ASICS Corporation
Annual Report 2014/12
-Contents
Leading the Running Market W
J A P A N
E U R O P E
20.2
% (2nd) ASICS market share¥
691.2
billion
Running market
¥
205.2
billion
Running market
MIDDLE EAST/
AFRICA
Running
market
¥
140.4
billion
A S I A
Running
market
¥
529.2
billion
Market
leader
France
26.7
%Market
leader
Australia
37.1
%Market
leader
Japan
17.8
%Mumbai Marathon
Since
2008
Sponsored by ASICS
38,000
Runners
*Global running market size based on exchange rate of ¥108/USD Source: NPD data
Tokyo Marathon
Since
2007
Sponsored by ASICS
36,000
Runners
Paris Marathon
Since
2009
Sponsored by ASICS
40,000
Runners
Management’s Discussion & Analysis
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Financial Highlights
A Message from the President
Special Feature :
News
Building our position in other sports to complement the running business
2 4 8 10 12 14 16 17 18
• ASICS Japan Corporation
• ASICS Sales Corporation
• Sanin ASICS Industry Corp.
•
• ASICS Trading Co., Ltd.
• ASICS America Corporation
• ASICS BRASIL LTDA
• Asics Canada Corporation
• ASICS Europe B.V.
• ASICS France S.A.S
• ASICS Italia S.p.A.
• ASICS Deutschland GmbH
• ASICS Iberia S.L.
• ASICS UK Limited
• ASICS Sverige AB
• ASICS Oceania PTY. LTD.
• ASICS China Trading Co., Ltd.
• ASICS Korea Corporation
• HAGLÖFS HOLDING AB
President and CEO, Representative Director:Representative Director and Managing Executive Oficer:
Directors and Managing Executive Oficers:
Director and Executive Oficer:
Senior Executive Oficers:
Executive Oficers: Kevin Wulff
Yuichi Honma Itaru Yamane
Yuji Mabuchi Audit & Supervisory Board Member:
Audit & Supervisory Board Members (external):
ASICS:
the first choice
for serious runners
Interest in healthy lifestyles is growing worldwide. This trend, along with the accessibility of running – anybody with a pair of running shoes can get started – means vast numbers of people now take part in running events all over the world. Running is far and away the largest sports market today.
We are leveraging the popularity of the ASICS brand among serious runners to expand our presence in the recreational runner market.
Running Soccer /
football Swimming Golf Basket-ball Tennis Baseball Rugby
Largest sports market
Serious runners
Performance focused
Recreational runners
Design focused
30
-
60
%
ASICS market share
Comparison with other sports
Running
market size
Quick
facts
*Ratio of marathon finishers wearing ASICS shoes (ASICS data) ¥1 trillion ¥2 trillion ¥3 trillion
t Worldwide
12.5
% (2nd) ASICS market shareA M E R I C A S
Running
market
¥
1,252.8
billion
ASICS LA Marathon
Since
2012
Sponsored by ASICS
25,000
Runners
*Title sponsor since 2013
*
*
Global
running
market
breakdown
¥
2.8
trillion
Global running
market size
Asia
19
%Europe
25
%Japan
7
%Middle East/ Africa
5
%Americas
44
%Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report
Corporate Information
1920 44 45
Financial Highlights
ASICS Corporation and Consolidated Subsidiaries
(Millions of yen)
2010/3
2011/3
2012/3
2013/3
2014/3
2014/12
For the year:
Net sales
¥ 224,395
¥ 235,349
¥ 247,793
¥ 260,199
¥ 329,465
¥ 354,052
Sports shoes
165,808
175,057
182,807
192,729
251,827
282,790
Sportswear
42,576
43,685
46,838
49,460
57,198
54,215
Sports equipment
16,010
16,606
18,148
18,010
20,438
17,046
Cost of sales
130,169
132,226
140,244
146,361
185,097
198,864
Gross profit
94,226
103,123
107,549
113,838
144,368
155,188
Selling, general and administrative expenses
76,643
81,549
87,920
95,175
117,852
124,721
Operating income
17,582
21,574
19,629
18,663
26,516
30,467
Income before income taxes and minority interests
18,309
18,496
20,650
20,803
27,694
34,183
Net income
8,326
11,046
12,618
13,773
16,108
22,286
Net cash provided by operating activities
16,982
9,553
10,240
14,296
6,393
10,720
Net cash used in investing activities
(2,698)
(25,151)
(3,563)
(8,056)
(13,735)
(9,845)
Net cash provided by (used in) financing activities
(4,919)
10,549
(3,842)
(2,956)
27,647
(4,848)
At year-end:
Total net assets
¥ 109,664
¥ 106,369
¥ 115,315
¥ 138,078
¥ 159,567
¥ 201,941
Total assets
184,774
200,790
212,344
244,725
317,528
355,837
Number of employees
5,357
5,604
5,906
5,937
6,585
7,484
Per share of common stock (Yen):
Net income
¥ 43.90
¥ 58.26
¥ 66.55
¥ 72.65
¥ 84.96
¥ 117.40
Cash dividends
10.00
10.00
12.00
12.00
17.00
23.50
Total net assets
525.58
524.91
569.39
685.10
834.68
1,058.94
Ratios
(%):
Gross profit ratio
42.0
43.8
43.4
43.8
43.8
43.8
Operating income ratio
7.8
9.2
7.9
7.2
8.0
8.6
Net income ratio
3.7
4.7
5.1
5.3
4.9
6.3
Return on assets (ROA)
4.6
5.7
6.1
6.0
5.7
6.6
Return on equity (ROE)
8.8
11.1
12.2
11.6
11.2
12.4
Shareholders’ equity ratio
53.9
49.6
50.8
53.1
49.9
56.5
Notes: 1. All the figures have been rounded off to the nearest million yen.
