ANNUAL REPORT 2012

M ACHINERY

MATERIALS

Business Domains of the Furukawa Company Group
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. In ourbusinesses, which can be broadly classified into the fields of machinery and materials, we deliver
attractive products to diverse markets. Going forward, we will expand our involvement in rapidly
growing businesses, while adhering to our basis corporate policies, which are to “promote further
overseas development and strengthen the technical capabilities of the Machinery business” and“promote development activities aimed at new product commercialization.”

Machinery Business

CONSTRUCTION AND
MINING MACHINERY (ROCK DRILLS)UNIC MACHINERY

INDUSTRIAL MACHINERY

Hydraulic breakers
Hydraulic crushers
Crawler drills
Tunnel drill jumbos

UNIC cranes
UNIC carriers
Mini crawler cranes
Ocean cranes

Slurry pumps, sludge pumps
Uniaxial screw pumps
Environmental machinery(Electrostatic precipitators)

Crushers, grinding mills, briquetting machines
Steel structures
Construction and Mining Machinery (Rock Drills) / UNIC Machinery
Industrial Machinery

Mines (iron ore, copper, coal, lime, etc.)

Engineering and construction sites

Steel plants

Quarries

Tunnel construction

Refineries

Sewage treatment plants

Shipyards

Bridges

Various plants

Pedestrian bridges

Incinerators

Logistics
Vehicle transportation

Resource development

Infrastructure, engineering, construction

Heavy industry

B U S I N E S S

Profile

Furukawa’s Technological Genealogy
Prospecting technologies

Drilling technologies

Rock Drills

Hydraulic control technologies

UNIC MachineryTransport / Mine selection technologies

Slurry transportation technologies

Smelting technologies

Exhaust gas treatment technologies

Grinding technologies

Mine development technologies

Industrial Machinery

Flash smelting technologies

MetalsSulfuric acid production technologies

ChemicalsElectric technologies

Electronic Materials

Paint production technologies

PaintsMaterials Business

METALSCHEMICALSELECTRONIC MATERIALSElectrolytic copper

Cuprous oxide
Cupric oxide
Sulfuric acid

High-purity metallic arsenic
Other crystal products
Coils

MetalsChemicalsElectronic Materials

Paper manufacturing plant

White goods (air conditioners, refrigerators, etc.)

Solar power generation

Chemicals factory

Digital home appliances (TVs, DVD players, etc.)

Green car

Paints factoryCommunications equipment (mobile phones, etc.)

Smart community

Copper plating plant

PCs
LEDs

Next-generation medical
examination equipment

Electronic goods

Radiation meters

Semiconductor devices

Chemicals industry

D O M A I N SElectronics, IT, semiconductor industries

Next-generation energy,
next-generation equipment

1

2

To Our Stakeholders

Business Conditions and Performance
In fiscal 2012, ended March 31, 2012, the Japanese economy
showed signs of a moderate turnaround as restoration and recovery
efforts gradually progressed following the Great East Japan Earthquake. A number of problems remained, however, including prolonged deflation and the yen’s protracted appreciation, as well as
concerns about downturns in overseas economies impacted by theEuropean sovereign debt crisis and other factors.
Facing these challenging conditions, the Furukawa Company
Group advanced its overseas operations and otherwise implemented
proactive business strategies, centering on its three machinery-based
business segments: Industrial Machinery, Construction and Mining
Machinery (Rock Drills), and UNIC Machinery. At the same time, we
pursued extensive cost reductions and sought to improve earnings
through enhanced business efficiency. With respect to revenue, theIndustrial Machinery and UNIC Machinery segments posted healthy
year-on-year sales increases, thanks mainly to restoration-based
demand following the earthquake. Due to suspension of operations
after the earthquake and subsequent deterioration in market
conditions, however, the Metals segment and Electronic Materials
segment reported sales declines. Consolidated net sales for the year
totaled ¥157,566 million, down 4.9% from the previous fiscal year.
On the earnings side, the Industrial Machinery, Construction and
Mining Machinery (Rock Drills), and UNIC Machinery segments enjoyed year-on-year increases in income on the back of higher sales.
However, operating income fell 23.6%, to ¥2,155 million, due toincome declines in the Metals segment, impacted by lower sales andthe strong yen, and the Electronic Materials segment, also affectedby a sales decline. Turning to other income, the Group posted interest and dividend income of ¥865 million and compensation incomeof ¥632 million. In other expenses, the Group posted a ¥3,267 million write-down of investments in securities and a ¥1,027 million
loss on sales of investments in securities. Loss before income taxes
and minority interests totaled ¥2,663 million, down from an incomeof ¥447 million in the previous year. Accordingly, the Group posted
a net loss of ¥1,659 million, compared with net income of ¥563
million in the previous year.
Future-Oriented Initiatives
The Group has positioned its operations along two core businesslines: machinery (Industrial Machinery, Construction and Mining
Machinery (Rock Drills), and UNIC Machinery) and materials (Metals,
Electronic Materials and Chemicals).

3

In our machinery businesses, we have identified overseas sales
expansion and further growth in market share as important strategic priorities. To this end, we will respond to domestic demand,

Net Sales（Billions of yen）
213.4

which is changing dramatically, as well as overseas demand—whichis shifting towards resource-rich countries and emerging nations—

165.6

161.9

by expediting our businesses in essential social domains, notably

157.6

142.9

infrastructure, mining development, and transportation.
In our materials businesses, we will focus on developing newmaterials and products, especially in the Electronic Materials segment, in order to achieve commercialization at an early stage. In
the Metals segment, we will continue emphasizing stable ore procurement while examining investments in mines aimed at securing
strategic interests.
In the future, we will concentrate on the strategic areas of ma-

‘10/3

‘11/3

‘12/3

‘08/3

‘09/3

Machinery

MetalsElectronic Materials and Chemicals

PaintsReal Estate

Fuels and Otherschinery and materials, with the aim of further raising profitability
and corporate value.
Operating Income（Billions of yen）

Dividend Policy
Furukawa places great importance on improving returns of profits
to all shareholders while retaining earnings required to finance capi-

14.4

tal expenditures and research and development expenses necessary
to bolster earnings. Our basic policy is to appropriate profits after
comprehensive consideration of future business development andvarious other factors.
Regrettably, the Company did not declare cash dividends for the
2.3

year under review. In fiscal 2013, we do not plan to pay an interim

2.8
1.6

2.2

dividend and are yet to decide on the year-end dividend.
‘08/3

‘09/3

‘10/3

‘11/3

‘12/3

47.6

47.7

‘11/3

‘12/3

The Furukawa Company Group will continue pursuing its business
operations with strategic priority on its two fundamental policies,
which are to “promote further overseas development and strengthen the technical capabilities of the Machinery business” and “promote development activities aimed at new product commercializa-

Net Assets(Billions of yen)
55.4
50.9

tion.” We look forward to the understanding and support of all
45.7

stakeholders as we embrace the challenges of the future.
August 2012

Nobuyoshi Soma
President and Representative Director

‘08/3

‘09/3

‘10/3

4

An Interview with the President— The Furukawa Company Group’s Future Business Strategies —In today’s challenging business environment, the Group is targeting renewed
growth by focusing on the expanding Machinery and Materials business domains.

Question 1
Please tell us about business conditions and theGroup’s business domains.
The world economy and the Group’s operating environment have changed considerably since the global financial
crisis of 2008. A huge paradigm shift has occurred in the world economy, as emerging nations and resourcerich countries have supplanted advanced nations as the world’s key economic growth drivers. Japan and otherdeveloped countries are finding it difficult to cast off prolonged sluggish growth caused by market maturation.
Meanwhile, products related to next-generation energy sources and energy conservation, such as solar power
generation, smart community, and electric vehicles, are successively appearing in the market.
In light of such changes in the operating environment, the Group has decided to concentrate on the Machineryand Materials business domains and to focus on areas enjoying remarkable growth. Specifically, in the Machinery
business we will reinforce our technological strengths and make a further push overseas. In the Materials business,

In response to recent changes
in the world economy
and the Group’s operating
environment, Furukawa willconcentrate on the Machineryand Materials businessdomains with a focus on areas
enjoying remarkable growth.

we will promote development aimed at the commercialization of new products. We believe that by enhancing ourpresence in these two business domains, we will be able to gain a firm footing in growth markets.

Question 2
What is the growth strategy for the Machinery business?
In addition to domestic demand generated by reconstruction in the wake of the March 2011 disaster, we
recognize that significant Group growth rests with overseas markets, particularly emerging economies andresource-rich countries. Therefore, we will accelerate business development centering on areas of critical social
importance in these countries, such as infrastructure, mining development, and transportation.
The rock drills business, which is expanding its activities overseas, has a number of markets in its sights. One
example is India, where there is active public investment in infrastructure and mining development. There is also
Brazil, which will host the FIFA World Cup in 2014 and the Olympic Games in 2016, as well as other promisingSouth American markets, such as Chile and Peru, which are actively involved in mining development. In addition
to establishing subsidiaries in India and South America, we also plan to set up representative offices in Indonesia
and South Africa. Through the establishment of bases in these countries, the Group will develop and bring tomarket strategic products developed to meet local needs. We will also work to achieve further sales growth inemerging economies by taking steps to shorten delivery schedules and reinforce after-sales services.

Question 3
Please tell us about the commercialization of new products in the
Materials business.
At present, Furukawa has a number of projects working on the commercialization of new products. One promisingexample is the development of coil products by the Electronic Materials segment. The Furukawa Company Group

Furukawa recognizes thatits growth markets lie in
India, Central and SouthAmerica, and resource-richcountries. We will acceleratebusiness development bytargeting infrastructure,mining development, andtransportation—areas of criticalsocial importance—centeringon these countries and regions.

5

is developing its coil business by drawing on in-house core production technologies to manufacture coil products,
centering on coils for automotive electronic control devices. Our filter coils for electronic power steering (EPS)
applications already hold a dominant market share. We are focusing on the development of coil products forthe environmentally friendly vehicle market, which is expected to expand considerably. For example, we havedeveloped a large reactor—a type of coil—for chargers used in plug-in hybrid vehicles, and more recently an SMD
coil for injection engine control units. Going forward, we will deploy the Group’s reliability and track record in theautomotive field to expand and strengthen the coil business as one of the pillars of the Electronic Materials segment.
Two other projects with exciting prospects are the development of gallium nitride (GaN) substrates as nextgeneration semiconductor materials for power devices, and thermoelectric conversion materials that convert heat into
electricity. As materials that make effective use of heat emitted by a vehicle engine, we are receiving more and more
inquiries about our thermoelectric conversion materials in conjunction with the tightening of fuel efficiency regulations
around the world. Another materials project is the development of a next-generation positron emission

The Group is working on
various projects aimed atcommercializing new products.
Coil products developedby the Electronic Materials
segment are but one example
of our numerous successfulprojects. Going forward, we
will transform the coil business
into one of the pillars of theElectronic Materials segment.

mammography (PEM) system using lutetium aluminum garnet (LuAG) scintillator crystals. The system is currently at
the clinical trial stage, and we are preparing a pharmaceutical application for regulatory approval. We are also working
on the development of radiation detectors that use gadolinium aluminum gallium garnet (GAGG) scintillator crystals.
In these ways, the Group actively cultivates fledgling technologies and products with the aim ofcommercialization. While more time is required for some projects before they reach fruition, we are confident thatmany products currently under development will become growth drivers of the future.

Question 4
What is the position of the Group’s Metals segment today, and whatplans do you have for this segment?
Metals was the Furukawa Company Group’s foundation business. Growing demand for copper from emerging
markets in recent years has contributed to the ongoing expansion of our refining business, although theoperating environment is far from favorable. Stable procurement of copper ore and fluctuating copper prices
are two of the challenges we face today. Previously, Furukawa has invested in copper mines in Indonesia andCanada to secure stable supplies. Taking advantage of the recent hikes in copper prices, we bought a stake in
the Gibraltar Copper Mine in Canada in 2010. Further investment in 2011 for expanding mining operations
at the Gibraltar and Huckleberry mines illustrates the Group’s active investment in the Metals segment. Goingforward, we will focus on capital investment in mines and the acquisition of mining rights.

The Metals segment has
actively invested in mines
to secure stable supplies ofcopper ore. Going forward, we
will focus on capital investment
in mines and the acquisition ofmining rights.

Question 5
What is the Furukawa Company Group’s basic strategy for the future?
Many uncertainties still cloud the Group’s operating environment. Domestic factors include protracted deflationin Japan and the entrenched high yen, while overseas there is the European sovereign debt crisis and theweaker growth of emerging economies. To ride out these problems and put the Group firmly on a recovery
track, Furukawa will implement the measures I have talked about above. We will foster businesses with strong
growth potential by wasting no time in developing and commercializing new materials, while in the immediate
term the Machinery business will serve as the main earnings foundation.

I would like to take this opportunity to thank all stakeholders for their ongoing understanding and support as
we tackle future challenges.

We will foster businesses withstrong growth potential by
wasting no time in developing
and commercializing newmaterials, while in theimmediate term the Machinery
business will serve as the main
earnings foundation.

6

At a Glance

Machinery

Electronic Materials
and Chemicals

MetalsIndustrial Machinery

MetalsElectronic Materials

Furukawa Industrial Machinery Systems Co., Ltd.
Pumps, environmental machinery, crushers,
plants, steel structures, castings

Furukawa Metals & Resources Co., Ltd.

Furukawa Denshi Co., Ltd.

Electrolytic copper, gold,
silver, sulfuric acid

High-purity metallic arsenic, gallium
phosphide polycrystals, X-ray scintillator crystals,
aluminum nitride ceramics, coils, lenses

Construction and
Mining Machinery (Rock Drills)

Chemicals
Furukawa Chemicals Co., Ltd.

Furukawa Rock Drill Co., Ltd.
Rock drills (hydraulic breakers, hydrauliccrawler drills, tunnel drill jumbos, etc.)

Cuprous oxide, sulfuric acid,aluminum sulfate, titanium dioxide,
ferric polysulfate solution,
cupric oxide

UNIC Machinery
Furukawa UNIC Corporation
UNIC cranes, mini crawler cranes,
UNICPAL, UNIC carriers

Net Sales / Operating Income (Loss) (Billions of yen)
75.8 75.8 75.8
62.6 62.6 62.6
53.2 53.2 53.2
6.8 6.8 6.8
47.0 47.0 47.0
44.3 44.3 44.3

97.5 97.5 97.5
6.2

1.7

1.7

1.7

2.0

(3.0) (3.0) (3.0)

2.080.0 80.0 80.0
71.1 71.1 71.1
68.1 68.1 68.1
68.8 68.8 68.8
6.2 6.2

2.0

3.2(0.6) (0.6) (0.6)

0.0’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3
Net Sales
Net Sales
Net Sales
OperatingOperating
IncomeOperating
Income(Loss)
Income(Loss) (Loss)

0.0

3.2

0.0

3.2
1.5

1.5

1.5
0.3

0.3

1.5 1.5 1.5
15.3 1.5
15.3 1.5
15.3 1.5
12.2 12.2 12.2
11.4 11.4 11.4
11.0 11.0 11.0
9.8 9.8
0.8 0.8 0.8
0.2

0.3

’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3
Net Sales
Net Sales
Net Sales
OperatingOperating
IncomeOperating
IncomeIncome

0.2

0.2

0.0

9.8
0.0

0.0

’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3
Net Sales
Net Sales
Net Sales
OperatingOperating
IncomeOperating
IncomeIncome’08/3 ’0Net S

Operating Margin (%)
9.0

9.0

9.0
2.8

12.7 12.7 12.7
2.8

3.7

2.8

3.7

3.7

6.4

6.4

9.5

6.4
4.5

(1.2) (1.2) (1.2)(6.8) (6.8) (6.8)’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3

0.0

0.0

0.0

4.5

9.5

9.5

4.5
1.9

1.9

1.9
0.5

6.9
0.5

0.5

’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3

1.8

1.8

6.9

6.9
0.2

1.8

% of Net Sales

33.8%

43.2%

0.2

0.2

’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3

6.2%’08/3 ’0

7

PaintsReal Estate

Fuels and Others

Paints *Real Estate

Fuels

Tohpe Corporation

Furukawa Co., Ltd.

