Annual Report 2016
Year ended March 31, 2016

About the Furukawa Company GroupThe key to the success of the Furukawa Company Group, which recently celebrated the 140th anniversary of its
founding, began with the development of the Ashio Copper Mine by founder Ichibee Furukawa. At the time,
the Company introduced world-leading mine development technologies that have become the foundation for its
technological expertise today. Since then, we have developed and advanced ourtechnologies—amassed through mine development—according to the needs of thetimes.
Today, the Machinery business and the Materials business, which are our corebusiness domains, continue to provide products that the world needs in multiple
markets.
Last year, the Group announced its Vision for 2025, called “FURUKAWA Power& Passion 150.” Under this vision, we will strive constantly to “Become a corporategroup that leverages its reputation for category leadership and uniqueness to deliver growth” as we approach our 150th anniversary in fiscal 2025.
Ashio Copper Mine (around 1920)

Furukawa’s Technological Genealogy

Mining technologies

Exploitation technologies

Drilling
technologies

Hydrauliccontrol
technologies

Transport / Mineral processing
technologies

Slurrytransportation
technologies

Grinding
technologies

Smelting technologies

Exhaust gas
treatment
technologies

ROCK DRILL MACHINERYUNIC MACHINERY

INDUSTRIAL MACHINERY

Hydraulic breakers,
hydraulic crushers,
hydraulic crawler drills,
tunnel drill jumbos

UNIC cranes,
mini crawler cranes,
UNIC carriers,
UNICPAL

Pumps,
environmental machinery,crushers,
bridge structures,
castings

Machinery BusinessFlash smelting
technologies

Sulfuric acidproduction
technologies

Electric
technologies

METALSCHEMICALSELECTRONIC
MATERIALS

Electrolytic copper, Cuprous oxide,
gold,
sulfuric acid,silver,aluminum sulfate,sulfuric acidtitanium oxide,
ferric polysulfate
solution,
cupric oxide

Materials Business

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

Profile

Financial Highlights For the years ended March 31
Millions of yen

2016/3

2015/3

2014/3

2013/3

2012/3¥ 161,799¥ 172,544¥ 163,026¥ 165,540¥ 157,566

Operating income

7,989

8,925

6,886

3,363

2,155

Profit (Loss) before income taxes

6,631
5,056

6,160
9,793

7,092
3,976

5,433
2,976

(2,663)(1,659)For the year:
Net sales

Profit (Loss) attributable to owners of parent
Capital expenditures

2,869

2,557

11,430

2,926

3,588

Depreciation and amortization

3,191

3,223

2,828

3,015

3,329

Research and development expenses

2,680

2,227

2,539

2,559

2,622

Total assets¥ 195,650¥ 207,317¥ 199,408¥ 186,076¥ 193,971

Net assets

68,26270,581

56,31351,50747,668At year-end:

Per share amounts:

Yen¥

Basic earnings (loss)

12.51

¥

24.23

¥

9.84

¥

7.37

¥

(4.11)

5.00

5.00

3.00

2.00

0.00

164.48170.22135.34123.99113.88Return on equity (ROE) (%)

7.5

15.9

7.6

6.2

(3.6)

Equity ratio (%)

34.0

33.2

27.4

26.9

23.7

Crushers

15%

Cash dividends
Net assets

Machinery Business: Priority Fields and Domestic Market Share65%

CONCRETE

Hydraulic crawler drills

40%
Hydraulic breakers

Crushes and cuts bedrock
into small pieces

Material for concreteand the like

To mine for gravel and limestone, which are raw materials for concrete, we supply hydraulic crawlers that are used to drill holes in rock, in which
gunpowder is inserted for blasting. We also have hydraulic breakers, which are used to break large rocks into small pieces, and crushers andscreens, used at plants to achieve the desired rock sizes. These products contribute to demand for concrete in various areas.

TUNNELPROJECTS

Tunnel drill jumbos

80%

CIVIL
ENGINEERINGANDCONSTRUCTION
WORKSITES Hydrauliccrushers

40%
Mini crawler cranes

UNIC cranes

10%

50%

Shield pumps
We develop and manufacture tunnel drill jumbos, which are used to create
openings for loading gunpowder needed for rock blasting in mountain tunnel
projects. We also develop and make shield pumps, which use water to pump
excavated earth and sand in underground tunnel projects. Here, our drilling andwastewater treatment technologies, amassed through mine development,
come to the fore.

A single UNIC crane can transport and unload building materials and the like. In
addition to UNIC cranes, we offer mini crawler cranes, which can operate independently in places inaccessible by truck, and hydraulic crushers that play a majorrole at demolition sites. Our construction machines feature exceptional functionality, operability, and safety and are also environmentally friendly.

