Annual Report 2011 アニュアルレポート|IRライブラリー|株主・投資家情報|コクヨ

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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 C2 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 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 ACHIEVING GROWTH GLOBALLY, LEVERAGING OUR STRENGTHS IN JAPAN 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-sector 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 previously mentioned factors. FINANCIAL HIGHLIGHTS KOKUYO CO.,LTD. AND CONSOLIDATED SUBSIDIARIES The years ended December 31, 2011, 2010 and 2009 Thousands of U.S. dollars Millions of yen For the year: Net sales Operating income Net loss (income) At year-end: Total assets Net assets 2011 2010 2009 260,005 4,073 (5,460) 261,874 3,282 815 266,726 579 595 3,344,546 52,393 (70,234) 252,794 147,270 252,880 155,923 252,053 157,475 3,251,788 1,894,392 Yen 2011 U.S. dollars Per share data: 46.16) Basic net loss (income) Cash dividends applicable to the year 15.00 6.89 15.00 5.03 15.00 0.59) 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. 01 NET SALES OPERATING INCOME/RATIO OF OPERATING INCOME TO NET SALES Millions of yen) Millions of yen) 300,000 2.5 5,000 260,005 4,073 2.0 4,000 1.6 200,000 3,000 1.5 2,000 1.0 100,000 0.5 1,000 0 2009 2010 0 2011 2009 2010 0 2011 NET INCOME (LOSS)/RETURN ON EQUITY TOTAL ASSETS/EQUITY RATIO Millions of yen) Millions of yen) 1,000 1 0 0 Operating Income (Left Scale) Ratio of Operating Income to Net Sales (Right Scale) 100 300,000 252,794 1,000 1 2,000 2 3,000 3.6 4,000 3 –4 5,000 5 5,460 –6,000 2009 2010 2011 6 Net Income (loss) Left Scale) Return on Equity (Right Scale) 240,000 80 180,000 58.2 60 120,000 40 60,000 20 0 2009 2010 2011 0 Total Assets (Left Scale) Equity Ratio (Right Scale) WHAT WE DO Since its establishment, KOKUYO has evolved as a full-line manufacturer of office stationery, supplies and furniture by creating new products from new ideas that have garnered the support of Japanese consumers. OVER 100 years OF BOUNTIFUL ACCOMPLISHMENTS KOKUYO traces its roots back to 1905 when founder Zentaro Kuroda established Kuroda Hyoshi-Ten to manufacture the covers of Japanese-style bookkeeping ledgers. 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 02 its first steel product—filing cabinets. In this way, we have gained over a centur y of experience in stationer y and half a centur y in office furniture to become Japan’s No. 1 office supply manufacturer. Book cover to a ‘Wacho’ traditional Japanese accounting book) 11 MOST RECOGNIZABLE 2.4 BRAND IN JAPAN STRONG PRODUCT DEVELOPER Our corporate brand enjoys an extremely high recogni- We develop products and technologies with a mission in tion rate in Japan, and we ranked 11th in a corporate mind: delivering useful products and services in tune brand perception quotient (PQ) sur vey conducted by with the changing times and customer needs. For Nikkei Research Inc. In addition, we are working hard to instance, our attention to detail regarding the six compo- be easy on the environment, including by making all of nents of value—binding method, material quality, ruling, our products environmentally friendly, and were ranked size, design, and price—for our Campus Notebook series a respectable 22nd in the Nikkei Environmental Man- has made it the top notebook brand in the industr y, with agement Sur vey. annual sales topping 100 million notebooks and cumu- TH billion NOTEBOOKS SOLD IS PROOF KOKUYO IS A lative sales since its launch topping 2.4 billion notebooks. 2011 RANKING TOP 20 Rank (2011) Corporate Name or Brand Name Total Score 1 2 3 3 5 5 7 8 9 10 Google Panasonic Microsoft Japan Canon SONY YAHOO! Shachihata Oriental Land SHARP Yamato Transport 11 KOKUYO 12 13 13 15 16 17 17 17 20 20 NISSIN FOODS PRODUCTS TOYOTA TOSHIBA Kewpie Corporation Coca-Cola (Japan) Company TOTO Häagen-Dazs Japan Kao Corporation CASIO COMPUTER AJINOMOTO 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. 1 STATIONERY BUSINESS 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. Furthermore, we are developing business overseas, 04 focusing on the emerging Asian markets of Vietnam, China, and India. Airofit in new color Harinacs (Staple-Less Stapler) 2 3 FURNITURE BUSINESS MAIL-ORDER AND RETAIL BUSINESS In this business, we manufacture and sell furniture for The mail-order business comprises online and catalog offices and public spaces, store fixtures, and offer a sales of office supplies via Kaunet Co.,Ltd. and variety of spatial concepts for offices, public buildings Forest Co.,Ltd. and commercial facilities. Furthermore, we are developing operations overseas in China and other emerging Asian markets. 