Furukawa Commerce Co., Ltd.

Kinds of paints, acrylic rubber, glue

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

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

OthersTransportation service by trucks and domestic shipping* Tohpe Corporation became a consolidated subsidiary in Dec. 2009.

15.0 15.0 14.9
15.0 14.9 14.9
2.8
3.7

9.8

0.0

0.0

3 ’12/3

0.2

3.7

3.7

2.8
0.7

1.1 1.1 1.1
2.8
2.4 2.4 2.4
2.0 2.0 2.0
22.0 22.0 22.0
0.7 0.7
0.7 0.7 0.7
16.7 16.7 16.7
1.6 0.6
1.6 0.6
1.6 0.6
10.7 10.7 10.7
9.8 9.8 10.3
9.8 10.3 10.3
1.2 1.2 1.2
0.4 0.4 0.4(0.0) (0.0) (0.1)(0.0) (0.1) (0.1)(0.3) (0.3) (0.3)’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3
Net Sales
Net Sales
Net Sales
OperatingOperating
IncomeOperating
Income(Loss)
Income(Loss) (Loss)(0.5) (0.5) (0.5)(0.6) (0.6) (0.6)(0.1) (0.1) (0.1)(0.1) (0.1) (0.1)(0.1) (0.1) (0.1)(0.4) (0.4) (0.4)(0.7) (0.7) (0.7)’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3
Net Sales
Net Sales
Net Sales
OperatingOperating
IncomeOperating
IncomeIncome’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3
Net Sales
Net Sales
Net Sales
OperatingOperating
IncomeOperating
Income(Loss)
Income(Loss) (Loss)

55.2 55.2 55.2

(0.6) (0.6) (0.6)(1.0) (1.0) (1.0)(1.5) (1.5) (1.5)

40.3 40.3 40.3
0.2

3 ’12/3(2.2) (2.2) (2.2)’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3

9.4%

29.6 29.6 29.6
27.2 27.2 27.2

29.0 29.0 29.0

’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3

0.8%(3.0) (3.0) (3.0)(3.8) (3.8) (3.8)’12/3 ’12/3 ’12/3’08/3 ’08/3 ’08/3’09/3 ’09/3 ’09/3’10/3 ’10/3’11/3’10/3’11/3 ’11/3

6.6%

8

Review of Operations

Supporting Urban
Development throughIndustrial Machinery“Machinery”

pumps and steel structures, while the environmental and general machinery

Performance and Strategies
In fiscal 2012, the industrial machinery business benefited from healthy sales ofbusiness saw the launch of new products, such as electrostatic precipitators
used in tunnel construction. Due also to solid demand for machinery needed forwater treatment and remediation and other disaster recovery work, the Industrial
Machinery segment enjoyed a year-on-year increase in revenue. The segment
posted sales of ¥12,949 million, up 21.5% from the previous fiscal year, andMachinery

operating income of ¥708 million, compared with an operating loss of ¥30 million
in the previous year.
In the public sector, we look forward to ongoing demand for machinery usedin disaster recovery and infrastructure construction, including sewage treatment
plants, bridges, roads, ports, and decontamination. Going forward, we will focus
on addressing demand related to these sectors.
In the private sector, we will reinforce sales centered on the key themes of“environment,” “recycling,” and “energy conservation and CO2 reduction.” Fiscal
2013 marks the third year since we shifted from a product-specific to an industryspecific sales approach. We will boost sales activities across the board, reinforce
solution-based sales, and launch new products in a drive to generate new demand.
Overseas, we will promote business expansion by strengthening sales targeting
Japanese businesses, including water treatment plant manufacturers, andcompanies engaged in the resource development and new energy sectors.

Construction and
Mining Machinery(Rock Drills)
Hydraulic crawler drills

Japanese Market
Share

70 %

Global Market
Share

Our mud pumps have a proud track record inwastewater treatment plants.

New type of uniaxial screw pump featuring
improved compactness

30 %Hydraulic breakers

Tunnel drill jumbos

Japanese Market
Share

Japanese Market
Share

40 %

90 %

Electrostatic precipitator
operating in tunnel
construction projectIndustrial Machinery

UNIC Machinery
Truck-mounted cranes(UNIC cranes)

Net Sales(Billions of yen)

Operating Income (Loss)(Billions of yen)

30

2.0

Vehicle carriers(UNIC carriers)
1.0
20Japanese Market
Share

Japanese Market
Share

50 %

51%

0.8

0.8

0.7
0.4

17.3
15.8
12.9

12.8

0

(0.0)

10.7

10
-1.0

0

-2.0
’08/3 ’09/3 ’10/3 ’11/3 ’12/3’08/3 ’09/3 ’10/3 ’11/3 ’12/3

9Construction and Mining Machinery (Rock Drills)

UNIC Machinery

Performance and Strategies

Performance and Strategies

In the domestic rock drills business, revenue increased considerably on the back ofIn the first half of fiscal 2012, the production activities and sales of domestic truck

demand for hydraulic breakers, hydraulic crushers, and hydraulic crawlers used in

manufacturers slumped due to the impact of the March 2011 disaster. Thanks to

disaster recovery and reconstruction. Overseas, we reinforced our sales and service

their recovery in the second half of the term, however, truck registrations increased

system and expanded our sales network by establishing local subsidiaries in India

15% compared with the previous corresponding period. This recovery, together

and Panama and opening representative offices in Indonesia and South Africa. As

with demand generated by reconstruction projects, contributed to significant

a result, the Construction and Mining Machinery (Rock Drills) segment posted a

growth in domestic sales of UNIC cranes. Accordingly, sales in the UNIC Machinery

1.1% increase in sales, to ¥24,144 million, and operating income of ¥334 million,

segment climbed 29.0% year on year, to ¥16,106 million. Operating income

compared with a ¥350 million operating loss in the previous year.

amounted to ¥928 million, compared with an operating loss of ¥187 million in

In Japan, we will step up sales of products needed for disaster recovery work,

the previous year.

including drills used for demolition and port construction. In China, we will work

Going forward, we will establish a sales structure that is not susceptible

to increase sales of new large hydraulic breakers and locally produced small

to fluctuations in domestic truck sales. To this end, we will institute immediate

hydraulic breakers. In other overseas markets, we will focus our sales capabilities

delivery of mini crawler cranes and continue measures aimed at boosting sales ofon emerging markets, including Central and South America, India, Indonesia, andocean cranes and folding-type cranes. Overseas, we will strengthen our sales andSouth Africa, in an effort to boost sales in those regions. On the production side,

service infrastructure in Russia, including by establishing a local subsidiary in thiswe will strive to achieve improved cost competitiveness, such as by increasing the

key sales region. To mitigate the impact of the high Japanese yen, we will makeoverseas procurement ratio for materials.

use of plants in China and Thailand to supply parts to Japan, while upgrading local
production systems.

Truck-mounted cranes (UNIC cranes)-theU-can ECO series of low-noise, fuel-efficient
truck-mounted cranes is steadily penetrating
the market.

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

Hydraulic breakers, which are attached tohydraulic shovels, are used for excavating rockand breaking concrete.

Vehicle carriers (UNIC carriers)the UNIC carriers lineup of highvalue-added products includes
truck-mounted cranes that canoperate on a platform with a 1˚angle and two-vehicle carriers.

Used for tunneling through mountains inroad and railway construction projects inJapan, tunnel drill jumbos dominate thedomestic market.

Our exceptional mini crawler cranes have wonhigh acclaim for their compactness and operating
efficiency, especially in Europe.

Construction and Mining Machinery (Rock Drills)

UNIC Machinery

Net Sales(Billions of yen)

Net Sales(Billions of yen)

40

Operating Income (Loss)(Billions of yen)
4.0

37.5

Operating Income (Loss)(Billions of yen)

30

3.7

4.0

3.0
30

3.0
2.3

29.4

21.0

2.0
23.9

20

24.1

20.4

17.4

16.1

1.0
0

11.1
(0.4)

-1.0

12.5

-3.0
’08/3 ’09/3 ’10/3 ’11/3 ’12/3

0.9

0.7

0
(0.2)

10

-1.0

-2.0
0

1.0

0.3

0.3

20

10

2.0

(0.9)

-2.0
(2.6)

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

0-3.0’08/3 ’09/3 ’10/3 ’11/3 ’12/3’08/3 ’09/3 ’10/3 ’11/3 ’12/3

10

Supporting Social
Infrastructure through“Copper”
Metals
MetalsPerformance and Strategies
After starting the year at US$9,336.00/ton in April 2011, the price of electrolytic

For the year, the Metals segment posted a 14.8% decrease in sales, to ¥68,114

copper suddenly declined due to the lower rating given to U.S. government bonds

million, and a 79.4% fall in operating income, to ¥308 million. The main factor

and cautionary sentiment surrounding the European sovereign debt crisis andbehind these results was a decline in sales of electrolytic copper at the Onahama

concerns that Greece might default on debt repayment. By the end of September

Smelter and Refinery, a joint refining vendor, stemming from the temporary

2011, the price had fallen to US$7,131.50/ton. Subsequently, the price fluctuatedsuspension of production due to the Great East Japan Earthquake.

against the backdrop of the European sovereign debt crisis, but rose to ¥8,448.00/
ton as of March 31, 2011. This was due to an announcement in the new year

Current purchasing conditions remain severe, although the situation is expected to
improve in several years owing to changes in the supply–demand balance for ore.

that the European Central Bank would leave interest rates unchanged and an

Overseas mines in which the Company has mining rights make a valuable

announcement by the U.S. Federal Reserve Board that it would continue its zero

contribution to revenue (under other income). Therefore, we will seek to expand

benchmark interest-rate policy. In Japan, the price of electrolytic copper declined

existing mines and secure new mining rights, with the aims of ensuring reliablefrom ¥830,000/ton in April 2011 to ¥760,000/ton by fiscal year-end.

copper ore procurement and stabilizing profits.

Copper prices and foreign exchange rates
2008/3

2009/3

2010/3

2011/3

2012/3

LME copper price (average; US$ / ton)

7,584

5,864

6,101

8,139

8,485

JPY rate per US$ (average for fiscal year)¥114.28¥100.54¥92.85¥85.71¥79.07

2008/3

2009/3

2010/3

2011/3

2012/3Copper production volume (tons)

95,35590,02384,45589,52376,896

Copper sales volume (tons)

95,80888,98989,45689,17682,597

Copper production and sales volume**Furukawa Metals & Resources Co., Ltd.

MetalsNet Sales(Billions of yen)100

Operating Income(Billions of yen)

97.5

8.0
80.0

80
68.8

71.1

6.2
68.1

6.0
Electrolytic copper

Hibi Kyodo Smelting Co., Ltd.

Gibraltar Copper Mine in Canada

Onahama Smelter and Refining Co., Ltd.

60
4.0
3.2

40
2.0

20

0

0
’08/3 ’09/3 ’10/3 ’11/3 ’12/3

1.5

0.0

0.3

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

11

Supporting Affluent
Lifestyles throughHigh-purity
metallic arsenic“Materials”

Cuprous oxide

Japanese(Production)
Market ShareJapanese Market
Share

65%

45%

Global Market
Share

Electronic Materials
and Chemicals

50 %Electronic Materials

Chemicals

Performance and Strategies

Performance and Strategies

In the year under review, damage caused to part of the Iwaki Plant by the Great

During the year, sales of cuprous oxide declined due to the cessation of exports toEast Japan Earthquake led to suspension of operations. This key facility had

unprofitable overseas paint manufacturers. However, expansion of our production

resumed operations by the middle of April. However, sales of high-purity metallic

facilities for cupric oxide for plating—a new product—contributed to increased

arsenic and scintillator crystals—mainstay products in this segment—declined

sales. As a result, the Chemicals segment reported a 2.2% increase in sales, todue to harmful rumors stemming from the protracted situation at the Fukushima¥5,187 million, and a 6.7% decline in operating income, to ¥251 million.

Nuclear Power Plant, as well as a slump in the semiconductor market in the second

Going forward, we expect domestic demand for cuprous oxide to continue

half of the year. Meanwhile, we enjoyed an increase in sales of core coils for use in

declining. For this reason, we will focus on sales aimed at overseas plants ofautomobiles, although total sales of this product fell significantly. As a result, theJapanese paint manufacturers. With respect to cupric oxide for plating, we will

Electronic Materials segment posted a 35.4% decrease in sales, to ¥4,616 million.

gather information on customer trends and work to expand sales to overseas

The segment recorded an operating loss of ¥234 million, compared with operating

plants and other channels.

income of ¥1,280 million in the previous year.
Going forward, our aim is to develop electric reactors into a mainstay product inthis segment. Electric reactors are a type of coil that we developed for chargers usedin plug-in hybrid vehicles and electric vehicles. We plan to launch new products inthis promising market. We will also continue focusing on the development of new
products slated for commercialization projects.

Our core coils are used in power sources andelectronic control devices.

High-purity metallic arsenic-high-purity gallium
arsenate semiconductor materials used in
mobile phones and other electronic devices,
red laser diodes, and LEDs

Electronic Materials

Sales of cupric oxide for plating have increased
thanks to completion of a new plant.

Cuprous oxide is used as an antifouling agent
in paints applied to the bottoms of ships.

Chemicals

Net Sales(Billions of yen)

Operating Income (Loss)(Billions of yen)

10.0

Net Sales(Billions of yen)

1.5

Operating Income(Billions of yen)

10

2.0

1.3

8.8

8.0

1.0

7.1

8

1.0

1.5
6.5

6.0

5.6

6.0

0.7
4.6

6

5.8
5.0

0.5

4.0

5.1

5.2

1.0

4
0

2.0

0.0

0.5

2

0.5
0.3

0.2
(0.2)

-0.5

0
’08/3 ’09/3 ’10/3 ’11/3 ’12/3

00’08/3 ’09/3 ’10/3 ’11/3 ’12/3

0.3

0.1

’08/3 ’09/3 ’10/3 ’11/3 ’12/3’08/3 ’09/3 ’10/3 ’11/3 ’12/3

12
Supporting Living
Spaces through“Paints”
PaintsNet Sales(Billions of yen)

Operating Income (Loss)(Billions of yen)

20.0

1.0

15.0

15.0

14.9

0.5

We established the Paints segment in December 2009, when equity-method affiliate
Tohpe Corporation was transformed into a consolidated subsidiary of the Furukawa

10.0Company Group. During the year under review, we increased sales of environmentallyfriendly powder coatings. However, a decline in road sign painting projects and theimpact of the Great East Japan Earthquake resulted in a revenue decline. As a result,

0
5.0

(0.0)
(0.1)

3.7

the Paints segment recorded sales of ¥14,874 million, down 1.1%, and an operating
loss of ¥329 million, compared with the previous year’s operating loss of ¥93 million.
Going forward, we plan to return this segment to profitability as soon as possible

(0.3)

-0.5

0

’08/3 ’09/3 ’10/3 ’11/3 ’12/3’08/3 ’09/3 ’10/3 ’11/3 ’12/3

by reinforcing sales of high-value-added products, centering on environmentallyfriendly paints.

Supporting Business through“Real Estate”
Real Estate

Net Sales(Billions of yen)
3.0

Operating Income (Loss)(Billions of yen)
1.5

2.8
2.4

1.1
2.0

2.0

1.0

Revenue in the Real Estate segment declined due to rising vacancy rates among office1.6

buildings in Osaka, our key center for real estate leasing activities. As a result, the Real
Estate segment posted a 21.9% decrease in sales, to ¥1,233 million, and a 43.8% fallin operating income, to ¥357 million.

