One Way Forward
Fiscal year ended December 31, 2008
Contents
01 Message to Stakeholders
02 Financial Highlights
10 Review of Operations
13 Kokuyo’s CSR Initiatives
16 Corporate Governance
17 Board of Directors
18 Six-year Summary
19 Management’s Discussion and Analysis for AR 2008/12
26 Consolidated Balance Sheets
28 Consolidated Statements of Operations
29 Consolidated Statements of Changes in Net Assets
30 Consolidated Statements of Cash Flows
31 Notes to Consolidated Financial Statements
52 Independent Auditors’ Report
53 Corporate Data
Established in 1905, Kokuyo Co., Ltd. now has over 100
years of experience in stationery and furniture products,
design and construction of office and store interiors, and
distribution and staffing services. The company has built
up its operations as a comprehensive office supplies and
services provider unparalleled worldwide, and focused on
responding to every conceivable need, whether in the home,
at school, or at work. In 2004, Kokuyo shifted to a holding
company structure, enabling it to exert the Group’s collec-
tive strengths more fully and aggressively expand its scope
of operations to China and elsewhere overseas. Looking
ahead, Kokuyo is striving to become a unique eco-friendly
company, accelerating voluntary environmental initia-
tives such as eliminating products that bear the proprietary
Eco-X mark. At the same time, it seeks to be a vibrant and
sustainable company with an innovative spirit and a unique
business approach.
Cautionary Statement With Respect to Forward- looking Statements
This annual report contains state- ments about Kokuyo’s future busi- ness plans and strategies as well as estimates. Statements regarding the Company’s projected business results are not based on historical facts and are subject to various risks and uncertainties. These risks and uncertainties relate to economic conditions in Kokuyo’s business environment, particularly the state of private-sector and public-sector capital investment, competitive pric- ing pressures in the marketplace, and Kokuyo’s ability to continue designing and developing products that will be accepted in markets. However, it should be noted that elements affecting performance are not limited to the previously men- tioned factors.
Kokuyo’s
Original Eco-X Mark
Kokuyo’s original Eco-X “non-eco” mark. Kokuyo intends to identify all non-environmentally friendly products in its general catalog with the Eco-X mark and phase them out by the end of 2010.
Message to Stakeholders
Looking back on fiscal 2008 (the fiscal year ended December 31, 2008), I am struck by how different the second half was from the first. In the first half, the Kokuyo Group’s net sales were slightly lower than a
year earlier, but thanks to the pro- motion of solution-based proposals by our sales force, we achieved positive results on the earnings front, with an increase in gross profit ratio. From the time news of
an economic downturn was reported in the second half, how- ever, demand for furniture in partic- ular dropped off dramatically. Then, after the collapse of a major U.S. investment bank in September, suspension of corporate capital investment and other factors con- spired to result in Kokuyo recording its largest-ever drop in profits.
Overview of Current Market
Environment and Fiscal 2008 Results
In today’s changed environment,
we must build a business model
based on high added value to
ensure profitability throughout
our operations.
Akihiro Kuroda President
Net Sales
(Billions of Yen)
Operating Income (Loss)
(Billions of Yen)
06/1207/1208/12 06/1207/1208/12 06/1207/1208/12 06/1207/1208/12 06/1207/1208/12 06/1207/1208/12
Full Year First Half Second Half Full Year First Half Second Half
334.1354.5326.1 14.2
6.8 175.5 183.3181.7 5.4
12.2
7.2 7.5
158.6171.2144.4
2.1 –0.4
–2.1
We took steps to mitigate this reduction in earnings, curtailing expenses and refraining from non-essential investment while pursuing a dynamic program of cost-reduction measures, but we were unable to fully cover the shortfall. Unfortunately our diffi- culties were compounded by the fact that while crude oil prices were lower than they had been, raw material costs remained at a high level.
As a result of the foregoing, both sales and income for fiscal 2008 were lower year on year, with net sales of ¥326.1 billion (down 8.0% compared to the preceding twelve months*), and operating income of ¥5.4 billion (down 21.4%). Meanwhile, we recorded a net loss of ¥12.0 billion—our second consecutive net loss—as a result of booking extraordinary
losses in the form of a one-time amortization of goodwill for Actus Co., Ltd. and a loss on revaluation of investments in securities. While these results have not directly impacted the Company’s cash flows, I sincerely apologize for any disappointment and concern that they may cause our stakeholders.
* Due to the change in Kokuyo’s fiscal year-end, the fiscal period ended December 31, 2007 was an irregular nine-month period. For the purposes of prior-year comparison, therefore, results for the twelve month period from January 1, 2007 to December 31, 2007 have been employed.
Looking ahead, I think we will need to take a long-term view as we wait for economic recovery. That said, however, we should move as quickly as possible to take any necessary action. 2009 is proving to be even more of a chal- lenge than 2008, and we should assume that sales will be at the same level, or even lower, at the
end of this year. So, to avoid a further drop in earnings, this year we will need to take a rigorous approach to assessing the relative future potential of individual prod- ucts and businesses.
I also feel that this is the ideal time to radically change the sense of values we share as a company, along with our corporate culture and mindset. It would be possible to survive the next two to three years just by downsizing our work- force, but it is not inconceivable that another crisis on the scale of last year’s bank collapse could occur. That is why we now need to build business models that anticipate the economic situation and markets we will face going forward. The key to our corporate survival will be the extent to which we can fundamentally change the makeup of our company.
Financial Highlights
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES Fiscal years ended December 31, 2007 and 2008
Millions of yen
Thousands of U.S. dollars
2008 2007 2008
For the year:
Net sales ¥326,120 ¥354,536 $3,582,162
Operating income 5,354 6,808 58,809
Net loss (11,991) (2,045) (131,711)
Return on equity (%) (7.1) (1.1)
At year-end:
Total assets 266,419 301,187 2,926,395
Net assets 159,079 179,182 1,747,353
Yen U.S. dollars
Per share data:
Basic net loss per share ¥ (101.36) ¥ (17.29) $ (1.11)
Notes 1: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥91.04 = US$1, the approximate exchange rate prevailing on December 31, 2008. 2: For the purpose of prior-year comparison, results for the twelve month period from January 1, 2007 to December 31, 2007 have been employed.
At the moment, all our efforts are focused on fording the river that blocks our path: the current eco- nomic crisis. Nobody knows whether the downturn will be over in a year or continue for the next ten years, but what is clear is that once we have made it across the river, we will find ourselves in a place that bears no resemblance to our surroundings today. In that new environment, files that sell now for ¥200, may be selling for
¥100, or even ¥50.
