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1 FINANCIAL HIGHLIGHTS
2 ON THE 9 5 TH ANNIVERS ARY OF KOKUYO’ S FOUNDATION 3 FOUNDER’ S PHILOS OPHY
4 A MES S AGE FROM THE PRES IDENT 12 S TATIONERY-RELATED BUS INES S 14 FURNITURE-RELATED BUS INES S
16 WORKING FOR ENVIRONMENTAL PROTECTION
22 S IX-YEAR S UMMARY
23 DIS CUS S ION AND ANALYS IS BY THE MANAGEMENT
26 CONS OLIDATED BALANCE S HEETS
28 CONS OLIDATED S TATEMENTS OF INCOME
29 CONS OLIDATED S TATEMENTS OF S HAREHOLDERS ’ EQUITY
30 CONS OLIDATED S TATEMENTS OF CAS H FLOWS (FIS CAL 2 0 0 0 )
31 CONS OLIDATED S TATEMENTS OF CAS H FLOWS (FIS CAL 1 9 9 9 )
32 NOTES TO CONS OLIDATED FINANCIAL S TATEMENTS
40 REPORT OF INDEPENDENT CERTIFIED
FINANCIALHIGHLIGHTS
NET SALES (Millions of yen)
NET INCOM E (Millions of yen)
TOTAL ASSETS (Millions of yen)
TOTAL SHAREHOLDERS’ EQUITY (Millions of yen)
’95 ’96 ’97 ’98 ’99 ’00 ’95 ’96 ’97 ’98 ’99 ’00 ’95 ’96 ’97 ’98 ’99 ’00 ’95 ’96 ’97 ’98 ’99 ’00
1,192
280,335 193,380
314,039
FINANCIAL HIGHLIGHTS
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES Years ended March 31, 2000 and 1999
Thousands of Millions of yen U.S. dollars (Note 2)
2000 1999 2000
For the year:
Net sales ¥280,335 ¥291,664 $2,640,932
Operating income 14,322 11,430 134,922
Net income 1,192 4,986 11,229
At year-end:
Total assets ¥314,039 ¥309,099 $2,958,446
Total shareholders’ equity 193,380 190,676 1,821,762
Amounts per share (in yen and U.S. dollars):
Net income (Note 1) ¥9.13 ¥38.14 $0.09
Diluted net income 9.16 38.11 0.09
Cash dividends applicable to the year 15.00 15.00 0.14
Notes: 1. Net income per share is computed based on the weighted-average number of shares outstanding during the year.
2. The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.15=U.S.$1, the approximate exchange rate prevailing at March 31, 2000.
Kokuyo was founded in 1905, and in the course of its 95 years of history it has become the home and office product industry leader, setting the standards that others have to follow. We have a vast lineup of stationery and furniture products—over 13,000 at the last count—as well as the ser- vice and know-how to match this impressive range.
To contribute to society through our products—we at Kokuyo operate on the basis of this philosophy. By
providing our customers and society as a whole with the products they need, we can grow and develop together with the people we serve.
Further, we feel that it is the duty of a company to ask itself how it can make a genuine contribution to society through its business. The world is awash in waste, and natural resources are growing scarcer. How, from a glob- al perspective, can companies fulfil their responsibilities to assist in solving these pressing issues? Individuals’
lifestyles are diversifying as people seek more self-fulfillment at work and more comfort and freedom at home. How should companies react to these trends? At Kokuyo, we never cease asking these questions.
We are striding forward to the 100th anniversary of Kokuyo’s foundation in 2005. We hope that you will support us every step of the way—and beyond.
Shounosuke Kuroda Chairman
On the 9 5 th Anniversary of Kokuyo’s Foundation
Founder’s Philosophy
Moving into the Next Millennium with Energy and Vision
Upon entering the Company, new employees are introduced to the Kokuyo philosophy,
which is reflected in the Company’s products and services as well as the heartfelt way in which
they are provided to customers, both in Japan and overseas.
When born into this world, a child has nothing to call its own. Our bodies, minds,
and spirits grow and are nourished by the love of our parents and families, the guidance and
discipline of our teachers, and the encouragement of society as a whole.
We grow and mature and adopt vocations suitable to ourselves
and the education instilled in us.
These vocations must be pursued with the utmost diligence and gain the trust of colleagues,
clients, and communities around us. The only way to secure this trust is to act
with absolute sincerity in every action and endeavor undertaken. In this way,
our endeavors succeed in and of themselves, and we are happy in our vocations.
“Sincerity not only in words but also in action”—this is the Kokuyo creed.
A M essage from the President
C
ORPORATEP
ERFORMANCEDuring fiscal 2000, ended March 31, 2000, although the Japanese economy showed signs of a modest recovery, personal consumption remained weak. Both the furniture and stationery mar- kets, which are of prime importance to Kokuyo, are shrinking—in the case of furniture, from a one-time annual sales peak of approximately ¥800 billion to the current ¥500 billion to ¥600 billion. In this kind of adverse operating envi- ronment, Kokuyo has chosen to emphasize profitability throughout its operations and has instituted a thor- oughgoing program of concentration and selection. We have overhauled our
tions, and invested management resources in goods and businesses with more favorable earnings prospects. Kokuyo has also taken measures to consolidate its manufac- turing bases and, through comprehen- sive Business Process Reengineering (BPR) innovations, has striven to pare costs. We have also strengthened our distribution channels to improve their level of integration.
As a result of these efforts, while net sales dropped 3.9% , to ¥280.3 billion, from the previous fiscal year, ordinary income rose impressively, to ¥13.5 bil- lion, a 13.4% increase over fiscal 1999. Net income for the period, however, slumped 76.1% over the previous fis-
amortized and Kokuyo carried out a stock repurchase program, buying back a million of its own outstanding shares. There are two significant and related questions facing the manage- ment of Kokuyo now: how to secure growth over the next 5 to 10 years— the principal objective being earnings accumulation—and how to boost the value of Kokuyo’s stocks. The results we have posted in the year under review are evidence that we have made a sure-footed opening gambit in our bid to resolve these two ques- tions, and we see our financial position at the end of fiscal 2000 as evidence of the fact that Kokuyo is changing for the better.