1

To Our Stakeholders

Business Conditions and Performance
In fiscal 2016, ended March 31, 2016, the Japanese economy
continued recovering moderately, buoyed by improved corporate
earnings on the back of fiscal and monetary stimulus measuresby the government and the Bank of Japan. However, signs of
weakness appeared in the second half of the year, and economic
instability in China and other emerging Asian nations, as well as
resource-rich countries, led to the risk of downward pressure on
the domestic economy—a situation that required ongoing caution.
Under these circumstances, the Furukawa Company Group
actively and efficiency advanced its operations by accurately
grasping market needs.
As a result, consolidated net sales amounted to ¥161,799
million, down 6.2% from the previous year. This was due mainly
to revenue declines in the Metals, Industrial Machinery, and UNIC
Machinery segments. Despite increased income generated by theRock Drill Machinery and Real Estate segments, operating income
decreased 10.5%, to ¥7,989 million, due mainly to lower income in
the UNIC Machinery, Industrial Machinery, and Electronic Materials
segments.
Among other income, we posted a ¥309 million gain on salesof noncurrent assets and ¥391 million in compensation income for
reputational damage related to a nuclear accident. Among otherexpenses, there was a ¥207 million impairment loss. Profit before
income taxes rose 7.6%, to ¥6,631 million. In the previous fiscal
year, there was a decline in income taxes associated with the forPresident and Representative Director

Naohisa Miyakawa

giveness of debt of a consolidated subsidiary. Due to the absenceof such a decline in the year under review, profit attributable toowners of parent fell 48.4%, to ¥5,056 million.
Future Initiatives
The Furukawa Company Group celebrated its 140th anniversary
on August 2015. We used the occasion in November 2015 to formulate our vision for the following 10 years ending 2025, when
we celebrate 150 years of operations. Under the vision, entitled“FURUKAWA Power & Passion 150,” we will strive to “Becomea corporate group that leverages its reputation for category leadership and uniqueness to deliver growth.” To achieve this, wewill target five policies: (1) Increase the value of the Furukawa
brand through “marketing-based management,” (2) Continuously
expand the Machinery business, (3) Strengthen and expand our2

To Our Stakeholders

human resource foundation, (4) Actively promote investments

Net Sales

to increase corporate value, and (5) Establish a robust operation-(Billions of yen)

al foundation. Under these policies, we will target consolidated
annual operating income regularly in excess of ¥15,000 million by
our 150th anniversary in fiscal 2025.

157.6 165.5 163.0

172.5

161.8

In the Machinery business, in particular, demand in Japan willremain firm in light of various projects, notably new Shinkansen
lines, the Linear Chuo Shinkansen Line, the Building National
Resilience Plan, and the 2020 Summer Olympics and Paralympics'12/3 '13/3 '14/3 '15/3 '16/3

in Tokyo.
At the same time, we will reinforce our income foundationin growing overseas markets centered on infrastructural andMachinery Business
Others Business

Materials Businessresource development. Deploying experience and technologies
amassed over the years, we realize our Vision for 2025 with“power” and “passion.” In the process, we will build a robust
corporate foundation that is resilient to changing business conditions while increasing corporate value.
Operating Income(Billions of yen)

Dividend Policy

8.9

Furukawa places great importance on improving returns of profits

6.9

to all shareholders while retaining earnings required to financecapital expenditures and research and development expenses
necessary to bolster earnings. Our basic policy is to appropriate

2.2

8.0

3.4

profits after comprehensive consideration of future businessdevelopment and various other factors.

'12/3 '13/3 '14/3 '15/3 '16/3

In fiscal 2016, the Company declared a year-end cash dividendof ¥5.00 per share. In fiscal 2017, we plan to pay a year-end
dividend of ¥5.00 per share, with no interim dividend scheduled.
We look forward to the understanding and support of all
stakeholders as we tackle the challenges of the future.
Profit (Loss) Attributable to
Owners of Parent(Billions of yen)August 2016

9.8

3.0

Naohisa Miyakawa
President and Representative Director

4.0

5.1

(1.7)
'12/3 '13/3 '14/3 '15/3 '16/3

3

VisionFurukawa Challenges for 2025
Having celebrated 140 years since its foundation on August 8, 2015, the Furukawa Company Group established a
new Management Philosophy and Corporate Conduct Charter. To realize our Management Philosophy, in November 2015 we formulated our Vision for 2025, entitled “FURUKAWA Power & Passion 150,” to guide the Group toward its 150th anniversary in 2025. With “power” and “passion,” we will strive to achieve the targets of the visionin order to meet the expectations of all stakeholders and secure their renewed trust.

“FURUKAWA Power & Passion 150” provides
the ideal image of the Group in 2025.
Our aim is to “Become a corporate groupthat leverages its reputation for category
leadership and uniqueness to deliver growth.”

