KOKUYO Co., Ltd. Annual Report 2011Fiscal year ended December 31, 2011
Excelling in Japan,
Expanding Overseas
Annual Report 2011
Fiscal year ended December 31, 2011
CORPORATE PHILOSOPHY
“Being useful to the world through our products”
CORPORATE VISION
Always Innovating For Your Knowledge
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
This annual report contains statements about KOKUYO’s future business 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-sec- tor capital investment, competitive pricing 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 previ- ously mentioned factors.
CONTENTS
C2 CORPORATE PHILOSOPHY / CORPORATE VISION 01 FINANCIAL HIGHLIGHTS
02 WHAT WE DO
06 MESSAGE TO STAKEHOLDERS
08 FEATURE: PRESIDENT AND CEO AKIHIRO KURODA SPEAKS
ACHIEVING GROWTH GLOBALLY, LEVERAGING OUR STRENGTHS IN JAPAN 16 REVIEW OF OPERATIONS
18 BOARD OF DIRECTORS, AUDITORS, AND CORPORATE OFFICERS 20 CORPORATE GOVERNANCE
22 KOKUYO’S CSR 26 SIX-YEAR SUMMARY
27 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR AR 2011.12 34 CONSOLIDATED BALANCE SHEETS
36 CONSOLIDATED STATEMENTS OF OPERATIONS
37 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS 38 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 39 CONSOLIDATED STATEMENTS OF CASH FLOWS
40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 69 INDEPENDENT AUDITORS’ REPORT
70 CORPORATE DATA C2
0 40 80
20 60 100
0 120,000 240,000
60,000 180,000 300,000
2009 2010 2011 252,794
58.2
–6 –3
–4
–5 0
–1
–2 1
–6,000 –3,000
–4,000
–5,000 –1,000
–2,000 1,000
0
2009 2010 2011 –5,460
–3.6
0 1.0 2.0
0.5 1.5 2.5
0 2,000 4,000
1,000 3,000 5,000
2009 2010 2011 4,073
1.6
NET SALES
(Millions of yen)
OPERATING INCOME/RATIO OF OPERATING INCOME TO NET SALES
(Millions of yen) (%)
NET INCOME (LOSS)/RETURN ON EQUITY
(Millions of yen) (%)
TOTAL ASSETS/EQUITY RATIO
(Millions of yen) (%)
FINANCIAL HIGHLIGHTS
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES The years ended December 31, 2011, 2010 and 2009
Millions of yen
Thousands of U.S. dollars
2011 2010 2009 2011
For the year:
Net sales ¥260,005 ¥261,874 ¥266,726 $3,344,546
Operating income 4,073 3,282 579 52,393
Net loss (income) (5,460) 815 595 (70,234)
At year-end:
Total assets 252,794 252,880 252,053 3,251,788
Net assets 147,270 155,923 157,475 1,894,392
Yen U.S. dollars
Per share data:
Basic net loss (income) ¥ (46.16) ¥ 6.89 ¥ 5.03 $ (0.59)
Cash dividends applicable to the year 15.00 15.00 15.00 0.19
Note 1: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥77.74=U.S.$1.00, the approximate exchange rate prevailing on December 31, 2011.
Operating Income (Left Scale) Ratio of Operating
Income to Net Sales (Right Scale)
Net Income (loss) (Left Scale) Return on Equity
(Right Scale)
Total Assets (Left Scale) Equity Ratio
(Right Scale) 0
100,000 200,000 300,000
2009 2010 2011 260,005
01
WHAT WE DO
Since its establishment,
KOKUYO has evolved as a
full-line manufacturer of office
stationer y, supplies and
furniture by creating new
products from new ideas that
have garnered the support of
Japanese consumers.
KOKUYO traces its roots back to 1905 when founder Zentaro Kuroda established Kuroda Hyoshi-Ten to manu- facture the covers of Japanese-style bookkeeping led- gers. The Company then evolved into a comprehensive stationer y manufacturer by expanding its lineup, mainly for paper products like Western-style account books, invoices, and notebooks. In addition, KOKUYO entered the office furniture market in 1960 with the launch of its first steel product—filing cabinets.In this way, we have gained over a centur y of experi- ence in stationer y and half a centur y in office furniture to become Japan’s No. 1 office supply manufacturer. OF BOUNTIFUL
ACCOMPLISHMENTS
years
OVER
100
100
Book cover to a ‘Wacho’ (traditional Japanese accounting book) 02
Our corporate brand enjoys an extremely high recogni- tion rate in Japan, and we ranked 11th in a corporate brand perception quotient (PQ) sur vey conducted by Nikkei Research Inc. In addition, we are working hard to be easy on the environment, including by making all of our products environmentally friendly, and were ranked a respectable 22nd in the Nikkei Environmental Man- agement Sur vey.
MOST RECOGNIZABLE BRAND IN JAPAN
2011 RANKING TOP 20
Rank (2011) Corporate Name or Brand Name Total Score 1 Google
2 Panasonic 3 Microsoft Japan 3 Canon
5 SONY 5 YAHOO! 7 Shachihata 8 Oriental Land 9 SHARP
10 Yamato Transpor t
11 KOKUYO
12 NISSIN FOODS PRODUCTS 13 TOYOTA
13 TOSHIBA
15 Kewpie Corporation 16 Coca-Cola (Japan) Company 17 TOTO
17 Häagen-Dazs Japan 17 Kao Corporation 20 CASIO COMPUTER 20 AJINOMOTO
TH
We develop products and technologies with a mission in mind: delivering useful products and ser vices in tune with the changing times and customer needs. For instance, our attention to detail regarding the six compo- nents of value—binding method, material quality, ruling, size, design, and price—for our Campus Notebook series has made it the top notebook brand in the industr y, with annual sales topping 100 million notebooks and cumu- lative sales since its launch topping 2.4 billion notebooks. NOTEBOOKS SOLD IS PROOF KOKUYO IS A
STRONG PRODUCT DEVELOPER
11
11 2.4 2.4 billion
New campus notebooks with new design
03
WHAT WE DO
Through these three
businesses, KOKUYO seeks to
raise the creativity and
efficiency of office workers
around the world, and aims to
contribute to social progress as
a creator of comfortable spaces
and environments.
In this business, we manufacture, purchase, and sell paper products such as notebooks, invoices, and files, stationer y including writing instruments and products made of metal like paper clips. With a total of 12,000 items, we command the top share in the Japanese stationer y market.
Fur thermore, we are developing business overseas, focusing on the emerging Asian markets of Vietnam, China, and India.