That being the case, we need to focus not only on getting through the current downturn, but also on implementing a strategy that looks beyond the present, to the circumstances we will face once we have reached the other side. If we don’t, we will not be able to survive as a company.
Our first measure, therefore, will be to enhance Kokuyo’s cor- porate strength throughout its operations. We will give ourselves a concentrated period of one year to achieve this goal. In addition, we will dramatically lower our
break-even point by curtailing personnel expenses and taking a completely objective approach to reducing the number of unprofit- able products we handle. We have already taken some early measures to curtail personnel expenses, cutting remuneration for directors by between 12 and 20%, as well as reducing manag- ers’ salaries. We are also already taking steps to eliminate overtime work. We expect the combination of these measures to result in a
¥1.0 billion reduction in personnel expenses.
We view these measures to eliminate overtime and reduce compensation as part of the pro- cess of reforming Kokuyo by enhancing its corporate strength. We will encourage employees to change their mindset, taking stock of their own work and thinking about the value and benefits they as an individual are generating for the customer. This will form the basis for reviewing all of our oper- ations on an organizational and corporate level.
In the course of pursuing these measures, we have been
reminded that as the times have changed, many operational pro- cesses within the Group have become increasingly complicated. I want to make changes here by introducing operational models that allow us to provide the prod- ucts and services the customer requires in the most straightfor- ward way possible.
In our furniture business, for example, consumer needs have diversified, leading to an increased variety of items requested, and frequently requiring us to offer tailor-made solutions. As a result of this significant increase in our provision of non-standard services, we have had to take on more personnel. In response, therefore, we are starting to rebuild our sys- tems so that we can take a closer look at the work we do and sys- tematize whatever tasks we can. Another issue is that the core systems we have at the moment allow us to monitor data such as sales prices for desks, or how many chairs we sold, but they don’t give us information on why customers choose Kokuyo, what they think of us, or the reasons
Management Resolutions and
Fiscal 2009 Strategy
Personnel Expenses
(Billions of Yen)
Personnel Expenses to
Sales Ratio
(%)
07/12
06/12 08/12
Cost Reduction Results
and Targets
(Billions of Yen)
07/12
06/12 07/12 08/12 09/12
(Target)
08/12
Stationery Segment
Furniture Segment
Store Fixtures Segment 31.5 32.8 32.7
1.9 1.8
2.2
9.4 9.2 10.0
certain products sell so well. A major theme in re-establishing our systems will therefore be to enhance our ability to obtain this type of information. My intention is for us to identify what kind of office environment future consum- ers will want, and to create mech- anisms for reflecting their wishes at every stage, from product development to manufacturing.
In addition to this, we will also cut costs throughout our opera- tions. In a world where business is increasingly globalized, the ability to compete on price is essential for survival. We have to cut costs to prepare ourselves for the com- petition to come. However, our existing manufacturing plants in Japan and the continuation of present efforts alone will not enable us to achieve the 50% reduction in costs we believe is necessary. We need to bolster our overseas manufacturing. We cur- rently have stationery plants in Vietnam and Thailand, and a furni- ture plant in Malaysia exporting products to Japan. However, it is difficult to source high-quality raw materials in those countries, so we are still operating under an inefficient system whereby raw materials are sent from Japan, processed overseas, and then exported back to Japan. Potential suppliers in those regions com- mand capabilities comparable to those of Japanese companies, so going forward we will procure cheap raw materials locally and take a more active role in export- ing not only to Japan, but also to China and other parts of Asia. We will undertake manufacturing where the costs are cheapest, whether that be in Japan or overseas. Realignment of our manufacturing network is likely to
be an inevitable part of that pro- cess, and since cost reduction is an ongoing requirement, we intend to make root and branch changes.
Nonetheless, the fact is that simply enhancing Kokuyo’s strength as a company will not ensure its survival. We will there- fore also concentrate our efforts on employing business models that offer high added value in order to continuously enhance profitability. One area that offers potential in that sense is the environment- related business. In Japan, CO2 emissions from manufacturing plants are decreasing year on year, while CO2 emissions from offices are increasing. Looking ahead, it is likely that CO2 emissions regula- tions for office buildings will be reinforced, and reduction of CO2 emissions will become a pressing issue for companies. In addition, public recognition of global warm- ing as a problem makes it an issue around which Kokuyo and its cus- tomers can mobilize with a shared sense of purpose.
Last year, Kokuyo announced its intention to become the envi- ronmental frontrunner in the industry, and since then we have demonstrated originality of thought and ingenuity worthy of a frontrunner in pursuing a variety of initiatives addressing environmen- tal concerns.
When we first proposed put- ting the Eco-X “non-eco” mark on all insufficiently environmentally friendly products, there were many who argued that we were already doing enough to protect the environment in our own manufacturing processes. We eventually managed to obtain a consensus by explaining that as time goes on, customers will expect more and more from com- panies in terms of environmental action, and that it would become essential to increase the number of environmentally friendly prod- ucts we offer. The initiative itself has a single, straightforward goal: to completely eliminate products bearing the Eco-X mark by the end of 2010. Moreover, once the initiative got under way, we real- ized how much more there was to do in terms of environmental pro- tection, and we have established new, more stringent criteria for the non Eco-X products in our 2009 catalogs. Although the number of Eco-X products has temporarily increased as a result, our eyes remain firmly on our goal as we continue to drive our campaign forward. Our manufac- turing partners have endorsed the initiative, and are currently pursu- ing the necessary measures with a keen sense of urgency.
Eco-X Mark
Kokuyo’s original Eco-X mark. Kokuyo intends to identify all non-environmentally friendly products in its general catalog with the Eco-X mark and phase them out by the end of 2010.
The Eco LiveOffice Shinagawa, which we opened in 2008, was designed to reduce CO2 emis- sions on a continuous basis. The facility itself incorporates many innovative features, such as an outdoor “garden office,” as well
as LED lighting and energy-saving air conditioning, both activated by motion sensors. At the same time, we took steps to ensure that environmental considerations infused every aspect of employee working practices, thereby
changing their mindsets. These innovative environmental measures, unique to Kokuyo, stimulated considerable interest among the public. The Kokuyo Fair accompanying the launch of Eco LiveOffice Shinagawa drew
From “Eco” that’s about reduction
to “Eco” that’s about creation.
At Kokuyo’s Eco LiveOffice Shinagawa,
we both work to reduce CO
2emissions
while also enhancing environmental aware-
ness and creativity. We propose a new work style that
makes use of natural light and the changing seasons.
A new style of working,
where environmental awareness is
front and center.