Akihiro Kuroda Pre s ide nt
C
ONVERGENCE BETWEENE
XISTING ANDN
ETWORK-T
YPED
ISTRIBUTIONS
YSTEMSKokuyo’s existing distribution system has been a source of considerable competitive advantage for the Company and in the 20th century was a source of high earnings. But now, on the threshold of the 21st century, from the all-important perspective of sharehold- er value it is imperative that Kokuyo have the courage to institute major reforms to its distribution methods. Specifically, we need to focus on how to reform our existing distribution sys- tem, which accounts for some 70% of product distribution, and how to create a network-type distribution system using e-commerce. As a manufacturer, Kokuyo’s basic stance is that “ every- thing begins with the customer” and, consequently, is determined that the old and new distribution systems do not have to exist in opposition to each other but can be profitably integrated. It is often and rightly pointed out that even in the United States—the birth- place of new distribution channels— long-existing methods of distribution remain prevalent and universal and will never completely vanish. That is to say, human services and the delivery of both those services and goods themselves will never disappear.
Kokuyo is busy laying the foundations of a multivalent distribution system based on an amalgamation of existing and network-type distribution methods.
Whereas up to now there has been at least one overall exclusive agent for every Japanese prefecture, these 60 agents are to be reorganized and slimmed by a third, with one company serving a number of prefectures over a broad but contiguous geographical area. The majority of the current sales by the overall exclusive agents are of goods that are physically distributed and retailed. Kokuyo would like to gradually change this practice so that physical distribution and network dis- tribution both account for about 50% of overall exclusive agents’ sales. Physical distribution systems are still the backbone of new distribution methods, and Kokuyo is integrating its physical distribution
system into a company called Office Supply Logistics (OSL). OSL is a new distribution com- pany established through joint invest- ments by Kokuyo and its overall exclusive agents, and delivers in small volumes and to tight deadlines. Current- ly, OSL has bases in
just three places—Tokyo, Osaka, and Hokkaido—but in fiscal 2001 five more will be added, and Kokuyo has plans to eventually expand the number of bases nationwide to 12. The establish- ment of OSL means that overall exclu- sive agents can manage without maintaining inventories. Combined with moves to reorganize and consoli- date them so that they cover wider areas, this should result in a strength- ening of Kokuyo’s financial base.
OSL Bases Tokyo OSL
Hokkaido OSL
Kinki OSL FY 1999 FY 2000 FY 2001 and after
ODistribution Strategy— Office Supply Logistics (OSL) Coverage
K
OKUYO AND E-C
OMMERCEThe market for office stationery goods in Japan is said to be worth ¥1.1 trillion annually. Of suppliers in that market, companies with more than 300 employ- ees account for sales of approximately
¥200 billion, businesses employing between 30 and 300 people account for sales of ¥460 billion, and SOHO and other small-scale operations account for the remainder—some ¥440 billion. As far as companies with more than 30 employees are concerned,
their customers are seeking more from them than merely competitive prices and rapid deliv- ery. Although these larger businesses must make every effort to reduce costs in every aspect of their business relating to the delivery price of consumable goods, their cus- tomers want them to carry products other than those listed in their catalogs and to respond almost instantaneously to telephone orders. In short, the cus- tomers are looking for the human touch, that extra touch of attentive- ness and courtesy that the best retailers offer.
Kokuyo prides itself on providing this human touch to suppliers—first with its Benrinet system for larger corporations and its C-Business for midsize businesses, and now, from
July 2000, with its DELIVO system for SOHOs and small-scale operations.
Kokuyo’s Benrinet, started in October 1997, is an Internet-based office supplies ordering system geared toward larger companies, which enables them—and Kokuyo—to dramatically cut the costs associated with purchasing. There are currently 250 companies involved in the scheme, and that number is expected to increase in the future. As of April 2000, thanks to a tie-up with Oracle Corporation Japan and SAP Japan Co., Ltd., it has been possible to access Benrinet using Enterprise Resource Planning (ERP) system software, and we foresee a further leap in the number of users. The Benrinet system is to be expanded still further within 2000 and will become dramatically more convenient.
Larger Corporations
(more than 300 employees)
Midsize Businesses (more than 30 employees)
Small-Scale Operations and SOHOs
Service with a Human Touch
Competitive Total Purchase Cost
Speed Customer Needs
Competitive Purchase Cost
Speed Benrinet
C-Business
DELIVO
Kokuyo—A Network for Every Need
C-Business, Kokuyo’s stationery retail system aimed at smaller busi- nesses, is a catalog-based distribution system that allows Kokuyo to lend its full support to retail outlets by stream- lining the order and delivery processes. C-Business was expanded massively in June 2000 and is beginning to shift from customary fax-based order place- ment arrangements to ones which exploit the efficiencies of the Internet. For users, the convenience of the sys- tem is increasing in leaps and bounds as we have expanded the number of products available, from 3,000 in fiscal 1998 to a current 11,000 and rising, and can now promise next-day dispatch even later in the day on which the order is placed. C-Business enables Kokuyo to support its customers’ elec- tronic catalogs and their systems development and operations. Thanks to C-Business, retailers can share the benefits of being able to order,
manage inventories, and take delivery in one fell swoop, thereby freeing themselves to devote their attentions entirely to operational activities.
In July 2000, Kokuyo’s DELIVO ser- vice commenced operations, offering office furnishings via mail order for small-scale businesses and SOHO operations. It is widely believed that demand for office furnishings in this sector will grow as smaller-scale offices with 20 people or fewer flourish, and SOHO businesses, in particular, proliferate. With these promising prospects for future growth, DELIVO has started accepting faxed orders in
the high-demand, population-dense regions of greater Tokyo, Kinki, and Chubu. Within the calendar year, ser- vices will be expanded to cover the whole of Japan, and we will also intro- duce a system that makes ordering via the Internet feasible. With the advent of DELIVO, small-scale offices can now enjoy the same access to competitive prices that larger corporations have had for so long and, moreover, take care of their order in a single stroke. DELIVO is a highly convenient system that offers not only furnishings but also a variety of other services.
