Traded Stock Code
YUHO
REPORT
Fiscal Year Ended May 31, 2010
Traded TSE1
This report is based on the Company’s Japanese-language annual filing with the Financial Services Agency and supplemented with materials that facilitate comparison with the Company’s peers. The materials from the annual filing with the Financial Services Agency have been edited and reorganized in a format more familiar to the international investment community. All information contained in this report has been obtained from sources believed to be reliable, but the accuracy of the data and the translation and the completeness and timeliness of the information are not warranted by the Company, Pacific Associates, or PRONEXUS. None of the above parties shall be responsible for any error or omission or for results obtained from the use of this information.
Table of Contents
Profile ... 3
Financial highlights...3
Peer comparisons ...3
Business Overview ... 4
Contents of business...4
Group companies ...6
History ...7
Risk factors...9
Research and development ...11
Analysis of financial condition and results of operations ...13
Corporate governance ...17
Directors ...29
Employees...30
Union ...30
Acquisition of treasury stock ...30
Cash Flows... 31
Consolidated statement of cash flows ...31
Capital expenditures ...33
Dividend policy ...33
Consolidated Operations ... 35
Consolidated income statement...35
Consolidated statement of changes in net assets ...37
Results of operations ...39
Segment information ...45
Issues requiring action ...47
Sales and procurement ...47
Selling, general and administrative expenses...48
Leases...48
Capital Structure... 50
Consolidated balance sheet...50
Financial instruments ...53
Market value of securities ...56
Derivatives...57
Retirement benefits ...58
Deferred taxes...59
Accounting Policies... 60
Share-related Information ... 62
Profile
Financial highlights
Years ended May 31; Millions of yen 2006 2007 2008 2009 2010 2010/2006Changes
Consolidated
Net sales 46,042 46,671 46,781 45,355 46,518 101.0% Ordinary profit 1,951 1,378 1,404 675 1,835 94.1%
Net income 534 194 294 (1,709) 1,001 187.5%
Net assets 87,470 88,189 84,169 72,399 73,236 83.7% Total assets 101,841 102,796 99,215 85,602 85,740 84.2% Net assets per share (Yen) 1,765.63 1,780.28 1,699.24 1,574.47 1,592.64 90.2% Net income per share (Yen) 10.80 3.92 5.96 (34.75) 21.80 201.9% Net income per share, fully diluted (Yen) 10.80 - - - -
Net cash provided by (used in) operating activities 2,560 689 3,410 680 3,199 125.0% Net cash provided by (used in) investing activities (5,153) (1,296) (979) 2,622 (103)
Net cash provided by (used in) financing activities 29 (910) (624) (4,705) (1,445)
Cash and cash equivalents at year-end 6,862 5,428 7,067 5,304 7,093 103.4%
Employees 1,679 1,711 1,724 1,823 1,825 108.7%
Peer comparisons
Percentage 2006 2007 2008 2009 2010
Net income / net sales 1.2 0.4 0.6 (3.8) 2.2
Peers 2.5 0.8 2.6 2.2 3.8
Ordinary profit / net sales 4.2 3.0 3.0 1.5 3.9
Peers 4.9 4.0 5.3 4.8 6.8
Net income / assets 0.5 0.2 0.3 (1.8) 1.2
Peers 4.0 1.2 3.2 1.1 3.8
Ordinary profit / assets 2.0 1.3 1.4 0.7 2.1
Peers 7.5 4.7 6.2 4.6 6.7
Equity / assets 85.8 85.7 84.8 84.5 85.3
Peers 48.4 45.8 45.9 46.4 47.3
Net income / equity 0.6 0.2 0.3 (2.2) 1.4
Peers 6.6 0.2 5.8 3.4 9.2
Business Overview
Contents of business
The Corporate Group, composed of Sakata Seed Corporation (“the Company”), 41 subsidiaries and two affiliated companies, is engaged in selling horticultural products and materials (vegetable seeds, flower seeds, bulbs, seedlings and agricultural and horticultural products).
The Group’s businesses and the relationship of the Company and its affiliates to these businesses are outlined below.
1. Wholesaling (the Company and 40 affiliated companies)
This division produces or procures vegetable seeds, flower seeds, bulbs, seedlings, and agricultural and horticultural products and wholesales these products to
nurseries, etc., in Japan and other countries around the world.
2. Retailing (the Company and 1 affiliated company)
The retailing division procures products for gardening hobbyists and sells them to home improvement retailers in Japan. It also operates a mail-order sales business and a garden shop.
3. Others (the Company and 2 affiliated companies)
This division is engaged in landscaping for the public and private sectors and operates an insurance agency and a temporary staffing agency.
The following table presents an outline of the Group’s business segments and the companies participating in them.
Changes in scope of consolidation:
• Additions: Sakata America Holding Company Inc., plus two other newly established companies
Principal operations Main companies involved
Wholesaling
Wholesaling of seeds and agricultural and horticultural products to nurseries and other producers
(Products: vegetable seeds, flower seeds, bulbs and seedlings)
33 companies, including the Company
SAKATA SEED CORPORATION (Consolidated subsidiaries)
Sakata Logistics Co., Ltd., Brolead Co., Ltd., Sakata Seed America, Inc., Sakata Seed de Mexico, S.A., Sakata Centroamerica, S.A., Sakata Seed de Guatemala S.A., Alf Christianson Seed Co., Sakata Seed Sudamerica Ltda., Sakata Korea Co., Ltd., Sakata Vegetables Europe S.A.S., Sakata Ornamentals Europe A/S, Sakata Holland B.V., Sakata Seed Iberica S.L., Sakata UK Limited, Sakata Ornamentals UK Ltd., Sakata Seed Southern Africa (Pty) Ltd., Sakata Seed India Private Limited and 13 other companies (Affiliated companies)
Sakata Polska Sp. z.o.o. and 1 other company
Wholesaling of agricultural and horticultural products to nurseries and other producers
(Products: agricultural and horticultural materials) 2 companies, including the Company
SAKATA SEED CORPORATION (Consolidated subsidiary)
Jiffy Pot Products Co. of Japan, Ltd.
Production of seeds and agricultural and horticultural products for nurseries and other producers
(Products: vegetable seeds, flower seeds, bulbs and seedlings)
7 companies
(Consolidated subsidiaries)
Yamagata Celltop Co., Ltd., Nagano Celltop Co., Ltd., Hida Celltop Co., Ltd., Fukuoka Celltop Co., Ltd., Sakata Seed Chile S.A., Sakata Siam Seed Co., Ltd., Sakata Seed (Suzhou) Co., Ltd.
Retailing
Selling to gardening hobbyists through home improvement retailers
2 companies, including the Company
SAKATA SEED CORPORATION (Consolidated subsidiary)
Nishio Shokubutsu Co., Ltd.