1
1
STATIONERY BUSINESS
Harinacs (Staple-Less Stapler) Airofit in new color 04
In this business, we manufacture and sell furniture for offices and public spaces, store fixtures, and offer a variety of spatial concepts for offices, public buildings and commercial facilities.
Fur thermore, we are developing operations overseas in China and other emerging Asian markets.
2
2
FURNITURE BUSINESS
The mail-order business comprises online and catalog sales of of fice supplies via Kaunet Co., Ltd. and Forest Co., Ltd.
The retail business encompasses operation of The Conran Shop, a home furnishings store founded by British designer Sir Terence Orby Conran, and ACTUS, an interior store.
Operations extend overseas to the Easybuy online office supply business in China, and The Conran Shop we opened in Shanghai.
3
3
MAIL-ORDER AND RETAIL BUSINESS
WORKLINK
The Conran Shop in Shibuya
Kaunet catalog
05
MESSAGE TO STAKEHOLDERS
AKIHIRO KURODA
President and CEO
Excelling in Japan,
Expanding Overseas
06
In the year under review, the re-emergence of the European debt crisis in the summer dampened and delayed Japan’s economic recovery from the Great East Japan Earth- quake until the fourth quarter. KOKUYO’s sales had also begun to recover year on year, and we were able to report financial results that were mostly on target.
Despite the tenuous economic circum- stances, the KOKUYO Group remained on track with its plan to enhance margins in Japan and invest the profits to drive top-line sales overseas. We made strides executing a plan to boost overseas sales to 30% of net sales by 2020, while continuing to reinforce our operations in Japan. In the stationery business, earnings strength improvements from well-developed products with excep- tional value became a solid business model that provided the cash flow to grow interna- tionally. In the furniture business, we set the stage for recovery by renewing the value chain from end-to-end; from development and manufacturing, to distribution and sales.
In terms of our operating results, net sales declined 0.7% to ¥260.0 billion. Successful efforts to improve the gross margin 0.5 of a percentage point to 33.3% and reduce sell- ing, general and administrative expenses resulted in a 24.1% increase in operating income to ¥4.1 billion. However, we recorded a net loss of ¥5.5 billion, primarily as a conse- quence of writing off the goodwill in the
controlling interest we acquired of KOKUYO Camlin Limited and impairment losses on domestic property, plant and equipment.
In the meantime, we made strides to strengthen our corporate governance with outside directors on the Board and a system of executive officers. In addition, we also engaged extensively in activities promoting corporate social responsibility (CSR). Our activities for realizing a sustainable society as a trusted and accountable corporate citizen were recognized by the ETHIBEL PIONEER label and other benchmark indicators of socially responsible investment (SRI) funds. But above all, KOKUYO values its sharehold- ers. The Group’s top priority will be to pay a stable dividend as we strive to provide excep- tional value to customers and achieve our goal of becoming a company based all over Asia. I ask for the continued support of all our shareholders, investors and stakeholders.
OVERSEAS
July 2012
Akihiro Kuroda, President and CEO
07
the exceptional value arising from well-developed products in Japan as we endeavor to build up the momen- tum of our overseas expansion.
On balance, we are therefore forecasting a 5.0% increase in consol- idated net sales to ¥273.0 billion. Operating income is forecast to increase 2.4% to ¥4.2 billion in 2012. The top-line sales increase is esti- mated to include ¥10.0 billion in con- tributions from newly consolidated subsidiaries and acquisitions primarily overseas. The flatter increase fore- cast in operating income is the conse- quence of an estimated increase in raw material costs, domestic sales promotion expenses and initial over- seas investments. On the other hand, we are forecasting a net income of
¥2.7 billion.
FEATURE: PRESIDENT AND CEO AKIHIRO KURODA SPEAKS
ACHIEVING GROWTH GLOBALLY, LEVERAGING OUR STRENGTHS IN JAPAN
AKIHIRO KURODA
President and CEO
MACROECONOMIC OUTLOOK
AND BUSINESS FORECASTS
FOR 2012
Problems in the European financial system are likely to be a drag on the Japanese economy and export-driven growth in Asia. Yet many of the emerging countries in Asia are fore- casted to continue exhibiting high economic growth, having developed consumer markets of their own and overcome the inflationary pressures of rising labor costs.
Pressing forward in this economic environment will not be easy. The Group will have to work hard to curtail its production costs around the world as material and energy prices, and wages, continue to increase. We must also take the initiative to raise and retain
KOKUYO must continue to grow its business in well-developed
products with exceptional value if we are to bolster and
capitalize on our strengths in Japan, generate top-line growth
overseas, and maintain profit in the face of economic
adversity. To this end, we will continue to execute a plan to
boost overseas sales to 30% of net sales by 2020, from 3%
in 2011, while we reinforce our operations in Japan with the
development of new products from new ideas.
In addition, we will pay special attention to the many
business risks ranging from cultural differences to
compliance as we develop operations overseas to become a
company based all over Asia.
08
EXCELLING IN JAPAN
BOLSTERING VALUE OF
KOKUYO-ONLY PRODUCTS
Stationery Business
In the stationery business, the strat- egy we began five years ago to enhance our added value with excep- tional and well-developed products has become a solid business model that provided the cash flow in our quest for international growth.
Our drive to create new products from new ideas continues to evolve. The items we develop that pay special attention to the small things custom- ers find satisfying have grown both in number and sales. Sales of our Harinacs Handy-Type Staple-Less Staplers and DOTLINER roller-type adhesive dispensers have continued to grow at a double-digit rate. Another recent success story is the CamiApp series of smartphone-friendly note- books—sales here are four times greater than we had initially forecast. Successful attempts at spotlighting distinctive products during the past year include the sales promotion booths developed to showcase our Pritt line of paper glue, which we repackaged with a vivid biomass mark to indicate that the glue is made from eco-friendly vegetable oils. These sales promotion booths resulted in a signifi- cant increase in sales of this paper glue. And even though these higher- margin products have yet to overtake our commonplace stationery items in Japan, progress is being made.
In 2012, we are increasing our R&D expenditure 30% in an effort to underpin our earnings and sales power
in Japan with the creation of new products from new ideas. At the same time, we are increasing our sales pro- motion expenses to make certain that these higher-margin items gain the public exposure they deserve.
Furniture Business
The Japanese market for office furni- ture shrank 30% following the global financial crisis of 2008, and gave rise to a need to restructure the domestic distribution framework of our furniture business, which we have had to downsize gradually because of the fixed overheads involved.
