UNIC Machinery

ANNUAL REPORT 2010
Year ended March 31, 2010
Industrial MachineryRock Drills(Construction & Mining Machinery)

MetalsProfile
Since its establishment in 1875, Furukawa has emerged from its origins in mine development to build a broad
range of businesses while constantly addressing the needs of the times. Our core technologies, amassed
through our involvement in copper mine development, have advanced over the years and form the basis of ourcurrent business portfolio. The Furukawa Company Group operations are classified into six business divisions:
Machinery, Metals, Electronic Materials and Chemicals, Paints, Real Estate, and Fuels and Others. These divisions
complement each other and together enable the Group to demonstrate its powerful strengths.
Furukawa is returning to its roots as a manufacturer by drawing on its technological tradition under theguidance of its corporate philosophy—Innovation, Creativity, and Harmony. Here, our aim is to further improve
competitiveness and maintain growth that will permit the next substantial leap forward.

Furukawa’s Technological Genealogy
Mine development technologies

Six Business Divisions
Exploration
technologies

Conveyance andconcentration technologies

Excavation technologies

Rock Drill BusinessHydraulic control technologies

UNIC Business

Machinery

Wastewater treatment technologies

Pulverization technologies

Smelting
technologies

Industrial Machinery Business

Waste gas treatment technologies

Ore smelting technologies

Metals Business

Sulfuric acid production technologies

Chemicals Business

MetalsElectronic Materials
and Chemicals

Contents
Consolidated Financial Highlights
To Our Stakeholders

TopicsPaint production technologies

Paints Business

PaintsReal Estate
4

6

Review of Operations

Electronic Materials Business

1

2

Business Strategies of the Furukawa GroupAt a GlanceElectric technologies

Fuels and Others

8

13

Furukawa Initiatives

14

Corporate Governance16

Consolidated Six-Year Financial Summary
Financial Review

18

Corporate Data

48

Corporate History

17

49

Forward-Looking Statements
This annual report contains statements about the Company’s plans, strategies, performance outlooks, and the like, and includes forward-looking statements that are
not historical facts. Such statements reflect expectations, estimates, forecasts, projections, and plans based on information currently available to the Company and are
subject to various risks, uncertainties, and assumptions. These changing factors may cause actual results to differ materially from those projected.

Consolidated Financial Highlights
Furukawa Co., Ltd. and consolidated subsidiaries
Years ended March 31, 2010, 2009 and 2008
Millions of yen

Thousands of
U.S. dollars

Percent change

2010/2009

2010

2009

2008

2010

¥ 142,925¥ 161,858¥ 213,426$1,536,828

1,598

2,303

14,407

17,183(30.6)

886(2,618)12,484

9,527

ー

585

(5,917)

8,595

6,290

ー

Total assets

204,774

188,361

199,383

2,201,871

8.7

Net assets

50,85545,74255,431

546,828

11.2

For the year:
Net sales
Operating income(11.7)%

Income (loss) before income taxes
and minority interests
Net income (loss)
At year-end:

Per share amounts:

Yen

U.S. dollars

Net income (loss):
Basic
Cash dividends

1.45(14.64)

21.26

0.02

ー

0.00

4.00

6.00

0.00

ー

Notes: 1. U.S. dollar amounts are translated from yen for convenience only at the rate of ¥93=US$1.00.
2. From the fiscal year ended March 31, 2007, what was formerly recorded as “shareholders’ equity” is now recorded as “net assets,” in line with revisions to Japanese accounting
standards as detailed in the Accounting Standards Board of Japan’s (ASBJ’s) “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Statement No.5, December 9,2005) and its implementation guidance, ”Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No.8, December 9, 2005).
Figures for fiscal 2006 represent total shareholders’ equity

Net Sales

Operating Income

Net Assets(Billions of yen)(Billions of yen)(Billions of yen)

16.9

55.4
52.1

213.4

50.9

14.4

200.7
181.9

313

161.9

45.7

43.1

12.1
142.9

Machinery
MetalsElectronic Materials and Chemicals
Paints2.3
1.6

Real Estate
Fuels and Others

‘06

‘07

‘08

‘09

‘10

‘06

‘07

FURUK AWA

1

‘08

‘09

‘10

Annual Report 2010

‘06

‘07

‘08

‘09

‘10

To Our Stakeholders
Shareholder Return
Furukawa places great importance on returning
profits to shareholders while retaining earnings
required to finance capital expenditures and R&D
expenses necessary to bolster earnings. Our basic
policy is to appropriate profits after comprehensive
consideration of future business development andvarious other factors. Unfortunately, in the year
under review we were unable to pay a dividend due
to insufficient profits. In fiscal 2011, we do not plan
to pay an interim dividend and are yet to decide on
the year-end dividend.

Management Policy

Nobuyoshi Soma
President and Representative Director

Business Conditions and Performance
In fiscal 2010, ended March 31, 2010, the Japanese
economy showed some signs of recovery after aperiod of deterioration in parallel with the worldwide
economic recession. However, conditions remained
difficult amid ongoing appreciation of the Japanese
yen and deflation. Overseas, despite continued
economic expansion in some emerging countries,
including China and India, the economic recovery inindustrialized regions, such as the United States andEurope, remains moderate amid significant restraints
on the pace of recovery.
This difficult business environment has
had a considerable influence on the performanceof the Furukawa Company Group. Consolidated
net sales for the year amounted to ¥142,925
million, down 11.7% from the previous fiscal year.
This decline stemmed from various factors. In the
Machinery Division, a recovery in demand failed tomaterialize, prompting a decline in revenues in theindustrial machinery, rock drills, and UNIC machinery
businesses. In the Fuels Division, the decrease insales volumes and a fall in sales prices amid declining
demand resulted in a slump in sales.
FURUK AWA2

Operating income fell 30.6%, to ¥1,598
million. In addition to the aforementioned decline
in revenues, this was mainly due to deteriorating
profitability in the Machinery Division stemming fromlower capacity utilization. These factors outweighed
increased profits generated by the Metals Divisionowing to rising copper and gold prices, leading tosignificant decline in total earnings.
Turning to other income, the Group posteda ¥1,345 million gain related to copper smelting
business in Australia following a review of expenses
incurred in the dismantling of smelting equipment
at its Australian copper smelting subsidiary. The
Group also posted a ¥610 million gain on sales ofinvestments in securities. In other expenses, theGroup incurred a ¥762 million loss on withdrawal
from the compound lumber business and a ¥266
million impairment loss on fixed assets. Based on
the aforementioned, the Group posted net incomeof ¥585 million, a ¥6,502 million improvement fromthe previous year when we incurred a ¥7,418 million
write-down of investments in securities.

Annual Report 2010

Guided by our corporate philosophy—Innovation,
Creativity, and Harmony—we will continue pursuing
reforms of our corporate structure to build an
efficient management system. Deploying our creative
strengths, we will provide appealing manufactured
products and services in order to earn the trust ofcustomers.
We will strive to increase enterprise value
by pursuing four key strategies. First, we will expand
provision of creative high-value-added products
and services. Second, we will increase the ratio of
new products and businesses by promoting theirdevelopment. Third, we will pursue cost reductions
for existing products. Fourth, we will downsize
and abolish unprofitable businesses and promotecollaboration with other companies.

Medium-Term Management Plan
In April 2008, the Furukawa Company Groupembarked on a Medium-Term Management Plancovering the three-year period to March 2011. With
the aim of establishing a solid earnings structurethat is resilient to the external environment, we
designated the period of the plan as a time to build
a robust springboard for making a significant leap
forward. However, the global financial crisis andthe subsequent economic recession that occurredin the first year of the plan have had a considerable
impact on the Group’s performance. At present, ourperformance so far in fiscal 2011, the final year of
the plan, has differed significantly from the plan’stargets. Although it will be difficult to achieve ournumerical targets for the year, we will adhere to thebasic policies of the plan, which are to “promote

FURUK AWA3

further overseas development and strengthen thetechnical capabilities of the Machinery Division”
and “promote development activities aimed at
new product commercialization.” We will continue
to powerfully implement these policies, which are
positioned as strategic priorities for the Group.
During fiscal 2011, we intend to formulate a new
medium-term management plan that will takesufficient account of current conditions.

Outlook
We are hopeful of a recovery in Japan’s economy on
the back of improvements in overseas economies andemergency economic measures. However, there areseveral areas of concern with regard to the risk of afurther economic downturn, including a weakening
in overseas economies, the yen’s appreciation, andongoing deflation.
In this challenging economic environment,
we expect the Metals Division, one of the Group’s
core divisions, to find it more and more difficult
to generate earnings due to worsening copper
purchasing conditions accompanying intenseworldwide competition to procure resources.
Accordingly, we will focus on further expanding
the Machinery Division and the Electronic Materials
and Chemicals Division, where future growth isanticipated.
We can expect the harsh business climate
to continue in fiscal 2011, the final year of theMedium-Term Management Plan. Nevertheless,while adhering closely to its basic policies, the Groupwill work hard to restore its performance by taking
accurate and prompt measures to address changes inthe business environment.
We look to the ongoing understanding and supportof all stakeholders as we embrace the challenges
ahead.
August 2010

Nobuyoshi Soma
President and Representative Director

Annual Report 2010

To Our Stakeholders
Shareholder Return
Furukawa places great importance on returning
profits to shareholders while retaining earnings
required to finance capital expenditures and R&D
expenses necessary to bolster earnings. Our basic
policy is to appropriate profits after comprehensive
consideration of future business development andvarious other factors. Unfortunately, in the year
under review we were unable to pay a dividend due
to insufficient profits. In fiscal 2011, we do not plan
to pay an interim dividend and are yet to decide on
the year-end dividend.

Management Policy

Nobuyoshi Soma
President and Representative Director

Business Conditions and Performance
In fiscal 2010, ended March 31, 2010, the Japanese
economy showed some signs of recovery after aperiod of deterioration in parallel with the worldwide
economic recession. However, conditions remained
difficult amid ongoing appreciation of the Japanese
yen and deflation. Overseas, despite continued
economic expansion in some emerging countries,
including China and India, the economic recovery inindustrialized regions, such as the United States andEurope, remains moderate amid significant restraints
on the pace of recovery.
This difficult business environment has
had a considerable influence on the performanceof the Furukawa Company Group. Consolidated
net sales for the year amounted to ¥142,925
million, down 11.7% from the previous fiscal year.
This decline stemmed from various factors. In the
Machinery Division, a recovery in demand failed tomaterialize, prompting a decline in revenues in theindustrial machinery, rock drills, and UNIC machinery
businesses. In the Fuels Division, the decrease insales volumes and a fall in sales prices amid declining
demand resulted in a slump in sales.
FURUK AWA2

Operating income fell 30.6%, to ¥1,598
million. In addition to the aforementioned decline
in revenues, this was mainly due to deteriorating
profitability in the Machinery Division stemming fromlower capacity utilization. These factors outweighed
increased profits generated by the Metals Divisionowing to rising copper and gold prices, leading tosignificant decline in total earnings.
Turning to other income, the Group posteda ¥1,345 million gain related to copper smelting
business in Australia following a review of expenses
incurred in the dismantling of smelting equipment
at its Australian copper smelting subsidiary. The
Group also posted a ¥610 million gain on sales ofinvestments in securities. In other expenses, theGroup incurred a ¥762 million loss on withdrawal
from the compound lumber business and a ¥266
million impairment loss on fixed assets. Based on
the aforementioned, the Group posted net incomeof ¥585 million, a ¥6,502 million improvement fromthe previous year when we incurred a ¥7,418 million
write-down of investments in securities.

Annual Report 2010

Guided by our corporate philosophy—Innovation,
Creativity, and Harmony—we will continue pursuing
reforms of our corporate structure to build an
efficient management system. Deploying our creative
strengths, we will provide appealing manufactured
products and services in order to earn the trust ofcustomers.
We will strive to increase enterprise value
by pursuing four key strategies. First, we will expand
provision of creative high-value-added products
and services. Second, we will increase the ratio of
new products and businesses by promoting theirdevelopment. Third, we will pursue cost reductions
for existing products. Fourth, we will downsize
and abolish unprofitable businesses and promotecollaboration with other companies.

Medium-Term Management Plan
In April 2008, the Furukawa Company Groupembarked on a Medium-Term Management Plancovering the three-year period to March 2011. With
the aim of establishing a solid earnings structurethat is resilient to the external environment, we
designated the period of the plan as a time to build
a robust springboard for making a significant leap
forward. However, the global financial crisis andthe subsequent economic recession that occurredin the first year of the plan have had a considerable
impact on the Group’s performance. At present, ourperformance so far in fiscal 2011, the final year of
the plan, has differed significantly from the plan’stargets. Although it will be difficult to achieve ournumerical targets for the year, we will adhere to thebasic policies of the plan, which are to “promote

FURUK AWA3

further overseas development and strengthen thetechnical capabilities of the Machinery Division”
and “promote development activities aimed at
new product commercialization.” We will continue
to powerfully implement these policies, which are
positioned as strategic priorities for the Group.
During fiscal 2011, we intend to formulate a new
medium-term management plan that will takesufficient account of current conditions.

Outlook
We are hopeful of a recovery in Japan’s economy on
the back of improvements in overseas economies andemergency economic measures. However, there areseveral areas of concern with regard to the risk of afurther economic downturn, including a weakening
in overseas economies, the yen’s appreciation, andongoing deflation.
In this challenging economic environment,
we expect the Metals Division, one of the Group’s
core divisions, to find it more and more difficult
to generate earnings due to worsening copper
purchasing conditions accompanying intenseworldwide competition to procure resources.
Accordingly, we will focus on further expanding
the Machinery Division and the Electronic Materials
and Chemicals Division, where future growth isanticipated.
We can expect the harsh business climate
to continue in fiscal 2011, the final year of theMedium-Term Management Plan. Nevertheless,while adhering closely to its basic policies, the Groupwill work hard to restore its performance by taking
accurate and prompt measures to address changes inthe business environment.
We look to the ongoing understanding and supportof all stakeholders as we embrace the challenges
ahead.
August 2010

Nobuyoshi Soma
President and Representative Director

Annual Report 2010

Business Strategies of the Furukawa GroupThe Group’s Medium-Term Management Plan, covering the three-year period from April 2008 through March 2011,sets out two basic policies. These policies are to “promote further overseas development and strengthen the technicalcapabilities of the Machinery Division” and “promote development activities aimed at new product commercialization.”
We will continue pursuing business strategies guided by these two basic policies.

Promoting Further Overseas Development and Strengthening
the Technical Capabilities of the Machinery Division
Since the worldwide economic recession began two years ago,
there has been no let-up in the harsh operating environment
surrounding the Machinery Division. According to data suppliedby the Japan Construction Equipment Manufacturers Association,in fiscal 2010 worldwide shipments of construction machinery
contracted by 57%. Further, domestic truck registrations, whichhave a direct bearing on our UNIC machinery business, declined
to less than half the figure of two years ago, reaching a level notseen since 1961. The Company is pursuing a range of initiatives toaddress these challenging conditions.

and local staff, establishing distributors in regions where we do not
yet have a presence, reinforcing distributor support, and working incollaboration with construction machinery manufacturers. We will
accelerate efforts aimed at increasing sales of hydraulic breakers in
China by making use of local procurement and local assembly to reduce
costs, thereby enabling the provision of low-cost products.
Besides China, we will also pursue sales expansion in otherpriority markets, namely, in Southeast Asia, India, the Middle East,
Central and South America, and North America.

Expanding the Rock Drill Business in China
Amid languishing global demand for machinery, the market in China
continues to grow. In the past ten years, sales of mainstay hydraulicbreakers in the Group’s rock drill business have increased approximately
ten-fold in China. The market for construction equipment used forbuilding road infrastructure and farming infrastructure is expected
to continue expanding, primarily in China’s interior regions. At thesame time, we face increasingly harsh competition from cheaper
products made in China and South Korea. Meanwhile, because ourcrawler drills—which are used at mines, quarries, civil engineering,and construction sites—are high-value-added products, we are able
to dominate the market together with leading European companies,
making it difficult for newcomers to compete.
Under these circumstances, in the year under review
Furukawa Rock Drill (Shanghai) Co., Ltd. opened new offices in Beijing
and Chengdu, boosting sales and service support for the Company’s
distributor network in China. In fiscal 2011, we will concentrate on
addressing customer needs by increasing the number of both Japanese

Demand for hydraulic breakers
continues to grow, especially in
China’s interior regions.

Our high-value-added crawler drills boast
the top share of the world market.

Further Expansion of the UNIC Machinery Market
The Company is stepping up efforts aimed at developing UNIC
machinery that meets the specific needs of each region. In advanced
countries, this involves stimulating demand for mini crawler cranes. As
for emerging markets, we will introduce UNIC products that deliver highcost-performance.
Our mini crawler cranes have already established a solid
reputation in European markets, where they are known for theircompact size, which enables excellent operability in confined spaces.
These machines have carved out a completely new market as cranes
that can be used indoors and other restricted areas. Recognizing thelatent demand that exists for these cranes in other advanced regions,such as North America and Oceania, we will work on developing
markets in these areas as well.

Advancing into the Chinese Market

Beijing Office
Our mini crawler cranes arewidely acclaimed in Europe.

Chengdu Office
FRD Shanghai

FRD Shanghai
FURUK AWA

4

Annual Report 2010Market needs for existing truck-mounted cranes vary fromcountry to country. In the growing Chinese market, we are establishinga business model tailored to its specific needs. This entails putting inplace an appropriate sales structure and introducing products that meet
local needs, such as cranes that deliver high cost-performance. We plan
to market such products in Asia and the Middle East as well. In Europe,
we will carve out a new market for mini cranes that can be mounted oncommonly used trailers.

Cranes made by Taian Furukawa deliver
high cost-performance.

Crane mounted on trailer

Promoting Development Activities Aimed at New ProductCommercialization
The development and commercialization of new products that draws
on Furukawa’s core technologies is absolutely vital for the Company’ssurvival. Leveraging our core technologies, we will commercialize new
products that meet the needs of today’s world.
Gallium Nitride Substrates
The establishment of the
Nitride Semiconductors
Department in April 2008
marked the start of full-scale
development of mass-produced
gallium nitride (GaN) substrate
products. Development

was further advanced withthe construction of a newbuilding in April 2009, whichbrought together the crystal
manufacturing and polishingprocesses under one roof.
In the year under review,using numerous hydride
vapor phase epitaxy (HVPE)
machines developed in-house, New laboratory of Nitride Semiconductors
w e a d v a n c e d f r o m t h e Department
developmental stage to the manufacture of mass-produced substrates.
Our plan is to swiftly expand our current crystal mass production
capacity in order to supply customers with products for use in laser
diodes (LDs) mass production in the second half of the current fiscal
year. With a view to commercialization, we will work with Furukawa
Denshi to establish marketing, mass production management, andquality control systems.
The Company’s GaN substrates meet a wide range of
device-related needs. This is because the entire two-inch surface of thesubstrates is uniform, so they have the advantage of offering a highlevel of freedom for device design. In collaboration with POWDEC K.K.,
an affiliate, we are promoting low-cost development of large-diameter
GaN substrates for use in electric vehicles and power supply devices,which require heavy current and high pressure resistance. We also
intend to develop GaN substrates for high-luminescence LEDs.
Thermoelectric Conversion Material
In August 2008, we developed a high-performance thermoelectric
conversion material that can convert energy from heat exhaust toelectricity. In the year under review, we continued developing mass
production technologies for this material, while pursuing developmentof thermoelectric modules. At present, we are conducting enclosure
tests for seal-casing the modules, and we plan to speed up sampling in
the future.

Gallium nitride (GaN) substrate

Progress of Gallium Nitride (GaN) Substrate

We are also developing other new products that meet current
market needs. These include a positron emission mammography (PEM)system that uses lutetium aluminum garnet (LuAG) scintillator crystals to
detect cancer, and a reactor for use in chargers used by plug-in hybrid
vehicles and electric vehicles.