Mail-order sales, garden shop The Company
SAKATA SEED CORPORATION
Others
Landscaping, insurance agency, temporary staffing agency
3 companies, including the Company
SAKATA SEED CORPORATION (Consolidated subsidiaries)
Group companies
Millions of yen or as indicated Capital stock Percent ownership
Sakata Logistics Co., Ltd. 30 100
Sakata Kosan Co., Ltd. 10 100
Brolead Co., Ltd. 50 100
Yamagata Celltop Co., Ltd. 50 100
Nagano Celltop Co., Ltd. 60 70
Hida Celltop Co., Ltd. 70 62
Fukuoka Celltop Co., Ltd. 200 100
Jiffy Pot Products Co. of Japan, Ltd. 18 100
Nishio Shokubutsu Co., Ltd. 21 52
Sakata Techno Service Ltd. 13 100
Sakata America Holding Company Inc. - 100
Sakata Seed America, Inc. US$ 1,500 thousand 100
Sakata Seed de Mexico, S.A. Mex$ 55,850 thousand 100
Semillas Sakata de Mexico, Aric Mex$ 46 thousand 100
Sakata Mexico, S.A. - 100
Productora de Semillas Sakata, Spr de Rl Mex$ 58 thousand 100
Agricola Sakata, Spr de Rl Mex$ 58 thousand 100
Sakata Centroamerica, S.A. CCO 10 million 100
Sakata Seed de Guatemala S.A. GTQ 1,541 thousand 100
Sakata Seed Oceania Pty Ltd. Aus$ 240 thousand 100
Alf Christianson Seed Co. US$ 7 thousand 100
Alfco, Inc. US$ 0 thousand 100
Seaward Investments, Inc. US$ 0 thousand 100
Quincy Investments, LLC - 100
Bayview Ridge Properties, LLC US$ 1 thousand 100
European Sakata Holding S.A.S. EUR 36,050 thousand 100
Sakata Holland B.V. EUR 420 thousand 100
Sakata Vegetables Europe S.A.S. EUR 5,630 thousand 100
Sakata Ornamentals Europe A/S DKK 119 million 100
FPA Ejendomme A/S DKK 10 million 100
Sakata Seed Iberica S.L. EUR 3 thousand 100
Sakata UK Limited STG£ 100 thousand 100
Sakata Ornamentals UK Ltd. STG£ 1,200 thousand 100
Sakata Seed Southern Africa (Pty) Ltd. ZAR 598 thousand 100
Sakata Vegenetics RSA (Pty) Ltd. ZAR 0 thousand 100
Sakata Seed Chile S.A. Ch$ 2,242 million 100
Sakata Seed Sudamerica Ltda. R$ 13,776 thousand 100
Sakata Siam Seed Co., Ltd. THB 87 million 100
Sakata Seed India Private Limited INR 100 million 100
Sakata Korea Co., Ltd. WON 18,540 million 100
History
Year Month Event
1913 July Takeo Sakata (the Company's founder) establishes Sakata Noen in Shirosato-mura, Kanagawa (currently, Rokkakubashi, Yokohama).
1916 Company name changed to T. Sakata & Co.
1923 September Company building lost in fire following the Great Kanto Earthquake.
1930 May Chigasaki Breeding Station established.
1942 December Merger of T. Sakata & Co., Atariya Noen, Fujita Zenbei & Co., Enomoto Tokujiro & Co. and Yomoto Co. completed to form T. Sakata & Company, capitalized at 195,000 yen.
1951 December Retail store operations begun (currently, Garden Center Yokohama).
1959 April Misato Research Station established.
1960 April Chogo Research Station established.
1966 August Hazawa Office established.
1967 August Fukuoka Branch (currently, Kyushu Branch) opened.
1970 June Chogo Distribution Center established (closed in May 2006).
1971 June Kimitsu Research Station established.
July Sendai Branch opened.
1974 August Shirakawa Branch opened (closed in May 2002).
1975 October Shares of Jiffy Pot Products Co. of Japan, Ltd. acquired.
1976 January Okayama Branch opened (closed in May 2004).
1977 July Sakata Seed America, Inc. established.
1979 June Kyoei Noji Co., Ltd. (currently, Sakata Logistics Co., Ltd.) established.
1980 October Florist Sakata Co., Ltd. established (liquidation completed in May 1999).
Sapporo Branch (currently, Hokkaido Branch) opened.
1982 July Nakai Engei Ltd. established (liquidation completed in January 2009).
1985 October Nagoya Branch opened (closed in May 2006).
1986 January Corporate name changed to Sakata Seed Corporation.
1987 January Yamagata Vegetable Center, Co., Ltd. (currently, Yamagata Celltop Co., Ltd.) established.
May Shares listed on the Second Section of the Tokyo Stock Exchange.
1988 January Sakata Kosan Co., Ltd. established.
June Higashimura Seed Co., Ltd. (currently, Brolead Co., Ltd.) established.
December European Representative Office established.
1989 September Shares of Yamaki Kogyo Co., Ltd. acquired (liquidation completed in May 2003).
1990 March European Representative Office upgraded to local subsidiary through establishment of Sakata Seed Europe B.V. (currently, Sakata Holland B.V.).
April Kakegawa Research Center established.
May Nagano Celltop Co., Ltd. established.
June Kanto-Kita Branch opened (closed in May 2006).
November Hokkaido Research Station established.
Shares listed on the First Section of the Tokyo Stock Exchange.
December Hida Celltop Co., Ltd. established.
1991 July Yokohama Branch (currently, Higashi Nihon Branch) opened.
August Sakata Seed Chile S.A. established.
Year Month Event
1993 March Sakata Seed de Mexico, S.A. established.
1994 March Yamagata Distribution Center established (closed in May 2008).
April Kazo Distribution Center established (closed in December 2009).
May Shiga Breeding Branch Station of Kakegawa Research Center established (closed in October 1999).
June Shares of Naniwa Green Co., Ltd. acquired (liquidation completed in April 2002).
October Sakata Seed do Brasil Ltda. established.
November Shares of Agroflora S.A. (currently, Sakata Seed Sudamerica Ltda.) acquired by Sakata Seed do Brasil Ltda.
1995 February Corporate headquarters and head office moved to present site (Tsuzuki-ku, Yokohama).
1996 February Hokkaido Branch established (entailing move and change of name of Sapporo Branch).
Shares of Yurix Co., Ltd. acquired (liquidation completed in February 2006).
March Shares of Samuel Yates Ltd. (currently, Sakata UK Limited) acquired.
April Sakata Seed France S.A.R.L. (currently, Sakata Vegetables Europe S.A.R.L.) acquired.
June Osaka Branch opened (currently, Nishi Nihon Branch).
Sakata Siam Seed Co., Ltd. established.
Sakata Seed Iberica S.L. established.
August YCC Distribution Center established (closed in February 2006).
September Shares of Flora Feliz S.A. in Costa Rica (currently, Sakata Centroamerica, S.A.) acquired.
October Number of shares comprising one trading unit of the Company's stock changed from 1,000 to 100.
1997 March Shares of Chung Won Seed Co., Ltd. (currently, Sakata Korea Co., Ltd.) acquired.
April Shares of Nishio Shokubutsu, Co., Ltd. acquired.
1998 October Garden Center Shonan opened (closed in November 2005).
1999 February Sakata Seed (Suzhou) Co., Ltd. established.
October Additional shares in Wilgro Nurseries Ltd. (currently, Sakata Ornamentals UK Ltd.) acquired.
December Shares of MayFord Holdings (Pty) Ltd. acquired.
2000 January Additional shares of Sakata Seed NZ Ltd. acquired (liquidation completed in August 2001).
December Additional shares of Piloncito Verde S.A. acquired (liquidation completed in December 2008).