0.7

0.7
0.6

1.2

1.0

0.5
0.4

The Nihonbashi-Muromachi Eastern District Redevelopment Project is progressing
well, with completion scheduled for January 2014.
00’08/3 ’09/3 ’10/3 ’11/3 ’12/3’08/3 ’09/3 ’10/3 ’11/3 ’12/3

Supporting Business through“Services”
Fuels and Others

Net Sales(Billions of yen)

Operating Income (Loss)(Billions of yen)

30

1.0

22.0

0.5

20
16.7

In the fuels category, there was a decline in sales volume, but surging crude oil prices

0boosted overall revenue. This business posted a 6.3% increase in sales, to ¥9,576
million, and an operating loss of ¥14 million, compared with an operating loss of ¥57
million in the previous fiscal year.

10.7

10

9.8

(0.1)

10.3

In the Others category, consisting primarily of the transport business, we reported(0.7)

operating loss of ¥92 million in the previous fiscal year.
Sales in the Fuels and Others segment increased 5.6%, to ¥10,343 million, and operating
loss was ¥107 million, from an operating loss of ¥149 million in the previous fiscal year.

(0.1)

(0.4)

-0.5

a 2.4% decline in sales, to ¥767 million, and an operating loss of ¥94 million, from an

(0.1)

0

-1.0
’08/3 ’09/3 ’10/3 ’11/3 ’12/3’08/3 ’09/3 ’10/3 ’11/3 ’12/3

Research and Development

The Furukawa Company Group’s Research and Development Division consists of seven entities: Nitride Semiconductors Department,
Semiconductor Growth System Department, Materials Research Laboratory, Techno-Research Laboratory, R&D Planning Department,
Intellectual Property Department, and Control Department.
The Division plays a key role in supporting initiatives aimed at providing “Technology for Our Future.” As well as engaging in research anddevelopment activities on new materials and machinery products and on processing equipment in the interdisciplinary field of materials andmachinery, the Division uses simulation and other technologies to support the product development initiatives of each Group company.
The Research and Development Division is reinforcing initiatives geared toward realizing Furukawa’s guiding principle, which is to“promote development activities aimed at new product commercialization.”

GaN Substrates (Nitride Semiconductors Department)
The Nitride Semiconductors Department develops and manufactures
GaN substrates used in the fabrication of GaN devices, which are nextgeneration semiconductor materials that transcend the limits of silicon
semiconductors. Following the successful development of two-inch andfour-inch GaN substrates, the Company is currently working to develop
mass production technology and technology for enhancing the qualityof these GaN substrates. We have also been promoting sales of GaN
substrates to manufacturers of laser diodes, light-emitting devices (LEDs),
and electronic devices.

radiation detector by applying the superior gamma-wave detection
properties of these crystals. We expedited the development and launchof this detector, called Gamma Spotter, to meet a surge in demand forradiation detectors following the recent nuclear power plant accident
in Japan. In addition, we are currently developing a non-destructive
radiation detector specifically for fish in response to calls for a nondestructive means of measuring radiation levels.

Gamma Spotter

GaGG Scintillator crystals

Two-inch GaN substrate andthe recently developed fourinch GaN substrate

LuAG and GAGG Scintillator Crystals(Materials Research Laboratory)
Scintillator crystals are crystals that absorb and emit radioactive energy.
The Company is developing scintillator crystals for medical diagnostic
imaging systems and for radiation detectors that measure radiationlevels. A PEM system (next-generation breast cancer screening system)
using LuAG scintillator crystals developed under a collaborative projectwith a tertiary research organization is currently undergoing clinical trials.
Following the successful development of LuAG Scintillator crystals, theCompany used GAGG scintillator crystals to develop a high-sensitivity

Thermoelectric Conversion Materials(Materials Research Laboratory)
Furukawa is developing thermoelectric conversion materials that use
thermal energy to convert heat into electricity. For example, these materials
can use heat emitted by a vehicle engine. So far, we have sampled athermoelectric conversion element and module. Thermoelectric conversion
materials can be applied to exhaust heat and may contribute to enhanced
fuel efficiency by using heat emitted by a vehicle’s engine to charge its
battery. The Company has been
receiving increasing inquiries in
conjunction with the scheduled
tightening of global fuel efficiency
regulations. While addressing suchinquiries, we will move steadily
towards commercialization.
Thermoelectric conversion element module

ZLS(R&D Planning Department)

Second PEM system prototype

LuAG scintillator crystals

We recently launched a lighting /security zone positioning system(ZPS), called LAN Star, to meetdemand for an energy-saving
system the delivers enhanced
security. Deploying our ZPS,
which uses ultrasound waves totake measurements, LAN Star
combines sensors that detecthuman movement with an LED
projector and a Web camera.

LAN Star13

14

Furukawa Initiatives and Systems

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 to perform all corporate activities in harmony with the environment, consider the improvementof the environment, and contribute to the development of a sustainable society. We are aware of the important role we play in givingback to the community as a good corporate citizen.

Environmental Management
Environmental Management System
The senior decision-making body for environmental protection activities is
the Central Committee for Environmental Management, in which the senior
managing directors and managing directors participate. In addition, we have theEnvironmental Management Subcommittee, which makes proposals related toenvironmental 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 and safety initiatives in each Group company. At these meetings,
the Committee aims to fulfill four basic purposes: (1) convey and ensure theenforcement of decisions made by the Environmental Management Committee;(2) help improve the competency of environmental protection supervisors at eachGroup company; (3) prevent accidents and disasters through concerted efforts toshare information and reflect it in its daily business management; and (4) verify
revisions to environment-related regulations.

Environment and Safety Audits
The Furukawa Company Group conducts annual “Environment and Safety Audits.”
In fiscal 2012, these audits gave priority to the theme of complete compliance withregulations. Checks were made to ensure that regulations required for the safe
operation of each factory and site were clearly documented and fully understoodby all employees. Under a system introduced in the previous fiscal year, meanwhile,each factory and site was checked for legal compliance with the relevant rules using
100 new workplace audit items, as well as a new environmental safety checklist
and basic checklist covering labor health and safety activities. Going forward, we
will target the upgrading of control systems related to environmental safety andlabor safety while making the Group’s internal networks more robust.
The year under review marked the fifth time that the Group conducted “crossaudits,” in which each plant is audited by an environmental protection supervisor
from another plant. We introduced the cross-auditing system with the objectiveof improving the competence of auditors and the level of auditing undertaken at
the Group’s worksites. In fiscal 2012, the success of this system was apparent inreciprocal learning and reciprocal education on wide-ranging know-how, as well as
in the increase in auditors’ knowledge and the expansion of personal networks.

High-Efficiency Slurry Pump
The adoption of an energy-enhancing impeller with a new design in our SPL
e-Performance high-efficiency slurry pump has improved maximum pumping
efficiency by 20% compared with the previous model. What is more, the force of the
shaft, which affects the amount of power usage, has been reduced by a maximumof 19%. As a result, the capacity of the motor can be reduced in accordancewith the conditions of use, contributing tosignificant energy savings. Owing to Furukawa’s
proprietary liner design, the space between
the impeller and the front and back liner canbe easily adjusted. The effect is a lengtheningof the impeller replacement cycle without
decreasing slurry throughput efficiency, which
also contributes to a reduction in the amount ofwaste generated at replacement time.
High-Sensitivity Radiation Detector, Gamma Spotter
Furukawa recently launched a portable high-sensitivity radiation detector called
Gamma Spotter. We developed the detector using the Group’s proprietary
scintillator crystals—materials that exhibit fluorescence when excited by ionizing
radiation. Because the GAGG scintillator crystals used in the radiation detector are
not deliquescent (the property of absorbing moisture in the air and dissolving in it),the detector has excellent thermal resistance, cold resistance, and shock resistance.
These properties make the Gamma Spotter suitable for measuring radioactivity
outside and in the rain. Using one of the detector’s three measurement modes,
readings can be taken once every 0.5 second(real-time), once every 10 seconds to show theaverage reading for the past minute (average),
and average readings at certain intervals (timer).
The Gamma Spotter is compact, lightweight,
and easy to operate. These advantages
combined with its excellent portability enhance
onsite workability and reduce operator radiation
exposure.

Social Contribution Activities
Environmental Protection Activities
The Furukawa Company Group’s energy-saving activities center on achieving mediumterm targets for energy and resource consumption set every five years.
The results for the first set of targets (covering fiscal 2005–2009) and the targets
for the next five years (fiscal 2010–fiscal 2014) are shown below.
Second Medium-Term Reduction Targets (Base year: Fiscal 2006)
Category

Fiscal 2014 (target)

CO2 emissions*

5% reduction of fiscal 2006 consumption

Water

5% reduction of fiscal 2006 consumption

Waste discharge

10% reduction of fiscal 2006 consumption* Forms of electricity used: Gasoline, kerosene, diesel oil, heavy oil, LPG, natural gas, and electricity

Environmentally Friendly Products
The Furukawa Company Group actively engages in the development of bothpeople-friendly and environmentally friendly products as part of its contribution to
the creation of a sustainable society.

The Furukawa Company Group seeks to live in harmony with local communities
through stewardship and maintenance of forests owned by Furukawa andinvolvement in afforestation programs. We also participate in factory neighborhoodcleanup activities and preservation of the “Nikko-Suginamiki” (“Avenue of cedars
in Nikko”), as well as accept internships and host factory visits. Other activities
include fund-raising activities, arranging blood-donor drives, sponsorship ofcommunity events, helping preserve biodiversity, holding original environmental
activities, and loaning our land for free to local environmental associations.
Third Ashio Cherry Tree-Planting Drive
In March 2009, the newly formed Ashio
Cherry Blossom Planting Group got together
to begin planting 1,000 cherry blossom
seedlings on land owned by Furukawa
in Ashio-machi in Tochigi Prefecture. The
annual tree-planting activity scheduled forMarch 2011 was cancelled due to the Great
East Japan Earthquake. Consequently,
in March 2012, 67 Group members—made up of Furukawa employees and theirfamilies—took part in the Third Ashio Cherry Tree-Planting Drive.

15

Corporate GovernanceThe basic policy of the Furukawa Company Group is to contribute to society, our shareholders, and other stakeholders by building anefficient management 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 Governanceimportant 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 five 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.

Furukawa maintains a Board of Directors comprising eight members, one of whom
is appointed from outside the Group. The Board of Directors oversees the executionof the Furukawa Company Group’s operations and in principle meets once every
month, with additional meetings held as required.
To clearly separate management oversight functions from executive functions,accelerate decision-making, and clarify responsibilities, Furukawa has adopted an
executive officer system. At present, we have 16 executive officers, six of whom
concurrently hold positions as directors.
The Management Council sets the Furukawa Company Group’s fundamental
management policies and strategies and makes decisions on important matters.
There is also a Management Committee, which meets monthly to discuss theoperations of Furukawa and its core companies, and provides direction. Decisions
made by the Management Council that involve the allocation of funds or otherimportant management issues must be discussed and approved by a resolution of
the Board of Directors. Furthermore, important matters that have been determinedby 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 composed oftwo 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 otherCompliance 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 members of
the Group are fully aware of and practice the principles contained in each.
Furukawa also recognizes effective risk management as an important aspectof 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 forthe purpose of formulating the Group’s basic policies toward risk management
and compliance. Through these means, Furukawa is committed to developing acomprehensive structure capable of addressing all relevant issues.

Corporate Governance and Internal Control Systems

As of June 28, 2012

Annual General Meeting of Shareholders
Appoints / recalls

Appoints / recalls

Appoints / recalls
Reports

Independent Auditors

AuditsBoard of Directors

Reports

Board of Auditors

Reports

8 members(7 internal, 1 outside)

5 members(2 statutory, 3 outside)

AuditsExchanges opinions /information
Reports

Reports

Representative Director
Reports

Directs

Oversees

Management
Committee
Reports

Reports

Management
CouncilAuditsDirects

Executive Officers(16 members)

AuditsInternal Control Division
Audit Office
Risk Management &Compliance Committee

Business execution

Accounting Dept.,
othersAuditsAuditsReports

All Divisions and Group Companies

Audits16

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

Millions of yen

2012/3

2011/3

2010/3

2009/3

2008/3

2007/3For the year:¥ 157,566¥ 165,638¥ 142,925¥ 161,858¥ 213,426¥ 200,749

Cost of sales

138,097

146,364

127,302

143,651

181,522

167,507

Gross profit

19,46919,274

15,623

18,20731,90433,242

Net sales

Selling, general and administrative expenses

17,314

16,453

14,025

15,904

17,497

16,343Operating income

2,155

2,821

1,598

2,303

14,407

16,899

Income (loss) before income taxes and minority interests(2,663)447

886(2,618)12,484

11,127

Net income (loss)(1,659)563

585(5,917)

8,595

17,554

Cash flows from operating activities

4,978

3,743

9,083

5,112

12,823

12,648Cash flows from investing activities(3,153)(1,644)(3,643)(11,539)(855)(4,367)

Cash flows from financing activities(3,782)(5,703)(4,769)12,116(13,835)(8,910)Capital expenditures

3,028

1,933

2,936

16,507

4,374

3,905

Depreciation and amortization

3,329

3,290

3,244

3,145

2,993

2,626

Research and development expenses

2,622

2,225

1,862

1,752

1,941

1,888
¥ 217,027

At year-end:¥ 193,971¥ 196,234¥ 204,774¥ 188,361¥ 199,383

Current assets

81,49780,19982,61777,50988,88894,865Current liabilities

74,80770,45673,73364,27680,48789,293

Total equity

46,02245,84948,88544,58554,301

56,246

Total assets

Net assets

47,66847,62250,85545,74255,431

52,136

Interest-bearing liabilities

85,79689,26594,714

92,47577,90789,389Per share amounts:
Net income (loss): Basic
Net income (loss): Diluted
Cash dividends
Net assets

Yen¥(4.11)

¥

1.39

¥

1.45

¥

(14.64)

¥

21.26

¥

43.42

—

—

—

—

—

—

0.00

0.00

0.00

4.00

6.00

5.00

113.88113.45120.96110.31134.33139.13

Profitability:
Cost of sales margin (%)

87.6

88.4

89.1

88.8

85.1

83.4

Gross margin (%)

12.4

11.6

10.9

11.2

14.9

16.6

SG&A expense margin (%)

11.0

9.9

9.8

9.8

8.2

8.1

Operating margin (%)

1.4

1.7

1.1

1.4

6.8

8.4

Return on sales (%)

(1.1)

0.3

0.4

(3.7)

4.0

8.7

Return on equity (%) (Note 1)

(3.6)

1.2

1.3

(12.0)

15.5

35.3

Return on assets (%) (Note 2)

(0.9)

0.3

0.3

(3.1)

4.1

8.2

Debt-to-equity (D/E) ratio (times) (Note 3)

1.9

1.9

1.9

2.1

1.4

1.6

Equity ratio (%) (Note 4)

23.7

23.4

23.9

23.7

27.2

25.9
11.5

Efficiency and soundness:

Investment indicators:
Dividend payout ratio (%) (Note 5)

—

—

—

—

28.2

Dividends on equity (DOE) ratio (%) (Note 6)

—

—

—

3.2

4.5

4.3

Price book value ratio (PBR) (times) (Note 7)

0.7

0.8

0.9

0.7

1.4

2.1

Stock price at fiscal year-end

80

86

114

82

183

293

Notes: 1. Return on equity = Net income / Average total equity × 100
2. Return on assets = Net income / Average total assets × 100
3. D
 ebt-to-equity (D/E) ratio = Interest-bearing liabilities (fiscal year-end) / Total
equity [Shareholders’ equity] (fiscal year-end)
4. E quity ratio = Total equity [Shareholders’ equity] (fiscal year-end) / Total assets(fiscal year-end) × 100

5. Dividend payout ratio = Total cash dividends / Consolidated net income × 100
6. Dividends on equity (DOE) ratio = Total cash dividends / Average net assets × 100
7. Price book value ratio (PBR) = Stock price (fiscal year-end) / Net assets per share

Financial Review(Billions of yen)

250

200
161.9

year on year, to ¥12,949 million, and sales of the UNIC Machinery segment rose
29.0%, to ¥16,106 million. Both segments made a solid contribution to revenue,
benefiting from steady restoration-related demand following the Great East Japan

150

157.6

Within this amount, sales of the Industrial Machinery segment increased 21.5%

165.6

million, down 4.9% compared with the previous fiscal year.