(Millions of yen)
Net Sales by Product
(Millions of yen)
Net Sales by Reportable Segment
Sports shoes
282,790
(79.9%)
Sportswear
54,215 (15.3%)
Sports equipment
17,046 (4.8%)
(Millions of yen)
Net Sales
’10/3 ’11/3 ’12/3 ’13/3 ’14/3
235,349 224,395 247,793 260,199 ’14/12 329,465 354,052
(Millions of yen, %)
Operating Income / Operating Income Ratio
’10/3 ’11/3 ’12/3 ’13/3 ’14/3
21,574 17,582 19,629 18,663 ’14/12 26,516 30,467
’10/3 ’11/3 ’12/3 ’13/3 ’14/3
11,046 8,326 12,618 13,773 ’14/12 16,108 22,286
(Millions of yen, %)
Total Assets / Total Net Assets /
Shareholders’ Equity Ratio
’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’14/12
ROE / ROA
’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’14/12
(Yen)
Net Income per Share
’10/3 ’11/3 ’12/3 ’13/3 ’14/3
58.26 43.90 66.55 72.65 ’14/12 84.96 117.40 (Yen)
Cash Dividends per Share
’10/3 ’11/3 ’12/3 ’13/3 ’14/3
10.00 10.00 12.00 12.00 ’14/12 17.00 23.50 200,790 106,369 212,344 244,725 317,528 355,837 184,774 109,664 53.9 7.8 3.7 4.7
5.1 5.3 4.9 6.3 9.2 7.9 7.2 8.0 8.6 49.6 50.8 53.1 49.9 56.5 115,315 138,078 159,567 201,941
Total Assets Total Net Assets Shareholders’ Equity Ratio
Operating Income Operating Income Ratio
(Millions of yen, %)
Net Income / Net Income Ratio
Net Income Net Income Ratio
8.8 11.1 12.2 11.6 11.2 12.4 4.6
5.7 6.1 6.0 5.7 6.6
(%)
ROA ROE
East Asia
31,495 [3]
Oceania/ SouthEast and South Asia
18,559 [52]
Other business
11,821 [9]
Japan
82,575 [14,268]
Americas
118,880 [1]
Europe
104,792 [7]
Note: Net Sales by Reportable Segment figures include the intersegment sales.
The intersegment amount is indicated in [ ]. A dash indicates there were
President and CEO, Representative Director
Motoi Oyama
1. Provide valuable products and services through sport to all our customers
2. Fulfill our social responsibility and help improve conditions for communities
around the world
3. Share profits brought by our sound services with our shareholders,
communities and employees
4. Maintain a spirit of freedom, fairness and discipline, respectful of all individuals
- Corporate Philosophy
Anima Sana In Corpore Sano = “A sound mind in a sound body.”
- Founding Philosophy
Philosophy
A Message from the President
Working
toward our
AGP 2015 goals, aiming
for further growth
Net Sales
Operating income ratio
ROE
(Return on equity)ROA
(Return on assets)¥400
billion or more
10
% or more
15
% or more
8
% or more
Group Management Targets
- Athletic sports business domain - Sports lifestyle business domain - Health/Comfort business domain
Continuously focus on three business domains
Business
domains
Basic Strategy
Establish a global organization
Organization
Provide innovative values and
integrate them to address customer needs
Products
(Fiscal 2015)
Under ASICS Growth Plan (AGP) 2015, our current Five-Year Strategic Plan, we are targeting
consolidated net sales of ¥400 billion in the fiscal year ending December 31, 2015.
In the fiscal year ended December 31, 2014, a transitional period due to a change in our
fiscal year-end from March to December, we continued to actively strengthen and grow our
running business and accelerate the opening of directly managed stores, which we are using to
communicate the ASICS world view. These efforts paid off, with the Group performing well in all
five of its operating regions – Japan, the Americas, Europe, Asia and Oceania.
We continue to position the vast Americas market as our priority operating region in order to
achieve our AGP 2015 targets. However, the market environment in the United States is
under-going far-reaching change, such as the rapid growth of online shopping and a steep rise in the
number of women taking up sport. Against this backdrop, we have delivered double-digit growth
by offering high-quality products that consumers really want. Global sports trends tend to start
in the United States, so achieving success there is often a model for success in other markets.
Delivering further growth by addressing change
in all regions worldwide
Our recent gains in the United States are therefore translating into growth in the Group’s
consolidated earnings. We are aiming to deliver further growth in the United States by
launching innovative new products in tune with the latest market trends and by creating a
retail network that addresses changes in our business environment. In Brazil, our sales
continue to rise strongly despite slowing growth in the wider economy. We plan to continue
aggressively marketing our products to Brazilian consumers.
Despite the sluggish economy, sales in Europe are also firm, supported by a high level
of interest in healthy lifestyles and sport. We will continue to work on expanding sales and
enhancing the value of our brand in Europe by increasing sponsorship activities in popular
sports such as tennis and rugby, in addition to our core running business.
In the fast-growing economies of Asia, sales in China are still modest in value terms but
are growing at a triple-digit pace. Sales growth in Southeast Asian markets is in double digits.
We plan to use these footholds to drive growth going forward. In China, we are using marathon
sponsorships to put our running shoe business on the path to growth and are now shifting our
focus to sales expansion. In Southeast Asia, we are putting the foundations for growth in place
by strengthening our business base, centered on our main subsidiary in the region, ASICS ASIA.
Sales in Japan are firm, despite a prolonged correction in demand after the hike in
consump-tion tax. We are channeling business resources into areas that offer real prospects for growth,
such as the running business and the Onitsuka Tiger brand, in order to strengthen the
Group’s domestic earnings.
Also, in September 2014, we opened a nursing care facility in Japan called Tryus
Nishinomiya, which provides functional exercise programs for the elderly. Our aim is to help
enhance the quality of life for Japan’s aging population by leveraging our expertise in sports
science to improve the motor functions of elderly people.
Interest in sport is growing worldwide, a trend that is not confined to advanced economies.
Emerging economies are now also home to numerous marathon events and the number of
people taking up sport for health reasons is growing in those countries.
ASICS has built up its reputation by providing high-performance, high-quality products
to the world’s leading athletes. We are now working to expand our customer base by offering
Boosting earnings in Japan
by channeling resources into strategic areas
Relaunching the ASICS Tiger brand
Running
More
A Message from the President
ASICS Growth Plan 2015
new products that retain that performance and quality while also being more fashionable. As part
of those efforts, we have relaunched the ASICS Tiger brand, which was used on our footwear for
competitive athletics from the 1980s until around 1990. ASICS Tiger is now a casual footwear
brand positioned to complement our ASICS sports brand and our Onitsuka Tiger brand, which
combines the qualities of Japanese craftsmanship and European sports luxury goods. ASICS
Tiger brings together Japanese technology and street fashion in a range of footwear designed to
attract the attention of sneaker fans worldwide.
We are making our operating structure and organization more global to support sustained growth.
That process includes hiring highly skilled people regardless of nationality. We are also enhancing
the skills of our domestic employees and changing the way they think so that they can interact with
overseas ASICS employees on equal terms, enabling them to communicate better and realize their
true potential. Reforms to personnel systems designed to achieve those aims have been
complet-ed and we have now startcomplet-ed a training program for management-level employees.
