are recorded in cost of sales), respectively.
The profit from the sale of fixed assets was ¥ 31 million (recorded in other income (expenses)) for the year ended March 31, 2013. Loss on the sale
of fixed assets was ¥96 million (recorded in other income (expenses)) for the year ended March 31, 2013, and impairment loss was ¥4 million
(recorded in other income (expenses)) for the year ended March 31, 2013.
The following table summarizes the carrying amount, the change during the fiscal year and the estimated fair value of the investment and rental
property.
Millions of yen Thousands of U.S. dollars
2014 2013 2014
Balance at the beginning of April 1, 2013 and 2012 ¥31,641 ¥32,821 $307,433
Decrease in the fiscal term (260) (1,179) (2,526)
Balance at the end of March 31, 2014 and 2013 ¥31,381 ¥31,641 $304,907
Fair value on March 31, 2014 and 2013 ¥36,446 ¥39,099 $354,120
Note: 1. The carrying amount represents the net amount calculated as the acquisition cost less accumulated depreciation and impairment loss.
2. The change during the fiscal year ended March 31, 2013 was attributable mainly to a decrease in rental properties of ¥917 million and to a
decrease in the sale of assets of ¥194 million.
3. The fair value on March 31, 2014 and 2013 was based on real estate appraisal reports provided by external real estate appraisers for major
properties and the index considered to reflect the current market price for other properties.
18. CASH FLOW INFORMATION
Cash on hand, readily available deposits and short-term highly liquid investments with maturities not exceeding three months at the time of
purchase are considered to be cash and cash equivalents in preparing the consolidated statements of cash flows.
The reconciliation of cash and cash equivalents in the consolidated balance sheets and cash and cash equivalents in the consolidated statements
of cash flows as of March 31, 2014 and 2013 was as follows:
Millions of yen Thousands of U.S. dollars
2014 2013 2014
Cash and cash equivalents in the consolidated balance sheets ¥19,330 ¥26,600 $187,816
Time deposits maturing after three months (153) (133) (1,487)
Cash and cash equivalents in the consolidated statements of cash flows ¥19,177 ¥26,467 $186,329
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Assets and liabilities of newly acquired subsidiary in the year ended March 31, 2014
Details of assets and liabilities at the time of starting consolidation of Spinreact, S.A.U., which became a new consolidated subsidiary of the
Company as a result of an acquisition of shares, the acquisition cost of the shares of Spinreact, S.A.U. and payments for the acquisition of
Spinreact, S.A.U., net are summarized as follows:
19. COMPREHENSIVE INCOME
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous period and
the tax effects for each component of other comprehensive income were as follows:
Assets ¥2,986Liabilities (668)Goodwill 1,152Acquisition cost of shares of Spinreact, S.A.U. 3,470Cash and cash equivalents of Spinreact, S.A.U. (239)Payments for the acquisition of Spinreact, S.A.U. ¥3,231
Millions of yen
(2,322)$31,393
Thousands of U.S.dollars
$29,013(6,490)11,19333,716
Thousands ofU.S. dollars
2014 2013 2014Valuation difference on available-for-sale securitiesIncrease during the year ¥1,683 ¥4,676 $16,353Reclassification adjustments - (2,074) -Subtotal, before tax 1,683 2,602 16,353Tax of benefit (538) (883) (5,227)Subtotal, net of tax 1,145 1,719 11,125
Deferred gains and losses on hedgesDecrease during the year 27 (136) 262Reclassification adjustments 85 211 826Subtotal, before tax 112 75 1,088Tax of benefit (42) (30) (408)Subtotal, net of tax 70 45 680
Land revaluation excessTax of benefit (13) - (126)Subtotal, net of tax (13) - (126)
Foreign currency translation adjustmentsDecrease during the year 2,529 852 24,572
Share of other comprehensive income of associatesaccounted for using the equity methodDecrease during the year 107 105 1,040
Total other comprehensive income ¥3,838 ¥2,721 $37,291
Millions of yen
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20. BUSINESS COMBINATION BY ACQUISITION
1. Overview of acquisition
(1) Name and nature of the business of the acquired company
Name: Spinreact, S.A.U. (“Spinreact”)
Nature of the business: Manufacture and sale of in vitro diagnostic (“IVD”) reagents and sale of instruments
(2) Purpose of the acquisition
Spinreact has a network of dealers in approximately 90 countries around the world, covering not only Spain but also Africa, Central and South
America, Europe, Asia, and elsewhere and an extensive lineup of IVD-related products that have been adapted for use in emerging country
markets. On the other hand, Toyobo has sales networks in China and Southeast Asia and a lineup of products different from that of Spinreact. The
Company believes that this business combination will enhance the corporate value of Spinreact and Toyobo group companies by realizing sales
expansion through the utilization of bioproducts and sales networks of both companies.