2001 February Chiba Branch opened (closed in March 2002).
European Sakata Holding S.A.S. established.
June Sakata Vegenetics RSA (Pty) Ltd. established.
Merger of Sakata Seed do Brasil Ltda. and Sakata Seed Sudamerica Ltda. completed.
September Sakata Techno Service Ltd. established.
2002 April Narita Office opened.
Alf Christianson Seed Co. and Alfco, Inc. incorporated into Group as subsidiaries through share buyback and retirements.
May Additional shares in Sakata Siam Seed Co., Ltd. acquired.
August System of regional branches (Hokkaido Branch, Higashi Nihon Branch, Nishi Nihon Branch, Kyushu Branch) established.
2003 July Sakata Ornamentals Europe A/S established following acquisition of the flower division of L. Daehnfeldt A/S.
2005 May Sakata Seed Oceania Pty Ltd. established.
Year Month Event
2006 February Yaita Distribution Center opened.
2007 May Qualiveg Seed Production, Inc. merged into Sakata Seed America, Inc.
2008 May Sakata Seed India Private Limited established.
2009 May Bayview Ridge Properties, LLC established.
December Sakata Ornamentals Chile Ltda. merged into Sakata Seed Chile S.A.
2010 January Sakata Mexico S.A. established.
February Sakata America Holding Company Inc. established.
Risk factors
The following is a discussion of factors that could negatively impact the Company’s financial performance and financial condition. The forward-looking statements in the discussion are based on judgments made by the Company as of the last day of the fiscal year under review.
1. Weather-related risks
• Climate changes around the world exert a significant impact on sales of vegetable seeds, flower seeds, bulbs and seedlings; poor weather conditions could thus erode sales and adversely affect the Company’s financial
performance.
• The Company carries out seed production in 19 countries around the world. In each region, the Company takes steps to disperse risk by consigning seed production to multiple outside producers. Despite these precautions, it may be unable to assure sufficient quality and quantity of production in the event of sudden changes in the local weather. Such circumstances may exert a significant negative impact on its financial results.
2. Impact of geopolitical and social systems
The Company is engaged in production, R&D and sales operations in 21 countries around the world. It operates five breeding and research stations in Japan and another 10 overseas (in eight countries). This extensive base of operations exposes the Company to the following kinds of risks, which could have a significant impact on the Group’s financial performance:
• Sudden and unexpected enactment of laws and regulations, or amendments to existing laws and regulations
• Political and economic upheaval
• Social disorder caused by terrorism or other eruptions of violence
• Information age-related problems, including computer viruses and information leakage
3. Development risks, including those related to human resources
• The long-term nature of cultivar development (over 10 years) exposes the Company to the following kinds of risk:
1) Investment risk—that economic payoffs may fall short of expectations
2) Development risk—that efforts may fail to produce the desired cultivar
3) Market risk—that market needs may change during the course of development
4) Competitive risk—that a product may receive a less favorable reception than a product developed by another company
• In addition to access to genetic resources, successful development hinges to a large extent on the abilities of individual breeders. There is a risk that a breeder may leave the Company midway through a project, thus raising obstacles to its successful completion. Failure to produce an intended high-quality variety could have a significant impact on the Company’s financial performance.
4. Risks related to safety
• The Company’s creed, articulated by its founder Takeo Sakata, is “Quality, Reliability and Service.” With this as a basis, the Company seeks to gain customers’ confidence in the quality and safety of its products. Accordingly, it responds quickly and effectively when complaints arise, and works diligently to prevent problems from occurring.
• Because the Company’s products are examples of “living genetics,” however, appropriate levels of quality or uniformity may not always be achieved.
Safety-related problems could also arise from environmental factors or manufacturing technologies, rather than from the seeds themselves.
Safety-related problems could have a significant impact on the Company’s financial performance.
5. Risks related to currency fluctuations
• Financial statements prepared in local currencies are translated into yen during consolidation. Fluctuations in foreign exchange markets could thus reduce earnings, even if earnings in local currencies remain unchanged.
6. Changes in the value of assets held
Because the Sakata Group holds a wide variety of assets, any decline in the price of land, marketable securities or other assets could negatively impact the Group’s financial performance.
Research and development
Product development for the Company’s main vegetables and flowers is coordinated by the Company’s R&D Division, which develops new varieties for markets
worldwide. In Japan, research is carried out at five farms, led by the Company’s principal farm at Kakegawa, Shizuoka Prefecture. Overseas, the company operates 10 research farms in North America and other regions.
Throughout the Group, 327 people are involved in research and development. Total R&D expenditures amounted to ¥3,712 million during the fiscal year under review.
Wholesaling
Vegetables—notable developments
1. The SEIRIN cabbage cultivar
• Ideal for summer/autumn harvesting in cold areas and harvesting before year-end in mild and warm climates
• The first private sector-developed cultivar to be recognized for excellence by the Ministry of Agriculture, Forestry and Fisheries of Japan (selected as one of the Ministry’s certified cultivars for fiscal 2009)
2. Prize-winning cultivars, as judged by the Japan Seed Trade Association
• SK5-441 carrot, also winner of the Ministry of Agriculture, Forestry and Fisheries Minister’s Award
• SK3-084 broccoli
• MIRAGE spinach 3. New cultivars
• Tomato rootstock FRIENDSHIP, which has the greatest resistance to
pyrenochaeta disease of any of the Company’s tomatoes—and is ideally suited to forcing culture and semi-forcing culture
• MIFUNE, a radically new, turnip with sweet, tender flesh that is resistant to multiple diseases
• AOSAE, a salad-type pok choi that can be eaten raw
4. Overseas
• Farms in the United States, France, Spain, South Africa, Brazil, Korea and Thailand
• Development of cultivars adapted to the cultural, climatic and soil conditions of the respective countries
Flowers
1. R&D strategies
• In the area of cut flowers, a continued emphasis on breeding the main varieties and most popular colors
• For potted varieties and flower bed seedlings, plans are to focus on distinctively new cultivars to generate new demand and expand the size of the gardening market
• A further focus on breeding for the Southeast Asian market, where the Company foresees a future increase in demand
2. Responses from the market to previously introduced cultivars
• VOYAGE® GREEN (lisianthus) and ALA CARTE® YELLOW (primula), winners
of Best Flower prize at 2009 Japan Flower Selection
• Since its introduction last year, the VINCENT series of sunflowers has achieved a steady expansion in market share, earning it further R&D investment hereafter
3. New cultivars
• Lisianthus: introduction of REINA WHITE, the Company’s largest diameter variety, developed to increase the size of the white lisianthus market
• SunPatiens® line: the addition of new colors, VARIEGATED WHITE and
LAURA, to a variety that has demonstrated superior environmental purification capabilities
• SuperCal® BLUE: the first blue-colored hybrid cross between petunia and
calibrachoa—released on the spring market
Analysis of financial condition and results of operations
1. Significant accounting policies and estimates• The Sakata Group’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in Japan.
• In preparing these statements, the Company makes all necessary estimates based on rational standards.
2. Analysis of financial performance (Percentage changes are year-on-year.)
Net sales and operating income
• Net sales: International sales increased in both the local currencies and in yen, contributing to a 2.6% increase in overall sales to ¥46,518 million; sales in Japan did well despite challenges in the domestic market (see “Issues requiring action”).