We have to strengthen our apparel business and reinforce the Group’s earnings capabilities to take
the Group into a new era of growth. In the apparel business, we need to closely integrate product
development and manufacturing functions so we can create a steady stream of highly competitive
products. And to boost the Group’s earnings capabilities, we need to fundamentally restructure our
domestic operations and optimize the global supply chain. We are already implementing measures
to address these issues, aiming for concrete improvements in the current fiscal year.
Our AGP 2015 sales target is in sight, but we have no intention of easing off on our
expansion plans, as our aim is to take on the world’s leading sports companies. In 2015, we will
finalize the Group’s strategic direction post-AGP 2015, but there will be no change to our basic
approach of increasing corporate value by creating more points of contact with consumers
through four core brands – ASICS, Onitsuka Tiger, ASICS Tiger and HAGLÖFS.
We appreciate and look forward to your continued understanding and support.
Creating a more global business and management structure
Stepping up growth after AGP 2015
April 2015
ASICS Tiger GEL-LYTE III
ning
More
Motoi Oyama President and CEO, Representative Director
2010
2011
2012
2013
2014
0 8,000
Tennis
Tennis has a large global base of players and is especially popular in Europe and Australia. Sales of ASICS tennis shoes have grown rapidly in Europe and Japan and ASICS now has the leading market share in France and Spain.
Top market share
in France and Spain
Gaël Monfils
Sales of ASICS tennis shoes
GEL-RESOLUTION 6 (Millions of yen)
Valentina Arrighetti
Volleyball is a hugely popular sport in Japan, which hosts major international competitions every year. ASICS has a long connec-tion with volleyball, going back to 1952 when it first started selling volleyball shoes. ASICS continues to hold the top market share in Japan, the United States, France, Germany and Italy.
Still the leader in Japan,
Europe and the United States
Italy South Korea Japan Sponsored national teams
Volley
-ball
2010
2011
2012
2013
Sales of ASICS volleyball shoes
GEL-ROCKET 7 2014
0 8,000
(Millions of yen)
Special Feature
Building our position in other sports
to complement the running business
Brazil Sponsored national teams Gaël Monfils
(France)
Samantha Stosur
(Australia)
2011
2012
2013
GEL-LETHAL ULTIMATE IGS 11
The Southern Hemisphere and Europe are home to a large base of passionate rugby fans. ASICS has signed sponsorship contracts with two of the world’s top rugby teams – Australia and South Africa – providing them with sportswear, boots and other support to help them achieve their maximum potential.
Raising brand visibility
in South Africa
Sales of ASICS rugby boots
Rugby
Israel Folau
(Australia)
Tendai Mtawarira
(South Africa)
Israel Folau
Sponsored players
Australia South Africa Sponsored national teams 2010
2014
0 1,000
(Millions of yen)
Footwear is the main sports equipment used in track and field events, with competition and records almost entirely dependent on the performance of individual athletes. This is the area where ASICS has honed its technological skills over the years. ASICS provides footwear and sportswear to many national track & field teams, which recognize the high quality of our products. In Japan, ASICS has the leading market share in sports shoes.
Track
and
Field
Christophe Lemaitre (100m, 200m) (France)
Antoinette Djimou (heptathlon) (France)
Alysia Montaño (800m) (United States)
Queen Harrison (100m hurdles) (United States)
Jared Tallent (race walking) (Australia)
Kimberly Mickle (javelin) (Australia)
Emma Green Tregaro (high jump) (Sweden)
Christophe Lemaitre Germany
Finland South Korea Japan
France Italy
Sponsored players
Sponsored national teams
Supporting
national teams worldwide
2011
2012
2013
Sales of ASICS track & field shoes
SONICSPRINT ELITE 2010
2014
0 2,500
(Millions of yen)
News
We have relaunched our sports shoe brand ASICS
Tiger as a casual footwear brand.
Popular among leading sports men and women
from the 1980s until around 1990, ASICS Tiger also
built up a strong following among consumers. The
GEL-LYTE range, which featured thick shock-absorbing
soles, sold particularly well when they were released in
1990. ASICS Tiger grew in popularity in Japan as well
as overseas thanks to an eye-catching combination of
performance and design.
Our relaunched ASICS Tiger shoes retain the
classic shape of their predecessors while using
materi-als and colors in new ways to create designs with a US
street fashion feel.
We are using ASICS Tiger to create a new
segment in the market, complementing our other two
footwear brands, ASICS and Onitsuka Tiger.
GEL-LYTE III
1
Targeting the global sports lifestyle
market with the relaunched
ASICS TIMES SQUARE, a new store mainly selling
running shoes and apparel, opened in New York in
October 2014. Based on the same concept as other
ASICS STORES worldwide, the Times Square store has
an interior design with a 1970s New York feel, including
a real subway car as the centerpiece, which is used to
display products.
The store mainly stocks running products,
including T-shirts with a New York theme. Customers
can also buy shoes fitted for their specific running style
thanks to the store’s ASICS Foot ID system, which
creates highly accurate 3D foot maps and analyzes the
form and movement of feet during running.
We are using the store to further raise the
visibili-ty of the ASICS brand in the United States.
Subway car centerpiece
2
New ASICS STORE
opened near
New York’s Times Square
Overview
In the fiscal year ended December 31, 2014, business was steady in the sporting goods industry on the back of a high level of interest in sports owing to rising health consciousness, as well as a running boom. In the U.S., particularly, which is one of the highest priority areas for the ASICS Group (“the Group”), the footwear market and others continued to show steady growth.
Under these conditions, the Group continued its efforts to reinforce and expand its business on a global scale based on the Five-Year Strategic Plan, “ASICS Growth Plan (AGP) 2015”.
In the running business, the Group strove to expand the business further as the core business. The Group’s efforts to this end included launching various high-function running shoes, GEL-NIMBUS 16 and GEL-KAYANO 21, onto the market. The Group also carried out initiatives such as sponsoring marathon events held in different parts of the world, including the TCS New York City Marathon, which is one of the largest participated marathon events in the world, and events in Paris, Stockholm and Kobe.
In the athletic sports business, the Group concentrated on activities to heighten the value of the ASICS brand. For example, the Group launched replica jerseys of both the South African and Australian national rugby teams. In addition, the Group supplied products to be used by wrestlers representing their countries (in total, six countries) at the 2014 World Wrestling Championship held in Uzbekistan. The Group also supplied products to be used by athletes representing their countries or region (in total, eight countries and one region) at the 17th Asian Games INCHEON 2014 held in the Republic of Korea.
In the Onitsuka Tiger business, the Group strove to heighten the value of Onitsuka Tiger as an innovative and sophisticated brand. To this end, the Group launched models of shoes and apparel products designed in collaboration with famous designers from Japan and overseas, and carried out other activities such as participating in the Mercedes-Benz Fashion Week TOKYO.