Fiscal 2009
Newly setup the Nitride Semiconductors Department.

Fiscal 2010
Operations concentrated in newly built laboratory.
Shifted to integrated manufacturing process, from development
to mass production.
Begun sample shipments of LDs and electronic devices to users.

Fiscal 2011
Established mass production system (first half)
Supply to begin for LDs mass production (scheduled forsecond half).

FURUK AWA

High-performance thermoelectric
conversion material

5

Annual Report 2010

Thermoelectric moduleAt a Glance% of Net Sales

31.0%

Businesses

Main Group Company

Industrial
Machinery

Furukawa Industrial
Machinery
Systems Co.,
75.8
Ltd.
62.6

70.3

67.8
5.9

4.2 &
Rock Drills (Construction
Mining Machinery)

Machinery’06

UNIC Machinery’07

Net Sales

6.8

8.7
6.0

44.3

Furukawa Rock Drill
Co., Ltd.
1.7
’08

’09

Furukawa UNIC
Operating
Income (Loss)
Corporation

’10

(3.0)

’06

11.0

49.8%

84.8 8.8

6.2

52.7 5.8

Metals’07

Net Sales

Electronic
Materials
and Chemicals

68.8

’08

10.4

71.1

Furukawa Metals &Resources Co., Ltd.

Metals
’06

97.5

’07

3.2

0.02
’09

’10

’06

’07

Operating Income
13.1

7.7%

Electronic
Materials

21.2

2.1
1.5

15.9

Furukawa Denshi
Co.,
Ltd.
15.3
1.5

11.4

11.0
0.8

7.1

Furukawa Chemicals
’08
’09
’10
Co., Ltd.

’06

’07

’06

’07

0.2

Chemicals

’06

’07

Net Sales

Operating Income

2.6%

3.7

Paints*PaintsTohpe Corporation
’06

’07

Net Sales

1.4%

3.1

Real Estate(0.01)’10’09

Operating Income (Loss)

2.9
0.9

’08

2.8
0.8

Real Estate

1.1

2.4
0.7

0.7

2.0
29.1 28.6

Furukawa Co., Ltd.
’06

’07

Net Sales

’08

’10

’09

’06

’07

Operating Income
(0.2)

7.5%

Fuels

34.6

29.4

Furukawa Commerce
22.0
Co.,
Ltd. 16.7

(1.4)

10.7

Fuels and Others

(0.1)
(0.4)

Others’06’07

Net Sales

FURUK AWA

6

Annual Report 2010

(0.1)
(0.7)
’08

’09

Operating Income (Loss)

(0.4)
’10

’06

’07

Main Products

8.7
70.3

67.8

62.6

6.0

6.8

4.2
1.7
’06

’07

Net Sales

’08

(6.8)

’10

’09

(3.0)

’06

’08

’09

’10

6.2

68.8

10.4

71.1

6.4
4.5

Metals97.5

52.7 5.8

3.2

’06

’07

Net Sales

’08

0.02
’09

’10

’06

’07

’08

’09

0.0
’10

Operating Income
13.1

21.2

2.1
1.5

15.9

9.5
15.3 1.5

11.4

6.9

11.0
0.8

7.1

’10

’06

0.2
’06

’07

Net Sales

’08

’09

’07

’08

1.8
’09

’10

Electronic Materials
and Chemicals

Cuprous oxide, sulfuric acid, aluminum sulfate,titanium dioxide, ferric polysulfate solution,copper oxide, copper oxide for plating’07

Operating Income (Loss)

84.8 8.8

High-purity metallic arsenic, gallium
phosphorous polycrystals, X-ray scintillator
crystals, aluminum nitride ceramics,
core coil, optical parts

2.8

44.3

11.0

Electrolytic copper, electrolytic gold,
electrolytic silver, sulfuric acid

9.0

75.8
5.9

Rock drills (hydraulic breakers, hydrauliccrawler drills, tunnel drill jumbos, etc.)
UNIC cranes, mini crawler cranes,
UNICPAL, UNIC carriers

Operating Margin (%)

Machinery

Pumps, environmental machinery, stone
crushers, plants, steel structures, castings

Net Sales/Operating Income (Billions of yen)

Operating Income(0.5)

Paints

3.7

Kinds of paints, acrylic rubber, glue
’06

’07

Net Sales’08(0.01)
’10

’09

’06

’07

’08

’09

’10

Operating Income (Loss)

Construction/sales, mediation/brokerage,
other related services for office buildings
and apartments

2.9
0.9

2.8
0.8

1.1

2.4
0.7

0.7

2.0
29.1 28.6 27.2

’06

’07

Net Sales

’08

’10

’09

’06

’07

’08

29.4

22.0

(0.1)

Transportation service by trucks and domestic
shipping

(0.4)
’06

’07

Net Sales

10.7

(0.1)
(0.7)
’08

’09

Operating Income (Loss)

7

(0.6)

(1.4)
16.7

* New business launched in December 2009 when Tohpe Corporation became a consolidated subsidiary.
FURUK AWA

’10

Fuels and
Others34.6’09

Operating Income(0.2)

Heavy oil, gasoline, diesel, kerosene,
lubricating oil, LPG, coke

29.6

Real Estate

55.2
3.1

Annual Report 2010

(3.0)

(0.4)
’10

’06

’07

’08

(3.8)
’09

’10

Review of Operations
MachineryIn fiscal 2010, ended March 31, 2010, the Machinery Division
reported sales of ¥44,313 million, a 29.3% decline comparedwith the previous year. The division reported an operating loss of¥3,010 million, down ¥4,744 million from the previous year, andthe operating margin fell 9.6 percentage points, to –6.8%.

Industrial Machinery
Performance and Strategies
In fiscal 2010, we recorded a decline in both revenues and earnings
for industrial machinery. The main reasons were a decrease in sales ofpump plants and lower demand for environmental machinery and steel
structures due to fewer public works projects. Other factors included aslump in large-scale projects stemming from the economic downturn,as well as postponements in the release of new products and an overall
decline in demand for other industrial machinery. As a result, sales ofindustrial machinery declined 19.3% year on year, to ¥12,783 million,
and operating income fell 43.5%, to ¥433 million.
As a manufacturer of pumps, environmental machinery,stone crushers, and other industrial machinery, we will strive to increase
orders received through comprehensive proposal-based sales and thedeployment of best practices across the division. We will restructure ourcurrent product-based sales system into two sector-based groups—one
for the public sector and one for the private sector—and improvesales efficiency by centralizing customer information. Demand is
expected to increase for environmental measures, recycling, and energy
conservation amid a tightening of environment-related regulations. We
will work hard to secure new sources of earnings by launching new
products that draw on technologies the Group has amassed over many

Crushers used in the steel,chemical, and nonferrous
metal mining industries

years. For example, we plan to release a uniaxial screw pump with amechanism that is more compact than existing products for applicationin the food industry. We will also increase sales by creating replacement
demand for a new filter-type electrostatic precipitator with significantly
higher efficiency.

Electrostatic precipitators used
for removing particulates fromgas emissions and dust from theenvironment

New type of uniaxial screw pump featuring
improved compactness

Rock Drills (Construction and Mining Machinery)
Our pumps have a proud trackrecord in wastewater treatment
plants and underground tunnel
projects nationwide.

Performance and Strategies
In the rock drill business, demand for breakers slumped amid adecrease in a wide spectrum of domestic projects. Sales of crawler drills
also declined on the back of a fall in capital investments stemmingfrom production cutbacks in the quarry and lime sectors. Overseas,
we recorded a sharp decline in sales of breakers and crawler drills,
which are mainstay products in the construction and mining machinery
segment. The exceptions here were China, where the market remained

Industrial Machinery
Net Sales

Operating Income (Loss)(Billions of yen)(Billions of yen)

30

2.0

Hydraulic crawler drills
1.0

0.8

20
17.3

17.0
14.1

30%

0.8
0.4

15.8
12.8

‘06

‘07

‘08

‘09

‘10

35%
65%

Global Market
Share

10

0

Tunnel drill jumbos

0.1

0

-1.0

Hydraulic breakers

(1.0)

-2.0
‘06

‘07

Rock Drills (Construction and Mining Machinery)

‘08

‘09

Japanese Market
Share

90%

Japanese Market
Share

Used at mines, quarries, civil engineering, andconstruction sites in Japan and overseas, Furukawa’s
hydraulic crawler drills boast the top market share in
the world.

‘10

FURUK AWA

Japanese Market
Share

8

Annual Report 2010

buoyant owing to demand for the construction of infrastructure, as
well as Saudi Arabia and some other countries. The decline in sales
stemmed from prolonged inventory adjustments and price competition
with rival manufacturers. As a result, sales in the rock drill businessdeclined 30.7%, to ¥20,386 million, and we recorded a ¥2,572 million
operating loss, down ¥2,827 million from the previous year.
China is the largest market for Furukawa’s rock drills. In lightof its strategic importance, we will increase the number of staff basedin that country, as well as strengthen collaboration with manufacturersof construction machinery, expand our distributor networks, andupgrade our services. We will strive to improve price competitiveness byoffering low-priced products through cost reductions achieved throughlocal procurement and local assembly. As for other priority markets, wewill pursue sales expansion in Southeast Asia, India, the Middle East,
Central and South America, and North America. At the same time,
we will develop new markets in Japan for ultralow-noise hydraulicbreakers and other environmentally friendly products by boosting sales
expansion activities.

Hydraulic breakers

ulic crawler drills

Hydraulic breakers

30%

MarketeTunnel drill jumbos

35%
65%
Japanese Market
Share

90%

Japanese Market
Japanese Market
Share Machinery
Share
Industrial

Net Sales

Net Sales cranes
Truck-mounted(Billions of yen)
(UNIC cranes)

Hydraulic breakers,
which(Billions ofyen)are attached tohydraulic shovels, are used for excavating rockand breaking
2.0concrete.

30

Performance and Strategies
In the UNIC machinery business, domestic sales inevitably slumped due
to a decline in truck registrations in Japan for the fourth consecutive
year. In fiscal 2010, truck registrations fell 33.9% year on year, to
41,000 units, the first time total registrations have fallen below 50,000
since 1961. Overseas sales declined overall for the year, despite signs ofIndustrial
Machineryrecoveryin demandin the second half of the period. As a result, sales
in the UNIC machinery business amounted to ¥11,142 million, down
Net Sales
Operating Income (Loss)
35.9%
fromofthe
an ofoperatingloss of ¥870
(Billionsyen)previous year. We reported(Billionsyen)million, down ¥1,581 million from the previous year.
30
2.0With no prospect of a rapid recovery in demand in thedomestic truck market, we will work hard to boost sales of high1.0
value-added products, including environmentallyfriendly
ECO cranes
0.8 0.8
and an20operator-friendly joystick remote crane controller. At the
0.4 same
17.3
17.0
0.1 in markets thattime, we will reinforce15.8
our product lineup and sales
14.1
0
12.8 such as mini crawler cranes and large
are not dependent on trucks,
10
ship cranes.
Overseas, we will create business models tailored to local
market needs by identifying strategic -1.0
products(1.0) for each region or
country. For example, in North America and Oceania we will market
mini crawler
cranes, which have earned a-2.0
solid reputation in Europe for0‘06 ‘07‘10‘07 introduce‘08 ‘09 ‘10cranes
their compact
size ‘08and ‘09
accessibility.
In China, ‘06
we willthat offer high cost-performance.

Rock Drills (Construction and Mining Machinery)

Operating Income (Loss)(Billions of yen)

UNIC Machinery

40

Operating
Vehiclecarriers Income (Loss)(Billions of yen)
(UNIC carriers)

1.0

Hydraulic
20 crawler drills

17.3

17.0

30%

14.1

Hydraulic breakers
15.8
12.8

10

65%

Global Market
Share

Japanese Market
Share

Tunnel drill jumbos
0.4

0.1

35%0

Japanese Market
Share

-1.0

30

Tunnel 0.8
drill 0.8
jumbos

3.7

4.0

37.5
32.8 33.0

47%

3.0

29.4
Japanese Market
Share

2.0

20.4

1.0

20

3.1

48%

2.6

Japanese Market
Share
0.3

0
(1.0)

90%

-2.0
0
‘06 through‘07 ‘08mountains‘09 ‘10in road and railway construction
Used for tunneling‘06 ‘07 ‘08
projects in Japan, tunnel drill jumbos dominate the domestic market.

‘09

-1.0

10

Japanese Market
Share

-2.0
The U-can ECO series of low-noise,0fuel-efficient truck-mounted‘06 ‘07 ‘08 cranes‘09 ‘10is slowly penetrating the market.

‘10

The UNIC carriers lineup of high-value-added
(2.6)
-3.0
products includes‘06
truck-mounted
cranesthat can‘07 ‘08 ‘09‘10
operate on a platform with a zero-degree
angle and two-vehicle carriers.

Rock Drills (Construction and Mining Machinery)

UNIC Machinery

Net Sales

Operating Income (Loss)

Net Sales

Operating Income (Loss)(Billions of yen)(Billions of yen)(Billions of yen)(Billions of yen)

30

4.0

40
32.8 33.0

3.0
29.4

30

3.7

4.0

37.5

3.1

3.0

2.6

2.0
20.4

20

20

20.5

20.6 21.0

11.1
10

-1.0

‘06

‘07

‘08

‘09

UNIC Machinery

‘10

0.7

0
-1.0

-2.0
0

2.3

1.0

0.3
0

10

2.7

2.0

17.4

1.0

2.6

(0.9)

-2.0

-3.0
‘06

‘07

‘08

‘09

(2.6)
‘10

FURUK AWA

0

9

‘06

Annual Report 2010

‘07

‘08

‘09

‘10

-3.0
‘06

‘07

‘08

‘09

‘10

Review of Operations
MetalsIn fiscal 2010, sales in the Metals Division amounted to ¥71,133 million, up 3.4% from the previous year. Operating income grew ¥3,201
million, to ¥3,224 million, and the operating margin improved 4.5 percentage points, to 4.5%.

Performance and Strategies
After starting the year at US$3,963.50/ton in April 2009, the price ofelectrolytic copper continued to soar throughout the rest of the year.
Copper prices were firm owing to a decline in LME inventories up
until August, as well as expectations of an upturn in the U.S. economy
and higher demand in China. Despite a subsequent increase in LME
inventories, in November the price of copper climbed to US$6,945.50/
ton amid fears of strikes at mines in Chile and weaker U.S. dollar
exchange rates. This was followed by a temporary fall in price due toDubai’s debt problems. However, the minimum price remained firm,and once the threat of Dubai’s debt problems had receded, fears of
strikes at Chilean mines prompted a further rally, and by December
2009 the price had climbed to US$7,346.00/ton. From January
onwards, uncertainties surrounding supply in South America andstrong economic indicators for the U.S. and China prompted further
price rises. Due to these factors combined with a weakening U.S. dollar
against the euro, at fiscal year-end the price of copper had climbed to
US$7,830.00/ton, its highest point for fiscal 2010. In Japan, too, theprice of electrolytic copper rose from ¥450,000/ton in April 2009 to¥730,000 by fiscal year-end.

Sales by the Metals
Division increased 3.4% year on
year, to ¥71,133 million, owing torising copper prices and growthin gold sales volumes. Operating
income rose significantly, to ¥3,224
million, amid an inventory valuation
gain accompanying the rising priceCopper cathodesof electrolytic copper in overseas
markets and higher sales volumes for gold.
While demand for copper is expected to increase in China
and other emerging countries, there are fears that TC/RC conditions
will worsen following mergers among resource companies to form
oligopolies. In March 2010, the Company acquired mining rights in
the Gibraltar Copper Mine in Canada through a joint venture. We willcontinue securing stable supplies of copper ore and building a businessstructure that can withstand harsh TC/RC conditions.

Copper prices and foreign exchange rates
2006

2007

2008

2009

2010

LME copper price (average; U.S. dollars/ton)

4,096

6,970

7,584

5,864

6,101

JPY rate per U.S. dollar (average for fiscal year)¥114.32¥118.03¥114.28¥100.54¥92.85

Copper production and sales volume*
2006

2007

2008

2009

2010

Copper production volume (tons)

84,49888,686

95,35590,02384,455

Copper sales volume (tons)

84,46488,521

95,80888,98989,456＊ Furukawa Metals & Resources Co., Ltd.

Electronic Materials
Net Sales

Operating Income(Billions of yen)(Billions of yen)
97.5

100

10
8.8

84.8
80
68.8
60

71.1

6

52.7

40

4

20

2

0

‘06

‘07

‘08

‘09

‘10

Joint acquisition of Gibraltar
Copper Mine in Canada

8

0

6.2

5.8

3.2

0.02
‘06

‘07

‘08

‘09

‘10

FURUK AWA10

Annual Report 2010

Electronic Materials and Chemicals
Sales in the Electronic Materials and Chemicals Division declined 3.5% year on year, to ¥10,995 million. Operating income rose ¥557
million, to ¥763 million, while the operating margin increased 5.1 percentage points, to 6.9%.

Electronic Materials

Chemicals

Performance and Strategies
Demand for gallium arsenate semiconductors, the main application for
high-purity metallic arsenic, recovered thanks to higher demand forelectronic devices and optical devices. Shipments of crystal products
were steady in the second half of the year owing to an upturn in themarket that prompted customers to complete inventory adjustments.
As a result, sales in the electronic materials business grew 7.2% year
on year, to ¥5,969 million. Operating income jumped ¥653 million, to¥657 million.
The Company is currently focusing on establishing a mass
production system for gallium nitride (GaN) substrates as part ofcommercialization efforts directed at the early market launch of thesesubstrates. We plan to start supplying GaN substrates to customers during
fiscal 2011. We are also in the process of creating a foundation for ourelectronic materials business that draws on our track record in supplying
noise filters used in electronic control circuits. Here, we have alreadybegun sampling reactors, a type of coil, that we have developed for
application in chargers used in plug-in hybrid vehicles and electric vehicles.

Performance and Strategies
In the year under review, we reduced production of sulfuric acid,cuprous oxide, and ferric polysulfate solution in response to a decline
in shipments that stemmed from languishing demand from domestic
customers caused by production adjustments. As a result, sales in thechemicals business decreased 13.7%, to ¥5,025 million, and operating
income fell 47.8%, to ¥105 million.
Demand for cuprous oxide is expected to decrease due
to ongoing declines in orders for new ships. Consequently, we will
work hard to reduce costs by diversifying raw materials procurement.
We will also strengthen sales of high-value-added copper compound
products. In addition, we will powerfully promote development of nextgeneration products while focusing on improving the competitivenessof our entire product range.

High-purity metallic arsenic

Global Market
Share

Global Market
Share

Global Market
Share

Japanese Market
Share

Cuprous oxide40%

Operating Income
45%

Net Sales(Billions of yen)Japanese Market
Share(Billionsof yen)Japanese(Production) Market
Share
2.0

20
15.9

1.5

15
Cuprous oxide is used as an antifouling
9.4
agent in10
paints applied to8.8
the bottoms
of ships.
5.6 6.0545%Japanese (Production) Market
Share

Gallium arsenate semiconductor materials
used in cellular phones and other electronic
devices, red laser diodes, and LEDs

Semiconductor materials used in LED
applications for displays and cellular phones

0

‘06

‘07

‘08

‘09

‘10

1.4
1.1

1.0

1.0

0.7
0.5

0

0.0
‘06

‘07

‘08

‘09

Net Sales

Operating Income

Net Sales

Operating Income(Billions of yen)(Billions of yen)(Billions of yen)(Billions of yen)

20

2.0

15

2.0

15.9
1.5

15

9.4

10

5

0

‘06

‘07

Chemicals

‘08

1.0

‘09

6.5
6

0.7

6.0
0.5

‘10

0

1.5

9

1.1

5.6

12

1.4

1.0

8.8

‘10

ChemicalsElectronic Materials

6.5

5.3

1.0
5.8

0.5

3
0.0
‘06

‘07

‘08

‘09

0

‘10

FURUK AWA

11

0.7

5.0

0.5

0.4

0.2
‘06

Annual Report 2010

‘07

‘08

‘09

‘10

0

‘06

4

70%

Electronic Materials

70%

Japanese Market
Share

Global Market
Share

Gallium phosphorus polycrystals

40%
55%

55%

‘07

‘08

‘09

0.1
‘10

Review of Operations
PaintsFor the period covering January through March 2010, the newly established
Paints Division recorded sales of ¥3,693 million, and an operating loss of¥19 million. The operating margin was –0.5%.
Overview

In December 2009, the Company transformed equity-method affiliate
Tohpe Corporation into a consolidated subsidiary of the Furukawa Company
Group. Tohpe Corporation is engaged in the manufacture and sales of paints
and chemicals. As a result, Tohpe Corporation s financial results for the
fourth quarter of fiscal 2010 are included in the Group s financial results.
In the three months from January through March 2010, the Paints Division
reported sales of ¥3,693 million, and an operating loss of ¥19 million.
In line with the management plan currently under way, we will stepup efforts to reduce costs by consolidating production and other measures.
At the same time as focusing on sales of highly profitable environmentallyfriendly paints, we will boost the production structure for acrylic rubber usedin automotive-related applications, for which there is strong demand.