Benrinet, C-Business, and DELIVO have one key feature in common—by combining network distribution with the best of existing distribution chan- nels, they supply our customers with not just products but also that all- important human touch. Kokuyo’s belief that “ everything begins with the customer” extends to the smallest detail of its services.
Catalog Sales
Delivery Service for Smaller Businesses (Kamibunki Kyohai
Co., Ltd) Support for the
Production of Dealer Catalogs
Orders Accepted by Fax on Behalf
of Smaller Businesses C-Business (for small and midsize businesses)
• Reforming the Distribution System
• DELIVO Service M enu Products
SOHO Furniture Office Furniture Office Goods Interior Goods PC Goods Office Appliances
Services Office Cleaning Furniture Repairs Furniture Disposal Decor Renewal Making of Spare Keys Moving
LAN Installation Art Rental Layout Design
F
OCUSING ON THEP
ERSONALAlthough B2B sales comprise around 80% of Kokuyo’s net sales, the market is very susceptible to the slightest shift in economic trends. We feel that it is necessary to increase B2C sales to put us on an even sounder operational
footing. In B2C sales, it pays to have as close a relationship with customers as possible to better understand their needs. To achieve this, Kokuyo established a Personal Products Division in late 1998 and amplified the division’s post-establishment functions to the stage where it
evolved into the New Shop Creation Division in April 2000. The new division is now engaged in the devel- opment of new prod- ucts and product materials, the manage-
ment of volume retailers, and even the construction of new outlets. While overall sales at volume retailers are on a downward trend, Kokuyo’s product sales at this kind of outlet sustained growth of 3% in fiscal 2000.
As part of Kokuyo’s product devel- opment and marketing strategies in the personal products sector, Kokuyo
commenced participation in the excit- ing WiLL project in March 2000. This project brings together businesses from a variety of different fields to reach out to the new generation of consumers, mostly in their 20s and 30s and eight million in number, whose needs companies on their own find increasingly difficult to satisfy. There are currently five other companies
"WiLL" Brand. This brand is used in an exclusively Japanese intercorpo- rate marketing project
involved—Kao Corp., Toyota Motor Corp., Kinki Nippon Tourist Co., Ltd., Asahi Breweries, Ltd., and Matsushita Electric Industrial Co., Ltd.—but this will grow to a total of seven when Ezaki Glico Co., Ltd., joins in August 2000. Through its participation in this project, Kokuyo intends to deploy its experi- ence in the development of its own new products and product materials.
Kokuyo intends to exponentially increase its presence in the SOHO mar- ket in 2000 with the introduction of some 340 new products. The membership- based rental office facility Kokuyo opened in 1998 at JR Tokyo Station, Desk@, has proven to be a great suc- cess, with three times as many current users as there were shortly after the facility first opened. The increase in SOHO and individual users has been particularly marked. At the end of
1999, Kokuyo introduced a free Internet connection service that has been a notable success.
Demand for products targeted at the elderly is increasing with the introduc- tion of long-term nursing care insur- ance and a burgeoning interest being exhibited by society as a whole in at- home care. Kokuyo plans to focus on the development and sale of products catering to healthy senior citizens, whose numbers are likely to grow in the coming years. In response to robust demand in this area, in November 1999 Kokuyo opened a specialty store in Osaka stocking merchandise for seniors, with more than 400 different kinds of products on offer selected for their relevance to the needs of con- sumers in this demographic group. Subsequent Kokuyo product R&D will reflect these developments.
W
ORKING TOP
ROTECT THEE
NVIRONMENTIn 1999, Kokuyo was the first company in the stationery and office supplies industry to achieve ISO 14001 certifi- cation for its entire operations. There are only a handful of companies in Japan that can boast Multisite System Companywide certification. Products made by Kokuyo bear more of the Japan Environmental Association’s prestigious Ecomark labels than those of any other company. Additionally, Kokuyo now has more than 2,700
products in its range that are specifical- ly tailored to be environment-friendly.
In 1999, by deploying special new coatings, Kokuyo was able to launch an Ecodesk, which does not use the melamine laminate usually found in the slab tops of steel desks. We also devel- oped desks with peel-off melamine lami- nate so that the steel and melamine components can be disposed of sepa- rately. Through the development of this system, even desks currently in use can be rendered more compatible with environmental requirements.
By investing heavily in new technolo- gies and new products in this way in its furniture business, Kokuyo has raised Companywide sales of environmentally sound products—including stationery and furnishings—to approximately ¥45 billion. Our customers everywhere are showing more and more concern for environmental issues, and, according- ly, we are not merely a supplier of material goods but, as demonstrated by our ISO 14001 acquisition, have come to support the environment in all our activities.
P
ROSPECTS FOR THEM
ARKETS INF
ISCAL2001—K
OKUYO’
SR
ESPONSEIt seems increasingly certain that the Japanese recession has bottomed out
and that the economy is now on a recovery path. This trend is gradually being reflected, too, in corporate investment.
In the Furniture segment, Kokuyo’s net sales improved steadily from February to May 2000, and with the prospect of the healthy number of office start-ups continuing through to fall 2000, Kokuyo anticipates that sales in fiscal 2001 in the Furniture segment will rise approximately 5% , to ¥149 million. In the Stationery products seg- ment, we forecast a 3.3% increase in sales, to ¥143 billion, as we expand our Benrinet and C-Business systems and work to boost sales at volume retailers. At this stage, we anticipate both ordinary income and operating income to amount to approximately
¥15 billion, with net income for the period reaching about ¥8.7 billion.
• M elamine Laminate Peeling System
Returned Desktops
Laminated Chips Laminated Chips after Pulverization
Recycled into Steel Products
Recycled as an Aggregate in Filling Material Used in Office Underfloor Wiring Systems Peeling
Device
Steel Desktop after Laminate Removal
Kokuyo is planning some ¥10 billion of investments, two-thirds of which will go to updating the distribution network and systems development—as always, Kokuyo is maintaining an attacking management posture.