12,300 visitors in two days, an increase of 50% compared to the previous year’s fair, despite the challenging economic conditions. Many visitors expressed grati- tude to Kokuyo for proposing products and services that so
clearly and precisely demonstrate the direction in which society should be heading.
Subsequently, when we started operating Eco LiveOffice Shinagawa, we were heartened when employees contributed their
own original suggestions. Ideas included spending 90 days per year working outside in the garden office, or using the stairs instead of the elevator when going to and from work. It is impossible to tell how many of
An office where staff work amid
light, gentle breezes, and greenery.
our customers will put the Eco LiveOffice ethos into practice in their own workplaces in future, or how far that ethos will spread, but when I see how committed the employees are to our goals, I feel that we have really achieved
something tangible in creating the Eco LiveOffice Shinagawa.
For over a decade, Kokuyo has taken a proactive approach where the environment is concerned, and our customers are well aware of the leading role we play in this
regard. Still, we cannot rest on our laurels, but must continue to offer the environmental solutions for which we are renowned if we are to be the environmental front- runner in our industry.
A: A teleconferencing system and other features support productivity and creativity as well as CO2 reductions.
B: The entire floor is fitted with LED lights and energy-saving air conditioners equipped with motion sensors.
C: Surrounded by nature, inspiration and creativity flow into work. D: The office also features multi-purpose spaces equipped with projectors
for holding information sessions and other meetings.
E: 12,300 curious visitors came to explore Eco LiveOffice Shinagawa.
A B C
D E
Overseas Manufacturing Bases
Thai stationery plant
Vietnamese stationery plant
Malaysian office furniture plant In addition to environmental
aims, another key aspect of our plans is our overseas strategy. Japan’s working-age population is expected to drop below 40 million in 70 years’ time. It seems to me that if we are to maintain stable growth despite such population decline, we will need to pursue
business opportunities overseas. In China, our furniture busi- ness achieved profitability in its fifth year of operations. We actively promoted our services to Japanese corporations doing busi- ness in the country, and secured a comparatively high market share for a Japanese company. Going
forward, we will target further growth by extending our market- ing to local Chinese corporations. In our Chinese mail order busi- ness, meanwhile, we expect it to take another two or three years until we achieve profitability. How- ever, two U.S. companies that entered the Chinese mail order
Sales Results and
Targets in China
(Billions of Yen)
Sales Results and
Targets in India
(Billions of Yen)
07/12 08/12 08/12 09/12
(Target)
09/12
(Target) 10/12(Target)
Furniture Stationery (Easy buy)
Easy buy Catalog
Kokuyo’s mail order office supply catalog serving Shanghai, Beijing and other areas in China
0.18
0.12
0.30
5.4 4.2
7.1
Returns to Shareholders
The Kokuyo Group offers returns to shareholders based on a target dividend payout ratio of 20% or higher, taking into account consoli- dated operating results as well as our established policy of paying a stable dividend. Although we recorded a net loss of ¥12.0 billion for fiscal 2008, this was due to temporary non-cash factors such as a one-time amortization of goodwill and a loss on revaluation of investments in securities. We therefore paid a cash dividend of
¥15.0 per share for fiscal 2008, reflecting an improvement in our cash flow, and to express our appreciation to our shareholders. Dividends for fiscal 2009 are also scheduled to be ¥15.0 per share.
All things considered, I believe that the best way we can contrib- ute to raising shareholder value in this harsh business environment is to ensure that we are successful in making Kokuyo stronger, and that we appreciate each custom- er’s particular needs and provide new products and services that match those needs.
I believe it is my duty to lead Kokuyo in overcoming the chal- lenges it currently faces and to fundamentally reform it as a com- pany, and I am determined to spare no effort in doing so. Now more than ever, as we put our plans into action, I ask our shareholders, investors, and other stakeholders for their continued support.
June 2009 Akihiro Kuroda, President
market before us have run into difficulties as a result of fund procurement problems back in the U.S. This is an ideal opportunity for us to increase our share, and we will capture as many new customers as we can en-masse with stand-out products such as the least expensive photocopying paper in the industry. We also took advantage of the increased buying power of Chinese individu- als by launching a B-to-C mail order business in 2008. Offering catalog gifts and hard-to-obtain high-end products made in Japan, this business is performing well.
In another overseas initiative, we will commence full-scale sales promotion in India, where we have plans to establish a local subsidiary. In future, I would like us to sell Kokuyo products beyond the BRICs markets in other prom- ising markets such as Africa.
As I mentioned earlier, Kokuyo has three overseas manu- facturing plants. The Vietnam Plant in particular still has capac- ity to spare, and we will be making active use of it as a pro- duction base for the Asia region. The plant will be able to compete with local companies on price by
mass-producing low-priced prod- ucts. Since the quality of these products is assured, once our overseas production in Vietnam and elsewhere is established, we can expect our overseas sales to grow dramatically.
Emerging economies are of course facing the same challeng- ing conditions that we currently face here in Japan, but there is no doubt that in the long-term they are growth markets. We will maintain our current course of action and wait until the markets pick up.
170,272 127,168
168,903 6,852
1,733 4,423
Review of Operations
Stationery Segment
Results for the
Fiscal Period to
December 31, 2008
Net sales from the stationery segment declined by 2.6% year on year to ¥168.9 billion, while operating income rose 2.0% to
¥4.4 billion.
For all prior-year comparisons, results for the twelve month period from January 1, 2007 to December 31, 2007 have been employed.
Market Conditions
The stationery goods market continues to face harsh condi- tions, including lower demand resulting from restrained purchas- ing of consumables and other products brought on by the eco- nomic recession; soaring prices for base paper, plastics and other raw materials; and intensifying competition in the office supply mail order business.
tape glue as well, we actively developed new products and expanded our share, most nota- bly through the introduction of three new products in the DOTLINER series, which achieves a clean break through dotted application of glue.
Office Supply Mail
Order Business
In the office supply mail order business, Kaunet sales continued to perform well, achieving a seventh straight year of growth in revenue since the service was founded. Overseas, the Easy buy
office supply mail order busi- ness is operated in the Shanghai and Beijing areas of China by Kokuyo Commerce (Shanghai) Co., Ltd. In the fiscal year under review, the com- pany launched Passage, a new B-to-C catalog featuring a wide selection of products previously difficult to obtain in China, focusing mainly on Japanese brands that have yet to enter the Chinese market. These and other initiatives helped bolster Easy buy service offerings and differentiate it from other mail- order companies.
Note: Kokuyo changed its fiscal year-end from March 31 to December 31, effective from the previous fiscal year. For the fiscal year ended December 31, 2007, the accounting term for the Company was 9 months.