FURUKAWA Power & Passion 150
Our Vision for 2025, “FURUKAWA Power & Passion 150,” provides the ideal image of the Group in 2025. The aim of the vision
is to “Become a corporate group that leverages its reputation
for category leadership and uniqueness to deliver growth.”“Category leadership and uniqueness” means holding dominant
or top market positions in our limited domains of engagement,
including businesses, products and services. It also means possessing original technologies and know-how that others cannot
imitate. Going forward, we will deepen our focus on niche markets in which we can demonstrate our strengths as we deploy
4

our original technologies to address customer needs and deliver
sustained growth.
To realize our vision, we have articulated five policies. Amongthese, the most important is our “marketing-based management”
approach. Committed to providing products and services that
customers truly desire, we use the term “marketing-based management” to express ongoing awareness among all employeesof the need to offer value to customers, and incorporation ofthis into the core of management. We believe this will enable us
to devise product development policies from two perspectives:

VisionVision for 2025: “FURUKAWA Power & Passion 150”
“Become a corporate group that leverages its reputation for category leadership		 and uniqueness to deliver growth.”—Targeting consolidated annual operating income regularly in excess of¥15 billion as we approach our 150th anniversary in fiscal 2025.—

Policies for Achieving Vision for 2025

		(1) Increase the value of the Furukawa brand through “marketing-based management*”					 ① Develop products and technologies that match market needs					 ② Reinforce technological sales capabilities (proposals and solutions) reflecting customer needs					 ③ Achieve category-leading positions by concentrating on niche products that have competitive advantages and						 using differentiation strategy					 ④ Cultivate and create new markets and product categories; build a new business model							 * Marketing-based management: Incorporating marketing into the core of management to provide products and services recognized as					valuable in changing markets, thus deepening ties with customers, achieving sustained growth, and increasing corporate value.

(2) Continuously expand the Machinery business					 ① Reinforce profit foundation in growing overseas markets centered on infrastructural and resource development					 ② Strengthen and enhance stock business					 ③ Maximize business opportunities by demonstrating comprehensive Group strengths and strengthening 								 engineering capabilities 		(3) Strengthen and expand our human resource foundation					 ① Build vibrant human resources and corporate culture for new Furukawa					 ② Secure, utilize, and develop diverse human resources in Japan and overseas				 ③ Strengthen priority on sales and marketing personnel(4) Actively promote investments to increase corporate value					 ① Make proactive capital investments necessary for growth				 ② Expand business through strategic M&As and alliances(5) Establish a robust corporate foundation					 ① Increase corporate value by improving profitability and capital efficiency, targeting ROE of more than 10%					 ② Establish strong financial base					 ③ Achieve balanced appropriations between investments for growth and return to shareholders“market-in” determined by market needs and “product-out”
determined by our own strengths and technologies. To achievesustained growth of the Machinery business, in addition to overseas expansion we need to change our current focus from flowbusiness to stock business, including after-sales services and life
cycle support. Our aim is to build a strategic business model thatcombines both flow and stock businesses in order to create astable profit structure that is less affected against changing
external conditions. We are currently formulating a new mediumterm business plan that will start in fiscal 2017 in our quest to
realize our Vision for 2025.

In order to build a company that is a “cut above” in all areas—
including management, product development, manufacturing,sales, and administration—we must break our reliance on our existing corporate culture and attributes while retaining all the goodelements. With “power” and “passion,” we will strive to realize
the ideal image of the new Furukawa Company Group.

5Strength

Deploying Our Core Competencies
Maintaining our strengths in category leadership and uniquenessIn our Machinery business, we have many products that boast high markets shares. (cf.P1)
In particular, the main products of our Rock Drill Machinery segment have overwhelming
market shares, and our hydraulic drifter, the core of our rock drill machines, combines
our comprehensive strengths amassed as a maker of such machinery. It all began about
100 years ago, when we succeeded in developing the first domestically made hand-heldrock drill, which was used in the Ashio Copper Mine and became the cornerstone of our
subsequent advancement. Since then, we made various modifications according to onsite
requirements and, after repeated trial-and-error testing, we refined the hydraulic drifterthat now forms a pillar of our operations. Thanks to this success, we have built a solid position as a world-leading manufacturer of rock drill machines.