In July 2000, Kokuyo will split off its Office Furniture Sales Division and establish it as a new, wholly owned subsidiary company, Kokuyo Office Systems Co., Ltd. In Europe and the Americas, office systems are widely recognized as one of the most impor- tant instruments for effecting opera- tional change, and the number of corporations in Japan that feel similarly and are placing office systems at the center of their operational strategies is on the increase. Kokuyo Office Systems will advise not just on office design and changes to the office layout but will also offer solutions aimed at construct- ing strategic office environments with low overhead costs that facilitate improved productivity—making offices for winners a reality. We anticipate annual sales of approximately ¥45.0 billion for this new subsidiary.
T
OO
URS
HAREHOLDERSKokuyo Co., Ltd., will commemorate the 100th anniversary of its foundation
in 2005. We view the five years that remain until then as a time for us to acquire new strengths and as an opportunity for us to institute a range of reforms.
We aim first to bring changes to our operational style. In June 1999, we introduced an executive director sys- tem and in April 2000 inaugurated a much more results-oriented personnel rewards system. We are promoting the notion of individual divisions as profit centers in their own right to raise shareholder and corporate value.
The second series of reforms will be made to our business structure. We must not allow ourselves to lose sight of the fact that we are first and fore- most a manufacturer and must have the courage to make tough choices and consolidate where necessary. We will withdraw from unprofitable busi- nesses and no longer offer unprofitable products, while devoting ourselves to such strategic sectors as Small Office/ Home Office (SOHO), environment- friendly products, personal products, and products for the elderly.
Finally come the reforms to be made to dis- tribution struc- tures, which, if successful, will
have a great impact on Kokuyo’s future corporate strength and the reso- lution of some of the problems that the 20th century has left behind. The expansion of not just Business-to- Business (B2B) but, crucially, Business-to-Consumer (B2C) com- merce will help us build a new Kokuyo—like newly formed and flood- ing rivers, B2B and B2C commerce are poised to sweep away the dams of tra- ditional restrictive practices that have checked progress for so long.
We would like to thank our share- holders and Company stakeholders for their support and hope that they con- tinue to show an interest in the for- tunes of Kokuyo in the future.
S
S tt a a tt ii o o n n e e rr y y -- R R e e ll a a tt e e d d B B u u s s ii n n e e s s s s
REVIEW OFOPERATIONS
S
Kokuyo has been implementing a pre- cisely focused sales expansion strate- gy in the financial year under review. Activities have included a special cam- paign commemorating the 30th anniversary of the launch of the Company’s first Pritt Stick glue and another campaign to generate increased sales of environmentally sound products. We have also brought such new goods to the personal prod- ucts market as a metallic photo album that displays photographs in the best possible light and the C-line Campus Notebook (5mm line width) for stu- dents, a first in the industry in its top- flight environmental soundness. The division has also been actively pushing ahead with moves to expand C- Business and Benrinet to respond appro- priately to the growth of e-commerce
and reforms being made to distribution structures.
We have been participating in the groundbreaking WiLL project, which brings together Kao, Toyota Motor, Kinki Nippon Tourist, Asahi Breweries, Matsushita Electric Industrial, and Ezaki Glico, companies from different industry backgrounds. This project has been launching a succession of prod- ucts targeted at consumers in their 20s and 30s who attach great importance to their own discriminating tastes. As part of Kokuyo’s contribution to the project, in July 2000 the Company launched a range of pens and note- books, COSMiC FiZZ, and is progress- ing with plans to enrich its range of personal product items still further.
As personal computers spread from the office to the home, the number of ink-jet printers is growing rapidly, too.
Consequently, demand for the
Company’s ink-jet paper has improved recently, and it is the best-selling prod- uct in the general-use paper industry. Sales increased 34.0% in the period under review to reach a total of ¥1.1 billion.
In the Stationery products segment, sales in fiscal 2000 amounted to
¥138.5 billion, down 2.8% from the previous fiscal term, due to continued slack demand, an intensification of price competition, and the disposal or consolidation of such unprofitable sec- tors as the plain paper copier (PPC) paper and photo album sectors.
REVIEW OFOPERATIONS
F
F u u rr n n ii tt u u rr e e -- R R e e ll a a tt e e d d B B u u s s ii n n e e s s s s
F
Kokuyo has been striving to broaden the market for office furnishings with the C Square range of desk trays designed with diversifying working styles in mind and the introduction of the Ecology Chair Series, consisting of products that can be separated by component material and thus recycled. In the Store Fixtures and Fittings Division, sales rose 18.0% in the period, to
¥10.7 billion, thanks to proactive management attentions directed at the convenience store fixtures and fit- tings market, of which Kokuyo holds a greater than 50% share. The division also benefited from a rush to build large-scale retail outlets, a phenome- non related to recent revisions to the Large-Scale Retail Store Law.
In the SOHO furnishings market, we launched the skeleton-type PC desk Beje—which is the first desk in the industry to use a top board made of
glass—a very easy-to-assemble shelv- ing system, Tanalot, and BP (Best Positioning) Chair, an ergonomically superior desk chair with a freely adjustable backrest. In fiscal 2000, we more than doubled the scope of our product lineup with the introduction of some 340 new items.
Moreover, Kokuyo is pressing ahead with measures to adjust its businesses to the requirements of an aging society by opening a directly managed retail outlet called Gokigen Seikatsukan, catering to seniors in Osaka, with over 1,000 different products in more than 400 categories.
Kokuyo commenced sales in the original equipment market (OEM) of a digital whiteboard scanner, Kokuyo mimio, in an alliance with the U.S. company Virtual Ink Corp. Kokuyo mimio uses the epoch-making mimio device that digitizes analog information
and, once installed on a normal white- board, scans data written on the board with a special marker pen, in the order in which it is written, and enters it as is on a PC. As the data is stored as images on a PC, data can be shared in real time at a Net meeting on the Internet or an intranet. It is light and easily carried in just one hand, and, as its cost is less than half that of conventional digital whiteboards, customers can digitize more of their whiteboards, more quickly.
In the Furniture segment, sales in fiscal 2000 amounted to ¥141.8 billion, down 4.9% from the previous fiscal term, due to a falling off in private- sector capital investment and few new sources of demand in addition to a surge in property orders that stress cost-competitiveness.