(3) Date of acquisition
July 31, 2013
(4) Legal form of acquisition
Acquisition of shares for consideration in cash
(5) Name of the company after acquisition
No change
(6) Ratio of voting rights acquired
100%
(7) Reason for the acquisition
The Company acquired 100% of voting rights of Spinreact for consideration in cash.
2. Period for the results of operations of acquired company included in the consolidated financial statements
The results of operations from August 1, 2013 to March 31, 2014 were included.
3. Acquisition cost
The acquisition cost of the shares of Spinreact was ¥3,470 million ($33,715 thousand) and included consideration for the ordinary shares in the
amount of Spinrect of ¥3,278 ($31,850 thousand) million and advisory fees and other expenses of ¥193 million ($1,875 thousand).
4. The value of goodwill recognized and reason for recognizing goodwill and the amortization method and period
(1) The value of goodwill recognized was ¥1,152 million ($11,193 thousand)
(2) Reason for recognizing goodwill
Goodwill is recognized for the excess amount of acquired assets and accepted liabilities.
(3) Amortization method and period
Equally amortized over 5 years
5.Details of assets and liabilities acquired at the acquisition date
Millions of yen Thousands ofU.S. dollars
2014 2014Current assets ¥2,305 $22,396Noncurrent assets 681 6,617Total assets 2,986 29,013Current liabilities (477) (4,635)Noncurrent assets (191) (1,856)Total liabilities (¥668) ($6,490)
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6. Amounts allocated to intangible assets and the major components of intangible assets other than goodwill and their respective weighted
average amortization period
21. LAWSUITS
Lawsuit for damages brought against the Company by the U.S. Department of Justice.
The U.S. Department of Justice has filed a lawsuit in the United States against Toyobo and Toyobo’s U.S. subsidiary, Toyobo U.S.A., Inc. for
violating U.S. False Claims Act, for fraud and for unjust enrichment in relation to bulletproof vests which a U.S. company named Second Chance
Body Armor, Inc. manufactured and distributed using Toyobo’s “Zylon” fibers and which were purchased by the U.S. government.
In addition, regarding bulletproof vests which a number of U.S. companies other than Second Chance (including Armor Holding, Inc.) manufactured
and distributed using Toyobo’s “Zylon” fibers and which were purchased by the U.S. government, the Department of Justice has filed a lawsuit
against Toyobo and Toyobo U.S.A., Inc. for violating U.S. False Claims Act, for fraud and for unjust enrichment.
These lawsuits are pending in court, but Toyobo maintains to argue that it was not at fault and is taking appropriate actions to defend its case.
22. RELATED PARTY TRANSACTIONS
Related party transactions for the years ended March 31, 2014 and 2013 were as follows:
1. For the year ended March 31, 2014
There were no material related party transactions to report.
2. For the year ended March 31, 2013
There were no material related party transactions to report.
23. SUBSEQUENT EVENTS
At the Company’s ordinary meeting of stockholders held on June 27, 2014, appropriations of retained earnings for the year ended March 31, 2014
were duly approved as follows:
Thousands of
Millions of yen U.S. dollars
Cash dividends - ¥3.50 ($0.034) per share ¥3,108 $30,198
Major components Millions of yenThousands ofU.S. dollars
Customer related assets ¥176 $1,710 20 yearsTechnology related assets 132 1,283 10Patent related assets 120 1,166 5Total intangible assets ¥428 $4,159 13 years
Weighted averageamortization period