Developed Japan’s first rock drill
machine (for the Ashio Copper
Mine)

Hydraulic Drifter: At the Heart of Our Technologies
Our tunnel drill jumbos and crawler drills are fitted with hydraulic drifters, which determine the performance of themachines. Our hydraulic drifters represent the heart of ourtechnological expertise and incorporate experience and knowhow amassed over many years. They have four key functions—percussion, rotation, thrusting, and flushing—that operate in amutually balanced manner to enable optimal rock drilling.
The first basic function is “percussion.” Shock waves createdby piston strikes are transmitted to the bit at
the tip, which crushes rock at the rate ofseveral dozen strokes per second.
Then, the “rotation” function
shifts the contact surfaceof the bit little bylittle, resulting inuniform andHydraulic drifter
configuration

efficient blows to the rock. The role of the “thrusting” function
is to ensure that the bit keeps firm contact with the rock, whilethe “flushing” function uses water or air to remove crushedrock fragments easily and prevent them from remaining at
the bottom of hole (expose the virgin/fresh rock surface). The
intensity of the rotation and thrusting functions determines theefficiency of the percussion function. The balanced operationof four functions enables swift drilling, with impact rates of
2,000–5,000 times per minute, rotation speed of 80–200 times
per minute, thrust force of 10–20kN, and sufficient flushingcapability, depending on rock quality and the like.

Basic function of hydraulic drifter
Rotation Thrusting Percussion

Flushing

PistonRod

Bit

Hydraulic drifterComprehensive Manufacturing Strength Delivers High Performance and Durability
Hydraulic drifters must be highly durable and able to operate in
the harshest environments. Extra durability is essential to perform the percussion and rotation functions precisely and athigh speeds under conditions of high pressures and temperatures. Our hydraulic drifters contain up to 100 components,
each with different functions that include rotation, sliding,

Manufacturing Process
Design6

Original technologies based onlong experience and know-how
are incorporated into the design

Heat Treatment

Steel is heated and cooled(quenched) to control its
hardness and strength

Machining

Assembling

Cutting of the hydraulic drifter’score component is done with
1/1,000mm precision

Skilled workers accurately andswiftly assemble componentsthat consist of up to 100 parts

Strength

and impacting—and each must be resistant to pressure andtemperature.
We identify the requirements of each component and selectmaterials that meet those requirements, then identify the optimal
combination of factors, including strength, toughness, shape, anddimensional tolerance. We have equipment and control techniquesthat permit manufacturing to be done with reliable quality. We incorporate our unique technological expertise, which draws on many
years of experience and know-how, into the design process, andpractically all of our key components are subject to integrated production—covering heat treatment, machining, and assembly—at our

Takasaki Works. By performing heat treatment under difficult quality
control conditions and machining accuracy of 1/1,000mm, we areable to manufacture high-performance hydraulic drifters.
Across the board, from design to materials selection andmanufacturing, we deploy our experience as a user of rock drill
machinery in the initial development of the Ashio Copper Mine, as
well as technologies amassed over many years as a maker of rock
drill machines. The exceptional performance and durability of ourhydraulic drifters are the culmination of our experience and technologies. Herein lies our core competence, which underscores our
reputation for category leadership and uniqueness.

Tunnel Drill Jumbo Business: Epitome of Marketing-Based Management
Our hydraulic drifters represent our core competence and form theheart of our rock drill machines. Among our rock drill machine lineup,
our representative tunnel drill jumbos boast an overwhelming shareof the domestic market. Indeed, we practice marketing-based management most profoundly in our tunnel drill jumbos business because
it is crucial to realizing our vision.
As a rock drill machine maker, we have been involved innumerous excavation projects in Japan, including for railways, roads,
dams, and tunnels. In the 20th century, main projects included the
Seikan Tunnel, Kanetsu Tunnel, and Kurobe River No. 4 Hydropower Plant, and today we remain involved in various Shinkansenline projects, as well as tunnel and other restoration projects in the
Tohoku District.
Tunnel construction requires exceptional levels of safety, execution,and speed, and it is necessary to select construction methods that
address geological changes and match specific cross-sectional dimensions. In order to resolve various construction issues and maximize
benefits for construction companies—the users of our machines—
we have worked with them to develop original tunnel drill jumbos
for each worksite tailored to the construction method adopted. Our
history of working hand-in-hand with construction companies fromthe initial planning stages of a tunnel project and making proposals
based on their requirements forms the basis of our prosperity today.
At present, we are working on various fronts in tunnel projects for
the Linear Chuo Shinkansen Line, scheduled to start running in
2027. These projects are quite challenging for a number of reasons,
including the need for rapid construction, large cross-section drilling over extended tunnel excavation lengths, and concerns about
the stability of the cutting face when encountering fracture zones.
In response to these challenges, we drew on our experience andforesight to develop a tunnel drill jumbo for Linear Chuo Shinkansen Line excavation projects. In addition to a long boom dimensionthat can tackle large cross-sections of rock, we fit our machineswith hydraulic drifters at the top of their class in terms of striking
power, which contributes to high-speed excavation work. On the
management side, the tunnel drill jumbo is equipped with anavigation system that supports the machine operator by ensuring
better work precision and efficiency, as well as our newly developed “Drill Navi” function that automatically records drilling data