Product
Development
During the year under review, the Kokuyo Group aimed for the number one market share in its major product categories, actively launching new products. In the area of notebooks, for example, we introduced novel offerings such as the Campus Notebook Dotted Ruled Lines Series devel- oped through research of the notebooks used by students who passed the entrance examina- tions at the prestigious University of Tokyo. Even amid a contracting market, we succeeded in expand- ing sales and further securing the leading market
share. In the area of
DOTLINER Cute
tape glue
Makes gluing more fun with pink heart-patterned glue tape.
Operating Income
(Millions of yen)
Net Sales
(Millions of yen)
Share of Total Net Sales
(08/12)
51.8%
Campus Notebook
Dotted Ruled Lines
Series
Notebooks designed especially for study- ing, with dots spaced at intervals along the lines to help make notes neater.
07/3 07/12 08/12 07/3 07/12 08/12
145,802 107,945
138,216 4,430
–231 1,506
Furniture Segment
September, when the economy began to feel the full brunt of the financial crisis and business began to postpone and cancel plans for office relocations and renovations.
Product
Development
Kokuyo released a number of new products designed to support creative work, such as the Avein office chair featuring the Compa- ny’s proprietary air cushion, and the LEVIST panel system, a flexi- ble solution of interchangeable furniture components for adjust- ing to changing work styles or variations in headcounts.
Overseas Markets
In the Chinese market, Kokuyo Trading (Shanghai) Co., Ltd., which designs and sells office furniture, achieved profitability in its fifth year of business as a result of a proactive marketing campaign targeting Japanese and Western companies in China as well as local Chinese companies.
Note: Kokuyo changed its fiscal year-end from March 31 to December 31, effective from the previous fiscal year. For the fiscal year ended December 31, 2007, the accounting term for the Company was 9 months.
LiveOffice
During the year under review, Kokuyo estab- lished an outdoor
“garden office” and opened Eco LiveOffice Shinagawa, an experimental office that aims to curb CO2
emissions by 41.5% by using low-energy equipment such as LED lighting and air condition- ers with 20% lower energy consumption.
Kokuyo Office System Co., Ltd., which handles sales in the major metropolitan areas, held a fair in July timed to coin- cide with the renewal of the main office in Kasumigaseki, which is open to the public as a LiveOf- fice. The Kasumigaseki office is a
“free address” office, offering a number of new work-style proposals, including Office Darts, which randomly assigns workers to desks in order to vitalize com- munication among employees.
07/3 07/12 08/12 07/3 07/12 08/12
Operating Income (Loss)
(Millions of yen)
Net Sales
(Millions of yen)
Share of Total Net Sales
(08/12)
42.4%
Avein
The Avein office chair incorporates Kokuyo’s proprietary air cushion, which adjusts its air pressure according to the user’s build and movements.
Office Darts
Office Darts randomly assigns workers to desks in order to vitalize communica- tion among employees.
Results for the
Fiscal Period to
December 31, 2008
Net sales from the furniture segment declined by 11.5% year on year to ¥138.2 billion, while operating income fell 41.2% to
¥1.5 billion.
For all prior-year comparisons, results for the twelve month period from January 1, 2007 to December 31, 2007 have been employed.
Market Conditions
Conditions during the past fiscal year were severe due to factors such as the decline in capital investment amid the economic slowdown. In particular, demand has fallen sharply since
23,485
17,71119,001
81
–100 –575
Store Fixtures Segment
Results for the
Fiscal Period to
December 31, 2008
The store fixtures segment posted net sales of ¥19.0 billion, down 24.1% year on year, and an operating loss of ¥0.6 billion.
For all prior-year comparisons, results for the twelve month period from January 1, 2007 to December 31, 2007 have been employed.
Market Conditions
Demand was stagnant amid restraint in retailer investment resulting from the economic slowdown, as major custom- ers postponed the opening of new stores.
Concentration and
Selection
In order to improve profitability, the Kokuyo Group withdrew from the unprofitable egao project (a business involving the sale of products displayed on rolling sales stands, which enable the sale of products in a wider variety of retail locations, including leased empty spaces in commercial facilities) and transferred the Store Goods mail order store products busi- ness to Kaunet.
Note: Kokuyo changed its fiscal year-end from March 31 to December 31, effective from the previous fiscal year. For the fiscal year ended December 31, 2007, the accounting term for the Company was 9 months.
Net Sales
(Millions of yen)
07/3 07/12 08/12
Share of Total Net Sales
(08/12)
Operating Income (Loss)
(Millions of yen)
07/3 07/12 08/12
Product display
cabinet
A versatile display cabinet with a simple design.
5.8%
Kokuyo’s CSR Initiatives
For the Kokuyo Group, corporate social responsibility
(CSR) means being accountable to and trusted by society.
Kokuyo aims to discharge its responsibility to society and
retain public trust by contributing to the realization of
a sustainable society through its business activities and
socially beneficial activities.
Corporate Philosophy
“Contributing to
society through the
provision of superior
products”
Since its founding, the Kokuyo Group has aspired to support social and economic development through the provision of familiar products that people use on a daily basis. In the years to come our aim will be the same: to pro- vide products that delight millions of customers through the uncom- promising pursuit of ease of use and ready availability in familiar products that people use without a second thought.
Socially Responsible
Management
Basic Policy on CSR
The normative standard that informs and imbues the Kokuyo Group’s CSR activities is the cor- porate philosophy of “contributing to society through the provision of superior products.” This philoso- phy derives from the Kokuyo Management Credo, which codifies the concept of “Serving all cus- tomer needs” and the attitude of
self-reliance advocated by Kokuyo founder Zentaro Kuroda.
In keeping with this standard, in 2004 Kokuyo established the Kokuyo Group CSR Charter with the aim of building and improving relationships with our various stake- holders as a good corporate citizen. In the Charter, Kokuyo sets forth specific action guidelines for each of five areas of focus (customers, local communities, environmental protection, business activities, and human rights), and conducts its activities based on these guide- lines. The Company has also estab- lished the Kokuyo Corporate Ethics Code, a guideline for day-to-day
actions of employees in relation- ships with stakeholders.
Starting in 2008, Kokuyo has designated preventing global warming and promoting eco- friendly products as two themes for priority measures in its CSR activities. The Company is work- ing to combine business strate- gies with CSR activities by, for example, launching the Eco-X mark, which identifies all non- environmentally friendly products, and striving to eliminate such products from its lineup. In this manner, Kokuyo is stepping up efforts to better fulfill its social responsibilities.