In the meantime, we worked in stages to improve the competitive- ness of our furniture business in other areas. These included a shift to global manufacturing to reduce our produc- tion costs, and ¥3.7 billion in IT invest- ments for building an upgraded value chain system. We are now utilizing this system, which went into full oper- ation in 2012, to improve productivity, reduce inventory and enhance our furniture business in various other ways. Elsewhere, we built up our architectural capabilities to propose the layout of entire office space con- figurations, retail stores and other commercial facilities, among other interior designs that include class- rooms in schools, waiting rooms in hospitals, and public spaces in govern- ment buildings. We also developed products in demand, such as our Madre line of modular waiting room furniture, and higher-end office furni- ture for worldwide sales, such as the M4 and AIRFORT chairs.
Binds multiple sheets without the use of metal staples, making it both eco-friendly and safe even for children to use
Harinacs Handy-Type Staple-Less Staplers
A long-selling stick adhesive first introduced in 1970.
Pritt Stick
Stationer y Business Furniture Business Mail-order & Retail NEW SEGMENT INFORMATION
Star ting with the fiscal year ending December 31, 2012, segments divided along product lines were revised for division more clearly by actual business operations. This was done to align the segments more closely with KOKUYO’s management approach and growth strategies. Old segments: Stationer y Business, Furniture Business
SEGMENT REVISION
09
Mail-Order & Retail Business
Kaunet and Forestway are the two centerpieces to the KOKUYO Group’s online and catalog sales business. Together, the two companies have an estimated 12% share of Japan’s roughly ¥500 billion online and cata- log sales market for stationery and office supplies.
Online and catalog sales is a grow- ing segment in the Japanese market for stationery and office supplies, wherein we are forecasting Kaunet’s sales in 2012 to increase 5.4% to
¥54.6 billion. In, 2012, Kaunet’s prod- uct catalog will undergo thorough upgrades involving a user-friendly browser and search functions to build on this online sales site’s strategy of providing a select lineup carefully chosen by office supply professionals.
As a domestic retail business, the KOKUYO Group operates and fran- chises The Conran Shop exclusively in Japan, and operates a chain of ACTUS home furniture, fabric and accessory stores. Together, these stores provide products and services that add high- quality and pleasure to the lifestyles of customers. The Group is working to expand the earnings base of these and other retail businesses by enhancing the merchandise lineup, raising the customer footfall of existing stores and expanding the chains with new store openings.
A cluster of work stations configured in a circle, designed to strike a balance between concentration on individual work and communication among the team and between organizations
HARMONii
The Conran Shop in Osaka
Last year we built a framework for our wholesale and direct-sales forces to cooperate closely with one another as the final phase of restructuring our furniture distribution system in Japan. In contrast to two sales channels that were at times in conflict with one another, we now have a cohesive distribution structure that has become much more adept at gathering market intelligence, making customer sales, and bringing back useful information and feedback from customers. These are important elements of added value at KOKUYO.
In 2012, Tokyo will see a surge in new office building completions of a cyclical nature. We have formed proj- ect teams and are collaborating with our wholesalers and retailers in the Tokyo area to make certain we don’t miss this wave of possible demand.
Kaunet catalog 10
Feature Excelling in Japan
We must also take the initiative to raise and retain the value arisingfrom exceptional and well-developed products in Japan. 11
EXPANDING OVERSEAS
BUILDING VALUE IN ASIA
Critical Mass in China
The markets in China are fast resem- bling Japan’s, and require a very sophisticated critical mass on the ground. In the stationery business, we answered this challenge by agreeing in November 2011 to acquire the trademark and business rights to China’s largest nationwide sales chan- nel in adhesive-bound notebooks from HOT ROCKS STATIONERY (Shenzhen) Co., Ltd. We are now in the process of investing ¥2 billion in the construction of a notebook factory in Shanghai, which is scheduled to commence operations in September 2012. Once complete, the factory will have the capacity to supply well over 100 million notebooks a year to our newly acquired nationwide sales channel. Nationwide momentum is important in the stationery business in China, where most of KOKUYO’s potential competitors are small to medium- sized companies that still operate on a regional basis.
In furniture, we now know also that to grow our business once again we need to approach China and other countries in Asia as end markets; and not just as a place where we produce chair legs and seatbacks. Hence, we are targeting local Chinese companies looking for office furniture in the middle to high end of the market, and working to develop a nationwide net- work of dealers to sell our furniture and architects to propose solutions in space and interior design.
In the mail-order and retail busi- ness, the development of our online sales of office supplies in China dates back to the launch of our Easybuy e-commerce business in 2005. More recently, we bought the franchising rights to The Conran Shop for China, Hong Kong and Taiwan, in addition to those shops we already own and fran- chise exclusively in Japan. The first Conran Shop in Shanghai opened in July 2012. It will be a vehicle for publi- cizing the KOKUYO brand in office furniture among the high-income busi- ness owners who we hope will fre- quent the store.
Business in India
KOKUYO’s involvement in increasing added value at KOKUYO Camlin Lim- ited in India resulted almost immedi- ately in a substantial improvement in sales momentum.
The KOKUYO Group exhibited at the largest stationer y trade fair in China
Members of the Board of KOKUYO Camlin Limited The AIRFORT chair from KOKUYO and desk from Practika Co. Ltd. sold in China
12
Expanding Overseas
We endeavor to build up the momentum of our overseas expansion. 13KOKUYO Camlin is India’s third- largest stationery maker with a long, 80-year history. We decided that our first priority upon acquiring a stake in October 2011 was to build a KOKUYO- style value chain for the Indian compa- ny’s manufacturing, distribution and sales departments to work as one. This soon resulted in substantial sales momentum and inventory control improvements and prompted KOKUYO Camlin to announce a plan for tripling sales by 2017.
Going forward, we will endeavor to build KOKUYO Camlin’s business base nationwide by increasing the sales force and expanding the network of wholesalers and retailers in northern and southern India.
Notebook Business in
Vietnam
In Vietnam, KOKUYO is the third-larg- est producer and only nationwide supplier of notebooks in the country. The two larger producers are govern- ment-owned and conduct business only in the north or the south. Stu- dents in Vietnam consume three times more notebooks on average than students in Japan each year. As an exceptional value, the covers to KOKUYO’s notebooks in Vietnam are decorated with Doraemon, a Japanese anime character the Vietnamese revere as a symbol of intelligence. POPULAR NOTEBOOKS IN VIETNAM
Decorated with Doraemon, a Japanese anime character
This notebook operation was launched when our Vietnamese fac- tory, which makes files for export, began producing them in 2010. After selling 3.7 million initially, KOKUYO sold 15 million notebooks in Vietnam in 2011. The Group is aiming for high sales growth in Vietnam once again in 2012.