142.9

In the fiscal year ended March 31, 2012, consolidated net sales totaled ¥157,566

Net Sales

213.4

Revenue and Expenses

Earthquake. However, sales of the Metals segment decreased 14.8%, to ¥68,114
million, due to declining sales of electrolytic copper stemming from the temporary

100

closure of Onahama Smelter and Refinery, a major refining vendor of the Company,
following the earthquake. In addition, sales of the Electronic Materials segment fell

50

35.4%, to ¥4,616 million, impacted by the accident at the Fukushima Nuclear Power0

Plant and sluggish conditions in the semiconductor devices market.

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

Cost of sales declined 5.6%, to ¥138,097 million, owing to rigorous cost-reduction
efforts, and the cost of sales margin was down 0.7 percentage point, to 87.6%.
Selling, general and administrative (SG&A) expenses rose 5.2%, to ¥17,314 million.

Operating Income
Operating Margin

As a result, operating income declined 23.6% from the previous fiscal year, to(Billions of yen)

(%)

20

10

¥2,155 million. Contributing to earnings were the Industrial Machinery segment, which

15

operating income of ¥334 million (operating loss of ¥350 million in the previous year);and the UNIC Machinery segment, with operating income of ¥928 million (operating

7.5

6.8

the previous year); the Construction and Mining Machinery (Rock Drills) segment, with

14.4

reported operating income of ¥708 million (from an operating loss of ¥30 million in

10

5.0

5

2.5

loss of ¥187 million in the previous year). However, the Metals segment posted a 79.4%

0Among other income, the Group posted ¥865 million in interest and dividend

1.4

1.7

1.1

2.8

2.2

the operating margin decreased 0.3 percentage point, to 1.4%.

2.3(compared with operating income of ¥1,280 million in the previous year). Accordingly,

1.6

yen, and the Electronic Materials segment reported an operating loss of ¥234 million

1.4

decline in operating income, to ¥308 million, due to the fall in revenue and the strong‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

0income and ¥632 million in compensation income. By contrast, other expenses
included a ¥3,267 million write-down of investments in securities and a ¥1,027 million
loss on sales of investments in securities.
As a result, the Group reported a loss before income taxes and minority interests

Net Income (Loss)
Return on Sales(Billions of yen)

(%)

20

10.0

15

7.5

10

5.0

Minority interests amounted to ¥134 million. Accordingly, the Group posted a net lossof ¥1,659 million, compared with net income of ¥563 million in the previous year.

4.0

enterprise tax, and corporate income tax adjustments—amounted to ¥870 million.

8.6

of ¥2,663 million. Total income taxes subtraction—the sum of inhabitants’ tax,

2.5

by falling prices of listed shares.

-10

(1.7)

(1.1)

-5

to an increase in notes and accounts receivable. Investments and other assets declined
9.8%, to ¥27,388 million, due largely to a decrease in investments in securities caused

0
-2.5

(3.7)

earlier. Within this amount, current assets rose 1.6%, to ¥81,497 million, due mainly

0

(5.9)

At March 31, 2012, total assets stood at ¥193,971 million, down 1.2% from a year

0.6
0.4

Financial Position

0.3
0.6

5

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

-5.0

17

18

213.4

payable. As a result, the fiscal year-end balance of interest-bearing liabilities (corporate
157.6

165.6

161.9

200to ¥85,796 million.
bonds and debt) declined 3.9%,

(Yen)

50
40
30

150
This was mainly due to an increasein net unrealized holding gain on securities, net

20

142.9

Net assets at fiscal year-end stood at ¥47,668 million, up 0.1% from a year earlier.
of income taxes. Consequently, the equity ratio edged up 0.3 percentage point, to23.7%, and the debt-to-equity100(D/E) ratio was unchanged, at 1.9 times.

10

1.39

(Billions of yen)contrasted with an increase in current
liabilities caused by a rise in notes and accounts
250

1.45

a decline in long-term liabilities stemming from a decrease in long-term debt, which

Net Income (Loss) per Share

21.26

Sales to ¥146,303 million. This was due primarily to
Total liabilities were downNet
1.6%,

R&D and Capital Expenditures-10( 4.11)(14.64)050

The Furukawa Company Group is actively engaged in R&D on new materials and0high-value-added products that meet
diversified‘08/3‘09/3 ‘10/3 market‘11/3 ‘12/3needs. In the year under-20‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

review, total research and development expenses amounted to ¥2,622 million, up

7.5

Capital expenditures (increase
15 in tangible fixed assets and7.5intangible fixed assets)

10

5.0

segment, ¥204 million to the UNIC Machinery segment, ¥170 million to the Industrial
Machinery segment, ¥158 million to the Construction and Mining Machinery (Rock

2.5

100

2.2

2.8

1.6

2.3

50

to the Real Estate segment, mainly
for the Nihonbashi-Muromachi
Eastern District00‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

0Redevelopment Project, and ¥27 million went to the Fuels and Others segment for

0

-2.5

(3.1)

1.4

1.7

1.1

1.4

2.5
Drills) segment, and ¥69 million5 to the Electronic Materials segment,
aimed primarily

at improvements in production efficiency. In addition, ¥1,428 million was allocated

5.0

150
0.3

segment, ¥225 million to the Metals segment, ¥217 million was allocated to the Paints

200

4.1

6.8

amounted to ¥3,028 million. Of this total, ¥264 million was allocated to the Chemicals

194.0

250
14.4

to the Paints segment.

(%)

10.0

(0.9)

Electronic Materials segment, ¥90 million to the Chemicals segment, and ¥233 million(Billions of yen)

300

196.2

10

204.8

20

0.3

Drills) segment, ¥231 million (Billions
to theof yen)
UNIC Machinery segment,(%) ¥1,362 million to the

Total Assets
Return on Assets

188.4

Operating Income

Machinery segment, ¥632 million
to theConstruction and Mining Machinery (RockOperatingMargin199.4

17.8% from the previous year. Of this total, ¥71 million was allocated to the Industrial‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3-5.0

the purchase of vehicles for use in the transportation business. All funds required forof various factors, including demand forecasts, production plans, and investment
15 31, 2013, the Group plans
7.5to invest a total of ¥3.0
benefits. In the year ending March(Billions of yen)

(%)

60

40

50

47.7

10.0

47.6

20

50.9

(Billions of yen)(%)
The Group’s capital expenditurebudget is based on comprehensive
consideration

Net Assets
Return on Equity

45.7

on Salesand amortization rose 1.2%, Returnto ¥3,329
million.

55.4

capital expenditures were derived
from internalfunds and borrowings. Depreciation
Net Income(Loss)

30

billion, mainly for the purchase of new facilities and repair of existing ones. We expect
5.0

40

2.5

30
1.3

0.3
0.6

-2.5

10

(3.7)

(5.9)

(3.6)

(1.7)

(1.1)

million, up ¥1,235 million from the previous year. The main factor was an increase in
-5

20

-10
-5.0up ¥1,509 million from
Net cash used in investing activities
totaled ¥3,153 million,‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

the previous year. The primary reason was purchases of property, plant and equipment.

0(12.0)

0.6
0.4

0In the year under review, net cash0 provided by operating activities
amounted to ¥4,978payables—trade.

10
1.2

4.0

8.6

5

Cash Flows

20
15.5

10

to procure these funds via borrowings and/or internal funds.

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

0
-10
-20

19

(%)

23.7

million, a ¥2,117 million, or 13.0%, decline from a year earlier.

Capital Strategies

30

21.26

157.6

40

23.7

30

23.4

(Yen)

As a result, cash and cash equivalents
at the end of the fiscal year totaled ¥14,154
50

23.9

the previous year. This was due mainly to repayment of long-term debt.

Equity Ratio

27.2

Incomewas(Loss)
per Share
Net cash used in financingNet
activities¥3,782
million, down ¥1,921 million from20

Furukawa places great importanceon improving returns of profits to all shareholders.
20
Our basic policy is to appropriate profits after comprehensive consideration of various
10

1.39

1.45

factors, including retained earnings required to finance capital expenditures and10( 4.11)(14.64)0research and development expenses
necessary to bolster earnings, as well as futurebusiness development and other-10 factors. In principle, we appropriate retained earnings
to shareholders twice a year in the form of interim and year-end cash dividends. The-20

decision-making body for the year-end
dividendis theAnnual General Meeting of‘08/3 ‘09/3‘10/3 ‘11/3
‘12/3

‘12/3

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

Shareholders, while that for the interim dividend is the Board of Directors’ meeting.
The Company’s Articles of Incorporation states that “Interim dividends can be paid,
Total Assets

with September 30 of each year
being
the date of record, pursuant to resolution of
Returnon Assets(%)

10(Billions of yen)the Board of Directors’ meeting.”

300

Debt-to-Equity (D/E) Ratio(%)(Times)10.0

4Regrettably, the Company did not declare cash dividends for the year under review.
194.0

1.9

2

1.9

2.5

1.9

150

0.3

enhance operational management and strongly promote administrative reforms, in

2.1

Facing difficult business conditions, we will deploy retained earnings to further
0.3

3

5.0

1.4

4.1

Electronic Materials segment.

196.2

200

5.0

204.8

segments did not adequately compensate for lower profits in the Metals segment and
188.4

7.5

199.4

This is because increases in profits
business
250 generated by the three machinery-related
7.5

aimed at expanding overseas sales in existing businesses and entering markets for2.2

new products.
0

Business Risks

50

0

1

-2.5

(3.1)

1.4

(0.9)

100 position. We will also make0 effective investments
order to reinforce our financial
2.5

2/3

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

-5.0

0

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3(1) Fluctuations in the Foreign Exchange and Nonferrous Metals Markets
The Furukawa Company Groupis Assets
at risk of foreign exchange fluctuations in connection
Net

Dividends on Equity (DOE) Ratioon Equitywith its export business, theReturn
importof raw materials, primarily copper ore, and
40

(%)

5

4
3.2

47.7

47.6

market movements. While the 50
Group utilizes foreign exchange30contracts and forward
45.7

delivery transactions as a hedge against the aforementioned risks, its operating results
20

30

2/3

2
(3.6)

0

Historically, the Furukawa Company Group has maintained relatively high balances
10

-10

1

of marketable securities and land. As of March 31, 2012, the carrying value of-5.0

0
investments in securities as statedin the balance sheets was-20¥15,067 million, while‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

land stood at ¥58,653 million. Accordingly, the Group’s operating results and financial

0

0.0

-2.5

20
(2) Investments in Securities andLand(12.0)

0

3

10
1.2

nonferrous metal markets.

1.3

2.5

40

and financial position may be adversely affected by movements in exchange rates and
15.5

5.0

0.0

7.5

50.9

of nonferrous metal inventories, an internationally traded commodity, is subject to

0.0

60

4.5

(Billions of yen)smelting and processing income.
In addition, the Furukawa (%)
Company Group’s stock

55.4

(%)

10.0

(1.7)

(1.1)

0

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

Equity
Ratio losses from devaluation, and losses on sales
position are at risk of impairment
losses,due to movements in stock and land prices.
(%)

Capital Expenditures
Depreciation and Amortization(Billions of yen)

23.7

23.4

23.9

23.7

(3) Accrued Employees’ Retirement Benefits

16.5

20

27.2

30

The employees of the Furukawa Company Group are covered by a defined contribution
corporate pension plan and a single-payment
retirement benefit plan. Accrued employees’
20

15

retirement benefits are provided at an amount calculated based on the retirement
benefit obligation and the fair value of pension plan assets at the balance sheet date.

10

In calculating accrued employees’ retirement benefits, the Group adopts assumptions
3.0
3.3

1.9
3.3

2.9
3.2

3.1

5

as other assumptions. Accordingly, the Group’s operating results and financial position

4.4
3.0

10

in connection with the discount rate and expected rate of return on plan assets, as well
are at risk in the event the actual discount rate and expected rate of return on plan0

assets differs materially from the assumptions,as wellin the event of a change in the‘08/3 ‘09/3 ‘10/3‘11/3as‘12/3
assumptions on which accrued employees’ retirement benefits are made.
Debt-to-Equity (D/E) Ratio

0

-2.5

-5.0

-10

protection, environmental safety, and prevention of pollution at its various business1
sites, both in Japan and overseas,
respecting all laws and regulations. Furthermore,-15

in Japan the Group is vigilant in preventing water run-off from idle mines from-20

contaminating water supplies andin preventing the buildup of slag or slurry. However,0‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

5.0
(3.2)

The Furukawa Company Group places the highest importance on environmental

0
(3.6)

1.9

1.9

2

1.9

2.1

(5) Environmental Protection

1.4

2.5

(3.8)

5

5.0

3.7

3

( 5.7)

10

9.1

due to damage to manufacturing bases and facilities from earthquakes and other

(4.8)
(1.6)

15

12.1

the event of a suspension in operations and delays in production and/or shipments

5.1

4

20
12.8

(Times)operating results and financial position are at risk in
The Furukawa Company Group’s

natural disasters.

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities(11.5)

7.5

Cash Flows

(0.9)

10.0

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3(13.8)(%)

0(Billions of yen)

(4) Earthquakes and Other Natural Disasters‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

in the event of changes in legislation and the like, there is a possibility that the Group’s
performance results and its financial position could be influenced.
Dividends on Equity (DOE) Ratio

Cash Dividends per Share

(%)

40

The Furukawa Company Group5seeks to procure investment capital in a flexible manner30

at its meeting held on December
20, 2010, passed a resolution to issue new stock
4

(Yen)

6

to fund overseas investments and other initiatives. To this end, the Board of Directors,
3.2

5

acquisition rights in a third-party allotment, with the recipient being Mizuho Securities
2011. In the event that said rights are exercised, the per-share value of the Company’s
2
2

0

0.0

0

1
0.0

-20

1
0.0

-10

3

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

0

0.00

shares may become diluted.

4

0.00

10

Co., Ltd. The new stock acquisitionrights were subsequently issued on January 5,
3

0.00

20

4.00

(%)

6.00

(6) Dilution of Shares Due to Exercise of New Stock Acquisition Rights
4.5

(0.9)

20

‘08/3 ‘09/3 ‘10/3 ‘11/3 ‘12/3

21

Financial Section
P22

Consolidated Balance Sheets

P24

Consolidated Statements of Operations

P25

Consolidated Statements of Comprehensive Income

P26

Consolidated Statements of Changes in Net Assets

P28

Consolidated Statements of Cash Flows

P29

Notes to Consolidated Financial Statements

P50

Independent Auditors' Report22

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
As of March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 4)

Millions of yen

ASSETS
Current Assets:
Cash and cash equivalents . ..........................................................................................
Short-term investment securities . .........................................................................................
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 ...................................................................................................

2012¥

14,154
49

2012

2011
¥

16,271—$

172,610598

28,993693
12,526
6,399
11,883
1,945
4,973
(118)
81,497

24,956242
11,217
5,183
13,263
2,098
7,142
(173)
80,199353,573
8,451
152,756
78,037
144,915
23,72060,645(1,439)993,866

60,51045,03050,072
1,632
1,843

60,93144,78250,121
1,295
645

737,927
549,146
610,634
19,902
22,476

159,087

157,774

1,940,085

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

(74,001)
85,086(72,117)85,657(902,451)
1,037,634

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

437
17,982
5,165
1,333
132

599
19,349
5,257
1,444
12

5,329
219,293
62,98816,256
1,610

Property, Plant and Equipment, at Cost (Notes 6 and 20):
Land and timberlands ...................................................................................................
Buildings and structures ...............................................................................................
Machinery and equipment . ..........................................................................................
Lease assets (Note 11) ..................................................................................................
Construction in progress ..............................................................................................

Other investments .......................................................................................................

3,887

5,542

47,402

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

(1,548)27,388(1,825)30,378(18,878)
334,000

196,234$ 2,365,500

		 Total assets . ..........................................................................................................
The accompanying notes are an integral part of these statements.

¥

193,971¥

23

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) ..................................................................

