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Management’s Discussion and Analysis 30
Consolidated Balance Sheet 34
Consolidated Statement of Income 36
Consolidated Statement of Changes in Equity 37
Consolidated Statement of Cash Flows 38
Notes to Consolidated Financial Statement 39
Independent Auditors’ Report 58
Board of Directors and Auditors 59
Executive Officers and Senior Officers 59
Corporate Data 59
Global Network 60
Contents
Consolidated Financial Highlights 01
Message from the President 02
Business at a Glance 04
Segment Information 06
Nikkiso Global Strategies 14
Nikkiso Group Network 16
Research and Development 18
Stage of Activity of LEWA Products 20
The Flow and Our Products of Dialysis 22
Topics 24
Corporate Social Responsibility 26
Corporate Governance 28
NIKKISO Profile
Nikkiso Co., Ltd., was established in 1953 by a founder, Mr.Keijiro Oto. Since its foundation, the Nikkiso Group has provided a host of products worldwide based on its core fluid control technology expertise. This expertise includes fluid equipment, water conditioning systems for thermal and nuclear power plants, medical products and carbon fiber products. We plan to continue in our endeavors to build a brighter future for industry.
In 2006, the Nikkiso Group made a major change in direction, navigated by globally aware management, from its former focus on the domestic Japanese market to future high-growth overseas regions. As a result of this strategic shift, Nikkiso products are now readily available throughout the world.
We aim to maintain the leading position in our field by responding to the ever-changing needs of industry and society through our extensive accumulated experience and innovative research and development.
The ideals we pursue are not fixed, nor are they a mere extension of the past. While being firmly grounded, we will set high goals and continually consider and promptly carry out measures to achieve them. We believe that deepening the connection between technology and the market, without losing sight of the value of the technologies and products we have developed and the close relationships we have fostered with our customers, as well as fulfilling our social responsibility to protect and nurture “life” and “the environment,” will lead to greater flourishing of the Nikkiso Group.
Millions of YenThousands of U.S.
Dollars
2012 2011 2010 20 0 9 20 0 8 2012
Results of OperationsNet sales ¥ 90,138 ¥ 83,143 ¥ 78,020 ¥ 72,395 ¥ 72,532 $ 1,099,242
Gross profit 29,626 26,920 24,248 21,094 23,116 361,288
Operating income 6,581 5,399 5,663 4,771 6,908 80,253
Income before income taxes and minority interests 5,891 4,718 5,027 2,327 6,682 71,838
Net income 3,317 2,685 3,240 1,368 3,657 40,452
Financial PositionTotal assets ¥ 118,235 ¥ 122,009 ¥ 115,131 ¥ 83,688 ¥ 91,157 $ 1,441,885
Inventories 16,282 14,638 13,861 14,198 14,589 198,559
Property, plant and equipment, net 18,934 19,051 20,677 19,036 20,514 230,902
Total liabilities 67,842 72,970 67,614 46,966 50,876 827,337
Equity 50,393 49,039 47,517 36,722 40,281 614,548
Equity ratio (%) 41.8 39.3 40.5 43.3 43.5
Per Share (Yen and U.S. dollars)
Net income
Basic ¥ 42.47 ¥ 33.86 ¥ 47.49 ¥ 21.46 ¥ 56.59 $ 0.52
Diluted – – – – –Cash dividend applicable to the year 12.00 12.00 12.00 12.00 12.00 0.15
Payout ratio (%) 28.26 35.40 25.30 55.92 21.21
Equity 639.98 605.46 587.66 578.72 614.18 7.80
Key Ratios (%)
ROE 6.8 5.7 7.8 3.6 9.3
ROA 2.8 2.3 3.3 1.6 4.3
Consolidated Financial HighlightsNIKKISO CO., LTD., AND CONSOLIDATED SUBSIDIARIES For the years ended March 31
Notes: The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥82 to $1, the approximate rate of exchange at March 31, 2012. On November 26, 2009, the Company issued and publicly offered 5,500,000 shares and disposed of 9,000,000 shares of treasury stock. On December 22, 2009, 2,175,000 shares were issued to a third party through over allotment. As a result, the number of shares issued increased by 7,675,000 shares and the number of treasury stock decreased by 9,000,000 shares.
Net Sales Net Income Total Assets/Equity Equity Ratio ROE/ROA
’08 ’09 ’10 ’11 ’120
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
’08 ’09 ’10 ’11 ’12’08 ’09 ’10 ’11’08 ’09 ’10 ’11 ’120
1,000
2,000
3,000
4,000
5,000
’120
20,000
40,000
60,000
80,000
100,000
120,000
140,000
0
10
20
30
60
80
100
50
40
70
90
0
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(Millions of Yen) (Millions of Yen) (Millions of Yen) (%) (%)
Total Assets Equity Equity Ratio ROE ROA
’08 ’09 ’10 ’11 ’120
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
’08 ’09 ’10 ’11 ’12’08 ’09 ’10 ’11’08 ’09 ’10 ’11 ’120
1,000
2,000
3,000
4,000
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’120
20,000
40,000
60,000
80,000
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120,000
140,000
0
10
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50
40
70
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(Millions of Yen) (Millions of Yen) (Millions of Yen) (%) (%)
Total Assets Equity Equity Ratio ROE ROA
’08 ’09 ’10 ’11 ’120
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
’08 ’09 ’10 ’11 ’12’08 ’09 ’10 ’11’08 ’09 ’10 ’11 ’120
1,000
2,000
3,000
4,000
5,000
’120
20,000
40,000
60,000
80,000
100,000
120,000
140,000
0
10
20
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60
80
100
50
40
70
90
0
2
4
6
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(Millions of Yen) (Millions of Yen) (Millions of Yen) (%) (%)
Total Assets Equity Equity Ratio ROE ROA
’08 ’09 ’10 ’11 ’120
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
’08 ’09 ’10 ’11 ’12’08 ’09 ’10 ’11’08 ’09 ’10 ’11 ’120
1,000
2,000
3,000
4,000
5,000
’120
20,000
40,000
60,000
80,000
100,000
120,000
140,000
0
10
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50
40
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(Millions of Yen) (Millions of Yen) (Millions of Yen) (%) (%)
Total Assets Equity Equity Ratio ROE ROA
1Annual Report 2012
Business Results
For more than half a century, the Nikkiso Group has met the demands of its customers, the needs of society and the changing times with original technologies and products in core industries. Central to our business are pumps—used in the energy and petrochemical sectors—and dialysis-related equipment, particularly for hemodialysis. We also provide water conditioning systems for power plants, precision equipment and carbon-composite aircraft components. During the year ended March 31, 2012, business performance was affected by a delayed start to full-fledged sales of our new dialysis machines in Japan, but the Industrial Division recovered smoothly. Furthermore, toward the end of the fiscal year there was an adjustment in yen appreciation, and stock prices recovered. As a result, earnings and profits were up year on year, and the Company posted orders of ¥94.9 billion, net sales of ¥90.1 billion, operating income of ¥6.5 billion, ordinary income of ¥6.3 billion and net income of ¥3.3 billion. Performance is currently solid, as the Industrial Business remains in a recovery phase and we expect the Medical Business to catch up through increased sales of new dialysis machines. We should reap steady profits from the measures and forward investments we have made in the past, and at the same time we are endeavoring to boost performance from a medium-term perspective.
Message from the President
We aim to achieve further growth
through initiatives that address
medium-term management issues
based on our global strategies.
These include strategically
developing the pump business,
where LEWA is key; increasing
the overseas production of aircraft
components; and extending our
Medical Division into global markets.
2 NIKKISO Co., Ltd.
Medium-Term Management Issues
1 Strategic Business Expansion Centered on LEWA
Two years ago, we established the global business strategy headquarters for the Nikkiso Group’s pump business at the head office of LEWA in Germany, and we have pushed ahead with strategic business development since that time. We believe it is important to clearly define the roles of each key facility. For example, our Higashimurayama Plant serves as a point for the development and manufacture of products specifically for the Japanese market, where needs are diverse in comparison with the rest of the world. We are also considering expanding our production and procurement function in China. Rather than mutually introducing Nikkiso and LEWA products, we are working toward further strategic integration of our sales structures, as well as our production and service structures. As a result of these initiatives, we believe that we can achieve the integration effects that we had anticipated through the acquisition of LEWA.
2 Increasing Production at Our Aircraft Components Plant in Hanoi, Vietnam
One of Nikkiso’s strengths lies in its ability to manufacture components with complex geometries from carbon fiber for use around aircraft engines, and we have earned solid customer trust for the quality of our parts and our lead times. Given the trend toward using carbon fibers as aircraft materials, our plant in Hanoi, Vietnam, which commenced operations in 2011, has attracted substantial attention within the industry, and we have received numerous product inquiries. Going forward, in addition to mainstay cascades we anticipate orders for new products. In preparation, we are reinforcing our technological development capabilities and expanding the Hanoi Plant’s facilities. We intend to build our business by pursuing a two-pronged structure composed of our Hanoi and current Shizuoka plants.
3 Enhancing the Domestic Dialysis Business and Developing Global Markets
With one of the world’s most rapidly graying populations, in addition to providing stable levels of quality treatment Japanese medical institutions are being called upon to operate hospitals more efficiently. Also, in the near future the number of dialysis patients in Japan is expected to peak, and then to plateau. In January 2012, Nikkiso began selling its new automated multipurpose dialysis machines. In addition to their reputation for high reliability—a major advantage—these products are earning high marks for contributing to the reduction of staff workloads at medical institutions and to lowering operating costs. We are working to enhance our domestic dialysis business by pursuing developments to meet dialysis facilities’ needs for enhanced links between electronic medical records and dialysis network systems. Overseas, China is slated for a surge in the number of dialysis patients, so we plan to set up a joint venture there to manufacture and sell dialysis equipment conforming to Japanese quality standards. We are also buttressing our device manufacturing and development structure at our plant in Hanover, Germany. Through moves such as these, the Medical Division is preparing for full-fledged expansion in global markets.
The various fields in which we operate constitute niche global markets. Even if none of these fields is particularly large, our strength derives from being at or near the top of each. We are leveraging our strengths and introducing a host of ongoing measures to take advantage of opportunities when they arise on a global basis. We would like to ask our shareholders and other investors for their continued support as we work toward further growth going forward.
August 2012
Toshihiko KaiPresident &
Chief Executive Officer
3Annual Report 2012
40.3%47.3%
6.9%
インダストリアル事業本部
精密機器事業本部
5.5%
航空宇宙事業本部
メディカル事業本部 売上高
構成比
Business at a Glance
The operations of the Nikkiso Group are carried out in four business divisions: the Industrial Division, the Precision Equipment Business Division, the Aerospace Division and the Medical Division. Each division has established its own business operations system that makes optimal use of the highly specialized technologies held by each.
The division is in charge of the manufacture, sales and
maintenance of various technological products. These
include the Isostatic presses essential to precision electronic
components, particle size distribution analyzers, Specific
Surface Area / Pore Size Distribution Analyzers, and water
and air purification systems. It is currently developing optical
devices with lasers and LEDs.
Pump ProductsThe Industrial Division engages in the manufacture, sales and maintenance
of special-purpose pumps with a wide range of uses in energy (petroleum,
petrochemicals and liquefied gases), water and sewage treatment, and food
product fields. Our comprehensive knowledge and expertise enable us to
provide customers with system solutions tailored to their needs, such as package
products incorporating LEWA pumps.
Sampling Systems and Chemical Feed SystemsThe division focuses on the manufacture, sales and
maintenance of water conditioning systems and test
equipment for use in thermal and nuclear power plants.
Owing to original technologies and product manufacturing
skills, the division is able to meet all kinds of customer
needs with the same consistent quality, from engineering to
equipment manufacturing, quality control and service.
Share of Net Sales
Industrial Business
52.7%
Industrial Division
40.3%¥36,281million
Precision EquipmentBusiness Division
6.9%¥6,217million
4 NIKKISO Co., Ltd.
40.3%47.3%
6.9%
インダストリアル事業本部
精密機器事業本部
5.5%
航空宇宙事業本部
メディカル事業本部 売上高
構成比
The division focuses on the design, development, manufacture
and consulting Aerospace Products related to carbon fiber
reinforced composite products. Its primary product consists
of the Cascades and Blocker Doors for thrust reversers
developed for commercial aircrafts. With the capability of
their recent advanced design, analysis and manufacturing
technologies, the division is expanding their product range.
The division focuses on the manufacture, sales and
maintenance of medical equipment, including hemodialysis
machines, dialyzers, blood tubing lines, dialysate, blood
glucose controller and related products. In Japan, we are
striving to develop more user-friendly dialysis communication
systems that incorporate even better data management
system as a leading manufacturer.
Results by Region
Share of Net Sales
Japan
56.0%¥50,496 million
Europe
14.7%¥13,220 million
NorthAmerica
8.6%¥7,722 million
Asia
17.8%¥16,029 million
Japan
56.0%¥50,496 million
Europe
14.7%¥13,220 million
NorthAmerica
8.6%¥7,722 million
Asia
17.8%¥16,029 million
Japan
56.0%¥50,496 million
Europe
14.7%¥13,220 million
NorthAmerica
8.6%¥7,722 million
Asia
17.8%¥16,029 million
Japan
56.0%¥50,496 million
Europe
14.7%¥13,220 million
NorthAmerica
8.6%¥7,722 million
Asia
17.8%¥16,029 million
Industrial Business
52.7%
Aerospace Division
5.5%¥4,991million
Medical Division
47.3%¥42,646million
5Annual Report 2012
Introduction of Major Products
With more than a half-century of expertise in fluid and water conditioning technologies, we are continuously taking up new product challenges. Our specialty is pumps that operate reliably in harsh environments of extremely high or low temperatures and high pressure. They include non-seal pumps with integrated pump and motor for leak-free transport of hazardous liquids, ecoflow pumps that inject chemicals with high accuracy, and cryogenic pumps for transporting super-low-temperature liquefied natural gas (LNG). Ever since developing Japan’s first boiler water treatment system for thermal power plants, we have been contributing to the stable supply of electrical energy essential to modern society. Drawing on our advanced
Super Heat Resistant, Super-Low Temperature, High Precision…Leading the world with creative technologies, Nikkiso provides optimal solutions.
Industrial Division
technology and expertise, we are developing new water conditioning systems for power plants and effluent treatment systems to solve water and environmental problems. Most of Nikkiso’s customers are world-leading petrochemical firms, energy firms including electric power companies and engineering contractors. While responding to the issues faced by each individual client and to overall high-level client needs, Nikkiso also boldly takes on the challenge of developing products capable of handling special conditions. Known for our manufacturing, sales, service and maintenance structures built up over many years, Nikkiso is recognized in Japan and overseas as a global equipment supplier.
Industrial Business
Reciprocating pumpsReciprocating pumps supply
fluids to processes with high
precision. These are available
in various models, such as
diaphragm types, which
ensure no leakage, and ground
packing types, as well. This
series covers a broad range of
pump discharge pressures.
Canned motor pumpsThe pump and motor are
integrated in a seal-less
unit, with no shaft seal (i.e.,
no mechanical seal); this is
ideal for liquids that require
no-leakage pumping.
▲ Nikkiso NON-SEAL® Pump▲ Nikkiso LEWA ecoflow Pump
6 NIKKISO Co., Ltd.
Cryogenic submerged motor pumpsThese pumps transport
cryogenic liquefied gases,
such as LNG and LPG.
They are available in
different models, such as
those installed in storage
tanks, out of which the
pump can be pulled, ones installed in separate pots,
and a fixed type installed in tankers.
Automated water conditioning systems for power generation plantsThese systems
automatically process
water to maintain water
quality levels using our sampling and chemical feed systems. We
design process control networks between our systems in line with a
power plant’s operating procedures.
Two years ago, we established our global
strategic division for the pump business within the
headquarters of LEWA, in Germany, and we have
been pursuing strategic business development
there since that time. As one aspect of this move,
we integrated Nikkiso reciprocating pumps for the
Japanese market with LEWA products.
We are relocating our base of production for
large cryogenic pumps to Nikkiso Cryo, Inc., our U.S.
subsidiary. This shift is designed to help us meet
the growing demand for LNG pumps, as well as to
hedge exchange rate fluctuation risk. Meanwhile, we
are leveraging LEWA as our base for sales and are
working to cultivate potential demand in the oil and
gas markets.
Topics
▲ Steam / Water Sampling System
7Annual Report 2012
Precision Equipment Business Division
Through our innovative technologies, the Nikkiso Group plays a key role from R&D through production and quality control for our customers. We cater to the needs of our customers in rapidly changing industries such as electronics, healthcare and environment; the Nikkiso Group is capable of satisfying the requirements of clients. For example, multilayer ceramic electronic components are utilized and essential for smartphones,
tablets and computers. These components can benefit from our warm isostatic laminating systems and related equipment to improve production efficiency. Our Particle Size Distribution, Specific Surface Area/Pore Size Distribution and Image Analyzers characterize a sample’s particles to
Microtrac particle size analyzersThese devices measure the physical characteristics of
powders and granules (such as particle diameter, zeta
potential and surface measurements of particles with different
geometries). The Microtrac series of particle size analyzers,
which uses lasers to measure the size of powder granules,
was first introduced in Japan in 1979. Since that time, the
series has maintained the top share of the domestic market
and earned a strong reputation from customers.
Introduction of Major Products
From R&D through production and quality control, we are supporting our customers to resolve any kind of problems with the latest original technologies.
▲ BlueRaytrac
▲ MT3000+SI
8 NIKKISO Co., Ltd.
help develop new medicines, batteries and others. These products are targeted as a “Solution Tool” for problems our customers may face.
We are also developing water and air purification systems designed to conserve valuable water resources while minimizing damage to the environment.
BELSORP-maxThis product, our high-end
volumetric gas adsorption
instrument, was added to
our lineup in November 2011
as the result of Nikkiso’s
acquisition of BEL Japan, Inc.
To obtain useful information
about micropores, it is important to accurately measure
adsorption isotherms from low relative pressure.
Electronic component manufacturing systemsNikkiso provides manufacturing
and production systems for the
global electronic components
industry. The picture at left shows
what is known as a warm isostatic
press (WIP). The warm laminating
system is a global standard for sheet lamination of high-quality
multi-layer ceramic electronic components, such as MLCC,
MLCI, LTCC, HTCC, MCM, PZT, filters and varistors.