for sharing online. In these ways, we are improving work efficiency
and addressing the need for IT-driven construction. Our machines
are also compatible with the micro-bench construction method, adrilling method suited to Japan’s unstable geological structure, thus
contributing to safety at a high level. We have already started giving
demonstrations of our new-model tunnel drill jumbo to construction
companies, and we are using valuable feedback to make further refinements.
To provide more practical support for Linear Chuo Shinkansen Lineprojects, in April 2016 we opened an office in the Shimoina districtof Nagano Prefecture, close to the front lines of construction. In addition to equipment sales, the office will sell components, provide repairs and services, and maintain the machines, thus creating a service
infrastructure capable of swift, high-quality responses.
Our tunnel drill jumbos business, which emphasizes close relationships with construction companies, fully embodies our marketingbased management approach. We will broaden this approach toencompass other products and businesses in our quest to build individual business models together with our customers that help realize
our Vision for 2025.

Newly developed tunnel
drill jumbo
7Review ofOperations% of Net Sales

44.6%

Machinery

Industrial Machinery

Sludge pump

Crusher

Belt conveyor

BridgeNet Sales

Operating Income(Billions of yen)
18.5
12.9 12.9

16.7(Billions of yen)

14.9
1.9
0.7

'12/3 '13/3 '14/3 '15/3 '16/3

8

0.8

1.7
1.0

'12/3 '13/3 '14/3 '15/3 '16/3

In fiscal 2016, the Industrial Machinery segment posted a year-onyear decline in sales, due to lower revenue from general industrial
machinery and bridge projects for the public sector. This was
despite healthy sales of pumps. Also, a large-scale earth-moving
project for relocating people to higher ground in Rikuzentakata
City, Iwate Prefecture, ended in September 2015. By contrast,
we received orders for a large-scale belt conveyor project. As aresult, the segment posted sales of ¥14,927 million, down 10.7%
from the previous fiscal year. Operating income declined 39.3%,
to ¥1,038 million.
Going forward, we will step up sales by taking full advantage
of our earth-moving technologies using long-distance belt conveyors—which were highly acclaimed in the Rikuzentakata City
relocation project—as well as crushing technologies using largescale crushing equipment. We will also focus on demand fromvarious construction projects, including for disaster prevention, as
well as infrastructure renewal projects to replace aging bridges andthe like. At the same time, we will establish businesses that will
become future income foundations as we target increased domestic market share and entry into Asian markets. The aforementioned
large-scale belt conveyor project, for which we received orders, is
expected to be the first in Japan to transport earth along expressways currently in service.

Machinery/Review of Operations
油圧クローラドリル

油圧クローラドリル

Rock Drill Machinery

GlobalMarketShare

30％

油圧クローラドJapanese
MarketShare

Global65％
In the Rock Drill Machinery segment, we were unable to generate
MarketMarketShare
Share
increased sales of hydraulic breakers and hydraulic crushers due
Japanese30％
30％
to a sharp slowdown in demand for construction machinery, as
MarketShare
well as a decline in demolition projects. However, sales related to65％tunnel drill jumbos were healthy as we approached the peak inJapaneseJapanese
MarketMarkettunnel construction for reconstruction roads and service roads in
Share
Share
the Tohoku District. Overseas, we enjoyed steady sales of hydraulicHydraulic crawler drill
40％
80％
breakers in North America and Europe and of hydraulic crawler
drills in the Middle East, Africa, and Southeast Asia. As a result, theJapaneseJapaneseJapanese
MarketMarketMarketRock Drill Machinery segment posted a 2.7% decrease in sales, to
Share
Share
Share
¥30,077 million. Thanks to improved profitability of our overseas
40％
80％
40％
business, however, operating income jumped 81.0%, to ¥2,217
million.
油圧ブレーカトンネルドリルジャンボ
In Japan and abroad, we will work to improve the functions of
our new-model hydraulic breakers, upgrade our lineup to reinforce
sales, increase market share, and strengthen and upgrade ourTunnel drill jumbo
Hydraulic breakerstock business. In Japan, we will reinforce our product and service 油圧ブレーカ
トンネルドリルジャンボ
油圧ブレーカcapabilities in a comprehensive effort to attract orders for tunnel
Net Sales
Operating Income (Loss)drill jumbos to be used in tunnel projects for new Shinkansen lines(Billions of yen)(Billions of yen)and the Linear Chuo Shinkansen Line. Overseas, we will target
2.2
sales from infrastructure and resource development projects. We
30.9 30.1
26.8
will also promote alliances and collaborations with overseas subsid1.2
24.1 23.3
iaries and so on to secure steady revenue.
0.3

Global0.3(0.1)

トラック搭載型クレーンキャリア'12/3 '13/3'14/3 '15/3 '16/3（ユニッククレーン）（ユニックキャリア）'12/3 '13/3 '14/3 '15/3 '16/3