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. The Conran Shop in Shibuya WORKLINK Kaunet catalog 05 MESSAGE TO STAKEHOLDERS 06 Excelling in Japan, Expanding Overseas AKIHIRO KURODA President and CEO In the year under review, the re-emergence of controlling interest we acquired of KOKUYO the European debt crisis in the summer Camlin Limited and impairment losses on dampened and delayed Japan’s economic domestic property, plant and equipment. recovery from the Great East Japan Earth- In the meantime, we made strides to quake until the fourth quarter. KOKUYO’s strengthen our corporate governance with sales had also begun to recover year on year, outside directors on the Board and a system and we were able to report financial results of executive officers. In addition, we also that were mostly on target. engaged extensively in activities promoting Despite the tenuous economic circum- corporate social responsibility (CSR).Our stances, the KOKUYO Group remained on activities for realizing a sustainable society as track with its plan to enhance margins in a trusted and accountable corporate citizen Japan and invest the profits to drive top-line were recognized by the ETHIBEL PIONEER sales overseas. We made strides executing a label and other benchmark indicators of plan to boost overseas sales to 30% of net socially responsible investment (SRI) funds. sales by 2020, while continuing to reinforce But above all, KOKUYO values its sharehold- our operations in Japan. In the stationery ers. The Group’s top priority will be to pay a business, earnings strength improvements stable dividend as we strive to provide excep- from well-developed products with excep- tional value to customers and achieve our tional value became a solid business model goal of becoming a company based all over that provided the cash flow to grow interna- Asia. I ask for the continued support of all our tionally. In the furniture business, we set the shareholders, investors and stakeholders. stage for recovery by renewing the value OVERSEAS chain from end-to-end; from development and July 2012 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 selling, 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 consequence of writing off the goodwill in the Akihiro Kuroda, President and CEO 07 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 AKIHIRO KURODA President and CEO compliance as we develop operations overseas to become a company based all over Asia. FEATURE: PRESIDENT AND CEO AKIHIRO KURODA SPEAKS 08 ACHIEVING GROWTH GLOBALLY, LEVERAGING OUR STRENGTHS IN JAPAN MACROECONOMIC OUTLOOK AND BUSINESS FORECASTS FOR 2012 the exceptional value arising from well-developed products in Japan as we endeavor to build up the momentum of our overseas expansion. Problems in the European financial On balance, we are therefore system are likely to be a drag on the forecasting a 5.0% increase in consol- Japanese economy and export-driven idated net sales to ¥273.0 billion. growth in Asia. Yet many of the Operating income is forecast to emerging countries in Asia are fore- increase 2.4% to ¥4.2 billion in 2012. casted to continue exhibiting high The top-line sales increase is esti- economic growth, having developed mated to include ¥10.0 billion in con- consumer markets of their own and tributions from newly consolidated overcome the inflationary pressures of subsidiaries and acquisitions primarily rising labor costs. overseas. The flatter increase fore- Pressing forward in this economic cast in operating income is the conse- environment will not be easy. The quence of an estimated increase in Group will have to work hard to curtail raw material costs, domestic sales its production costs around the world promotion expenses and initial over- as material and energy prices, and seas investments. On the other hand, wages, continue to increase. We must we are forecasting a net income of also take the initiative to raise and retain 2.7 billion. EXCELLING IN JAPAN BOLSTERING VALUE OF KOKUYO-ONLY PRODUCTS in Japan with the creation of new Harinacs Handy-Type Staple-Less Staplers products from new ideas. At the same time, we are increasing our sales promotion expenses to make certain that Stationery Business these higher-margin items gain the In the stationery business, the strat- public exposure they deserve. egy we began five years ago to enhance our added value with excep- Furniture Business tional and well-developed products The Japanese market for office furni- has become a solid business model ture shrank 30% following the global that provided the cash flow in our financial crisis of 2008, and gave rise quest for international growth. to a need to restructure the domestic Our drive to create new products distribution framework of our furniture from new ideas continues to evolve. business, which we have had to The items we develop that pay special downsize gradually because of the attention to the small things custom- fixed overheads involved. ers find satisfying have grown both In the meantime, we worked in in number and sales. Sales of our stages to improve the competitive- Harinacs Handy-Type Staple-Less ness of our furniture business in other Staplers and DOTLINER roller-type areas. These included a shift to global adhesive dispensers have continued manufacturing to reduce our produc- to grow at a double-digit rate. Another tion costs, and ¥3.7 billion in IT invest- recent success story is the CamiApp ments for building an upgraded value series of smartphone-friendly note- chain system. We are now utilizing books—sales here are four times this system, which went into full oper- greater than we had initially forecast. ation in 2012, to improve productivity, Successful attempts at spotlighting reduce inventory and enhance our distinctive products during the past furniture business in various other year include the sales promotion ways. Elsewhere, we built up our booths developed to showcase our architectural capabilities to propose Pritt line of paper glue, which we the layout of entire office space con- repackaged with a vivid biomass mark figurations, retail stores and other to indicate that the glue is