To expand its capabilities and boost its operating
performance, on April 1, 2011, Nikkiso spun off part of its
industrial business to form the new Precision Equipment
Business Division.
In November 2011, we acquired BEL Japan, Inc.,
which is a leader in the Japanese market for surface area
measuring instruments using absorption technology. By
adding BEL Japan’s surface area measuring instruments
to our existing lineup of particle size distribution
measuring instruments, we have become one of the
few manufacturers in the world able to supply diverse
analytical solutions for particle characterization in an
integrated manner, thereby creating a structure to meet
a wide range of customer needs.
Topics
▲ Nanotrac Wave
▲ Isostatic Press
9Annual Report 2012
Blocker Doors for Thrust reverser Blocker Doors are also built in the thrust reverser. They
produce reverse thrust by blocking the airflow and diverting
through the cascades.
Aerospace Division
Cascades are the components of the thrust reversers provided for commercial aircraft to control engine airflow during landing. Approximately a quarter of a century ago, the Aerospace Division produced the first cascades made of CFRP (carbon fiber reinforced plastic). Using CFRP cascades, we were able to reduce the component weight by two-thirds without compromising the strength and durability previously provided by metal, thereby improving fuel efficiency.
Strength, Light Weight, Durability…We are ready to meet the highly complex demands of aircraft manufacturers with our original technologies to fully utilize the advantages of CFRP.
Nowadays, Nikkiso composite cascades have gained worldwide recognition for superb qualities in advanced design, analysis, curing, manufacturing techniques and quality control. The majority of commercial aircraft manufacturers choose our products, including Boeing and Airbus. Other than cascades, our CFRP products have also been applied to the main wings in components like ailerons (wing flaps) and shrouds (wing covers).
Cascades for Thrust reverserThrust reversers are attached
to the engines of commercial
jet liners to control the
engine airflow while landing.
Cascades are built in the
thrust reverser working as
airflow deflectors. We supply
these products worldwide for
most commercial aircraft.
Introduction of Major Products
10 NIKKISO Co., Ltd.
In addition, our technologies are applied to the general industries, such as components used in liquid crystal panel manufacturing. With our technologies and manufacturing knowledge acquired in our work with the aerospace industry, we hope to support our customers to expand the sphere of possibility.
Furthermore, Nikkiso is expanding their product line range within the commercial aircraft component field, such as the Blocker Doors and Torque Boxes for thrust reversers. To support this growing business, Nikkiso has also established a subsidiary company in Vietnam (Nikkiso Vietnam, Inc.(NVI)) to produce high quality products with a competitive price.In the space industry, our products are used to build satellite components.
Torque BoxesTorque Boxes provide the structure that supports the fan cowl
and cascade, bearing the load during the reverser operation. It is
an important part that holds together the other key components
with in the engine nacelle.
Blocker Doors
Torque Boxes
Cascades
Our plant expansion at Nikkiso Vietnam, Inc.(NVI)
is part of our effort to hedge against exchange rate
risks and keep production costs down. With aircraft
industry demand continuing to grow, we are proactively
pursuing efforts to garner orders. In 2011, we
entered a long-term supply agreement with Goodrich
Corporation, a leading U.S. manufacturer of engine
nacelles, to provide torque boxes, which are large
nacelle components. As a result, we have decided to
expand NVI’s manufacturing facilities even further. Our
mission is to expand the product range and volume to
achieve a balanced growth.
Topics
11Annual Report 2012
Medical Division
Medical Business
As the pioneer of hemodialysis machine in Japan, the Medical Division continues to improve dialysis medical care and patient quality of life(QOL). A state-of-the-art computerized hemodialysis machine, data communication systems, powder dialysate, powder dialysate dissolving device and a multi-patient dialysate supply system were all developed to allow medical professionals to reduce workload and spend more time on patient care.
Our sophisticated technologies and fine maintenance systems offer reliability and trust.Our goal as a comprehensive dialysis manufacturer is to improve patient QOL.
Furthermore, Nikkiso works to develop and securely supply disposable products (and supplies) such as a dialyzer that uses Nikkiso’s original PEPA membranes and blood tubing lines standardized for easier use.We take “pride and responsibility” for our business, which
Powder dialysate and powder dialysate dissolving devicesA proprietary system is used
to automatically dissolve the
dialysate (powder), automatically
adjusting solvents A and B. These
devices operate automatically,
ensuring that dialysate is
dissolved safely and hygienically.
Hemodialysis machinesThe machine shown at left monitors
dialysate flow, temperature and venous
pressure when hemodialysis is used for
dialysis. The unit is located at a patient’s
bedside to supply dialysate to
the dialyzer.
Introduction of Major Products
12 NIKKISO Co., Ltd.
involves human lives. A reliable after-sales service system is provided for our products, since they are used in the medical field where mistakes are not tolerated.In addition to engineer developing in Nikkiso Group, we provide customers with preliminary services and the latest instruction courses. Our goal as a comprehensive manufacturer of dialysis products is to build and maintain the trust, relief and reliability of our customers, and to provide comfortable treatment environment for people who need dialysis.
DialyzersDialyzers are used
to remove impurities
from the blood if
kidney function
is impaired or in
the event of renal
insufficiency. In
addition to using
proprietary technology to develop a PEPA membrane dialyzer,
Nikkiso offers polysulfone dialyzers.
Blood tubing linesThese sterile, single-use sets are used for dialysis (including
hemofiltration and dialysis filtration).
In January 2012, we commenced full-fledged sales of
our new automated multipurpose dialysis machines in
Japan. By their contribution to laborsaving and cost
reductions at medical institutions, these products have
been well received, and sales are proceeding apace.
Overseas, preparations are underway to
commence production and sales of dialysis machines
at a joint venture in China, where a surge in dialysis
needs is expected.
Topics
13Annual Report 2012
Nikkiso Global Strategies
The Nikkiso Group’s ratio of overseas net sales has risen in tandem with the expansion of its overseas operations. This ratio increased even higher as a result of the July 2009 acquisition of LEWA. During the fiscal year ended March 31, 2012, the overseas sales ratio was essentially flat year on year, owing to the effects of yen appreciation, but as our business continues to grow globally we expect the percentage of sales derived overseas to increase further.
Overseas sales by region
The Nikkiso Group seeks to create a network for product manufacturing, sales and service not just here in Japan, but throughout the world. Focusing on the United States, Europe and Asia we have established factories, sales representatives, and branch offices (manufacturing, sales and service) to complete our network. Through our sales and maintenance representatives, we seek to ensure the trust and satisfaction of our customers throughout the world.
Nikkiso Pumps Korea Ltd.
Weigao Nikkiso (Weihai) Dialysis Equipment Co., Ltd.
Shanghai Nikkiso Non-Seal Pump Co., Ltd.
Shanghai Nikkiso Trading Co., Ltd.
Taiwan Nikkiso Co., Ltd.
M.E. Nikkiso Co., Ltd.
Nikkiso Head Office
Nikkiso-KSB GmbH
Nikkiso Europe GmbH LEWA GmbH
Nikkiso Vietnam MFG Co.,Ltd.
Nikkiso Vietnam, Inc.
’08 ’09’07’060
1,000
2,000
3,000
4,000
5,000
(Millions of Yen)
0
10
20
30
40
50
(%)Asia North America Europe Other Sales Ratio
’12’11’10
14 NIKKISO Co., Ltd.
Division Products Japan Germany U.S.A. China Vietnam Thailand
Industrial Canned motor pumps
Reciprocating Pumps
Cryogenic submerged pumps
PrecisionEquipment
Particle size analyzers
High-pressure processing equipment
Aerospace Cascades
Blocker Doors
Torque Boxes ( )
Medical Dialysis machines
Dialyzers
Blood tubing lines
Leveraging the individual strengths of each of its business divisions, the Nikkiso Group is constantly looking toward business opportunities throughout the world. One aspect of our initiatives in this area involves the development of a global production system, which has grown in importance from the perspective of formulating business strategies. Through this structure, outlined in the figure at left, we strive to supply products that meet customers’ needs in a timely manner.
Main production sites Production sites
Area management company
Industrial Business
Medical Business
Global production system
Shizuoka Plant �
Kanazawa Plant
Higashimurayama Plant Nikkiso Cryo, Inc. Microtrac, Inc.
Nikkiso Head Office
Nikkiso America, Inc.
Nikkiso Pumps America, Inc.
2013
15Annual Report 2012
Nikkiso Group Network
Domestic Production Bases
Industrial Division
Precision EquipmentBusiness Division
Medical Division
Aerospace Division
Medical Division
Manufactures products for the Industrial Division and the Precision Equipment Business Division.
At the Industrial Division, we develop, design and produce a variety of special-purpose pumps and water conditioning systems for thermal and nuclear power plants addressing the diverse needs of customers. In recent years, the production systems have been upgraded, and larger equipment has been introduced to meet the demand for larger-scale pumps. In the Precision Equipment Business Division, we develop, design and manufacture isostatic pressing equipment essential to the production of the laminated electronic components used in cellular phones and household appliances.
The Shizuoka Plant includes the Shizuoka Medical Factory for the Medical Division and the Aerospace Products Factory for the Aerospace Division.
The Shizuoka Medical Factory develops, designs and produces hemodialysis machines and related products. While production factories for blood tubing lines are located in Vietnam and Thailand, the design and quality control departments are located in Shizuoka. The Technical Support Department was established to meet customers’ technical needs. This department promotes close cooperation between the sales and service departments and incorporates customer feedback into new product development. At the Aerospace Products Factory, we develop, design and manufacture cascades, which are thrust reverser components for commercial aircraft, as well as other carbon fiber reinforced plastic products. Our quality standards and accurate delivery times have led to numerous commendations from our valued customers, including the Boeing Company.
Manufactures pharmaceutical products and medical disposables for the Medical Division.
The plant’s main products are the dialyzer with Nikkiso’s proprietary PEPA membrane and dialysate powder manufactured with various equipments specifically designed and developed internally for high quality and high value-added products.With polymer molding and processing technologies for dialyzers and with granulation technology and the following good manufacturing practice (GMP) for powder dialysate, we operate automated production lines in clean rooms 24 hours a day, seven days a week.
Higashimurayama Plant
Shizuoka Plant
���Kanazawa Plant
Completion of construction ......................................... 1960
Site area ...............................................................21,973m2
Total floor area of the main building ....................35,697m2
Completion of construction ......................................... 1974
Site area .............................................................. 56,958m2
Total floor area of the main building ...................38,483m2
Completion of construction .........................................1995
Site area ..............................................................98,044m2
Total floor area of the main building ................... 19,043m2
16 NIKKISO Co., Ltd.
Overseas Main Production Bases
Manufacture and sale of reciprocating pumps and pump systemsHas one of the world’s largest shares for reciprocating pumps and serves as the core of our global production system for these pumps.
Manufacture, sale and after-sales service of Nikkiso canned motor pumpsManufactures and sells canned motor pumps in the Chinese market. Augmenting production structure to meet further increases in demand.
Manufacture, sale and after-sales service of medical products (e.g. dialysis equipment, disposable products) in the European marketPursuing full-fledged business in the global market for medical products and serves as a major production base for dialysis equipment for Europe.
Manufacture of components for thrust reverser systems in the engine nacelles of commercial aircraftManufactures blocker doors and other aircraft components with the same high quality as in Japan and also keeping on-time delivery. Facility expansion is underway to enable production to meet new orders.
Manufacture and testing of cryogenic pumpsIn response to growing LNG demand and to reduce exchange rate risk, the company is taking on an increasing role as a production base for cryogenic pumps.
Manufacture of medical equipment for dialysis treatmentsAlong with M.E. Nikkiso Co., Ltd., in Thailand, has a leading share of the Japanese market for the provision of blood tubing.
Manufacture and sale of particle size analyzers Has a leading share in Japan and supplies Microtrac particle size analyzers throughout the world.
Manufacture, sales and after-sales service of dialysis equipment in the Chinese marketMaking steady progress on preparation for the production and sale of dialysis equipment with Japanese standards for the Chinese market, which ranks among the world’s largest in terms of potential demand.
Aerospace Division
Precision EquipmentBusiness Division
Industrial Division Industrial Division
Industrial Division
LEWA GmbHGermany
Shanghai Nikkiso Non-Seal Pump Co., Ltd. China
Nikkiso Europe GmbHGermany
Nikkiso Vietnam, Inc.Vietnam
Nikkiso Cryo, Inc.United States
Nikkiso Vietnam MFGCo., Ltd.Vietnam
Microtrac, Inc.United States
Weigao Nikkiso (Weihai) Dialysis Equipment Co., Ltd.China
Medical Division
Medical Division
Medical Division
17Annual Report 2012
Research and DevelopmentNikkiso works to join together and merge its original technologies, which span a broad spectrum
of fields, to help find solutions to problems encountered by its customers. It also utilizes its core
technologies to promote the development of new business opportunities.
In July 2009, the Nikkiso Technical Research Institute was established as a center to further
the research and development that underpin the Nikkiso Group’s manufacturing. The institute
is pursuing medium- and long-term product development, as well as technological innovation
through efforts that include research on future-oriented basic technologies and the improvement
of manufacturing techniques.
Special pump technology / Super-low temperature technology / Boiler water treatment technology / Water conditioning systems / Industrial effluent treatment systems /
Supercritical CO2 technology Instrumentation technology / Control technology / High-pressure technology / Powder technology / Analysis technology / Nanoscale technology
Composite technology Artificial organ technology /
Electronics technology
Japan’s First Artificial HeartIn 1960, a dog in the laboratory at the Kimoto Surgical
Department of the University of Tokyo was the focus of a
great deal of attention.
Beating somewhat stiffly but steadily in keeping the dog
alive, this artificial heart was the first ever made in Japan.
Responsible for creating Japan’s first artificial heart was
the fluid technology of the just-established Nikkiso. The
achievement of the artificial heart also represented the
moment that Nikkiso stepped up to a new starting line in its
efforts to develop original technologies.
The desire to provide our customers with products that
exactly meet their needs—this passion and spirit of our
researchers has been
handed down from the
past to the present,
and will be passed on
in a great many fields to
generations in the future.
18 NIKKISO Co., Ltd.
Medical Division
Aerospace Division
Precision EquipmentBusiness Division
Nikkiso Technical Research InstituteAs the scope of the Nikkiso Group’s operations expands,
we recognize that research into and development of new
products and technologies is indispensable from a medium-
to long-term perspective. Based on this premise, we
founded the Nikkiso Technical Research Institute in July
2009 as a manufacturing hub for the entire Nikkiso Group.
The institute is currently pursuing developments on two
fronts: basic technologies that support existing business
and technologies linked to the creation of new businesses.
We are convinced that R&D in these areas will enable
us to provide even better products and services to our
customers. In this manner, the Nikkiso Technical Research
Institute is looking to the future.
Industrial Division
19Annual Report 2012
OIL & GAS
CLEAN
CHEMICAL
OTHER
2011
The p
roportion of orders by f ield Stage of Activity of LEWA Products
The LEWA Group’s principal products are high-pressure, high-capacity,
high-precision pumps and the packaged systems that use these pumps.
These products have earned a broad-based reputation for reliability among
customers across a host of industries, including oil and gas, chemicals and
clean applications.
Oil and GasThe oil and gas industry requires products that can handle high pressure, high capacity, high precision and highly-reliable. LEWA’s pumps and packages have been used in this industry on a worldwide basis for more than 50 years.
Chemical Injection Packages
World’s Biggest High-Pressure Process Diaphragm Pumps
The Chemical injection packages are used for various applications in the oil and gas industry –including production, transfer, processing and pipeline.Nikkiso-LEWA process pumps and ecoflow pumps playing main roles in the packages satisfy such stringent requirements as High Pressure & High-Precision Injection, High Quality, Totally leak-free and Exceptionally long up-times without maintenance.
The LEWA Group is proactive in its sales of not only individual pumps, but also pump packages combined with components and equipments.
Our highly experienced and seasoned engineers offer complete, ready to use solutions for customer’s specific application and demands.
High-pressure process diaphragm pumps are used for CO2 re-injection for LNG processing. Natural gas contains considerable amount of carbon dioxide and for industrial processing, the carbon dioxide must be separated once and can be liquefied and re-injected into the natural gas reservoirs to avoid carbon dioxide emission into the atmosphere. For this CO2 re-injection technology, LEWA process diaphragm pumps of a world performance class are used.
20 NIKKISO Co., Ltd.
OIL & GAS
CLEAN
CHEMICAL
OTHER
2011
The p
roportion of orders by f ield Chemicals
The chemical and petrochemical industries, which require safety and a high degree of precision, have continued using diaphragm pumps and other LEWA products over many years.
Clean ApplicationsWe anticipate new demand for LEWA’s products from the pharmaceutical, food products and cosmetics industries. To ensure consumer safety, we provide pumps that are highly precise and hygienic.
Nikkiso LEWA Diaphragm Pumps
LEWA Hygienic Series (Sanitary/hygienic diaphragm metering pumps)
On resin and fiber production lines, Nikkiso LEWA diaphragm pumps are used for catalyst injection and the transport of additives and modifiers. Particularly in high-value-added resin and fiber production processes, these pumps must offer highly precise, high-pressure injection and be leak-free and explosion-proof.
Only a few companies in the world have the ability to provide pumps for extremely high-pressure injection. Based on its decades of experience in this area, the LEWA Group develops pumps to meet ever more sophisticated requirements.
We intend to continuously supply our pumps meeting customer’s needs and demands based on long years of our experience and expertise.
The innovative diaphragm metering pumps for hygienic applications employ hermetically tight sealing and surfaces with no irregularities to prevent the handling liquid from remaining behind. The pump structure contributes significantly to preventing the formation of bacteria. The pumps are reliably used for applications demanding high sterility* and precision (Examples, coloring gummy candy and extruding tablets). * Materials that are compliant with U.S. Food and Drug Administration (FDA) requirements and have undergone testing by the European Hygienic Engineering & Design Group (EHEDG)
21Annual Report 2012
Machinery room
RO water RO water Powder dialysate
Liquid concentrate
A
Liquid concentrate
B
2 3
Uses highly pure water (water produced by reverse osmosis (RO water))
Water produced through RO device is used to dissolve the powder dialysate, producing liquid concentrate A and B.
The liquid concentrate (solutions A and B) is diluted with RO water and mixed to produce the dialysate.