On the sales front, the Group worked on expanding sales through such measures as increasing directly managed sales venues. The Group pushed ahead with store openings around the world, including the opening of a large ASICS brand partner store, ASICS TIMES SQUARE, on 42nd Street in Manhattan, and openings of directly managed ASICS brand stores in Melbourne (Australia), Madrid (Spain), Hamburg (Germany) and Rio de Janeiro (Brazil). With these new stores, the number of ASICS’ directly managed sales venues came to more than 1,100 stores worldwide, including 381 directly managed stores and other partner stores. Furthermore, the Group started selling through ASICS’ own E-commerce websites at a shared global IT platform in Germany, France, Spain and Italy in addition to the four countries where the Group had already carried out such sales.
In the apparel business, the Group worked on strengthening the
function of the global sourcing and development in order to expand sales and boost profitability. To this end, the Group centralized the production control function of each country’s apparel products in ASICS HongKong Apparel Limited in Hong Kong, and transferred parts of the materials procurement and quality control functions at the apparel business of ASICS to that company. In addition, the Group pressed ahead with transferring production facilities from areas in China to areas in Southeast Asia for the purpose of reducing costs. Also in this business, the Group worked on expanding running apparel business.
In the new business, the Group worked on creating a service that contributes to people’s lives by starting the operation of “Tryus Nishinomiya” (Japan), a nursing care service facility specializing in functional training that provides exercise service programs utilizing the Group’s sports expertise.
Furthermore, the Group worked on establishing a stable product supply system through the construction of a global logistics network. As part of this work, the Group established the “ASICS European Distribution Center” in Germany as its new logistics base in Europe, and started operations at the center.
In addition, in order to strengthen its research and development capabilities with the aim of providing innovative products and value, the Group expanded the facilities of the ASICS Institute of Sports Science and improved the institute’s experimentation equipment as part of the Group’s efforts to enhance its research and development environment.
The Group strove to strengthen fast-track development and hiring of professional talent on global and regional bases and to ensure the optimal placement of global talent. The Group introduced new human resources system to replace the traditional seniority system. In addition, the Group promoted diversity under the slogan “One Team” –– Stronger through Diversity, aiming that diverse employees feel fulfilled in the corporate culture and environment to let them perform at peak, and contribute sustainable growth of the business and the organization.
In other activities, as part of a continuous support program for the Great Eastern Japan Earthquake, “A Bright Tomorrow Through Sport”, the Group supported the Tohoku Food Marathon & Festival 2014. The Group also held Tomorrow Ball Park in Fukushima, an event which provided opportunities for children to play with professional baseball players.
Performance Analysis
In the fiscal year ended December 31, 2014, consolidated net sales were ¥354,052 million. Domestic net sales were ¥68,991 million, overseas sales were ¥285,061 million, gross profit was ¥155,188 million, operating income was ¥30,467 million and net income was ¥22,286 million.
’11/3 ’12/3 ’13/3
(Billions of yen)
’11/3 ’12/3 ’13/3
Operating Income
(Billions of yen)
’11/3 ’12/3 ’13/3
Working Capital
103.1 107.5 21.6 19.6
83.1 92.5
113.8
18.7 112.7
’14/3 ’14/12 ’14/3 ’14/12 ’14/3 ’14/12
144.4
26.5 159.1
(Billions of yen)
Gross Profit
155.2 30.5 187.6
Segment Information
Business results by reportable segment were as follows.
The fiscal year ended December 31, 2014 is a transitional period for the change in the fiscal year end. Therefore, the fiscal year ended December 31, 2014 has irregular settlement periods whereby the period of consolidation is nine months (April 1, 2014 to December 31, 2014) for the Company and those consolidated subsidiaries whose fiscal year end was on March 31, and 12 months (January 1, 2014 to December 31, 2014) for consolidated subsidiaries whose fiscal year end was on December 31. As a result, year-on-year ratios are not disclosed for the Japan area.
(1) Japan Area
Sales were ¥82,575 million and segment loss was ¥715 million.
(2) America Area
Sales increased 25.8% (an increase of 14.9% using the previous fiscal year’s foreign exchange rate) to ¥118,880 million, due to the strong sales of running shoes and the effect of foreign exchange rates. Moreover, segment income increased 31.4% (an increase of 20.0% using the previous fiscal year’s foreign exchange rate) to ¥10,936 million, mainly due to the impact of the increase in sales and improvements of the cost of sales ratio.
(3) Europe Area
Sales increased 22.9% (an increase of 13.0% using the previous fiscal year’s foreign exchange rate) to ¥104,792 million, due to the strong sales of running shoes and the effect of foreign exchange rates. However, segment income increased 14.7% (an increase of 5.4% using the previous fiscal year’s foreign exchange rate) to ¥8,653 million, mainly due to a fall in exchange rates of Russian Ruble and Norwegian Krone against the euro and an increase of purchasing cost.
(4) Oceania/SouthEast and South Asia Area
Sales increased 21.8% (an increase of 19.6% using the previous fiscal year’s foreign exchange rate) to ¥18,559 million, due to the steady sales of running shoes in Australia, the start of sales activities by a subsidiary in Singapore, and the effect of foreign exchange rates. However, segment income increased 1.9% (a decrease of 0.3% using the previous fiscal year’s foreign exchange rate) to ¥3,245 million, mainly due to the effect of foreign exchange rates on purchasing costs.
(5) East Asia Area
Sales increased 32.5% (an increase of 18.3% using the previous fiscal year’s foreign exchange rate) to ¥31,495 million, due to the strong sales of running shoes and Onitsuka Tiger shoes, in addition to the effect of foreign exchange rates. Moreover, segment income increased 85.8%
(an increase of 68.8% using the previous fiscal year’s foreign exchange rate) to ¥2,328 million, mainly due to the effect of increased sales at a subsidiary in China.
(6) Other business
Sales increased 9.4% (an increase of 5.8% using the previous fiscal year’s foreign exchange rate) to ¥11,821 million, due to the steady sales of outdoor wear under the HAGLÖFS brand and the effect of foreign exchange rates. Segment loss was ¥822 million mainly due to the recording of the temporary costs for business restructuring.
Financial Condition
As for consolidated financial position as of December 31, 2014, total assets increased 12.1% from the end of the previous fiscal year to ¥355,837 million, total liabilities decreased 2.6% from the end of the previous fiscal year to ¥153,896 million and net assets increased 26.6% from the end of the previous fiscal year to ¥201,941 million.
Cash Flows
As for cash flows as of December 31, 2014, cash and cash equivalents (hereinafter, “cash”) decreased ¥2,583 million from the end of the previous fiscal year to ¥51,051 million.