MODERNIZING THE
RELEVANCE OF KOKUYO’S
106-YEAR HISTORY
Corporate Governance
Our system of corporate governance emerged from my strong desire to modernize and update the relevance of KOKUYO’s 106 years of business heri- tage for our employees and society at large. KOKUYO has strong traditions and a long history. But I became con- cerned that the Company wasn’t keep- ing up with changes in society and that this might have begun to disillusion some of our employees. This led me to decide that we needed to change, and that those changes had to begin from where I sat on the Board.
As our first move, KOKUYO appointed three new people to the Board of Directors in 2011 to strengthen oversight. One of them was Masa Matsushita, an executive with international experience who we brought in from FAST RETAILING CO., LTD. to serve full-time as a director and a senior corporate officer with executive responsibilities. The others
From the left: Yasuhiro Kuroda (Executive Vice President of KOKUYO Co., Ltd. ), Akihiro Kuroda (President & CEO of KOKUYO Co., Ltd.), Dilip Dandekar (Chairman & Managing Director of KOKUYO Camlin Ltd.) and Shriram Dandekar (Joint Managing Director of KOKUYO Camlin Ltd.)
SALES AT KOKUYO CAMLIN
(Millions of rupees)
0 1,000 3,000
2,000 4,000
2008 2009 2010 2011
3,592 3,864 3,310
2,837
14
were outside directors Takeharu Nagata, previously deputy president (representative director) of Sumitomo Mitsui Banking Corporation, and Nobuyuki Oneda, formerly a board member and executive vice president of Sony Corporation.
At the same time, we launched an executive officer system in which we delegated executive authority to the heads of our stationery and furniture businesses and the general manager of Group strategy. In 2012 we went a step further by appointing another outside director Hisao Sakuta, who is currently the chairman of the board of OMRON Corporation. As of 2012, three of the six directors on KOKUYO’s Board are outside directors.
I felt it was important our manag- ers and employees should see that the Board was discussing resolutions in the context of relevant business implications and risk returns. Board members from both within and out- side the Company also came to an agreement that the Board should be devoted more to management over- sight. I wanted our executive officers to know that they were in charge of their own responsibilities.
In retrospect, I also think that the strengthening of corporate gover- nance and internal control made a difference in the KOKUYO Group’s additional steps to internationalize. Our Board had the foresight, as well as expert input, to discuss how the decisions we were making might
impact our cash position a number of years down the road. All employees, including people we hired mid-career for their professional skills, had clear tasks and targets to measure them- selves against. Anyone given an important assignment was empow- ered and knew exactly where the Company was heading.
I am therefore determined more than ever to execute our top-down reforms in corporate governance and compliance, and to start transforming management, employees, and KOKUYO itself.
Returns to Shareholders
The KOKUYO Group offers returns to shareholders based on a target divi- dend payout ratio of 20% or higher, taking into account consolidated oper- ating results as well as our established policy of paying a stable dividend. We therefore paid a cash dividend of
¥15.0 per share for 2011. Dividends for 2012 are also scheduled to be
¥15.0 per share.
That said, the first order in KOKUYO enhancing returns to share- holders amid this austere business environment will be to provide each of our customers with exceptional value as we accelerate the development of overseas operations to become a company based all over Asia. My responsibilities are to ensure we do just that.
15
STATIONERY SEGMENT
Results for the Fiscal Period ended December 31, 2011
Net sales amounted to ¥147.9 billion, down 0.8% year on year. However, operating income was recorded at ¥6.8 billion, up 3.6% year on year.
Market Conditions
The stationery market continues to face severe business conditions as companies limit their purchases of consumables amid economic stagnation, resulting in a decline in demand. At the same time, competition is intensifying in the office supply online and catalog sales business.
REVIEW OF OPERATIONS
Product Development
We aim to develop products that will be sought out by name, pressing forward with our long-held basic policy of customer-driven development to exceed customer expecta- tions and create exceptional value.
Further, we have divided the products in this segment into three categories. The first category is high value-added products for which we are aggressively pursuing develop- ment. The second category is products for which we are using sales promotions and adding value through measures such as cost reduction to grow market share. The third category is mature products.
In the high value-added products cate- gory, we revamped the mainstay Campus
Notebook series for the first time in eleven years. Additionally, we developed products including the CamiApp series of smartphone- friendly notebooks and the AIR BEAM series of non-laser PC presentation pointers that run on PC software.
Overseas Business Development
In China, we concluded a business succes- sion agreement with HOT ROCK STATIO- NERY (Shenzen) Co., Ltd., the top local manufacturer of adhesive-bound notebooks. Through this, we will acquire brand trade- marks, production facilities, and sales net- works. Combine this with our plant that is scheduled to come online around the summer of 2012, and we will quickly gain the top share in the office-use notebook market.
In India, we completed the acquisition of shares in Camlin Limited, forging ahead with the construction of a foundation for local business expansion.
In Vietnam, we introduced products in tune with local needs and proactively developed sales channels to sell roughly 15 million notebooks.
NET SALES
(Millions of yen)
OPERATING INCOME
(Millions of yen)
SHARE OF TOTAL NET SALES
56.9%
0 50,000 150,000
100,000 200,000
2009 2010 2011
147,866 148,987 153,656
0 2,000 6,000
4,000 8,000
2009 2010 2011
6,770 6,532
4,872
AIRBEAM
CamiApp
NEW SEGMENT INFORMATION
Star ting with the fiscal year ending December 31, 2012, segments divided along product lines were revised for division more clearly by actual business operations. This was done to align the segments more closely with KOKUYO’s management approach and growth strategies. Old segments: Stationer y Business, Furniture Business
SEGMENT REVISION
Stationery Business Furniture Business Mail-Order & Retail
16
FURNITURE SEGMENT
Results for the Fiscal Period ended December 31, 2011
Net sales were down 0.7% to ¥112.1 billion with an operating loss of ¥2.6 billion.
Market Conditions
Although we have begun to see a glimmer of hope with an increase in office building con- struction starts in the Tokyo metropolitan area, competition continues and market conditions remain tough.
Product Development
Based on our fundamental policy of “custom- ers will always side with creative value,” we strive to develop products that offer some- thing new yet useful to everyone.