1
RO device Dissolving equipment
Dialysate supply device
The Flow and Our Products of DialysisNikkiso is a total manufacturer of all the products that are needed for dialysis treatment.
We also have in place a one-stop structure spanning development to production,
sales and maintenance.
Dialysate
reverse osmosis water production system
fully automatic dissolving system
multi-patient dialysate supply system
Powderdialysate
22 NIKKISO Co., Ltd.
The blood is passed outside the body circulated extracorporeally, and purified by removing excess fluid and waste through a dialyzer (hollow fiber dialyzer).
6 7
Dialysis treatment room
5
4
The prepared dialysate is sent to the dialysis treatment room.
Blood tubing line
Dialysis monitoring equipment
Central monitoring
system
Dialysis machines are managed centrally, improving the operational efficiency of medical personnel. This system also links with electronic medical records and other systems.
Treatment is monitored to ensure safety.
Dialyzer
Dialyzer
Characteristics of Dialysis Treatment in Japan
As the figure below indicates, dialysis treatment in Japan typically involves the use of a “central dialysis fluid delivery system” to supply dialysate. As the diagram shows, dialysate is prepared in the preparation room and supplied to dialysis console unit. As dialysate is prepared all at once, treatment is efficient and stable. Overseas, however, dialysis machine of individual use is typically used for dialysis treatment, and dialysate is
prepared by each machine. This approach allows for a broad range of dialysis treatment, as dialysate can be prepared to meet individual patient needs. Nikkiso not only supplies all of the equipment that is required for central dialysis fluid delivery systems, but also develop, manufacture and sell equipment to meet demand for dialysis equipment for individual use in each country.
23Annual Report 2012
Topics
LEWA uses a globally exclusive license to HPLC and SMB technologies from Bayer Technology Services GmbH
1
At the end of 2011 LEWA has signed a patent and know-
how license agreement for HPLC(*1) and SMB(*2) with
Bayer Technology Services GmbH (hereafter “BTS”) to
exploit and further develop the know-how and products
from BTS in all industry segments where industrial
Chromatography
is used.
Based on a long supply and cooperation relationship
between BTS and LEWA, LEWA takes over continuing
development, manufacturing and sales of complete
industrial HPLC Systems from BTS under the new brand
LEWA EcoPrime HPLC.
In addition this agreement also includes the
complete range of SMB systems from BTS for industrial
continuous chromatography under the new brand LEWA
EcoPrime SMB.
LEWA and its powerful parent company Nikkiso have
now a complete portfolio of industrial chromatography
systems to support the strong growing biopharmaceuticals,
pharmaceuticals (classical), food and chemical markets.
From now on, Nikkiso and LEWA are fully committed
to further develop the technology from BTS with its three
competence centers for the LEWA EcoPrime technology:
in the United Sates (LEWA Inc.), in Europe (LEWA GmbH)
and in Japan (NIKKISO Co., Ltd.). This promises excellent
synergies with the current Nikkiso´s ion-chromatography
technology in the power generation markets.
*1 HPLC: High Performance Liquid Chromatography *2 SMB: Simulated Moving Bed
24 NIKKISO Co., Ltd.
Aerospace Division Receives Platinum Supplier Award from Spirit AeroSystems
3
▲ The 13 excellent suppliers with their crystal trophies.(Toshihiro Kai—fifth from the right)
In May 2012, Nikkiso received the Platinum Supplier Award
from Spirit AeroSystems, Inc., of the United States, a
leading manufacturer of commercial aircraft components.
The award was received in recognition of our contribution
to the company’s business, as one of its best suppliers.
Of the some 2,000 suppliers that do business with Spirit
AeroSystems, we were one of only 13 companies selected
for this honor, which indicates our importance as a future
strategic partner for the company.
Reasons cited for our receiving this award were our
steady provision of high-quality aircraft components to Spirit
AeroSystems over many years. Furthermore, the company
noted that the quality of the products that we delivered from
our plant in Hanoi, Vietnam, kept that same high-quality
as been delivered from Japan. Spirit AeroSystems also
evaluated highly the fact that we commenced production
according to plan.
Over the years, our Aerospace Division has worked
consistently to provide high-quality products and strictly
adhere to delivery dates. As a result, the division has satisfied
customers’ expectations and, by expanding overseas
production, has hedged against exchange rate risk and
heightened the cost competitiveness of its products.
New Dialysis Machine Launched in 20122In January 2012, Nikkiso began full-fledged sales of its new dialysis machine, the DCS-
100NX in Japan. The new instrument meets a diverse variety of needs for medical
institutions, as it saves labor, reduces costs and improves safety. The DCS-100NX also
has a variety of uses such as hemodiafiltration (HDF) treatment. Even though it offers
a host of functions, the unit is compact. Customers rate the machine highly for these
reasons, and sales are progressing apace.
Going forward, Nikkiso aims to continue offering a complete lineup of products with
various functions, spanning water conditioning devices, dissolving devices, dialysate
supply systems, communications systems and waste dialysate processing devices, as
well as providing extensive maintenance services.
25Annual Report 2012
CSRThrough the introduction of an environmental management system and its foundation activities, Nikkiso is involved in a variety of social contribution efforts. In March 1998, we announced the Nikkiso Environmental Declaration, and our efforts to contribute to a recycling-oriented society include development and production designed to lower greenhouse gas emissions and protect the global environment.
One example of Nikkiso’s efforts to develop and sell environment-friendly products is the cryogenic pump, a submerged-motor pump used for low-temperature gases, such as LNG and LPG. LNG, in particular, is heralded as a clean energy resource that will play an important role in coping with environmental problems. In Nikkiso’s cryogenic pumps, the pump and motor are combined into a single unit that is submerged directly by liquefied gas, avoiding the risk of gas escaping into the surrounding environment.
More than a quarter of a century ago, cascades in the thrust reverser systems of jet engines on commercial aircraft were made of metal, typically magnesium alloy or aluminum. In 1983, Nikkiso became the first manufacturer in the world to succeed in the development of CFRP composite cascades. This breakthrough led to aircraft that were more lightweight and fuel-efficient. Today, most commercial aircraft are equipped with Nikkiso’s CFRP composite cascades, which lead to safe landings and reduced environmental impact.
Philosophy Nikkiso’s corporate philosophy is to contribute to the world using its proprietary technologies, focusing on “human life” and “environment.” Modern-day society is in a stage of transition, seeking both harmony with nature and sustainable development. Nikkiso aims to grow and develop with society and offer technologies, products and services to help realize these objectives.
Environmental Management Systems (ISO 14001)
To develop its environmental management systems, Nikkiso has adopted a process that involves studying the environmental aspects of its operations, identifying any operations with a significant impact on the environment, formulating and implementing environmental management plans, and carrying out reviews by management. All our domestic production bases (Higashimurayama Plant, Shizuoka Plant and Kanazawa Plant) have gained ISO 14001 accreditation through the U.K.’s Bureau Veritas Certification (formerly BVQI). In the future, we will strive to make ongoing improvements to environmental conservation and pollution prevention.
▲ Cascades for Thrust reverser
▲ Cryogenic submerged motor pump
Corporate Social Responsibility
Nikkiso Cryogenic Pumps
Cascades
Environmental EndeavorsIn March 1998, we announced the Nikkiso Environmental Declaration as part of our stance as a corporation that contributes to an environment-friendly society.
26 NIKKISO Co., Ltd.
12
3
5
6
Dialysis Equipment Recycling System
Support for Culture and the Art
Introduction to the Activities of the Soukeikai Foundation Cultivating Successors: Operating a Specialized School
The Kaga Zogan Special School for Repoussage opened in 1998 with the goal of training the next generation of artisans skilled in the traditional crafts of inlay and repoussage, thereby ensuring that these techniques would be passed down to future generations. Operated through funding by the city of Kanazawa, the school is managed by the Soukeikai Foundation. Heading the cadre of teachers at the school is Mr. Mamoru Nakagawa, a living national treasure, who provides guidance on the production of inlay works. Some 135 people have attended this school to date, and the majority of these former students are active in the craft and exhibiting their works.
We are working to reduce our environmental impact and lighten the burden of waste-processing activities.
Under this system, we conclude commissioned industrial waste disposal agreements with customers so that when they dispose of Nikkiso dialysis equipment after use, we collect and dismantle this equipment, reusing parts and recycling, as appropriate. This approach eliminates the need for customers to issue and manage industrial waste manifests. Nikkiso is pursuing this system as one of its efforts to contribute to a recycling-oriented society.
The history of Kaga Zogan—the Japanese traditional craft of metal inlaying—dates back around 400 years to the city of Kanazawa, Ishikawa Prefecture, and now is steadily gaining popularity in the rest of the world. The art of Kaga Zogan focuses on quality, not showiness. This is a philosophy that Nikkiso shares, as the Company strives to create products with every higher levels of quality, making Kaga Zogan a natural fit with Nikkiso’s corporate spirit. Nikkiso established the Soukeikai Foundation to preserve and encourage the spread of Kaga Zogan as an important Japanese cultural tradition, as well as to train future artisans in the craft. Through the Soukeikai Foundation, Nikkiso also
aims to contribute to the community from which Kaga Zogan originates, helping to invigorate Ishikawa Prefecture.
Recycling flow ▶Used dialysis equipment is collected for disassembly and
separation at a disassembly center. Iron, aluminum, copper and other resources are recycled.
Customer
Specified transport company
Disassembly center
Recycling company
7
4
◀ Kaga Zogan (Inlay Craft)Stirrups with the design of blossom flowers in a silver inlay The work of Kiyotake Kashu (17c - 18c)
Activity completion notice
Collection request
Commissioned waste processing agreement
Direction to collect
Collection
27Annual Report 2012
Corporate Governance
1. Corporate Governance System
a. Board of Directors and Board of Corporate AuditorsThe Board of Directors meets at least once a month to
formulate basic management policy, while striving to bolster
supervisory functions through resolutions on important
management issues, regular reports on the status of business
execution and other activities. The Board of Corporate Auditors
also meets at least once a month, with duties that include
deliberating on audit policy, assigning duties to each corporate
auditor, determining a specific implementation agenda, and
conducting hearings of audit reports from corporate auditors
and business execution updates from directors. The Board of
Corporate Auditors reports its results to the Board of Directors.
b. Other Major Administrative BodiesTo ensure swift management decision making and a high
level of management transparency, Management Meetings
are held twice a month, attended by directors and executive
officers, with the objective of conducting extensive discussions
and preliminary deliberations regarding resolutions by the
Board of Directors, the policies and strategies of each
operating division and other important management issues.
Furthermore, Executive Officers Meetings are held periodically
to deliberate on major management strategies, report on
the status of business execution and carry out various other
duties. Management Meetings and Executive Officers Meetings
are also attended by the corporate auditors, who are free to
express their opinions and to enter into active discussions.
c. Accounting AuditorThe Company has appointed Deloitte Touche Tohmatsu LLC
as its accounting auditor to provide advice regarding audits
during the settlement of accounts and on general appropriate
accounting as needs dictate.
d. Internal Control SystemNikkiso recognizes the construction and preservation of
an internal control system to ensure appropriate business
execution as an important management issue for the Nikkiso
group, including its subsidiaries. We are improving our internal
control system based on our Internal Control Basic Policy, as
determined by the Board of Directors. To facilitate optimal operation of the Internal Control System, we established an
Internal Control Committee, presided over by a director, which
deliberates on compliance, risk management, securement of
appropriate financial reporting and other issues. Moreover,
we established the Internal Control Department, under the
direct control of the President, to promote the Internal Control
System throughout the Company in a methodical and efficient
manner and to conduct self-inspections and independent
appraisals by the Internal Auditor. Internal control in relation to
financial reporting is carried out via auditing by Deloitte Touche
Tohmatsu LLC.
e. Risk Management SystemThrough the Risk Management System, Nikkiso develops and
publicizes internal regulations in response to various specific
risks, including product liability risk, credit risk, insider trading
risk, illicit exporting risk and personal information leakage
risk, and revises the system as necessary. Based on internal
regulations that systematically stipulate risk management, we
have established a department for controlling companywide
risk management. Moreover, we have clarified the departments
responsible for the management of each respective risk in
a drive to promote improvements to the risk management
system.
f. Contracts for Limitation of LiabilityBased on the provisions of the Company’s Articles of
Incorporation, one outside director and two outside corporate
auditors are contracted to the Company with mutual limited
liability in damages as stipulated under Article 423, Item 1, of
Japan’s Companies Act. The maximum liability in damages
based on this contract is whichever is higher of ¥5 million, ¥3
million or the legally stipulated minimum total maximum liability.
The Nikkiso Group’s corporate governance system, as
described above, is both rational and effective and is
deemed to be adequate to accomplish the Group’s corporate
governance objectives.
Nikkiso recognizes that reinforcing corporate governance is a major management priority if it is to maintain fair and trustworthy management and earn a reputation for reliability from its shareholders and all its other stakeholders. Accordingly, we have built a corporate governance system as described below.
28 NIKKISO Co., Ltd.
2. Internal Audits and Audits of Auditors
The Nikkiso Group has formed an Internal Audit Department,
comprising three full-time members under the direct control of
the President, as an internal auditing body to conduct internal
audits.
Nikkiso deploys a system of corporate auditors. The Board of
Corporate Auditors comprises four corporate auditors, including
two outside corporate auditors, responsible for the auditing of
the Nikkiso Group. These corporate auditors include members
with significant specialist knowledge of finance and accounting.
The Internal Audit Department and the corporate auditors
regularly exchange information and opinions, in addition to
exchanging opinions and deliberating with the accounting
auditor on a regular basis or as needed.
3. Outside Directors and Outside Corporate Auditors
a. Number of outside directors and outside corporate auditorsThe Company elects one outside director and two
outside corporate auditors.
b. Personal relationships, capital relationships, transactional relationships or other interest-based relationships with the outside director and the outside corporate auditorsOther than as outside director/corporate auditors, no personal
relationships, capital relationships, transactional relationships or
other interest-based relationships exist between the Company
and its outside director and outside corporate auditors.
Furthermore, the outside director and all outside corporate
auditors are independent director/corporate auditors, as
prescribed by the Tokyo Stock Exchange.
c. Functions and responsibilities of the outside director and the outside corporate auditors in Nikkiso’s corporate governanceThe roles that the Company anticipates for outside director
and the outside corporate auditors are to supervise and audit
management decision-making and business execution from a
standpoint that does not result in conflicts of interest with general
shareholders. Mr. Kenjiro Nakane, an outside director who is
a Certified Public Accountant and tax accountant, provides a
high level of expertise on general corporate management based
on his specialized skills in accounting and finance. Mr. Yutaro
Kikuchi, an outside corporate auditor who has many years
of experience working as an attorney, provides specialized
knowledge and broad-ranging expertise concerning company
law and business management. Mr. Eisuke Nagatomo, an
outside corporate auditor who is a former Managing Director and
Chief Regulatory Officer of Tokyo Stock Exchange, Inc., brings
his experience as a former member of the Financial Services
Agency Business Accounting Council and commissioner of
the Financial Accounting Standards Foundation, providing
extensive experience related to finance and accounting and
close familiarity with corporate governance and compliance
systems. Consequently, Nikkiso believes that these individuals
will amply fulfill the function of supervising and auditing the
making of decisions and execution of business by directors from
an independent, objective and specialized perspective.
d. Standards and policies on independence from the Company in its election of the outside director and the outside corporate auditorsThe Company has not formulated specific standards or policies
related to independence in its election of the outside director or
the outside corporate auditors. However, when electing these
executives, the Company refers to the decision standards
related to the independence of outside executives prescribed
by the Companies Act and the Tokyo Stock Exchange.
e. The Company’s position on the status of election of the outside director and the outside corporate auditorsThe Company elects the outside director and the outside
corporate auditors in accordance with the standards and
policies indicated in “d.” above to fulfill the functions and roles
indicated in “c.” above.
f. Supervision and audits by the outside director and the outside corporate auditorsOutside director and outside corporate auditors are provided
with ample management information to enable them to fulfill
their supervisory and auditing functions through the exchange
of information with the Board of Directors, the Board of
Corporate Auditors and personnel executing operations.
Outside directors and outside corporate auditors interact
regularly and exchange ideas with directors, corporate auditors
and personnel executing operations at Board of Corporate
Auditors and Board of Directors meetings. In addition, they
meet regularly with the accounting auditor, the internal auditors
and the Internal Control Department to exchange information
and ideas.
29Annual Report 2012
Business Results for Fiscal 2012
Operating EnvironmentDuring the year, the Company’s operating environment was affected by global economic uncertainties, such as the European debt crisis, and protracted yen appreciation. Furthermore, the Industrial Business in particular was affected severely by the sluggish Japanese economy in the aftermath of the Great East Japan Earthquake, creating a difficult business environment from the start of the fiscal year. Toward the end of the fiscal year, however, substantial moves by developed countries to ease monetary policy provided a temporary calm in the European debt crisis, and overseas economies, notably the United States, began to rebound. These factors served to check the yen’s appreciation, and signs of improvement became evident. Against this backdrop, Nikkiso benefited from robust energy-related investments, stemming from high crude oil prices and rising LNG demand. The Industrial Business saw an increase in business inquiries regarding large pumps for the oil and gas industry, and a solid increase in orders. In the Medical Business, the first half of the fiscal year was difficult, but sales rose steadily owing to the full-fledged commencement of sales in Japan of a new dialysis machine in January 2012.
Overview by Business Segment
Industrial Business
In April 2011, the Precision Equipment Business Division was separated from the Industrial Division, to handle specific product types. The three current divisions are the Industrial Division, the Precision Equipment Business Division and the Aerospace Division.
▶ Industrial DivisionIn the Pump Segment, the LEWA Group posted historically high orders on the back of vigorous ongoing capital investment in the oil and gas markets, stemming from high crude oil prices. In addition, through vigorous sales activities the segment worked aggressively to expand business related to LNG pumps, in response to substantial increases in demand for LNG as a clean energy source. These efforts resulted in the segment winning orders for major projects in Japan and overseas, leading to steady progress in performance. In the Water Conditioning System Segment, the impact of the Great East Japan Earthquake on projects related to
nuclear power plants was limited. At the same time, sales increased as a result of demand for reconstructing power plants that sustained damage in the earthquake, as well as for systems for new thermal power stations. As a result, orders in this division amounted to ¥41,733 million and sales totaled ¥36,281 million. In response to vigorous activity in the oil and gas markets, we plan to reinforce our production of LNG cryogenic pumps and LEWA pumps. At the same time, we will develop a strategic Group sales structure for our lineup of Nikkiso and LEWA Pumps including Nikkiso canned motor pumps in an effort to accelerate the global development of our pump business.