• Cost of goods sold
1) Increased by 1.7% to ¥24,266 million.
2) Gross profit on sales consequently increased by 3.5% to ¥22,251 million.
• SG&A expenses
1) Increased by 1.3% to ¥20,576 million.
2) Operating income consequently rose by 41.2% to ¥1,675 million.
Nonoperating income and expenses
• In the nonoperating accounts, despite the recognizing ¥385 million in
currency-related losses, the Company reported a gain of ¥160 million (cf. a loss of ¥511 million in the previous year) because it did not recognize losses from portfolio trading.
• Ordinary profit increased by 171.6% as a result to ¥1,835 million.
Extraordinary losses and income before taxes and other adjustments
• Gain from sale of securities: ¥417 million
• Losses on valuation of investment securities: ¥333 million
• Thus, income before taxes and other adjustments was ¥1,729 million as compared with a loss before taxes and other adjustments of ¥1,071 million in the previous year.
Corporate taxes
Net income
• The Company recognized net income for the year of ¥1,001 million compared to a net loss of ¥1,709 million in the previous year, an increase of ¥2,710 million.
3. Financial condition
Assets
• Total assets: increased by ¥138 million to ¥85,740 million.
• Principal changes:
1) Increase of ¥2,238 million in cash and deposits
2) Decline of ¥405 million in marketable securities
3) Decline of ¥538 million in buildings and structures
4) Decline of ¥749 million in investment securities
Liabilities
• Total liabilities: declined by ¥698 million to ¥12,504 million.
• Principal changes:
1) Decline of ¥340 million in notes and accounts payable-trade
2) Decline of ¥1,635 million in short-term borrowings
3) Increase of ¥975 million in long-term debt
Shareholders’ equity
• Total shareholders’ equity: increased by ¥836 million to ¥73,236 million.
• Breakdown:
1) Decline of ¥3,042 million in retained earnings
2) Decline in treasury stock of ¥3,352 million
3) Increase in foreign currency translation adjustments of ¥538 million
Equity ratio
• The equity ratio at the end of the year was consequently 85.3% compared to 84.5% at the end of the previous year.
4. Strategic situation and forecasts
The fiscal year ended May 2010 marked the end of the Company’s 3rd
strategies aimed at rebuilding profitability before the 100th anniversary of its founding (in 2013):
• Improving profitability domestically and internationally based on a number of core strategic products—with an emphasis on improving profitability in the domestic market
• Bolstering the profitability of the retailing division by encouraging greater collaboration between the domestic wholesaling and retailing businesses
• Taking aggressive steps to cultivate a presence in the major markets of India and China
• Centralizing management of seed production strategies and ensuring the supply of high-quality seeds
• Creating a global R&D presence and developing competitive products efficiently
As detailed below, significant progress was achieved in all of the key areas presented in the plan.
• Core strategic products
1) RINKA 409 tomato: Tomatoes represent a very large market in Japan and this product has been extremely well received in all the major production areas, leading to a rapid increase in sales.
2) Overseas, broccoli and carrots have demonstrated highly satisfactory growth.
3) In the flower seed segment, the new VINCENT series of cut sunflowers has been very well received in the consumer market and among growers; while enhancing its ability to supply high-quality seeds, the Company has
gradually generated higher sales of this product.
4) Another cut flower, lisianthus, is doing well in Europe and Asia.
• The retailing division: because of falling sales of horticultural products and bulbs, restoring profitability in this segment remains a difficult issue, to which the Company is responding with the following measures:
1) Managing profitability for all merchandise that it sells to home improvement centers and implementing strict cost controls
• Amid the protracted recession in the United States and Europe, India and China have taken on increasing strategic importance.
1) Business at the Company’s Indian subsidiary, which was established in May 2008, has been on track to expand and begun to contribute to profits.
2) In the China market, where middle class incomes are rising and the Westernization of diets is progressing, the Company has focused on expanding and deepening its sales network, setting the stage for a large increase in future sales.
• Difficulties in the gardening business continue to mount, making the future of this business difficult to predict.
1) In this situation, the concepts from the 3rd medium-term management plan remain in effect and will continue to be implemented as means of dealing with the difficulties.
2) At the same time, careful evaluations will be made with the aim of building a new operating strategy before the 100th anniversary year.
5. Analysis of sources of capital and liquidity
In the following statement, all content related to the future is based on judgments made by the Sakata Group as of the end of the fiscal year under review.
Millions of yen 2006 2007 2008 2009 2010
Equity ratio (%) 85.8 85.7 84.8 84.5 85.3
Market capitalization ratio (%) 73.9 74.3 79.4 70.7 65.7
Interest-bearing debt ratio (%) 92.0 380.0 84.4 483.1 82.1
Interest coverage ratio (times) 27.2 5.0 21.6 7.3 43.2
(Notes)
Equity ratio: total equity/total assets
Market capitalization ratio: total market capitalization/total assets Interest-bearing debt ratio: interest-bearing debt/cash flows Interest coverage ratio: cash flows/interest paid
1. All indicators are calculated on a consolidated basis.
2. The total market value of the Company’s shares is calculated on the basis of the total number of shares outstanding, less treasury stock.
3. Cash flows refer to cash flows from operations from the Company’s consolidated statement of cash flows. 4. Interest-bearing debt includes all debt on the consolidated balance sheet on which the Company pays interest.
• Major funding requirements
1) In addition to procurement expenses for seeds and horticultural products, the Sakata Group’s funding requirements revolve principally around
personnel costs, transportation expenses, packaging expenses and advertising expenses.
2) The Group also maintains a program of ongoing capital investment aimed at upgrading, expanding and rationalizing its manufacturing facilities and strengthening its R&D capabilities.
3) The Sakata Group’s interest payment burden from its interest-bearing debt as of the end of the fiscal year under review was sufficiently low as a
percentage of expenditures. At its current level of interest-bearing debt, the impact on the Group’s operations of an increase in interest rates would be limited.
• Possibilities for financing
With respect to liquidity, the Group’s approach is to deal with unforeseen future situations by ensuring that it has sufficient liquidity on hand. With respect to financing, Sakata Seed Corporation and its domestic and international
subsidiaries all maintain good relationships with their correspondent financial institutions, enabling the respective companies to respond appropriately to situations in their locale.
6. Management’s assessment of issues and its future policies: see discussion under “Issues requiring action.”
Corporate governance
Corporate governance
1. Basic views regarding corporate governance
The Sakata Group’s management policy is “to become the top seed company in the world” by “helping to improve the everyday life and culture of the world’s people through the provision of high-quality products and services.” Based on its
time-honored creed, “Quality, Reliability and Service,” it is taking active steps to establish a healthier financial structure, more efficient operations and a stronger compliance system. To enhance the public’s understanding of the Sakata Group, it is also devoting additional resources to improving its public information and investor relations capabilities.
2. Governing entities and internal control system
• Basic explanation of the Company’s governing bodies
1) At its General Meeting of Shareholders held on August 30, 2007, the Company elected one outside director.
3) The Company establishedan internal Auditing Office in January 2007 to support the operations of its corporate auditors and its Board of Corporate Auditors.