As part of environmental initiatives, we stepped up measures to reduce our carbon
footprint. We acquired certification for 342 items as having met the international carbon footprint standards compared with 13 items in the previous fiscal year, making us a leader on this front in the Japanese office furniture industry.
Turning to new products, we launched the AIRFORT office chair with airbags built into its lumbar region to reduce back strain. This is the first domestically produced chair for which this airbag feature is standard.
In addition, we rolled out the Madre lobby chair with an innovative universal design offering comfort and style. Madre was also created with an eye to ensuring that even people using wheelchairs or stroll- ers have an easily accessible place to relax in city hall waiting areas.
Overseas Business Development
In business development overseas, we are focusing on China where we have enhanced our lineup of office furniture suited to local customers’ needs. This includes items like the AIRFORT Chair, a strategic global product that has won top awards at office furniture exhibitions in China, and the products of Practika Co., Ltd., with which we formed a manufacturing and sales licensing agreement in December 2010 to bolster products designed for the local market. Further, we worked to grow earnings by improving and expanding our sales networks and promoting solution-oriented marketing.
* Since the fiscal year ended December 2011, the store fixtures business has been integrated into the furni- ture business as a reporting segment. For this reason, figures for the fiscal years ended December 2009 and 2010 are sums of the un-integrated furniture business and store fixtures business.
NET SALES
(Millions of yen)
OPERATING LOSS
(Millions of yen)
SHARE OF TOTAL NET SALES
43.1%
0 30,000 90,000
60,000 120,000
2009 2010 2011
112,139* 112,887 113,069
–6,000 –4,500 –1,500
–3,000 0
2009 2010 2011
–2,697* –3,250
–4,292
AIRFORT
Madre
17
BOARD OF DIRECTORS, AUDITORS, AND CORPORATE OFFICERS
(AS OF MARCH 31 2012)
1 2
3 5 4
6
MEMBERS OF THE BOARD
AKIHIRO KURODA
Representative Director of the Board, President and CEO
1 April 1972 Joined KOKUYO Co., Ltd.
December 1977 Director of the Board, KOKUYO Co., Ltd. August 1989 Representative Director of the Board,
President, KOKUYO Co., Ltd. March 2011 Representative Director of the Board,
President and CEO, KOKUYO Co., Ltd. (to present)
TAKEHARU NAGATA
Outside Director of the Board
4 April 1967 Joined Sumitomo Bank, Limited
June 2002 Deputy President, Executive Officer, Sumitomo Mitsui Banking Corporation June 2005 Outside Statutor y Auditor,
Shionogi & Co., Ltd. (to present) June 2010 Chairman,
Keihanshin Building Co., Ltd. (to present) March 2011 Outside Director of the Board,
KOKUYO Co., Ltd. (to present)
2
YASUHIRO KURODA
Representative Director of the Board, Executive Vice President
April 1975 Joined KOKUYO Co., Ltd.
June 1991 Director of the Board, KOKUYO Co., Ltd. March 2010 Representative Director of the Board,
Vice President, KOKUYO Co., Ltd. March 2011 Representative Director of the Board,
Executive Vice President, KOKUYO Co., Ltd. (to present)
NOBUYUKI ONEDA
Outside Director of the Board
5 April 1969 Joined Sony Corporation
June 2005 Director of the Board, Executive Vice President and Chief Financial Officer, Sony Corporation March 2011 Outside Director of the Board,
KOKUYO Co., Ltd. (to present), Outside Statutor y Auditor,
Kirin Holdings Company, Limited (to present)
MASA MATSUSHITA
Director of the Board, Senior Corporate Officer
3 April 1989 Registered attorney (Tokyo Bar Association) March 2003 Vice President and Director of the Board,
General Electric Japan, Ltd.
September 2005 Director of the Board, Executive Vice President, FAST RETAILING CO., LTD.
July 2010 Director of the Board and Executive Vice President, Siemens Japan K.K.
March 2011 Director of the Board,
Senior Corporate Officer, KOKUYO Co., Ltd. (to present)
HISAO SAKUTA
Outside Director of the Board
6 April 1968 Joined OMRON Corporation
June 2003 Chief Executive Officer and Representative Director of the Board, OMRON Corporation
June 2011 Chairman of the Board of Directors, OMRON Corporation (to present) March 2012 Outside Director of the Board,
KOKUYO Co., Ltd. (to present)
18
CORPORATE OFFICERS
AUDITORS
7
8 9
10
11 12
13
16
14
15
11
AKIHIRO KURODA
President and CEO
12
YASUHIRO KURODA
Executive Vice President
13
MASA MATSUSHITA
Senior Corporate Officer
14
TAKUYA MORIKAWA
Senior Corporate Officer
Representative Director and President, KOKUYO S&T Co., Ltd.
15
HIDEKUNI KURODA
Senior Corporate Officer
Representative Director and President, KOKUYO Furniture Co., Ltd.
16
MOTOHIRO HOJO
Corporate Officer
General Manager of Group Strategy, KOKUYO Co., Ltd.
YOICHI KOTANI
Standing Statutor y Auditor 7
April 1972 Joined KOKUYO Co., Ltd.
June 2001 Director of the Board, KOKUYO Co., Ltd. March 2009 Statutor y Auditor, KOKUYO Co., Ltd. (to present)
YOSHIO TERADA
Outside Statutor y Auditor 9
April 1972 Joined Takenaka Corporation
March 2009 Statutor y Auditor, Takenaka Corporation (to present) March 2009 Outside Statutor y Auditor, KOKUYO Co., Ltd. (to present)
8
NOBUYUKI MIYAGAKI
Standing Statutor y Auditor
April 1978 Joined KOKUYO Co., Ltd. April 2011 General Manager,
Process Reform Division, KOKUYO Co., Ltd. March 2012 Statutor y Auditor, KOKUYO Co., Ltd. (to present)
TOMOMI YATSU
Outside Statutor y Auditor 10
September 1990 Registered cer tified public accountant November 2001 Registered attorney (Tokyo Bar Association) April 2007 Par tner, Bingham McCutchen LLP (to present) June 2009 Outside Statutor y Auditor, CALBEE, Inc. (to present)
June 2010 Outside Statutor y Auditor, Taiko Pharmaceutical Co., Ltd. (to present) March 2012 Outside Statutor y Auditor, KOKUYO Co., Ltd. (to present)
19
Structure of Corporate Governance Business
Execution
KOKUYO Group’s Board of Directors is comprised of a total of six members, half (three) of which are outside directors. As part of a system that is able to respond
CORPORATE GOVERNANCE
promptly to changes in the business environment, direc- tors are appointed for a term of one year. In attendance at the board meetings, along with the directors, are four auditors, including two outside statutory auditors. KOKUYO Group has separated its supervisory
Under its corporate philosophy of “Being useful to the world through our products,” the KOKUYO
Group strives to achieve sustainable growth while maintaining harmonious relations with its
shareholders. By creating and maintaining a structure which ensures replicability and continuity
of transparent, apt, and efficient business administration, the KOKUYO Group will continue to
work toward elevating its corporate governance standards.