▶ Precision Equipment Business DivisionIn the global electronics component market, although demand for smartphones and other mobile communication devices remained strong, consumption of personal computers and digital consumer electronics fell, and prices on electronic components decreased. Under these circumstances, the trend toward postponing capital investment in the mainstay Asian market became more pronounced, and orders for our electronic component manufacturing systems dropped. Particle size analyzers continued to enjoy firm sales in Japan, partly owing to the addition to our lineup of surface area measuring instruments, in line with our November 2011 acquisition of BEL Japan, Inc. Owing to these factors, in this division orders totaled ¥5,636 million and sales were ¥6,217 million. Going forward, we anticipate increased sales for new model of particle size analyzers, owing to our expanded lineup. We will also follow through with initiatives to enhance our overseas sales structure.
Note: Orders for the Industrial Division including the Precision Equipment Business Division amounted to ¥47,369 million, up 23.1% year on year, and sales were ¥42,499 million, a 13.2% increase.
▶ Aerospace DivisionIn the aircraft industry, orders remained strong thanks to a continued upswing in demand, supported primarily by the ongoing rush to develop new aircraft. On a U.S. dollar basis, the division posted solid orders for core components of engine thrust reversers, such as cascades and blocker doors.
Management’s Discussion and Analysis
30 NIKKISO Co., Ltd.
During the year, we signed a long-term supply agreement on large components for new aircraft with a leading U.S. nacelle manufacturer, and we began work to expand our Hanoi Plant in Vietnam to manufacture these components. This move is also aimed at countering the effects of yen appreciation. Construction is scheduled for completion in the autumn of 2012. In order to mitigate the impact of yen appreciation on our business, we reviewed purchasing and production channels and put in place thorough measures to lower the cost of sales. These moves led to a 9.2% year-on-year increase in orders for this division to ¥5,023 million. Sales rose 9.0% to ¥4,991 million. Going forward, we will continue with efforts to bolster productivity and lower the cost of sales. At the same time, we will move forward aggressively to secure orders to take advantage of expanded production capacity at our Hanoi Plant.
Medical Business
▶ Medical DivisionAlthough the sales performance of our hemodialysis machines was hampered by delays in development and the start of sales of a new hemodialysis machine, we commenced a full-fledged launch in January 2012. This machine is earning high marks as an automated multipurpose dialysis machine that meets the labor-saving needs of dialysis treatment facilities. Sales in this category consequently rebounded toward the end of the fiscal year. However, sales of dialyzers and other consumables remained flat. Looking overseas, our sales structures in China, India and other emerging markets are not fully established, and sales of dialysis machines were generally stagnant, except in Europe and parts of South America. Consequently, orders expanded 2.6% to ¥42,528 million and sales grew 4.0% to ¥42,646 million. Moving forward, we anticipate higher sales in Japan for the new dialysis machines that underwent a full-fledged launch at the beginning of 2012, as well as stronger sales of the dialyzers and other consumables. Overseas, we aim to put the production and sales of hemodialysis machines back on plan quickly once our joint venture in China receives sales approval, which is expected in the Autum of 2012. In Europe, we will strengthen the production and development structures at our Hannover Plant in Germany. We will also work toward the full-scale global penetration of this business. The table below indicates overseas sales by region.
Research and DevelopmentThe Nikkiso Group is active in the field of medical care, which is central to life, and the plant and other environmental categories. In these areas, we conduct aggressive research and development activities to create new techniques—leading to the products and technologies of the future. In the field of medical care, we are leveraging our many years of expertise in dialysis-related technologies to contribute to the treatment of ulcerative colitis and other immunological diseases. We continued clinical testing in Germany on blood purification therapy products. We have also received manufacturing and sales permission in relation to our next-generation blood glucose controllers in Japan, which are the result of extensive research and development and can be used in the fields of internal medicine and surgery. In the plant category, our R&D efforts focus on improving the functionality and efficiency of large pumps for LNG exploration sites, as well as on technologies to increase the size and efficiency of leak-free pumps that protect the environment and expand their application. Furthermore, we are striving proactively to develop new applications for carbon fiber composite materials, which help to reduce the weight of commercial jet aircraft, thereby lowering engine fuel consumption.
Orders, Sales and IncomeDuring the year under review, the Industrial Business saw an increase in business inquiries related to large pumps for the oil and gas industry, which is currently strong. Furthermore, the Medical Business overcame a difficult first half owing to its full-fledged launch of a new dialysis machine in January 2012. During the year, orders totaled ¥94,921 million, up 12.3% year on year, and net sales grew 8.4% to ¥90,137 million. Performance was also strong at the income level: operating income expanded 21.9% to ¥6,580 million, ordinary income rose 36.7% to ¥6,370 million and net income increased 23.6% to ¥3,317 million.
(Millions of Yen)
Results
2010 2011 2012 Percentage of total
Asia ¥13,714 ¥16,259 ¥16,029 40.4%
North America 5,879 7,134 7,722 19.5%
Europe 12,257 11,971 13,220 33.4%
Other 2,503 2,011 2,668 6.7%
Sales 34,355 37,377 39,639 100.0%
Sales Ratio 44.0% 45.0% 44.0%
31Annual Report 2012
compared with 35.4% one year earlier, and the dividend on equity ratio stood at 1.9%, down from 2.0%.
Outlook for the Upcoming Fiscal Year The Nikkiso Group is pursuing aggressive business development strategies in the global market. In addition to increasing vigor in overseas energy development investment projects, we anticipate business expansion in fields related to medical care in emerging markets. We will move forward steadily with measures to become more global, develop technologies and products to match market needs and raise the efficiency of our operations. Through these efforts, we expect to build a more robust management structure and anticipate stronger operating performance as a result. In the Industrial Division, energy-related investments are expected to continue rising, and solid growth is slated to continue in the orders environment for pumps. In the Precision Equipment Business Division, we believe that capital investment will recover as the electronic components industry rebounds on the back of stronger demand for smartphones and other devices. Consequently, we anticipate an upswing in orders for electronic component manufacturing systems in the second half of the fiscal year. In the Aerospace Division as well, the recovery in aircraft demand should lead to higher shipments for our mainstay cascades. Accordingly, we anticipate achieving record levels of sales on a U.S. dollar basis. In the Medical Business, although we do not expect the Japanese market for hemodialysis-related healthcare devices to expand, we do anticipate ongoing needs for automation in order to meet medical institutions’ need for labor savings. Overseas, we will endeavor to expand our share of the Chinese dialysis market, which is surging upward, and we will reinforce our device production and sales systems in Europe. In these ways, we are preparing for full-fledged development of our business in world markets.
Global Market DevelopmentsBased on the Nikkiso Group’s aspirations globally and over the medium to long term, we will endeavor to steadily increase performance in each of our existing businesses. At the same time, we will aim to develop businesses that meet anticipated future needs, cultivate markets and enter into strategic alliances, boosting operating performance even further. We will continue pushing forward with globalization as we work toward the early development of a business structure that is relatively impervious to exchange rate fluctuations. To accomplish this, we will enhance synergies with the LEWA, expand production of aircraft components at our Hanoi Plant in Vietnam, reinforce production and sales of hemodialysis
Financial PositionAs of March 31, 2012, total assets came to ¥118,234 million, down ¥3,774 million from one year earlier. The main reason was a decrease in cash and deposits, owing to debt repayment. Total liabilities were ¥67,841 million at year-end, down ¥5,128 million from a year earlier. Reduction of short-term bank loans and long-term debt was the primary factor. Net assets amounted to ¥50,392 million as of March 31, 2012, up ¥1,353 million. Although the acquisition of treasury stock had a downward effect on net assets, retained earnings increased owing to the posting of net income.
Net cash provided by operating activities was ¥3,961 million during the year, ¥2,043 million less than provided in the preceding year. Income before income taxes was the primary increase, whereas cash was used as the result of an increase in receivables. Net cash used in investing activities amounted to ¥3,325 million, ¥2,715 million more than in the preceding year. The main use of cash was for the acquisition of plant, property and equipment. Net cash used in financing activities was ¥10,242 million compared with ¥6,623 million provided by these activities a year earlier. The difference was attributable mainly to paying down debt and the acquisition of treasury stock. As a result of these flows, cash and cash equivalents as of March 31, 2012, amounted to ¥13,108 million, down ¥9,863 million from one year earlier.
ROE and ROAReturn on equity rose from 5.7% to 6.8% during the year, and return on assets improved from 2.3% to 2.8%. These increases indicate that the rate of increase in net income exceeded the changes in assets and shareholders’ equity.
Basic Policy on Profit Distribution and Dividends for Fiscal 2012Nikkiso’s basic policy is to return profits to shareholders after comprehensive consideration for business performance, management conditions and other pertinent factors, while paying due attention to a stable dividend payment. Moreover, the Company endeavors to maintain a sufficient level of internal reserves to fund future long-term business development and to fortify its financial standing. Based on this policy, we paid a year-end dividend of ¥6.00 per share. Including the interim dividend, this brought the dividend per share for the full business year to ¥12.00.The consolidated payout ratio at the year-end was 28.3%
32 NIKKISO Co., Ltd.
machines in Europe and achieve steady progress at our hemodialysis machine joint venture in China.
Through these measures, we currently anticipate the following results for the fiscal year ending March 31, 2013.
(Millions of Yen)
Orders Net sales Operatingincome
Ordinaryincome Net income
¥99,000 ¥97,000 ¥7,000 ¥6,500 ¥3,800
Up 4.3%year on year
Up 7.6% Up 6.4% Up 2.0% Up 14.6%
Cautionary Statement Regarding Forward-Looking Statements and Business RisksThe following are recognized as the main risk factors that could adversely affect the business results, stock price and financial condition of the Nikkiso Group. Please note also that forward-looking statements herein represent the expectations of the Group as of the end of the consolidated fiscal year described in this report.
Changes in Markets for Nikkiso ProductsWithin the Industrial Business, Nikkiso’s main customers in the Industrial Division and the Precision Equipment Business Division are in the petrochemical industry, IT-related industries and the electric power industry. If demand from these sectors were to fall or competition to intensify, the Nikkiso Group’s operating performance and financial condition could be negatively affected. Also within the Industrial Business, the majority of customers in the Aerospace Division are in the aircraft industry, where demand could be significantly affected by such events as simultaneous terrorist attacks. Such events could have a negative effect on the Nikkiso Group’s operating performance and financial condition.
Medical InsuranceIn the Nikkiso Group’s Medical Business, government regulations on medical insurance affect dialysis-related markets, which are a key source of sales. Such regulation can have both direct and indirect effects on the markets and prices for products in this business. If markets were to shrink or prices to fall as a result of changes in government policies, the Nikkiso Group’s operating performance and financial condition could be negatively affected.
Fluctuations in Currency Exchange RatesThe assets and liabilities of the Nikkiso Group’s overseas subsidiaries are denominated in foreign currencies, and the Group converts foreign-currency sales, purchases, assets and liabilities into yen when preparing its consolidated financial statements. Fluctuations in the exchange rates for major currencies, notably the U.S. dollar and the EURO, could affect the Nikkiso Group’s operating performance and financial condition. In general, the Nikkiso Group’s foreign currency sales exceed its purchases that are denominated in foreign
currencies, and foreign currency assets outweigh foreign currency liabilities. As a result, appreciation of the yen against these currencies could have a negative effect on the Nikkiso Group’s operating performance and financial condition.
Overseas ProductionThe majority of blood tubings, one of the major product categories for the Nikkiso Group’s Medical Business, is produced by subsidiaries in Vietnam and Thailand. The Group also produces dialysis equipment at its subsidiary in Germany. Furthermore, a portion of products for the Industrial Business are produced in the United States, Germany, China, Taiwan, Vietnam and other countries. Accordingly, changes in laws and regulations or changes in political and economic factors in those regions could affect normal company operations and the production activities at overseas subsidiaries. Such changes could have a negative effect on the Nikkiso Group’s operating performance and financial condition.
Performance of Overseas SubsidiaryIn August 2011, the Nikkiso Group acquired the LEWA Group of Germany, judging that its product portfolio, technologies and sales routes would complement and strengthen the Nikkiso Group. The Nikkiso Group believes that this acquisition will strengthen its Industrial Division and lead to higher future growth. However, if the Nikkiso Group is unable to generate income sufficient to offset the amortization expense of goodwill posted on the acquisition, the Nikkiso Group’s performance and financial condition could be negatively affected.
Impact of the March 11 EarthquakeThe Nikkiso Group manufactures, sells and performs maintenance on various systems and equipment used at nuclear power plants. The disaster at the Fukushima Daiichi Nuclear Power Plant is prompting an overall review of nuclear power generation. Consequently, there is a risk that new projects could be halted or delayed, and that work for existing facilities could decrease. Furthermore, if procurement of parts or materials is hampered, production activities could be affected, which could negatively impact the performance and financial condition of the Nikkiso Group.
33Annual Report 2012
Millions of YenThousands of U.S. Dollars
(Note 1)
2012 2011 2012ASSETS
Current Assets:
Cashandcashequivalents(Note14) ¥ 13,108 ¥22,972 $ 159,856
Short-terminvestments(Note3) 709 319 8,650
Notesandaccountsreceivable:
Trade(Note14) 29,846 25,371 363,970
Unconsolidatedsubsidiariesandaffiliatedcompanies 614 579 7,484
Other 455 507 5,554
Allowancefordoubtfulaccounts (462) (485) (5,629)
Inventories(Note5) 16,282 14,638 198,559
Deferredtaxassets(Note10) 1,283 1,239 15,650
Othercurrentassets 1,137 916 13,857
Totalcurrentassets 62,972 66,056 767,951
Property, Plant and Equipment (Note7):
Land 4,082 4,118 49,780
Buildingsandstructures 24,772 24,547 302,097
Machineryandequipment 16,063 16,005 195,889
Leaseassets 292 254 3,565
Constructioninprogress 362 118 4,412
Others 8,250 7,615 100,609
Accumulateddepreciation (34,887) (33,606) (425,450)
Property,plantandequipment,net 18,934 19,051 230,902
Investments and Other Assets:
Investmentsecurities(Notes4and14) 8,148 7,318 99,364
Investmentsinandadvancestounconsolidated subsidiariesandaffiliatedcompanies(Note14) 1,371 1,542 16,719
Long-termloansreceivable 3 12 34
Goodwill(Note13) 23,260 24,282 283,654
Prepaidpensionexpense(Note8) 349 709 4,262
Leaseassets 48 54 590
Deferredtaxassets(Note10) 193 199 2,351
Otherassets 2,977 2,803 36,314
Allowancefordoubtfulaccounts (20) (17) (256)
Totalinvestmentsandotherassets 36,329 36,902 443,032
Total ¥118,235 ¥122,009 $1,441,885
Consolidated Balance SheetNIKKISO CO., LTD., and Consolidated SubsidiariesAs of March 31, 2012
Seenotestoconsolidatedfinancialstatements.
34 NIKKISO Co., Ltd.
Millions of YenThousands of U.S. Dollars
(Note 1)
2012 2011 2012LIABILITIES AND SHAREHOLDERS
, EQUITY
Current Liabilities:
Short-termbankloans(Notes7and14) ¥ 6,868 ¥10,899 $ 83,752
Currentportionoflong-termdebt(Notes7and14) 10,128 3,671 123,517
Notesandaccountspayable:
Trade(Note14) 12,610 11,947 153,783
Unconsolidatedsubsidiariesandaffiliatedcompanies 12 16 146
Constructionandother(Note14) 1,856 1,596 22,636
Incometaxespayable 1,887 922 23,008
Accruedexpenses 2,939 2,706 35,839
Depositsreceived:
Unconsolidatedsubsidiariesandaffiliatedcompanies 106 98 1,297
Other 297 261 3,618
Deferredtaxliabilities(Note10) 55 — 674
Othercurrentliabilities 1,728 1,667 21,071
Totalcurrentliabilities 38,486 33,783 469,341
Long-term Liabilities:
Long-termdebt(Notes7and14) 27,548 37,533 335,951
Liabilityforemployees'retirementbenefits(Note8) 369 401 4,498
Allowanceforretirementbenefitfordirectorsandcorporateauditors 160 19 1,949
Deferredtaxliabilities(Note10) 1,156 1,064 14,092
Otherlong-termliabilities 123 170 1,506
Totallong-termliabilities 29,356 39,187 357,996
Commitments and Contingent Liabilities (Notes12and15)
Equity(Notes9and17):
Commonstock-noparvalue, authorized,249,500,000shares; issued,80,286,464sharesin2012and2011 6,544 6,544 79,809
Capitalsurplus 10,701 10,701 130,496
Retainedearnings 34,619 32,241 422,192
Treasurystock-atcost,3,133,216sharesin2012 and1,020,777sharesin2011 (2,276) (840) (27,768)
Accumulatedothercomprehensiveincome(loss)
Unrealizedgainonavailable-for-salesecurities 1,659 834 20,231
Foreigncurrencytranslationadjustments (1,870) (1,488) (22,803)
Total 49,377 47,992 602,157
Minorityinterests 1,016 1,047 12,391
TotalEquity 50,393 49,039 614,548
Total ¥118,235 ¥122,009 $1,441,885
35Annual Report 2012
Millions of YenThousands of U.S. Dollars
(Note 1)
2012 2011 2012Net Sales ¥90,138 ¥83,143 $1,099,242 Cost of Sales (Notes8,11and12) 60,512 56,223 737,954 Grossprofit 29,626 26,920 361,288
Selling, General and Administrative Expenses (Notes8,11,12and13) 23,045 21,521 281,035 Operatingincome 6,581 5,399 80,253
Other Income (Expenses): Interestanddividendincome 236 180 2,880 Interestexpense (880) (937) (10,728) Gainonsaleofinvestmentsecurities 1 506 16 Gainonsaleofproperty,plantandequipment 23 7 280 Lossonwrite-downofinvestmentsecurities (335) (40) (4,098) Lossonsaleofstockofasubsidiary (22) (288) (269) Lossonsaleanddisposalofproperty,plantandequipment (20) (33) (240) Equityinearningsofaffiliatedcompanies 31 231 376 Foreignexchangeloss,net (166) (656) (2,030) Other,net 442 349 5,398 Otherexpenses-net (690) (681) (8,415)Income before Income Taxes and Minority Interests 5,891 4,718 71,838
Income Taxes (Note10): Current 2,615 1,861 31,887 Deferred (234) (19) (2,856) Totalincometaxes 2,381 1,842 29,031
Net Income before Minority Interests 3,510 2,876 42,807
Minority Interests in Net Income 193 191 2,355
Net Income ¥ 3,317 ¥2,685 $ 40,452
Per Share of Common Stock (Note17): Yen U.S. Dollars (Note 1)
2012 2011 2012Basicnetincome ¥42.47 ¥33.86 $0.52
Cashdividendapplicabletotheyear 12.00 12.00 0.15
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
NIKKISO CO., LTD. and Consolidated SubsidiariesFor the year ended March 31, 2012
NIKKISO CO., LTD. and Consolidated SubsidiariesFor the year ended March 31, 2012
Seenotestoconsolidatedfinancialstatements.