• Governing bodies and internal control system
1) The Company’s governing bodies and their meeting schedules are as follows. On June 1, 2007, the Company introduced a new system of
corporate executive officers to expedite decision-making, devolve authority for execution of operations and make the most of up-and-coming younger managers.
a) Monthly meetings of the Board of Directors, where decisions are made on basic management policy and other important issues; all corporate
auditors also in attendance
b) Monthly senior management meetings, attended by all directors above the rank of managing director and by the standing corporate auditors
c) Monthly general managers’ meetings, attended by general managers, branch managers and standing corporate auditors
d) Monthly corporate executive officers’ meetings, attended by directors, corporate auditors and corporate executive officers
2) Methods of internal auditing and oversight
a) To ensure the health of operations, the Auditing Office conducts audits of the Company and its domestic affiliates based on internal regulations.
b) Formerly reporting directly to the President, the Auditing Office now reports to the senior management meeting; because it is also responsible for evaluating internal controls, it is staffed by three persons.
c) When expert judgment becomes necessary, the office receives advice from consulting attorneys, consulting tax accountants and others.
• The Company has adopted this structure of governance to enhance its long-term enterprise value, which it believes will require the following:
1) An ability to make expeditious decisions
2) An ability to ensure transparent management
3) Establishment of a more effective management oversight function
• Internal audits; audits by corporate auditors
auditors are carried out in accordance with the policies and division of responsibility determined by the Board of Corporate Auditors.
2) Addition of personnel: in June 2008, the Company created and filled the position of full-time director for the Corporate Auditors’ Office, which was established in January 2007; the above-mentioned Auditing Office carries out internal audits based on internal regulations.
3) Coordination
a) To coordinate the various audits—by the Auditing Office, corporate auditors and financial auditors—the corporate auditors and members of the Auditing Office meet on an as-needed basis to exchange information. b) The financial auditors and corporate auditors also meet on an as-needed
basis to discuss findings and exchange relevant information.
c) Selection criteria
Corporate auditors: knowledge of finance and accounting
External auditors: independence
• Financial audits
1) Conducted by the following certified public accountants and 15 assistants (four CPAs and eleven others)
2) The Company asks KPMG AZSA LLC to conduct its audits in accordance with the Financial Instruments and Exchange Law.
Name Affiliation
No. of consecutive years of auditing the Company’s accounts
Designated limited liability partner/engagement partner: Takahisa Miyamoto
KPMG AZSA LLC 1 year
Designated limited liability partner/engagement partner: Shigemori Akiyama
KPMG AZSA LLC 6 years
• Relationships between the Company and its external directors and corporate auditors
1) Based on wide-ranging knowledge and experience, external members of the Board play the vital roles of providing objective oversight over management and enhancing management transparency.
b) Kunihiko Maeda, one of two external corporate auditors, was elected as Atsushi Hachiboshi’s replacement. He is not a former employee of the Company or any of its affiliates; he does not have any ownership, transactional or other interests in the Company.
c) External auditor Yoshinobu Sato is not a former employee of the Company or any of its affiliates; he does not have any ownership, transactional or other interests in the Company.
2) The Company has registered Yoshinobu Sato as an independent director/auditor with the Tokyo Stock Exchange.
3. Status of risk management system
• Development of a Risk Management Manual to ensure quick and effective responses to risks facing the enterprise
1) When an event occurs and is reported, a Crisis Management Headquarters shall be established.
2) Construction of an information-conveyance mechanism
3) Direct, hands-on control by the President
• The procedures for the protection and acquisition of rights related to the intellectual properties of the Company and its affiliates are
1) Coordinated by the Legal Department and the Research and Development Headquarters and
2) Conducted with the aim of responding in an appropriate and timely manner to changes that occur in every country around the world.
• System to ensure ethical behavior and to foster the development of healthy openness in the corporate culture
1) Preparation and distribution of a Compliance Manual
2) Adoption of measures to educate employees and to encourage ethical behavior
• Customer Relations Office organized to improve customer satisfaction 1) Central collection point for complaints received by other departments or
directly from customers
2) Reporting to the Board of Directors
4. Basic policies regarding internal control and measures adopted to improve internal control
At its meeting of May 19, 2006, the Board of Directors adopted the following basic eight-point policy related to the development of internal systems as prescribed under Articles 362-4-6 and 362-5 of the Companies Act. These articles of the Companies Act require companies to establish systems to ensure that the directors, in executing their duties, act in compliance with the relevant laws and ordinances and in compliance with their Articles of Incorporation. The eight-point policy has also been developed in accordance with ministerial ordinances of the Ministry of Justice, which aim to ensure the appropriateness of other activities by joint stock corporations.
• Mechanisms to ensure that, in executing their duties, the directors and
employees act in accordance with all relevant laws and ordinances and with the Company’s Articles of Incorporation
1) Preparation of a Compliance Manual and other regulations to ensure the development of, and widespread adherence to, a system of compliance; the directors and employees closely follow the provisions of this manual and these regulations.
2) Establishment of a Compliance Committee headed by the President with the participation of outside attorneys
a) The committee decides on all important policies regarding training, education and other compliance-related programs.
b) It reports all required information to the Board of Directors.
3) Establishment of Compliance Consultation Offices both within and outside the Company, where any employee of the Sakata Group can go to consult about and/or report on actions that appear questionable from the standpoint of legal or ethical compliance
a) The Company strictly protects the secrecy of such reports and/or consultations.
b) It does not treat whistleblowers in any way that violates the
Whistleblower Protection Act or other laws or ordinances, or in any way that violates the Company’s internal regulations.
• Mechanisms to ensure the preservation and control of information related to the directors’ execution of duties
a) Preservation for periods prescribed under the Company’s Regulations on the Management of Documents, and preservation in the departments or sections indicated by such regulations
b) Ensuring that such documents are available for inspection on an as-needed basis
2) Management of documents is carried out in accordance with the following:
a) Standards for Establishing Information Security Measures
b) Regulations on the Management of Personal Information
• Regulations and other structures to protect against the risk of losses 1) The Company recognizes and evaluates a number of specific risks,
including the following:
a) Weather-related risks
b) Risks associated with geopolitical and societal changes in regions where it does business
c) R&D-related risks
d) Risks related to infringements of intellectual property rights
e) Risks related to safety
f) Foreign exchange risks
2) Each division (responsible for research, production and distribution, quality control, domestic sales, or international sales or management) identifies and manages the risks specific to its particular area of operations.
a) When necessary, manuals are created and operating regulations established.
b) Weather-related risks have a special bearing on agricultural enterprises; since weather cannot be predicted or controlled, the Company deals with these risks through diversification; i.e., by establishing production areas in different countries around the world.
c) In an emergency, the Company implements solutions by following procedures spelled out in its Risk Management Manual:
- Establishment of a Crisis Management Headquarters headed by the President
• Mechanisms to ensure efficient execution of duties by the directors 1) The directors execute their duties in a manner stipulated under the
Company’s Regulations Concerning the Division of Duties and its Table of Standards Related to Personal Authority.
2) To enable the directors to carry out their duties efficiently, the Company permits collaboration with other directors and employees through
committees and project teams.
3) The Company also promotes efficiency through the rationalization and computerization of operations.
4) When the Company meets the conditions specified under Article 370 of the Companies Act, it permits resolutions of the Board of Directors to be
adopted through written communications.