Real Estate
In fiscal 2010, sales in the Real Estate Division amounted to ¥2,044 million,
down 14.3% from the previous year. Operating income jumped 59.9%,
to ¥1,129 million, while the operating margin increased 25.6 percentage
points, to 55.2%.
Overview

Revenue in this business declined due partly to the sale of the Dojima
Grand Building in the previous year, despite efforts to acquire new tenants
in an office building market experiencing rising vacancy rates. By contrast,
earnings in this division were boosted by a decline in lease payments owing
to the acquisition of the Furukawa Building, which had previously been
subleased.

Furukawa Osaka Building

Fuels and Others
Sales in the Fuels and Others Division decreased 35.5%, to ¥10,747 million.
The operating loss was ¥406 million, down ¥304 million from the previous
year.
Overview

Crude oil prices rose during the year, although declining demand made itdifficult to pass on these increases to sales prices. As a result, sales in thefuels business fell 36.0%, to ¥9,893 million, and we reported an operating
loss of ¥29 million, down ¥232 million from the previous year.
In the Others category, consisting primarily of the transportbusiness, we reported sales of ¥854 million, down ¥351 million, and an
operating loss of ¥377 million, down ¥72 million from the previous year.
In March 2010, we withdrew from the compound lumber business. The
Company decided to discontinue this business in light of the challenging
operating environment that shows no prospect of future profitability.

FURUK AWA

12

Annual Report 2010

TOPICS
Tohpe Corporation Becomes Consolidated Subsidiary
In December 2009,the Company transformed equity-method affiliate Tohpe Corporation into a consolidated
subsidiary. Tohpe Corporation is engaged in the manufacture and marketing of paints and chemicals. Establishedin 1915, Tohpe has more than 90 years’ experience as a manufacturer of paints and related products. Since Tohpe
became a member of the Furukawa Group (then Furukawa Mining Co., Ltd.) in 1919, the Company has maintained
strong personal, capital, and business relationships with this important member of the Furukawa Company Group.
Tohpe’s principal activities are the manufacture and marketing of paints and chemical products. It has astrong track record in the development of both environmentally friendly and highly functional paint products, as

Tohpe Corporation

well as highly functional chemical products. Tohpe will receive assistance from the Company, primarily in the areasof finance and human resources, under the Company’s current management plan that seeks to shore up its businesssegments. By making it a consolidated subsidiary, the Company is placing Tohpe on a more steady footing while
expanding the business activities of the Group.

Sampling of Reactor for Charger Application
In the past, Furukawa has drawn on the technology it uses for the in-house production of core coils to supply corecoils tailored to meet customers’ needs, primarily in the automotive sector. In January 2010, the Company began
supplying mass-produced samples of a new type of reactor* it has developed for application in chargers used inplug-in hybrid vehicles and electric vehicles. An amorphous dust core coil developed by the Company is used as thecore material in the reactor. The reactor is smaller, less expensive, and not as noisy as conventional electromagnetic
steel coils, and also saves energy through reduced conversion loss.
The Company plans to expand sales of this new reactor and other coil products by capitalizing on its
strong track record in the supply of a wide range of core coils to the automotive sector.
* Coil made for use in a battery charger circuit.

New type of reactor developed

Acquisition of Canadian Copper Mine Rights
In March 2010, Furukawa Co., Ltd., Sojitz Corporation, and Dowa Metals and Mining Co., Ltd. jointly acquired a
25% interest in the Gibraltar Copper Mine, owned by Taseko Mines Ltd., a Canadian copper mining firm.
Located in British Colombia, the Gibraltar Copper Mine is currently in operation and has mineable
reserves of 472 million tons. Operations can be sustained for 25 more years. The scheduled completion of an
expansion project in 2010 will boost the current annual production capacity of approximately 120,000 tons ofcopper concentrate to 180,000 tons.
Furukawa’s investment in the Gibraltar Copper Mine marks its third overseas mine investment, following
earlier investments in the Huckleberry Mine in Canada and the Batu Hijau Mine in Indonesia. Furukawa is proactively
establishing a business structure that will enable its Metals Division to secure a stable supply of copper ore and ride

Gibraltar Copper Mineout harsh copper treatment charges and refining charges.

Renewal of Furukawa Website
In March 2010, the Group launched its renewed website. A video called “Special Contents: Furukawa’s Path fromthe Past to the Future,” which traces Furukawa’s involvement in Japan’s growth over the years, has been added tothe site. This new feature complements the highly popular five-minute video guide to the Company Group, available
on the Japanese-language site. The Furukawa Company Group’s Business page contains information on the historyof the Company and its strategies, while the Investor Relations page contains a link for individual investors thatoffers concise snapshots of our history, technologies, and business activities. We encourage all visitors to our website
to make use of these new eye-catching features, including an easy-to-use search function.
Furukawa’s renewed website
FURUK AWA

13

Annual Report 2010

Furukawa Initiatives
Research and Development
The Furukawa Company Group has embraced “Full-Fledged Monozukuri” as one of its medium-to-long-term strategies, and research anddevelopment activities are an important element supporting this initiative. The Group’s Research and Development Division consists of sevenentities: Materials Research Laboratory, Techno-Research Laboratory, Nitride Semiconductors Department, Semiconductor Growth System
Department, R&D Planning Department, Intellectual Property Department, and Control Department. The Company promotes R&D aimed at
benefiting its own business and contributing to social advancement, while working closely with other Group members in all areas, from basic
materials to machinery and equipment.
■ R&D Policies
The Group has a monozukuri (art of production creation) tradition goingas well as production, control, and data processing technologies. The Nitride

back more than 130 years. In order to win against the competition with

Semiconductors Department develops nitride semiconductor materials, andan overwhelming presence, we are stepping up technological and productthe Semiconductor Growth System Department mainly handles development

development activities based on the key axiom of “Full-Fledged Monozukuri

and manufacture of leading-edge electronic materials and thin-film productionand Structural Development.” Every employee of the Group shares the sameequipments. The R&D Planning Department coordinates the Group’s overall

understanding that our products must sell because of their superior quality, not

R&D activities and is responsible for marketing and formulation of productdue to temporary fads or environmental changes. Based on this recognition,

development strategies. The Intellectual Property Department handles rights to

we have a policy of developing core technologies within the Group. Consistenttechnologies developed by the Group and also provides Groupwide and R&D

with this policy, the Research and Development Division is working to develop

support from the perspective of ensuring effective utilization of such rights.

new materials, mainly in the field of new functional materials, and is actively
advancing R&D aimed at developing next-generation machinery products andproduction technologies.

Materials Research Laboratory
Techno-Research Laboratory■ R&D Organization

Nitride Semiconductors Department

The Group’s Research and Development Division consists of seven entities:

Research andDevelopment
Division

Materials Research Laboratory, Techno-Research Laboratory, Nitride
Semiconductors Department, Semiconductor Growth System Department, R&D

Semiconductor Growth System Department
R&D Planning Department

Planning Department, Intellectual Property Department, and Control Department.
The Materials Research Laboratory develops new functional materials, while

Intellectual Property Department

the Techno-Research Laboratory develops next-generation machinery products,

Control Department■ Major R&D Successes
The Furukawa Company Group is working to commercialize the following products, which are the results of its R&D activities.

Gallium Nitride (GaN) Substrates

Pr:LuAG Scintillator Crystals

Thermoelectric Conversion
Materials

Liquid Crystal Display
Processing Equipment

GaN is a new semiconductor that

A scintillator is a material thatis used in next-generation high-exhibits the property of luminescence

Thermoelectric conversion materials

performance, sophisticated electronic

when subject to radiation. Pr:LuAG

devices. Blue-violet laser diodes (LDs) in

scintillator crystals, developed jointly

Blu-ray Discs and white light emitting

by Furukawa and Tohoku University,

diodes (LEDs) for lighting equipment

are expected to find applications inwere invented using GaN. Moreover,the medical diagnostic field, including

there are growing expectations forin positron emission tomographyusing GaN in new types of transistors(PET) scanners used for early cancer

for electric cars. The Furukawa

detection, as well as next-generation

Company Group supplies GaN sub-positron emission mammography

strates that are indispensable for these(PEM) equipment for breast cancer

devices.

screening. Currently, we are making

The recent spread of digital terrestrial
televisions has led to remarkable
growth in demand for color liquid
crystal modules. These modules are
subject to an extremely large numbero f p ro c e s s e s b e f o re p ro d u c t i o n
is complete. At Furukawa, wemanufacture baking equipment to
dry oriented films coated on glass
substrates to align liquid crystal
molecules when manufacturing liquid
crystal modules.
Our latest 7.5-generation baking
equipment, for example, can dry
oriented films coated on 1.95mm
× 2.25mm glass subordinates very
evenly. Our state-of-the-art baking
equipment incorporates the latest
technologies in such areas as heat flow
analysis by simulation, high-precision
temperature control, and threedimensional position control.

a prototype of large crystals with adiameter of 3 inches.

FURUK AWAare capable of converting excess heat
into electricity. If we can effectively
convert heat emissions from car
engines and industrial furnaces, which
normally wasted, into electricity, we
can save energy and contribute to theglobal environment. Furukawa hasdeveloped thermoelectric conversion
materials with heat conversion
efficiency at the world’s highest level.
Currently we are making a prototype
and advancing research activities
towards the practical application ofthermoelectric modules.

14

Annual Report 2010

Environmental Protection and Social Contribution Activities
The protection of the environment is one of the most important management issues at the Furukawa Company Group. Our fundamental policy
is that each employee should strive in all corporate activities to perform in harmony with the environment, consider the improvement of theenvironment, and contribute to the development of a sustainable society. We are aware of the important role we play in giving back to thecommunity as a good corporate citizen.

■ Environmental Management■ Environmentally Friendly Products

Environmental management system

The Furukawa Company Group actively engages in the development of environmentally

The senior decision-making body for environmental protection activities is the Central
Committee for Environmental Management, in which the senior managing directors andmanaging directors participate. In addition, we have the Environmental Management
Subcommittee, which make proposals related to environmental protection activities and studies
policies and guidelines to address revisions of environment-related regulations.
Furthermore, the Committee of Environmental Protection Supervisors meets
every year, bringing together the people who directly guide and manage environmental andsafety initiatives in each Group company. At these meetings, the committee aims to fulfill fourbasic purposes: (1) convey and ensure the enforcement of decisions made by the Environmental
Management Committee; (2) help improve the competency of environmental protection
supervisors at each Group company; (3) prevent accidents and disasters through concerted
efforts to share information and reflect it in its daily business management; and (4) verify
revisions to environment-related regulations.

friendly products as part of its contribution to the creation of a sustainable society.

Environment and safety audits■ Environmental Protection Activities
The Furukawa Company Group’s energy-saving activities center on achieving medium-termtargets for energy and resource consumption set every five years. The results for the first set oftargets (covering fiscal 2005–2009) and the targets for the next five years (fiscal 2010–fiscal
2014) are shown below.

● First Medium-Term Reduction Targets
Electricity
Heavy oil
Natural gas (*1)
Water
Waste discharge

Base year: Fiscal 2004

Fiscal 2009 (target)

Achievement ratio

40% reduction of fiscal
2004 consumption
25% reduction of fiscal
2004 consumption
10% reduction of fiscal
2004 consumption
25% reduction of fiscal
2004 consumption
35% reduction of fiscal
2004 consumption

142％
374％
(842)％
101％
142％

Calculation of achievement ratio: [(FY2004 result – FY2009 result) ÷ (FY2004 result – FY2009
target)] x 100%

● Second Medium-Term Reduction Targets
CO2 emissions (*2)
Water
Waste discharge

Base year: Fiscal 2006

Fiscal 2014 (target)
5% reduction of fiscal 2006 consumption
5% reduction of fiscal 2006 consumption
10% reduction of fiscal 2006 consumption*2: Forms of energy used: Gasoline, kerosene, diesel oil, heavy oil, LPG, natural gas,and electricity

FURUK AWA

Amorphous dust core coil
A Japanese automobile manufacturer has adopted
the Group’s amorphous dust core coil for its
electric vehicles. The amorphous dust core coilserves as a reactor, which is required in circuits
used to convert voltage for recharging thebatteries of electric vehicles and plug-in hybrid
vehicles. Because this coil, which uses amorphous
dust materials, provides greater recharging
efficiency compared with cores that use othermaterials, it reduces energy loss and helps lower
CO2 and NOx emissions.

■ Social Contribution Activities
The Furukawa Company Group seeks to live in harmony with local communities throughstewardship and maintenance of forests owned by Furukawa and participation in afforestation
programs, as well as factory neighborhood cleanup activities, preservation of the “NikkoSuginamiki” (Avenue of Cedars in Nikko), accepting internships, and hosting factory visits.
Other initiatives include fund-raising activities, arranging blood-donor drives, sponsorship ofcommunity events, helping preserve biodiversity, holding original environmental activities, andloaning our land for free to local environmental associations.
In March 2009, we formed the Ashio Cherry Blossom Planting Group to promote
the restoration of the natural environment in Ashio-machi in Tochigi Prefecture, where the
Furukawa Company developed its second mine more than 130 years ago. Many volunteers
from the Company took part in the second tree-planting drive, held in March 2010.

Preserving biodiversity*1: Switched from heavy oil to natural gas, which produces fewer CO2 emissions

Category

A large ultralow-noise hydraulic breaker achieves
an approximately 70% reduction in acousticpressure and reduces sound levels by approximately
11 decibels by suppressing the unpleasant noise(high frequency region) that is made when metal
strikes various surfaces. Furukawa applied toregister a demolition and excavation method thatuses this ultralow-noise hydraulic breaker with
the New Technology Information System (NETIS)
managed by Japan’s Ministry of Land, Infrastructure and Transport. In January 2010, ours was
the first product granted registration in the “ultralow-noise hydraulic breaker” category.

The Furukawa Company Group conducts annual “Environment and Safety Audits.” In fiscal
2010, these audits gave priority to the themes of promoting visualization (quantification), theprompt detection of on-site problems, and making efficiencies and improvements. We will
strive to upgrade control systems related to environmental protection and worker safety, whilefurther strengthening the Group’s internal networks.
The year under review marked the third time that the Group conducted “crossaudits,” in which each plant is audited by an environment protection supervisor from anotherplant. The supervisors bring back the knowledge and experience acquired from performing
cross-audits to their own plants, and the new perspective gained in the process help withthe ongoing implementation of improvements. In fiscal 2010, the success of this system
was apparent in the decrease in the number of items requiring improvement or correction
compared with the previous year, as well as in the expansion of personal networks.

Category

Ultralow-noise hydraulic breaker

15

The site of the former Kune Mine, situated in Hamamatsu City in Shizuoka Prefecture, used tobe home to a large number of Genji-botaru (Genji fireflies). For the past several years, we haveworked together with the local community on aplan for the regeneration of fireflies in this area.
Owing to genetic differences between individualorganisms, even those belonging to the same
species, caused by their particular habitat, we had
previously undertaken an environmental survey of
not only the river but also the entire surrounding
environment. Thanks to these efforts, in June2009 we confirmed the lights of multiple fireflies.

Annual Report 2010

Corporate GovernanceThe basic policy of the Furukawa Company Group is to contribute to society, our shareholders, and other stakeholders by building an efficientmanagement structure that will yield stable profits and increased corporate value through greater management transparency and continuous
innovation in our corporate structure. This policy binds the Group’s businesses together to ensure Group integrity, while enabling them to manage
their individual operations under a flexible management structure with a clear focus on asset management and accountability for gain and loss. At
the same time, Group businesses leverage collective strengths to maximize corporate value by providing products and services that achieve customer
satisfaction.
System of Corporate GovernanceFurukawa maintains a Board of Directors comprising seven members, one ofwhom is appointed from outside the Group. The Board of Directors oversees theexecution of the Furukawa Company Group’s operations and in principle meetsonce every month, with additional meetings held as required.
To clearly separate management oversight functions from executivefunctions, accelerate decision-making, and clarify responsibilities, Furukawa has
adopted an executive officer system. At present, we have 15 executive officers,
five of whom concurrently hold positions as directors.
The Management Council sets the Furukawa Company Group’s
fundamental management policies and strategies and makes decisions onimportant matters. There is also a Management Committee, which meets
monthly to discuss the operations of Furukawa and its core companies, andprovides direction. Decisions made by the Management Council that involve theallocation of funds or other important management issues must be discussed
and approved by a resolution of the Board of Directors. Furthermore, importantmatters that have been determined by individual Group companies are discussed
and reviewed by the Board of Directors and other relevant bodies.
Furukawa uses an auditor system, with a Board of Auditors composedof two statutory auditors and three outside auditors. Pursuant to an audit policy
formulated by the Board of Auditors, auditors attend meetings of the Board of
Directors, the Management Council, the Management Committee, and otherimportant management meetings. In addition, they receive business reports fromdirectors, audit business sites and subsidiaries, and monitor the performance of
duties carried out by directors. The audit function is further reinforced by the
Audit Office, an organization in charge of internal auditing. The Audit Office
is composed of six members who engage in auditing Groupwide operations
management and the execution of business operations. In order to ensure theefficiency and effectiveness of the audit function, Furukawa continuously works
to reinforce cooperation between the Audit Office, auditors, and independent
auditors, who together devise audit plans, review audit results, and share otheraudit-related information.
Compliance and System of Risk Management
The Furukawa Company Group has formulated a Corporate Conduct Charter andan Employees’ Code of Behavior. Every effort is made to ensure that all membersof the Group are fully aware of and practice the principles contained in each.
Furukawa also recognizes effective risk management as an important
aspect of its business activities. In addition to identifying and assessing potential
risk and formulating preventive and response measures as well as remedial
initiatives, the Group has established the Risk Management & Compliance
Committee for the purpose of formulating the Group’s basic policies toward risk
management and compliance. Through these means, Furukawa is committed todeveloping a comprehensive structure capable of addressing all relevant issues.