Management Credo
“Serving all customer needs” Corporate Philosophy
“Contributing to society through the provision of superior products”
Kokuyo Group CSR Charter
Kokuyo Corporate Ethics Code
31,220
29,173 28,780 28,337 29,311 28,488
Environment
Global Warming
Prevention Measures
In fiscal 2008, the Kokuyo Group’s CO2 emissions volume was 2.8% lower than in the previous fiscal year, representing a decrease of 823 tons. Of this decrease, emis- sions from manufacturing plants were down by 202 tons, or 1.3% year on year, emissions from logistics (storage and shipping) were down by 321 tons, or 4.3% year on year, and office emissions were down 300 tons, or 4.5% year on year. Notably, in the area of preventing global warming through eco-friendly offices, the Company established two such offices, Eco LiveOffice Shinagawa and Resonance Field 2.0, and actively proposed eco-friendly solutions to customers.
Promotion of
Eco-friendly Products
In conjunction with the launch of an initiative to eliminate Eco-X mark products, in 2008 Kokuyo switched its indicator for eco- friendly products from the previ- ous eco-products sales ratio to the percentage of products that bear the Eco-X mark.
In fiscal 2008, Kokuyo focused on promoting the following two priorities:
1. Reducing volatile organic com- pounds (VOCs) by reviewing adhesives and other materials used during product manufactur- ing, and
2. Reviewing product planning to facilitate recycling, while investi- gating the facts behind the recy- cled-paper percentage mislabeling issue that arose in January 2008 and bolstering corrective mea- sures mainly through onsite inspections of paper manufactur- ing plants.
Review of Standards
and Policy for 2009
and Beyond
Along with the decision to elimi- nate Eco-X mark products, in 2008 Kokuyo revised the standards for labeling a product with the Eco-X mark. As a result of this review, the Company established an eco- friendly product policy which states that it will make environ- mental efforts at all four stages of the product lifecycle: production, transportation, use, and disposal. This policy will be effective through the end of 2010. The review also created uniform Eco-X mark labeling standards for statio- nery and furniture products.
In line with this revision, Eco-X mark labeling standards have become more demanding than for products in the 2008 edition of the Kokuyo general catalog. Conse- quently, as of December 31, 2008, products labeled with the Eco-X mark accounted for 65% of statio- nery products and 14% of office furniture products.
CO
2Emissions
(Tons of CO2)
90 04 05 06 07 08
CO
2Emissions Sources
(Tons of CO2)
Uses CO2 Emissions Index from Version 1.5 of the Corporate Greenhouse Gas Emissions Volume Calculation Guidelines (Ministry of the Environment)
Offices 6,339
22%
Logistics (Storage and Shipping) 7,068
25%
Plants 15,081
53%
Going forward, the newly established Eco-X mark labeling standards will remain in force, with the aim of eliminating all Eco-X mark products by the end of 2010, as initially planned.
Contributions to
Society
In order to remain a good corpo- rate citizen that enjoys the trust of local communities, the Kokuyo Group conducts a wide range of social contribution activities in addition to its business activities.
Last year, the Group conducted a total of 164 social contribution activities, including plant tours and support for various events.
On May 12, 2008 a major earthquake struck Szechuan Prov- ince in China, causing extensive damage. In order to help the affected areas recover as soon as possible, the Kokuyo Group donated a total of ¥10 million (670,000 yuan) in emergency relief assistance to the Red Cross Soci- ety of China.
Inclusion in Prominent
SRI Indexes in Japan
and Abroad
Socially responsible investment (SRI) in companies that actively engage in environmental protec- tion, demonstrate progressive employment practices, and make social contributions has become the focus of increasing attention worldwide. In recogni- tion of the Kokuyo Group’s pro- active approach to CSR, the Company has been included in the Ethibel Sustainability Indexes run by Ethibel, a leading
Western SRI consulting firm. Kokuyo is also included in the FTSE4Good index run by FTSE International Ltd. of the U.K., as well as other prominent SRI indexes.
Stationery
(%)
Furniture
(%)
Eco-X Mark
Kokuyo’s original Eco-X mark. Kokuyo intends to identify all non-environmentally friendly products in its general catalog with the Eco-X mark and phase them out by the end of 2010.
08
08 09 10 11 09 10 11
48 65
35
0%
25
14 10
0% Eliminate
Eco-X mark products by
the end of 2010
Ethibel Sustainability
Indexes
(Sweden)
FTSE4Good
(UK)
Corporate Governance Framework
Corporate Governance
The Kokuyo Group implements corporate governance with an emphasis on transparency, speed, and fairness. While striving to clarify executive authority and responsibilities under the holding company system, the Group also works to strengthen oversight functions to enhance corporate governance. The Kokuyo Group Basic Policy on Corporate Gover- nance, formulated in October 2004 upon the transition to a hold- ing company structure, defines the management framework and basic structure of the Kokuyo Group under the Group’s holding company and spin-off company structure and stipulates basic matters concerning Group busi- ness operations.
Kokuyo has a corporate auditor system. The Board of Directors
comprises seven directors (no outside directors). To ensure a management structure that can react responsively to changes in the operating environment, the term of office of directors is one year. There are four statutory audi- tors (including two outside audi- tors) supported by a full-time staff of two. In addition, Kokuyo has signed a legal counsel contract with four attorneys and obtains legal advice as necessary. The Group also conducts internal audits based on shared Group- wide themes to further strengthen collaboration among the holding company and Group companies.
Internal Control
System
At a Board of Directors meeting in May 2006, the Kokuyo Group decided the basic policy for its internal control system.
This basic policy stipulated a framework for internal control within the Group, including cre- ation of a system for storing and safekeeping information related to directors’ execution of duties in accordance with the Rules on Handling of Documents and ethi- cal standards according to the Kokuyo Corporate Ethics Code.
Furthermore, with the enforce- ment of the Financial Instruments and Exchange Act, in January 2009 Kokuyo established a cross- organization J-SOX Committee that actively engages in creation and enhancement of internal con- trols with a focus on ensuring the reliability of financial reporting.