made from commercial facilities, among other eco-friendly vegetable oils. These sales interior designs that include class- promotion booths resulted in a signifi- rooms in schools, waiting rooms in cant increase in sales of this paper hospitals, and public spaces in govern- glue. And even though these higher- ment buildings. We also developed margin products have yet to overtake products in demand, such as our our commonplace stationery items in Madre line of modular waiting room Japan, progress is being made. furniture, and higher-end office furni- In 2012, we are increasing our R&D expenditure 30% in an effort to underpin our earnings and sales power 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 Pritt Stick 09 A long-selling stick adhesive first introduced in 1970. SEGMENT REVISION Starting 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 NEW SEGMENT INFORMATION Stationery Business Furniture Business Mail-order &Retail HARMONii Last year we built a framework for our wholesale and direct-sales forces Kaunet and Forestway are the two to cooperate closely with one another centerpieces to the KOKUYO Group’s as the final phase of restructuring our online and catalog sales business. furniture distribution system in Japan. Together, the two companies have an In contrast to two sales channels that estimated 12% share of Japan’s were at times in conflict with one roughly ¥500 billion online and cata- another, we now have a cohesive log sales market for stationery and distribution structure that has become office supplies. much more adept at gathering market 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 10 The Conran Shop in Osaka Mail-Order &Retail Business Online and catalog sales is a grow- intelligence, making customer sales, ing segment in the Japanese market and bringing back useful information for stationery and office supplies, and feedback from customers. These wherein we are forecasting Kaunet’s are important elements of added value sales in 2012 to increase 5.4% to at KOKUYO. 54.6 billion. In, 2012, Kaunet’s prod- In 2012, Tokyo will see a surge in uct catalog will undergo thorough new office building completions of a upgrades involving a user-friendly cyclical nature. We have formed proj- browser and search functions to build ect teams and are collaborating with on this online sales site’s strategy of our wholesalers and retailers in the providing a select lineup carefully Tokyo area to make certain we don’t chosen by office supply professionals. miss this wave of possible demand. As a domestic retail business, the KOKUYO Group operates and franchises 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 highquality 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 Kaunet catalog customer footfall of existing stores and expanding the chains with new store openings. Feature Excelling in Japan We must also take the initiative to raise and retain the value arising from exceptional and well-developed products in Japan. 11 EXPANDING OVERSEAS BUILDING VALUE IN ASIA In the mail-order and retail business, the development of our online sales of office supplies in China dates The KOKUYO Group exhibited at the largest stationer y trade fair in China Critical Mass in China back to the launch of our Easybuy The markets in China are fast resem- e-commerce business in 2005. More bling Japan’s, and require a very recently, we bought the franchising sophisticated critical mass on the rights to The Conran Shop for China, ground. In the stationery business, we Hong Kong and Taiwan, in addition to answered this challenge by agreeing those shops we already own and fran- in November 2011 to acquire the chise exclusively in Japan. The first trademark and business rights to Conran Shop in Shanghai opened in China’s largest nationwide sales chan- July 2012. It will be a vehicle for publi- nel in adhesive-bound notebooks from cizing the KOKUYO brand in office HOT ROCKS STATIONERY (Shenzhen) furniture among the high-income busi- Co.,Ltd. We are now in the process of ness owners who we hope will fre- investing ¥2 billion in the construction quent the store. of a notebook factory in Shanghai, 12 which is scheduled to commence Business in India operations in September 2012. Once KOKUYO’s involvement in increasing complete, the factory will have the added value at KOKUYO Camlin Lim- capacity to supply well over 100 ited in India resulted almost immedi- million notebooks a year to our newly ately in a substantial improvement in acquired nationwide sales channel. sales momentum. Nationwide momentum is important in the stationery business in China, where most of KOKUYO’s potential competitors are small to mediumThe AIRFORT chair from KOKUYO and desk from Practika Co. Ltd. sold in China 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 network of dealers to sell our furniture and architects to propose solutions in Members of the Board of KOKUYO Camlin Limited space and interior design. Expanding Overseas We endeavor to build up the momentum of our overseas expansion. 