Corporate Governance and Internal Control Systems

As of June 29, 2010

Annual General Meeting of Shareholders
Appoints/recalls

Appoints/recalls

Appoints/recalls
Reports

Independent Auditors

Board of Directors

Reports

7 members(6 internal, 1 external)

AuditsBoard of Auditors

Reports

5 members(2 statutory, 3 external)

AuditsExchanges opinions/information
Reports

Reports

Representative Director
Reports

Directs

Oversees

Management
Committee
Reports

Reports

Management
CouncilAuditsDirects

Executive Officers(15 members)

AuditsInternal Control Division
Audit Office
Risk Management &Compliance Committee

Accounting Dept.,
othersBusiness execution

AuditsAuditsReports

All Divisions and Group Companies
FURUK AWA

16

Annual Report 2010

AuditsConsolidated Six-Year Financial Summary
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31
Millions of yen

2009

2010
For the year:
Net sales ............................................................... ¥ 142,925
Cost of sales.......................................................... 		 127,302
Gross profit ........................................................... 		 15,623
Selling, general and administrative expenses ................ 		 14,025
Operating income .................................................. 		
1,598
Income (loss) before income taxes andminority interests................................................ 		
886
Net income (loss) ................................................... 		
585
Cash flows from operating activities ......................... 		
9,083
Cash flows from investing activities .......................... 		
(3,643)
Cash flows from financing activities ......................... 		
(4,769)
Capital expenditures............................................... 		
2,936
Depreciation and amortization ................................ 		
3,244
At year-end:
Total assets............................................................ ¥ 204,774
Current assets ....................................................... 		 82,617
Current liabilities .................................................... 		 73,733
Net assets (Note 1) ................................................. 		 50,855
Interest-bearing liabilities ........................................ 		 94,714
Per share amounts:
Net income (loss):
Basic ................................................................. ¥Diluted .............................................................. 		
Cash dividends ...................................................... 		
Net assets ............................................................. 		

2008

2007

2006

2005

¥ 161,858
		 143,651
		 18,207
		 15,904
		
2,303¥ 213,426
		 181,522
		 31,904
		 17,497
		 14,407¥ 200,749
		 167,507
		 33,242
		 16,343
		 16,899¥ 181,938
		 153,281
		 28,657
		 16,527
		 12,130¥ 147,237
		 124,586
		 22,651
		 15,268
		
7,383

		
		
		
		
		
		
		

		
		
		
		
		
		
		

		
		
		
		
		
		
		

		
		
		
		
		
		
		

		
		
		
		
		
		
		

(2,618)(5,917)
5,112(11,539)
12,116
16,5073,145¥ 188,361
		 77,509
		 64,276
		 45,742
		 92,475

12,484
8,595
12,823(855)(13,835)
4,374
2,993

¥ 199,383
		 88,888
		 80,487
		 55,431
		 77,907

11,127
17,554
12,648(4,367)(8,910)
3,905
2,626

¥ 217,027
		 94,865
		 89,293
		 52,136
		 89,389

9,810
5,309
8,254
(336)
(18,086)
1,777
2,595

4,199
2,257
7,698
7,620
(8,227)
2,994
3,026

¥ 213,046
		 89,055
		 88,220
		 43,072
		 99,418¥ 204,651
		 92,197
		 104,439
		 31,335
		 116,851

Yen

1.45
—
0.00
120.96¥						(14.64)—ー
4.00
110.31

¥
		
		
		

21.26
—
6.00
134.33

¥
		
		
		

43.42
—
5.00
139.13

¥
		
		
		

13.12
12.37
3.00
106.52

¥
		
		
		

5.57
5.03
0.00
77.49

89.1
10.9
9.8
1.1
0.4

		
		
		
		
		

88.8
11.2
9.8
1.4
(3.7)

		
		
		
		
		

85.1
14.9
8.2
6.8
4.0

		
		
		
		
		

83.4
16.6
8.1
8.4
8.7

		
		
		
		
		

84.2
15.8
9.1
6.7
2.9

		
		
		
		
		

84.6
15.4
10.4
5.0
1.5

Return on equity (%) (Note 2) ................................. 		
Return on assets (%) (Note 3) .................................. 		
Debt-to-equity ratio (times) (Note 4) ......................... 		

1.3
0.3
1.9

		
		
		

(12.0)
(3.1)
2.1

		
		
		

15.5
4.1
1.4

		
		
		

35.3
8.2
1.6

		
		
		

14.3
2.5
2.3

		
		
		

7.5
1.1
3.7

Equity ratio (%) (Note 5) ......................................... 		

23.9

		

23.7

		

27.2

		

25.9

		

20.2

		

15.3

0.0
0.0

		
		

0.0
3.2

		
		

28.2
4.5

		
		

11.5
4.3

		
		

22.9
3.3

		
		

0.0
0.0

Price book value ratio (times) (Note 8) ...................... 		

0.9

		

0.7

		

1.4

		

2.1

		

2.9

		

1.8

Stock price at fiscal year-end ................................... 		

114

		

82

		

183

		

293

		

306

		

143

Profitability:
Cost of sales margin (%)......................................... 		
Gross margin (%)................................................... 		
SG&A expense margin (%)...................................... 		
Operating margin (%) ............................................ 		
Return on sales (%) ................................................ 		
Efficiency and soundness:

Investment indicators:
Dividend payout ratio (%) (Note 6) .......................... 		
Dividend on equity ratio (%) (Note 7) ....................... 		

Notes: 1. Figures for fiscal 2005 to fiscal 2006 represent total shareholders’ equity.
2. Return on equity = Net income / Average total equity × 100
3. Return on assets = Net income / Average total assets × 100
4. Debt-to-equity ratio = Interest-bearing liabilities (fiscal year-end) / Total equity [Shareholders’ equity] (fiscal year-end)
5. Equity ratio = Total equity [Shareholders’ equity] (fiscal year-end) / Total assets (fiscal year-end) × 100
6. Dividend payout ratio = Total cash dividends / Consolidated net income × 100
7. Dividends on equity (DOE) = Total cash dividends / Average net assets × 100
8. Price book value ratio (PBR) = Stock price (fiscal year-end) / Net assets per share
9. Total equity = Net assets - Minority interests
		 (as of March 31, 2010: ¥48,885 million; as of March 31, 2009: ¥44,585 million; as of March 31, 2008: ¥54,301 million; as of March 31, 2007: ¥56,246 million)
FURUK AWA

17

Annual Report 2010

Financial Review

Revenue and Expenses

declined 20.1%, to ¥498 million, and interest expense to ¥1,680

In the fiscal year ended March 31, 2010, consolidated net sales

million. Turning to other income, the Group posted a ¥1,345 million

totaled ¥142,925 million, a decline of 11.7% compared with thegain related to copper smelting business in Australia following aprevious fiscal year.

review of expenses incurred in the dismantling of smelting equipment

Within this amount, sales of the Metals Division increased 3.4%

at its Australian copper smelting subsidiary. The Group also posted

year on year, thanks to rising market prices for electrolytic coppera gain of ¥610 million on sales of investments in securities. In otherand higher sales volume. However, sales in the Machinery Division

expenses, the Group incurred a ¥762 million loss on withdrawal fromfell 29.3% amid declining demand for rock drill products and UNIC

the compound lumber business, and a ¥266 million impairment loss

products, both in Japan and overseas. Despite increasing prices ofon fixed assets. As a result, income before income taxes and minority

crude oil, sales in the Fuels Division dropped 36.0% due to difficulties

interests rose ¥3,504 million, to ¥886 million.
Total income taxes—the sum of inhabitants’ taxes, enterprise tax,

in passing higher costs onto sales prices, as well as falling demand.

and corporate income tax adjustments—dropped 90.6%, to ¥303

Cost of sales decreased 11.4%, to ¥127,302 million, with themillion. Minority interests amounted to ¥2 million. Accordingly, thecost of sales margin edging up 0.3 percentage point, to 89.1%.

Group posted net income of ¥585 million.

Selling, general and administrative expenses were down 11.8%,

Return on equity (ROE) was 1.3%, and net income per shareto ¥14,025 million, owing mainly to declines in shipping charges andtotaled ¥1.45, compared with a net loss per share of ¥14.64 in thesalaries and allowances.

previous year.

As a result, operating income decreased 30.6% from the previous
fiscal year, to ¥1,598 million. This was primarily due to a ¥4,744
million year-on-year operating income decline in the Machinery

Financial Position

Division amid languishing sales. By contrast, the Metals Division

At March 31, 2010, total assets stood at ¥204,774 million, up 8.7%

posted a ¥3,201 million increase in operating income, thanks tofrom a year earlier. The increase stemmed mainly from the inclusion

higher sales volume for gold, as well as a gain on valuation ofof Tohpe Corporation in the scope of consolidation. Total current

inventories reflecting rising prices of electrolytic copper. Accordingly,

assets rose 6.6%, to ¥82,617 million, due mainly to increases in notes

the operating margin was down 0.3 percentage point, to 1.1%.

and accounts receivable and raw materials and supplies.

Under other income (expenses), interest and dividend income(Billions of yen)

(%)

10.0

8.7

20
17.6

14.4

15

7.5

10

5.0

2.5

2.5
0.6

5

5

‘06

‘07

‘08

‘09

(Yen)

50

.42

Net Income (Loss) per Share

‘10

0
‘06

‘07

Total Assets
Return on Assets
F UofRyen)
UK AWA(Billions

300

‘08

18

‘09

(5.9)

1.1

‘10

0

-10

‘06

‘07

‘08

‘09

‘10

0
-2.5
-5.0

Net Assets
Return on Equity
Annual Report 2010
(%)

10.0

(Billions of yen)

60

(%)

.4

0

-5
1.6

2.3

50

1.4

0

0.4

5.0

100

(3.7)

10

4.0

6.8

7.5
8.6

16.9
8.4
6.7

12.1

150

15
142.9

161.9

200

(%)

10.0

2.9

20

Net Income (Loss)
Return on Sales

5.3(Billions of yen)

213.4

(Billions of yen)

250
200.7

Operating Income
Operating Margin

181.9

Net Sales

Investments and other assets climbed 28.9%, to ¥34,512 million,40

due mainly to an increase in investments in securities caused by

was allocated to the Machinery Division, ¥205 million to the Metals

higher prices of listed shares.

Division, ¥227 million to the Electronic Materials and Chemicals

Total liabilities grew 7.9%, to ¥153,919 million. This was mainly

Division, and ¥59 million to the Paints Division, primarily fordue to a rise in notes and accounts payable in the current liabilities

improvements in manufacturing efficiency. In addition, ¥236 million

section, as well as an increase in borrowings associated with thewas allocated to the Real Estate Division, mainly for maintenanceinclusion of Tohpe Corporation in the scope of consolidation. Asof buildings owned by the Group, and ¥114 million went to thea result, the fiscal year-end balance of interest-bearing liabilities

Fuels and Others Division for the purchase of vehicles for use in the(corporate bonds and debt) rose 2.4%, to ¥94,714 million.

transportation business. All funds required for capital expenditures

Net assets at fiscal year-end stood at ¥50,855 million, up 11.2%

were derived from internal funds and borrowings. Depreciation andfrom a year earlier. This was mainly due to an increase in net unrealized

amortization rose 3.1%, to ¥3,244 million.

holding gain on securities, net of income taxes. Consequently, theIn the fiscal year ending March 31, 2011, the Group plans toequity ratio edged up 0.2 percentage point, to 23.9%, and the debt-

invest a total of ¥1.9 billion, mainly for the purchase of new facilities

to-equity ratio was down 0.2 point, to 1.9 times.

and repair of existing ones. We expect to procure these funds via
borrowings and/or internal funds. With respect to the Furukawa

R&D and Capital Expenditures

Building (Chuo-ku, Tokyo), purchased in March 2009, the Group plans

The Furukawa Company Group is actively engaged in R&D on new

to rebuild this property as part of its participation in the Nihonbashi-materials and high-value-added products that meet diversified
Net Sales
Operating Income
market needs and address dramatic changes in the socioeconomic
Operating Margin
environment.
In the year under review, research anddevelopment(Billions of yen)(Billions of yen)

Muromachi Eastern District Development Project.
Net Income (Loss)
Return on Sales

Cash Flows (%)

8.7

7.5

10

5.0
8.6

7.5

6.8

12.1

142.9

15

year. Main factors included dividends income on investment in silent
partnership.

6.7

161.9

Division, and ¥61 million to the Paints Division.

(%)

amounted to ¥9,083 million, up ¥3,971 million from the previous
14.4

181.9

net sales. Of this total, ¥791 million was allocated to the Machinery

200
Division,¥1,009 million to the Electronic Materials and Chemicals
15(Billions of yen)

20 cash provided by operating activities10.0
10.0review, net
In the year under
17.6

16.9
8.4

213.4

200.7

250
20of consolidated
expenses
were ¥1,862 million, equivalent to 1.3%

10 ¥1,502 million
assets) amounted to ¥2,936 million. Of this total,

5.0 the previous
5¥7,896 million fromyear. The primary reason was a 2.5

100
0
5

‘07

‘08

‘09

‘10

‘06

‘07

‘08

‘09

‘10

-5.0

50

5.0

40

2.5

30

0

20

-2.5

10

‘08

‘09

-5.0

0

Equity Ratio

Debt-to-Equity (D/E) Ratio(%)

FURUK AWA(Times)19‘10

Annual Report 2010

40
30
20

1.3

10
0

(12.0)

-10
-20

‘06

‘07

‘08

‘09

Dividends on Equity (DOE)
(%)

50.9

7.5

(%)

45.7

60

15.5

204.8

188.4
(3.1)

0
‘06

‘07

(Billions of yen)

10.0

4.1

100
50

-20

‘06

8.2

217.0

0.3

1.45
(14.64)

0-10

Net Assets
Return on Equity

199.4

21.26

150

-10

0

(%)

200

10

(5.9)

1.1

‘10

-2.5

(3.7)

1.4
1.6

‘09

(Billions of yen)

250

13.12

20

‘08

300

40
30

‘07

Total Assets
Return on Assets

43.42

(Yen)

50

‘06

55.4

Net Income (Loss) per Share

0

35.3

‘10

52.1

‘09

43.1

‘08

2.5

‘07

213.0

‘06

-5

14.3

0

0

2.5
2.3

50

0.4

0.6

2.9

4.0

Net cash used in investing activities totaled ¥3,643 million, down
5.3

150 Capital expenditures (including investments in intangible fixed‘10Business Risks

decline in purchases of property, plant and equipment.
Net cash used in financing activities totaled ¥4,769 million,(1) Fluctuations in the Foreign Exchange and Nonferrous Metals
Net Income (Loss)
Markets
Return on Sales
The Furukawa Company Group is at risk of foreign exchange

Net Sales
Operating
Incomedown¥16,885 million from the previous year. This wasdue mainlytoOperatingMarginproceeds from long-term loans payable.
(Billions of yen)

20

(%)

(Billions of yen)(%)

fluctuations in connection
with20its export business, the import of raw 10.0
10.0
17.6

213.4

As a result, cash and cash equivalents at the end of the fiscal

8.7(Billions of yen)

250

14.4

6.7

10

5.0

4.0

2.9

8.6

market movements. While the Furukawa Company Group utilizes
5.3

12.1

7.5

metal inventories, an internationally traded commodity, is subject to

6.8

15
142.9

161.9

CapitalStrategies
150

16.9
8.4

15
In addition, the Furukawa Company
Group’s stock of nonferrous 7.5

200

200.7

materials, primarily copper ore, and smelting and processing income.

a year earlier.

181.9

year totaled ¥20,257 million, a ¥914 million, or 4.7%, increase fromforeign exchange5.0contracts and
5 forward delivery transactions as 2.5

to100
all shareholders. Our basic policy is to appropriate profits after

a hedge against the aforementioned risks, its operating results

comprehensive consideration of various factors, including retained

and financial position may be0adversely affected by movements inearnings
required to finance capital expenditures and R&D expenses
50

exchange rates and nonferrous metal markets.

5‘07

shareholders twice a year in the form of interim and year-end cash

(3.7)

(5.9)

1.1

‘10

‘06

‘07

‘08

‘09

‘10

high balances of marketable securities and land. As of March 31,
Net Assets
2010, the carrying value of investments
in securities as stated in the
Return on Equity(%) sheets (Billionsof yen)consolidated balancewas ¥18,973
million, while land stood (%)

10.0

60

8.2

at ¥59,306 million. Accordingly, the Furukawa Company Group’s

20(14.64)

(3.1)

50

-2.5

10

0
‘06

‘07

‘08

‘09

‘10

‘06

‘07

‘08

‘09

-5.0

0

‘10

15.5
‘07

‘08

‘09

1

Capital Expenditures
Depreciation and Amortization

Cash Flows(Billions of yen)

‘09

3.2

3.3

‘08

0
‘06

‘08

0.0

0
‘07

‘07

1

‘10

‘06

‘10

3

‘07

‘08

‘09

‘10

Cash Flows from Operating Activities
Cash Flows from Investing Activities
20 from
F U R U K A W ACash Flows
AnnualReport2010
Financing
Activities(Billions of yen)

‘06

‘09

Cash Dividends per Share
(Yen)

.00

0

-10

2

1.6

10

4.5

1.4

2

1.9

2.1

2.3

20

4.3

5

23.9

(%)

4
23.7

(Times)

27.2

(%)

30
25.9

Dividends on Equity (DOE)

20.2

Debt-to-Equity (D/E) Ratio

4

0

-20
‘06

Equity Ratio

3

30

10
1.3

0

40

20

(12.0)

30

0

-20

40

2.5
0.3

businesses and entering markets for new products. 100
-10

43.1

188.4

1.45

2.5

20
structureand reinforce our financial position. We will also make150
effective investments aimed at expanding overseas sales in existing
10

14.3

13.12

5.0
in stock and land prices.
4.1

21.26

30

7.5

45.7

losses, losses from devaluation, and losses on sales due to movements

204.8

earnings to further enhance operating efficiency and strongly

199.4

operating results and financial
position are at risk of impairment
50

213.0

deploy retained
40Facing difficult business conditions, we will250

200 our earnings
promote administrative reforms, in order to improve-5.0

Historically, the Furukawa Company Group has maintained relatively

300
217.0

43.42

declare cash dividends for the year under review.

1.4

‘09

dividends. The decision-making body for the year-end dividend is the
Net Income (Loss) per ShareTotal Assets
Annual General Meeting of Shareholders, while thatfor theoninterim
ReturnAssets(Yen)(Billions of yen)
dividendis the Board of Directors. Regrettably, the Company
did not
50

1.6

2.3
‘08

-2.5

50.9

‘06

55.4

‘10

35.3

‘09

52.1

‘08

-5

(2) Investments in0Securities-10
and Land

and0other factors. In principle, we appropriate retained
earnings to
0
‘07

0

2.5

necessary to bolster earnings, as well as future business development
‘06

0.4

0.6

Furukawa places great importance in improving returnsof profits
10

‘10

6.8

5.0

2.5

4.0

2.5

100

0

‘06Employees’‘07‘08 Retirement‘09‘10 Benefits(3) Accrued

0
‘06

0
-10
‘08 (5)‘09‘10
Environmental
Protection

‘07

‘06

‘07

‘08

‘09

0
-2.5

(3.7)

1.1

(5.9)

-5
1.6

2.3

50

1.4

0

0.4

5

5

0.6

5.0

2.9

10

8.6

10
5.3

6.7

12.1

142.9

16
150

‘10

-5.0

52.1

8.2

217.0

50.9

60
10.0 and regulations.
respecting all laws
Furthermore, in Japan the 40

55.4

50
300
employees’
retirement benefits are provided at an amountcalculated

35.3

The Furukawa Company Group places the highest importance on
Net Assets
environmental protection, environmental safety, and prevention of
Return on Equity
pollution at its various
business(%)(Billionssites,of yen)both in Japan and overseas, (%)

43.42

The employees of the Furukawa Company Group are covered by
Net Income (Loss) per ShareTotal Assets
unfunded employee retirement benefit plans and non-contributory
Return on Assets
fundedplans.
Accrued(Yen) employee pension plans as defined-benefit(Billionsof yen)contaminating water supplies and in preventing the buildup of slag

50

43.1

204.8

7.5

0

20

(3.1)

(14.64)expected rate of return on plan assets differs materiallyfrom the50
assumptions, as well as in the event of a change in the assumptions

-2.5

10

‘06

‘07

‘08

‘09

‘10

‘06

‘07

‘08

-5.0

0

‘10

‘09

14.3

1.3

100

0
financial
position are at risk in the event the actual discount rate and

10

-20
‘06

‘07

‘08

‘09

(4) Earthquakes and Natural Disasters
Equity Ratio
Debt-to-Equity (D/E) Ratio
The Furukawa Company Group’s operating results and financial

Dividends on Equity (DOE)(%)(Times)position
are at risk in the event of a suspension
in operations

(%)

2.1

2.3
1

0

0

(Billions of yen)

20

15

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities

‘10

-15
-20

‘06

5

‘06

(4.8)

(3.6)

(0.9)
(8.9)

3
2
1

0.00

3.1

2.9
3.2

‘09

(13.8)

4.4
3.0
‘08

0

(Yen)

6

(18.1)

2.6

-10

‘07

3.9

1.8
2.6

5

(4.4)

-5

0
‘07

FURUK AWA

‘08

21

‘10

Cash Dividends per Share

4
(0.3)

10

‘09

4.00

5
0

‘06

(11.5)

15

‘10

‘09

5.1

16.5

10

‘08

6.00

(Billions of yen)

‘07

12.1
9.1

Cash Flows

‘09

12.8

Capital Expenditures
Depreciation and Amortization

‘08

12.6

‘06

‘07

8.3

‘10

‘06

0.0

1

5.00

0

‘08

2

1.6

10

‘07

3

1.4

2

3.00

20

3.3

4

3

1.9

23.9

natural disasters.