UNIC Machinery
Japanese
MarketShare

Japanese

MarketIn fiscal 2016, we reported increased shipments of mini crawler
Sharecranes and shipbuilding cranes. However, shipments of mainstay
50％
UNIC cranes were weak amid soft overall crane demand, despite
healthy domestic registrations of trucks on which such cranes
are mounted. As a result, sales in the UNIC Machinery segment
declined 4.0% year on year, to ¥27,229 million, and operating
income fell 27.3%, to ¥2,627 million.
Going forward, we will work to increase sales of UNIC cranes
by highlighting the appeal of UNIC-only products, such as joystickradio-controlled models. We will also step up sales of mini crawler
cranes, shipbuilding cranes, and forestry cranes. On the productionside, we will emphasize the manufacturing of high-quality products
at optimal cost to meet demand in various world regions. Here, wewill promote our three-pronged global production system, with
operations in Japan, Thailand, and China. In particular, we will step
up cost-reduction efforts at our plant in Thailand, with upgradedproduction facilities, which will serve as our production base foritems destined for overseas. Meanwhile, we will make proactive
capital investments in the Sakura Plant, which will fulfill a “motherfactory” role making products for the domestic market.

50％

UNIC crane

トラック搭載型クレーン（ユニッククレーン）

キャリア（ユニックキャリア）

Japanese
MarketShare

Japanese
MarketShare

50％

Mini crawler crane

Net Sales

Operating Income(Billions of yen)

16.1

25.7

40％

50％

UNIC carrier

20.7

Japanese
MarketShare

28.4(Billions of yen)

27.2

3.1
2.2

3.6
2.6

0.9
'12/3 '13/3 '14/3 '15/3 '16/3'12/3 '13/3 '14/3 '15/3 '16/3

9

Japanese
Market
Share

65％

トン

% of Net Sales

53.0%

Materials

MetalsElectrolytic copper

Hibi Kyodo Smelting Co., Ltd.

Gibraltar Copper Mine in Canada

Onahama Smelting and Refining Co., Ltd.

Net Sales

Operating Income(Billions of yen)

68.1

77.9 78.7

81.5(Billions of yen)

74.2

1.5

0.3
'12/3 '13/3 '14/3 '15/3 '16/3

1.5

1.2

0.3

After starting the year at US$6,019.50/ton in April 2015, theprice of electrolytic copper fell to the US$5,000 range following
resolution of the Greek debt crisis and weak stock prices aroundthe world. As the Chinese economic slowdown became apparent
after the beginning of calendar 2016, the price declined to the
US$4,300 range in January, the lowest since May 2009, before
finishing the fiscal year at US$4,885.50/ton on March 31, 2016.
For the year, we posted a significant decline in sales of electrolytic
copper amid softness in demand from the automotive, housing,and home appliance sectors and weak demand for electric cable,
as well as falling prices in overseas markets.
In fiscal 2016, the Company’s sales of electrolytic copper in volume terms declined 2,347 tons, to 94,327 tons. Overall sales in the
Metals segment decreased 9.0%, to ¥74,193 million, and operating income fell 20.3%, to ¥1,155 million.
While purchasing conditions for copper concentrates remain highly
favorable, there are also some concerns, such as deteriorating earningsof copper refining companies stemming from the strong yen, as well as
increasing costs of environmental measures and rising electricity prices.
We must also closely monitor nationalistic tendencies with respect
to procuring raw materials.

'12/3 '13/3 '14/3 '15/3 '16/3● Copper Prices and Foreign Exchange Rates

2012/3

2013/3

2014/3

2015/3

2016/3

LME copper price (average; US$/ton)

8,485

7,855

7,104

6,554

5,215

JPY rate per US$ (average for fiscal year)¥79.07¥83.10¥100.24¥109.93¥120.13● Copper Production and Sales Volume*

2012/3

2013/3

2014/3

2015/3

2016/3Copper production volume (tons)

76,896

90,38787,76790,44786,466

Copper sales volume (tons)

82,597

96,78994,966

96,67594,327* Furukawa Metals & Resources Co., Ltd.

10

Materials/Review of Operations

Electronic Materials
In the year under review, sales of high-purity metallic arsenic, amainstay product in this segment, continued to struggle due toharmful rumors stemming from the Fukushima nuclear power
plant accident, while sales of scintillator crystal products were also
weak. Despite an increase in sales of coils, moreover, the profitability of such products fell dramatically due to surging personnel
costs at overseas processing subcontractors and foreign exchange
fluctuations. As a result, the Electronic Materials segment posted
a 4.6% decrease in sales, to ¥5,477 million, and an operating lossof ¥368 million, compared with operating income of ¥53 million in
the previous fiscal year.
Going forward, our aim is expand sales of coils, aluminum nitride, and optical components while maintaining solid profits fromour mainstay high-purity metallic arsenic and crystal businesses
despite their ongoing challenges. Although the profitability of
the coil business is deteriorating, the market for these products is
growing due to advancements in electric-powered automobiles.
We plan to grow our coil business into a major pillar supporting
the Electronic Materials segment. To this end, we will reassess our
production operations and target cost reductions and quality
improvements, in order to return the segment to profitability.
Net Sales