13 KOKUYO Camlin is India’s third- 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.)This notebook operation was largest stationery maker with a long, launched when our Vietnamese fac- 80-year history. We decided that our tory, which makes files for export, first priority upon acquiring a stake in began producing them in 2010. After October 2011 was to build a KOKUYO- selling 3.7 million initially, KOKUYO style value chain for the Indian compa- sold 15 million notebooks in Vietnam ny’s manufacturing, distribution and in 2011. The Group is aiming for high sales departments to work as one. sales growth in Vietnam once again This soon resulted in substantial sales in 2012. momentum and inventory control improvements and prompted KOKUYO Camlin to announce a plan for tripling sales by 2017. MODERNIZING THE RELEVANCE OF KOKUYO’S 106-YEAR HISTORY Going forward, we will endeavor to build KOKUYO Camlin’s business base Corporate Governance SALES AT KOKUYO CAMLIN nationwide by increasing the sales Our system of corporate governance Millions of rupees) 4,000 force and expanding the network of emerged from my strong desire to wholesalers and retailers in northern modernize and update the relevance of and southern India. KOKUYO’s 106 years of business heri- 3,864 3,592 3,310 14 3,000 2,837 tage for our employees and society at 2,000 1,000 0 2008 2009 2010 2011 Notebook Business in Vietnam large. KOKUYO has strong traditions In Vietnam, KOKUYO is the third-larg- cerned that the Company wasn’t keep- est producer and only nationwide ing up with changes in society and that supplier of notebooks in the country. this might have begun to disillusion The two larger producers are govern- some of our employees. This led me to ment-owned and conduct business decide that we needed to change, and only in the north or the south. Stu- that those changes had to begin from dents in Vietnam consume three where I sat on the Board. times more notebooks on average POPULAR NOTEBOOKS IN VIETNAM and a long history. But I became con- As our first move, KOKUYO than students in Japan each year. As appointed three new people to the an exceptional value, the covers to Board of Directors in 2011 to KOKUYO’s notebooks in Vietnam are strengthen oversight. One of them decorated with Doraemon, a Japanese was Masa Matsushita, an executive anime character the Vietnamese with international experience who we revere as a symbol of intelligence. brought in from FAST RETAILING CO.,LTD. to serve full-time as a director and a senior corporate officer with executive responsibilities. The others Decorated with Doraemon, a Japanese anime character were outside directors Takeharu impact our cash position a number of Nagata, previously deputy president years down the road. All employees, representative director) of Sumitomo including people we hired mid-career Mitsui Banking Corporation, and for their professional skills, had clear Nobuyuki Oneda, formerly a board tasks and targets to measure them- member and executive vice president selves against. Anyone given an of Sony Corporation. important assignment was empow- At the same time, we launched an executive officer system in which we ered and knew exactly where the Company was heading. delegated executive authority to the I am therefore determined more than heads of our stationery and furniture ever to execute our top-down reforms in businesses and the general manager corporate governance and compliance, of Group strategy. In 2012 we went a and to start transforming management, step further by appointing another employees, and KOKUYO itself. outside director Hisao Sakuta, who is currently the chairman of the board of Returns to Shareholders OMRON Corporation. As of 2012, The KOKUYO Group offers returns to three of the six directors on KOKUYO’s shareholders based on a target divi- Board are outside directors. dend payout ratio of 20% or higher, I felt it was important our manag- taking into account consolidated oper- ers and employees should see that ating results as well as our established the Board was discussing resolutions policy of paying a stable dividend. We in the context of relevant business therefore paid a cash dividend of implications and risk returns. Board 15.0 per share for 2011. Dividends members from both within and out- for 2012 are also scheduled to be side the Company also came to an 15.0 per share. agreement that the Board should be That said, the first order in devoted more to management over- KOKUYO enhancing returns to share- sight. I wanted our executive officers holders amid this austere business to know that they were in charge of environment will be to provide each of their own responsibilities. our customers with exceptional value In retrospect, I also think that the as we accelerate the development of strengthening of corporate gover- overseas operations to become a nance and internal control made a company based all over Asia. My difference in the KOKUYO Group’s responsibilities are to ensure we do additional steps to internationalize. just that. Our Board had the foresight, as well as expert input, to discuss how the decisions we were making might 15 REVIEW OF OPERATIONS STATIONERY SEGMENT SHARE OF TOTAL NET SALES NET SALES OPERATING INCOME Millions of yen) 200,000 Millions of yen) 8,000 153,656 148,987 6,532 6,770 147,866 150,000 6,000 100,000 4,000 50,000 2,000 4,872 56.9% AIRBEAM 0 2009 2010 2011 0 2009 2010 2011 Results for the Fiscal Period ended December 31, 2011 Product Development Notebook series for the first time in eleven We aim to develop products that will be years. Additionally, we developed products Net sales amounted to ¥147.9 billion, down sought out by name, pressing forward with including the CamiApp series of smartphone- 0.8% year on year. However, operating