23.7

25.9

20.2

manufacturing bases and facilities from earthquakes and other

‘10

3.2

27.2

and delays in production and/or shipments due to damage to

4.5

5

4

4.3

30

‘09

‘10

Annual Report 20100
-10

(12.0)

0.3

1.45

2.5

like, there is a possibility that the Group’s performance results and its

Accordingly, the Furukawa Company Group’s operating results and0
on-20
which accrued employees’ retirement benefits are made.

15.5

30
2.5 be influenced.
financial position could

13.12

150 assumptions.
expected rate of return on plan assets, as well as other
10

-10

30

or slurry. However,40 of changes in legislation and the 20
5.0in the event

adoptsassumptions in connection with the discount rate and20

4.1

employees’ retirement benefits, the Furukawa 200
Company Group

188.4

21.26

30

213.0

250

45.7

Group is vigilant in preventing water run-off from idle mines frompension plan assets at the balance sheet date. In calculating accrued

199.4

based
40 on the retirement benefit obligation and the fair value of

‘06

‘07

‘08

‘09

‘10

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
March 31, 2010 and 2009

Thousands of
U.S. dollars (Note 4)

Millions of yen

ASSETS
Current Assets:
Cash and cash equivalents . .........................................................................................
Receivables, trade:		 Notes and accounts .................................................................................................
		 Affiliates ..................................................................................................................
Finished products ........................................................................................................
Work in process ...........................................................................................................
Raw materials and supplies ..........................................................................................
Deferred income taxes (Note 15) .................................................................................
Other current assets ....................................................................................................
Allowance for doubtful accounts .................................................................................
		 Total current assets ..................................................................................................

¥

20,257¥

19,343$217,817

		
		
		
		
		
		
		
		
		

23,984443
10,261
4,713
16,448
1,048
5,659
(196)
82,617

		
		
		
		
		
		
		
		
		

18,942
601
13,034
6,370
9,671
772
9,201
(425)
77,509

		
		
		
		
		
		
		
		
		

257,892
4,763
110,333
50,677
176,860
11,26960,852(2,108)888,355

Investments and Other Assets:
Goodwill (Note 7) ........................................................................................................
Investments in securities (Notes 5 and 6) .....................................................................
Investments in affiliates ...............................................................................................
Loans receivable ..........................................................................................................
Deferred income taxes (Note 15) .................................................................................
Other investments (Note 8) .........................................................................................

		
		
		
		
		
		

713
22,059
5,381
1,492
13
6,902

		
		
		
		
		
		

—
15,931
3,310
1,396
14
7,771

		
		
		
		
		
		

7,667
237,194
57,86016,043
140
74,216

Allowance for doubtful accounts ................................................................................. 		
		 Total investments and other assets .......................................................................... 		

(2,048)34,512

				(1,653)
26,769				

(22,022)
371,098

		
		
		
		
		
		

61,165
45,10950,4291,041
359
158,103

		
		
		
		
		
		

58,02040,93144,607536
309
144,403		657,688		
485,043		
542,247
		
11,194
		
3,860
		 1,700,032

Accumulated depreciation ........................................................................................... 		
		 Property, plant and equipment, net ......................................................................... 		

(70,458)
87,645				

(60,320)
84,083

				

¥204,774¥

188,361

Property, Plant and Equipment—at Cost (Notes 6 and 8):
Land and timberlands ..................................................................................................
Buildings and structures . .............................................................................................
Machinery and equipment . .........................................................................................
Lease assets (Note 11) .................................................................................................
Construction in progress .............................................................................................

		 Total assets ..............................................................................................................

FURUK AWA

22

2010

Annual Report 2010

2010

2009

(757,613)
942,419$ 2,201,871

Thousands of
U.S. dollars (Note 4)

Millions of yen

LIABILITIES AND NET ASSETS
Current Liabilities:
Short-term loans (Note 6) ............................................................................................ ¥Current portion of long-term debt (Note 6) ................................................................. 		
Lease obligations (Note 6) ........................................................................................... 		

2010

2010

2009

13,077
20,222
207

¥
		
		

13,172
18,141
101

$
		
		

140,613217,4412,226

		 Notes and accounts ................................................................................................. 		

26,227

		

16,342

		

282,011

		 Affiliates .................................................................................................................. 		

199

		

219

		

2,140

Accrued expenses ........................................................................................................ 		
Accrued income taxes . ................................................................................................ 		

9,880
183

		
		

11,462827

				

106,237
1,968

Payables, trade:

Deferred income taxes (Note 15) ................................................................................. 		

102

		

30

		

1,097

Other current liabilities ................................................................................................ 		

3,636

		

3,982

		

39,095

		 Total current liabilities .............................................................................................. 		

73,733

		64,276

		

792,828

Long-term debt (Note 6) ............................................................................................. 		

61,415

		

61,162

		

660,376

Lease obligations (Note 6) ........................................................................................... 		

684

		

418

		

7,355

Accrued employees’ retirement benefits (Note 14) ...................................................... 		

1,589

		

1,381

		

17,086Long-term Liabilities:

Deferred income taxes (Note 15) ................................................................................. 		

8,869

		

7,098

		

95,366

Deferred income taxes on surplus on the revaluation of land (Note 15) ....................... 		

2,806

		

3,030

		

30,172

Provision for environmental measures . ........................................................................ 		

214

		

—

		

2,301

Other long-term liabilities ............................................................................................ 		

4,609

		

5,254

		

49,559

		 Total long-term liabilities . ........................................................................................ 		

80,186

		

78,343

		

862,215

			 Issued—404,455,680 shares ............................................................................... 		

28,208

		

28,208		

303,312

		 Retained earnings .................................................................................................... 		

16,687

		

16,386

		179,430

(45)

		

—

		

(484)

			 2009— 283,139 shares . ...................................................................................... 		

—

		

(43)

		

—

		 Total shareholders’ equity ........................................................................................ 		

44,850		

44,551

		

482,258

		 Net unrealized holding gain (loss) on securities, net of income taxes ....................... 		

2,791

		

(2,076)

		

30,011		 Deferred gains (losses) on hedges . .......................................................................... 		

41

		

(138)

		

441

Net Assets:
Shareholders’ Equity:
		 Common stock without par value:
			 Authorized—800,000,000 shares .......................................................................

Treasury stock, at cost:			 2010— 298,479 shares . ...................................................................................... 		

Valuation, Translation Adjustments and Others:

		 Surplus on the revaluation of land, net of income taxes ........................................... 		

3,348

		

3,674

		

36,000		 Translation adjustments ........................................................................................... 		

(2,145)

		

(1,426)

		(23,065)

			 Total valuation, translation adjustments and others ............................................. 		

4,035

		

34

		

43,387

Minority Interests in Consolidated Subsidiaries ............................................................ 		

1,970

		

1,157

		

21,183

			 Total net assets .................................................................................................... 		

50,855

		

45,742

		546,828¥

204,774¥

188,361			 Total liabilities and net assets ...............................................................................
The accompanying notes are an integral part of these statements.

FURUK AWA

23

Annual Report 2010

$ 2,201,871

Consolidated Statements of Operations
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2010 and 2009

Thousands of
U.S. dollars (Note 4)

Millions of yen

Net Sales ....................................................................................................................... ¥Cost of Sales (Notes 9 and 17) .................................................................................... 		
		 Gross profit . ............................................................................................................ 		
Selling, General and Administrative Expenses (Note 9) .......................................... 		
		 Operating income .................................................................................................... 		
Other Income (Expenses):
Interest and dividend income . ..................................................................................... 		
Equity in (losses) earnings of affiliates . ........................................................................ 		
Interest expense .......................................................................................................... 		
Other, net (Note 18) .................................................................................................... 		
		 Income (loss) before income taxes and minority interests ........................................ 		
Income Taxes (Note 15):
Current ........................................................................................................................ 		
Deferred ...................................................................................................................... 		
		 Total ........................................................................................................................ 		
Minority Interests ........................................................................................................ 		
		 Net income (loss) ..................................................................................................... ¥2010
142,925(127,302)
15,623(14,025)
1,598

¥
		
		
		
		

2009
161,858(143,651)
18,207(15,904)
2,303

498
(83)
(1,680)
553
886

		
		
		
		
		

623
107
(1,728)(3,923)(2,618)

		
		
		
		
		

5,355
(892)
(18,065)
5,946
9,527

(363)
60
(303)
2
585

		
		
		
		
¥

(1,047)(2,177)(3,224)(75)(5,917)

		
		
		
		
$

(3,904)645(3,259)
22
6,290

Yen

Net Income (Loss) per Share:
Basic ............................................................................................................................ ¥Cash Dividends per Share ........................................................................................... 		
Net Assets per Share . .................................................................................................. 		
The accompanying notes are an integral part of these statements.

FURUK AWA24

Annual Report 2010

1.45—
120.96

¥
		
		

2010
$ 1,536,828
		 (1,368,839)
		
167,989		 (150,806)
		
17,183

U.S. dollars (Note 4)(14.64)4.00
110.31

$
		
		

0.02
—
1.30

Consolidated Statements of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2010 and 2009

Millions of yen
Shareholders’ equity
Number ofshares ofcommon stock(thousands)

Balance as of March 31, 2009 ...................................................................... 		404,456
Cash dividends paid . ................................................................................... 		
—Net income for the year ............................................................................... 		
—Acquisition of the treasury stock . ................................................................ 		
—Stocks of the parent company owned		—		 by new consolidated subsidiaries . .............................................................
Disposal of stocks of the parent company owned		—		 by consolidated subsidiaries ......................................................................
Loss on disposal of stocks of the parent company owned		—		 by consolidated subsidiaries ......................................................................
Reversal of surplus on the revaluation of land . ............................................ 		
—Net change during the year ......................................................................... 		
—Balance as of March 31, 2010 ...................................................................... 		404,456

Treasury stock,at costTotal
shareholders’equityCommon stock

Retainedearnings¥ 28,208
		
—
		
—
		
—
		
—

¥ 16,386
		
(606)
		
585
		
—
		
—

¥
		
		
		
		

(43)
—
—
(2)
(52)

¥ 44,551
		
(606)
		
585
		
(2)
		
(52)

		

—

		

—

		

52

		

52

		

—

		

(4) 		

—

		

(4)

		
—
		
—
¥ 28,208

		
326
		
—
¥ 16,687

		
		
¥

— 		
326
— 		
—
(45) ¥ 44,850

Millions of yen
Valuation, translation adjustments and others
Net unrealized
Surplus on theholding
revaluation ofDeferred(loss) gain on
securities, net (losses) gains on land, net ofincome taxes
hedgesof income taxes

Balance as of March 31, 2009 ............................. ¥ (2,076)
Cash dividends paid . .......................................... 		
—Net income for the year ...................................... 		
—Acquisition of the treasury stock . ....................... 		
—Stocks of the parent company owned		—		 by new consolidated subsidiaries . ....................
Disposal of stocks of the parent company owned 		—
		 by consolidated subsidiaries .............................
Loss on disposal of stocks of the parent company owned 		—
		 by consolidated subsidiaries .............................
Reversal of surplus on the revaluation of land . ... 		
—Net change during the year ................................ 		 4,867
Balance as of March 31, 2010 ............................. ¥ 2,791

¥
		
		
		
		

(138)
—
—
—
—

		

Translation
adjustments

Total valuation,translation
adjustments
and others

Minority
interests inconsolidated
subsidiaries

Total net assets¥ 3,674
		
—
		
—
		
—
		
—

¥ (1,426)
		
—
		
—
		
—
		
—

¥
		
		
		
		

34
—
—
—
—

¥ 1,157
		
—
		
—
		
—
		
—

¥ 45,742
		
(606)
		
585
		
(2)
		
(52)

—

		

—

		

—

		

—

		

—

		

52

		

—

		

—

		

—

		

—

		

—

		

(4)

		
		
¥

—
179
41

		
— 		
— 		
—
		
(326) 		(719) 		 4,001¥ 3,348¥ (2,145) ¥ 4,035

		
—
		
813
¥ 1,970		
326
		 4,815¥ 50,855

Millions of yen
Shareholders’ equity
Number ofshares ofcommon stock(thousands)

Balance as of March 31, 2008 . .................................................................... 		404,456
Cash dividends paid...................................................................................... 		
—Net loss for the year .................................................................................... 		
—Acquisition of the treasury stock . ................................................................ 		
—Reversal of surplus on the revaluation of land . ............................................ 		
—Net change during the year ......................................................................... 		
—Balance as of March 31, 2009 ...................................................................... 		404,456

FURUK AWA25

Common stock

Retainedearnings¥ 28,208
		
—
		
—
		
—
		
—
		
—
¥ 28,208¥ 24,629
		 (2,427)
		 (5,917)
		
—
		
101
		
—
¥ 16,386

Annual Report 2010

Treasury stock,at costTotal
shareholders’equity

¥
		
		
		
		
		
¥

¥ 52,802		 (2,427)
		 (5,917)
		
(8)
		
101
		
—
¥ 44,551

(35)
—
—
(8)
—
—
(43)

Millions of yen
Valuation, translation adjustments and others
Net unrealized
holding loss on Deferred gains(losses) on
securities, net
hedgesof income taxes

Balance as of March 31, 2008 . ........................... ¥ (1,200)
Cash dividends paid............................................. 		
—Net loss for the year ........................................... 		
—Acquisition of the treasury stock . ....................... 		
—Reversal of surplus on the revaluation of land . ... 		
—Net change during the year ................................ 		
(876)
Balance as of March 31, 2009 ............................. ¥ (2,076)

¥
		
		
		
		
		
¥

146
—
—
—
—
(284)
(138)

Surplus on therevaluation ofland, net ofincome taxes¥ 3,775
		
—
		
—
		
—
		
(101)
		
—
¥ 3,674

Translation
adjustments

Total valuation,translation
adjustments
and others

Minority
interests inconsolidated
subsidiaries

Total net assets¥ (1,222)
		
—
		
—
		
—
		
—
		
(204)
¥ (1,426)¥ 1,499
		
—
		
—
		
—
		
(101)
		 (1,364)¥
34¥ 1,130
		
—
		
—
		
—
		
—
		
27
¥ 1,157¥ 55,431
		 (2,427)
		 (5,917)
		
(8)
		
—
		 (1,337)¥ 45,742

Thousands of U.S. dollars (Note 4)
Shareholders’ equity
Treasury stock,at costTotal
shareholders’equity$ 176,193
		 (6,516)
		
6,290
		
—
		
—

$
		
		
		
		

(462)
—
—
(22)
(559)

$ 479,043
		 (6,516)
		
6,290
		
(22)
		
(559)

		

—

		

559

		

559

		

(42) 		

—

		

(42)

Retainedearnings

Common stock

Balance as of March 31, 2009 .......................................................................................... $ 303,312
Cash dividends paid . ....................................................................................................... 		
—Net income for the year ................................................................................................... 		
—Acquisition of the treasury stock . .................................................................................... 		
—Stocks of the parent company owned		—		 by new consolidated subsidiaries . .................................................................................
Disposal of stocks of the parent company owned		—		 by consolidated subsidiaries ..........................................................................................
Loss on disposal of stocks of the parent company owned		—		 by consolidated subsidiaries ..........................................................................................
Reversal of surplus on the revaluation of land . ................................................................ 		
—Net change during the year ............................................................................................. 		
—Balance as of March 31, 2010 .......................................................................................... $ 303,312

		
3,505
		
—
$ 179,430

		
		
$

— 		
3,505
— 		
—
(484) $ 482,258

Thousands of U.S. dollars (Note 4)
Valuation, translation adjustments and others
Net unrealized
Surplus on theholding
revaluation ofDeferred(loss) gain on
securities, net (losses) gains on land, net ofincome taxes
hedgesof income taxes

Balance as of March 31, 2009 ............................. $ (22,322)
Cash dividends paid . .......................................... 		
—Net income for the year ...................................... 		
—Acquisition of the treasury stock . ....................... 		
—Stocks of the parent company owned		—		 by new consolidated subsidiaries . ....................
Disposal of stocks of the parent company owned 		—
		 by consolidated subsidiaries .............................
Loss on disposal of stocks of the parent company owned 		—
		 by consolidated subsidiaries .............................
Reversal of surplus on the revaluation of land . ... 		
—Net change during the year ................................ 		 52,333
Balance as of March 31, 2010 ............................. $ 30,011

$
		
		
		
		

(1,484)
—
—
—
—

		

Translation
adjustments

Total valuation,translation
adjustments
and others

Minority
interests inconsolidated
subsidiaries

Total net assets$ 39,505
		
—
		
—
		
—
		
—

$ (15,334)
		
—
		
—
		
—
		
—

$
		
		
		
		

365
—
—
—
—

$ 12,441
		
—
		
—
		
—
		
—

$ 491,849
		 (6,516)
		
6,290
		
(22)
		
(559)

—

		

—

		

—

		

—

		

—

		

559

		

—

		

—

		

—

		

—

		

—

		

(42)

		
		
$

—
1,925
441

		
— 		
— 		
—
		 (3,505) 		 (7,731) 		 43,022$ 36,000$ (23,065) $ 43,387

The accompanying notes are an integral part of these statements.

FURUK AWA

26

Annual Report 2010

		
—
		
8,742
$ 21,183

		
3,505
		 51,764$ 546,828

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2010 and 2009

Thousands of
U.S. dollars (Note 4)

Millions of yen

2010
Cash Flows from Operating Activities:
Income (loss) before income taxes and minority interests ............................................
Adjustments to reconcile income (loss) before income taxes
		 and minority interests to net cash provided by operating activities:
Depreciation and amortization ....................................................................................
(Decrease) increase in allowance for doubtful accounts, net . ......................................
Increase in accrued employees’ retirement benefits .....................................................
Loss on disposal and sales of property, plant and equipment ......................................
Write-down of investments in securities ......................................................................
Expenses on removal of office tenants . .......................................................................
Gain on sales of investments in securities ....................................................................
Gain related to copper smelting business in Australia ..................................................
Increase in provision for environmental measures ........................................................
Gain on sales of property, plant and equipment ..........................................................
Interest and dividend income . .....................................................................................
Interest expense ..........................................................................................................
Loss on impairment of fixed assets ..............................................................................
Changes in operating assets and liabilities:
		 Receivables, trade ....................................................................................................
		 Inventories ...............................................................................................................
		 Payables, trade ........................................................................................................
Other . .........................................................................................................................
		 Subtotal ...................................................................................................................
Interest and dividends received . ..................................................................................
Interest paid ................................................................................................................
Payments for removal of office tenants . ......................................................................
Dividends income on investment in silent partnership . ................................................
Income taxes paid . ......................................................................................................
Income taxes refunded ................................................................................................
Other . .........................................................................................................................
		 Net cash provided by operating activities .................................................................