The respective cash flow positions and main factors behind the changes are as follows.
The fiscal year ended December 31, 2014 is a transitional period for the change in the fiscal year end. Therefore, the fiscal year ended December 31, 2014 has irregular settlement periods whereby the period of consolidation is nine months (April 1, 2014 to December 31, 2014) for the Company and those consolidated subsidiaries whose fiscal year end was on March 31, and 12 months (January 1, 2014 to December 31, 2014) for consolidated subsidiaries whose fiscal year end was on December 31. As a result, year-on-year ratios are not disclosed.
Net cash provided by operating activities was ¥10,720 million. Major sources of cash were ¥34,183 million from income before income taxes and minority interests, and ¥6,412 million from a decrease in notes and accounts receivable-trade, while major uses of cash were ¥14,079 million for income taxes paid and ¥12,923 million for an increase in inventories.
Net cash used in investing activities was ¥9,845 million. The major source of cash was ¥6,140 million from proceeds from withdrawal of time deposits, while major uses of cash were ¥7,526 million for purchases of property, plant and equipment, ¥4,335 million for purchases of time deposits, ¥2,248 million for purchases of intangible assets and ¥1,036 million for purchases of investment in securities.
Net cash used in financing activities was ¥4,848 million. Major uses of cash were ¥3,226 million for cash dividends paid and ¥780 million for a net decrease in short-term bank loans.
(Billions of yen)
’11/3 ’12/3 ’13/3
Long-Term Debt
(Billions of yen)
’11/3 ’12/3 ’13/3
Total Net Assets
(Billions of yen)
’11/3 ’12/3 ’13/3
Total Assets
23.2 24.2
106.4 115.3 200.8
212.3
27.3
138.1 244.7
’14/3 ’14/12 ’14/3 ’14/12 ’14/3 ’14/12
58.6
159.6
317.5
ASICS Corporation and Consolidated Subsidiaries December 31, 2014 and March 31, 2014
Consolidated Balance Sheet
Millions of yen
Thousands of U.S. dollars
(Note 1)
ASSETS December 31, 2014
March 31, 2014
December 31, 2014
Current assets:
Cash and deposits (Notes 6 and 17) ... ¥ 54,888 ¥ 58,862 $ 457,400
Short-term investments (Notes 6, 7 and 17) ... 2,821 2,179 23,508
Notes and accounts receivable (Note 17):
Trade ... 80,992 83,169 674,933
Less allowance for doubtful receivables ... (3,899) (3,525) (32,492)
Inventories (Note 8) ... 100,412 81,090 836,767
Deferred income taxes (Note 15) ... 5,520 5,936 46,000
Other current assets ... 24,235 12,601 201,959
Total current assets ... 264,969 240,312 2,208,075 Property, plant and equipment (Note 9):
Land ... 9,467 9,465 78,892
Buildings and structures ... 36,045 33,703 300,375
Machinery, equipment and vehicles ... 5,049 4,807 42,075
Tools, furniture and fixtures ... 21,680 18,643 180,667
Leased assets ... 7,240 6,160 60,333
Construction in progress ... 1,735 437 14,458
Less accumulated depreciation ... (39,107) (35,641) (325,892)
Property, plant and equipment, net (Note 22) ... 42,109 37,574 350,908 Intangible assets:
Goodwill (Note 22) ... 5,166 6,133 43,050
Other intangible assets ... 14,425 14,413 120,208
Total intangible assets ... 19,591 20,546 163,258 Investments and other assets:
Investments in securities:
Unconsolidated subsidiaries ... 101 216 842
Other (Notes 7 and 17) ... 10,433 8,523 86,942
Long-term loans receivable ... 412 462 3,433
Assets for retirement benefits (Note 12) ... 523 676 4,358
Deferred income taxes (Note 15) ... 996 2,224 8,300
Other assets (Note 9) ... 17,073 7,472 142,275
Less allowance for doubtful receivables ... (370) (403) (3,083)
Less allowance for losses on investment in an unconsolidated subsidiary ... — (74) —
Total investments and other assets ... 29,168 19,096 243,067
Millions of yen
Thousands of U.S. dollars
(Note 1)
LIABILITIES AND NET ASSETS December 31, 2014
March 31, 2014
December 31, 2014
Current liabilities:
Short-term bank loans (Notes 10 and 17) ... ¥ 14,667 ¥ 14,041 $ 122,225
Current portion of long-term debt (Notes 10 and 17) ... 1,364 1,021 11,367
Notes and accounts payable (Note 17):
Trade ... 27,264 30,665 227,200
Construction ... 2 80 17
Accrued income taxes (Note 15) ... 1,915 4,294 15,958
Accrued expenses ... 15,842 15,028 132,017
Allowance for sales returns ... 595 894 4,958
Allowance for employees’ bonuses ... 844 1,968 7,033
Asset retirement obligations (Note 11) ... 8 31 67
Deferred income taxes (Note 15) ... 2,176 54 18,133
Other current liabilities ... 12,671 13,102 105,592
Total current liabilities ... 77,348 81,178 644,567 Long-term liabilities:
Long-term debt (Notes 10 and 17) ... 58,972 58,602 491,433
Liabilities for retirement benefits (Note 12) ... 8,241 8,586 68,675
Asset retirement obligations (Note 11) ... 852 773 7,100
Deferred income taxes (Note 15) ... 6,074 4,092 50,617
Other long-term liabilities ... 2,409 4,730 20,075
Total long-term liabilities ... 76,548 76,783 637,900 Net assets:
Shareholders’ equity (Note 13): Common stock:
Authorized shares -790,000,000 shares at December 31, 2014 and March 31, 2014
Issued shares -199,962,991 shares at December 31, 2014 and March 31, 2014 ... 23,972 23,972 199,767
Capital surplus ... 17,490 17,490 145,750
Retained earnings (Note 23) ... 134,641 115,295 1,122,008
Less treasury stock, at cost
(10,140,795 shares at December 31, 2014 and 10,137,988 shares at March 31, 2014) ... (7,658) (7,652) (63,817)
Total shareholders’ equity ... 168,445 149,105 1,403,708
Accumulated other comprehensive income:
Unrealized holding gain on securities (Note 7) ... 3,168 2,351 26,400
Unrealized deferred gain (loss) on hedges ... 14,646 (2,072) 122,050
Revaluation reserve for assets of foreign subsidiaries ... 129 194 1,075
Translation adjustments ... 14,548 9,076 121,233
Retirement benefits liability adjustments ... 74 (211) 617
Total accumulated other comprehensive income ... 32,565 9,338 271,375
Stock acquisition rights (Note 13) ... 35 14 292
Minority interests ... 896 1,110 7,466
Total net assets ... 201,941 159,567 1,682,841
Total liabilities and net assets ... ¥ 355,837 ¥ 317,528 $ 2,965,308
ASICS Corporation and Consolidated Subsidiaries
Nine months ended December 31, 2014 and twelve months ended March 31, 2014
Consolidated Statement of Income
Millions of yen
Thousands of U.S. dollars
(Note 1)
Nine months ended December
31, 2014