Compliance and Risk
Management
The Kokuyo Group periodically conducts training to raise compli- ance awareness and maintain compliance with laws and regula- tions. In fiscal 2008, as part of efforts to prevent the
reoccurrence of misconduct by employees, we conducted compliance training for executive officers at all operating compa- nies to better identify compliance breaches and understand the seriousness of the consequences. We also provided compliance training to managers of procure- ment and purchasing depart- ments. Additionally, in light of a violation of the Antimonopoly Law with respect to tendering for providing equipment to local governments, we held fact-finding
Independent auditor
Group operating companies Internal auditing units
Board of Directors
President
Management Committee
Audit
Internal audit Collaboration
Control
Appointment/ dismissal Appointment/
dismissal of auditors
Accounting audit Appointment/
dismissal of directors
Board of Auditors
Management Audit Department General Meeting of Shareholders
Holding company
J-Sox Committee Risk and
Compliance Committee Environmental
Committee Central
Workplace Safety and Hygiene Committee
Diversity Promotion Committee
Akihiro Kuroda
President
Yasuhiro Kuroda
Senior Executive Director
Toshifumi Okubo
Executive Director
Tsukasa Ozaki
Director
Takuya Morikawa
Director
Yoshiaki Yoshimoto
Director
Hidekuni Kuroda
Director
Board of Directors
(As of March 27, 2009)
Directors Statutory Auditors
Akihiro Kondo Yoichi Kotani
Outside Auditors
Yoshio Terada Naoshige Nakada interviews and had direct conver-
sations about preventing viola- tions at sales companies. In fiscal 2009, Kokuyo plans to implement mandatory compliance training at each level of the company.
The Kokuyo Group has estab- lished a Risk and Compliance Committee to lead compliance promotion efforts. In 2008, the president of the Kokuyo Group took the helm of the committee, as the Group worked to speed up responses to crisis issues and enhance preventive measures.
In addition, for each operating company, Kokuyo visualizes the current risk situation using a “risk map,” identifies key risks to be
managed on an annual basis, and works to prevent risks from mate- rializing and to respond quickly in such an event. In fiscal 2008, the common theme was the risk of improper environmental labeling,
Corporate governance committees meet to discuss key issues
including that of the Kokuyo Group’s own Eco-X mark. In response to this theme, Kokuyo shared information with manufac- turing companies and took action to prevent risks from materializing.
Six-year Summary
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
The years ended March 31, 2004, 2005, 2006 and 2007; and the years ended December 31, 2007 and 2008
Millions of yen
Thousands of U.S. dollars
2008.12 2007.12 2007.3 2006.3 2005.3 2004.3 2008.12
For the year:
Net sales ¥326,120 ¥252,824 ¥339,559 ¥303,959 ¥283,519 ¥273,462 $3,582,162
Cost of sales 221,574 175,512 228,959 202,879 187,008 181,279 2,433,810
Selling, general and
administrative expenses 99,192 75,910 99,237 86,975 84,352 83,317 1,089,543
Operating income 5,354 1,402 11,363 14,105 12,159 8,866 58,809
Net income (loss) (11,991) (5,326) 5,622 4,145 5,207 1,949 (131,711)
Capital expenditure 4,988 7,733 4,999 6,042 6,431 9,369 54,789
Depreciation and amortization 6,488 4,430 6,057 6,082 6,220 6,197 71,265
Net cash and cash equivalents provided
by operating activities 16,153 3,286 7,936 11,488 10,168 7,457 177,428
Net cash and cash equivalents used
in (provided by) investing activities (1,012) (11,333) 2,389 (17,217) (20,778) (7,112) (11,116) Net cash and cash equivalents provided
by (used in) financing activities (12,343) 7,349 (5,272) 2,059 7,075 (4,586) (135,578)
At year-end:
Total assets 266,419 301,187 320,033 314,573 291,651 289,194 2,926,395
Working capital 50,755 44,584 56,120 50,733 58,486 57,790 557,502
Property, plant and equipment, net 79,534 81,195 79,349 89,733 94,778 97,134 873,616
Total liabilities 106,599 120,780 130,125 121,051 104,268 103,693 1,170,903
Interest-bearing debt 41,448 52,069 42,958 36,491 26,770 17,777 455,272
Total net assets 159,820 180,407 189,908 193,522 187,378 185,501 1,755,492
Minority interests 741 1,225 1,235 1,678 340 360 8,139
Net assets 159,079 179,182 188,673 191,844 187,038 185,141 1,747,353
Yen U.S. dollars
Per share data:
Basic net income (loss) ¥ (101.36) ¥ (45.02) ¥ 46.94 ¥ 33.82 ¥ 41.88 ¥ 15.38 $(1.11)
Diluted net income – – – 31.80 – – –
Cash dividends applicable to the year 15.00 11.25 15.00 15.00 18.50 15.00 0.16
Net assets 1,344.82 1,514.64 1,594.79 1,587.49 1,522.17 1,506.80 14.77
%
Ratios:
Ratio of operating income to net sales 1.6% 0.6% 3.3% 4.6% 4.3% 3.2%
Return on sales (3.7) (2.1) 1.7 1.4 1.8 0.7
Return on equity (7.1) (2.9) 3.0 2.2 2.8 1.1
Return on assets (4.2) (1.7) 1.8 1.4 1.8 0.7
Equity ratio 59.7 59.5 59.0 61.0 64.1 64.0
Debt-to-equity ratio 26.1 29.1 22.8 19.0 14.3 9.6
Thousands of shares
Common stock:
Number of shares issued 128,742 128,742 128,742 128,742 128,742 128,742
Notes: 1: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥91.04=U.S.$1, the approximate exchange rate prevailing at December 31, 2008. 2: In August 2004, Kokuyo issued ¥12 billion in bonds with stock acquisition rights, but as their coupon was zero, no interest liability arose.
3: The period ended December 31, 2007 comprised a period of only 9 months instead of 12 months.
Overview
In running its operations, the Kokuyo Group remains steadfast to its basic management principle of “contributing to society through the provision of superior prod- ucts.” Under the management vision of “Always Innovating For Your Knowledge,” the Group con- stantly works to innovate in response to changes in society to ensure that its activities play a useful social role.
The Group’s brand message highlights “Inspiration, Efficiency, and Amenity” as the types of added value that Kokuyo aims to continue delivering to assist users in their “knowledge work.”
As of December 31, 2008, the Kokuyo Group consisted of the holding company (Kokuyo Co., Ltd.), 50 subsidiaries, and 18 affili- ates. Of these, 25 companies were consolidated subsidiaries and 2 were affiliates accounted for by the equity method.
During the period under review (from January 1 through Decem- ber 31, 2008), the Japanese econ- omy entered a recession phase, characterized by deteriorating corporate performance due to the global financial crisis triggered by the subprime loan problem. As a result, business conditions were extremely severe.
Amid this operating environ- ment, the Kokuyo Group strove to reduce costs throughout its opera- tions in order to re-establish its revenue base and capacity to generate profits. At the same time, the Group worked to secure new competitive advantages and provide products and services that reflect customer needs. Further- more, in line with its goal of becoming an environmental inno- vator in the industry, the Group made efforts to cut back on CO2
emissions volume from offices. Other environmental initiatives included establishing Eco LiveOffice*1 Shinagawa—a test office targeting an environmentally conscious approach to boosting creativity and productivity—and a reduction in the number of products carrying the Eco-X mark (products that are insufficiently eco-friendly).