Millions of YenThousands of U.S. Dollars
(Note 1)
2012 2011 2012Net Income before Minority Interests ¥3,510 ¥2,876 $42,807
Other Comprehensive Income (Loss)(Note16): Unrealizedgainonavailable-for-salesecurities 825 2 10,062 Foreigncurrencytranslationadjustments (438) (304) (5,345) Sharesofothercomprehensivelossinassociates (23) (73) (277) Totalothercomprehensiveincome(loss) 364 (375) 4,440
Comprehensive Income ¥3,874 ¥2,501 $47,247
Total Comprehensive Income attributable to (Note16): Ownersoftheparent ¥3,760 ¥2,365 $45,851 Minorityinterests 114 136 1,396
36 NIKKISO Co., Ltd.
Consolidated Statement of Changes in EquityNIKKISO CO., LTD. and Consolidated SubsidiariesFor the year ended March 31, 2012
Millions of Yen
Outstanding number of shares of common
stock
Common stock
Capital surplus
Retained earnings
Treasury stock
Accumulated other comprehensive income
(loss)
Total Minority interests Total equityUnrealized
gain on available-for-sale
securities
Foreign currency
translation adjustments
Balances, April 1, 2010 79,287,080 ¥6,544 ¥10,701 ¥30,508 ¥(826) ¥ 833 ¥(1,166) ¥46,594 ¥ 923 ¥47,517
Net Income 2,685 2,685 2,685
Cash dividends, ¥12.00 per share (951) (951) (951)
Net increase in unrealized gain on available-for-sale securities 1 1 1
Net decrease in foreign currency translation adjustments (322) (322) (322)
Purchase of treasury stock (22,375) (15) (15) (15)
Disposal of treasury stock 982 (1) 1 0 0
Net change in the year 124 124
Balances, March 31, 2011 79,265,687 6,544 10,701 32,241 (840) 834 (1,488) 47,992 1,047 49,039
Net Income 3,317 3,317 3,317
Cash dividends, ¥12.00 per share (938) (938) (938)
Net increase in unrealized gain on available-for-sale securities 825 825 825
Net decrease in foreign currency translation adjustments (382) (382) (382)
Purchase of treasury stock (2,113,019) (1,437) (1,437) (1,437)
Disposal of treasury stock 580 (1) 1 0 0
Net change in the year (31) (31)
Balances, March 31, 2012 77,153,248 ¥6,544 ¥10,701 ¥34,619 ¥(2,276) ¥1,659 ¥(1,870) ¥49,377 ¥1,016 ¥50,393
Thousands of U.S. Dollars (Note 1)
Outstanding number of shares of common
stock
Common stock
Capital surplus
Retained earnings
Treasury stock
Accumulated other comprehensive income
(loss)
Total Minority interests Total equityUnrealized
gain on available-for-sale
securities
Foreign currency
translation adjustments
Balances, April 1, 2011 $79,809 $130,496 $393,186 $(10,247) $10,169 $(18,141) $585,272 $12,770 $598,042
Net Income 40,452 40,452 40,452
Cash dividends, $0.15 per share (11,445) (11,445) (11,445)
Net increase in unrealized gain onavailable-for-sale securities 10,062 10,062 10,062
Net decrease in foreign currencytranslation adjustments (4,662) (4,662) (4,662)
Purchase of treasury stock (17,526) (17,526) (17,526)
Disposal of treasury stock (1) 5 4 4
Net change in the year (379) (379)
Balances, March 31, 2012 $79,809 $130,496 $422,192 $(27,768) $20,231 $(22,803) $602,157 $12,391 $614,548
Seenotestoconsolidatedfinancialstatements.
37Annual Report 2012
Millions of YenThousands of U.S. Dollars
(Note 1)
2012 2011 2012Cash flows from operating activities:
Income before income taxes and minority interests ¥ 5,891 ¥4,718 $ 71,838
Adjustments for:
Income taxes paid (1,769) (2,379) (21,572)
Income taxes refunded 27 142 333
Depreciation and amortization 4,218 4,332 51,442
Gain on sale of investment securities (1) (506) (16)
Loss on write-down of investment securities 335 40 4,098
Gain on sale of property, plant and equipment (23) (7) (280)
Loss on sale and disposal of property, plant and equipment 20 33 240
Loss on sale of stock of a subsidiary 22 288 269
Equity in earnings of affiliated companies (31) (231) (376)
Provision for doubtful accounts 8 66 103
(Decrease) increase in liability for employees' retirement benefits (10) 6 (119)
Foreign exchange loss (43) (145) (528)
Changes in assets and liabilities:
Increase in notes and accounts receivable (4,651) (74) (56,715)
Increase in inventories (1,556) (1,663) (18,980)
Decrease in interest and dividend receivable 46 9 561
Increase in notes and accounts payable 637 1,933 7,773
Other 840 (557) 10,239
Net cash provided by operating activities 3,960 6,005 48,310
Cash flows from investing activities:
(Decrease) increase in short-term investments, net (341) 44 (4,153)
Payments for purchases of property, plant and equipment (2,586) (1,591) (31,537)
Proceeds from sale of property, plant and equipment 52 15 629
Payments for purchase of other assets (101) (507) (1,232)
Proceeds from sale and redemption of investment securities 103 937 1,258
Payment for acquisition of shares of a newly-consolidated subsidiary (40) (493)
Payment for acquisition of shares of subsidiaries (374) (4,563)
Proceeds from sale of stock of a subsidiary 460
Collection of loans receivable 38 42 460
Payments for loans receivable (76) (9) (922)
Net cash used in investing activities (3,325) (609) (40,553)
Cash flows from financing activities:
(Decrease) increase in short-term bank loans (4,399) 3,632 (53,648)
Proceeds from long-term debt 226 9,373 2,763
Repayment of long-term debt (3,629) (5,403) (44,262)
Repurchase of treasury stock (1,437) (15) (17,521)
Cash dividends paid (938) (951) (11,446)
Cash dividends paid to minority shareholders (65) (12) (793)
Net cash (used in) provided by financing activities (10,242) 6,624 (124,907)
Foreign currency translation adjustments (257) (346) (3,142)
Net (decrease) increase in cash and cash equivalents (9,864) 11,674 (120,292)
Cash and cash equivalents at beginning of year 22,972 11,298 280,148
Cash and cash equivalents at end of year ¥ 13,108 ¥22,972 $ 159,856
Consolidated Statement of Cash FlowsNIKKISO CO., LTD. and Consolidated SubsidiariesFor the year ended March 31, 2012
Seenotestoconsolidatedfinancialstatements.
38 NIKKISO Co., Ltd.
TheaccompanyingconsolidatedfinancialstatementshavebeenpreparedinaccordancewiththeprovisionssetforthintheJapaneseFinancialInstrumentsandExchangeActanditsrelatedaccountingregulations,andinconformitywithaccountingprinciplesgenerallyacceptedinJapan(“JapaneseGAAP”),whicharedifferentincertainrespectsastotheapplicationanddisclosurerequirementsofInternationalFinancialReportingStandards.
Inpreparingtheseconsolidatedfinancialstatements,certainreclassificationsandrearrangementshavebeenmadetotheconsolidatedfinancialstatementsissueddomesticallyinordertopresenttheminaformwhichismorefamiliartoreadersoutsideJapan.Inaddition,certainreclassificationshavebeenmadein
(1) ConsolidationTheconsolidatedfinancialstatementsasofMarch31,2012includetheaccountsoftheCompanyandits41(39in2011)significantsubsidiaries(together,the“Group”).
Underthecontrolorinfluenceconcept,thosecompaniesinwhichtheCompany,directlyorindirectly,isabletoexercisecontroloveroperationsarefullyconsolidated,andthosecompaniesoverwhichtheGrouphastheabilitytoexercisesignificantinfluenceareaccountedforbytheequitymethod.
Investmentsin5(8in2011)affiliatedcompaniesareaccountedforbytheequitymethod.Investmentsintheremainingunconsolidatedsubsidiariesandaffiliatedcompaniesarestatedatcost.Iftheequitymethodofaccountinghadbeenappliedtotheinvestmentsinthesecompanies,theeffectontheaccompanyingconsolidatedfinancialstatementswouldnotbematerial.
Allsignificantintercompanybalancesandtransactionshavebeeneliminatedinconsolidation.AllmaterialunrealizedprofitincludedinassetsresultingfromtransactionswithintheGroupisalsoeliminated.
(2) Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements
InMay2006,theAccountingStandardsBoardofJapan(the“ASBJ”)issuedASBJPracticalIssuesTaskForce(PITF)No.18,“PracticalSolutiononUnificationofAccountingPoliciesAppliedtoForeignSubsidiariesfortheConsolidatedFinancialStatements.”PITFNo.18prescribes(1)theaccountingpoliciesandproceduresappliedtoaparentcompanyanditssubsidiariesforsimilartransactionsandeventsundersimilarcircumstancesshouldinprinciplebeunifiedforthepreparationoftheconsolidatedfinancialstatements;(2)financialstatementspreparedbyforeignsubsidiariesinaccordancewitheitherInternationalFinancialReportingStandardsorthegenerallyacceptedaccounting
the2011consolidatedfinancialstatementstoconformtotheclassificationsusedin2012.
TheconsolidatedfinancialstatementsarestatedinJapaneseyen,thecurrencyofthecountryinwhichNikkisoCo.,Ltd.(the“Company”)isincorporatedandoperates.ThetranslationsofJapaneseyenamountsintoU.S.dollaramountsareincludedsolelyfortheconvenienceofreadersoutsideJapanandhavebeenmadeattherateof¥82to$1,theapproximaterateofexchangeatMarch31,2012.SuchtranslationsshouldnotbeconstruedasrepresentationsthattheJapaneseyenamountscouldbeconvertedintoU.S.dollarsatthatoranyotherrate.
Notes to Consolidated Financial StatementNIKKISO CO., LTD. and Consolidated SubsidiariesFor the year ended March 31, 2012
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
principlesintheUnitedStatesofAmericatentativelymaybeusedfortheconsolidationprocess;(3)however,thefollowingitemsshouldbeadjustedintheconsolidationprocesssothatnetincomeisaccountedforinaccordancewithJapaneseGAAP,unlesstheyarenotmaterial:1)amortizationofgoodwill;2)scheduledamortizationofactuarialgainorlossofpensionsthathasbeendirectlyrecordedintheequity;3)expensingcapitalizeddevelopmentcostsofR&D;4)cancellationofthefairvaluemodelaccountingforproperty,plantandequipmentandinvestmentpropertiesandincorporationofthecostmodelofaccounting;and5)exclusionofminorityinterestsfromnetincome,ifcontainedinnetincome.
(3) Unification of Accounting Policies Applied to Foreign Affiliated Companies for the Equity Method
InMarch2008,theASBJissuedASBJStatementNo.16,“AccountingStandardforEquityMethodofAccountingforInvestments.”Thenewstandardrequiresadjustmentstobemadetoconformtheaffiliate’saccountingpoliciesforsimilartransactionsandeventsundersimilarcircumstancestothoseoftheparentcompanywhentheaffiliate’sfinancialstatementsareusedinapplyingtheequitymethodunlessitisimpracticabletodeterminesuchadjustments.Inaddition,financialstatementspreparedbyforeignaffiliatedcompaniesinaccordancewitheitherInternationalFinancialReportingStandardsorthegenerallyacceptedaccountingprinciplesintheUnitedStatesofAmericatentativelymaybeusedinapplyingtheequitymethodifthefollowingitemsareadjustedsothatnetincomeisaccountedforinaccordancewithJapaneseGAAP,unlesstheyarenotmaterial:1)amortizationofgoodwill;2)scheduledamortizationofactuarialgainorlossofpensionsthathasbeendirectlyrecordedintheequity;3)expensingcapitalizeddevelopmentcostsofR&D;4)cancellationofthefairvaluemodelofaccountingforproperty,plantand
39Annual Report 2012
equipmentandinvestmentpropertiesandincorporationofthecostmodelofaccounting;and5)exclusionofminorityinterestsfromnetincome,ifcontainedinnetincome.
(4) Business CombinationsInOctober2003,theBusinessAccountingCouncilissuedaStatementofOpinion,“AccountingforBusinessCombinations,”andinDecember2005,theASBJissuedASBJStatementNo.7,“AccountingStandardforBusinessDivestitures”andASBJGuidanceNo.10,“GuidanceforAccountingStandardforBusinessCombinationsandBusinessDivestitures”.
Theaccountingstandardforbusinesscombinationsallowscompaniestoapplythepoolingofinterestsmethodofaccountingonlywhencertainspecificcriteriaaremetsuchthatthebusinesscombinationisessentiallyregardedasunitingofinterests.
Forbusinesscombinationsthatdonotmeettheuniting-of-interestscriteria,thebusinesscombinationisconsideredtobeanacquisitionandthepurchasemethodofaccountingisrequired.Thisstandardalsoprescribestheaccountingforcombinationsofentitiesundercommoncontrolandforjointventures.
InDecember2008,theASBJissuedarevisedaccountingstandardforbusinesscombinations,ASBJStatementNo.21,“AccountingStandardforBusinessCombinations.”Majoraccountingchangesundertherevisedaccountingstandardareasfollows:(1)Therevisedstandardrequiresaccountingforbusinesscombinationsonlybythepurchasemethod.Asaresult,thepoolingofinterestsmethodofaccountingisnolongerallowed.(2)Thepreviousaccountingstandardrequiredresearchanddevelopmentcoststobechargedtoincomeasincurred.Undertherevisedstandard,in-processresearchanddevelopmentcostsacquiredinthebusinesscombinationiscapitalizedasanintangibleasset.(3)Thepreviousaccountingstandardprovidedforabargainpurchasegain(negativegoodwill)tobesystematicallyamortizedoveraperiodnotexceeding20years.Undertherevisedstandard,theacquirerrecognizesthebargainpurchasegaininprofitorlossimmediatelyontheacquisitiondateafterreassessingandconfirmingthatalloftheassetsacquiredandalloftheliabilitiesassumedhavebeenidentifiedafterareviewoftheproceduresusedinthepurchaseallocation.TherevisedstandardwasapplicabletobusinesscombinationsundertakenonorafterApril1,2010.
(5) Cash EquivalentsCashequivalentsareshort-terminvestmentsthatarereadilyconvertibleintocashandthatareexposedtoinsignificantriskofchangesinvalue.
Cashequivalentsincludetimedeposits,whichmatureorbecomeduewithinthreemonthsofthedateofacquisition.
(6) InventoriesInventoriesarestatedatthelowerofcost,determinedbythemoving-averagemethodwiththeexceptionofcertainfinishedproductsandworkinprocessbythespecificationmethod,ornetsellingvalue.
(7) Marketable and Investment SecuritiesMarketableandinvestmentsecuritiesareclassifiedandaccountedfor,dependingonmanagement’sintent,asfollows:—marketableavailable-for-salesecurities,whicharenotclassifiedastradingsecuritiesnorheld-to-maturitydebtsecurities,arereportedatfairvalue,withunrealizedgainsandlosses,netofapplicabletaxes,reportedinaseparatecomponentofequity.—Non-marketableavailable-for-salesecuritiesarestatedatcostdeterminedbythemoving-averagemethod.
Forother-than-temporarydeclinesinfairvalue,investmentsecuritiesarereducedtonetrealizablevaluebyachargetoincome.
(8) Property, Plant and EquipmentProperty,plantandequipmentarestatedatcost.Depreciationofproperty,plantandequipmentoftheCompanyanditsconsolidateddomesticsubsidiariesiscomputedmainlybythedeclining-balancemethodbasedontheestimatedusefullivesoftheassets.Thestraight-linemethodisappliedtocertainbuildingsoftheCompanyanditsconsolidateddomesticsubsidiaries,andallproperty,plantandequipmentofconsolidatedforeignsubsidiaries.Therangeofusefullivesisprincipallyfrom3to50yearsforbuildingsandstructures,andfrom4to8yearsformachinery.
Undercertainconditionssuchasexchangesoffixedassetsofsimilarkindsandcashsubsidiesgrantedfromgovernmentalormunicipalauthorities,Japanesetaxlawspermitanentitytodefertherecognitionofprofitarisingfromsuchtransactionsbyreducingthecostoftheassetsacquiredorbyprovidingaspecialreserveintheequitysection.ThereductionofthecostoftheassetsasofMarch31,2012and2011were¥990million($12,073thousand)and¥990million,respectively,andthespecialreserveintheequitysectionasapartofretainedearningsasofMarch31,2012and2011were¥409million($4,988thousand)and¥377million,respectively.
(9) Long-lived Assets TheGroupreviewsitslong-livedassetsforimpairmentwhenevereventsorchangesincircumstancesindicatethecarryingamountofanassetorassetgroupmaynotberecoverable.Animpairmentlosswouldberecognizedifthecarryingamountofanassetorassetgroupexceedsthesumoftheundiscountedfuturecashflowsexpectedtoresultfromthecontinueduseandeventualdispositionoftheassetorassetgroup.Theimpairmentlosswouldbemeasuredastheamountbywhichthecarryingamountoftheassetexceedsitsrecoverableamount,whichisthehigherofthediscountedcashflowsfromthecontinueduseandeventualdispositionoftheassetorthenetsellingpriceatdisposition.
(10) GoodwillGoodwill,whichwasrecognizedbytheGroup,issubjecttoamortizationoveraperiodnottoexceed20yearsandatestforimpairment.