Twelve months ended March 31, 2014
Nine months ended December
31, 2014
Net sales (Note 22) ... ¥ 354,052 ¥ 329,465 $ 2,950,433 Cost of sales ... 198,864 185,097 1,657,200
Gross profit ... 155,188 144,368 1,293,233 Selling, general and administrative expenses (Notes 13 and 14) ... 124,721 117,852 1,039,341
Operating income (Note 22) ... 30,467 26,516 253,892 Other income (expenses):
Interest and dividend income ... 638 645 5,316
Interest expense ... (764) (718) (6,367)
Exchange gain, net ... 3,678 365 30,650
Gain on sales of investments in securities, net (Note 7) ... 172 265 1,433
Loss on impairment of investments in securities (Note 7) ... – (20) –
(Loss) gain on sales or disposal of property, plant and equipment and other, net ... (79) 748 (658)
Loss on devaluation of investments in unconsolidated subsidiaries ... (41) – (342)
Loss on impairment of property, plant and equipment (Notes 9 and 22) ... (172) (42) (1,433)
Loss on plant closure ... – (256) –
Other, net ... 284 191 2,367 3,716 1,178 30,966
Income before income taxes and minority interests ... 34,183 27,694 284,858 Income taxes (Note 15):
Current ... 12,554 11,314 104,617
Deferred ... (810) (863) (6,751) 11,744 10,451 97,866
Income before minority interests ... 22,439 17,243 186,992 Minority interests ... 153 1,135 1,275
Net income ... ¥ 22,286 ¥ 16,108 $ 185,717
Millions of yen
Thousands of U.S. dollars
(Note 1)
Nine months ended December
31, 2014
Twelve months ended March 31, 2014
Nine months ended December
31, 2014
Income before minority interests ... ¥ 22,439 ¥ 17,243 $ 186,992 Other comprehensive income (loss) (Note 19):
Unrealized holding gain on securities ... 817 32 6,808
Unrealized deferred gain (loss) on hedges ... 16,718 (3,089) 139,317
Revaluation reserve for assets of foreign subsidiaries ... (65) (93) (542)
Translation adjustments ... 5,560 17,790 46,333
Retirement benefits liability adjustments ... 285 – 2,375
Total other comprehensive income, net ... 23,315 14,640 194,291 Comprehensive income ... ¥ 45,754 ¥ 31,883 $ 381,283
Comprehensive income attributable to:
Shareholders of ASICS Corporation ... ¥ 45,512 ¥ 30,470 $ 379,267
Minority shareholders of consolidated subsidiaries ... 242 1,413 2,016
See accompanying notes to consolidated financial statements.
ASICS Corporation and Consolidated Subsidiaries
Nine months ended December 31, 2014 and twelve months ended March 31, 2014
ASICS Corporation and Consolidated Subsidiaries
Nine months ended December 31, 2014 and twelve months ended March 31, 2014
Consolidated Statement of Changes in Net Assets
Millions of yen Number of issued shares of common stock Common stock Capital surplus Retained earnings Treasury stock, at cost Unrealized holding gain on securities Unrealized deferred gain (loss) on hedges Revaluation reserve for assets of foreign subsidiaries Translation adjustments Retirement benefits liability adjustments Stock subscription rights Minority interests Total net assets
Balance at April 1, 2013 ...199,962,991 ¥23,972 ¥17,183 ¥101,369 ¥(7,824) ¥2,327 ¥ 1,050 ¥287 ¥ (8,477) ¥ – ¥ – ¥8,191 ¥138,078
Dividends ... – – – (2,275) – – – – – – – – (2,275)
Reversal of revaluation reserve for
assets of foreign subsidiaries ... – – – 93 – – – (93) – – – – –
Net income ... – – – 16,108 – – – – – – – – 16,108
Purchases of treasury stock ... – – – – (11) – – – – – – – (11)
Sales of treasury stock ... – – 0 – 0 – – – – – – – 0
Changes resulting from share
exchanges ... – – 307 – 183 – – – – – – – 490
Other changes ... – – – – – 24 (3,122) – 17,553 (211) 14 (7,081) 7,177
Balance at April 1, 2014 ...199,962,991 23,972 17,490 115,295 (7,652) 2,351 (2,072) 194 9,076 (211) 14 1,110 159,567
Cumulative effect of change in
method of accounting ... – – – 222 – – – – – – – – 222
Balance as adjusted ...199,962,991 23,972 17,490 115,517 (7,652) 2,351 (2,072) 194 9,076 (211) 14 1,110 159,789
Dividends ... – – – (3,227) – – – – – – – – (3,227)
Reversal of revaluation reserve for
assets of foreign subsidiaries .... – – – 65 – – – (65) – – – – –
Net income ... – – – 22,286 – – – – – – – – 22,286
Purchases of treasury stock ... – – – – (6) – – – – – – – (6)
Sales of treasury stock ... – – 0 – 0 – – – – – – – 0
Other changes ... – – – – – 817 16,718 – 5,472 285 21 (214) 23,099
Balance at December 31, 2014 ...199,962,991 ¥23,972 ¥17,490 ¥134,641 ¥(7,658) ¥3,168 ¥14,646 ¥129 ¥14,548 ¥ 74 ¥35 ¥ 896 ¥201,941
Thousands of U.S. dollars (Note 1)
Common stock Capital surplus Retained earnings Treasury stock, at cost Unrealized holding gain on securities Unrealized deferred gain (loss) on hedges Revaluation reserve for assets of foreign subsidiaries Translation adjustments Retirement benefits liability adjustments Stock subscription rights Minority interests Total net assets
Balance at April 1, 2014 ...$199,767 $145,750 $ 960,791 $(63,767) $19,592 $ (17,267) $1,617 $ 75,633 $(1,758) $117 $9,250 $ 1,329,725
Cumulative effect of change in method of
accounting ... – – 1,850 – – – – – – – – 1,850
Balance as adjusted ... 199,767 145,750 962,641 (63,767) 19,592 (17,267) 1,617 75,633 (1,758) 117 9,250 1,331,575
Dividends ... – – (26,892) – – – – – – – – (26,892) Reversal of revaluation reserve for assets
of foreign subsidiaries ... – – 542 – – – (542) – – – – –
Net income ... – – 185,717 – – – – – – – – 185,717
Purchases of treasury stock ... – – – (50) – – – – – – – (50)
Sales of treasury stock ... – 0 – 0 – – – – – – – 0
Other changes ... – – – – 6,808 139,317 – 45,600 2,375 175 (1,784) 192,491
Balance at December 31, 2014 ...$199,767 $145,750 $ 1,122,008 $(63,817) $26,400 $122,050 $1,075 $121,233 $ 617 $292 $7,466 $ 1,682,841
Millions of yen
Thousands of U.S. dollars
(Note 1)
Nine months ended December
31, 2014
Twelve months ended March 31, 2014
Nine months ended December
31, 2014
Operating activities:
Income before income taxes and minority interests ... ¥34,183 ¥27,694 $284,858
Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating activities:
Depreciation and amortization ... 6,288 6,034 52,400
Amortization of goodwill, net ... 992 960 8,267
Increase in allowance for doubtful receivables ... 115 457 958
Decrease in accrued retirement benefits for employees ... – (7,515) –
Increase in liabilities for retirement benefits, net ... 569 8,348 4,742
Decrease in allowance for employees’ bonuses ... (1,206) (438) (10,050)