our long-held basic policy of customer-driven friendly notebooks and the AIR BEAM series income was recorded at ¥6.8 billion, up 3.6% development to exceed customer expecta- of non-laser PC presentation pointers that year on year. tions and create exceptional value. run on PC software. Further, we have divided the products in 16 Market Conditions this segment into three categories. The first Overseas Business Development The stationery market continues to face category is high value-added products for In China, we concluded a business succes- severe business conditions as companies which we are aggressively pursuing develop- sion agreement with HOT ROCK STATIO- limit their purchases of consumables amid ment. The second category is products for NERY (Shenzen) Co.,Ltd.,the top local economic stagnation, resulting in a decline which we are using sales promotions and manufacturer of adhesive-bound notebooks. in demand. At the same time, competition adding value through measures such as cost Through this, we will acquire brand trade- is intensifying in the office supply online reduction to grow market share. The third marks, production facilities, and sales net- and catalog sales business. category is mature products. works. Combine this with our plant that is In the high value-added products category, we revamped the mainstay Campus 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 CamiApp business expansion. In Vietnam, we introduced products in tune with local needs and proactively developed sales channels to sell roughly 15 million notebooks. SEGMENT REVISION Starting 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 NEW SEGMENT INFORMATION Stationery Business Mail-Order &Retail Furniture Business AIRFORT FURNITURE SEGMENT SHARE OF TOTAL NET SALES NET SALES (Millions of yen) 120,000 113,069 OPERATING LOSS 112,887 112,139* Millions of yen) 0 90,000 1,500 60,000 3,000 30,000 4,500 43.1% 0 2009 2010 2011 6,000 2,697* 3,250 –4,292 2009 2010 2011 Results for the Fiscal Period ended December 31, 2011 footprint. We acquired certification for 342 Overseas Business Development items as having met the international carbon In business development overseas, we are Net sales were down 0.7% to ¥112.1 billion footprint standards compared with 13 items focusing on China where we have enhanced with an operating loss of ¥2.6 billion. in the previous fiscal year, making us a leader our lineup of office furniture suited to local on this front in the Japanese office furniture customers’ needs. This includes items like Market Conditions industry. Although we have begun to see a glimmer of Turning to new products, we launched the AIRFORT Chair, a strategic global product that has won top awards at office furniture hope with an increase in office building con- the AIRFORT office chair with airbags built exhibitions in China, and the products of struction starts in the Tokyo metropolitan into its lumbar region to reduce back strain. Practika Co.,Ltd.,with which we formed a area, competition continues and market This is the first domestically produced chair manufacturing and sales licensing agreement conditions remain tough. for which this airbag feature is standard. in December 2010 to bolster products In addition, we rolled out the Madre designed for the local market. Further, we Product Development lobby chair with an innovative universal worked to grow earnings by improving and Based on our fundamental policy of “custom- design offering comfort and style. Madre expanding our sales networks and promoting ers will always side with creative value,”we was also created with an eye to ensuring solution-oriented marketing. strive to develop products that offer some- that even people using wheelchairs or stroll- thing new yet useful to everyone. ers have an easily accessible place to relax in As part of environmental initiatives, we stepped up measures to reduce our carbon Madre city hall waiting areas. Since the fiscal year ended December 2011, the store fixtures business has been integrated into the furniture 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. 17 BOARD OF DIRECTORS, AUDITORS, AND CORPORATE OFFICERS (AS OF MARCH 31 2012) MEMBERS OF THE BOARD 3 2 1 5 6 4 18 1 April 1972 Joined KOKUYO Co.,Ltd. 4 December 1977 Director of the Board, KOKUYO Co.,Ltd. AKIHIRO KURODA Representative Director of the Board, President and CEO 2 YASUHIRO KURODA Representative Director of the Board, Executive Vice President 3 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) 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) April 1989 Registered attorney (Tokyo Bar Association) March 2003 Vice President and Director of the Board, General Electric Japan, Ltd. MASA MATSUSHITA Director of the Board, Senior Corporate Officer 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) 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) 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) 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) TAKEHARU NAGATA Outside Director of the Board 5 NOBUYUKI ONEDA Outside Director of the Board 6 HISAO SAKUTA Outside Director of the Board AUDITORS 10 8 7 9 7 9 YOICHI KOTANI YOSHIO TERADA Standing Statutory Auditor Outside Statutory Auditor 19 April 1972 Joined KOKUYO Co.,Ltd. April 1972 Joined Takenaka Corporation June 2001 Director of the Board, KOKUYO Co.,Ltd. March 2009 Statutor y Auditor, Takenaka Corporation (to present) March 