4.6

5.0

5.4

5.7

50％

Japanese
MarketShare

70％

High-purity metallic arsenic—high-purity
gallium arsenide semiconductormaterials used in mobile phones andother electronic devices, red laser
diodes, and LEDs

Core coils used in automobile
electronic control devices

Operating Income (Loss)(Billions of yen)

GlobalMarketShare(Billions of yen)

Owing to its excellent thermal
conductivity, thermal radiation, andelectrical insulation properties,
aluminum nitride is a basic material
used in semiconductor device
fabrication components andsubstrates.

5.5
0.1(0.2) (0.3)'12/3 '13/3 '14/3 '15/3 '16/3

(0.1)

(0.4)

'12/3 '13/3 '14/3 '15/3 '16/3

Chemicals
In fiscal 2016, we reported a year-on-year increase in shipments ofcuprous oxide amid healthy domestic demand for its use in marine
antifouling paint, a mainstay application. However, shipments oftitanium oxide were weak. As a result, sales in the Chemicals segment edged down 0.7%, to ¥5,974 million, and operating income
declined 26.5%, to ¥197 million.
Looking ahead, we will do our utmost to maintain equipment
and operational stability by making capital investments as plannedand securing appropriate human resources. We will also foster thisbusiness into a new earnings foundation by upgrading our lineupof copper-related products.
Net Sales

5.1

6.1

6.0

45％

Cuprous oxide is a red powdery
substance used to prevent biofoulingon the underside of marine vessels.

Operating Income(Billions of yen)

5.2

Japanese(Production)
Market Share

(Billions of yen)

6.0

0.3

'12/3 '13/3 '14/3 '15/3 '16/3

0.3

0.3

0.3

0.2

'12/3 '13/3 '14/3 '15/3 '16/3

Cupric oxide used for copper plating

Sulfuric acid11

Real Estate andOthers% of Net Sales

Real Estate

2.4%

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

OthersTransportation services, etc.

Real Estate and Others
In the Real Estate category, fiscal 2016 saw the full-scale operationof our rental business associated with the Muromachi Furukawa
Mitsui Building (commercial name: COREDO Muromachi 2), completed in February 2014. This boosted category sales, which grew
20.1% year on year, to ¥3,045 million. Operating income jumped
64.6%, to ¥1,277 million.
Total sales in the Real Estate and Others segment, which also includes the transport business, rose 19.5%, to ¥3,922 million, andoperating income surged 86.4%, to ¥1,204 million.

T O
■

P

I C

Net Sales(Billions of yen)

3.3
2.0

1.8

3.9

1.8

0.3

0.6

0.2

'12/3 '13/3 '14/3 '15/3 '16/3'12/3 '13/3 '14/3 '15/3 '16/3

S

Launch of UR–U174C (1.73t hanging mini crawler crane)

Mini crawler crane(working mode)

Mini crawler crane(traveling mode)

Opening of FRD Alps Office in Shimoina, Nagano Prefecture
On April 2016, we opened an office in the Shimoina district of Nagano
Prefecture. The office will control and coordinate sales and services related
to tunnel drill jumbos, concrete sprayers, hydraulic breakers, and othermachinery to be used at the front lines of tunnel construction for the
Linear Chuo Shinkansen Line. In addition to equipment sales, the office willsell components, provide repairs and services, and maintain the machines.
Even at the busiest stage of construction, we will provide a broad-based
service infrastructure capable of swift, high-quality responses.
FRD Alps Office opened■

Tunnel drill jumbo

Radiation detector using GAGG scintillator crystals adopted
for use in monitoring posts
A radiation detector using Furukawa’s gadolinium aluminum gallium garnet(GAGG) scintillator crystals was adopted for use in the monitoring posts
installed around the Fukushima area, which detect levels of radiation in theenvironment, decontaminated soil, etc. GAGG scintillator crystals have ahigh-sensitivity and are non-hygroscopic, which means they have little orno tendency to absorb moisture in the air. As well, the detector is able tomeasure radiation levels at temperatures as low as -20˚C. As the numberof inquiries regarding the use of GAGG scintillator crystals is increasing not
only for radiation detectors but also for medical and space applications,
we will continue to work aggressively to open up new avenues for their use.

12

1.2

(0.1)

On October 8, 2015, the Group began selling a new addition to its
lineup—the UR–U174C, a 1.73t hanging mini crawler crane. The newmachine can be operated with the lowest grounding pressure in its class.
Compared with existing models, it features improved road surface tracking
characteristics and bad-road running performance. Aligning our products
to match customer needs, we will step up sales to the constructionindustry—mainly targeting the stone, landscaping, and construction
equipment sectors—as well as the rental industry.