40 NIKKISO Co., Ltd.
(11) Retirement and Pension PlansTheCompanyandcertaindomesticconsolidatedsubsidiarieshavenon-contributorydefinedbenefitpensionplans.TheGroupaccountsfortheliabilityforemployees’retirementbenefitsbasedontheprojectedbenefitobligationsandplanassetsatthebalancesheetdate.Certainconsolidatedsubsidiarieshavedefinedcontributionpensionplans.
(12) Allowance for Retirement Benefit for Directors and Corporate Auditors
RetirementbenefitstodirectorsandcorporateauditorsundertheunfundedretirementallowanceplanswereprovidedattheamountthatwouldberequiredifalldirectorsandcorporateauditorsoftheCompanyandcertaindomesticsubsidiariesretiredatthebalancesheetdate.However,effectivethedateofthestockholders’meetingoftheCompanyin2006,andofcertaindomesticsubsidiariesin2007,theunfundedretirementallowanceplanswereterminated.TheoutstandingbalancesofretirementallowancesfordirectorsandcorporateauditorsasofMarch31,2012and2011were¥160million($1,949thousand)and¥19million,respectively.
(13) Asset Retirement ObligationsInMarch2008,theASBJpublishedASBJStatementNo.18,“AccountingStandardforAssetRetirementObligations”andASBJGuidanceNo.21,“GuidanceonAccountingStandardforAssetRetirementObligations”.Underthisaccountingstandard,anassetretirementobligationisdefinedasalegalobligationimposedeitherbylaworcontractthatresultsfromtheacquisition,construction,developmentandthenormaloperationofatangiblefixedassetandisassociatedwiththeretirementofsuchtangiblefixedasset.Theassetretirementobligationisrecognizedasthesumofthediscountedcashflowsrequiredforthefutureassetretirementandisrecordedintheperiodinwhichtheobligationisincurredifareasonableestimatecanbemade.Ifareasonableestimateoftheassetretirementobligationcannotbemadeintheperiodtheassetretirementobligationisincurred,theliabilityshouldberecognizedwhenareasonableestimateofassetretirementobligationcanbemade.Uponinitialrecognitionofaliabilityforanassetretirementobligation,anassetretirementcostiscapitalizedbyincreasingthecarryingamountoftherelatedfixedassetbytheamountoftheliability.Theassetretirementcostissubsequentlyallocatedtoexpensethroughdepreciationovertheremainingusefullifeoftheasset.Overtime,theliabilityisaccretedtoitspresentvalueeachperiod.Anysubsequentrevisionstothetimingortheamountoftheoriginalestimateofundiscountedcashflowsarereflectedasanincreaseoradecreaseinthecarryingamountoftheliabilityandthecapitalizedamountoftherelatedassetretirementcost.
(14) Research and Development CostsResearchanddevelopmentcostsarechargedtoincomeasincurred.
(15) LeasesInMarch2007,theASBJissuedASBJStatementNo.13,“AccountingStandardforLeaseTransactions,”whichrevisedthepreviousaccountingstandardforleasetransactionsissuedinJune1993.TherevisedaccountingstandardforleasetransactionswaseffectiveforfiscalyearsbeginningonorafterApril1,2008.
Underthepreviousaccountingstandard,financeleasesthatweredeemedtotransferownershipoftheleasedpropertytothelesseeweretobecapitalized.However,otherfinanceleaseswerepermittedtobeaccountedforasoperatingleasetransactionsifcertain“asifcapitalized”informationwasdisclosedinthenotestothelessee’sfinancialstatements.Therevisedaccountingstandardrequiresthatallfinanceleasetransactionsshouldbecapitalizedbyrecognizingleaseassetsandleaseobligationsinthebalancesheet.
Inaddition,therevisedaccountingstandardpermitsleaseswhichexistedatthetransitiondateanddonottransferownershipoftheleasedpropertytothelesseetobemeasuredattheobligationsunderfinanceleaseslessinterestexpenseatthetransitiondateandrecordedasacquisitioncostofleaseassets.
Allotherleasesareaccountedforasoperatingleases.
(16) Bonuses to Directors and Corporate AuditorsBonusestodirectorsandcorporateauditorsareaccruedattheyearendtowhichsuchbonusesareattributable.
(17) Income TaxesTheprovisionforincometaxesiscomputedbasedonthepretaxincomeincludedintheconsolidatedstatementsofincome.Theassetandliabilityapproachisusedtorecognizedeferredtaxassetsandliabilitiesfortheexpectedfuturetaxconsequencesoftemporarydifferencesbetweenthecarryingamountsandthetaxbasesofassetsandliabilities.Deferredtaxesaremeasuredbyapplyingcurrentlyenactedtaxlawstothetemporarydifferences.
(18) Foreign Currency TransactionsAllshort-termandlong-termmonetaryreceivablesandpayablesdenominatedinforeigncurrenciesaretranslatedintoJapaneseyenattheexchangeratesatthebalancesheetdate.Theforeignexchangegainsandlossesfromtranslationarerecognizedintheconsolidatedstatementofincome.
(19) Foreign Currency Financial StatementsThebalancesheetaccountsoftheconsolidatedforeignsubsidiariesaretranslatedintoJapaneseyenatthecurrentexchangerateasofthebalancesheetdateexceptforequity,whichistranslatedatthehistoricalrate.
Differencesarisingfromsuchtranslationareshownas“Foreigncurrencytranslationadjustments”underaccumulatedothercomprehensiveincomeinaseparatecomponentofequity.
Revenueandexpenseaccountsofconsolidatedforeignsubsidiariesaretranslatedintoyenattheaverageexchangerate.
41Annual Report 2012
(20) Derivatives and Hedging Activities TheGroupusesderivativefinancialinstrumentstomanageitsexposurestofluctuationsinforeignexchangeandinterestrates.ForeignexchangeforwardcontractsandinterestrateswapsareutilizedbytheGrouptoreduceforeigncurrencyexchangeandinterestraterisks.TheGroupdoesnotenterintoderivativesfortradingorspeculativepurposes.
Derivativefinancialinstrumentsareclassifiedandaccountedforasfollows:a)allderivativesarerecognizedaseitherassetsorliabilitiesandmeasuredatfairvalue,andgainsorlossesonderivativetransactionsarerecognizedintheconsolidatedstatementofincomeandb)forderivativesusedforhedgingpurposes,ifsuchderivativesqualifyforhedgeaccountingbecauseofhighcorrelationandeffectivenessbetweenthehedginginstrumentsandthehedgeditems,gainsorlossesonderivativesaredeferreduntilmaturityofthehedgedtransactions.
Theforeigncurrencyforwardcontractsemployedtohedgeforeignexchangeexposuresandtheinterestrateswapswhichqualifyforhedgeaccountingaremeasuredatthefairvalueandtheunrealizedgains/lossesarerecognizedinincome.
Theinterestrateswapswhichqualifyforhedgeaccountingandmeetspecificmatchingcriteriaarenotremeasuredatmarketvalue,butthedifferentialpaidorreceivedundertheswapagreementsarerecognizedandincludedininterestexpenseorincome.
(21) Per Share InformationBasicnetincomepershareiscomputedbydividingnetincomeavailabletocommonshareholdersbytheweighted-averagenumberofcommonstocksoutstandingfortheperiod,retroactivelyadjustedforstocksplits.
Dilutednetincomepersharereflectsthepotentialdilutionthatcouldoccurifsecuritieswereexercisedorconvertedintocommonstock.Dilutednetincomepershareofcommonstockassumesfullconversionoftheoutstandingconvertiblenotesandbondsatthebeginningoftheyear(oratthetimeofissuance)withanapplicable
adjustmentforrelatedinterestexpense,netoftax,andfullexerciseofoutstandingwarrants.
DilutednetincomepershareofcommonstockfortheyearendedMarch31,2012isnotdisclosedbecausenopotentiallydilutiveshareshavebeenissued.
Cashdividendspersharepresentedintheaccompanyingconsolidatedstatementofincomearedividendsapplicabletotherespectiveyearsincludingdividendstobepaidaftertheendoftheyear.
(22) Accounting Changes and Error CorrectionsInDecember2009,theASBJissuedASBJStatementNo.24,“AccountingStandardforAccountingChangesandErrorCorrections,”andASBJGuidanceNo.24,“GuidanceonAccountingStandardforAccountingChangesandErrorCorrections.”Accountingtreatmentsunderthisstandardandguidanceareasfollows:(1)ChangesinAccountingPolicies-Whenanewaccountingpolicyisappliedwitharevisionofaccountingstandards,thenewpolicyisappliedretrospectivelyunlesstherevisedaccountingstandardsincludespecifictransitionalprovisions.Whentherevisedaccountingstandardsincludespecifictransitionalprovisions,anentityshallcomplywiththespecifictransitionalprovisions.(2)ChangesinPresentations-Whenthepresentationoffinancialstatementsischanged,priorperiodfinancialstatementsarereclassifiedinaccordancewiththenewpresentation.(3)ChangesinAccountingEstimates-Achangeinanaccountingestimateisaccountedforintheperiodofthechangeifthechangeaffectsthatperiodonly,andisaccountedforprospectivelyifthechangeaffectsboththeperiodofthechangeandfutureperiods.(4)CorrectionsofPriorPeriodErrors-Whenanerrorinpriorperiodfinancialstatementsisdiscovered,thosestatementsarerestated.Thisaccountingstandardandtheguidanceareapplicabletoaccountingchangesandcorrectionsofpriorperiod-errorswhicharemadefromthebeginningofthefiscalyearthatbeginsonorafterApril1,2011.
Short-terminvestmentsasofMarch31,2012and2011consistedofthefollowing:
3. SHORT-TERM INVESTMENTS
Millions of Yen Thousands of U.S. Dollars
2012 2011 2012Timedeposits ¥709 ¥319 $8,650
42 NIKKISO Co., Ltd.
MarketableandinvestmentsecuritiesasofMarch31,2012and2011consistedofthefollowing:
Millions of Yen Thousands of U.S. Dollars
2012 2011 2012Non-current:
Equitysecurities ¥8,103 ¥7,268 $98,815
Trustfundinvestmentsandother 45 50 549
Total ¥8,148 ¥7,318 $99,364
ThecarryingamountsandaggregatefairvaluesofmarketableandinvestmentsecuritiesatMarch31,2012and2011wereasfollows:
Millions of Yen
March 31, 2012 Cost Unrealized Gains Unrealized Losses Fair Value
Securitiesclassifiedas:
Available-for-sale:
Equitysecurities ¥5,489 ¥3,458 ¥877 ¥8,070
Millions of Yen
March 31, 2011 Cost Unrealized Gains Unrealized Losses Fair Value
Securitiesclassifiedas:
Available-for-sale:
Equitysecurities ¥5,825 ¥2,625 ¥1,215 ¥7,235
Thousands of U.S. Dollars
March 31, 2012 Cost Unrealized Gains Unrealized Losses Fair Value
Securitiesclassifiedas:
Available-for-sale:
Equitysecurities $66,944 $42,173 $10,697 $98,419
Theimpairmentlossonavailable-for-saleequitysecuritiesfortheyearendedMarch31,2012was¥335million($4,098thousand).
4. MARKETABLE AND INVESTMENT SECURITIES
InventoriesasofMarch31,2012and2011consistedofthefollowing:
Millions of Yen Thousands of U.S. Dollars
2012 2011 2012Merchandise ¥ 2,305 ¥1,955 $ 28,114
Finishedproducts 2,552 2,069 31,116
Workinprocess 4,759 4,492 58,040
Rawmaterialsandsupplies 6,666 6,122 81,289
Total ¥16,282 ¥14,638 $198,559
5. INVENTORIES
43Annual Report 2012
TheGrouprevieweditslong-livedassetsforimpairment.Noimpairmentlosswasrecognizedin2012and2011.
6. LONG-LIVED ASSETS
7. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-termbankloansatMarch31,2012and2011consistedofnotestobanks,withweighted-averageinterestratesof0.99%and0.84%,respectively.
Long-termdebtatMarch31,2012and2011consistedofthefollowing:
Millions of Yen Thousands of U.S. Dollars
2012 2011 2012Unsecuredloansfrombanksandotherfinancialinstitutionsdue seriallyto2019withinterestratesofTokyoInterbankOfferedRate plusacertainspreadrangingfrom1.34%to3.95%(2012)andfrom 1.34%to2.67%(2011). ¥ 31,464 ¥35,025 $ 383,713
1.73%yenunsecuredstraightbonds,due2012 6,000 6,000 73,170
Leaseobligations 212 179 2,585
Total 37,676 41,204 459,468
Lesscurrentportion (10,128) (3,671) (123,517)
Long-termdebt,lesscurrentportion ¥ 27,548 ¥37,533 $ 335,951
Annualmaturitiesoflong-termdebtatMarch31,2011wereasfollows:
YearsendingMarch31 Millions of Yen Thousands of U.S. Dollars
2013 ¥10,128 $123,517
2014 11,056 134,835
2015 4,171 50,869
2016 7,474 91,147
2017 1,434 17,488
2018andthereafter 3,413 41,612
Total ¥37,676 $459,468
Thecarryingamountsofassetspledgedascollateralforbankloansof¥9,233million($112,605thousand)asofMarch31,2012wereasfollows:
Millions of Yen Thousands of U.S. Dollars
Land ¥95 $1,155
Buildingsandstructures 2,534 30,903
Machineryandequipment 428 5,225
Total ¥3,057 $37,283
Inaddition,theconsolidatedsubsidiarysharesof¥24,141million($294,400thousand)beforeeliminationunderconsolidationarepledgedatMarch31,2012.
44 NIKKISO Co., Ltd.
8. EMPLOYEES’ RETIREMENT AND PENSION PLANS
TheCompanyandcertainofitsconsolidatedsubsidiarieshavenon-contributorydefinedbenefitplansforemployees.
Undermostcircumstances,employeesterminatingtheiremploymentareentitledtoretirementbenefitsdeterminedbasedontherateofpayatthetimeoftermination,yearsofserviceandcertainotherfactors.Theseretirementbenefitsarecomprisedofalump-sumseverancepaymentfromtheCompany
orconsolidatedsubsidiaries,togetherwithannuitypaymentsfromtrustees.Employeesareentitledtolargerpaymentsiftheterminationisinvoluntary,suchaswhenitresultsfromretirementatthemandatoryretirementageordeath,butnotforemployeeswhotakevoluntaryretirementatcertainspecificagespriortothemandatoryretirementage.
Theliabilityforemployees’retirementbenefitsatMarch31,2012and2011consistedofthefollowing:
Millions of Yen Thousands of U.S. Dollars
2012 2011 2012Projectedbenefitobligation ¥ 15,710 ¥15,687 $ 191,580
Fairvalueofplanassets (13,569) (13,438) (165,477)
Unrecognizedpriorservicecost 905 1,097 11,038
Unrecognizedactuarialloss (3,026) (3,654) (36,905)
Prepaidpensionexpense 349 709 4,262
Liability ¥ 369 ¥401 $ 4,498
ThecomponentsofnetperiodicretirementbenefitcostsfortheyearsendedMarch31,2012and2011wereasfollows:
Millions of Yen Thousands of U.S. Dollars
2012 2011 2012Servicecost ¥ 528 ¥560 $ 6,440
Interestcost 367 361 4,474
Expectedreturnonplanassets (269) (273) (3,278)
Recognizedactuarialloss 752 858 9,172
Amortizationofpriorservicecost (192) (343) (2,340)
Netperiodicretirementbenefitcosts ¥1,186 ¥1,163 $14,468
AssumptionsusedfortheyearsendedMarch31,2012and2011weresetforthasfollows:
2012 2011Discountrate 2.4% 2.4%
Expectedrateofreturnonplanassets 2.0% 2.0%
Amortizationperiodofpriorservicecost 10 years 10years
Recognitionperiodofactuarialgain/loss 10 years 10years
Certainconsolidatedsubsidiarieshavedefinedcontributionpensionplans.
45Annual Report 2012
9. EQUITY
JapanesecompanieshavebeensubjecttotheCompaniesActofJapan(the“CompaniesAct”).ThesignificantprovisionsintheCompaniesActthataffectfinancialandaccountingmattersaresummarizedbelow:
(a) DividendsUndertheCompaniesAct,companiescanpaydividendsatanytimeduringthefiscalyearinadditiontotheyear-enddividenduponresolutionattheshareholdersmeeting.Forcompaniesthatmeetcertaincriteriasuchas(1)havingtheBoardofDirectors,(2)havingindependentauditors,(3)havingtheBoardofCorporateAuditors,and(4)thetermofserviceofthedirectorsisprescribedasoneyearratherthantwoyearsofnormaltermbyitsarticlesofincorporation,theBoardofDirectorsmaydeclaredividends(exceptfordividends-in-kind)atanytimeduringthefiscalyearifthecompanyhasprescribedsoinitsarticlesofincorporation.TheCompanymeetsalltheabovecriteria.
TheCompaniesActpermitscompaniestodistributedividends-in-kind(non-cashassets)toshareholderssubjecttoacertainlimitationandadditionalrequirements.
SemiannualinterimdividendsmayalsobepaidonceayearuponresolutionbytheBoardofDirectorsifthearticlesofincorporationofthecompanysostipulate.TheCompaniesActprovidescertainlimitationsontheamountsavailablefordividendsorthepurchaseoftreasurystock.Thelimitationisdefinedastheamountavailablefordistributiontotheshareholders,buttheamountofnetassetsafterdividendsmustbemaintainedatnolessthan¥3million.
(b) Increases/decreases and transfer of common stock, reserve and surplusTheCompaniesActrequiresthatanamountequalto10%ofdividendsmustbeappropriatedasalegalreserve(acomponentofretainedearnings)orasadditionalpaid-incapital(acomponentofcapitalsurplus)dependingontheequityaccountchargeduponthepaymentofsuchdividendsuntilthetotalaggregateamountofthelegalreserveandadditionalpaid-incapitalequals25%ofthecommonstock.UndertheCompaniesAct,thetotalamountofadditionalpaid-incapitalandlegalreservemaybereversedwithoutlimitation.TheCompaniesActalsoprovidesthatcommonstock,legalreserve,additionalpaid-incapital,othercapitalsurplusandretainedearningscanbetransferredamongtheaccountsundercertainconditionsuponresolutionoftheshareholders.