• Mechanisms that ensure the appropriate conduct of operations of the Corporate Group (comprising the Company and its subsidiaries)
1) Operations of subsidiaries managed and overseen by the Office of Management and Planning
2) In accordance with its Regulations Concerning the Management of Subsidiaries, the Company takes steps such as the following to ensure sound, effective operation of the Corporate Group:
a) Promotion of information exchange
b) Establishment of a system of collaboration, including personnel exchanges
c) Provision of appropriate levels of management guidance for subsidiaries
• Matters with respect to the employees concerned when the corporate auditors request the assistance of employees in carrying out their auditing duties; matters related to ensuring the independence of such employees from the directors
1) When requested to do so by a corporate auditor, the Company shall establish a position to be filled by employees with responsibility for assisting the corporate auditors with their duties.
2) The directors shall consult with the Board of Corporate Auditors regarding each of the following matters:
a) The numbers and ranks of such employees
b) The lines of authority under which they operate
c) Compensation
• Mechanisms related to reporting by the directors and employees to the corporate auditors and to other instances of reporting to the corporate auditors
1) When they discover facts that could cause significant harm to the Company, directors shall report such facts to the corporate auditors.
2) Directors shall also report any dishonest activities by directors and any activities by directors that are in violation of laws or ordinances or the Articles of Incorporation.
3) To enable the corporate auditors to execute their duties smoothly and effectively, directors and employees shall report important
management-related matters to the corporate auditors; they shall also provide the corporate auditors with status reports on operations.
4) The corporate auditors shall be allowed to participate in the following:
a) Senior management meetings and other important management meetings
b) Compliance Committee meetings, where they shall receive reports on the operations of the Compliance Consultation Offices; the kinds of issues under consultation at these offices; and the improvements being made as a result of such consultations
• Mechanisms related to ensuring the effectiveness of the corporate auditors in other areas
1) The directors and corporate auditors shall endeavor to meet regularly and to improve their mutual communication.
2) When the corporate auditors deem it necessary for reasons concerning operations, they shall receive reports on audits and the status of operations from the following and shall exchange information on such matters with them:
a) Persons responsible for the Internal Auditing Division
b) Corporate auditors of subsidiaries
c) Other persons in equivalent positions
3) When they deem it necessary, the corporate auditors shall have the authority to appoint attorneys, CPAs or other outside experts independently for the purpose of auditing operations.
The following is an update on the status of the primary measures the Company has adopted in accordance with the foregoing basic policies; it also lists any new
measures the Company has adopted during the fiscal year under review.
repeatedly taken action through such means as training sessions and other educational programs to ensure observance of laws and of Sakata Seed’s Code of Conduct.
(2) All electronic records and other documents related to the minutes of Board of Directors’ meetings, documents circulated for approval, etc., are preserved and managed in accordance with the Articles of Incorporation and other internal regulations.
(3) In the event of a crisis, the Company shall immediately establish a Crisis Management Headquarters chaired by the President to act quickly and efficiently in response to the situation; the Company is now revising and improving related regulations to facilitate effective responses.
(4) The Company implemented a corporate executive officer system in June 2007 to expedite decision-making and to improve its operating efficiency.
(5) Based on the Company’s Regulations Concerning the Management of
Subsidiaries and through participation in senior management meetings of the affiliates in question, the departments and directors responsible for overseeing affiliated companies develop a firm grasp of the operating conditions of these affiliates and provide for their appropriate management.
(6) The Company established a Corporate Auditors’ Office in January 2007 to assist the corporate auditors in the execution of their duties.
(7) In addition to attending all important management meetings, including Board of Directors meetings and senior management meetings, the corporate auditors study all documents related to important corporate decisions.
(8) From time to time, directors and corporate auditors exchange information on the status of risk management activities within the Company and its affiliates as a means of establishing and maintaining good communications.
5. Directors’ compensation
• Compensation by board member category; breakdown by type of compensation; and number of board members in each category
Total amounts paid out to board members by type of compensation
Millions of yen Amount paid Compensation Bonuses Retirement benefits
Number of board members in each category
Directors (excluding External Corporate Directors)
103 72 5 25 6
Corporate Auditors (excluding External Corporate Auditors)
17 16 - 1 1
External Corporate Directors and Auditors
• Total compensation for each director/auditor of the Company: this information is omitted because no individual’s compensation exceeds ¥100 million.
• Significant compensation paid to directors who are also employees: not applicable
• Policy regarding amounts paid to board members and the method of calculating such amounts
To determine compensation for its directors/auditors, the Company takes into account a wide variety of factors, including its financial results, the nature of the tasks in which the directors/auditors are involved, their respective
contributions to the financial results that have been achieved, etc.
6. Shareholdings in other companies
• Shares held by the Company for purposes other than pure investment Number of issues: 23
Total value on balance sheet: ¥7,537 million
• Of these, shares whose balance sheet values exceed one-hundredth the value of shareholders’ equity
Millions of yen
Number of
shares Book value Investment purpose
Maruichi Steel Tube Ltd. (5463) 1,060,000 1,746 To strengthen sales-related relationships
Yokohama Reito Co., Ltd. (2874) 1,022,000 652 To strengthen sales-related relationships
Kikkoman Corporation (2801) 649,000 608 To strengthen sales-related relationships
The Gunma Bank, Ltd. (8334) 1,178,000 557 To strengthen relationships with financial institutions
MAX Co., Ltd. (6454) 537,000 481 To strengthen sales-related relationships
T&D Holdings, Inc. (8795) 205,800 443 To strengthen sales-related relationships
The Bank of Yokohama, Ltd. (8332) 866,000 376 To strengthen relationships with financial institutions
Sotetsu Holdings, Inc. (9003) 736,000 282 To strengthen sales-related relationships
Amano Corp. (6436) 335,000 259 To strengthen sales-related relationships
Bull-Dog Sauce Co., Ltd. (2804) 1,152,000 228 To strengthen sales-related relationships
Hakuyosha Company, Ltd. (9731) 850,000 226 To strengthen sales-related relationships
Maruzen Showa Unyu Co., Ltd. (9068) 766,000 222 To strengthen sales-related relationships
Mitsubishi Pencil Co., Ltd. (7976) 155,000 198 To strengthen sales-related relationships
• Shares held by the Company for purely investment purposes
2009 2010
Millions of yen
Total amount on balance sheet
Total amount on balance sheet
Total amount of dividends received
Total amount of gains or losses from sales
Total amount of valuation losses
Unlisted shares - 1,119 21 -
-Shares other than unlisted shares
- 312 5 - 47
7. Content of agreements limiting liability
• In accordance with Article 423-1 of the Companies Act, the Company has entered into agreements with all of its outside directors and outside corporate auditors limiting their liability.
• These agreements contain a maximum liability for the payment of damages by outside directors and outside corporate auditors, which is the minimum amount prescribed under Article 425-1 of the Companies Act.
8. Necessary number of directors
The Company has stipulated in its Articles of Incorporation that there shall be no more than 11 directors.
9. Resolutions for the election of directors
The Company has stipulated in its Articles of Incorporation that resolutions concerning the election of directors must be approved as follows: shareholders holding one-third or more of the voting rights of all shareholders eligible to vote must be in attendance, and a majority of these must vote in the affirmative. Cumulative voting is not permitted.