2010

2009

¥

886

¥

(2,618)

$

9,527

		
		
		
		
		
		
		
		
		
		
		
		
		

3,244
(245)
820
306
0
—
(610)
(1,345)
214
(432)
(498)
1,680
266

		
		
		
		
		
		
		
		
		
		
		
		
		

3,145
80
565
806
7,418
1,305
(3)
—
—
(2,599)
(623)
1,728
225

		
		
		
		
		
		
		
		
		
		
		
		
		

34,882(2,634)
8,817
3,290
—
—
(6,559)(14,462)
2,301(4,645)(5,355)18,065
2,860

		
		
		
		
		
		
		
		
		
		
		
		
		

200
(145)
3,994
(555)
7,780
661
(1,675)—
3,944(2,622)
995
—
9,083

		
		
		
		
		
		
		
		
		
		
		
		
		

12,064
5,355(16,194)(2,433)8,221
630(1,709)(1,023)—(1,859)
985
(133)
5,112

		
		
		
		
		
		
		
		
		
		
		
		
		

2,151
(1,559)42,946(5,969)83,656
7,108(18,011)—
42,409(28,194)
10,699—97,667

Cash Flows from Investing Activities:
Purchases of property, plant and equipment ...............................................................
Proceeds from sales of property, plant and equipment ................................................
Purchases of investments in securities . ........................................................................
Proceeds from sales of investments in securities ..........................................................
Purchases of stocks of subsidiaries and affiliates ..........................................................
Collection of investments in capital .............................................................................
Payment for purchases of investments in subsidiaries ..................................................
Other . .........................................................................................................................
		 Net cash used in investing activities .........................................................................

		
		
		
		
		
		
		
		
		

(2,929)1,070(1,123)
1,372(2,053)210(198)
8(3,643)

		
		
		
		
		
		
		
		
		

(16,437)
5,517
(6)
3
—
—
—
(616)
(11,539)

		
		
		
		
		
		
		
		
		

(31,495)
11,505(12,075)
14,753(22,075)
2,258(2,129)86(39,172)

Cash Flows from Financing Activities:
Proceeds from long-term loans payable .......................................................................
Repayment of long-term loans payable .......................................................................
Proceeds from short-term loans ...................................................................................
Repayment of short-term loans ...................................................................................
Cash dividends ............................................................................................................
Other . .........................................................................................................................
		 Net cash (used in) provided by financing activities ...................................................
Effect of Exchange Rate Changes on Cash and Cash Equivalents ..........................
Net Increase in Cash and Cash Equivalents ...............................................................
Cash and Cash Equivalents at Beginning of Year .....................................................
Cash and Cash Equivalents at End of Year ................................................................

		
		
		
		
		
		
		
		
		
		
¥

17,930(18,606)
2,511(5,954)(606)(44)(4,769)243
914
19,343
20,257

		
		
		
		
		
		
		
		
		
		
¥

35,000(18,286)
4,615(6,827)(2,427)
117
12,116(893)
4,796
14,547
19,343

		
		
		
		
		
		
		
		
		
		
$

192,796(200,065)
27,000(64,022)(6,516)(473)(51,280)
2,613
9,828
207,989
217,817

The accompanying notes are an integral part of these statements.

FURUK AWA27

Annual Report 2010

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
March 31, 2010

1. Basis of Presentation
The accompanying consolidated financial statements of Furukawa

generally accepted in Japan but is presented herein as additional

Co., Ltd. (the “Company”) and consolidated subsidiaries (together

information.

the “Furukawa Group”) have been prepared in accordance with

In preparing these statements, the Company has made certain

accounting principles generally accepted in Japan, which are different

reclassifications and rearrangements to the consolidated financial

in certain respects as to the application and disclosure requirements ofstatements prepared in Japan in order to present these statements inInternational Financial Reporting Standards, and have been compiled

a form which is more familiar to readers outside Japan.

from those prepared by the Company as required under the Financial

In addition, certain amounts in the prior year’s financial

Instruments and Exchange Law of Japan.

statements have been reclassified to conform to the current year’s

In addition, the notes to the consolidated financial statements

presentation.

include information which is not required under accounting principles

2. Summary of Significant Accounting Policies(1) Principles of Consolidationor other securities. The Furukawa Group does not hold any trading

The Company had 46 subsidiaries as of March 31, 2010 (34 as ofor held-to-maturity securities as of March 31, 2010 and 2009.

March 31, 2009). The consolidated financial statements included theMarketable securities classified as other securities are carried at fairaccounts of the Company and 45 subsidiaries as of March 31, 2010

value with changes in unrealized holding gain or loss, net of the(34 as of March 31, 2009).

applicable income taxes, included directly in net assets. Fair value isCompared with the previous year, the number of subsidiaries

determined based on the average of the market value during the last

increased by 12 due to acquisition of stocks of Tohpe Corporation

month of the fiscal year. Non-marketable securities classified as otherand decreased by 1 due to completion of liquidation.

securities are carried at cost. Cost of securities sold is determined by

For the purpose of preparing the consolidated financial

the moving average method.

statements, all significant inter-company transactions, accountbalances and unrealized profits among the Furukawa Group have(4) Inventories

been eliminated.

Finished copper products and work in process relating to copper

Certain foreign subsidiaries have a December 31 year-end.

products are stated at cost determined by the moving average

Relevant adjustments have been made for significant transactions

method (the balance sheets amounts of the inventories are stated atwith such subsidiaries during the period from January 1 to March 31.

the lowered book values reflecting potential decline in profitability).

The Company had 17 affiliates as of March 31, 2010 (12 affiliates

Other inventories are mainly stated at cost determined by the averageas of March 31, 2009) and the equity method was applied to 7

method (the balance sheets amounts of the inventories are stated ataffiliates as of March 31, 2010 (6 as of March 31, 2009) in preparing

the lowered book values reflecting potential decline in profitability).

the consolidated financial statements.
(5) Allowance for Doubtful Accounts

Investments in the remaining unconsolidated subsidiaries andaffiliates are carried at cost because of their immaterial impact on the

In order to cover probable losses on collection, the allowance forconsolidated financial statements.

doubtful accounts is calculated based on the historical default
rates for normal receivables plus estimate of uncollectible amounts(2) Cash and Cash Equivalents

determined by reference to specific doubtful receivables from

Cash and cash equivalents include all highly liquid investments with acustomers who are experiencing financial difficulties.

maturity of three months or less when purchased.
(6) Provision for Environmental Measures(3) Marketable Securities and Investments in Securities

The provision for environmental countermeasures is provided to cover

Securities other than equity securities issued by subsidiaries andthe disposal costs anticipated to be incurred with respect to the “Lawaffiliates are classified into three categories: trading, held-to-maturity

FURUK AWA28

Annual Report 2010

Concerning Special Measures for Promotion of Proper Treatment of

Actuarial gain and loss is amortized in the year following the year

PCB Wastes.”in which the gain or loss is recognized by the straight-line method
over the period of mainly 15 years, which is shorter than the average(7) Property, Plant and Equipment and Depreciation

remaining years of service of the employees.

Property, plant and equipment is stated at cost. Depreciation is mainly
calculated by the straight-line method based on the estimated useful(9) Surplus on the Revaluation of Land

lives of the assets. The range of useful lives of property, plant andPursuant to the “Law Concerning the Revaluation of Land,” land

equipment is summarized as follows:

used for the Company’s business operations was revalued on March

Buildings and structures

5 to 60 years

31, 2002. The income tax effect of the difference between the

Machinery and equipment

2 to 22 years

book value and the revalued amount has been presented under

Amortization is calculated by the straight-line method for

liabilities as “Deferred income taxes on surplus on the revaluation

intangible assets.

of land” and the remaining balance has been presented under net

Depreciation of lease assets arising from finance leaseassets as “Surplus on the revaluation of land” in the accompanying

transactions that do not involve transfer of ownership is calculated byconsolidated balance sheets. Revaluation of land was determined

the straight-line method over the lease term with no residual value.

based on the official notice prices published by the Commissioner ofFinance lease transactions that do not involve transfer of ownership,

the National Tax Authorities in accordance with Paragraph 4, Article 2

entered into on and before March 31, 2008, by the Company andof the “Enforcement Ordinance Concerning Land Revaluation,” withdomestic consolidated subsidiaries are accounted for as operating

relevant adjustments. The carrying value of the land after revaluationleases.

exceeded its fair value by ¥1,453 million ($15,624 thousand) and¥1,609 million as of March 31, 2010 and 2009, respectively.

(8) Retirement Benefit Plans
The employees of the Company and most of its domestic consolidated(10) Income Taxes

subsidiaries are covered by unfunded employee retirement benefit

Current income taxes comprising corporation tax, enterprise tax

plans and non-contributory funded employee pension plans as

and inhabitants’ taxes are provided for based on amounts currently

defined benefit plans. The employee retirement benefit plans provide

payable for each year. Deferred income taxes arising from temporary

for lump-sum payments. The employee pension plans, which are

differences between financial reporting and tax bases of the assets

funded, were instituted to replace a certain portion of the benefits

and liabilities, which were measured using the enacted tax rates

under the retirement benefit plans with respect to employees

and laws which will be in effect when the temporary differences

who retire at the mandatory retirement age. Certain consolidated

are expected to reverse, are reflected in the consolidated financial

subsidiaries (both domestic and foreign) have defined contribution

statements.

plans.

The Company and its domestic wholly-owned subsidiaries file a

Accrued employees’ retirement benefits have been provided atconsolidated corporation tax return.

an amount calculated based on the retirement benefit obligation andthe fair value of the pension plan assets at the balance sheet dates,(11) Amounts per Shareas adjusted for unrecognized actuarial gain or loss and unrecognized

Basic net income per share is computed based on the net income

prior service cost. The retirement benefit obligation has been

available for distribution to shareholders of common stock and theattributed to each period by the straight-line method over the years

weighted-average number of shares of common stock outstandingof service of the eligible employees.

during the year. Diluted net income per share is not presented for the

The net obligation at transition of the listed subsidiary, which

years ended March 31, 2010 and 2009 since no dilutive instruments

amounts to ¥1,940 million ($20,860 thousand), is being amortized bywere issued and outstanding during those years.

the straight-line method over a period of 15 years.

Cash dividends per share represent the cash dividends declared

Prior service cost is being amortized as incurred by the straight-

as applicable to the respective years together with the interim cash

line method over a period of principally 15 years, which is shorter

dividends paid.

than the average remaining years of service of the employees.

FURUK AWANet assets per share are computed based on the net assets

29

Annual Report 2010

excluding minority interests and the number of common stockof net assets in the balance sheet until the recognition of gain or loss

outstanding at the year-end.

on hedged items when those derivative financial instruments qualify
for hedge accounting.

(12) Foreign Currency Translation

Trade receivables, trade payables and forecast transactions

Foreign currency denominated monetary assets and liabilities aredenominated in foreign currencies are translated at the contracted

translated into Japanese yen using the rates of exchange in effectrates if the relating forward contracts qualify for hedge accounting.

at the balance sheet date. Resulting gains or losses are credited or

The interest rate swaps which qualify for hedge accounting andcharged to income as incurred.

meet specific matching criteria are not carried at fair value, but any

The balance sheet accounts of the foreign consolidated

differences paid or received on the interest rate swaps are recognizedsubsidiaries are translated into yen at the rates of exchange in effectas adjustments to interest expense or income over the life of eachat the balance sheet date, except for the components of net assets

swap, thereby adjusting the effective interest rate on the hedged

excluding minority interests, which are translated at their historical

items.

exchange rates. Revenue and expense accounts are translated at the
average rate of exchange in effect during the year. Differences arising(14) Shareholders’ Equityfrom the translation are presented as translation adjustments and

The Company Law of Japan (the “Law”) provides that an amountminority interests in consolidated financial statements.

equal to 10% of the amount to be distributed as distributions ofcapital surplus (other than the capital reserve) and retained earnings(13) Hedging Activities(other than the legal reserve) be transferred to the capital reserve

The Furukawa Group uses derivative financial instruments for theand the legal reserve, respectively, until the sum of the capital reserve

purpose of hedging the risks of adverse fluctuations in foreign

and the legal reserve equals 25% of the common stock account.

exchange rates on the trade receivables, trade payables and forecast

Such distributions can be made at any time by resolution of thetransactions denominated in foreign currencies, commodity prices andshareholders or by the Board of Directors if certain conditions areinterest rates. All derivative financial instruments except below are

met, but neither the capital reserve nor the legal reserve is available

stated at fair value and related gain or loss on the changes in the fairfor distributions.

values of derivative financial instruments is deferred as a component

3. Accounting Changes(1) Practical Solution on Unification of Accounting Policies($6,235 thousand) compared with the corresponding amounts which

Applied to Foreign Subsidiaries for Consolidated Financial

would have been reported under the previous method.

Statements
From the fiscal year ended March 31, 2009, the Company adopted(3) Accounting Standard for Lease Transactions“Practical Solution on Unification of Accounting Policies Applied toPreviously, finance lease transactions that do not involve transfer of

Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ

ownership were accounted for as operating leases. However, starting

Practical Issues Task Force No. 18, May 17, 2006). The Company

from the fiscal year ended March 31, 2009, the Company and its

unified accounting standards for the consolidated overseas

domestic consolidated subsidiaries adopted “Accounting Standard forsubsidiaries and made the necessary adjustments upon consolidation.

Lease Transactions” (ASBJ Statement No. 13, June 17, 1993, RevisedThis change had no impact on income.

March 30, 2007) and “Guidance on Accounting Standard for Lease
Transactions” (ASBJ Guidance No. 16, January 18, 1994, Revised(2) Accounting Standard for Measurement of Inventories

March 30, 2007).

From the fiscal year ended March 31, 2009, the Company andUnder the new accounting standard, finance lease transactions

its consolidated subsidiaries adopted “Accounting Standard forthat do not involve transfer of ownership were capitalized. Finance

Measurement of Inventories” (ASBJ Statement No. 9, July 5, 2006).

lease transactions that do not involve transfer of ownership, entered

As a result, operating income decreased by ¥579 million ($5,908

into on and before March 31, 2008, are accounted for as operating

thousand) and loss before income taxes increased by ¥611 million

leases.

FURUK AWA30

Annual Report 2010

The adoption of the new standard had immaterial impact on total

Accounting Standard for Retirement Benefits (Part3)” (ASBJ

assets and no impact on income.

Statement No. 19, July 31, 2008). This adoption had no impact on
income because actuarial differences are amortized from the next(4) Accounting Standard for Retirement Benefits

year. In addition, unrecognized actuarial differences that arose by thisFrom the fiscal year ended March 31, 2010, the Company andadoption are ¥310 million ($3,333 thousand).

its consolidated subsidiaries adopted “Partial Amendments to

4. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is included

translation should not be construed as a representation that yen havesolely for convenience, as a matter of arithmetic computation only, atbeen, could have been or could in the future be converted into U.S.

¥93=US$1.00, the exchange rate prevailing on March 31, 2010. Thisdollars at the above or any other rate.

5. Investments in Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of March 31, 2010 and2009 were as follows:
Millions of yen

Thousands of U.S. dollars

2010

2010

Unrealized gain
Carrying value Acquisition cost(loss)

Securities whose carrying value exceeds their acquisition cost:
Corporate shares ................................................................... ¥		 14,886
Government bonds . .............................................................. 		
—		 14,886
Securities whose acquisition cost exceeds their carrying value:
Corporate shares ................................................................... 		 4,087
Government bonds . .............................................................. 		
—		 4,087
Total .......................................................................................... ¥		 18,973

¥		
		
		

3,390
—
3,390

$		160,065
		—		160,065$		123,613
		—		123,613$		 36,452
		—		 36,452

		 4,586		—		 4,586¥		 16,083

		
		
		
¥		

(500)
—
(500)
2,890

		 43,946		—		 43,946$		204,011

		 49,322
		—		 49,322$		172,935

		 (5,376)		—		 (5,376)$		 31,076

2009
Carrying value Acquisition cost

FURUK AWA31

Unrealized gain
(loss)¥		 11,496
		—		 11,496

Millions of yen

Securities whose carrying value exceeds their acquisition cost:
Listed corporate shares .......................................................... ¥ 2,603
Government bonds . .............................................................. 		
—		 2,603
Securities whose acquisition cost exceeds their carrying value:
Listed corporate shares .......................................................... 		 10,325
Government bonds . .............................................................. 		
15
		 10,340
Total .......................................................................................... ¥ 12,943

Carrying value Acquisition cost

Unrealized gain
(loss)¥ 1,841		—		 1,841¥
						 13,141		
16
		 13,157¥ 14,998

		 (2,816)		
(1)
		 (2,817)¥ (2,055)

Annual Report 2010

762
—
762

Gain on sales of securities classified as other securities with aggregate gain and loss for the years ended March 31, 2010 and 2009 aresummarized as follows:

Millions of yen

2010
2009
Sales proceeds . ...................................................................................................................................... ¥ 1,491¥
3Aggregate gain ...................................................................................................................................... 		
610 		
3Aggregate loss ....................................................................................................................................... 		
(12) 		0Thousands of
U.S. dollars

2010$ 16,032
		 6,559
		(129)

6. Short-Term Loans, Long-Term Debt and Lease Obligations
Short-term loans, most of which are unsecured, represented notes payable to banks, with the average interest rates of 0.9% and 1.3% as ofMarch 31, 2010 and 2009, respectively.
Long-term debt as of March 31, 2010 and 2009 consisted of the following:

Millions of yen

2010
Loans, principally from banks, insurance companies and government agencies,¥		 81,637
most of which are secured, due 2010 to 2025 .....................................................................................
		 81,637
Current portion of long-term debt ......................................................................................................... 		(20,222)¥		 61,415

Thousands of
U.S. dollars

2009¥		 79,3032010$		877,817

		 79,303
		 (18,141)¥		 61,162

		877,817
		(217,441)$		660,376

The average interest rate applicable to the above loans amounting to ¥81,637 million ($877,817 thousand) was 1.7% and 1.8% as of March
31, 2010 and 2009, respectively.
The aggregate annual maturities of long-term debt subsequent to March 31, 2010 were as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2011 ...........................................................................................................................................................................
2012 . .........................................................................................................................................................................
2013 . .........................................................................................................................................................................
2014 . .........................................................................................................................................................................
2015 and thereafter ...................................................................................................................................................

¥		 20,222
		 15,675
		 13,713
		 18,428
		 13,599¥		 81,637$		217,441
		168,548
		147,452
		198,151
		146,225$		877,817

Lease obligations as of March 31, 2010 and 2009 consisted of the following:

Millions of yen¥		Current portion of lease obligations ...................................................................................................... 		
¥Lease obligations due 2010 to 2016 ......................................................................................................

FURUK AWA32

Annual Report 2010

2010
2009
891
¥
519
891 		
519
(207) 		
(101)
684
¥
418

Thousands of
U.S. dollars

2010$ 9,581		 9,581
		 (2,226)$ 7,355

The aggregate annual maturities of lease obligations subsequent to March 31, 2010 were as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2011 ...........................................................................................................................................................................
2012 . .........................................................................................................................................................................
2013 . .........................................................................................................................................................................
2014 . .........................................................................................................................................................................
2015 and thereafter ...................................................................................................................................................

¥
		
		
		
		
¥

$
		
		
		
		
$

207
206
189
155
134
891

2,226
2,215
2,032
1,667
1,441
9,581

The Company and certain consolidated subsidiaries have enteredcredit facilities amounted to ¥20,656 million ($222,107 thousand)into overdraft and loan commitment agreements amounting toand ¥19,632 million ($211,097 thousand), respectively, as of March¥40,288 million ($433,204 thousand) with 27 banks and ¥44,789

31, 2010 and amounted to ¥25,356 million and ¥19,433 million,

million with 27 banks as of March 31, 2010 and 2009, respectively.

respectively, as of March 31, 2009.