Working for Environmental Protection
C
OMPANYWIDEU
NIFIEDISO 14001
C
ERTIFICATIONAs the search for effective ways to protect the environment grows more intense on a global scale, Kokuyo has come to regard environmental issues as the single biggest set of challenges it faces in its operations.
In March 2000, Kokuyo completed the acquisition of Unified ISO 14001 certification Companywide. The ISO 14001 management systems that had already been set in place at seven Company sites were reconstructed, and an environmental management system was constructed that integrat- ed the entire Company’s activities from the design stage to development, manufacture, distribution, and ultimate sale. This approach encompasses all products—paper, stationery, furniture, etc.—in a Multisite System* that covers 14 principal operations bases including business centers, production facilities, and distribution points with the Company’s Head Offices at the core. There are very few companies in the
manufacturing business that have achieved across-the-board Multisite System certification, and Kokuyo is the first to do it in its industry.
* Multisite System: A system whereby multi- ple target sites are managed under a uni- fied system, and the center (the Head Office) monitors environmental matters and carries out environmental audits. The system is under regular review by centrally based management.
K
OKUYOE
NVIRONMENTALA
CTIVITYV
ERIFICATION(C
HARTER)
On October 1, 1993, we drew up the Kokuyo Environmental Activity Charter, a plan of action that the Company had decided to initiate in relation to global environmental problems on a purely voluntary basis and in advance of legislation. The charter makes our position on addressing environmental issues clear and details the Company’s fundamental philosophy, the goals and
• List of Company and Affiliate Sites with Certification Registration Number: JQA-EM0368
Offices:
Head Office (including south building, showroom, and workshop) Shinagawa Office (including showroom)
Kasumigaseki Office Plants:
Yao Plant Mie Plant Shibayama Plant Affiliated Companies: Kokuyo Logitem Co., Ltd.
Nishi-Nihon Business Sector
Nishi-Nihon Business Sector, Shiga Distribution Center Nishi-Nihon Business Sector, Fujiidera Distribution Center Nishi-Nihon Business Sector, Torigai Distribution Center Nishi-Nihon Business Sector, Yao-minami Distribution Center Nishi-Nihon Business Sector, Yao Distribution Center Nishi-Nihon Business Sector, Mie Distribution Center Higashi-Nihon Business Sector
Higashi-Nihon Business Sector, Koutou Distribution Center Higashi-Nihon Business Sector, Koutou-minami Distribution Center Kokuyo Business Service Co., Ltd.
Nishi-Nihon Branch Office, Osaka Office
Nishi-Nihon Branch Office, Service Group in Yao Plant Nishi-Nihon Branch Office, Service Group in Mie Plant Higashi-Nihon Branch Office, Shinagawa Office Higashi-Nihon Branch Office, Kasumigaseki Office
Higashi-Nihon Branch Office, Service Group in Shibayama Plant
scope of its environmental activities, and the structures that promote their achievement.
F
UNDAMENTALP
HILOSOPHY On its foundation, the Company set its corporate goal high—to contribute to society through its products—and it has maintained that goal ever since. As a natural extension of this philosophy, we are aware that the preservation of the global environment is a pressing issue for the whole planet, and we are drawing on the collective wisdom of all personnel and acting Companywide to address this issue.S
COPE OFA
CTIVITIESWe are aware that we have responsi- bilities, as a consumer of natural resources and as a supplier of finished products, to contribute to the protec- tion of the global environment. In all our activities, we work to integrate
consciousness of the importance of the three “Rs”—reduce, reuse, and recycle.
REDUCE
REUSE RECYCLE
• The Three ‘R’ M otto
• Goals of Environmental Activities
Scope
1. Prevention of Global Warming 2. Promotion of Recycling and Efficient
Energy Use
3. Products
4. Promotion of Green Purchasing 5. Social Contribution Activities
Goals & Targets
• Reduce CO2emissions from fiscal 1990 levels: Reduce 6% by 2003; Reduce 10% by 2010
• Reduce volume of waste produced (calculated as a percentage of 1997 net sales): Reduce 10% by 2000; Reduce 25% by 2005
• Raise recycling rate in relation to total volume of waste produced: Raise to 76% by 2000; Raise to 80% by 2005
• Raise used paper recycling rate: Raise to 45% by 2000; Raise to 55% by 2005
• Raise used resin recycling rate: Raise to 10% by 2000; Raise to 30% by 2005
• Reduce use of polyvinyl chlorides from 1996 levels: Reduce to 30% by 2000
• Expand Green Purchasing product list in accordance with guidelines
• Clean areas adjacent to Kokuyo facilities; Participate proactively in environmental protection activities; Promote landscaping activities
ENVIRONMENTALMANAGEMENT
3,100 1,193
1,433
5,726
2,966 FY2010
(projected) Ratio of reduction: 10.0% FY2003 (projected) Ratio of reduction: 6.0
3,055 1,166
1,445
5,666 FY1998
Ratio of reduction: 7.0%
3,190 1,146
1,448
5,783 FY1999
Ratio of reduction: 5.1%
1,151 1,366
5,482
Factories Distribution Division Offices Entire Company
3,519 1,104
1,469
6,092 FY1990
Unit: tons of carbon
Global-Warming Countermeasures
• Trends in CO2 Emission Volumes
Footnotes:
1) CO2 emissions refer to those CO2 emissions produced by electric pressure pumps in drainage systems, Company incinerators, and through the consumption of petroleum products, gas, and electricity.
2) Distribution Division refers only to CO2-emitting energy sources used inside distribution centers.