The KOKUYO Group is a company that has the Board of Auditors. We have created a corporate
governance system that consists of a Board of Directors that super vises the execution of
business, and the Board of Auditors that, as an entity independent of the Board of Directors,
audits the duties executed by the directors. As a global company, we strive to build corporate
governance that is worthy of our shareholders’ trust. To realize this goal, we work to enhance our
super visor y function, clarify the responsibilities of management at all levels, and heighten the
objectivity and transparency of business administration.
OPERATING COMPANIES
HUMAN RESOURCES
COMMITTEE BOARD OF AUDITORS
Major Committees Relating to Internal Controllership
Risk Management Committee Investment Council
Internal Accounting Control Committee Disclosure Committee
Compliance Committee
President & CEO
HEAD OFFICE DIVISIONS PROCESS DEVELOPMENT DEPARTMENT HQ MANAGEMENT
BOARD BOARD OF DIRECTORS
ACCOUNTING AUDITORS
GENERAL MEETING OF SHAREHOLDERS
Inquiry
Inquiry Advice
Advice
Appointment, dismissal and supervision
Appointment and dismissal Appointment and dismissal
Report Instructions Report
Instructions
Report
Coordination
Internal auditing Approval of important business operational matters
Appointment and dismissal
Coordination and report
Accounting audit
Coordination
Accounting audit HOLDING COMPANY
Internal auditing Auditing 20
and executive functions and, in order to promote faster decision making and streamlined business execution, adopted a corporate officer system. The Board of Direc- tors, which assumes a supervisory function, makes cru- cial decisions on such matters as group-wide
management policies and various business plans. Also, as an entity responsible for business execution, it runs the Headquarters Management Board. This board is comprised of four Group Headquarters Operating Offi- cers, the head of which is the President and CEO, and its main functions are to deliberate and make decisions on issues related to the Group Head- quarters. Further, issues regarding business exe- cution are discussed and decided upon at the Board of Directors’ meetings held at respective group operating companies.
Advisory Body for the Board of Directors
As an advisory body for our Board of Directors, we have in place a Human Resources Committee, a majority of which consists of external members or directors. The Human Resources Committee reviews, appoints, and dismisses candidates for director, auditor, and operating officer (hereinafter collectively referred to as “officers”). It also deliberates on compensation plans, evaluates individual officers, verifies remunerations, and offers reports and recommendations regarding such matters to the Board of Directors.
Board of Auditors
KOKUYO Group’s Board of Auditors is comprised of two full-time internal auditors and two outside statutory audi- tors who possess a wealth of knowledge and experi- ences in a wide range of fields. The auditors attend the Board of Directors and other important meetings to audit the legality of the duties executed by the directors. Moreover, to ensure the effectiveness of audits, the auditors exchange opinions regularly with personnel in charge of various duties and functions, as well as have in place a system for working closely with the Internal Audit Division and the auditors of the main subsidiary companies.
Internal Audit Division
The Internal Audit Division has set up the Process Devel- opment Division—head director of which is appointed by the Board of Directors—and audits the group headquar- ters and affiliated companies. The Process Development Division audits, from a company-wide standpoint, the appropriateness of risk-management, compliance, and business operations. It also evaluates the efficacy of internal control and reports on the audits directly to the President and CEO at the Headquarters Management Board. It also reports of its activities to the Board of Directors at appropriate times.
OUTSIDE DIRECTORS
2010
No outside directors Internal directors:6 Outside directors: 0
Building a Highly Transparent Business Management System
2011
Recruit Outside Directors Internal directors:4 Outside directors: 2
2012
Increase Outside Directors Internal directors:3 Outside directors: 3
21
KOKUYO’S CSR CHARTER
Grounded in the founding corporate philosophy of “Being useful to the world through our products,”
KOKUYO Group conducts business that is necessar y for society, while remaining profitable and
honest in its business practices.
In addition to complying with laws and regulations, we seek to maintain continuity of our
business by acquiring the trust of all related stakeholders, investors, and, of course, our
customers by fulfilling our social responsibilities as a corporate citizen.
KOKUYO’S CSR
For Our Customers
1. Without being satisfied with the present conditions, we continue to improve the safety and quality of our entire product line and services.
2. Strive to continually innovate society through our business operations by developing new products and services.
For Regional Communities
1. Strive to be a trusted ‘corporate citizen’ on both regional and national levels via proactive interaction and planning with regional communities, while respecting regional culture and customs and encouraging their advancement.
For Environmental Conservation
1. Concentrate the wisdom of each or our employees, and align the actions of our entire company in order to assist in reaching solutions for the common environmental problems facing the world today.
2. By developing Eco Products, we strive to decrease the environmental burden over the life cycle of these products and to introduce new environmental engineering and green procurement techniques.
3. Contribute towards the advancement of a ‘low carbon society’ by proposing revolutionary work styles and environments, and decrease society’s overall burden on the environment.
Corporate Activities
1. Conduct transparent, just, and free competition and business transactions while keeping sound and cor- rect relations with politicians and governmental bodies.
2. In order to become a trusted company, we strive for business partner relations that are consistently fair and built upon a foundation of reciprocal cooperation, allowing for mutual growth.
3. Recognize our responsibility to increase our corporate value for stockholders, and maintain a corporate management style that earns the trust of society through its transparency and virtue.
Respect for Human Rights
1. Respect the human rights of all individuals involved with or affected by all of our corporate activities. We support work environments free from discrimination, and do not approve of child labor or forced labor practices.