*1 Kokuyo makes the design of its own offices publicly available as inspiration for the creation of office spaces. These publicly viewable offices are called “LiveOffices.”
In 2007, the Kokuyo Group changed its consolidated fiscal year-end from March 31 to December 31, such that the fiscal
“year” ended December 31, 2007 comprised a period of only 9 months instead of 12 months. Due to the difference in the length of the fiscal years, year-on-year increases and decreases are not provided in this section.
Net Sales
Consolidated net sales for the year under review amounted to
¥326.1 billion. This was due in part to a significant decrease in demand resulting from the sudden worsening of business sentiment in the second half of the year. The breakdown by seg- ment is as follows: stationery, 51.8%, furniture, 42.4%, and store fixtures, 5.8%. These per- centages were largely unchanged year on year.
Cost of Sales and
Cost of Sales Ratio,
Gross Profit and Gross
Profit Ratio
Cost of sales amounted to ¥221.6 billion, with a cost of sales ratio of 67.9%. Gross profit was ¥104.5 billion, and the gross profit ratio was 32.1%. Despite increases in raw material costs, the Group took measures to boost the gross profit ratio, revising prices for major products, reducing costs, and offering more high value- added proposals.
SG&A Expenses
Selling, general and administrative (SG&A) expenses amounted to
¥99.2 billion, with an SG&A expenses ratio of 30.5%. Major contributing factors were lower variable expenses associated with decreased sales and cost- reduction efforts.
Management’s Discussion and Analysis for
AR 2008/12
Due to the change in Kokuyo’s fiscal year-end, the period ended December 31, 2007 was an irregular nine-month period.
Research and
Development Expenses
Research and development expenses for the fiscal year amounted to ¥1.7 billion, compris- ing ¥1.0 billion for the stationery segment, ¥0.6 billion for the furni- ture segment, and ¥0.1 billion for the store fixtures segment.
Operating Income and
Operating Income
Ratio
Operating income totaled ¥5.4 billion. This was largely due to factors such as the effects of lower gross profit in full twelve month period terms caused by the decrease in net sales, despite measures to improve the gross profit ratio and reduce SG&A expenses. The operating income ratio was 1.6%.
Extraordinary Loss
On a consolidated basis, during the fiscal year under review, the Group saw no extraordinary profit, but recorded an extraordinary loss of ¥13.6 billion. Major compo- nents of this loss were ¥7.0 billion in a one-time amortization of goodwill for consolidated subsid- iary Actus Co., Ltd., ¥4.1 billion in loss on valuation of investment in securities, and ¥1.0 billion in expenses for additional contribu- tions on withdrawal from pension funds at a consolidated subsidiary.
Net Loss
The Company posted a net loss of
¥12.0 billion for the fiscal year under review. The reasons for this include ¥13.6 billion in extraordi- nary loss.
Capital Expenditure
Capital expenditure amounted to
¥5.0 billion.
By Segment
Stationery Segment
We estimate the value of the Japanese stationery market at around ¥1 trillion*2. The business environment remains harsh, with steeply rising prices for raw mate- rials such as base paper and plas- tics, accelerating diversification of distribution channels and intensi- fying competition in the office supply mail order area. Amid this environment, we believe that the Kokuyo Group, as the only comprehensive manufacturer of stationery goods in Japan, holds the leading market share of approximately 11%.
0 100,000 200,000 300,000 400,000
05/3 06/3 07/3 07/12 08/12 05/3 06/3 07/3 07/12 08/12 05/3 06/3 07/3 07/12 08/12
326,120 32.1
0 10 20 30 40
30.5
0 5,000 10,000 15,000 20,000 25,000
0 1 2 3 4 5
5,354 1.6
Net Sales
(Millions of yen)
Stationery Segment Furniture Segment Store Fixtures Segment
* In fiscal 2005, Kokuyo reclassified its business segments.
Ratio of Gross Profit to
Net Sales and SG&A
Expenses to Net Sales
(%)
Operating Income and
Ratio of Operating
Income to Net Sales
(Millions of yen, %)
Ratio of Gross Profit to Net Sales Ratio of SG&A Expenses to Net Sales
Operating Income (Left Scale)
Ratio of Operating Income to Net Sales (Right Scale)
Under these conditions, we aimed for the number one market share in major product categories, actively launching new products. In the area of notebooks, for example, the Company introduced novel offerings such as the Campus Notebook Dotted Ruled Lines Series developed through research of the notebooks used by students who passed the entrance examinations at the prestigious University of Tokyo. Even amid a contracting market, we succeeded in expanding sales and further securing the leading market share. In the area of tape glue as well, we actively devel- oped new products and expanded our share, most notably through the introduction of three new products in the DOTLINER series, which achieves a clean break through dotted application of glue.
We also responded to the increasing importance of corporate disaster control measures with our disaster control solutions busi- ness. The focus here is develop- ing new products and services with all the functions needed in case of disaster. Unique new prod- uct offerings included a multi- function radio light offering reassurance for those awaiting rescue in a stalled elevator and a cabinet containing emergency food and water supplies, also for use in elevators. Through these and other products, we offered disaster prevention solutions to a broad range of users, opening up new markets. Our customers include apartment complexes, commercial facilities and hospitals as well as businesses.
*2 Kokuyo’s own estimate based on industrial and commercial data, and Kokuyo Group research.
In the office supply mail order business, Kaunet sales continued to perform well, achieving a sev- enth straight year of growth in revenue since the service was founded. Overseas, the Easy buy office supply mail order business is operated in the Shanghai and Beijing areas of China by Kokuyo Commerce (Shanghai) Co., Ltd. In the fiscal year under review, the company launched Passage, a new B-to-C catalog featuring a wide selection of products previ- ously difficult to obtain in China, focusing mainly on Japanese brands that have yet to enter the Chinese market. These and other initiatives helped bolster Easy buy service offerings and differentiate it from other mail-order companies.
–12,000 –6,000 0 6,000 12,000
05/3 06/3 07/3 07/12 08/12 05/3 06/3 07/3 07/12 08/12 05/3 06/3 07/3 07/12 08/12
–11,991 –101.36
4,988 6,488
–7.1 –8
–4 0 4 8
–120 –60 0 60 120
0 2,000 4,000 6,000 8,000
Net Income (Loss) and
Basic Net Income (Loss)
per Share
(Millions of yen, Yen)
Net Income (Loss) (Left Scale)
Basic Net Income (Loss) per Share (Right Scale)
ROE
(%)
Capital Expenditure
and Depreciation and
Amortization
(Millions of yen)
Capital Expenditure Depreciation and Amortization
Consequently, the stationery segment posted net sales of
¥168.9 billion and operating income of ¥4.4 billion.