27.1 24.7
4.4
20.3
5.4 73.4
0.5 0.4
93.2 0.6 1.8
73.9
0.4 1.0
64.4 7.7
0.5 0.3
Factories Distribution Division Offices Entire Company
• Reductions in CO2 Emissions by Source (FY 2000)
Factories: 6,554t (45% ) Distribution
Division: 7,083t (49% ) Offices:
(6% )811t
Entire Company:
14,448t
• Garbage Produced by Workplace Type (FY2000)
5,605 949
85.5%
5,067
11,164 3,284
2,016 492
319 60.7%
71.5%
77.3% Factories
Distribution Division
Offices
Entire Company
Volume Recycled Volume Not Recycled Recycling Ratio
• Garbage Volumes and Recycling Ratios (FY2000)
Footnotes:
1) The objective "Reduction of Waste Products" refers to the reduction in the volume of garbage 3) "Volume Recycled" refers to the total volume of garbage recycled, including industrial waste
0 3,000 6,000 9,000 12,000 15,000 (Unit: tons of carbon)
Resource Conservation and Recycling M easures
• Trends in Garbage Volumes and Recycling Ratios
Workplace Type
Factories Distribution Division Offices Entire Company
Garbage Volume Not Recycled Expressed as a Ratio to Sales (t/¥1 billion)
FY1997 Sales ¥306.3 billion FY1998 Sales ¥281.0 billion FY1999 Sales ¥264.5 billion Garbage
Volume 6,654 4,789 1,028 12,471
Volume Recycled
5,465 3,261 569 9,295
Volume Not Recycled
1,189 1,528 459 3,176
Recycling Ratio 82.1% 68.1% 55.3% 74.5%
0.10 Garbage
Volume 6,877 5,413 647 12,937
Volume Recycled
5,689 3,772 356 9,817
Volume Not Recycled
1,188 1,642 291 3,120
Recycling Ratio 82.7% 69.7% 55.0% 75.9%
0.11 Garbage
Volume 6,554 7,083 811 14,448
Volume Recycled
5,605 5,067 492 11,164
Volume Not Recycled
949 2,016 319 3,284
Recycling Ratio 85.5% 77.5% 60.7% 77.3%
0.12
Percentage Reduc- tions in Garbage Volume Not Recycled
20.2% -31.9% 30.5% -3.4%
-19.7%
64,657
79,469 79,371 197,192
188,053
169,325
27,270 27,648 28,413
5,234 5,058
3,963 3,449 32.8%
42.3%
46.9%
45.0%
2.5%
4.9%
8.0%
10.0%
3.4% 24.3%
34.1% 30.0%
• Improving the Ratio of Used Paper Utilization
• Improving the Ratio of Recycled Plastics and Resins Utilization
• Reducing the Volume of Polyvinyl Chloride Used
695
1,367
2,282 FY 2000 FY 2000
FY 2000
0 50,000 100,000 150,000 200,000
FY 1999 FY 1998
FY 1997 Volume of Paper Utilized
Volume of Used Paper Utilized
Ratio of Used Paper Utilization
= Volume of Used Paper Utilized / Volume of Paper Utilized 0 10,000 20,000 30,000
FY 1999 FY 1998
FY 1997 0
2,000 4,000 6,000
FY 1999 FY 1998 FY 1996 FY 1997 0
500 1,500 2,000
1,000 2,500
Ratio of Used Paper Utilization
Volume of Plastics and Resins Used
Volume of Recycled Plastics and Resins Used
Definition of Plastics and Resins: According to ISO/FDIS 14021 Improving the Ratio of Recycled Plastics and Resins Utilization = Volume of Recycled Plastics and Resins Used /Volume of Plastics and Resins Used
Ratio of Recycled Plastics and Resins Utilization
Volume of
polyvinyl chloride Ratio of Reduction
(Unit: t) (Unit: t) (Unit: t) (Unit: t)
• Kokuyo’s Environmental Labels
For cases where Kokuyo products do not fall under the mandate of any of the environmental labels awarded by external organizations, Kokuyo has evolved a system of nine easily understood designations, which are shown in catalogs and elsewhere, for its environmentally sound products.
Products Using Raw Materials That Place a Lighter Burden on the Environment 1. Recycled Materials
For products that are partially made of recycled materials—for example, bottles, wood boards, bar- rels, recycled plastic, milk cartons, and used paper 2. Substitute Materials
For paper products that use such fiber sources as bagasse and kenaf as lumber substitutes
3. Resources That Would Otherwise Go to Waste For products that use such resources as thinned wood or rubber trees from which the sap has already been extracted
4. CFC-Free
For products that formerly used but now do not use chlorofluorocarbons (CFCs) or trichloroethane, which have been linked to the destruction of the ozone layer. Such products as chairs, in the making of which CFCs were previously produced but now are not, are not included in this category.
Products That Place a Lighter Burden on the Environment When in Use 5. Refillable
For products whose lives can be lengthened by refilling or otherwise replenishing their consumable parts, allowing repeated use
6. Replaceable Parts
For products whose lives can be prolonged by the easy replacement of parts that wear out quickly, for instance the seat cushions and seat cover fabric of chairs and the front covers of files
7. Washable
For products using washable fabric covers, which thus do not have to be disposed of when they become dirty
Products That Place a Lighter Burden on the Environment through Recycling 8. Designed for Recycling
For products that can be easily recycled, either because they are made of a single raw material; because they can be easily disassembled and dis- posed of according to raw material type at the end of their life cycles; or because they were designed specifically to use recylable raw materials 9. Encouraging Recycling
For products that encourage recycling by utilizing used office paper or by being separable into con- stituent raw materials
Companywide Organization
Workplace Division
Executive Office (Environmental Management Department) Companywide Environmental
M onitoring Committee Environment Subcommittee Head of
Environmental M onitoring Internal Environmental
Auditing Team
Executives with Responsibility for Environmental M atters
President
Workplace Organization
Environment-M onitoring Office
People with Responsibility for Environmental Awareness
People with Responsibility for Environmental Activities People Responsible for Environmental M onitoring Environmental
M onitoring Committee
M anagement
M anagement Council
Shibayama Plant
Corporate Staff Division
Subsidiaries Other Organizations Project
Promotion Division Yao
Plant Mie Plant Kokuyo Logitem
Nishi-Nihon Delivery Center Delivery Center
Kokuyo Logitem Higashi-Nihon
D e p a r t m e n t s
• Promotional Structures
• Format Based on the Japan Environment Agency’s Guidelines (millions of yen)
Cost of Environment Preservation Classification
(1) Costs by Business Area Total 1. Pollution Prevention Costs 2. Environment Preservation Costs 3. Resource Recycling Costs (2) Upstream/Downstream Costs (3) Management and Monitoring Costs (4) R&D Costs
(5) Costs of Social Activities (6) Costs of Environmental Damage Total
Kokuyo’s Environment-Preservation Activities
(6) Observance of Laws and Regulations (1) Global Warming Countermeasures
(2) Resource Conservation and Recycling Measures (4) Green Purchasing (3)-2 Product Measures (7) Establishment and Operation of EMSs (3)-1 Product Measures (R&D Costs Only) (5) Contributions to Social Activities Other Environmental Preservation Costs
Amount Invested
¥ 12 0 2 11 159 0 0 0 0
¥171
Costs
¥268 65 25 178 286 279 94 64 0
¥991
• Costs of Various Environmental Preservation Activities and Results (Comparisons across Several Years) (millions of yen)
On the Introduction of Environmental Accounting
Kokuyo began to investigate the possibility of corporate disclosure of environmental costs in fiscal 1998. However, unified disclosure standards and methods for interpreting the results of an environmen- tal audit were not yet fully in place, and so it was not until fiscal 1999 that the first disclosure was made. On that occasion, Kokuyo used its own disclosure standards, basing them on its environmental preservation activities, and the Company endeavored to make comparisons with fiscal 1998 and several other fiscal years. Kokuyo simultaneously made it possible to make comparisons with fiscal 1999 quantitative performances, principally of the costs and results of the Company’s various environmental preservation activities. For readers’ convenience, we have used a format based on the Japan Environment Agency’s Guidelines on the Introduction of Environmental Accounting Systems, effective 2000.