2. Strive to accept each and every employee’s individual character and personal values, and become a com- pany where many different human resources can fully express their abilities and develop themselves. 22
ISO Core Subjects Issues KOKUYO Group Initiatives Organizational
governance Issue 1: Organizational governance • Establish the KOKUYO’s CSR philosophy
• Promote corporate governance
• Compliance implementation
• Communicate with stakeholders Human rights Issue 1: Due diligence
Issue 2: Human rights risk situations Issue 3: Avoidance of complicity Issue 4: Resolving grievances
Issue 5: Discrimination and vulnerable groups Issue 6: Civil and political rights
Issue 7: Economic, social and cultural rights Issue 8: Fundamental principles and rights at work
• Promotion of human rights educational activities
• Promote diversity
• Promote employment of people with disabilities
Labor practices Issue 1: Employment and employment relationships Issue 2: Conditions of work and social protection Issue 3: Social dialogue
Issue 4: Health and safety at work Issue 5: Human development and training
in the workplace
• Personnel system
• Human resource development programs
• Promote diversity
• Child-care/family-care and work compatibility support
• Safety at work
• Health care and mental health
• Safety measures regarding employees during disasters The environment Issue 1: Prevention of pollution
Issue 2: Sustainable resource use
Issue 3: Climate change mitigation and adaptation Issue 4: Protection of the environment, biodiversity and
restoration of natural habitats
• Environmental management
• Global warming preventive measures
• Resource saving & recycling measures
• Development of environmentally friendly products & services
• Consideration for biodiversity
• Compliance and pollution prevention
• Promoting environmental communication
• Environmental accounting Fair operating
practices
Issue 1: Anti-corruption
Issue 2: Responsible political involvement Issue 3: Fair competition
Issue 4: Promoting social responsibility in the value chain Issue 5: Respect for property rights
• Establish the KOKUYO’s CSR philosophy
• Compliance implementation
Consumer issues Issue 1: Fair marketing, factual and unbiased information and fair contractual practices
Issue 2: Protecting consumers’ health and safety Issue 3: Sustainable consumption
Issue 4: Consumer service, support, and complaint and dispute resolution
Issue 5: Consumer data protection and privacy Issue 6: Access to essential services Issue 7: Education and awareness
• Provide products and services that incorporate customers’ perspectives
• Provide safety and reliability to customers
• Promote optimal quality standards for each country and region
• Continuously improve quality
• System for harnessing customer feedback
• Initiative to bond with customers
Community involvement and development
Issue 1: Community involvement Issue 2: Education and culture
Issue 3: Employment creation and skills development Issue 4: Technology development and access Issue 5: Wealth and income creation Issue 6: Health
Issue 7: Social investment
• Support the recovery from the Great East Japan Earthquake
• India—(KOKUYO Camlin Ltd.) Film competition
• China—Grass roots support activities
• Vietnam—Library donations
*KOKUYO’s CSR Charter applies in common to all topics.
ISO 26000 TABLE
The KOKUYO Group uses the ISO 26000 International Standard as a guideline
on social responsibility. We have classified our initiatives according to the main
topics under this standard.
23
UNIQUE CSR INITIATIVES
Compliance Implementation
In addition to our domestic activities, we’ve begun educa- tion initiatives focused on compliance in foreign countries in order to become a proper business in Asia.
Based on the lessons learned from unfortunate events that have occurred since 2008, KOKUYO Group’s Compli- ance Initiatives are grounded in the intent and assump- tion that all employees of KOKUYO Group act in compliance with laws and regulations so that KOKUYO may be considered as an upstanding and honest corpo- rate citizen.
Since 2009 we have conducted discussion-type com- pliance training, and starting this fiscal year, we will sequentially expand these training initiatives into our overseas locations, starting with China.
Painting Competition, in India
The “All India Camel Colour Contest” for children, orga- nized by KOKUYO Camlin Ltd., has been certified by Guinness World Records as the largest art competition in the world. With 6,601 schools taking part in the competi- tion, and a total of 4,850,271 entrants submitting artwork, this certification is due to recognition of the huge and rarely seen scale of the event.
Within the framework of school education in India and with the aim of raising awareness of artistic activities and of art itself, the All India Camel Colour Contest has been held continuously for 38 years, and has become a very important event for Indian schools and school children.
Promotion of Human Rights Awareness Activities
The KOKUYO Group strives to enhance human rights awareness by conducting human rights training at each level of the company. These training sessions provide education on the importance of respecting human rights, corporate social responsibility (CSR) and compliance, with the aim of realizing a Company and society free of discrimination. In addition, the Group has established the KOKUYO Hotline as a system that provides employees with a window for reporting job harassment incidents and freely seeking counseling on human relations in the workplace.
While these activities were conducted within Japan, the employees comprising the KOKUYO Group have diversified with each passing year and the ratio of non-Japa- nese employees is rising. A key issue and target for the Group going forward will be the creation of a corporate culture in which people of diverse backgrounds can work together without regard
to nationality, race, gender, religion or any other division to strengthen the organiza- tion, while mutually respecting the different values of one another.
Employment Opportunities for People with
Disabilities in Japan
As of December 31, 2011, the ratio of employees with disabilities at the KOKUYO Group was 2.41%, well above the statutory level of 1.8%. But, we are not content to stop there. We will continue to promote employment of people with disabilities with the goal of providing as many people as possible an opportunity to use their skills and abilities in the workplace.
Children working on their ar twork at school
The cer tificate from Guinness World Records
0 1.5 2.0
2.5 2.41
2.14 1.95 2.01
1.84
2011 2010 2009 2008 2007 (Employment ratio)
Statutory employment ratio 1.8%
(Fiscal year)
RATIO OF EMPLOYEES WITH DISABILITIES 24
FTSE4Good (UK) ETHIBEL Sustainability Indexes (Sweden)
1.00
08 07
00 09
4.80 44.05
1.49 1.05 1.01 3.82 34.44
1.51 1.12 1.11
10 4.33
37.17
1.25 1.02 0.82
11 3.97 24.55
1.12 0.81 0.92
1.21 20.31
0.89 0.80 4.47 50.0
Chemical substances Water consumption CO2 emissions Waste disposal Net sales (Consolidated)
In Harmony with the Global Environment
The KOKUYO Group is making a concerted effort to improve its environmental performance. As part of this, in fiscal 2011 we took steps to reduce the environmental impact of every KOKUYO product at every point in the product lifecycle. Up until now, our environmental man- agement efforts have focused on operating companies in Japan, but as we go forward we will apply our standards strictly to all consolidated subsidiaries and affiliates, including those overseas.
KOKUYO Group designates unique environmental friendliness efficiency indicators as indices that can com- prehensively evaluate financial performance and impact on the global environment. These indicators indicate “the extent to which products and services are being offered to society with respect to specific environmental loads” and correspond to the following four items.