2012
¥

2012

2011

12,89718,042¥

12,85817,152$

157,280
220,024

311

262

3,793

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

26,01923,586317,305

		 Affiliates ..................................................................................................................
Accrued expenses ........................................................................................................

4
13,901

67
12,37549
169,525

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

458

438

5,585

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

37

13

451

Lease obligations (Note 6) ............................................................................................
Payables - trade:

Provision for restoration expenses for disaster ..............................................................

—

54

—

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

3,138
74,807

3,651
70,45638,269912,281

54,85859,255669,000

Long-Term Liabilities:
Long-term debt (Note 6) ..............................................................................................
Lease obligations (Note 6) ............................................................................................

701

693

8,549

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

1,694

1,625

20,659Provision for environmental measures ..........................................................................

176

178

2,146

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

8,146

9,499

99,341
28,902

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

2,370

2,767

Asset retirement obligations . .......................................................................................

196

192

2,390

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

3,355

3,947

40,915

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

71,49678,156

871,902

Net Assets (Note 8):
Shareholders’ equity:
		 Common stock without par value:
			 Authorized—800,000,000 shares
			 Issued—404,455,680 shares ................................................................................

28,20828,208344,000

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

15,704

17,310191,512

(46)

(46)

(561)

		 Treasury stock, at cost:			 2012—313,540 shares .........................................................................................
			 2011—306,068 shares .........................................................................................

—―

—

—

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

43,86645,472534,951

Accumulated other comprehensive income:		 Unrealized holding gain (loss) on securities, net of income taxes . .............................

2,162

294

26,366

		 Deferred gains (losses) on hedges . ...........................................................................

(191)

(110)

(2,329)

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

3,578

3,289

43,634

		 Translation adjustments . ..........................................................................................

(3,393)(3,096)(41,378)

			 Total other comprehensive income .......................................................................

2,156

377

26,293

		 Subscription rights to shares . ...................................................................................

53

53

646

		 Minority interests .....................................................................................................

1,593

1,720

19,427

			 Total net assets ....................................................................................................
			 Total liabilities and net assets .........................................................................

47,668¥

193,971¥

47,622581,317

196,234$ 2,365,500

24Consolidated Statements of Operations
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 4)

Millions of yen

Net Sales .......................................................................................................................
Cost of Sales (Note 17) ..................................................................................................
		 Gross profit . ............................................................................................................
Selling, General and Administrative Expenses (Note 10) . ........................................
		 Operating income ....................................................................................................
Other Income (Expenses):
Interest and dividend income . .....................................................................................
Interest expense ..........................................................................................................
Other, net (Notes 18 and 20) .......................................................................................
		 Income (loss) before income taxes and minority interests ........................................
Income Taxes (Note 15):
Current ........................................................................................................................
Deferred ......................................................................................................................
		 Total ........................................................................................................................
Income (Loss) Before Minority Interests ...................................................................
Minority Interests ........................................................................................................
		 Net income (loss) .....................................................................................................

¥

¥

2012
157,566(138,097)
19,469(17,314)
2,155

2011
165,638(146,364)
19,274(16,453)
2,821

2012
$ 1,921,537(1,684,110)
237,427(211,147)
26,280865(1,404)(4,279)(2,663)678(1,527)(1,525)447

10,549(17,122)(52,183)(32,476)

(509)
1,379
870
(1,793)134(1,659)

(483)
369
(114)
333
230
563

(6,207)
16,817
10,610(21,866)
1,634(20,232)¥¥
Yen

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

¥(4.11)
113.88$

U.S. dollars (Note 4)¥

1.39
113.45$(0.05)
1.39

25

Consolidated Statements of Comprehensive Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 4)

Millions of yen

Income (Loss) Before Minority Interests ............................................................

¥

2012(1,793)

2011
¥

333

$

2012
(21,866)

Other comprehensive income (loss):
Unrealized holding gain (loss) on securities, net of income taxes ..................................
Deferred gains (losses) on hedges ................................................................................
Revaluation surplus of land ..........................................................................................
Translation adjustments . ..............................................................................................
Share of other comprehensive income (loss)
		 of associates accounted for using equity method .....................................................
			 Total other comprehensive income (loss) (Note 9) ..................................................

1,888
(85)
354
(177)

(2,479)
(157)
—
(802)

23,024(1,037)
4,317(2,158)

(129)
1,851

(164)
(3,602)(1,573)
22,573Comprehensive income (loss) .....................................................................................

58(3,269)707

Comprehensive income (loss) attributable toComprehensive income (loss) attributable to owners of the parent ...............................
Comprehensive income (loss) attributable to minority interests .....................................

173
(115)

(3,036)
(233)

2,110
(1,403)

The accompanying notes are an integral part of these statements.

26

Consolidated Statements of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2012 and 2011

Millions of yen
Shareholders’ equity

Balance as of March 31, 2011 ......................................................................
Cash dividends paid . ...................................................................................
Net income (loss) for the year ......................................................................
Purchase of treasury stock ...........................................................................
Reversal of surplus on the revaluation of land . ............................................
Net change during the year .........................................................................
Balance as of March 31, 2012 ......................................................................

Number ofshares ofcommon stock(thousands)

Common stock

Retainedearnings

404,456—————
404,456¥ 28,208—————¥ 28,208¥ 17,310—(1,659)—53—¥ 15,704

Treasury stock,at cost

¥

(46)
—
—
(0)
—
—
(46)

¥

Total
shareholders'equity¥ 45,472—(1,659)(0)53—¥ 43,866

Millions of yen
Accumulated other comprehensive income
Unrealized
holding gain
(loss) on
securities, netof income taxes

Balance as of March 31, 2011 ......... ¥Cash dividends paid . ......................
Net income (loss) for the year .........
Purchase of treasury stock ..............
Reversal of surplus on the revaluation of land ..
Net change during the year ............
Balance as of March 31, 2012 ......... ¥

294
—
—
—
—
1,868
2,162

Deferred
gains (losses)on hedges

Surplus on therevaluation ofland,
net of income
taxes

¥

¥

¥

(110)
—
—
—
—
(81)
(191)

¥

3,289
—
—
—
—
289
3,578

Translation
adjustments¥ (3,096)
—
—
—
—
(297)
¥ (3,393)

Total
accumulated
othercomprehensive
incomeSubscription
rightsto shares

¥

¥

¥

377
—
—
—
—
1,779
2,156

¥

53
—
—
—
—
—
53

Minority
interests

¥

¥

1,720
—
—
—
—
(127)
1,593

Total
net assets¥ 47,622—(1,659)
(0)
53
1,652
¥ 47,668

Millions of yen
Shareholders’ equity

Balance as of March 31, 2010 ......................................................................
Cash dividends paid . ...................................................................................
Net income (loss) for the year ......................................................................
Purchase of treasury stock ...........................................................................
Reversal of surplus on the revaluation of land . ............................................
Net change during the year .........................................................................
Balance as of March 31, 2011 ......................................................................

Number ofshares ofcommon stock(thousands)

Common stock

Retainedearnings

404,456—————
404,456¥ 28,208—————¥ 28,208¥ 16,687
—
563
—
60
—
¥ 17,310

Treasury stock,at cost

¥

¥

(45)
—
—
(1)
—
—
(46)

Total
shareholders'equity¥ 44,850
—
563
(1)
60
―
¥ 45,472

27

Millions of yen
Valuation, translation adjustments and others
Unrealized
holding gain
(loss) on
securities, netof income taxes

Balance as of March 31, 2010 ......... ¥ 2,791
Cash dividends paid . ......................
—Net income (loss) for the year .........
—
Purchase of treasury stock ..............
—
Reversal of surplus on the revaluation of land—
Net change during the year ............
(2,497)
Balance as of March 31, 2011 ......... ¥294

Deferred
gains (losses)on hedges

Surplus on therevaluation ofland,
net of income
taxes

¥

¥

¥

41
—
—
—
—
(151)
(110)

¥

3,348
—
—
—
—
(59)
3,289

Translation
adjustments¥ (2,145)
—
—
—
—
(951)
¥ (3,096)

Total valuation,translation
adjustments
and others

Subscription
rightsto shares

¥

¥

4,035
—
—
—
—
(3,658)
¥
377

¥

—
—
—
—
—
53
53

Minority
interests

¥

¥

1,970
—
—
—
—
(250)
1,720

Total
net assets¥ 50,855
—
563
(1)
60
(3,855)¥ 47,622

Thousands of U.S. dollars (Note 4)
Shareholders' equity

Balance as of March 31, 2011 ..........................................................................................
Cash dividends paid . .......................................................................................................
Net income (loss) for the year ..........................................................................................
Purchase of treasury stock ...............................................................................................
Reversal of surplus on the revaluation of land . ................................................................
Net change during the year .............................................................................................
Balance as of March 31, 2012 ..........................................................................................

Common stock

Retainedearnings$ 344,000—————$ 344,000$ 211,098—(20,232)—646—$ 191,512

Treasury stock,at cost

$

$

(561)
—
—
(0)
—
—
(561)

Total
shareholders'equity$ 554,537—(20,232)(0)646—―$ 534,951

Thousands of U.S. dollars (Note 4)
Accumulated other comprehensive income
Unrealized
holding gain
(loss) on
securities, netof income taxes

Balance as of March 31, 2011 ......... $ 3,585
Cash dividends paid . ......................
—Net income (loss) for the year .........
—
Purchase of treasury stock ..............
—
Reversal of surplus on the revaluation of land...
—
Net change during the year ............
22,781
Balance as of March 31, 2012 ......... $ 26,366
The accompanying notes are an integral part of these statements.

Deferred
gains (losses)on hedges$$(1,341)
—
—
—
—
(988)
(2,329)Surplus on therevaluation ofland,
net of income
taxesTranslation
adjustments$ 40,110
—
—
—
—
3,524
$ 43,634$ (37,756)————(3,622)$ (41,378)

Total
accumulated
othercomprehensive
incomeSubscription
rightsto shares

$

$

4,598
—
—
—
—
21,695$ 26,293

$

646
—
—
—
—
—―
646

Minority
interests

Total
net assets$ 20,976————(1,549)$ 19,427$ 580,757—(20,232)(0)646
20,146$ 581,317

28

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 4)

Millions of yen

2012
Operating Activities:
Income (loss) before income taxes and minority interests ............................................
		 Depreciation and amortization ................................................................................
		 Decrease in allowance for doubtful accounts, net . ..................................................
		 Increase in accrued employees’ retirement benefits .................................................
		 Write-down of investments in securities ..................................................................
		 Gain on sales of investments in securities ................................................................
		 Compensation income .............................................................................................
		 Interest and dividend income ...................................................................................
		 Interest expense . .....................................................................................................
Changes in operating assets and liabilities:
		 Receivables-trade . ...................................................................................................
		 Inventories ...............................................................................................................
		 Payables-trade .........................................................................................................
Other . .........................................................................................................................
		 Subtotal ...................................................................................................................
Interest and dividends received . ..................................................................................
Interest paid ................................................................................................................
Income taxes paid . ......................................................................................................
Income taxes refunded ................................................................................................
Compensation received ...............................................................................................
		 Net cash provided by operating activities .................................................................

(2,663)
3,329
(324)
1,107
3,267
1,024
(632)
(865)
1,404

2012

447
3,290
(199)
874
181
(7)
—
(678)
1,527

$ (32,476)
40,597(3,951)
13,50039,841
12,488(7,707)(10,549)
17,122(4,561)(1,209)
2,376
3,028
5,281
886
(1,409)
(777)
365
632
4,978

(941)
1,459
(2,391)
14
3,576
734
(1,567)
(583)
1,583
—
3,743

(55,622)(14,744)
28,97636,92764,402
10,805(17,182)(9,476)
4,451
7,707
60,707

Investing Activities:
Purchases of property, plant and equipment ...............................................................
Proceeds from sales of property, plant and equipment ................................................
Purchases of investments in securities . ........................................................................
Other . .........................................................................................................................
		 Net cash used in investing activities .........................................................................

(2,989)
707
(978)
107
(3,153)(1,896)173(4)83(1,644)(36,451)
8,622(11,927)
1,305(38,451)

Financing Activities:
Proceeds from long-term debt .....................................................................................
Repayment of long-term debt .....................................................................................
Proceeds from short-term loans ...................................................................................
Repayment of short-term loans ...................................................................................
Repayments of finance lease obligations .....................................................................
Other . .........................................................................................................................
		 Net cash used in financing activities . .......................................................................
Effect of Exchange Rate Changes on Cash and Cash Equivalents ..........................
Net (Decrease) Increase in Cash and Cash Equivalents . ..........................................
Cash and Cash Equivalents at Beginning of Year .....................................................
Cash and Cash Equivalents at End of Year ................................................................

13,750(17,258)
9,900(9,862)(310)(2)(3,782)(160)(2,117)
16,271¥ 14,154

15,110(20,340)
3,132(3,350)(290)
35(5,703)(382)(3,986)
20,257¥ 16,271

167,683(210,463)
120,732(120,268)(3,781)(25)(46,122)(1,951)(25,817)
198,427$ 172,610

The accompanying notes are an integral part of these statements.

¥

2011
¥

29

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2012 and 2011

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

information which is not required under accounting principles

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

generally accepted in Japan but is presented herein as additional

the “Furukawa Group”) are prepared in accordance with accounting

information.

principles generally accepted in Japan, which are different in certain

In preparing these statements, the Company makes certain

respects as to the application and disclosure requirements ofreclassifications and rearrangements to the consolidated financial

International Financial Reporting Standards, and are compiled fromstatements prepared in Japan in order to present these statements in

those prepared by the Company as required under the Financial

a form which is more familiar to readers outside Japan.

Instruments and Exchange Law of Japan.
The notes to the consolidated financial statements include

Certain amounts in the prior year’s financial statements arereclassified to conform to the current year’s presentation.

2. Summary of Significant Accounting Policies(1) Principles of Consolidation

Marketable securities classified as other securities are carried at fair

The Company had 46 subsidiaries and 16 affiliates as of Marchvalue with changes in unrealized holding gain or loss, net of the31, 2012 (44 subsidiaries and 17 affiliates as of March 31, 2011).

applicable income taxes, included directly in net assets. Fair value is

The consolidated financial statements included the accounts of thedetermined based on the average of the market value during the lastCompany and 46 subsidiaries as of March 31, 2012 (43 as of Marchmonth of the fiscal year. Non-marketable securities classified as other31, 2011).

securities are carried at cost. Cost of securities sold is determined byCompared with the previous year, the number of subsidiaries

the moving average method.

increased by 3 subsidiaries due to establishment and decreased by 1
subsidiary due to liquidation.

(4) Inventories

For the purpose of preparing the consolidated financial

Finished products and work in process relating to copper products

statements, all significant inter-company transactions, accountare stated at cost determined by the moving average method (thebalances and unrealized profits among the Furukawa Group havebalance sheet amounts of inventories are stated at the lowered bookbeen eliminated.

values reflecting potential decline in profitability). Other inventories

Certain foreign subsidiaries have been included on the basis of aare mainly stated at cost determined by the average method (thefiscal year ended on December 31, but prior to the parent company’sbalance sheet amounts of inventories are stated at the lowered bookfiscal year ended on March 31. Relevant adjustments have beenvalues reflecting potential decline in profitability).

made for significant transactions with such subsidiaries during theintervening period from January 1 to March 31.

(5) Allowance for Doubtful Accounts

Investments in the remaining unconsolidated subsidiaries andIn order to cover probable losses on collection, the allowance foraffiliates are carried at cost because of their immaterial impact on the

doubtful accounts is calculated based on the historical default

consolidated financial statements.

rates for normal receivables plus estimate of uncollectible amounts
determined by reference to specific doubtful receivables from

(2) Cash and Cash Equivalents

customers who are experiencing financial difficulties.

Cash and cash equivalents include all highly liquid investments with amaturity of three months or less when purchased.

(6) Provision for Environmental Measures
Provision for environmental measures is provided to cover the disposal(3) Investments in Securities

costs anticipated to be incurred with respect to the “Law Concerning

Securities other than equity securities issued by subsidiaries andSpecial Measures for Promotion of Proper Treatment of PCB Wastes.”

affiliates are classified into three categories: trading, held-to-maturity
or other securities. The Furukawa Group does not hold any trading(7) Property, Plant and Equipment and Depreciationor held-to-maturity securities as of March 31, 2012 and 2011.