Loss on impairment of investments in securities ... – 20 –
Gain on sales of investments in securities, net ... (172) (265) (1,433)
Interest and dividend income ... (638) (645) (5,317)
Interest expense ... 764 718 6,367
Exchange gain, net ... (3,071) (231) (25,592)
Loss (gain) on sales or disposal of property, plant and equipment and other, net ... 79 (748) 658
Other, net ... 142 36 1,184
(Increase) decrease in operating assets:
Notes and accounts receivable ... 6,412 (3,747) 53,433
Inventories ... (12,923) (14,059) (107,692)
Other operating assets ... (3,281) (3,582) (27,342)
Increase (decrease) in operating liabilities:
Notes and accounts payable ... (4,841) 276 (40,342)
Accrued consumption taxes ... 1,039 (114) 8,659
Other operating liabilities ... 432 3,713 3,600
Subtotal ... 24,883 16,912 207,358
Interest and dividends received ... 630 658 5,250
Interest paid ... (714) (722) (5,950)
Income taxes refunded ... – 951 –
Income taxes paid ... (14,079) (11,406) (117,325)
Net cash provided by operating activities 10,720 6,393 89,333
Investing activities:
Increase in time deposits ... (4,335) (10,286) (36,125)
Proceeds from withdrawal of time deposits ... 6,140 10,771 51,167
Purchases of property, plant and equipment ... (7,526) (6,294) (62,717)
Payments for disposal of property, plant and equipment ... (53) (31) (442)
Proceeds from sales of property, plant and equipment ... 109 1,905 908
Purchases of intangible assets ... (2,248) (1,048) (18,733)
Net increase in short-term investments ... (531) (33) (4,425)
Purchases of investments in securities ... (1,036) (725) (8,633)
Proceeds from sales and redemption of investments in securities ... 426 1,620 3,550
Purchase of shares of subsidiaries ... (684) (9,037) (5,700)
Net increase in short-term loans receivable included in other current assets ... (22) (30) (183)
Long-term loans receivable made ... (2) (76) (17)
Collection of long-term loans receivable ... 46 11 383
Other, net ... (129) (482) (1,074)
Net cash used in investing activities ... (9,845) (13,735) (82,041) Financing activities:
Net (decrease) increase in short-term bank loans ... (780) 2,509 (6,500)
Proceeds from long-term loans ... 100 450 833
Repayment of long-term loans ... (358) (2,279) (2,983)
Proceeds from issuance of bonds with stock acquisition rights ... – 30,049 –
Purchases of treasury stock ... (6) (11) (50)
Proceeds from sales of treasury stock ... 0 0 0
Purchases of treasury stock by a subsidiary ... – (0) –
Repayment of lease obligations ... (572) (660) (4,767)
Cash dividends paid to the shareholders of the Company ... (3,226) (2,275) (26,883)
Cash dividends paid to minority shareholders of consolidated subsidiaries ... (6) (136) (50)
Net cash (used in) provided by financing activities ... (4,848) 27,647 (40,400) Effect of exchange rate changes on cash and cash equivalents ... 1,390 996 11,583 Net (decrease) increase in cash and cash equivalents ... (2,583) 21,301 (21,525) Cash and cash equivalents at beginning of year ... 53,634 32,333 446,950 Cash and cash equivalents at end of year (Note 6) ... ¥51,051 ¥53,634 $425,425
ASICS Corporation and Consolidated Subsidiaries
Nine months ended December 31, 2014 and twelve months ended March 31, 2014
ASICS Corporation and Consolidated Subsidiaries December 31, 2014
Notes to Consolidated Financial Statements
Basis of Preparation
1
The accompanying consolidated financial statements of ASICS Corporation (the “Company”) and consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan.
Certain reclassifications of previously reported amounts have been made to conform the accompanying consolidated financial statements for the twelve months ended March 31, 2014 to the presentation for the nine months ended December 31, 2014. Such reclassifications had no effect on consolidated net income or net assets.
The U.S. dollar amounts in the accompanying consolidated financial statements have been translated from yen amounts solely for convenience, as a matter of arithmetic computation only, at ¥120 = U.S.$1.00, the approximate rate of exchange prevailing on December 31, 2014. This translation should not be construed as a representation that yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.
(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and significant companies which it controls directly or indirectly. All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if applicable. All significant intercompany transactions and accounts have been eliminated in consolidation.
Certain subsidiaries were excluded from the scope of consolidation because the effect of its sales, net income or loss, total assets and retained earnings on the accompanying consolidated financial statements was immaterial.
(b) Foreign currency translation
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance sheet date and gain or loss on each translation is credited or charged to income. Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at the rates in effect at the respective transaction dates. Foreign exchange gain or loss is credited or charged to income in the period in which the gain or loss is recognized for financial reporting purposes.
The financial statements of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect at the balance sheet date, except that the components of net assets excluding minority interests are translated at their historical exchange rates.
(c) Cash and cash equivalents
For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash on hand, deposits with banks withdrawable on demand, and short-term investments which are readily convertible into cash subject to an insignificant risk of any change in their value and which were purchased with an original maturity of three months or less.
(d) Securities
Marketable securities classified as other securities are carried at fair value with any changes in unrealized holding gain or loss, net of the applicable income taxes, reported as a separate component of net assets. Cost of securities sold is determined by the moving-average method. Non-marketable equity securities classified as other securities are stated at cost determined by the moving-average method. Non-marketable debt securities classified as other securities are stated at net amortized cost.