1. CO2 emissions 2. Final waste disposal
3. Usage of chemical substances subject to PRTR regulations
4. Water usage
For fiscal 2011, CO2 emissions were reduced for offices and distribution thanks to a variety of measures taken by the entire KOKUYO Group as well as each com- pany in the Group such as the re-examination of air con- ditioning operation methods and work styles to respond to the summer power reductions, but in-house
production increased at the plants, so the overall amount of CO2 emissions and usage of chemicals increased.
Third-party Review
In order to have independent feedback on the accuracy of the KOKUYO Group’s environmental performance data, we asked Bureau Veritas Japan to carry out a third party review.
We were notified of a total of 19 “commendable points,” 29 “opportunities for improvement,” and 28
“modification requests.” In order to further improve the level of accuracy with regard to future disclosure, we plan to actively deal with the points highlighted as being opportunities for improvement.
Inclusion in SRI Indexes and Funds Index
The KOKUYO Group has been selected for selection in several socially responsible investment (SRI) indexes and funds, including the FTSE4Good index and funds with the ETHIBEL Pioneer, and ETHIBEL Excellence labels. The fact that only 23 Japanese companies are eligible for investment by funds bearing the ETHIBEL Pioneer label shows how highly KOKUYO’s CSR initiatives are rated.
ECO-EFFICIENCY INDEX-BASED ACTIVITIES
25
SIX-YEAR SUMMARY
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
The years ended March 31, 2007; and the years ended December 31, 2007, 2008, 2009, 2010 and 2011
Millions of yen
Thousands of U.S. dollars
2011.12 2010.12 2009.12 2008.12 2007.12 2007.3 2011.12
For the year:
Net sales ¥260,005 ¥261,874 ¥266,726 ¥326,120 ¥252,824 ¥339,559 $3,344,546
Cost of sales 173,345 175,843 180,260 221,574 175,512 228,959 2,229,805
Selling, general and
administrative expenses 82,587 82,749 85,887 99,192 75,910 99,237 1,062,348
Operating income 4,073 3,282 579 5,354 1,402 11,363 52,393
Net loss (income) (5,460) 815 595 (11,991) (5,326) 5,622 (70,234)
Capital expenditure 7,262 4,827 3,479 4,988 7,733 4,999 93,414
Depreciation and amortization 6,531 6,009 6,334 6,488 4,430 6,057 84,011
Net cash and cash equivalents provided
by operating activities 10,653 8,966 13,737 16,153 3,286 7,936 137,034
Net cash and cash equivalents used
in (provided by) investing activities (10,818) (4,730) (1,930) (1,012) (11,333) 2,389 (139,156) Net cash and cash equivalents provided
by (used in) financing activities 1,040 (2,625) (4,746) (12,343) 7,349 (5,272) 13,378
At year-end:
Total assets 252,794 252,880 252,053 266,419 301,187 320,033 3,251,788
Working capital 41,289 50,601 49,483 50,755 44,584 56,120 531,117
Property, plant and equipment, net 70,866 77,134 78,050 79,534 81,195 79,349 911,577
Total liabilities 103,213 96,248 93,979 106,599 120,780 130,125 1,327,669
Interest-bearing debt 44,695 39,797 39,244 41,448 52,069 42,958 574,929
Total net assets 149,581 156,632 158,074 159,820 180,407 189,908 1,924,119
Minority interests 2,311 709 599 741 1,225 1,235 29,727
Net assets 147,270 155,923 157,475 159,079 179,182 188,673 1,894,392
Yen U.S. dollars
Per share data:
Basic net loss (income) ¥ (46.16) ¥ 6.89 ¥ 5.03 ¥ (101.36) ¥ (45.02) ¥ 46.94 $ (0.59)
Diluted net income – – – – – – –
Cash dividends applicable to the year 15.00 15.00 15.00 15.00 11.25 15.00 0.19
Net assets 1,245.08 1,318.22 1,331.30 1,344.82 1,514.64 1,594.79 16.02
%
Ratios:
Ratio of operating income to net sales 1.6% 1.3% 0.2% 1.6% 0.6% 3.3%
Return on sales (2.1%) 0.3% 0.2% (3.7%) (2.1%) 1.7%
Return on equity (3.6%) 0.5% 0.4% (7.1%) (2.9%) 3.0%
Return on assets (2.2%) 0.3% 0.2% (4.2%) (1.7%) 1.8%
Equity ratio 58.2% 61.7% 62.5% 59.7% 59.5% 59.0%
Debt-to-equity ratio 30.3% 25.5% 24.9% 26.1% 29.1% 22.8%
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 ¥77.74=U.S.$1.00, the approximate exchange rate prevailing on December 31, 2011. 2: Due to the change in KOKUYO’s fiscal year-end, the period ended December 31, 2007 was an irregular nine-month period.
26
OVERVIEW
In running its operations, the KOKUYO Group remains steadfast to its basic management principle of “contributing to society through the provision of superior products.” Under the management vision of
“Always Innovating For Your Knowledge,” the Group constantly 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 deliver- ing to assist users in their “knowledge work.”
As of December 31, 2011, the KOKUYO Group consisted of the holding company (KOKUYO Co., Ltd.), 50 subsidiaries, and 18 affiliates. Of these, 24 companies were consolidated subsidiaries and 1 affiliate was accounted for by the equity method.
Net Sales
Consolidated net sales for the year under review fell 0.7% to ¥260.0 billion, due in part to a decrease in demand resulting from the economic recession.
Gross Profit
Gross profit rose 0.7% year on year to ¥86.7 billion, despite the impact of lower net sales. Gross margin improved 0.5 of a percentage point year on year to 33.3%, as a result of cost reduction efforts and the change in the sales policy aimed at improving the profitability of sales operations.
SG&A Expenses
Selling, general and administrative (SG&A) expenses amounted to ¥82.6 billion, down 0.2% year on year. The SG&A expenses ratio increased by 0.2 of a per- centage point to 31.8%. The Group made an effort to reduce fixed expenses in other areas to offset an increase in IT-related expenses and depreciation and amortization expenses arising mainly from the main- tenance and operation of a new IT system.
MANAGEMENT’S DISCUSSION AND
ANALYSIS FOR AR 2011.12
0 100,000 200,000 300,000 400,000
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
260,005
33.3
0 10 20 30 40
31.8
0 5,000 10,000 15,000 20,000 25,000
0 1 2 3 4 5
4,073 1.6
NET SALES
(Millions of yen)
Stationery Segment Furniture Segment Store Fixtures Segment
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)
Due to the change in KOKUYO’s fiscal year-end, the period ended December 31, 2007 was an irregular nine-month period.
27