Property, plant and equipment are stated at cost. Depreciation of

30

property, plant and equipment except for lease assets is mainly

method over a period of principally 15 years, which is shorter thancalculated by the straight-line method based on the estimated useful

the average remaining years of service of the employees. Actuarial

lives of the assets. The range of useful lives of property, plant andgain and loss is amortized in the year following the year in which theequipment is summarized as follows:

gain or loss is recognized by the straight-line method over the period

Buildings and structures

5 to 60 yearsof mainly 15 years, which is shorter than the average remaining years

Machinery and equipment

2 to 22 yearsof service of the employees.

Amortization is calculated by the straight-line method for
intangible assets.

(10) Surplus on the Revaluation of Land
Pursuant to the “Law Concerning the Revaluation of Land,” land

Depreciation of lease assets arising from finance leaseused for the Company’s business operations was revalued on Marchtransactions that do not involve transfer of ownership is calculated

31, 2002. The income tax effect of the difference between the bookby the straight-line method over the lease term with no residual

value and the revalued amount has been presented under liabilities

value. Finance lease transactions that do not involve transfer of

as “Deferred income taxes on surplus on the revaluation of land”

ownership, entered into on and before March 31, 2008, by theand the remaining balance has been presented under net assets as

Company and domestic consolidated subsidiaries are accounted for“Surplus on the revaluation of land, net of income taxes” in theas operating leases.

accompanying consolidated balance sheets. Revaluation of land
was determined based on the official notice prices published by the(8) Amortization of Goodwill

Commissioner of the National Tax Authorities in accordance with

Goodwill is amortized by the straight-line method over five years.

Paragraph 4, Article 2 of the “Enforcement Ordinance Concerning
Land Revaluation,” with relevant adjustments. The carrying value of(9) Retirement Benefit Plans

the land after revaluation exceeded its fair value by ¥1,686 million

The employees of the Company and most of its domestic consolidated($20,561 thousand) and ¥1,503 million as of March 31, 2012 andsubsidiaries are covered by defined benefit corporate pension plans

2011, respectively.

and non-contributory funded employee pension plans as defined
benefit plans. The employee retirement benefit plans provide for(11) Income Taxes

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

Current income taxes comprising corporation tax, enterprise tax

were instituted to replace a certain portion of the benefits under theand inhabitants’ taxes are provided for based on amounts currently

retirement benefit plans with respect to employees who retire at thepayable for each year. Deferred income taxes arising from temporary

mandatory retirement age. Certain consolidated subsidiaries (bothdifferences between financial reporting and tax bases of the assets anddomestic and foreign) have defined contribution plans. On October 1,

liabilities, which were measured using the enacted tax rates and laws

2011, the Company adopted defined benefit corporate pension plans

which will be in effect when the temporary differences are expected toin place of unfunded employee retirement benefit plans.

reverse, are reflected in the consolidated financial statements.

Accrued employees’ retirement benefits have been provided at
an amount calculated based on the retirement benefit obligation and

The Company and its domestic wholly-owned subsidiaries file a
consolidated corporation tax return.

the fair value of the pension plan assets at the balance sheet dates,
as adjusted for unrecognized actuarial gain or loss and unrecognized(12) Amounts per Shareprior service cost. The retirement benefit obligation has been

Basic net income (loss) per share is computed based on the net

attributed to each period by the straight-line method over the years

income (loss) available for distribution to shareholders of commonof service of the eligible employees.

stock and the weighted-average number of shares of common

The net obligation at transition of the listed subsidiary, whichstock outstanding during the year. Diluted net income per shareamounts to ¥1,940 million ($23,659 thousand), is being amortized by

is not presented since the Company recorded net loss for the year

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

ended March 31, 2012 and no dilutive instruments were issued andPrior service cost is being amortized as incurred by the straight-line

outstanding for both of the years ended March 31, 2012 and 2011.

31

Net assets per share are computed based on net assets excludingin the fair values of derivative financial instruments is deferred as aminority interests and the number of common stock outstanding atcomponent of net assets in the balance sheet until the recognition

the year-end.

of gain or loss on hedged items when those derivative financial
instruments qualify for hedge accounting.

(13) 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 effect at

rates if the relating forward contracts qualify for hedge accounting.

the balance sheet date. Differences arising from the translation are
included in the consolidated statements of operations.

The interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not carried at fair value,

The balance sheet accounts of the foreign consolidated

but any differences paid or received on the interest rate swaps are

subsidiaries are translated into yen at the rates of exchange in effectrecognized as adjustments to interest expense or income over theat the balance sheet date, except for the components of net assets

life of each swap, thereby adjusting the effective interest rate on the

excluding minority interests, which are translated at their historicalhedged items.

exchange rates. Revenue and expense accounts are translated at the
average rate of exchange in effect during the year. Differences arising(15) Shareholders’ Equityfrom the translation are presented as translation adjustments and

The Company Law of Japan provides that an amount equal to 10% ofminority interests in the consolidated financial statements.

the amount to be distributed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than the legal(14) Hedging Activities

reserve) be transferred to the capital reserve and the legal reserve,

The Furukawa Group uses derivative financial instruments for therespectively until the sum of the capital reserve and the legal reserve

purpose of hedging the risks of adverse fluctuations in foreign

equals 25% of the common stock account. Such distributions can beexchange rates on the trade receivables, trade payables and forecast

made at any time by resolution of the shareholders or by the Board oftransactions denominated in foreign currencies, commodity prices

Directors if certain conditions are met, but neither the capital reserveand interest rates. All derivative financial instruments except those

nor the legal reserve is available for distributions.

below are stated at fair value and related gain or loss on the changes

3. Additional Information
Accounting Standard for Accounting Changes and Error

Standards Board of Japan (ASBJ) Statement No. 24 issued on

Corrections

December 4, 2009) and the “Guidance on Accounting Standard for

Effective April 1, 2011, the Company adopted the “Accounting

Accounting Changes and Error Corrections” (ASBJ Guidance No. 24

Standard for Accounting Changes and Error Corrections” (Accounting

issued on December 4, 2009).

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.

¥82=US$1.00, the exchange rate prevailing on March 31, 2012. Thisdollars at the above or any other rate.

32

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, 2012 and2011 were as follows:
Millions of yen

Thousands of U.S. dollars

2012

2012

Unrealized gain
Carrying value Acquisition cost(loss)

Securities whose carrying value exceeds their acquisition cost:
Listed stocks ..........................................................................
Government bonds . ..............................................................
Corporate bonds ...................................................................

Securities whose carrying value does not exceed their acquisition cost:
Listed stocks ..........................................................................
Government bonds . ..............................................................
Corporate bonds ...................................................................
Total ..........................................................................................

¥

7,715
—
—
7,715

7,240
18
94
7,352
¥ 15,067

¥

4,805
—
—
4,805

7,824
18
94
7,936
¥ 12,741¥¥

Carrying value Acquisition cost

Unrealized gain
(loss)

2,910
—
—
2,910

$ 94,085——
94,085$ 58,598——
58,598$ 35,487——
35,487

(584)
—
—
(584)
2,326

88,293220
1,146
89,659$ 183,744

95,414220
1,146
96,780$ 155,378(7,121)——(7,121)$ 28,366

Millions of yen

2011
Carrying value Acquisition cost

Securities whose carrying value exceeds their acquisition cost:
Listed stocks ..........................................................................
Government bonds . ..............................................................
Corporate bonds ...................................................................

Securities whose carrying value does not exceed their acquisition cost:
Listed stocks ..........................................................................
Government bonds . ..............................................................
Corporate bonds ...................................................................
Total ..........................................................................................

¥ 8,362
—
—
8,362

¥

5,421
—
—
5,421

7,904
—
—
7,904
¥ 16,266

10,472——
10,472¥ 15,893

Unrealized gain
(loss)

¥

2,941
—
—
2,941

(2,568)——(2,568)¥373

Gain on sales of securities classified as other securities with aggregate gains and losses for the years ended March 31, 2012 and 2011 aresummarized as follows:

Millions of yen

Sales proceeds . ......................................................................................................................................
Aggregate gains .....................................................................................................................................
Aggregate losses ....................................................................................................................................

2012
¥
7
3
—

¥

2011
17
7
(3)

Thousands of
U.S. dollars

2012
$
85
37
—

33

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 rate of 0.7% as of March 31, 2012
and 2011.
Long-term debt as of March 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2012
Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2012 to 2027 .....................................................................................
Current portion of long-term debt .........................................................................................................

2012

2011

¥ 72,900 ¥ 76,407
72,90076,407(18,042)(17,152)$ 889,024
889,024(220,024)¥ 54,858$ 669,000¥ 59,255

The average interest rates applicable to the above loans amounting to ¥72,900 million ($889,024 thousand) and ¥76,407 million were 1.4%
and 1.6% as of March 31, 2012 and 2011, respectively.
The aggregate annual maturities of long-term debt subsequent to March 31, 2012 are as follows:

Years ending March 31,

Millions of yen

Thousands of
U.S. dollars

2013 . .........................................................................................................................................................................
2014 . .........................................................................................................................................................................
2015 . .........................................................................................................................................................................
2016 . .........................................................................................................................................................................
2017 and thereafter ...................................................................................................................................................

¥ 24,246
13,219
8,382
5,311
3,700
¥ 54,858$ 295,683
161,207102,220
64,76845,122$ 669,000

Lease obligations as of March 31, 2012 and 2011 consisted of the following:

Millions of yen

Thousands of
U.S. dollars

2012
2011
1,012 ¥
955
1,012
955
(311)
(262)
¥
701 ¥
693

2012
$ 12,342
12,342(3,793)$ 8,549

Years ending March 31,

Millions of yen

Thousands of
U.S. dollars

2013 . .........................................................................................................................................................................
2014 . .........................................................................................................................................................................
2015 . .........................................................................................................................................................................
2016 . .........................................................................................................................................................................
2017 and thereafter ...................................................................................................................................................

¥$

Lease obligations due 2012 to 2021 ......................................................................................................
Current portion of lease obligations ......................................................................................................

¥

The aggregate annual maturities of lease obligations subsequent to March 31, 2012 are as follows:

¥

293
196
152
55
5
701

$

3,573
2,390
1,854
671
61
8,549

34

The Company and certain consolidated subsidiaries have enteredcredit facilities amounted to ¥21,856 million ($266,537 thousand)into overdraft and loan commitment agreements amounting toand ¥20,987 million ($255,939 thousand), respectively, as of March¥42,843 million ($522,476 thousand) with 26 banks and ¥40,024

31, 2012 and amounted to ¥20,456 million and ¥19,568 million,

million with 26 banks as of March 31, 2012 and 2011, respectively.

respectively, as of March 31, 2011.

The borrowings outstanding and the unused balances under these

Assets pledged as collateral and liabilities with collateral pledged as of March 31, 2012 and 2011 were as follows:(a) Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

Investments in securities ........................................................................................................................
Property, plant and equipment, net .......................................................................................................

2012
1,243
6,409
¥ 7,652
¥

2011
1,261
6,611
¥ 7,872¥2012$ 15,159
78,158$ 93,317(b) Liabilities with collateral pledged
Thousands of
U.S. dollars

Millions of yen

Short-term debt ....................................................................................................................................
Long-term debt (including current portion) ...........................................................................................

2012
150
2,795
¥ 2,945
¥

2011
100
2,826
¥ 2,926
¥

2012
1,829
34,086$ 35,915$

7. Goodwill
Goodwill and negative goodwill are netted against each other. The pre-netted amounts as of March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

Goodwill ...............................................................................................................................................
Negative goodwill .................................................................................................................................
Net goodwill .........................................................................................................................................

2012
437
—
¥
437
¥

2011
599
—
¥
599
¥

2012
5,329
—
$ 5,329$

8. Net Assets(1) Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2011

Shares issued:
Common stock ..............................................................................................................
		 Total ��������������������������������������������������������������������������������������������������������������������������
Treasury stock:
Common stock (Note) ����������������������������������������������������������������������������������������������������
		 Total ��������������������������������������������������������������������������������������������������������������������������

Increase

404,455
404,455

Decrease

As of March 31,
2012

—
—

—
—

404,455
404,455

7
7

—
—

313
313

		
306
306

Note: The increase of 7 thousand shares of equity in treasury was due to the purchase of shares of less than a standard unit.

35(2) Subscription rights to shares
Attribution
Parent company

Details of
subscription rights toshares (*)

Type of shares to beissued upon exerciseof rights

Subscription rights toshares due 2016

Common stockThousands of shares

Millions of yen

Number of shares subject to be issued upon exercise of rights
As of March 31, 2011

Balance as of March
31, 2012

As of March 31, 2011

Total

Increase

Decrease

100,000——

100,000

53

100,000——

100,000

53

Note: All subscription rights to shares can be exercised.

9. Other Comprehensive Income
Reclassification adjustment and tax effects allocated to each component of other comprehensive income for the year ended March 31, 2012 are as follows

Millions of yen

Thousand of
U.S. dollars

2012

2012

Unrealized holding gain (loss) on securities:
Amounts arising during the year .............................................................................................................................
Reclassification adjustments for gains and losses included in net income ................................................................
Amounts before tax effect . ....................................................................................................................................
Tax effect . ..............................................................................................................................................................
Unrealized holding gain (loss) on securities .............................................................................................................

¥ (1,309)
3,262
1,953
(65)
1,888

$ (15,963)
39,78023,817(793)
23,024

Deferred gain (loss) on hedges:
Amounts arising during the year .............................................................................................................................
Adjustment on the acquisition cost of assets ..........................................................................................................
Amounts before tax effect . ....................................................................................................................................
Tax effect . ..............................................................................................................................................................
Deferred gains (losses) on hedges ...........................................................................................................................

1,266(1,376)
(110)
25
(85)

15,439(16,781)(1,342)305(1,037)

Revaluation surplus of land:Tax effect . ..............................................................................................................................................................

354

4,317

Translation adjustments:
Amounts arising during the year .............................................................................................................................

(177)(2,158)

Share of other comprehensive income (loss) of associates accounted
for using equity method:Amounts arising during the year .............................................................................................................................
Reclassification adjustments for gains and losses included in net income ................................................................
Share of other comprehensive income (loss) of associates accounted for using equity method ...............................
		 Total other comprehensive income .......................................................................................................................

(123)
(6)
(129)
1,851

(1,500)(73)(1,573)$ 22,573¥

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,
2012 and 2011 amounted to ¥2,622 million ($31,976 thousand) and ¥2,225 million, respectively.

36

11. Leases
Leases’ accounting(1) Finance lease transactions that do not involve transfer of ownership
1. Leased asset quality
		(a) Tangible assets
Mainly production installations (Machinery and equipment) in the machinery segment and distribution vehicles (Machinery andequipment) in the others segment

		(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, 2012 and 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

Acquisition costs ...................................................................................................................................
Less accumulated depreciation ..............................................................................................................
Net carrying value .................................................................................................................................

2012
2,192
1,473
¥
719

¥

2011
2,718
1,635
¥ 1,083¥

2012$ 26,732
17,964$ 8,768

Lease payments relating to finance leases accounted for as operating leases amounted to ¥361 million ($4,402 thousand) and ¥471 million
for the years ended March 31, 2012 and 2011, 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, 2012 and 2011 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

Within one year . ...................................................................................................................................
Over one year ........................................................................................................................................

2012
294
425
¥
719

¥

2011
363
720
¥ 1,083¥2012$ 3,585
5,183$ 8,768(2) Operating leases
The future minimum lease payments under lease agreements other than finance leases as of March 31, 2012 and 2011 are summarized asfollows:
Thousands of
U.S. dollars

Millions of yen

Within one year . ...................................................................................................................................
Over one year ........................................................................................................................................

2012
17
17
¥
34

¥

2011
¥
¥

15
28
43

2012
207
207
$
414
$

37

12. Financial Instruments
1. Overview(1) Policy for financial instruments		In consideration of 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 purpose.
(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 Groupis 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.
			