2009 Statutor y Auditor, KOKUYO Co.,Ltd. to present) March 2009 Outside Statutor y Auditor, KOKUYO Co.,Ltd. to present) 8 10 NOBUYUKI MIYAGAKI TOMOMI YATSU Standing Statutory Auditor Outside Statutory Auditor April 1978 Joined KOKUYO Co.,Ltd. September 1990 Registered certified public accountant April 2011 General Manager, Process Reform Division, KOKUYO Co.,Ltd. November 2001 Registered attorney (Tokyo Bar Association) March 2012 Statutor y Auditor, KOKUYO Co.,Ltd. to present) April 2007 Partner, 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) CORPORATE OFFICERS 14 16 13 15 11 12 14 AKIHIRO KURODA TAKUYA MORIKAWA President and CEO Senior Corporate Officer Representative Director and President, KOKUYO S&T Co.,Ltd. 11 12 15 YASUHIRO KURODA HIDEKUNI KURODA Executive Vice President Senior Corporate Officer Representative Director and President, KOKUYO Furniture Co.,Ltd. 13 16 MASA MATSUSHITA MOTOHIRO HOJO Senior Corporate Officer Corporate Officer General Manager of Group Strategy, KOKUYO Co.,Ltd. CORPORATE GOVERNANCE 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 supervises 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 supervisory function, clarify the responsibilities of management at all levels, and heighten the objectivity and transparency of business administration. 20 Structure of Corporate Governance Business Execution promptly to changes in the business environment, direc- KOKUYO Group’s Board of Directors is comprised of a at the board meetings, along with the directors, are four total of six members, half (three) of which are outside auditors, including two outside statutory auditors. directors. As part of a system that is able to respond KOKUYO Group has separated its supervisory tors are appointed for a term of one year. In attendance HOLDING COMPANY GENERAL MEETING OF SHAREHOLDERS Appointment and dismissal HUMAN RESOURCES COMMITTEE Major Committees Relating to Internal Controllership BOARD OF DIRECTORS Auditing BOARD OF AUDITORS Advice Appointment, dismissal and supervision Inquiry President &CEO Advice Appointment and dismissal Coordination and report Report HQ MANAGEMENT BOARD Coordination Accounting audit Investment Council Instructions Internal Accounting Control Committee Instructions Report Report Disclosure Committee HEAD OFFICE DIVISIONS Internal auditing PROCESS DEVELOPMENT DEPARTMENT Coordination Compliance Committee Approval of important business operational matters OPERATING COMPANIES Internal auditing Accounting audit ACCOUNTING AUDITORS Risk Management Committee Inquiry Appointment and dismissal and executive functions and, in order to promote faster Board of Auditors decision making and streamlined business execution, KOKUYO Group’s Board of Auditors is comprised of two adopted a corporate officer system. The Board of Direc- full-time internal auditors and two outside statutory audi- tors, which assumes a supervisory function, makes cru- tors who possess a wealth of knowledge and experi- cial decisions on such matters as group-wide ences in a wide range of fields. The auditors attend the management policies and various business plans. Also, Board of Directors and other important meetings to audit as an entity responsible for business execution, it runs the legality of the duties executed by the directors. the Headquarters Management Board. This board is Moreover, to ensure the effectiveness of audits, the comprised of four Group Headquarters Operating Offi- auditors exchange opinions regularly with personnel cers, the head of which is the President and CEO, in charge of various duties and functions, as well as and its main functions are to deliberate and make have in place a system for working closely with the decisions on issues related to the Group Head- Internal Audit Division and the auditors of the main quarters. Further, issues regarding business exe- subsidiary companies. cution are discussed and decided upon at the Board of Directors’ meetings held at respective Internal Audit Division group operating companies. The Internal Audit Division has set up the Process Development Division—head director of which is appointed by Advisory Body for the Board of Directors the Board of Directors—and audits the group headquar- As an advisory body for our Board of Directors, we have ters and affiliated companies. The Process Development in place a Human Resources Committee, a majority of Division audits, from a company-wide standpoint, the which consists of external members or directors. The appropriateness of risk-management, compliance, and Human Resources Committee reviews, appoints, and business operations. It also evaluates the efficacy of dismisses candidates for director, auditor, and operating internal control and reports on the audits directly to the officer (hereinafter collectively referred to as “officers”)President and CEO at the Headquarters Management It also deliberates on compensation plans, evaluates Board. It also reports of its activities to the Board of individual officers, verifies remunerations, and offers Directors at appropriate times. reports and recommendations regarding such matters to the Board of Directors. OUTSIDE DIRECTORS Building a Highly Transparent Business Management System 2010 No outside directors Internal directors: 6 Outside directors: 0 2011 Recruit Outside Directors Internal directors: 4 Outside directors: 2 2012 Increase Outside Directors Internal directors: 3 Outside directors: 3 21 KOKUYO’S CSR KOKUYO’S CSR CHARTER Grounded in the founding corporate philosophy of “Being useful to the world through our products,”KOKUYO Group cond % 0.2% 0.4% 1.6% 3.7%)7.1%)0.6% 2.1%)2.9%)3.3% 1.7% 3.0% 2.2%)58.2% 30.3% 0.3% 61.7% 25.5% 0.2% 62.5% 24.9% 4.2%)59.7% 26.1% 1.7%)59.5% 29.1% 1.8% 59.0% 22.8% 128,742 128,742 Thousands of shares Common stock: Number of shares issued 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. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR AR 2011.12 OVERVIEW In running its operations, the KOKUYO Group Gross Profit remains steadfast to its basic management principle Gross profit rose 0.7% year on year to ¥86.7 billion, of “contributing to society through the provision of despite the impact of lower net sales. Gross margin superior products.”Under the management vision of improved 0.5 of a percentage point year on year to Always Innovating For Your Knowledge,”the Group 33.3%,as a result of cost reduction efforts and the constantly works to innovate in response to changes change in the sales policy aimed at improving the in society to ensure that its activities play a useful profitability of sales operations. social role. The Group’s brand message highlights “Inspiration, Efficiency, and Amenity” as the types of SG&A Expenses added value that KOKUYO aims to continue deliver- Selling, general and administrative (SG&A) expenses ing to assist users in their “knowledge work.”amounted to ¥82.6 billion, down 0.2% year on year. As of December 31, 2011, the KOKUYO Group The SG&A expenses ratio increased by 0.2 of a per- consisted of the holding company (KOKUYO Co.,centage point to 31.8%.The Group made an effort Ltd.)50 subsidiaries, and 18 affiliates. Of these, 24 to reduce fixed expenses in other areas to offset an companies were consolidated subsidiaries and 1 increase in IT-related expenses and depreciation and affiliate was accounted for by the equity method. amortization expenses arising mainly from the main27 tenance and operation of a new IT system. 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. Due to the change in KOKUYO’s fiscal year-end, the period ended December 31, 2007 was an irregular nine-month period. NET SALES RATIO OF GROSS PROFIT TO NET SALES AND SG&A EXPENSES TO NET SALES Millions of yen) OPERATING INCOME AND RATIO OF OPERATING INCOME TO NET SALES Millions of yen) 40 400,000 25,000 5 20,000 4 15,000 3 33.3 30 300,000 31.8 260,005 20 200,000 10,000 2 1.6 10 100,000 4,073 5,000 0 0 2007 2008 2009 2010 2011 Stationery Segment Furniture Segment Store Fixtures Segment 0 2007 2008 2009 2010 2011 Ratio of Gross Profit to Net Sales Ratio of SG&A Expenses to Net Sales 1 0 2007 2008 2009 2010 2011 Operating Income (Left Scale) Ratio of Operating Income to Net Sales (Right Scale) BY SEGMENT Operating Income Stationery Segment Operating income increased ¥0.8 billion, or 24.1%,The value of the Japanese stationery market is esti- to ¥4.1 billion as a net result of a ¥0.6 billion mated at around ¥500 billion*1. The stationery seg- increase in gross profit and a ¥0.2 billion decrease ment continues to face severe business conditions as in SG&A expenses. competition intensifies in the office supply online sales area and companies look to limit their purchase Net Loss (Income) of consumables amid the economic recession. In this The Group recorded a net loss of ¥5.5 billion after environment, the KOKUYO Group, as the only com- the recognition of extraordinary losses that prehensive manufacturer of stationery goods in Japan, included the amortization of goodwill and asset holds the leading market share of approximately 12%.In the domestic market, our efforts to increase impairment losses. market share in our high priority product areas included the renewal of the Campus Notebook Dotted Ruled Lines Series, which is the top-selling brand in the industry, for the first time in eleven years and the launch of high value-added products in the growing 28 mini-size scissors market, such as Clippy Non-Stick Pocket Scissors, which we developed specifically for use by workers who carry scissors in their pockets. In the Kaunet office supply online and catalog sales business, the KOKUYO Group posted record sales and operating income helped by the strong *1 On a manufacturers’ shipment value basis. KOKUYO’s own estimate based on commercial data and KOKUYO Group research. NET LOSS (INCOME) AND BASIC NET LOSS (INCOME) PER SHARE (Millions of yen) ROE Yen) 80 8,000 CAPITAL EXPENDITURE AND DEPRECIATION AND AMORTIZATION (Millions of yen) 8 8,000 7,262 40 4,000 0 0 4,000 40 46.16 –5,459 4 6,000 0 4,000 4 3.6 80 8,000 120 12,000 2007 2008 2009 2010 2011 Net Loss (Income) Left Scale) Basic Net Loss (Income) per Share (Right Scale) 8 6,531 2,000 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Capital Expenditure Depreciation and Amortization performance of With Kaunet and Benrinet Light Furniture Segment office supply bulk purchasing systems as well as The total Japanese office furniture market is our aggressive sales promotion activities. believed to have contracted by approximately 30% In business development overseas, in an earnest to a little over ¥200 billion*2 as a result of the major effort to enter the market for office-use notebooks in economic downturn following the Lehman Shock. China, the KOKUYO Group reached an agreement to The slight recovery in 2011 has