10. Acquisition of the Company’s own shares
The Company has stipulated in its Articles of Incorporation that, in accordance with Article 165-2 of the Companies Act, it is authorized to acquire its own shares through market transactions based on a resolution adopted by the Board of
Directors. The purpose of such acquisitions is to enable the Company to implement agile and efficient strategies with respect to shareholders and financing.
11. Interim dividends
12. Requirements for special resolutions at the General Meeting of Shareholders
With respect to special resolutions by the General Meeting of Shareholders, as provided for under Article 309-2 of the Companies Act, the Company has stipulated in its Articles of Incorporation that approval of such resolutions shall require that shareholders holding one-third or more of the voting rights of all shareholders eligible to vote be in attendance, and that two-thirds of the
shareholders present vote in the affirmative. The aim of this rule is to promote smoother transaction of business at the General Meeting of Shareholders.
Financial auditors’ compensation
1. Compensation paid to financial auditors
2009 2010 Millions of yen
Financial audit services
Non-audit services
Financial audit services
Non-audit services
Parent Company 55 - 60
-Subsidiaries - - -
55 - 60
-2. Other important compensation
In the fiscal years ended May 2009 and May 2010, the Company paid auditing compensation of ¥43 million and ¥77 million to KPMG, which audited certain of the Company’s subsidiaries and which is a member firm of the network of financial auditors that audited the Company.
3. Compensation policy for financial audit services
Although there is no policy to report under this section, the Company determines the compensation it pays to its financial auditor based on discussions with the auditor, taking comprehensively into account the auditor’s estimation of the number of days required for the audit and the number of auditors whose
Directors
Name Title
Date joined company
Previous or current
employers/occupations Date of birth Term
Thousand shares
Hiroshi Sakata President and Representative Director
May-81 The Dai-Ichi Kangyo Bank Ltd.
14-Feb-52 2 years from the General Meeting of Shareholders (GMS) held in August 2009
65.3
Hiroshi Arakawa Senior Managing Director
Apr-69 20-Jan-46 2 years from GMS held in August 2009
10.4
Makoto Ohta Managing Director Jul-90 The Sanwa Bank Ltd. 21-Oct-48 2 years from GMS held in August 2009
7.6
Ryoichi Kojima Director Apr-69 30-Oct-46 2 years from GMS held in August 2009
7.0
Seiko Tasaki Director Sep-92 16-Dec-48 2 years from GMS held in August 2009
1.9
Seiji Miyazaki Director Apr-70 1-May-46 2 years from GMS held in August 2009
7.3
Risho Uchiyama Director Apr-84 29-Jan-62 1 year from GMS held in August 2010
2.3
Hideto Kaneko Director Apr-90 18-Jun-62 1 year from GMS held in August 2010
200.0
Atsushi Hachiboshi Director Aug-03 Mizuho Bank, Ltd., Mizuho Research Institute
4-Sep-49 2 years from GMS held in August 2009
1.0
Akishige Sekiya Standing Corporate Auditor
Apr-70 3-Sep-47 4 years from GMS held in May 2008
5.9
Yoshinobu Sato Corporate Auditor Aug-03 Nissho Iwai Corp., Shin Mitsui Sugar
30-Jun-41 4 years from GMS held in May 2007
3.0
Kunihiko Maeda Corporate Auditor Aug-07 Mizuho Bank, Ltd., AEON Mall Co., Ltd.
5-Jul-41 4 years from GMS held in May 2008
-311.7
Current assignments and previous positions in the Company have been omitted.
Under law, the Company is required to have a certain number of corporate auditors. To prepare for the possibility that it might not be able to fill the required number of seats, the Company has elected an alternate corporate auditor in accordance with Article 329-2 of the Companies Act.
Name Title
Previous or current
employers/occupations Date of birth
Thousand shares
Employees
Consolidated 2010 Business segment Number
Wholesaling 1,467
Retailing 106
Others 10
Corporate staff 242
1,825
Parent Total or average
Number 621
Average age 36.9
Average years of service 13.6
Average annual salary (thousands of yen) 5,628
Average annual salary includes bonuses and overtime pay.
Union
Sakata Seed Corporation’s union is an intra-Company union independent of any outside umbrella organization. The Company enjoys amicable labor relations.
Acquisition of treasury stock
Types of shares
The acquisition of common stock as stipulated under Articles 155-7 of the Companies Act.
Acquisitions which are not based on resolutions adopted by the General Meeting of Shareholders or the Board of Directors
Yen No. of shares Total value
Treasury stock acquired during the year under review 1,411 1,833,931
Treasury stock acquired during the period under review 220 257,621
Disposal and ownership of treasury stock
Fiscal year under review Period under review Yen
Number of shares
Total value of disposed shares
Number of shares
Total value of disposed shares
Acquired treasury stock sold to underwriters - - -
-Acquired treasury stock subsequently cancelled 2,500,000 3,354,475,000 -
-Acquired treasury stock transferred through mergers, share exchanges or corporate divisions
- - -
-Others
(Treasury stock acquired in response to shareholders’ requests to purchase shares of less than one unit)
- - -
-Cash Flows
Consolidated statement of cash flows
Years ended May 31; Millions of yen 2008 2009 2010
Net cash provided by (used in) operating activities
Net income (loss) before taxes and other adjustments 898 (1,071) 1,729
Depreciation expenses 2,064 1,990 1,946
Amortization of negative goodwill (17) (17) (6)
Allowance for doubtful accounts (35) 293 (78)
Interest and dividend income (516) (548) (360)
Interest expenses 153 96 76
Foreign exchange losses 18 272 167
Impairment losses 135 469 94
Losses on valuation of investment securities 425 938 333
Losses (gains) on sales of investment securities 37 - (417)
Losses (gains) from investment securities portfolio 90 333 (19)
Decrease (increase) in trade receivables (393) (611) 9
Decrease (increase) in inventories (524) (240) 68
Increase (decrease) in notes and accounts payable (482) 3 (437)
Increase (decrease) in accounts payable - other - (1,411) 76
Others 1,807 (97) (31)
3,662 397 3,150
Interest and dividends received 512 545 361
Interest paid (151) (92) (74)
Income taxes refund - 55 170
Income taxes and others paid (612) (226) (409)
Years ended May 31; Millions of yen 2008 2009 2010
Net cash provided by (used in) investing activities
Increase in time deposits (3,274) (6,788) (1,850)
Proceeds from decrease in time deposits 4,384 8,556 1,792
Payments for purchase of marketable securities (239) - (300)
Proceeds from sales of marketable securities 239 - 41
Payments for acquisition of tangible fixed assets (1,060) (922) (1,625)
Proceeds from sales of tangible fixed assets 120 88 264
Payments for acquisition of intangible fixed assets (180) (668) (89)
Proceeds from redemption of marketable securities - - 718
Payments for purchase of investment securities (1,232) (368) (151)
Proceeds from sales of investment securities 157 - 755
Proceeds from redemption of investment securities 239 2,600 50
Payments for acquisition of subsidiaries' capital (1) -
-Payments for loans and advances (3) -
-Proceeds from collection of short-term loans 6 -
-Proceeds from maturity of insurance funds - - 397
Others (136) 126 (107)
(979) 2,622 (103)
Net cash provided by (used in) financing activities
Increase (decrease) in short-term borrowings 325 713 (1,632)
Proceeds from long-term loans payable - - 977
Payments for purchase of treasury stock (4) (4,589) (1)
Dividend payments (989) (742) (691)
Others 45 (87) (97)
(624) (4,705) (1,445)
Effects of exchange rate changes on cash and cash equivalents (167) (360) 139
Increase (decrease) in cash and cash equivalents 1,639 (1,763) 1,789
Cash and cash equivalents at beginning of year 5,428 7,067 5,304
Cash and cash equivalents at end of year 7,067 5,304 7,093
Relationship between the balance of cash and cash equivalents as of term-end and balance sheet items
Years ended May 31; Millions of yen 2008 2009 2010
Cash and deposits 13,846 10,192 12,430
Time deposits, etc., of 3 months or longer (6,778) (4,888) (5,336)
Capital expenditures
1. Group-wide: ¥1,791 million
• Objective: improvement of quality control and physical distribution capabilities
• Includes, notably, ¥551 million in expenditures related to a seed warehouse for Alf Christianson Seed Co.