(c) Treasury stock and treasury stock acquisition rightsTheCompaniesActalsoprovidesforcompaniestopurchasetreasurystockanddisposeofsuchtreasurystockbyresolutionoftheBoardofDirectors.Theamountoftreasurystockpurchasedcannotexceedtheamountavailablefordistributiontotheshareholderswhichisdeterminedbyaspecificformula.
UndertheCompaniesAct,stocksubscriptionrightsarepresentedasaseparatecomponentofequity.TheCompaniesActalsoprovidesthatcompaniescanpurchasebothtreasurystockacquisitionrightsandtreasurystock.Suchtreasurystockacquisitionrightsarepresentedasaseparatecomponentofequityordeducteddirectlyfromstockacquisitionrights.
46 NIKKISO Co., Ltd.
10. INCOME TAXES
TheCompanyanditsdomesticsubsidiariesaresubjecttoJapanesenationalandlocalincometaxeswhich,intheaggregate,resultedinanormaleffectivestatutorytaxrateofapproximately40.7%fortheyearsendedMarch31,2012and2011.
ThetaxeffectsofsignificanttemporarydifferencesandtaxlosscarryforwardswhichresultedindeferredtaxassetsandliabilitiesatMarch31,2012and2011wereasfollows:
Millions of Yen Thousands of U.S. Dollars
2012 2011 2012Deferredtaxassets:
Inventories ¥ 366 ¥304 $ 4,459
Accruedbonusestoemployees 605 607 7,377
Accruedbusinesstaxes 107 91 1,310
Taxlosscarryforwards 107 167 1,301
Investmentsecurities 102 13 1,244
Liabilityforemployees'retirementbenefits 52 76 634
Others 388 322 4,747
Lessvaluationallowance (104) (60) (1,274)
Total ¥1,623 ¥1,520 $19,798
Deferredtaxliabilities:
Unrealizedgainonavailable-for-salesecurities ¥920 ¥573 11,219
Reservefordeferredincomeonfixedassets 227 259 2,762
Prepaidpensionexpense 125 288 1,519
Others 86 26 1,063
Total ¥1,358 ¥1,146 $16,563
Netdeferredtaxassets ¥ 265 ¥374 $ 3,235
AreconciliationofthedifferencebetweentheeffectivestatutorytaxrateandtheactualeffectivetaxrateisnotdisclosedfortheyearendedMarch31,2012sincethedifferenceislessthan5%ofthenormaleffectivestatutorytaxrate.
OnDecember2,2011,newtaxreformlawswereenactedinJapan,whichchangedthenormaleffectivestatutorytaxratefromapproximately40.7%to38.0%effectiveforthefiscalyearsbeginningonorafterApril1,2012throughMarch31,2015,andto35.6%afterwards.TheeffectofthischangewastodecreasedeferredtaxliabilitiesintheconsolidatedbalancesheetasofMarch31,2012by¥97million($1,184thousand),toincreaseincometaxes—deferredintheconsolidatedstatementofincomefortheyearthenendedby¥33million($404thousand)andtoincreaseunrealizedgainonavailable-for-salesecuritiesintheconsolidatedbalancesheetasofMarch31,2012by¥130million($1,589thousand).
AsofMarch31,2012,certainsubsidiarieshadtaxlosscarryforwardsaggregatingtoapproximately¥370million($4,510thousand)whichareavailabletobeoffsetagainsttaxableincomeofsuchsubsidiariesinfutureyears.Thesetaxlosscarryforwardsof¥33million($401thousand),ifnotutilized,willexpireasfollows:
YearendingMarch31 Millions of Yen Thousands of U.S. Dollars
2018 33 401
Total ¥33 $401
Remainingtaxlosscarryforwardsof¥337million($4,110thousand)donothaveanexpirationdate.
47Annual Report 2012
Researchanddevelopmentcostschargedtoincomewere¥1,126million($13,728thousand)and¥1,150millionfortheyearsendedMarch31,2012and2011,respectively.
TheGroupleasescertainmachinery,computerequipment,officespaceandotherassets.TotalleaseandrentalexpensesfortheyearsendedMarch31,2012and2011were¥1,511million($18,428thousand)and¥1,280million.
TotalamortizationofgoodwillfortheyearsendedMarch31,2012and2011were¥1,480million($18,047thousand)and¥1,530million,respectively.
11. RESEARCH AND DEVELOPMENT COSTS
12. LEASES
13. AMORTIZATION OF GOODWILL
14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
(1) Group Policy for Financial InstrumentsTheGroupusesfinancialinstruments,mainlybankloansandbonds,basedonitscapitalinvestmentplan.Cashsurpluses,ifany,areinvestedinlowriskfinancialassets.Short-termbankloansareusedtofunditsongoingoperations.Derivativesareused,notforspeculativepurposes,buttomanageexposuretofinancialrisksasdescribedin(2)below.
(2) Nature and Extent of Risks Arising from Financial InstrumentsReceivablessuchastradenotesandtradeaccountsareexposedtocustomercreditrisk.Althoughreceivablesinforeigncurrenciesareexposedtothemarketriskoffluctuationinforeigncurrencyexchangerates,theposition,netofpayablesinforeigncurrencies,ishedgedbyusingforwardforeigncurrencycontracts.Marketableandinvestmentsecuritiesareexposedtotheriskofmarketpricefluctuations.
Paymenttermsofpayables,suchastradenotesandtradeaccounts,arelessthanoneyear.Althoughpayablesinforeigncurrenciesareexposedtothemarketriskoffluctuationinforeigncurrencyexchangerates,thoserisksarenettedagainstthebalanceofreceivablesdenominatedinthesameforeigncurrencyasnotedabove.
Maturitiesofbankloansandbondsarelessthaneight-and-a-halfyearsafterthebalancesheetdate.Althoughapartofsuchbankloansandbondsareexposedtomarketrisksfromchangesinvariableinterestrates,thoserisksaremitigatedbyusingderivativesofinterest-rateswaps.
(3) Risk Management for Financial InstrumentsCredit risk managementCreditriskistheriskofeconomiclossarisingfromacounterparty’sfailuretorepayorservicedebtaccordingtothecontractualterms.
TheGroupmanagesitscreditriskfromreceivablesonthebasisofinternalguidelines,whichincludemonitoringofpaymenttermsandbalancesofmajorcustomersbyeachbusinessdivisiontoidentifythedefaultriskofcustomersatanearlystage.Counterpartiestothederivativesarelimitedtomajorinternationalfinancialinstitutionstoreducecounterpartyrisk.
ThemaximumcreditriskexposureoffinancialassetsislimitedtotheircarryingamountsasofMarch31,2012.
Market risk management (foreign exchange risk and interest rate risk)Foreigncurrencytradereceivablesandpayablesareexposedtomarketriskresultingfromfluctuationsinforeigncurrencyexchangerates.TheCompanyandcertainconsolidatedsubsidiariesmanagetohedgesuchriskprincipallybyforwardforeigncurrencycontracts.
InterestrateswapsareusedbytheCompanyandcertainconsolidatedsubsidiariestomanageexposuretomarketrisksfromchangesininterestratesofloanpayablesandbondpayables.
Investmentsecuritiesaremanagedbymonitoringmarketvaluesandfinancialpositionofissuersonaregularbasis.
Inaccordancewithinternalpolicieswhichregulatetheauthorizationandcreditlimitamount,transactionsandreconciliationofthetransactionsandbalanceswithcustomeraremadebythefinancedepartment.
Liquidity risk managementLiquidityriskcomprisestheriskthattheCompanycannotmeetitscontractualobligationsinfullontheirmaturitydates.TheCompanymanagesitsliquidityriskbyadequatefinancialplanningbasedonreportsfromeachdepartment.
48 NIKKISO Co., Ltd.
(4) Fair values of Financial InstrumentsFairvaluesoffinancialinstrumentsarebasedonaquotedpriceinactivemarkets.Ifaquotedpriceisnotavailable,otherrationalvaluationtechniquesareusedinstead.Also,pleaseseeNote15forthedetailoffairvalueforderivatives.ThecontractamountshowninNote15isnottheamountofderivativetransactionsexposedtomarketrisk.
(a)Fairvalueoffinancialinstruments
Millions of Yen
March 31, 2012 Carrying amount Fair value Unrealized gain (loss)
Cashandcashequivalents ¥13,108 ¥13,108
Notesandaccountsreceivable
Trade 29,846 29,846
Investmentsecurities
Equitysecurities 8,070 8,070
Total ¥51,024 ¥51,024
Short-termbankloans ¥ 6,868 ¥ 6,868
Notesandaccountspayable
Trade 12,610 12,610
Constructionandother 1,856 1,856
Incometaxespayable 1,887 1,887
Long-termdebt 37,676 37,885 (209)
Total ¥60,897 ¥61,106 ¥(209)
Millions of Yen
March 31, 2011 Carrying amount Fair value Unrealized gain (loss)
Cashandcashequivalents ¥22,972 ¥22,972
Notesandaccountsreceivable
Trade 25,371 25,371
Investmentsecurities
Equitysecurities 7,235 7,235
Total ¥55,578 ¥55,578
Short-termbankloans ¥10,899 ¥10,899
Notesandaccountspayable
Trade 11,947 11,947
Constructionandother 1,596 1,596
Incometaxespayable 922 922
Long-termdebt 41,204 41,428 (224)
Total ¥66,568 ¥66,792 ¥(224)
49Annual Report 2012
Thousands of U.S. Dollars
March 31, 2012 Carrying amount Fair value Unrealized gain (loss)
Cashandcashequivalents $159,856 $159,856
Notesandaccountsreceivable
Trade 363,970 363,970
Investmentsecurities
Equitysecurities 98,419 98,419
Total $622,245 $622,245
Short-termbankloans $ 83,752 $ 83,752
Notesandaccountspayable
Trade 153,783 153,783
Constructionandother 22,636 22,636
Incometaxespayable 23,008 23,008
Long-termdebt 459,468 462,015 (2,548)
Total $742,647 $745,194 $(2,548)
Cash and cash equivalentsThecarryingvaluesofcashandcashequivalentsapproximatefairvaluebecauseoftheirshortmaturities.
Marketable and investment securitiesThefairvaluesofmarketableandinvestmentsecuritiesaremeasuredatthequotedmarketpriceofthestockexchangefortheequityinstruments,andatthequotedpriceobtainedfromthefinancialinstitutionforcertaindebtinstruments.FairvalueinformationformarketableandinvestmentsecuritiesbyclassificationisincludedinNote4.
Receivables and payablesThecarryingvaluesofreceivablesandpayablesapproximatefairvaluebecauseoftheirshortmaturities.
Short-term bank loansThecarryingvaluesofshort-termbankloansapproximatefairvaluebecauseoftheirshortmaturities.
Long- term debtThefairvaluesoflong-termdebtaredeterminedbydiscountingthecashflowsrelatedtothedebtattheGroup’sassumedcorporateborrowingrate.
DerivativesFairvalueinformationforderivativesisincludedinNote15.
50 NIKKISO Co., Ltd.
(b)Financialinstrumentswhosefairvaluecannotbereliablydetermined
Millions of Yen Thousands of U.S. Dollars
2012 2011 2012Investmentsinequityinstrumentsthatdonothaveaquotedmarketpriceinanactivemarket ¥1,404 ¥1,570 $17,114
Trustfundinvestmentsandother 45 50 549
Total ¥1,449 ¥1,620 $17,663
(c)Maturityanalysisforfinancialassetsandsecuritieswithcontractualmaturities
Millions of Yen
March 31, 2012 Due in one year or less Due after one year through five years
Due after five years through ten years Due after ten years
Cashandcashequivalents ¥13,108
Notesandaccountsreceivable
Trade 29,846
Total ¥42,954
Thousands of U.S.Dollars
March 31, 2012 Due in one year or less Due after one year through five years
Due after five years through ten years Due after ten years
Cashandcashequivalents $159,856
Notesandaccountsreceivable
Trade 363,970
Total $523,826
(d)Maturityanalysisforcorporatebond,long-termloananddebtwithinterestwithcontractualmaturitiesSeeNote7forannualmaturitiesoflong-termdebt.
51Annual Report 2012
15. DERIVATIVES
TheGroupentersintoforeigncurrencyforwardcontractstohedgeforeignexchangeriskassociatedwithcertainassetsandliabilitiesdenominatedinforeigncurrencies.TheGroupalsoentersintointerestrateswapcontractstomanageitsinterestrateexposuresoncertainassetsandliabilities.
AllderivativetransactionsareenteredintotohedgeinterestandforeigncurrencyexposuresincorporatedwithintheGroup’sbusiness.Accordingly,marketriskinthesederivativesisbasically
offsetbyoppositemovementsinthevalueofhedgedassetsorliabilities.
Becausethecounterpartiestothesederivativesarelimitedtomajorinternationalfinancialinstitutions,theGroupdoesnotanticipateanylossesarisingfromcreditrisk.
DerivativetransactionsenteredintobytheCompanyhavebeenmadeinaccordancewithinternalpolicieswhichregulatetheauthorizationandcreditlimitamount.
Derivative transactions to which hedge accounting is not applied
Millions of Yen
At March 31, 2012 Contract Amount Contract Amount Due after One Year Fair Value Unrealized Gain (Loss)
Foreigncurrencyforwardcontracts:
BuyingCNY ¥ 20 ¥ (2) ¥ (2)
SellingU.S.$ 442 (24) (24)
Interestrateswaps: (fixedratepayment,floatingratereceipt) 4,369 ¥4,369 (138) (138)
Optiontrading:(interestratecap) 1,402 1,402 6 6
Millions of Yen
At March 31, 2011 Contract Amount Contract Amount Due after One Year Fair Value Unrealized Gain (Loss)
Foreigncurrencyforwardcontracts:
SellingEUR ¥212 ¥(0) ¥(0)
Interestrateswaps: (fixedratepayment,floatingratereceipt) 6,469 ¥6,469 (204) (204)
Thousands of U.S. Dollars
At March 31, 2012 Contract Amount Contract Amount Due after One Year Fair Value Unrealized Gain (Loss)
Foreigncurrencyforwardcontracts:
BuyingCNY $ 246 $ (27) $ (27)
SellingU.S.$ 5,392 (289) (289)
Interestrateswaps: (fixedratepayment,floatingratereceipt) 53,283 $53,283 (1,680) (1,680)
Optiontrading:(interestratecap) 17,096 17,096 74 74
Derivative transactions to which hedge accounting is applied
Millions of Yen
At March 31, 2012 Hedged item Contract Amount Contract Amount Due after One Year Fair Value
Interestrateswaps: (fixedratepayment,floatingratereceipt) Long-term debt ¥15,077 ¥14,077 ¥(298)
Millions of Yen
At March 31, 2011 Hedged item Contract Amount Contract Amount Due after One Year Fair Value
Interestrateswaps: (fixedratepayment,floatingratereceipt) Long-termdebt ¥16,000 ¥16,000 ¥(363)
52 NIKKISO Co., Ltd.
Thousands of U.S. Dollars
At March 31, 2012 Hedged item Contract Amount Contract Amount Due after One Year Fair Value
Interestrateswaps: (fixedratepayment,floatingratereceipt) Long-term debt $183,862 $171,667 $(3,630)
Thefairvalueofderivativetransactionsismeasuredatthequotedpriceobtainedfromthefinancialinstitution.ThecontractornotionalamountsofderivativeswhichareshownintheabovetabledonotrepresenttheamountsexchangedbythepartiesanddonotmeasuretheGroup’sexposuretocreditormarketrisk.
.
ThecomponentsofothercomprehensiveincomefortheyearendedMarch31,2012wereasfollows:
Millions of Yen Thousands of U.S. Dollars
2012 2012Unrealizedgainonavailable-for-salesecurities:
Gainsarisingduringtheyear ¥835 $10,188
Reclassificationadjustmentstoprofit 336 4,097
Amountbeforeincometaxeffect 1,171 14,285
Incometaxeffect (346) (4,223)
Total ¥825 $10,062
Foreigncurrencytranslationadjustments:
Adjustmentsarisingduringtheyear ¥(438) $(5,345)
Shareofothercomprehensiveincomeinassociates:
Lossesarisingduringtheyear (¥23) ($277)
Totalothercomprehensiveincome ¥364 $4,440
ThecorrespondinginformationfortheyearendedMarch31,2011wasnotrequiredundertheaccountingstandardforpresentationofcomprehensiveincomeasanexemptionforthefirstyearofadoptingthatstandardandnotdisclosedherein.
16. COMPREHENSIVE INCOME
Informationtocomputebasicnetincomepershare(“EPS”)fortheyearsendedMarch31,2012and2011wasasfollows:
Millions of Yen Thousands of shares Yen U.S. Dollars
Net income Weighted average shares EPS
For the year ended March 31, 2012:
BasicEPS
Netincomeavailabletocommonshareholders ¥3,317 78,109 ¥42.47 $0.52
For the year ended March 31, 2011:
BasicEPS
Netincomeavailabletocommonshareholders ¥2,685 79,276 ¥33.86
17. NET INCOME PER SHARE
53Annual Report 2012
Appropriations of Retained EarningsTheCompany’sBoardofDirectorsapprovedthefollowingattheBoardofDirectorsmeetingheldonMay17,2012:
Millions of Yen Thousands of U.S. Dollars
Year-endcashdividends,¥6.00($0.07)pershare ¥463 $5,645
18. SUBSEQUENT EVENT
19. SEGMENT INFORMATION
UnderASBJStatementNo.17,“AccountingStandardforSegmentInformationDisclosures,”andASBJGuidanceNo.20,“GuidanceonAccountingStandardforSegmentInformationDisclosures,”anentityisrequiredtoreportfinancialanddescriptiveinformationaboutitsreportablesegments.Reportablesegmentsareoperatingsegmentsoraggregationsofoperatingsegmentsthatmeetspecifiedcriteria.Operatingsegmentsarecomponentsof
anentityaboutwhichseparatefinancialinformationisavailableandsuchinformationisevaluatedregularlybythechiefoperatingdecisionmakerindecidinghowtoallocateresourcesandinassessingperformance.Generally,segmentinformationisrequiredtobereportedonthesamebasisasisusedinternallyforevaluatingoperatingsegmentperformanceanddecidinghowtoallocateresourcestooperatingsegments.