Short-term investment securities and investments in securities are exposed to market risk. Those securities are composed of mainly theshares of common stock of other companies with which the Furukawa Group has business relationships.
			

Substantially all trade payables—trade notes and accounts payables—have payment due date 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 such risk and fix
interest expense for long-term debt bearing interest at variable rates, the Furukawa Group utilizes rate swap transactions as a hedging instrument
for each contract. The assessment of effectiveness is omitted since it meets conditions of specific matching criteria for interest rate swap.
			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
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 price of inventories. Information regarding the method ofhedge accounting, hedging instruments, hedged items, hedging policy and the assessment of effectiveness of hedging activities is found in “(14)Hedging Activities” in “2. Summary of Significant Accounting Policies.”(3) Risk management for financial instruments
		

(a) M
 onitoring 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 foreach currency on a monthly basis and principally enters into forward foreign exchange contracts to hedge such risk. In order to mitigate theinterest rate risk for loans payable and bonds bearing interest at variable rates, the Furukawa Group enters into interest rate swap transactions.
				For short-term investment securities and investments in 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 transaction-related 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 on 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.

38

2. Estimated fair value of financial instruments
	Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2012 and 2011 and estimated fair value are shownas 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) Trade notes and accounts receivable . ...............................
(3) Short-term investment securities and investments in securities ...
Total assets . .............................................................................. ¥Thousands of U.S. dollars

2012

2012

Estimated fairvalue

Estimated fairvalue

14,154 ¥29,686
15,06758,907 ¥Difference

Carrying value

Difference

14,154 ¥29,686
15,06758,907 ¥————$ 172,610 $ 172,610 $
362,024
362,024
183,744
183,744$ 718,378 $ 718,378 $

—
—
—
—

Liabilities(1) Trade notes and accounts payable .................................... ¥ 26,023 ¥ 26,023 ¥(2) Short-term loans (*1) ........................................................
12,897
12,897(3) Long-term debt (*1) .........................................................
72,90073,255
Total liabilities . ..........................................................................
111,820
112,175
Derivatives (*2) .......................................................................... ¥
261 ¥
261 ¥

—
—
355
355
—

$ 317,354 $ 317,354 $
157,280
157,280
889,024
893,354
1,363,658 1,367,988$
3,183 $
3,183 $

—
—
4,330
4,330
—

Millions of yen

2011
Carrying value

Estimated fair
value

Assets(1) Cash and cash equivalents ..............................................................................................................
(2) Trade notes and accounts receivable . .............................................................................................
(3) Short-term investment securities and investments in securities .......................................................
Total assets . ............................................................................................................................................

¥ 16,271
25,197
16,266¥ 57,734¥ 16,271
25,197
16,266¥ 57,734¥

Liabilities(1) Trade notes and accounts payable ..................................................................................................
(2) Short-term loans (*1) ......................................................................................................................
(3) Long-term debt (*1) .......................................................................................................................
Total liabilities . ........................................................................................................................................
Derivatives (*2) ........................................................................................................................................

¥ 23,653
12,85876,406112,917¥151¥ 23,653
12,85876,866113,377¥151¥

Difference

¥

¥

—
—
—
—

—
—
460
460
—

(*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 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) Trade notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(3) Short-term investment securities and 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.

39

Liabilities(1) Trade 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 transactions
Please refer to “13. Derivative Transactions” to the consolidated financial statements.
2. Financial instruments of which it is extremely difficult to determine the fair value as of March 31, 2012 and 2011
Thousands of
U.S. dollars

Millions of yen

2012
Unlisted stocks ......................................................................................................................................

¥

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

¥

8,340

$ 99,122

—

12

8,340

$ 99,134

1

Bonds ....................................................................................................................................................
¥

2012

2011

8,128
8,129

¥

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) Short-term investment securities and investments in securities.”
3. Redemption schedule for receivables and marketable securities with maturities after March 31, 2012 and 2011 are as follows:
For the year ended March 31, 2012
Millions of yen

Cash deposit . ..............................................................................
Trade notes and accounts receivable . .........................................
Short-term investment securities and investments in securities
		 Other securities with maturity
			 (1) Bonds (Municipal bonds) . ...............................................
			 (2) Bonds (Corporate bonds) ................................................
Total ............................................................................................

Due in one year or less¥¥

13,77329,686—47
43,506

Due after one year
through five years

		

		

—
—

—
—
—

Due after five years
through ten years

Due after ten years

¥

¥

¥

—
—

18
—
18

¥

—
—

—
46
46

For the year ended March 31, 2011
Millions of yen

Cash deposit . ..............................................................................
Trade notes and accounts receivable . ..........................................
		
Total ...................................................................................

Due in one year or less¥¥

16,19525,19741,392

Due after one year
through five years

		
		

—
—
—

Due after five years
through ten years

		
		

—
—
—

Due after ten years

		
		

—
—
—

For the year ended March 31, 2012
Thousands of U.S. dollars

Due in one year or less

Cash deposit . ..............................................................................
$
Trade notes and accounts receivable . ..........................................
Short-term investment securities and investments in securities
		 Other securities with maturity
			 (1) Bonds (Municipal bonds) . ............................................... 		
			 (2) Bonds (Corporate bonds) ................................................
Total ............................................................................................
$

Due after one year
through five years

Due after five years
through ten years

Due after ten years

167,964
362,024

		
		

—
—

$
		

—
—

$
		

—
—

—
573
530,561

		
		
		

—
—
—

220
—
220

		

		
$

—
561
561

4. The redemption schedule for long-term debt is disclosed in “6. Short-Term Loans, Long-Term Debt and Lease Obligations.”$

40

13. Derivative Transactions
The notional amounts and estimated fair value of the derivative instruments outstanding at March 31, 2012 and 2011 for which hedged
accounting have been applied are as follows.

1.Currency-related transactions
Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

Contract amounts

As of March 31, 2012
Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

¥

1,075
418
7,202

		

—
—
—

¥

(24)
(17)
(204)

Accounts receivable
Accounts receivable

¥

590
466

		

—
—

(*)
(*)

Accounts payable

¥

2,523

		

—

(*)

Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

Contract amounts

As of March 31, 2011
Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

¥

108
1,066
9,836

		

—
—
—

¥

(1)
(45)
(88)

Accounts receivable
Accounts receivable

¥

136
21

		

—
—

(*)
(*)

Accounts payable

¥

4,752

		

—

(*)

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

Contract amounts

As of March 31, 2012
Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable$

13,1105,098
87,829

		

—
—
—

$

(293)
(207)
(2,488)

Accounts receivable
Accounts receivable

$

7,195
5,683

		

—
—

		
		

(*)
(*)

Accounts payable$

30,768

		

—

		

(*)

Note: The fair values of forward currency contracts are based on exchange rates or prices provided by financial institutions.
(*) The fair values by means of the allocation method for foreign exchange contracts are included in the fair values of the hedged accounts
receivables and payables because the derivative transactions are treated as a part of hedged accounts receivables and payables.

41

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¥

33,984As of March 31, 2012
Maturing after one year¥

Fair value

27,780(*)

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¥

34,508

As of March 31, 2011
Maturing after one year¥

Fair value

29,104(*)

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$

414,439

As of March 31, 2012
Maturing after one year$

Fair value

338,780(*)(*) 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, 2012
Maturing after one year

Fair value

Raw material

		

—

		

—

		

—

Raw material¥

11,438

		

—

¥

(17)

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, 2011
Maturing after one year

Fair value

Raw material

		

—

		

—

		

—

Raw material

¥

6,244

		

—

¥

(17)

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, 2012
Maturing after one year

Fair value

Raw material

		

—

		

—

		

—

Raw material$

139,488

		

—

$

(207)

Note: The fair values of forward product 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, 2012 and 2011 does not exist and is not disclosed.

42

14. Employees’ 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, 2012 and 2011 are summarized as follows:
Millions of yen

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

Thousands of
U.S. dollars

2012
2011
2012
¥ (15,847) ¥ (15,165) $ (193,256)
8,096
9,390
98,732(7,751)(5,775)(94,524)
397
517
4,841
8,663
7,653
105,646
252
279
3,073
(3,255)(4,299)(39,695)¥ (1,694) ¥(1,625) $ (20,659)

The components of retirement benefit expenses for the years ended March 31, 2012 and 2011 were as follows:
Millions of yen

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

Thousands of
U.S. dollars

2012
2011
2012
713 ¥
719 $
8,695
339
348
4,134
(95)
(105)
(1,159)
28
135
341
1,001
885
12,208
132
22
1,610
2,118
2,004
25,8293
4
37¥2,121 ¥
2,008 $ 25,866¥

The assumptions used in accounting for the above plans were as follows:
Discount rates .......................................................................................................................................
Expected return on plan assets . ............................................................................................................

2012
mainly 1.8%
mainly 2.0%

2011
mainly 2.1%
mainly 2.0%

15. Income Taxes
The reconciliation between the effective tax rate reflected in the consolidated statements of operations and the statutory tax rate for the year
ended March 31, 2012 was omitted as the Company recorded loss before income taxes and minority interests.
The reconciliation for the year ended March 31, 2011 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 and losses of affiliates ....................................................................................................................
Amortization of goodwill and negative goodwill ........................................................................................................
Changes in valuation allowance .................................................................................................................................
Other .........................................................................................................................................................................
Effective tax rates .......................................................................................................................................................
Deferred tax assets and liabilities as of March 31, 2012 and 2011 consisted of the following:

40.7%
10.2
(14.9)
21.1
(9.7)
10.4
(31.4)
(0.9)
25.5%

43

Millions of yen

2012
Deferred tax assets:
Allowance for doubtful accounts ....................................................................................................
Accrued employees’ retirement benefits .........................................................................................
Impairment loss on property, plant and equipment . .......................................................................
Investments in securities .................................................................................................................
Accrued expenses ...........................................................................................................................
Net operating loss carryforwards ....................................................................................................
Land ...............................................................................................................................................
Other ..............................................................................................................................................
Total gross deferred tax assets ........................................................................................................
Valuation allowance ........................................................................................................................
Total deferred tax assets .................................................................................................................
Deferred tax liabilities:
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

2012

2011

244 ¥
311
5,660
6,224
2,772
3,166
3,837
3,729
78
117
15,887
16,280
2,198
2,772
871
950
31,54733,549(21,437)(22,443)
10,110
11,106(1,294)(1,536)(3,790)(4,327)(9,172)(10,545)(1,834)(1,969)(126)(131)(16,216)(18,508)¥ (6,106) ¥ (7,402)¥ (2,370) ¥ (2,767)

$

2,976
69,02433,805
46,793
951
193,744
26,805
10,622384,720(261,426)
123,294(15,780)(46,219)(111,854)(22,366)(1,537)(197,756)$ (74,462)$ (28,902)

Following the promulgation on December 2, 2011 of the “Act for Partial Revision of the Income Tax Act, etc. for the Purpose of Creating Taxation
System Responding to Changes in Economic and Social Structures” (Act No.114 of 2011) and the “Act on Special Measures for Securing Financial
Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No.117 of 2011), the corporate
tax rate is to be changed and the special reconstruction corporation tax is to be imposed for the fiscal year beginning on or after April 1, 2012.
Due to these changes, the effective statutory tax rate used to measure the Company’s deferred tax assets and liabilities was changed from
40.7% to 38.0% for temporary differences expected to be realized or settled in the fiscal year beginning on or after April 1, 2012, and to 35.6%
for temporary differences expected to be realized or settled in the fiscal year beginning on or after April 1, 2015. As a result, net deferred tax
liabilities (after deducting deferred tax assets) decreased by ¥1,058 million ($12,902 thousand) and deferred income taxes on surplus on therevaluation of land decreased by ¥354 million ($4,317 thousand), surplus on the revaluation of land increased by ¥365 million ($4,451 thousand)and deferred income taxes increased by ¥1,047 million ($12,768 thousand).

16. Contingent Liabilities
Contingent liabilities as of March 31, 2012 and 2011 consisted of the following:
Millions of yen

Notes receivable discounted and endorsed . ..........................................................................................
Loans guaranteed . ................................................................................................................................

2012¥ 1,8122,870

2011¥ 1,885
2,351

Thousands of
U.S. dollars

2012$ 22,098
35,00017. Write-Down of Inventories
The amounts of write-down of inventories, included in cost of sales, for the year ended March 31, 2012 amounted to ¥51 million ($622
thousand). For the year ended March 31, 2011, the Company reversed write-down in the amount of ¥13 million and credited it to cost of sales.

44

18. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 2012 and 2011 consisted of the following:

Gain on foreign exchange .....................................................................................................................
Compensation income ..........................................................................................................................
Gain on change in equity ......................................................................................................................
Gain on business transfer ......................................................................................................................
Payments for idle mines . .......................................................................................................................
Write-down of investments in securities ................................................................................................
Loss on sales of investments in securities . .............................................................................................
Loss on adjustment for changes of accounting standard for asset retirement obligations ......................
Other, net . ............................................................................................................................................

Millions of yen

Thousands of
U.S. dollars

2012
2011
160 ¥
—
632
—
79
—
—
135
(581)
(567)
(3,267)(181)(1,027)
(7)
—
(109)
(275)
(903)
¥ (4,279) ¥ (1,632)

2012
1,951
7,707
963
—
(7,085)(39,841)(12,524)—(3,354)$ (52,183)¥$

19. Segment Information
The reportable segments are constituent units of the Furukawa Group for which separate financial information is available. The Board of Directors
periodically examines these segments for the purpose of deciding the allocations of management resources and evaluating operating performance.
The Company mainly manufactures and sells machinery, smelts on consignment and sells copper and manufactures and sells electronic materials
and chemicals.
Under the holdings company structure, each main Group company plans domestic and overseas comprehensive strategies about their products,
and the Company manages and supervises them.
The Furukawa Group therefore categorizes segments classified by products based on main Group companies. The nine reportable segments are
as follows: Industrial Machinery, Construction and Mining Machinery (Rock Drills), UNIC Machinery, Metals, Electronic Materials, Chemicals, Paints,
Real Estate and Fuels.
Main products and services belonging to each segment are as follows:(a) Industrial Machinery		

Manufacture and sale environment machinery, pumps, plants, stone crushers, steel bridges and casting(b) Construction and Mining Machinery (Rock Drills)
		

Manufacture and sale rock drills such as breakers, crushers, crawler drills and tunnel drill jumbos(c) UNIC Machinery		

Manufacture and sale truck-mounted cranes (UNIC cranes) and vehicle carriers (UNIC carriers)(d) Metals
		After buying ore, sale electrolytic copper, electrolytic gold, electrolytic silver and sulfuric acid which is smelted on consignment by joint
smelting company(e) Electronic Materials
		Manufacture and sale high-purity metallic arsenic, gallium phosphorus polycrystals, aluminum nitride ceramics, optical components andcores and coils(f) Chemicals
		

Manufacture and sale cuprous oxide, polyferric sulfate, sulfuric acid, titanium oxide and functional materials(g) Paints
		

Manufacture and sale paints, acrylic rubber and adhesives

45(h) Real Estate		Lease real estate(i) Fuels
		

Purchase and sale perineum such as heavy oil, light oil and gasoline

The accounting method used for reportable segments is the same as the method stated in “2. Summary of Significant Accounting Policies.”
Operating income (loss) of reportable segments is based on operating income in the consolidated statements of operations. Intersegment sales
and transfers are recorded based on the actual market prices.
Segment information of the Furukawa Group for the years ended March 31, 2012 and 2011 was as follows:Year ended March 31, 2012

Millions of yen

Industrial
MachinerySales and operating income (loss)
Outside customers . .......................................................................
Intersegment .................................................................................
Total ..............................................................................................
Operating income (loss) . ...................................................................
OthersSegment assets .................................................................................
Depreciation . ....................................................................................
Investments in equity-method affiliates .............................................
Increase in tangible fixed assets and intangible fixed assets . .............