2. Capital investment by business segment
• Wholesaling: ¥1,499 million
• Retailing: ¥118 million
• Corporate assets: ¥173 million
3. No significant retirements or sales of facilities during the year under review
Dividend policy
Basic stance on dividends
1. The Company considers returning profits to shareholders to be a significant issue for management.
2. Over the medium-to-long term, its basic policy on dividends will be determined by:
• The financial results for each term
• Management’s need to ensure sufficient retained earnings to enhance its operational capabilities and to strengthen the foundations of the Company’s business
• The need to maintain stability and continuity of payouts Payouts
1. Frequency of dividend payouts: twice annually
• Interim dividend, as determined by the Board of Directors
• Year-end dividend, as determined by the General Meeting of Shareholders 2. Total dividends: ¥20 per share, of which ¥10 is paid out after the close of the
interim period
Allocation of retained earnings
To respond to the changes it foresees in the business environment and to enhance its ability to compete on cost, the Company will:
1. Strengthen its R&D and production capabilities to respond effectively to market needs
Articles of Incorporation
1. Regarding interim dividends, under Article 454-5 of the Companies Act, the Company has provided for the following in its Articles of Incorporation
2. “The Company may pay out interim dividends with a record date of November 30 each year, based on a resolution by its Board of Directors.”
Dividends paid for the year under review are as shown below.
Date of decision Dividend payout Dividend per share
(Millions of yen) (Yen)
January 13, 2010
Resolution of Board of Directors
459 10
August 27, 2010
Resolution of General Meeting of Shareholders
Consolidated Operations
Consolidated income statement
Years ended May 31; Millions of yen 2008 2009 2010
Net sales 46,781 45,355 46,518
Cost of goods sold 24,028 23,859 24,266
Gross profit on sales 22,753 21,496 22,251
Selling, general and administrative expenses 21,449 20,309 20,576
Operating income 1,303 1,186 1,675
Nonoperating income
Interest income 237 265 151
Dividend income 278 283 208
Rental income 233 229 205
Amortization of negative goodwill 17 17 6
Others 158 152 177
925 948 750
Nonoperating expenses
Interest expenses 153 96 76
Sales discounts 34 28 26
Foreign exchange losses 391 849 385
Losses on investment securities portfolio 90 333
-Others 155 151 101
824 1,459 590
Ordinary profit 1,404 675 1,835
Extraordinary income
Gains on sales of fixed assets 83 56 20
Gains on sales of investment securities - - 417
Insurance claims received 22 -
-Subsidy income 41 -
-Others 22 36 14
Years ended May 31; Millions of yen 2008 2009 2010
Extraordinary losses
Impairment losses 135 469 94
Special retirement expenses 23 -
-Losses on valuation of investment securities 425 938 333
Production indemnification expenses 32 29
-Settlement packages - - 70
Losses on valuation of inventories - 246
-Others 59 156 59
675 1,840 558
Income before taxes and other adjustments 898 (1,071) 1,729
Corporate, inhabitant and other taxes 422 399 423
Income tax refunds (15) -
-Adjustment of prior years’ corporate taxes - 13
-Deferred taxes 197 208 293
604 621 717
Minority interests in income of consolidated companies (0) 16 10
Consolidated statement of changes in net assets
Years ended May 31; Millions of yen 2008 2009 2010
Shareholders' equity Common stock
Balance at end of previous term 13,500 13,500 13,500
Changes of items during the term
Total changes of items during the term - -
-Balance at the end of current term 13,500 13,500 13,500
Capital surplus
Balance at end of previous term 10,823 10,823 10,823
Changes of items during the term
Disposal of treasury stock 0 (0)
-Total changes of items during the term 0 (0)
-Balance at the end of current term 10,823 10,823 10,823
Retained earnings
Balance at end of previous term 61,382 60,687 58,278
Effect of changes in accounting policies applied to foreign subsidiaries
- 42
-Changes of items during the term
Dividends (989) (742) (688)
Net income (loss) 294 (1,709) 1,001
Retirement of treasury stock - - (3,354)
Other - - 0
Total changes of items during the term (694) (2,451) (3,042)
Balance at the end of current term 60,687 58,278 55,235
Treasury stock
Balance at end of previous term (2,094) (2,097) (6,685)
Changes of items during the term
Acquisition of treasury stock (4) (4,589) (1)
Disposal of treasury stock 2 0
-Retirement of treasury stock - - 3,354
Total changes of items during the term (2) (4,588) 3,352
Years ended May 31; Millions of yen 2008 2009 2010
Total shareholders' equity
Balance at end of previous term 83,611 82,913 75,915
Effect of changes in accounting policies applied to foreign subsidiaries
- 42
-Changes of items during the term
Dividends (989) (742) (688)
Net income (loss) 294 (1,709) 1,001
Acquisition of treasury stock (4) (4,589) (1)
Disposal of treasury stock 2 0
-Other - - 0
Total changes of items during the term (697) (7,040) 310
Balance at the end of current term 82,913 75,915 76,225
Valuation/translation gains (losses)
Unrealized gains (losses) on other securities
Balance at end of previous term 3,759 2,429 167
Changes of items during the term
Other changes in non-shareholders' equity items during the term (net)
(1,329) (2,262) (16)
Total changes of items during the term (1,329) (2,262) (16)
Balance at the end of current term 2,429 167 151
Foreign currency translation adjustments
Balance at end of previous term 739 (1,244) (3,770)
Changes of items during the term
Other changes in non-shareholders' equity items during the term (net)
(1,984) (2,525) 538
Total changes of items during the term (1,984) (2,525) 538
Balance at the end of current term (1,244) (3,770) (3,232)
Total valuation/translation gains (losses)
Balance at end of previous term 4,499 1,184 (3,603)
Changes of items during the term
Other changes in non-shareholders' equity items during the term (net)
(3,314) (4,788) 521
Total changes of items during the term (3,314) (4,788) 521
Balance at the end of current term 1,184 (3,603) (3,081)
Minority shareholders' equity in consolidated companies
Balance at end of previous term 79 71 87
Changes of items during the term
Other changes in non-shareholders' equity items during the term (net)
(8) 15 4
Total changes of items during the term (8) 15 4