seen the market succeed the business of Ruhe Stationery (Shenzhen) grow to around ¥220 billion*2. KOKUYO has utilized Co.,Ltd.,a leading manufacturer in the local stitch- its nationwide sales network to capture a 25% share bound unlined notebook market. With this arrange- of this market. ment, the KOKUYO Group will acquire assets such At the 2012 KOKUYO Fair held in November as the trademark for the brand, production facilities 2011, the Group exhibited a variety of model spaces and sales networks of HOT ROCKS STATIONERY for offices, hospitals and clinics, educational facili- Shenzhen) Co.,Ltd which, together with our own ties and government bureaus that provided custom- local plant scheduled to start operation in summer ers with simulated work experience and proposals 2012, is expected to help the Group to seize the larg- for new ways of working, aimed at stimulating est share in the local market for office-use notebooks. demand, in addition to the exhibition of new prod- In India, we completed the acquisition of the ucts. The new products introduced at the fair shares in KOKUYO Camlin Limited, put the manage- included the Madre lobby chair, a product targeted ment system in place, and established the founda- for use at government bureaus, which has versatile tion for business expansion in the local market. functions and design features that can provide a The KOKUYO Group performed well in Vietnam, selling approximately 15 million notebooks, as it introduced products that meet local needs and actively developed sales channels. In summary, although we were affected by the wide variety of users, from infants to elderly people, with comfortable seating. In China, the Group expanded the office furniture product lines in order to meet the needs of local customers by introducing, among others, the decrease in domestic demand, the office supply mail AIRFORT chair, which won the Golden Award at an order business performed well and the sales of the office furniture tradeshow in China, and products of high priority products in the fourth quarter exceeded Practika Co.,Ltd.,with which the Group had con- the results of the previous year. As a result, the cluded a manufacturing and sales licensing agree- KOKUYO Group posted segment net sales of ¥147.9 ment in December 2010 for the purpose of billion (down 0.8% year on year) and a segment oper- reinforcing product lines targeted at local needs. ating income of ¥6.8 billion (up 3.6% year on year).2 Estimate based on “Current Survey of Production: Metal furniture” by the Ministry of Economy, Trade, and Industry. The ¥600 billion office furniture market breakdown comprises roughly ¥220 billion for office furniture, 150 billion for building materials and ¥230 billion for planning and services. 29 LIQUIDITY AND CAPITAL RESOURCES sales networks and actively offered solution propos- 1) Fund Procurement Policy and Liquidity Management als, thereby seeking revenue growth. KOKUYO’s capital structure policy centers on the Furthermore, the Group developed and expanded As a result, segment net sales decreased 0.7% year on year to ¥112.1 billion, as the segment performed well in the domestic office furniture area use of retained earnings but calls for the flexible use of direct and indirect financing as necessary. KOKUYO has been assigned a long-term credit where the business condition is recovering, although rating of A- and a short-term credit rating of a-1 by sales of the store fixtures business declined. Despite Rating and Investment Information, Inc. of Japan. the decrease in net sales, the segment’s operating KOKUYO intends to fund future business expansion loss decreased to ¥2.7 billion as a result of the from internal resources. efforts to improve the gross margin. 2) Assets, Liabilities and Total Net Assets Total assets at December 31, 2011 amounted to ¥252.8 billion, down ¥86.0 million from December 31, 2010, the end of the previous fiscal year. Current 30 assets increased ¥3.2 billion to ¥112.7 billion. The main contributory factors were increases in cash and cash equivalents of ¥0.7 billion, notes and accounts receivable of ¥1.7 billion. Non-current assets were ¥140.1 billion, down ¥3.2 billion. While property, plant and equipment decreased by ¥6.3 billion and investments and other assets decreased by ¥3.4 billion, intangible assets were up ¥6.4 billion in comparison with the previous fiscal year. Total liabilities at December 31, 2011 amounted to ¥103.2 billion, up ¥7.0 billion from December 31, 2010. Current liabilities increased ¥12.5 billion to ¥71.5 billion. The main contributory factors were increases in notes and accounts payable-trade and current portion of short-term loans, which rose ¥1.7 billion and ¥10.6 billion, respectively. Non-current liabilities decreased ¥5.5 billion to ¥31.8 billion. Net assets at December 31, 2011 amounted to ¥149.6 billion, down ¥7.1 billion from December 31, 2010. 3) Cash Flow Analysis 4) Dividends Net cash provided by operating activities was ¥10.7 KOKUYO advocates shareholder-centric manage- billion, up ¥1.7 billion from the previous fiscal year. ment and is implementing a dividend policy based on This was primarily the result of inflows of deprecia- the goal of achieving a dividend payout ratio of 20% tion and amortization of ¥6.5 billion and of amortiza- or higher, taking into account consolidated operating
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