The borrowings outstanding and the unused balances under these

Assets pledged as collateral and liabilities with collateral pledged as of March 31, 2010 and 2009 were as follows:(a) Assets pledged as collateralMillions of yen

2010
Investments in securities ........................................................................................................................
¥ 1,839
Property, plant and equipment, net ....................................................................................................... 		 7,086
Other current assets .............................................................................................................................. 		
87¥ 9,0122009¥
645
		 19,587
		—¥ 20,232

Thousands of
U.S. dollars

2010$ 19,774
		 76,194		
935$ 96,903(b) Liabilities with collateral pledged
Millions of yen

2010
Short-term debt ....................................................................................................................................
¥
300
Long-term debt (including current portion) ........................................................................................... 		 2,812¥ 3,1122009¥30
		 2,177¥ 2,207

Thousands of
U.S. dollars

2010$ 3,226
		 30,236$ 33,462

7. Presentation of Goodwill and Negative Goodwill
Goodwill and negative goodwill are netted against each other. The pre-netted amounts as of March 31, 2010 were as follows:

Millions of yen

Thousands of
U.S. dollars

2010
760
(47)
713

2010
$ 8,172		 (505)$ 7,667

Goodwill ....................................................................................................................................................................
¥
Negative goodwill ...................................................................................................................................................... 		
Net goodwill ..............................................................................................................................................................
¥FURUK AWA33

Annual Report 2010

8. Depreciation and Amortization
Depreciation and amortization for the years ended March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2010
Property, plant and equipment ..............................................................................................................
¥ 3,187
Other investments ................................................................................................................................. 		
57¥ 3,2442009¥ 3,095
		
50¥ 3,1452010$ 34,269
		613$ 34,882

9. Impairment Losses
The Company and its consolidated subsidiaries have recognized

The impairment loss of ¥689 million ($7,408 thousand) for the

impairment losses on idle assets and mining assets that are no longer

year ended March 31, 2010 consisted of losses on idle assets ofin operation due to a significant decline in their fair value by reducing¥504 million ($5,419 thousand) (land—¥45 million ($484 thousand),

their net book value to the respective net realizable value of eachbuilding and structures—¥36 million ($387 thousand), and machinery

asset.

and equipment—¥423 million ($4,548 thousand)) and a loss on

The impairment loss for the years ended March 31, 2010 andmining assets that are no longer in operation of ¥185 million ($1,989

2009 amounted to ¥689 million ($7,408 thousand) and ¥225 million,

thousand) (land—¥185 million ($1,989 thousand)).

respectively.

10. Research and Development Expenses
Research and development expenses, included in selling, general and administrative expenses and cost of sales, for the years ended March 31,
2010 and 2009 amounted to ¥1,862 million ($20,022 thousand) and ¥1,752 million, respectively.

11. Leases
Finance leases (lessee)(1) Finance lease transactions that do not involve transfer of ownership
1. Leased asset quality
		(a) Tangible fixed assets
Mainly production installations in the machinery segment (Machinery and equipment) and distribution vehicles in the others segment(Machinery and equipment)		(b) Intangible assets
Mainly software

2. Depreciation method of leased assets
Refer to “(7) Property, Plant and Equipment and Depreciation” in “2. Summary of Significant Accounting Policies.” Finance leasetransactions that do not involve transfer of ownership, entered into on and before March 31, 2008, by the Company and its domestic
consolidated subsidiaries are accounted for as operating leases.
The pro forma amounts representing acquisition costs, accumulated depreciation and net carrying value for the machinery and equipment
and others held under the finance leases currently accounted for as operating leases as of March 31, 2010 and 2009 were as follows:
Millions of yen

2010
Acquisition costs ...................................................................................................................................
¥ 3,217
Less accumulated depreciation .............................................................................................................. 		 1,660
Net carrying value .................................................................................................................................
¥ 1,557

FURUK AWA34

Annual Report 20102009
¥ 3,593		 1,522¥ 2,071

Thousands of
U.S. dollars

2010$ 34,591
		 17,849$ 16,742

Lease payments relating to finance leases accounted for as operating leases amounted to ¥540 million ($5,806 thousand) and ¥599 million
for the years ended March 31, 2010 and 2009, respectively, which were equal to the depreciation expense of leased assets computed by thestraight-line method over the lease terms.
Future minimum lease payments including an interest element under the finance leases outstanding as of March 31, 2010 and 2009 aresummarized as follows:

Millions of yen

2010
Within one year . ...................................................................................................................................
¥
473
Over one year ........................................................................................................................................ 		 1,084¥ 1,5572009¥
535
		 1,536¥ 2,071

Thousands of
U.S. dollars

2010$ 5,086
		 11,656$ 16,742(2) Operating leases
The future minimum lease payments under lease agreements other than finance leases as of March 31, 2010 and 2009 are summarized asfollows:
Millions of yen

2010
Within one year . ...................................................................................................................................
¥
12
Over one year ........................................................................................................................................ 		
14
¥
26

2009
¥
19
		
22
¥
41

U.S. dollars

$
		
$

2010
129
151
280

12. Financial Instruments
For the year ended March 31, 2010
1. Overview of financial instruments(1) Policy for financial instruments
In consideration of the annual financial plan, the Furukawa Group raises funds through mainly bank borrowings and bond issues. Further,
the Furukawa Group raises short-term capital through mainly bank borrowings. The Furukawa Group uses derivatives for the purpose of
reducing risk and does not enter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivables—are exposed to credit risk in relation to customers. In addition, the Furukawa
Group is exposed to foreign currency exchange risk arising from receivables denominated in foreign currencies. In principle, the foreign
currency exchange risks deriving from the trade receivables denominated in foreign currencies are hedged by forward foreign exchange
contracts.
Marketable securities and investment securities are exposed to market risk. Those securities are composed of mainly the shares ofcommon stock of other companies with which the Furukawa Group has business relationships.
Substantially all trade payable—trade notes and accounts payables—have payment due dates within one year.
Short-term loans are raised mainly in connection with business activities, and long-term debt is taken out principally for the purpose of
making capital investments. Long-term debt with variable interest rates is exposed to interest rate fluctuation risk. However, to reduce suchrisk and fix interest expense for long-term debt bearing interest at variable rates, the Furukawa Group utilizes rate swap transactions as ahedging instrument for each contract. The assessment of effectiveness is omitted since it meets conditions of specific matching criteria forinterest rate swaps.
Regarding derivatives, the Furukawa Group enters into forward foreign exchange contracts to reduce the foreign currency exchange
risk arising from the receivables and payables denominated in foreign currencies. The Furukawa Group also enters into interest rate swap

FURUK AWA35

Annual Report 2010

transactions to reduce fluctuation risk deriving from interest payable for debt bearing interest at variable rates. The Furukawa Group also
enters into forward commodity exchange contracts to reduce fluctuation risk of commodity prices of inventories. Information regarding
the method of hedge accounting, hedging instruments, hedged items, hedging policy and the assessment of effectiveness of hedging
activities is found in “(13) Hedging Activities” in “2. Summary of Significant Accounting Policies.”(3) Risk management for financial instruments		(a) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Furukawa Group for managing credit risk arising from receivables, each related divisionmonitors credit worthiness of their main customers periodically, and monitors due dates and outstanding balances by individual
customer.
In utilizing derivatives, the Furukawa Group has transactions with major financial institutions or trading companies which havehigh credit to reduce credit risk.

		(b) Monitoring of market risks (the risks arising from fluctuations in foreign exchange rates, interest rates and others)
For trade receivables and payables denominated in foreign currencies, the Furukawa Group identifies the foreign currency exchange
risk for each currency on a monthly basis and principally enters into forward foreign exchange contracts to hedge such risk. In order tomitigate the interest rate risk for loans payable and bonds bearing interest at variable rates, the Furukawa Group enters into interest
rate swap transactions.
For marketable securities and investment securities, the Furukawa Group periodically reviews the fair values of such financial
instruments.
In conducting or managing derivative transactions, each division makes transactions by approval of the directors of transactionrelated divisions.

		(c) Monitoring of liquidity risk (the risk that the Furukawa Group may not be able to meet its obligations on scheduled due dates)
Based on the report from each division, the Furukawa Group prepares and updates its cash flow plans on a monthly basis to manage
liquidity risk.

(4) Supplementary explanation of the estimated fair value of financial instruments
The value of financial instruments is based on their quoted market place, if available. When there is no quoted market price available,
fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions
and factors could result in different fair value. In addition, the notional amounts of derivatives in “13. Derivative Transactions” are notnecessarily indicative of the actual market risk involved in derivative transactions.
2. Estimated fair value of financial instruments
Carrying value of financial instruments on the consolidated balance sheet as of March 31, 2010 and estimated fair value are shown as follows.
The following table does not include financial instruments for which it is extremely difficult to determine the fair value. (Please refer to Note 2
below.)
Millions of yen

Carrying value

Assets(1) Cash and cash equivalents ................................................ ¥		(2) Notes and accounts receivable . ........................................ 		
(3) Investments in securities ................................................... 		
Total assets		

FURUK AWA2010

Estimated fairvalue

Estimated fairvalue

20,257 ¥		
24,427 		
18,973 		
63,657 		

36

Thousands of U.S. dollars

2010
Difference

20,257 		
24,427 		
18,973 		
63,657 		

Annual Report 2010

—
—
—
—

Carrying value

Difference$		 217,817 $		 217,817 		
		 262,656 		 262,646 		
		 204,010 		 204,010 				 684,483 		 684,483 		

—
—
—
—

Millions of yen

Carrying value

Thousands of U.S. dollars

2010

2010

Estimated fairvalue

Estimated fairvalue

Difference

Liabilities(1) Notes and accounts payable ............................................. ¥		 26,426 ¥		 26,426 		
(2) Short-term loans (*1) ........................................................ 		 13,077 		 13,077 		
(3) Long-term debt (*1) ......................................................... 		 81,637 		 82,187 ¥		Total liabilities		 121,140 		 121,690 		
Derivatives (*2)........................................................................... ¥		
145 ¥		145 		

—
—
550
550
—

Carrying value

Difference$		 284,151 $		 284,151 		
		 140,613 		 140,613 				 877,817 		 883,731 $				1,302,581 		1,308,495 		$		
1,559 $		
1,559 		

—
—
5,914
5,914
—

*1 Current portion of long-term debt is included in Long-term debt.
*2 The value of assets and liabilities arising from derivatives is shown at net value, with the amount in parentheses representing the net liability
position.
Notes:
1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
Assets(1) Cash and cash equivalents, (2) Notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(3) Investments in securities
The fair value of stocks is based on market prices. For information on securities classified by holding purpose, please refer to “5.
Investments in Securities” to the consolidated financial statements.
Liabilities(1) Notes and accounts payable (2) Short-term loans
Since these items are settled in a short period of time, their carrying value approximates fair value.
(3) Long-term debt
The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be
applied if similar new loans were entered into.
Derivatives transaction
Please refer to “13. Derivative Transactions” to the consolidated financial statement.
2. Financial instruments for which it is extremely difficult to determine the fair value as of March 31, 2010

Unlisted stocks ...........................................................................................................................................................

Millions of yen

Thousands of
U.S. dollars¥ 8,468$ 91,054

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are notincluded in the above table of ”(3) Investments in securities.”

FURUK AWA37

Annual Report 2010

3. Redemption schedule for receivables and marketable securities with maturities after March 31, 2010 is as follows:

Millions of yen

Due in one year or less

Cash deposit . ..............................................................................
¥
Notes and accounts receivable . ................................................... 		
Total 		
¥Thousands of U.S. dollars

20,18024,42644,606						Due in one year or less

Cash deposit . ..............................................................................
$ 216,989
Notes and accounts receivable . ................................................... 		 262,645
Total$ 479,634

Due after one year
through five years———

Due after one year
through five years

		
		
		

—
—
—

Due after five years
through ten years

		
		
		

—
—
—

Due after ten years

		
		
		

Due after five years
through ten years

		
		
		

—
—
—

—
—
—

Due after ten years

		
		
		

—
—
—

4. The redemption schedule for long-term debt is disclosed in “6. Short-Term Loans, Long-Term Debt and Lease Obligations.”(Additional information)
Effective the fiscal year ended March 31, 2010, “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, March 10, 2008) and“Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, July 10, 2008) have been adopted.

13. Derivative Transactions
The notional amounts and estimated fair value of the derivative instruments outstanding at March 31, 2010, for which hedged accounting havebeen applied, are as follows:
1. Currency-related transactions
Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

Major object of hedge

Forward foreign exchange contracts
Sell
		
U.S. dollars
		
EUR
		
U.S. dollars
Forward foreign exchange contracts
Sell
		
U.S. dollars
		
EUR
Buy
		
U.S. dollars

Contract amounts

As of March 31, 2010
Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

¥
		
		

768
46
6,220

		
		
		

—
—
—

¥
		
		

(13)
(0)
(209)

Accounts receivable
Accounts receivable

¥
		

324
43

		
		

—
—

		
		

(*)
(*)

¥

3,753

		

—

		

(*)

Accounts payable

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Allocation method

Type of transaction

Major object of hedge

Forward foreign exchange contracts
Sell
		
U.S. dollars
		
EUR
		
U.S. dollars
Forward foreign exchange contracts
Sell
		
U.S. dollars
		
EUR
Buy
		
U.S. dollars

Contract amounts

As of March 31, 2010
Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

$
		
		

8,258
495
66,872

		
		
		

—
—
—

$
		
		

(140)
(0)
(2,247)

Accounts receivable
Accounts receivable

$
		

3,484
462

		
		

—
—

		
		

(*)
(*)

$

40,355

		

—

		

(*)

Accounts payable

FURUK AWA38

Annual Report 2010

2. Interest-related transaction
Millions of yen
Method of hedge accounting

Special accounting
procedure for interest
rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

Contract amounts¥

37,094As of March 31, 2010
Maturing after one year¥

29,988Fair value

		

(*)

Thousands of U.S. dollars
Method of hedge accounting

Special accounting
procedure for interest
rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

Contract amounts$

398,860

As of March 31, 2010
Maturing after one year$

322,452

Fair value

		

(*)

(*) The fair values by means of the special accounting procedure for interest rate swap contracts are included in the fair values of the hedged
long-term debt because the derivative transactions are treated as a part of hedged long-term debt.
3. Commodity-related transactions
Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell		
CopperBuy		CopperMajor object of hedge

Contract amounts

As of March 31, 2010
Maturing after one year

Fair value

Raw material

		

—

		

—

		

—

Raw material

¥

5,118

		

—

¥

367

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell		
CopperBuy		CopperMajor object of hedge

Contract amounts

As of March 31, 2010
Maturing after one year

Fair value

Raw material

		

—

		

—

		

—

Raw material$

55,032

		

—

$

3,946

Note: The fair values of forward currency contracts are based on the price provided by trading companies.
(*) Since short position trade is dependent on copper price at the time when copper will be received, amount of contract and the fair value as ofMarch 31, 2010 does not exist and is not disclosed.

FURUK AWA

39

Annual Report 2010

14. Retirement Benefits
The balances of the retirement benefit obligation and plan assets, funded status and the amounts recognized in the consolidated balance sheets
as of March 31, 2010 and 2009 are summarized as follows:

Retirement benefit obligation ................................................................................................................
Plan assets at fair value . ........................................................................................................................
Unfunded status . ..................................................................................................................................
Unrecognized net obligation at transition . ............................................................................................
Unrecognized actuarial loss ...................................................................................................................
Unrecognized prior service cost .............................................................................................................
Prepaid pension expenses . ....................................................................................................................
Accrued employees’ retirement benefits . ..............................................................................................

Millions of yen

Thousands of
U.S. dollars

2010
2009
¥		 (15,117) ¥		 (13,743)
		 11,212 		 7,936
		 (3,905) 		 (5,807)
		647 		—
		 6,605 		 10,526
		226 		
248
		 (5,162) 		 (6,348)¥		 (1,589) ¥		 (1,381)

2010$		(162,548)
		 120,559
		 (41,989)
		 6,957
		 71,022
		 2,430
		 (55,506)$		 (17,086)

The components of retirement benefit expenses for the years ended March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost ...........................................................................................................................................
Interest cost . .........................................................................................................................................
Expected return on plan assets . ............................................................................................................
Amortization of prior service cost . ........................................................................................................
Amortization of actuarial loss ................................................................................................................
Amortization of net obligation at transition ..........................................................................................
Retirement benefit expenses .................................................................................................................
Employees’ contributions to the defined benefit pension plans .............................................................

2010
¥
627
		
360
		
(156)
		
22
		 1,052		32
		 1,937
		
8

2009
¥
686
		
349
		
(149)
		
22
		
855
		
—
		 1,763
		
12

2010
$ 6,742		 3,871
		 (1,677)
		237
		 11,311
		
344
		 20,828
		86

Total ......................................................................................................................................................

¥ 1,945¥ 1,775$ 20,914

The assumptions used in accounting for the above plans are as follows:
2010
Discount rates .......................................................................................................................................
mainly 2.2%
Expected return on plan assets . ............................................................................................................ 		mainly 2.0%

2009
mainly 2.4%
		mainly 2.0%

15. Income Taxes
The reconciliation between the statutory tax rate and the effective tax rate of the Furukawa Group for 2009 has not been presented because the
Furukawa Group recorded a loss before income taxes and minority interests.
The above information for the year ended March 31, 2010 was summarized as follows:
Statutory tax rate ..................................................................................................................................
Non-deductible expenses for tax purposes ............................................................................................
Non-taxable dividends and other income ..............................................................................................
Inhabitants per capital tax .....................................................................................................................
Equity in earnings of affiliates . ..............................................................................................................
Amortization of negative goodwill ........................................................................................................
Changes in valuation allowance ............................................................................................................
Other ....................................................................................................................................................
Effective tax rate ...................................................................................................................................

FURUK AWA40

Annual Report 2010

		 40.7%
		 4.9		 (4.3)
		 10.8
		 3.8
		 (1.0)
		 (21.3)
		 0.6
		 34.2%

Deferred tax assets and liabilities as of March 31, 2010 and 2009 consisted of the following:
Millions of yen

Deferred tax assets:
Allowance for doubtful accounts
Accrued employees’ retirement benefits .........................................................................................
Loss on impairment of fixed assets . ................................................................................................
Investments in securities .................................................................................................................
Accrued expenses ...........................................................................................................................
Net unrealized holding loss on securities .........................................................................................
Net operating loss carryforwards ....................................................................................................
Land ...............................................................................................................................................
Other ..............................................................................................................................................
Total gross deferred tax assets.........................................................................................................
Valuation allowance.........................................................................................................................
Total deferred tax assets..................................................................................................................
Deferred tax liabilities:
Net unrealized holding gain on securities.........................................................................................
Statutory reserves provided for tax purposes....................................................................................
Gain from establishment of trust for retirement benefit plans..........................................................
Land.................................................................................................................................................
Capitalized interest of a foreign subsidiary.......................................................................................
Other...............................................................................................................................................
Total deferred tax liabilities...............................................................................................................
Net deferred tax liabilities.................................................................................................................
Deferred income taxes on surplus on the revaluation of land...........................................................

Thousands of
U.S. dollars

2010

2009

2010

¥		
375
		 5,798
		 3,139
		 3,866		87		—		 15,933
		 2,638
		 1,443
		 33,279
		 (22,737)
		 10,542¥		322
		 5,257
		 2,791
		 3,820
		
351
		
998
		 14,227
		 2,627
		
875
		 31,268
		 (21,693)
		 9,575$		 4,032
		 62,344
		 33,753
		 41,570
		
935
		
—
		171,323
		 28,366
		 15,516
		357,839
		(244,484)
		113,355		—		 (1,593)
		 (4,327)
		 (10,545)
		 (1,604)		(383)
		 (18,452)¥		 (7,910)¥		 (2,806)		(20)
		 (1,478)
		 (4,327)
		 (9,225)
		
(738)
		
(129)
		 (15,917)¥		 (6,342)¥		 (3,030)		—		 (17,129)
		 (46,527)
		(113,387)
		 (17,247)
		 (4,119)
		(198,409)$		 (85,054)$		 (30,172)

16. Contingent Liabilities
Contingent liabilities as of March 31, 2010 and 2009 consisted of the following:
Millions of yen

2010
Notes receivable discounted and endorsed . ..........................................................................................
¥ 1,531
Loans guaranteed . ................................................................................................................................ 		 2,792

2009
¥
444
		 3,725

Thousands of
U.S. dollars

2010$ 16,462
		 30,022

17. Write-down of Inventories
The amounts of write-down of inventories, included in cost of sales, for the year ended March 31, 2009 amounted to ¥579 million. For the year
ended March 31, 2010, the Company reversed write-down in the amount of ¥536 million ($5,763 thousand) and credited it to costs of sales.