Objectives External Objectives
- To report on the costs associated with the internalization of what had been external pollution costs imposed on society
- To report on environmental preservation activities
- To deepen communication on environmental matters with green consumers
- To fulfill the responsibility the Company has, as a business and consumer of resources, to
Internal Objectives
- To better grasp the costs and effects associated with environmental preservation activities - To provide senior management with data for decision-making and environmental preservation
strategies
- To support the environmental preservation activities of each internal organization - To raise awareness among employees of environmental costs
Environmental Preservation Activity
(1) Global Warming Countermeasures
• Introduction of Energy-Saving Devices/Equipment
• Water Conservation Activities
• Anti-Idling Measures
• Others
(2) Resource Conservation and Recycling Measures
• Devices and Equipment to Facilitate Separation of Waste Products Prior to Collection
• Wastewater Recycling Devices
• Costs Associated with Disposal of Waste Products
• Other
(3)-1 Product Measures
• Reuse of Waste Paper
• Reuse of Resins/Plastics
• Substitution of Vinyl Chloride
• Research into Life Cycle Allocation
• Management and Monitoring of Chemical Substances
(3)-2 Environmental Labels/Marketing
• Acquisition of Environmental Labels
• Inclusion of Environmental Information in Catalogs and Other Publications
• Exhibitions on Environmental Themes, Other
(4) Promotion of Green-Purchasing Activities
• Introduction of Environment-Conscious Products
(5) Contribution to Social Activities
• Cleaning, Greening, and Beautification Campaigns
• Donations to Environment NGOs/NPOs
(6) Observance of Laws and Regulations
• Measures to Prevent Environmental Pollution/Contamination
• Measurement of Gas Emissions
• Slurry Control
• Other
(7) Establishment and Operation of EMSs
• Establishment and Maintenance of Environmental Management Systems
Total
Fiscal Consequences
for the Period
31
29
56
52
0
0
822
729
0 0
0
0
10
4
0
0
918 814 Details of Activities
• Introduction of the absorption machine proper air-conditioning system • Installation of heat-pump chillers • Installation of inverter-controlled lighting systems • Introduction of energy- conserving machines • Automatic light shut-off timers • Water- saving campaigns for bathrooms and everywhere water is used
• Battery-operated forklift trucks purchased • Promotion of an
“ idling stop” campaign • Others
• Installation of solvent recovery devices • Introduction of fold- up storage containers • Introduction of recycling systems for byproducts of cement-filler processes and wastewater
• Establishment of a recycling system using paper shredders
• Reduction in styrofoam usage • Appropriate disposal of returned used furniture by separating raw materials • Copy- paper recycling programs (as a member of business district associations)
• Procurement of used paper for use as a raw material
• Purchase of recycled resins and plastics • Purchase of vinyl chloride substitutes • Installation of melamine laminate recycling facilities • Shift to use of other recycled material resources
• Other environment-related R&D activities • Life Cycle Assessment (LCA) research/surveys • Pollutant Release and Transfer Registers (PRTRs) and other chemical substance man- agement procedures introduced
• Acquisition of Eco Mark labels from the Japan Environment Association and of other environment labels • Information about the Green Purchasing Network placed on the Kokuyo Web site
• Eco Mark information added to catalogs • Sales promotion campaigns featuring environment-conscious goods (using exhi- bitions, events, etc.) • Staff attend courses and seminars held by other organizations • Product sales courses • Other courses
• Establishment of an environmentally compatible Office Supplies Center (OSC) • Purchase of environment-conscious furniture/durable materials (for furnishings, etc.)
• Cleaning, greening, and beautification campaigns • Donations to local residents’ associations • Donations to environment NGOs/NPOs
• Measurement of gas emissions • Inspection of incinerators and their removal where possible • Analysis of water quality
• Wastewater/sewage treatment and disposal • Treatment and disposal of effluent from paint facilities • Slurry
management/disposal • Noise/vibration/odor measurement
• Installation of deodorizing ovens in paint facilities • Installation of facilities that generate less dust and noise • Measurement of chlorofluorocarbon leakage
• Establishment and operation of environmental management systems (EMSs) • Expenditures for ISO 14001 certification
• Company education campaigns • Activities of the Environmental Management Section
Fiscal Year
1999
1998
1999
1998
1999
1998
1999
1998
1999 1998
1999
1998
1999
1998
1999
1998
1999 1998
Investment
¥ 2
29
11
4
158
206
0
0
1 0
0
0
0
13
0
0
¥171 252
Costs
¥ 25
26
178
161
379
337
298
287
1 1
65
61
65
80
279
257
¥1,289 1,210
Item
Total Amount Invested during the Period Total R&D Costs during the Period
Contents
• Reconstruction of the Shibayama Plant etc.