1.DescriptionofreportablesegmentsTheGroup’sreportablesegmentsarethoseforwhichseparatefinancialinformationisavailableandregularevaluationbytheCompany’smanagementisbeingperformedinordertodecidehowresourcesareallocatedamongtheGroup.Therefore,theGroup’sreportablesegmentsconsistoftheIndustrialDivisionandMedicalDivision.IndustrialDivisionconsistsofproduction,saleandmaintenanceofindustrialpumps,water-conditioningequipment,carbon-fiberreinforcedplasticsandothervariousindustrialequipment.MedicalDivisionconsistsofproduction,saleandmaintenanceofartificialkidneymachines,dialyzers,bloodtubingsandpowderdialysate.
2.Methodsofmeasurementfortheamountsofsales,profit(loss),assetsandotheritemsforeachreportablesegmentTheaccountingpoliciesofeachreportablesegmentareconsistentwiththosedisclosedinNote2,“SummaryofSignificantAccountingPolicies”.
3.Informationaboutsales,profit(loss),assetsandotheritems
Millions of Yen
Reportable segment
At March 31, 2012 Industrial Division Medical Division Total Reconciliations Consolidated
Sales
Salestoexternalcustomers ¥47,491 ¥42,647 ¥90,138 ¥90,138
Segmentprofit 4,663 5,225 9,888 (3,307) 6,581
Segmentassets 62,384 27,625 90,009 28,226 118,235
Other:
Depreciation 1,252 1,257 2,509 229 2,738
Amortizationofgoodwill 1,315 153 1,468 12 1,480
Investmentsinaffiliatedcompaniesaccountedforbytheequitymethod 500 331 831 484 1,315
Increaseinproperty,plantandequipmentandintangibleassets 1,173 1,203 2,376 522 2,898
54 NIKKISO Co., Ltd.
Millions of Yen
Reportable segment
At March 31, 2011 Industrial Division Medical Division Total Reconciliations Consolidated
Sales
Salestoexternalcustomers ¥42,124 ¥41,019 ¥83,143 ¥83,143
Segmentprofit 2,761 5,599 8,359 (2,960) 5,399
Segmentassets 63,384 25,452 88,836 33,173 122,009
Other:
Depreciation 1,296 1,318 2,614 188 2,802
Amortizationofgoodwill 1,361 156 1,517 13 1,530
Investmentsinaffiliatedcompaniesaccountedforbytheequitymethod 452 425 877 603 1,480
Increaseinproperty,plantandequipmentandintangibleassets 883 1,061 1,944 352 2,296
Thousands of U.S. Dollars
Reportable segment
At March 31, 2012 Industrial Division Medical Division Total Reconciliations Consolidated
Sales
Salestoexternalcustomers $579,158 $520,084 $1,099,242 $1,099,242
Segmentprofit 56,863 63,717 120,580 (40,327) 80,253
Segmentassets 760,773 336,893 1,097,666 344,219 1,441,885
Other:
Depreciation 15,264 15,329 30,593 2,801 33,394
Amortizationofgoodwill 16,033 1,862 17,895 152 18,047
Investmentsinaffiliatedcompaniesaccountedforbytheequitymethod 6,103 4,031 10,134 5,899 16,033
Increaseinproperty,plantandequipmentandintangibleassets 14,307 14,670 28,977 6,369 35,346
55Annual Report 2012
Other related information1.Informationaboutgeographicalareas(1)Sales
Millions of Yen
2012Japan Asia North America Europe Other Total
¥50,497 ¥16,030 ¥7,722 ¥13,221 ¥2,668 ¥90,138
Millions of Yen
2011Japan Asia North America Europe Other Total
¥45,766 ¥16,259 ¥7,134 ¥11,972 ¥2,012 ¥83,143
Thousands of U.S. Dollars
2012Japan Asia North America Europe Other Total
$615,814 $195,486 $94,175 $161,226 $32,541 $1,099,242
Note:Salesareclassifiedincountriesorregionsbasedonlocationofcustomers.
(2)Property,plantandequipmentMillions of Yen
2012Japan Asia North America Europe Other Total
¥14,288 ¥2,046 ¥848 ¥1,732 ¥20 ¥18,934
Millions of Yen
2011Japan Asia North America Europe Other Total
¥14,376 ¥1,880 ¥884 ¥1,889 ¥22 ¥19,051
Thousands of U.S. Dollars
2012Japan Asia North America Europe Other Total
$174,247 $24,956 $10,346 $21,120 $233 $230,902
56 NIKKISO Co., Ltd.
2.Informationaboutmajorcustomers
The information isnotdisclosedsince thesalesamount toanexternalcustomer is less than10%of totalconsolidatedsales for theyearendedMarch31,2012.
Information about the unamortized balance of goodwill at March 31, 2012 and 2011Millions of Yen
Reportable segment
Industrial Division Medical Division Total Eliminations/Corporate Consolidated
GoodwillatMarch31,2012 ¥22,767 ¥238 ¥23,005 ¥255 ¥23,260
Millions of Yen
Reportable segment
Industrial Division Medical Division Total Eliminations/Corporate Consolidated
GoodwillatMarch31,2011 ¥23,860 ¥391 ¥24,251 ¥31 ¥24,282
Thousands of U.S. Dollars
Reportable segment
Industrial Division Medical Division Total Eliminations/Corporate Consolidated
GoodwillatMarch31,2012 $277,644 $2,904 $280,548 $3,106 $283,654
57Annual Report 2012
Independent Auditors’ Report
58 NIKKISO Co., Ltd.
Board of Directors and Auditors As of June 26, 2012
President & Chief Executive Officer .............Toshihiko Kai
Directors & Senior Executive Officers .. Hiroshi Nakamura
Akira Nishiwaki
Shigeo Maruo
Hisashi Homma
Director & Executive Officer ....................... Hiroaki Miyata
Outside Director ...................................... Kenjiro Nakane
Corporate Auditors ....................................Hatsuo Tashiro
Naoto Goto
Yutaro Kikuchi
Eisuke Nagatomo
Executive Officers and Senior OfficersAs of June 26, 2012
Executive Officers ..............................Yoshikazu Fusasaki
Naota Shikano
Hirohiko Narushima
Tetsuo Kurebayashi
Shoichi Nagato
Nobuhiko Ban
Tsunehisa Suita
Kazuo Murakami
Junichi Takeda
Susumu Koito
Senior Officers ...........................................Michio Kubota
Hiroshi Kinoshita
Number of Shares Held (Thousands)
Percent of Total Shares Outstanding
Japan Trustee Services Bank, Ltd.(Trust Account)
4,220 5.25%
Mizuho Bank, Ltd. 3,779 4.70
The Master Trust Bank of Japan, Ltd. (Trust Account)
3,712 4.62
Nikkiso Shareholders Association 2,280 2.84
Nikkiso Employee Shareholders Association
2,097 2.61
Mitsui Sumitomo Insurance Co., Ltd. 1,966 2.44
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
1,622 2.02
Nippon Life Insurance Company 1,500 1.86
The Chuo Mitsui Trust and Banking Company, Limited
1,404 1.74
Resona Bank, Limited 1.215 1.51
Major Shareholders
Corporate Data As of March 31, 2012
Company Name ..................................... NIKKISO CO., LTD.
Date of Establishment .......................... December 26, 1953
Paid-in Capital ..............................................¥6,544,339,191
Number of Employees ......................... 5,185 (Consolidated)
1,541 (Non-Consolidated)
Authorized Number of Shares .......................... 249,500,000
Issued Number of Shares ................................... 80,286,464
(Contained Treasury Stocks) .................................3,133,216
Number of Shareholders ..............................................7,624
59Annual Report 2012
Offices and PlantsDomestic
▶Head Office4-20-3, Ebisu, Shibuya-ku,Tokyo 150-6022, JapanPhone: +81-3-3443-3711Fax: +81-3-3473-4963
Aerospace DivisionPhone: +81-3-3443-3734Fax: +81-3-3443-9863
Medical DivisionPhone: +81-3-3443-3727Fax: +81-3-3440-0681
Industrial DivisionInternational Sales Department (Pumps)2-27-10, Ebisu, Shibuya-ku,Tokyo 150-8677, JapanPhone: +81-3-3443-3726Fax: +81-3-3444-2438
Industrial DivisionInstrumentation & Power Systems Sales Department 2-16-2, Noguchi-cho, Higashimurayama,Tokyo 189-8520, JapanPhone: +81-42-392-3556Fax: +81-42-392-3522
Precision Equipment Business Division2-16-2, Noguchi-cho, Higashimurayama,Tokyo 189-8520, JapanPhone: +81-42-390-3378Fax: +81-42-392-3355
▶PlantsHigashimurayama Plant2-16-2, Noguchi-cho, Higashimurayama,Tokyo 189-8520, JapanPhone: +81-42-392-3311Fax: +81-42-393-2201
Shizuoka Plant498-1, Shizutani, Makinohara-shi,Shizuoka 421-0496, JapanPhone: +81-548-22-5801Fax: +81-548-22-5886
Kanazawa Plant3-1, Hokuyohdai, Kanazawa,Ishikawa 920-0177, JapanPhone: +81-76-257-4181Fax: +81-76-257-4250
Overseas
▶OfficesNikkiso Beijing Representative OfficeRoom 908, No. 1 Building, Madian Jingdian Jiayuan, No. 8A Qijiahuozi, Chao Yang Qu, Beijing 100029, ChinaPhone: +86-10-6202-0066Fax: +86-10-6202-0055
Nikkiso Pumps Middle East7F, Al Yasat Tower-Baniyas Street,P.O. Box 97, Abu Dhabi, U.A.E.Phone: +971-2-6720730Fax: +971-2-6742422
Subsidiaries & AffiliatesDomestic
Nikkiso Eiko Co., Ltd.Phone: +81-42-390-6540Fax: +81-42-390-6541Manufacture, sale and after-sales service of small type pumps, sand filters, etc.
Nikkiso Ryuki Techno Co., Ltd.Phone: +81-42-396-9110Fax: +81-42-396-5767Technical service and parts sales for our ownindustrial products (pumps, compressors and other equipment).
Nikkiso Technica Co., Ltd.Phone: +81-42-394-7900Fax: +81-42-394-1181Technical service and installation of industrialproducts (systems).
Nikkiso-Therm Co., Ltd.Phone: +81-422-37-9811Fax: +81-422-37-9820Manufacture and sales of precision thermistors and thermistor-applied products.
Nikkiso Tohoku Medical Co., Ltd.Phone: +81-22-262-0421Fax: +81-22-263-2640Sales and after-sales service of medical products in the Tohoku area in Japan.
Nikkiso Technical Research InstitutePhone: +81-42-392-3087Fax: +81-42-392-3134Research and development of Nikkiso productsand manufacturing technology.
BEL Japan, Inc.Phone: +81-6-6841-2161Fax: +81-6-6841-2767Manufacture and sales of apparutus for powder and surface characterization.
Overseas
Nikkiso America, Inc.Suite 110, 5910 Pacific Center Boulevard,San Diego, CA 92121, U.S.A.Phone: +1-858-222-6300Fax: +1-858-222-6301Administration and management of business planning of the Company and its subsidiaries, as well as promotion and management of Nikkiso product businesses in North, Central and South America.
Nikkiso Pumps America, Inc.3433. N Sam Houston Parkway W, #400, Houston, TX 77086, U.S.A.Phone: +1-281-310-6747Fax: +1-281-310-6771Manufacture, sale and after-sales service of pumps.
Nikkiso Cryo, Inc.4661 Eaker Street, North Las Vegas, NV 89081-2746, U.S.A.Phone: +1-702-643-4900Fax: +1-702-643-0391Service of testing and analysis of submergedcryogenic pumps and other cryogenic components and systems for liquefied gases.
NIKKISO GROUPLEWA GROUP
Global Network As of July 31, 2012
NIKKISO GROUP
60 NIKKISO Co., Ltd.
Microtrac, Inc.148 Keystone Drive, Montgomeryville, PA 18936, U.S.A.Phone: +1-215-619-9920Fax: +1-215-619-9932Manufacture and sale of Microtrac Particle SizeAnalyzer for the powder fluid industry.
Nikkiso-KSB GmbHPhilipp-Reis-Strasse 13, 63486 Bruchkoebel, GermanyPhone: +49-6181-30010-0Fax: +49-6181-30010-99Manufacture, sale and after-sales service of pumps.
Nikkiso Europe GmbH(Head Office)Desbrocksriede 1, D-30855, Langenhagen, GermanyPhone: +49-511-679999-0Fax: +49-511-679999-11(R&D department)Beneckeallee 30, D-30419, Hannover, GermanyPhone: +49-511-679999-0Fax: +49-511-679999-266(Sales department)Alte Landstraße 284, D-22391, Hamburg, GermanyPhone: +49-40-414629-0Fax: +49-40-414629-49Manufacture, sale and after-sales service of medical products (dialysis equipment, disposable products, etc.) in the European market.
Shanghai Nikkiso Non-Seal Pump Co., Ltd.19#-21# Zhenxian Industrial Park, Lane 18 East,Huancheng Road, Fengxian District, Shanghai201401, ChinaPhone: +86-21-6710-3258Fax: +86-21-6710-3250Manufacture, sale and after-sales service of Nikkiso canned motor pumps.
Shanghai Nikkiso Trading Co., Ltd.27F, Huamin Empire Plaza, 728 Yan An West Road, Shanghai 200050, ChinaPhone: +86-21-5239-3637Fax: +86-21-5239-3639Sale of dialysis equipment in the Chinese market.
Weigao Nikkiso (Weihai) Dialysis Equipment Co., Ltd.No.20 Xingshan Road, Chucun Weigao Industry Park, Weihai City, Shandong, ChinaPhone: +86-631-5716299Fax: +86-631-5716297Manufacture and after-sales service of dialysis equipment in the Chinese market.
Nikkiso Pumps Korea Ltd.202, 6F, Ilshin Building, 541 Dowha-Dong,Mapo-Gu, Seoul, KoreaPhone: +82-2-719-1446Fax: +82-2-719-1440Sale and after-sales service of Nikkiso Non-Sealpumps, Nikkiso metering pumps and sale of other Nikkiso products.
Taiwan Nikkiso Co., Ltd.6FL, Der-Ho Bldg No.75, Nanking East Road, Sec. 4, Taipei, TaiwanPhone: +886-2-2713-9906Fax: +886-2-2713-9936Engineering and design, manufacture, sale and after-sales service of boiler-water conditioning systems for Asian region.(Medical Devices Division)6F–6, No.179, Fusing North Road,Songshan District, Taipei, TaiwanPhone: +886-2-2718-5759Fax: +886-2-2718-5739Consultant of sale and after-sales service of dialysisequipment in Taiwan.
M. E. Nikkiso Co., Ltd.74 Suwintawong Road, Saladang,Bangnumpeo Chacheongsao 24000, ThailandPhone: +66-38-593-207Fax: +66-38-593-208Manufacture and sale of disposable products for medical equipment.
Nikkiso Medical (Thailand) Co., Ltd.663 On-nuch Road (Sukhumvit 77) Suanluang,Bangkok 10250, ThailandPhone: +66-2-311-5736Fax: +66-2-716-2895Sale and after-sales service of medical products(dialysis equipment, disposable products, etc.) in Thailand and neighboring countries.
Nikkiso Vietnam MFG Co., Ltd.Road 19, Tan Thuan Export Processing Zone,Tan Thuan Dong Ward, District 7,Ho Chi Minh City, VietnamPhone: +84-8-37701320Fax: +84-8-37701640Manufacturing of medical equipment (blood tubes, etc.) for dialysis treatments.
Nikkiso Vietnam, Inc.Plot No. C6&C7, Thang Long Industrial Park II, Yen My District, Hung Yen Province, VietnamPhone: +84-321-397-4520Fax: +84-321-397-4521Manufacturing of aircraft parts.
LEWA GmbH/HeadquartersUlmer Str. 10, 71229 Leonberg, GermanyPhone: +49 7152 14-0Fax: +49 7152 14-1303
LEWA Pumpen GmbHDiefenbachgasse 35/3/9, 1150 Vienna, AustriaPhone: +43 1 8773 040-0Fax: +43 1 8773 040-29
LEWA Bombas Ltda.Rua Georg Rexroth 609 Bloco E Conj. 2, 09951-#70 Diadema/SP, BrazilPhone: +55 11 4075 9999Fax: +55 11 4071 9920
LEWA Pumps (Dalian) Co., Ltd.No. 86 Liaohedong Road DD Port, 11 6600 Dalian, ChinaPhone: +86 411 8758-1477Fax: +86 411 8758-1478
LEWA Pumpen spol. s.r.o.Sedlákova 19, 602 00 Brno, Czech RepublicPhone: +420 5 432360-52Fax: +420 5 432360-53
LEWA S.A.S.Z.A. des Sureaux 5-9 Rue d’Estienne d’Orves, 78500 Sartrouville, FrancePhone: +33 1 308674-80Fax: +33 1 308674-97
LEWA S.R.L.Via Vincenzo Monti 52, 20017 Mazzo di Rho (Mi), ItalyPhone: +39 02 93468-61Fax: +39 02 93468-62
LEWA OOO Bolschaya Poljanka 44/2 office 344, 119180 Moscow, RussiaPhone: +7 495 64027-73Fax: +7 495 64027-75
LEWA ASWelhavens vei 1, 4319 Sandnes, NorwayPhone: +47 529091-00Fax: +47 529091-01
LEWA Sp. z o.o.ul. Palisadowa 20/22 01-940 Warsaw, PolandPhone: +48 22 6358-204Fax: +48 22 6358-988
LEWA PTE LTD, SingaporeBlk 1 Clementi Loop, Clementi West Logispark #02-06, Singapore 129808Phone: +65 686-17127Fax: +65 686-16506
LEWA Hispania, S.L.Consejo de Ciento 295, 4-1/2, 08007 Barcelona, SpainPhone: +34 93 22477-40Fax: +34 93 22477-41
LEWA Pumpen AGNenzlingerweg 5, 4153 Reinach 1, SwitzerlandPhone: +41 61 7179 4-00Fax: +41 61 7179 4-01
LEWA Ukraine LC15-A, Prospekt 40-richya Zhovtnya, 03039 Kiev, UkrainePhone: +380 44 52796-31Fax: +380 44 52796-05
LEWA Inc.132 Hopping Brook Road, Holliston, MA 01746, USAPhone: +1 508 429-7403Fax: +1 508 429-8615
LEWA Middle East FZEP.O. Box 261900 RA8 VC04, Jebel Ali Free Zone Dubai, U.A.E.Phone: +971 4 8870999Fax: +971 4 8870998
LEWA GROUP
61Annual Report 2012
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