(e) Inventories
Inventories are principally stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method.
(f) Property, plant and equipment (except for leased assets under finance leases)
The Company and its domestic consolidated subsidiaries compute depreciation of property, plant and equipment by the declining-balance method over the estimated useful lives of the respective assets, except that the straight-line method is applied to buildings (other than
Summary of Significant Accounting Policies
structures attached to the buildings) acquired on or subsequent to April 1, 1998.
Foreign consolidated subsidiaries compute depreciation of property, plant and equipment by the straight-line method over the estimated useful lives of the respective assets.
Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged to income as incurred. The principal estimated useful lives used for calculating depreciation are as follows:
Buildings and structures 3 to 50 years Machinery, equipment and vehicles 2 to 14 years Tools, furniture and fixtures 2 to 20 years
(g) Intangible assets (except for leased assets under finance leases)
Expenditures relating to computer software developed for internal use are charged to income as incurred, unless the software is expected to contribute to the generation of future income or to cost savings, in which case such expenditures are capitalized as intangible assets and amortized by the straight-line method over their respective estimated useful lives, a period of five years.
The Company and its consolidated subsidiaries have recorded intangible assets such as sales rights, customer base and brand as a result of revaluation of assets and liabilities of acquired companies at fair value because of business combination. Such intangible assets are amortized by the straight-line method over periods of 5 to 24 years.
(h) Leased assets
Finance leases, other than those that are deemed to transfer the ownership of the leased assets to the lessees, are depreciated using the straight-line method over the lease term with no residual value.
(i) Goodwill
Goodwill is amortized by the straight-line method over periods of no more than 20 years.
(j) Allowance for doubtful receivables
The Company and its domestic consolidated subsidiaries provide an allowance for doubtful receivables at an amount calculated based on their historical experience of bad debts on ordinary receivables plus an additional estimate of probable specific bad debts from customers experiencing financial difficulties.
The overseas consolidated subsidiaries provide an allowance for doubtful receivables at an amount calculated based on probable specific bad debts from their customers.
(k) Allowance for sales returns
Allowance for sales returns is provided at an amount calculated based on their historical experience of sales returns.
(l) Allowance for employees’ bonuses
Allowance for employees’ bonuses is provided at an expected payment amount of the bonuses to employees attributable to the fiscal year.
(m) Retirement benefits for employees
Assets and liabilities for retirement benefits for employees are provided principally at an amount calculated based on the retirement benefit obligation and the fair value of the pension plan assets as of the balance sheet date.
The retirement benefit obligation is attributed to each period by the straight-line method over the estimated remaining years of service of the eligible employees.
Net retirement benefit obligation at transition is amortized by the straight-line method over a period of 15 years.
Actuarial gain or loss is amortized principally in the year following the year in which the gain or loss is incurred by the straight-line method over a period which falls within the estimated average remaining years of service of the eligible employees. Certain consolidated subsidiaries amortize actuarial gain or loss in the year in which the gain or loss is incurred by the straight-line method over a period which falls within the estimated average remaining years of service of the eligible employees.
(n) Research and development costs
Research and development costs are charged to income as incurred.
(o) Income taxes
Deferred income taxes are provided for temporary differences between the balances of assets and liabilities reported for financial purposes and the corresponding balances for tax reporting purposes.
(p) Derivatives and hedging activities
Derivatives positions are carried at fair value with any changes in unrealized gain or loss charged or credited to income, except for those which meet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as a component of net assets. Receivables and payables hedged by qualified forward foreign exchange contracts are translated at the corresponding foreign exchange contract rates (“allocation method”). Interest-rate swaps which meet certain conditions are accounted for as if the interest rates applied to the swaps had originally applied to the underlying debt (“special treatment”).
The hedge effectiveness of forward foreign exchange transactions is assessed by considering whether the transactions qualify based on past experience and the probability of the forecasted transaction. The hedge effectiveness of interest-rate swaps is assessed based on a comparison of the cumulative changes in cash flows of the hedged items and those of the hedging instruments in the period from the start of the hedging relationship to the assessment date. However, the assessment of hedge effectiveness is omitted if a high level of hedge effectiveness is identified based on the terms of the contracts.
(q) Distribution of retained earnings
Under the Corporation Law of Japan (the “Law”), the distribution of retained earnings with respect to a given financial period is made by resolution of the shareholders at a general meeting held subsequent to the close of the financial period. The accounts for that period do not, therefore, reflect such distributions. Refer to Note 23.
Effective the nine months ended December 31, 2014, paragraph 35 of “Accounting Standard for Retirement Benefits” (Accounting Standards Board of Japan (“ASBJ”) Statement No.26, revised on May 17, 2012) and paragraph 67 of “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No.25, revised on May 17, 2012) were adopted.
As a result of the adoption of these revised accounting standards, the method for calculating retirement benefit obligation and service cost has been revised. The method of attributing expected benefit to periods was changed from straight-line basis using a discount rate based on estimated average remaining years of service of the eligible employees to the plan’s benefit formula basis using a discount rate that is a single weighted average reflecting the projected benefit payment period and the projected payment per period.
The effect of the adoption of these revised accounting standards was included in retained earnings as cumulative effect of change in method of accounting as of April 1, 2014 in accordance with transitional accounting treatments provided in the revised accounting standards.
As a result of the adoption of these revised accounting standards, assets for retirement benefits and liabilities for retirement benefits decreased by ¥368 million ($3,067 thousand) and ¥713 million ($5,942 thousand), respectively, and retained earnings increased by ¥222 million ($1,850 thousand) as of April 1, 2014. In addition, the effect of this change on operating income, income before income taxes and minority interests for the nine months ended December 31, 2014 were immaterial. The effect of this change on net assets per share as of December 31, 2014 was immaterial.
Change in Method of Accounting
3
The Company and its domestic consolidated subsidiaries changed their fiscal year end from March 31 to December 31. The change is to align the closing date of the Company and its consolidated subsidiaries in order to enhance the timely and accurate disclosure of corporate information and improve the efficiency of its business operations, the budgetary process and business performance management methods.
As a result of this change, the fiscal year ended December 31, 2014 is an irregular settlement period whereby the period of consolidation is nine months (from April 1, 2014 to December 31, 2014) for the Company and its domestic consolidated subsidiaries whose fiscal year end was on March 31 while the settlement period is twelve months (January 1, 2014 to December 31, 2014) for overseas and the remaining domestic consolidated subsidiaries whose fiscal year end was already on December 31.