• Universal Design etc.
Amount 5,500 1,240
Economic Consequences of Environmental Preservation
Amount
¥19 31 37 Item
Income Gains from Recycling
Reduction in Expenses from Energy Conservation
Reduction in Costs of Disposal of Waste Products due to Recycling
Explanation of Amounts Contributed by Environmentally Sound Products
Methods to deduce the environmental value (value contributed by environmental preservation activities) of the sales of environmentally sound products are still at a formative stage, and Kokuyo is aware that an oversimplified method of accounting for this value risks creating misunderstandings in the minds of the readers of this report. However, Kokuyo has decided to disclose the data contained in this table in the interests of further promoting environmental preservation activities among its employees and to ensure that the Company’s environmental management activities maintain their momentum. Kokuyo’s objectives are twofold: 1) To stimulate an increase in the desire of Company employees to become involved in environmental preservation activities.
2) If Kokuyo can interpret the amounts contributed as evidence of the support of customers who purchase the Company’s environmental products, then this will assist in the further promotion of the Company’s environmental management activities.
• In FY 1999, data on sales of furniture products could not be fully collected. As a result, only sales of stationery products—office paper products, personal prod- ucts, writing materials, drawing and design products, and OA supply products—are stated.
Calculation Method
Economic consequences = costs classified by product measures in stationery-related business (ST) + (ST sales of environmentally sound products x Kokuyo’s ordinary income as a percentage of net sales) x (percentage growth over FY 1999 in sales of ST environmentally sound products – percentage growth over FY 1999 in sales of all ST products)/percentage growth over FY 1999 in sales of ST environmentally sound products.
Scope of Calculations
Kokuyo Co., Ltd., Kokuyo Business Service Co., Ltd., Kokuyo Logitem Co., Ltd.
Note:
A strict method of calculating differentials was used in regard to the calcula- tion of investments and expenses.
Details of Economic Consequences Reduction in Expenses
Income from Sale of Assets
Reduction in Expenses
Environment- Conscious Products
Reduction in Expenses
Objectives Reduction in CO2Emissions
Reduction in Waste Products Generated (Reduce 10% by FY 2000)
Increase Emissions Recycling Rate (Increase to 76% by FY 2000)
Increase Percentage of Waste Paper Reused (Increase to 45% by FY 2000)
Increase Reuse of Resins/Plastics (Increase to 10% by FY 2000)
Reduction in Volume of Vinyl Chloride Used (Reduction of 30% by FY 2000)
Number of Environment-Conscious Products Developed
Sales of Environment-Conscious Products
Result by Volume Volume of CO2Emissions—4,999t
Volume Not Recycled—3,065t Recycling Volume—8,616t
Volume of Waste Paper Reused—79,371t Volume of Resins/Plastics Reused—2,282t Volume of Vinyl Chloride Used—3.449t
Number of Environment-Conscious Products in FY 1999 (Cumulative)—2,774 Sales in FY 1999—¥31,647.2 million
Performance Assessment Reduction of 5.9% from FY 1990 Levels
Increase to 22.9% from FY 1997 Levels Recycling Rate—73.8%
Percentage of Waste Paper Reused—46.9% Percentage of Resins/Plastics Reused—8.0% Reduction of 34.1% in Vinyl Chloride Use from FY 1996 Levels
Percentage Increase from FY 1998—121% Percentage Increase from FY 1998—113% Environmental Performance (FY 1999)
S I X - Y E A R S U M M A R Y
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
At March 31 and for the years then ended Millions of yen (except per share amounts)
2000 1999 1998 1997 1996 1995
Net sales ¥ 280,335 ¥ 291,664 ¥ 317,218 ¥ 334,370 ¥ 314,044 ¥ 299,122
Cost of sales 198,190 214,950 233,287 246,335 231,668 219,462
Net income 1,192 4,986 8,706 10,893 9,463 8,989
Net income per share (in yen) ¥9.13 ¥38.14 ¥66.59 ¥83.32 ¥72.40 ¥68.77
Diluted net income
per share (in yen) 9.16 38.11 66.51 83.20 72.31 —
Cash dividends per share
applicable to the year (in yen) 15.00 15.00 15.00 15.00 15.00 17.50
Total assets ¥ 314,039 ¥ 309,099 ¥ 304,774 ¥ 310,012 ¥ 302,738 ¥ 277,192
Total shareholders’ equity 193,380 190,676 187,732 181,060 171,090 160,859
Total current assets 171,299 176,879 175,554 190,773 187,694 162,329
Total current liabilities 81,611 88,005 96,995 108,113 111,050 94,749
Thousands of U.S. dollars (except per share amounts) (Note)
Net sales $2,640,932 $2,747,659 $2,988,394 $3,149,976 $2,958,493 $2,817,918
Cost of sales 1,867,075 2,024,965 2,197,711 2,320,631 2,182,647 2,067,471
Net income 11,229 46,971 82,016 102,619 89,147 84,682
Net income per share
(in U.S. dollars) $0.09 $0.36 $0.63 $0.78 $0.68 $0.65
Diluted net income per share
(in U.S. dollars) 0.09 0.36 0.63 0.78 0.68 —
Cash dividends per share applicable to the year
(in U.S. dollars) 0.14 0.14 0.14 0.14 0.14 0.16
Total assets $2,958,446 $2,911,908 $2,871,163 $2,920,509 $2,851,983 $2,611,324
Total shareholders’ equity 1,821,762 1,796,288 1,768,554 1,705,699 1,611,776 1,515,393 Total current assets 1,613,744 1,666,312 1,653,829 1,797,202 1,768,196 1,529,242
Total current liabilities 768,827 829,063 913,754 1,018,493 1,046,161 892,595
Note: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.15=U.S.$1, the approximate exchange rate prevailing at March 31, 2000.