FURUK AWA41

Annual Report 2010

18. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 2010 and 2009 consisted of the following:
Millions of yen

Gain or loss on disposal and sales of property, plant and equipment . ...................................................
Gain on sales of investments in securities ..............................................................................................
Gain related to copper smelting business in Australia ............................................................................
Employment adjustment subsidy ...........................................................................................................
Liquidating distribution from silent partnership .....................................................................................
Payments for idle mines . .......................................................................................................................
Write-down of investments in securities ................................................................................................
Expenses on removal of office tenants ..................................................................................................
Provision for environmental measures ...................................................................................................
Loss on business withdrawal .................................................................................................................
Impairment loss on fixed assets .............................................................................................................

2010
¥
126
		
610
		 1,345
		
254
		
—
		
(562)
		
0
		
—
		
(214)
		
(762)
		
(266)

Other, net . ............................................................................................................................................ 		
¥

22
553

Thousands of
U.S. dollars

2009¥ 1,793
		
—
		
—
		
—
		 3,962		(532)
		 (7,418)
		 (1,305)
		
—
		
—
		
(225)

2010
$ 1,355
		 6,559
		 14,462
		 2,731		—		 (6,043)
		
0
		
—
		 (2,301)
		 (8,194)
		 (2,860)

		
(198)
¥ (3,923)

		237$ 5,946

19. Supplementary Cash Flow Information
The breakdown of assets and liabilities of the newly consolidated subsidiary, Tohpe Corporation, at the commencement of the consolidation is
as follows. The following also shows the acquisition cost of the shares of Tohpe Corporation and amounts paid (net) for the acquisition of suchshares for the year ended March 31, 2010.

Current assets ............................................................................................................................................................
Fixed assets ................................................................................................................................................................
Goodwill ....................................................................................................................................................................
Current liabilities ........................................................................................................................................................
Long-term liabilities ....................................................................................................................................................
Minority Interest . .......................................................................................................................................................
Acquisition cost of Tohpe Corporation shares . ...........................................................................................................
Cash and cash equivalents of Tohpe Corporation .......................................................................................................
Net amounts paid for the acquisition of Tohpe Corporation shares ............................................................................

FURUK AWA

42

Annual Report 2010

Millions of yen

Thousands of
U.S. dollars¥		 8,334
		 7,297		
761
		 (10,751)
		 (3,555)
		
(883)
		 1,203		 (1,005)¥		198$		 89,613
		 78,462
		 8,183
		(115,602)
		 (38,226)
		 (9,495)
		 12,935
		 (10,806)$		 2,129

20. Segment Information
The business of the Furukawa Group is divided into the following six categories: machinery, metals, electronic materials and chemicals, real estate,
fuels and others.
The business segment information of the Furukawa Group for the years ended March 31, 2010 and 2009 was as follows:Year ended March 31, 2010

Millions of yen

Machinery

I. Sales and operating income (loss)
Outside customers ..........................
Intersegment ...................................
Total ............................................
Costs and expenses .........................
Operating income (loss) . .................
II. Assets, depreciation, impairment
loss on fixed assets and capital
expenditures
Total assets . ....................................
Depreciation . ..................................
Impairment loss on fixed assets .......
Capital expenditures . ......................

MetalsElectronic
Materials andChemicals

Paints

Fuels

OthersConsolidated¥		 44,313 ¥		 71,133 ¥		 10,995 ¥		 3,693 ¥		 2,044 ¥		 9,893 ¥		
854 		— ¥		 142,925
		369 		
500 		
376 		
4 		
152 		
215 		 1,206 ¥		 (2,822) 		
—		 44,682 		 71,633 		 11,371 		 3,697 		 2,196 		 10,108 		 2,060 		 (2,822) 		 142,925
		 (47,692) 		(68,409) 		 (10,608) 		 (3,716) 		 (1,067) 		 (10,137) 		 (2,437) 		 2,739 		 (141,327)¥		 (3,010) ¥		 3,224 ¥		
763 ¥		
(19) ¥		 1,129 ¥		(29) ¥		 (377) ¥		(83) ¥		1,598¥		 57,193
		 1,570
		
3
		 1,502¥		 30,407
		
309
		
—
		
205

¥		 24,145
		
629
		
—
		
227

MetalsElectronic
Materials andChemicals¥		 15,287
		
66
		
—
		
59

Year ended March 31, 2010

¥		 23,584
		
270
		
63
		
236

¥		
		
		
		

2,401
12
5
16

¥		
		
		
		

4,017
152
422
98

¥		 47,740
		
236
		
196
		
593

¥		
		
		
		

204,774
3,244
689
2,936

Thousands of U.S. dollars

Machinery

I. Sales and operating income (loss)
Outside customers ..........................
Intersegment ...................................
Total ............................................
Costs and expenses .........................
Operating income (loss) . .................
II. Assets, depreciation, impairment
loss on fixed assets and capital
expenditures
Total assets . ....................................
Depreciation . ..................................
Impairment loss on fixed assets .......
Capital expenditures . ......................

Real Estate

Eliminations
andCorporate

PaintsReal Estate

Fuels

OthersEliminations
andCorporate

Consolidated$		 476,484 $		 764,871 $		 118,226 $		 39,710 $		 21,978 $		 106,376 $		 9,183 		
— $		 1,536,828
		 3,968 		 5,376 		 4,043 		
43 		 1,634 		 2,312 		 12,968 $		 (30,344) 		
—		480,452 		770,247 		122,269 		 39,753 		 23,612 		108,688 		 22,151 		 (30,344) 		 1,536,828
		(512,818) 		(735,580) 		(114,065) 		 (39,957) 		 (11,472) 		(109,000) 		 (26,205) 		 29,452 		 (1,519,645)$		 (32,366) $		 34,667 $		 8,204 $		 (204) $		 12,140 $		 (312) $		 (4,054) $		 (892) $		
17,183$		 614,978		 16,882
		32
		 16,151$		 326,957
		 3,323		—		 2,204$		 259,624
		 6,763		—		 2,441

FURUK AWA$		 164,376
		
710
		
—
		
634

43

$		 253,591
		 2,903
		
677
		 2,538

Annual Report 2010

$		 25,817
		
129
		
54
		
172

$		 43,195
		 1,634
		 4,538
		 1,054$		 513,333
		 2,538
		 2,108
		 6,376$		 2,201,871
		
34,882
		
7,409
		
31,570Year ended March 31, 2009

Millions of yen

Machinery

I. Sales and operating income (loss)
Outside customers ..........................
Intersegment ...................................
Total ............................................
Costs and expenses .........................
Operating income (loss) . .................
II. Assets, depreciation and capital
expenditures
Total assets . ....................................
Depreciation . ..................................
Capital expenditures . ......................

MetalsElectronic
Materials andChemicals

Real Estate

Fuels

OthersEliminations
andCorporate

Consolidated¥		 62,640 ¥		 68,786 ¥		 11,389 ¥		 2,386 ¥		 15,452 ¥		 1,205 		— ¥		 161,858
		372 		
526 		
204 		
159 		
329 		 1,400 ¥		 (2,990) 		
—		 63,012 		 69,312 		 11,593 		 2,545 		 15,781 		 2,605 		 (2,990) 		 161,858
		 (61,278) 		 (69,289) 		 (11,387) 		 (1,839) 		 (15,578) 		 (2,910) 		 2,726 		(159,555)¥		 1,734 ¥		
23 ¥		
206 ¥		706 ¥		203 ¥		
(305) ¥		(264) ¥		 2,303¥		 65,405 ¥		 20,748 ¥		 24,179 ¥		 28,534 ¥				 1,488 		
273 		
780 		
291 		
		 2,131 		
314 		
305 		 13,468 		

2,638 ¥		
14 		
10 		

4,823 ¥		 42,034 ¥		 188,361
98 		
201 		 3,145
108 		
171 		 16,507

The geographic segment information for the years ended March 31, 2010 and 2009 has not been presented, because the revenues and total
assets in Japan exceed 90% of consolidated totals.
Overseas sales, which include exports of the Company and its domestic consolidated subsidiaries and sales (other than exports to Japan) of
the foreign consolidated subsidiaries, totaled ¥22,950 million ($246,774 thousand) and ¥31,913 million or 16.1% and 19.7% of the consolidated
net sales for the years ended March 31, 2010 and 2009, respectively.

21. Business Combination
For the year ended March 31, 2010
On December 22, 2009, the Company made its affiliate Tohpe Corporation a consolidated subsidiary through an allocation of new shares to athird party and a takeover bid. In connection with the accounting for the acquisition, the Company has applied the purchase method.
1. Outline of the business combination(1) Names of the acquired party and description of its businessa) Tohpe Corporationb) Production and sales of paints(2) Reasons for the business combination
Tohpe Corporation announced its improved management plan that includes rationalization of production, personnel downsizing by freezing
continued re-employment and strengthening of sales and product development, to achieve earnings recovery in Paint and Chemical Productbusiness.
We have considered Tohpe Corporation as one of our important company in the Furukawa group and supported through investing,purchase of products and dispatching the Company’s employees as CEOs. We concluded that achieving the Tohpe Corporation’s improved
management plan by our financial and personnel supports is the best way not only for management reconstruction of Tohpe Corporation
but for expansion of the Furukawa group’s operation. Therefore, we decided to make Tohpe Corporation a consolidated subsidiary throughan allocation of new shares to a third party and takeover bid.
(3) Date of the business combination
December 22, 2009
(4) Form of the business combination
Allocation of new shares to a third party and takeover bid(5) Name of company after business combination
Tohpe Corporation

FURUK AWA

44

Annual Report 2010

(6) Ratio of voting rights acquired through the business combination
35.1%
2. Period for which the operating results of the acquired company are included in the consolidated financial statements of the Company
From January 1, 2010 to March 31, 2010
3. Acquisition cost
Cost for acquiring the shares: ¥954 million
Expenses related to the acquisition: ¥249 million
Total acquisition cost: ¥1,203 million
4. Amount, reason, amortization method and period of goodwilla) Amount of goodwill¥760 millionb) Reason
The acquisition cost of the acquired company exceeds the value of the assets and liabilities of the acquired company as of the date of thebusiness combination.
c) Amortization method and period of goodwill
To be amortized over 5 years using the straight-line method
5. Assets and liabilities assumed on the date of the business combination and their components
Current assets: ¥8,334 million
Fixed assets: ¥7,296 million
Total assets: ¥15,630 million
Current liabilities: ¥10,751 million
Long-term liabilities: ¥3,554 million
Total liabilities: ¥14,306 million
6. Approximate impact on the consolidated statements of operations, assuming that the business combination took place at the beginning of the
fiscal year ended March 31, 2010
Net sales: ¥14,518 million
Operating loss: ¥201 million
Loss before income taxes and minority interests: ¥483 million
Net loss: ¥258 million
Net loss per share: ¥0.64
These amounts were calculated based on the consolidated statements of operations of Tohpe Corporation with adjustment for the amortizedamount of goodwill and minority interests on the assumption that the business combination was completed at the beginning of the fiscal year
ended March 31, 2010.
The figures above are un-audited.

FURUK AWA45

Annual Report 2010

22. Investment and Rental Properties
The Company and certain consolidated subsidiaries own office buildings for lease mainly in Tokyo and other areas. Effective the fiscal year ended
March 31, 2010, rental income is ¥1,114 million ($11,978 thousand), gain on sales of rental properties is ¥432 million ($4,645 thousand), loss
on disposal and sales of rental properties is ¥171 million ($1,839 thousand) and loss on impairment of rental properties is ¥266 million ($2,860
thousand). The carrying value in the consolidated balance sheets and corresponding fair value of those properties are as follows:
Carrying Value
As of March
31, 2009

Fair Value
As of March
31, 2010

Net change

As of March
31, 2010(Millions of yen)¥

27,767

¥

(201)

¥

27,566¥

Carrying Value$

298,570

Fair Value

As of March
31, 2010(Thousands of U.S. dollars)

As of March
31, 2009

As of March
31, 2010

Net change$(2,161)

31,598$296,409$339,763

Notes:
1. The carrying value represents the acquisition cost less accumulated depreciation and cumulative impairment loss.
2. The components of net change in carrying value included increases mainly related to changes in use in the amount of ¥276 million ($2,968
thousand) and decreases mainly due to sales of real estate in the amount of ¥629 million ($6,763 thousand).
3. The fair value is mainly estimated in accordance with appraisal standards for valuing real estate.
(Additional information)
Effective the fiscal year ended March 31, 2010, “Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (ASBJ
Statement No. 20) and “Guidance on Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (ASBJ Guidance
No. 23) have been adopted.

FURUK AWA46

Annual Report 2010

FURUK AWA

47

Annual Report 2010

Corporate Data（(As of March 31, 2010)

Directors and Auditors

Company Name: Furukawa Co., Ltd.

(As of June 29, 2010)

Head Office: 2-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo

President and Representative Director Nobuyoshi Soma

100-8370, Japan

Senior Managing Director

Hiroyuki Shiaku

Tel: +81-3-3212-6570 Fax: +81-3-3212-6578

Managing Director

Manabu Zama

Date of Foundation: August 1875

Managing Director

Yoshihito Emoto

Director

Junnosuke Furukawa

Director

Susumu Nakamura

Stock Exchange Listing: Tokyo, Osaka

Director

Toshio Matsumoto

Securities Code Number: 5715

Statutory Auditor

Masafumi Miyata

Employees: Consolidated 2,670; Non-consolidated 207

Statutory Auditor

Tadatoshi Nanpei

AuditorTamiki Ishihara

AuditorNobuyuki Tomotsune

AuditorYoshiki Sato

Date of Establishment: April 1918
Number of Shares Authorized: 800,000,000 shares
Number of Shares Outstanding: 404,455,680 shares

Stock Transfer Agent: The Chuo Mitsui Trust and Banking
Company, Limited
33-1, Shiba 3-chome, Minato-ku,
Tokyo 105-8574, Japan
Principal Shareholders
Number of Percentage ofTotal Shares
Shares(%)(Thousands)

Asahi Mutual Life Insurance Co.

27,923

6.90

Executive Officers

Seiwa Sogo Tatemono Co., Ltd.

15,034

3.71(As of June 29, 2010)

Sompo Japan Insurance Inc.

13,8103.41

Senior Managing Executive Officer

Hiroyuki Shiaku

The Master Trust Bank of Japan, Ltd. (trust account)

12,235

3.02

Managing Executive Officer

Manabu Zama

Japan Trustee Services Bank, Ltd. (trust account)

12,006

2.96

Managing Executive Officer

Yoshihito Emoto

Chuo Real Estate Co., Ltd.

11.827

2.92

Senior Executive Officer

Susumu Nakamura

Fujitsu Limited

9,617

2.37

Senior Executive Officer

Toshio Matsumoto

Furukawa Electric Co., Ltd.

8,777

2.17

Senior Executive Officer

Toshikazu Nakagawa

Fuji Electric Holdings Co., Ltd.

8,620

2.13

Senior Executive Officer

Yasuji Tomiyama

The Yokohama Rubber Company, Limited

8,510

2.10

Senior Executive Officer

Akira Usui

Executive Officer

Naohisa Miyakawa

Executive Officer

Masaya Kouzaki

Executive Officer

Osamu Watanabe

Executive Officer

Saburou Saruhashi

Executive Officer

Kouichiro Umezaki

Executive Officer

Norihiro Yanagisawa

Executive Officer

Kenji Ichimura

Composition of Shareholders

Foreign Institutions
6.29%
Other JapaneseCompanies
22.94%

Financial Instruments Firms(Securities Companies)
3.36%
Financial Institutions
27.53%

Individuals
and Others
39.88%

URL: http://www.furukawakk.co.jp/e_index.htm

FURUK AWA48

Annual Report 2010

Corporate History

1875 Began the operation of the Kusakura
Copper Mine in Niigata (Company
foundation).

1987 Bought UNIC Corporation (manufacturer of truck-mounted cranes).

1877 Began the operation of the Ashio
Copper Mine in Tochigi.

1989 The Japanese name changed from
Furukawa Kogyo Kabushiki Kaisha
to Furukawa Kikai Kinzoku Kabushiki
Kaisha.

1900 Set up a machinery works at the
Ashio Copper Mine and entered into
the machinery business.

The Ashio Copper Mine is where the
Furukawa Company Group began.

“UNIC” has become a synonym for truckmounted cranes in Japan.

1990 Bought an America breaker manufacturer.

1914 Manufactured the first rock drill inJapan.
1918 Spun off mining business from Furukawa General Partnership and established Furukawa Mining Co., Ltd.

1997 Established a manufacturer of UNIC
products/components, Furukawa
UNIC (Thailand) Co., Ltd., in Thailand.

The first domestic rock drill was developedat Ashio.

1998 Established a sales company of rock
drill products, Furukawa Rock Drill
Europe B.V., in Holland.

1944 Bought Osaka Smelter of Toa Chemical Smelting Co., Ltd. and established it as Osaka Cementation and
Refining. Entered into the chemicalbusiness.
Built the Oyama Works of the Machinery Division of the Ashio Copper
Mine in Tochigi.

1999 Moved the Materials Research Laboratory to Tsukuba City in Ibaraki.

At the Oyama Works, pumps and mining
machinery for copper mines were
manufactured, not only for internal use
but also to sell externally.

2003 Established Taian Furukawa Machinery Co., Ltd. — a joint company forthe manufacturing and distributionof UNIC cranes in China.
2005 Spun off the Machinery business,
Metals business, and Electronic Materials and Chemicals business andshifted to a group management
structure as the Furukawa Company
Group to enhance management.

1950 Built the Takasaki Works of the Rock
Drill Division in Gunma.

1951 Began manufacturing of titanium dioxide and cuprous oxide at Osaka
Cementation and Refining.

1962 Completed the Furukawa/Outokumpu flash smelting plant at Ashio
Smelting and Refining.

This is an affiliate company for the UNIC
business established in Rayong, Thailand,
which manufactures truck-mounted cranes
and other products.

At the Takasaki Works, rock drills were
mass-produced, and we establishedthe position of a leading rock drill
manufacturer.

2006 Established a rock drills sales company, Furukawa Rock Drill (Shanghai)Co., Ltd., in China.

This is an affiliate company for theconstruction and mining machinery
business established in Utrecht, Holland,
which distributes rock drills and otherproducts.

This is an affiliate company for the UNIC
business established in Taian, Shandong,
China, which manufactures and distributes
truck-mounted cranes and other products.

2007 Formed a capital and business alliance for the GaN semiconductor
epi-wafer business with POWDEC
K.K.
2008 Newly setup the Nitride Semiconductors Department as a GaN andrelated nitride semiconductor-related
research organization.

The Furukawa/Outokumpu flash smelting
plant

Completed research and development of high-purity (99.999%) metallic arsenic and commenced withthe sale of it.

This is an affiliate company which
deals with the construction and mining
machinery business established in
Shanghai, China, and distributes rock drills
and other products.

2009 Built the new laboratory of the Nitride Semiconductors Department inOyama.
Made Tohpe Corporation, which
manufactures and distributes paints
and chemicals, into a consolidated
subsidiary.

Arsenic is one of th e b y - p r o d u c t s
generated during the smelting stage ofcopper concentrates.

FURUK AWA49

Annual Report 2010

In 2009, the new laboratory of the Nitride
Semiconductors Department was built inOyama.

Paints

2-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-8370, Japan

Real EstateElectronic Materials

Chemicals

Fuels and Others