Construction
and Mining
Machinery(Rock Drills)

UNIC
Machinery

Chemicals

4,616 ¥
74,623(234) ¥

¥ 19,707 ¥ 26,056 ¥ 16,982 ¥ 26,667 ¥
392
684
470
311
—
—
4
3,781
170
158
204
225

7,443 ¥ 16,244
306
272
674
—
69
264

5,187
878
6,065
251

Millions of yen
PaintsReal Estate¥ 14,874 ¥
46
14,920¥(329) ¥

Fuels

OthersAdjustments

Consolidated

1,233 ¥
135
1,368
357 ¥

9,576 ¥
344
9,920(14) ¥

767 ¥— ¥ 157,566
1,357(5,216)—
2,124(5,216) 157,566(94) ¥(60) ¥ 2,155¥ 14,931 ¥ 24,462 ¥
298
219
177
—
217
1,428

2,027 ¥
9—20

3,697 ¥ 35,755 ¥ 193,971
83
(5)
3,039
374
—
5,010
7
266
3,028

Year ended March 31, 2011

Millions of yen

Industrial
MachinerySales and operating income (loss)
Outside customers . .......................................................................
Intersegment .................................................................................
Total ..............................................................................................
Operating income (loss) . ...................................................................
OthersSegment assets .................................................................................
Depreciation . ....................................................................................
Investments in equity-method affiliates .............................................
Increase in tangible fixed assets and intangible fixed assets . .............

Electronic
Materials¥ 12,949 ¥ 24,144 ¥ 16,106 ¥ 68,114 ¥
1,828
31
75
515
14,777
24,175
16,181
68,629
¥
708 ¥
334 ¥
928 ¥
308 ¥

Year ended March 31, 2012

Sales and operating income (loss)
Outside customers . .......................................................................
Intersegment .................................................................................
Total ..............................................................................................
Operating income (loss) . ...................................................................
OthersSegment assets .................................................................................
Depreciation . ....................................................................................
Investments in equity-method affiliates .............................................
Increase in tangible fixed assets and intangible fixed assets . .............

MetalsConstruction
and Mining
Machinery(Rock Drills)

UNIC
Machinery

MetalsElectronic
Materials

Chemicals¥ 10,655 ¥ 23,880 ¥ 12,490 ¥ 79,980 ¥
1,609
24
71
587
12,26423,905
12,56280,566¥(30) ¥(350) ¥
(187) ¥ 1,495 ¥

7,147 ¥
49
7,196
1,280 ¥

5,076
808
5,885
269

¥ 16,854 ¥ 25,675 ¥ 14,712 ¥ 32,934 ¥
400
683
463
308
—
—
8
3,771
175
237
160
149

7,660 ¥ 16,112
302
265
671
—
87
50

46

Year ended March 31, 2011

Millions of yen
PaintsSales and operating income (loss)
Outside customers . .......................................................................
Intersegment .................................................................................
Total ..............................................................................................
Operating income (loss) . ...................................................................
OthersSegment assets .................................................................................
Depreciation . ....................................................................................
Investments in equity-method affiliates .............................................
Increase in tangible fixed assets and intangible fixed assets . .............

Real Estate¥ 15,041 ¥23
15,063¥(93) ¥

Adjustments

Consolidated

9,005 ¥
306
9,311(57) ¥

786 ¥
1,307
2,092
(92) ¥¥ 14,684 ¥ 23,296 ¥
279
237
196
—
340
308

1,842 ¥
10—
34,329 ¥ 38,136 ¥ 196,234
94
2
3,043
468
—
5,114
26
398
1,933

— ¥ 165,638(4,926)—(4,926) 165,638(49) ¥ 2,821

Thousands of U.S. dollars

Industrial
Machinery

Construction
and Mining
Machinery(Rock Drills)

UNIC
Machinery

MetalsElectronic
Materials

Chemicals$ 157,914 $ 294,439 $ 196,415 $ 830,659 $ 56,293 $ 63,256
22,293
378
914
6,280
85
10,707
180,207294,817
197,329
836,939
56,37873,963$ 8,634 $ 4,073 $ 11,317 $ 3,756 $ (2,854) $ 3,061$ 240,329 $ 317,756 $ 207,098 $ 325,207 $ 90,768 $ 198,098
4,780
8,341
5,732
3,793
3,732
3,317
—
—
49
46,110
8,220
—
2,073
1,927
2,488
2,744
841
3,220

Year ended March 31, 2012

Thousands of U.S. dollars
PaintsSales and operating income (loss)
Outside customers . .......................................................................
Intersegment .................................................................................
Total ..............................................................................................
Operating income (loss) . ...................................................................
OthersSegment assets .................................................................................
Depreciation . ....................................................................................
Investments in equity-method affiliates .............................................
Increase in tangible fixed assets and intangible fixed assets . .............

Others1,578 ¥
142
1,720
635 ¥

Year ended March 31, 2012

Sales and operating income (loss)
Outside customers . .......................................................................
Intersegment .................................................................................
Total ..............................................................................................
Operating income (loss) . ...................................................................
OthersSegment assets .................................................................................
Depreciation . ....................................................................................
Investments in equity-method affiliates .............................................
Increase in tangible fixed assets and intangible fixed assets . .............

Fuels

Real Estate

Fuels

OthersAdjustments

Consolidated$ 181,390 $ 15,037 $ 116,781 $ 9,353 $— $ 1,921,537
561
1,646
4,195
16,549(63,608)—
181,951
16,683
120,976
25,902(63,608) 1,921,537$ (4,012) $ 4,354 $(171) $ (1,146) $(732) $ 26,280$ 182,085 $ 298,317 $ 24,720 $ 45,085 $ 436,037 $ 2,365,500
3,634
2,671
110
1,012
(61)
37,061
2,159
—
—
4,560
—
61,0982,646
17,415244
85
3,244
36,927(Related information)
Years ended March 31, 2012 and 2011
1. Information regarding products and services
Year ended March 31, 2012

Millions of yen
CopperSales for outside customers ...................................................................................................................

¥

Year ended March 31, 2011¥

Others62,719 ¥ 102,919 ¥Year ended March 31, 2012

Total

165,638

Thousands of U.S. dollars
CopperSales for outside customers ...................................................................................................................

Total

157,566

Millions of yen
CopperSales for outside customers ...................................................................................................................

Others55,397 ¥ 102,169 ¥OthersTotal$ 675,573 $ 1,245,964 $ 1,921,537

47

2. Geographical information(1) Net sales
Year ended March 31, 2012
Millions of yen
Japan

¥

Asia

123,461¥

Others23,078¥

Total

11,027¥

157,566¥

165,638

Year ended March 31, 2011
Millions of yen
Japan

¥

Asia

134,773¥

Others

19,166¥

Total

11,699Year ended March 31, 2012
Thousands of U.S. dollars
Japan

Asia

$ 1,505,622$

Others281,439$

Total

134,476$ 1,921,537(2) Property, plant and equipment
The geographic segment information for the years ended March 31, 2012 and 2011 has not been presented, because the total assets in Japanexceed 90% of consolidated totals.
3. Information regarding main customers
Year ended March 31, 2012
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥17,209

MetalsYear ended March 31, 2011
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥26,626

MetalsYear ended March 31, 2012
Thousands of U.S. dollars
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

$209,866

Metals

4. Loss on impairment of fixed assets in reporting segments
Millions of yen

Year ended March 31, 2012

Industrial
Machinery

Loss on impairmentof fixed assets
		Construction
and Mining
Machinery(Rock Drills)

— 		

UNIC
Machinery

— 		

— 		

MetalsElectronic
Materials— 		

Chemicals— 		

Paints— 		Real Estate

Fuels

OthersAdjustments Consolidated

—

¥

13

¥

1 		

—

¥

87

¥ 101

—

¥

22

¥

3 		

—

¥

75

¥ 100

$ 159

$

12 		

—

$ 1,061$ 1,232

Year ended March 31, 2011
Millions of yen

Loss on impairmentof fixed assets
		

— 		

— 		

— 		

— 		

— 		

— 		

Year ended March 31, 2012
Thousands of U.S. dollars

Loss on impairmentof fixed assets
		

— 		

— 		

— 		

— 		

— 		

— 		

—

48

5. Amortization of goodwill and unamortized goodwill in reporting segments
Millions of yen

Year ended March 31, 2012

Industrial
Machinery

Balance as of March
31, 2012
		

Construction
and Mining
Machinery(Rock Drills)

— 		

—

UNIC
Machinery¥

Metals19 		

Electronic
Materials— 		

Chemicals— 		—

PaintsReal Estate¥ 418 		FuelsOthersAdjustments Consolidated

— 		

— 		

— 		

—

¥ 437

— 		

— 		

— 		

—

¥ 599

— 		

— 		

— 		

—

$ 5,329

Year ended March 31, 2011
Millions of yen

Balance as of March
31, 2011
		

— 		

—

¥

28 		

— 		

— 		

—

¥ 571 		Year ended March 31, 2012
Thousands of U.S. dollars

Balance as of March
31, 2012
		

— 		

—

$ 232 		

— 		

— 		

—

$ 5,097 		

6. Gain on negative goodwill in reporting segments
Not applicable.

20. Investment and Rental Properties
The Company and certain consolidated subsidiaries own office buildings for lease mainly in Tokyo and other areas. For the year ended March 31,
2012, rental income was ¥565 million ($6,890 thousand), loss on disposal and sales of rental properties was ¥96 million ($1,171 thousand) and
impairment loss on rental properties was ¥101 million ($1,232 thousand).
For the year ended March 31, 2011, rental income was ¥678 million, gain on sales of rental properties was ¥2 million, loss on disposal andsales of rental properties was ¥36 million and impairment loss on rental properties was ¥100 million.
The carrying value, net changes in the carrying value and the fair value of those properties as of and for the years ended March 31, 2012 and2011 are as follows:Year ended March 31, 2012

Carrying value
As of March
31, 2011

Fair value
As of March
31, 2012

Net change

As of March
31, 2012

Millions of yen¥

29,180

¥

(562)

¥

28,618¥28,530Year ended March 31, 2011

Carrying value
As of March
31, 2010

Fair value
As of March
31, 2011

Net change

As of March
31, 2011

Millions of yen¥

27,566

¥

1,614

¥

29,180¥30,358Year ended March 31, 2012

Carrying value$

355,854

Fair value

As of March
Net change
31, 2012
Thousands of U.S. dollars

As of March
31, 2011$(6,854)$

349,000

As of March
31, 2012$

347,927

49

Notes:
1. The carrying value represents the acquisition cost less accumulated depreciation and cumulative impairment loss.
2. Net change in carrying value for the year ended March 31, 2012 mainly consists of increases related to repair of buildings in the amount of¥158 million ($1,927 thousand) and decreases mainly due to sales of real estate in the amount of ¥240 million ($2,927 thousand), amortizationin the amount of ¥204 million ($2,488 thousand) and decrease in rental area in the amount of ¥168 million ($2,049 thousand). Net change incarrying value for the year ended March 31, 2011 mainly consists of increases related to changes to rental properties involved in the removalof office tenants due to real estate development in the amount of ¥2,381 million and decreases mainly due to amortization in the amount of¥232 million, decrease of rental area in the amount of ¥222 million and retirement in the amount of ¥209 million.
3. The fair value is mainly estimated in accordance with appraisal standards for valuing real estate.

50

51

52

Corporate Data
(As of March 31, 2012)

Directors and Auditors

Company Name: Furukawa Co., Ltd.

(As of June 28, 2012)

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

President and Representative Director

Nobuyoshi Soma

100-8370, Japan

Senior Managing Director

Manabu Zama

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

Managing Director

Yoshihito Emoto

Date of Foundation: August 1875

Managing Director

Susumu Nakamura

Date of Establishment: April 1918

Managing Director

Toshio Matsumoto

Director

Naohisa Miyakawa

Stock Exchange Listing: Tokyo

Director

Akinori Ota

Securities Code Number: 5715

Outside Director

Junnosuke Furukawa

Employees: Consolidated 2,752

Statutory Auditor

Kouichiro Umezaki

Statutory Auditor

Masaya Kouzaki

Outside Company Auditor

Tamiki Ishihara

Outside Company Auditor

Nobuyuki Tomotsune

Outside Company Auditor

Ryoji Hatsuse

Number of Shares Authorized: 800,000,000 shares
Number of Shares Outstanding: 404,455,680 shares

Stock Transfer Agent:

Sumitomo Mitsui Trust Bank, Limited
4-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo, Japan

Principal Shareholders
Number of Percentage ofTotal Shares
Shares(%)(Thousands)

Executive Officers(As of June 28, 2012)

Asahi Mutual Life Insurance Co.

27,923

6.90

Seiwa Sogo Tatemono Co., Ltd.

15,034

3.71

Japan Trustee Services Bank, Ltd. (trust account)

12,570

3.10

Senior Managing Executive Officer

Manabu Zama

Managing Executive Officer

Yoshihito Emoto

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

12,515

3.09

Managing Executive Officer

Susumu Nakamura

Sompo Japan Insurance Inc.

12,429

3.07

Managing Executive Officer

Toshio Matsumoto

Chuo Real Estate Co., Ltd.

9,712

2.40

Senior Executive Officer

Naohisa Miyakawa

Fujitsu Limited

9,617

2.37

Senior Executive Officer

Akinori Ota

Furukawa Electric Co., Ltd.

8,777

2.17

Senior Executive Officer

Toshikazu Nakagawa

Fuji Electric 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

Senior Executive Officer

Kenji Ichimura

Senior Executive Officer

Osamu Watanabe

Senior Executive Officer

Saburou Saruhashi

Executive Officer

Yasufumi Watanabe

Executive Officer

Minoru Iwata

Executive Officer

Shigeo Matsudo

Executive Officer

Kiyohito Mitsumura

Composition of Shareholders
Financial Instruments Firms(Securities Companies)
Foreign Institutions

6.23%
Other JapaneseCompanies

3.42%

Financial Institutions

26.84%

22.70%

Individuals
and Others

40.81%
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, andplans 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.

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

Corporate History

1875

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

1877

Began the operation of the Ashio Copper
Mine in Tochigi.

1900

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

1914

Manufactured the first rock drill in Japan.

1918

Spun off mining business from Furukawa
General Partnership and established
Furukawa Mining Co., Ltd.

1944

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

1950

1951

1962

1990

Bought an American breaker sales andmanufacturing company.

1997

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

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

The first domestic rock drill wasdeveloped at Ashio.

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

1998

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

1999

Moved the Materials Research Laboratory
to Tsukuba City in Ibaraki.

2003

Established Taian Furukawa MachineryCo., Ltd.—a joint company for the
manufacturing and distribution of UNIC
cranes in China.

2005

Spun off the Machinery business,
Metals business, and Electronic Materials
and Chemicals business and shifted toa group management structure as the
Furukawa Company Group to enhance
management.

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

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

2006

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

2007

Formed a capital and business alliancefor the GaN semiconductor epi-wafer
business with POWDEC K.K.

2008

Setup the Nitride Semiconductors
Department as a GaN and related
nitride semiconductor-related researchorganization.

2009

Built the laboratory of the Nitride
Semiconductors Department in Oyama.

At the Takasaki Works, rock
drills were mass produced, andwe established the position of aleading rock drill manufacturer.

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

Completed research and development ofhigh-purity (99.999%) metallic arsenic
and commenced with the sale of it.

Bought UNIC Corporation (manufacturerof truck-mounted cranes).

1989

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

“UNIC” has become a synonym fortruck-mounted cranes in Japan.

This is an affiliate company forthe construction and mining
machinery business established in
Utrecht, Holland, which distributes
rock drills and other products.

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

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

Made Tohpe Corporation, which
manufactures and distributes paints andchemicals, into a consolidated subsidiary.

Arsenic is one of the by-products
generated during the smelting
stage of copper concentrates.

1987

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

2011

Established a sales company of rock drill
products, Furukawa Rock Drill India Pvt. Ltd.
in India.

2012

Established a sales company of rock
drill products, Furukawa Rock Drill Latin
America S.A. in Panama

In 2009, the laboratory of
the Nitride Semiconductors
Department was built in Oyama.

53

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