Furniture Segment
The total Japanese office furniture market (including office furniture, building materials, and services) is worth around ¥800 billion annu- ally*3, about ¥300 billion of which comprises office furniture. Because this market is highly correlated to trends in the eco- nomic climate, it can be expected to have contracted in light of the global economic recession in the second half of the fiscal year.
Kokuyo is estimated to hold the leading market position, with a 17% share, which it has cap- tured by leveraging its nationwide sales network.
Business conditions were harsh during the fiscal year under review, due in part to decreased capital expenditures as a result of the economic slowdown. Amid this environment, the Kokuyo Group held its WORK@EARTH fair, and applied itself to introduc- ing a new image for “the office” as a workplace, establishing an outdoor “garden office,” and opening Eco LiveOffice Shinagawa. The latter is an experimental office where the aim is to reduce CO2 emissions by 41.5% by using low-energy equipment such as LED lighting and air conditioning that reduces energy consumption
by 20%. In addition, during the fair itself, Kokuyo displayed a number of new products designed to support creative work, such as the Avein office chair featuring the Company’s proprietary air cushion, and the LEVIST panel system, a flexible solution of interchangeable furni- ture components for adjusting to changing work styles or variations in headcounts. Approximately 12,300 people visited the fair over the course of the two days, 4,000 more than in the previous year.
In addition, Kokuyo Office System Co., Ltd., which serves corporate clients in major metro- politan areas, held a fair following the July renovation of its head office in Kasumigaseki, Tokyo, which is open to the public as a liveoffice. Over the course of two days, the event drew approxi- mately 3,200 visitors to view the new work style proposals such as OFFICE DARTS, which promotes intra-office communication by assigning seats at random.
Meanwhile, the company spurred demand by proposing solutions to enhance corporate value by increasing office produc- tivity, introducing innovations in work styles and other means.
In the Chinese market, Kokuyo Trading (Shanghai) Co., Ltd., which designs and sells office furniture, achieved profitability in its fifth year of business as a result of a proactive marketing
campaign targeting Japanese and Western companies in China as well as local Chinese companies.
Against this backdrop, net sales in the furniture segment amounted to ¥138.2 billion, and operating income was ¥1.5 billion.
*3 Kokuyo’s own estimate based on industrial and commercial data, and Kokuyo Group research. The ¥800-billion office furniture market break- down is roughly ¥300 billion for office furniture,
¥200 billion for building materials and ¥300 billion for planning and services.
Store Fixtures
Segment
The ¥200-billion Japanese store fixtures market is strongly affected by the number of new retail store openings. Due to the economic slowdown during the fiscal year under review, there were few new openings of retail stores, and it is believed that the market contracted. The Kokuyo Group is estimated to have an 11% share of this market, placing it second in Japan.*4
Demand was stagnant amid restraint in retailer investment resulting from the economic slow- down, as major customers post- poned the opening of new stores. Nevertheless, the Kokuyo Group conducted active marketing of store fixtures, secured new cus- tomers, and proposed storefront promotional fixtures.
As a result, net sales in the store fixtures segment amounted to ¥19.0 billion, with the decrease in sales resulting in an operating loss of ¥0.6 billion.
*4 Kokuyo’s own estimate based on industrial and commercial data, and Kokuyo Group research.
Liquidity and
Capital Resources
1) Fund Procurement
Policy and Liquidity
Management
Kokuyo’s capital structure policy centers on the use of retained earnings but calls for the use of direct and indirect financing as necessary. Kokuyo has been assigned a long-term credit rating of A- and a short-term credit rating of a-1 by Rating and Investment Information, Inc. of Japan. Kokuyo intends to fund future business expansion from internal resources.
2) Assets, Liabilities,
and Total Net Assets
Total assets as of December 31, 2008 amounted to ¥266.4 billion, a decrease of ¥34.8 billion from December 31, 2007. Of the total, current assets accounted for
¥118.4 billion, a decrease of ¥8.3 billion. The main factor in this decline was a ¥10.9 billion decrease in trade notes and accounts receivable related to the decline in net sales. Fixed assets decreased ¥26.5 billion to ¥148.0 billion. Within this, tangible fixed assets declined ¥1.6 billion from the previous fiscal year-end, while intangible fixed assets declined
¥8.0 billion due to factors such as one-time amortization of goodwill. Total investments and other assets decreased ¥16.9 billion as a result of a decline in market valua- tion of investment securities and other factors.
Meanwhile, liabilities decreased
¥14.2 billion from December 31, 2007 to ¥106.6 billion. Of the total, current liabilities were ¥67.7 billion, a decrease of ¥14.4 billion. This was mainly due to a decrease of
¥6.5 billion in trade notes and
accounts payable accompanying the decline in net sales. Long-term liabilities increased by ¥0.3 billion to ¥38.9 billion.
Total shareholders’ equity declined ¥13.6 billion to ¥158.4 billion, primarily as a result of a decrease in retained earnings due to a net loss of ¥12.0 billion during the fiscal year under review. Kokuyo holds ¥14.3 billion in trea- sury stock, at cost. Total net assets, comprising shareholders’ equity, valuation and translation adjustments, and minority inter- ests, amounted to ¥159.8 billion.
The current ratio was 175.0%, up 20.7 percentage points from the previous fiscal year-end, and the ratio of inter- est-bearing debt to net assets was 26.1%. Management believes that Kokuyo continues to have a robust financial founda- tion and adequate liquidity.
05/3 06/3 07/3 07/12 08/12 05/3 06/3 07/3 07/12 08/12 0 05/3 06/3 07/3 07/12 08/12
5,000 10,000 15,000 20,000 25,000
–4.5 0 1.5 3
266,419
–400,000 –4.2 0 200,000 400,000
159,820 59.7
–12,343 16,153
–1,012 0
60,000 120,000 180,000 240,000 300,000
0 15 30 45 60 75
Total Assets (Left Scale) ROA
(Right Scale)
Total Net Assets (Left Scale) Equity Ratio
(Right Scale)
Net Cash and Cash Equivalents Provided by Operating Activities
Net Cash and Cash Equivalents Used in (Provided by) Investing Activities Net Cash and Cash Equivalents Provided
by (Used in) Financing Activities
Total Assets and ROA
(Millions of yen, %)
Total Net Assets and
Equity Ratio
(Millions of yen, %)
Cash Flows
(Millions of yen)