■

Operating Income (Loss)(Billions of yen)

Gadolinium aluminum gallium garnet (GAGG)
scintillator crystals
Monitoring post

Corporate Social Responsibility

Management Philosophy
The Furukawa Company Group has a wealth of mine development and other technologies that underpin its
social foundation. By advancing these technologies and always embracing a spirit of challenge, we will remain
indispensable to society.

Corporate Conduct CharterTo demonstrate our Management Philosophy, we will practice our Corporate Conduct Charter of Innovation,
Creativity, and Harmony. These embody the three key words—Luck, Stolidity, and Perseverance*—that best
represent the spirit of our founder.

Innovation:

We will work constantly at self-innovation by embracing a future-oriented mindset.

Creativity:

We will seek to create reliable, appealing products that meet market needs.

Harmony:

We will contribute to the development of a society that is in harmony with the environment.
* This means that while humans may place highest importance on “luck,” getting important things done requires “stolidity” and “perseverance.”

The Furukawa Company Group’s Management Philosophy is embodied in its CSR activities.
Since commencing operations in the copper mining business in
1875, we have sought relentlessly to transform ourselves througheverlasting awareness reforms oriented toward the future. At thesame time, we have earned people’s trust by constantly addressing
the needs of the times and acquiring powerful product manufacturing capabilities. In the process, we have developed multiple businesses and made a significant contribution to Japanese industry.
Through compliance, corporate governance, risk management,
and other activities, we strive to raise operational transparency andfurther strengthen our manufacturing capabilities for the future.
We will also help create a sustainable, environmentally friendly
society while deepening communication with our various stakeholders.
The Furukawa Company Group has formulated Action Guidelines, the Corporate Conduct Charter, and the Directors’ andEmployees’ Code of Behavior*. Every effort is made to ensurethat all members of the Group are fully aware of and practice theprinciples contained in each. We have also formed a CSR Promotion Meeting to powerfully promote CSR initiatives. To clarify the
purpose of our activities, we adopt a proactive CSR approach thatinvolves setting core priorities for initiatives to be undertaken.
* Corporate Conduct Charter: Formulated on December 20, 2005, the Corporate Conduct Charter clearly outlines the social responsibilities of the Furukawa
Company Group as a corporate citizen. In addition to respect for humanrights and legal compliance, these responsibilities encompass corporate activities that contribute to society in all fields.
Directors’ and Employees’ Code of Behavior: Formulated on December 20,
2005, the Directors’ and Employees’ Code of Behavior sets out behavioral
standards for Group executives and employees aimed at fulfilling basic policies
outlined in the Management Philosophy, Action Guidelines, and Corporate
Conduct Charter.

Relationships with Stakeholders
In the course of strengthening CSR activities and demonstrating
our Management Philosophy, we have identified our stakeholders
as follows: Customers, business partners, shareholders and otherinvestors, employees, local communities, and the global environment. Our quest is to clarify our responsibilities to each stakeholder
group and maintain close communications, in order to build relationships of trust and thus maximize corporate value.

■ CSR Overview
Globalenvironment

Customers

Realizing asustainable society
Complianceresponsibility

Localcommunities

Business
partners

Economic responsibility
12

3
Shareholders
andother investors

Employees

1. Management Philosophy, Action Guidelines
2. Corporate Conduct Charter
3. Directors’ and Employees’ Code of Behavior■ Responsibility to Stakeholders
Stakeholder

Responsibility

Customers

We shall provide customers with high-quality products
and services in order to increase satisfaction levels.

Business
partners

We shall build mutually beneficial relationships conduciveto harmonious coexistence through stable procurement
activities based on the principles of fairness and economic
rationality.

Shareholders We shall work to maximize corporate value throughcommunications focusing on timely, appropriate informaand otherinvestors
tion disclosure and IR activities.
Employees

We shall create safe, healthy, motivating workplaces inwhich our diversified human resources can excel while
adopting appropriate evaluation standards and fair
incentives.

We shall build and maintain favorable relationships ofLocal
communities trust by pursuing social contribution activities aimed atharmonious coexistence with local communities.
We shall protect biodiversity by developing environmenGlobal
environment tally friendly technologies and products while minimizing
the environmental impact of our activities through savingsof energy and resources and reduction of waste.
13

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 improvement of the environment, and contribute to the development of a sustainable society.
Biodiversity is disappearing at an alarming rate on a global scale due to the destruction of ecosystems and extinction of
species stemming from the socioeconomic activities of humans. Aware of the importance of protecting biodiversity, theGroup formulated a set of “Biodiversity Action Guidelines.”
We recognize the key role we play in giving back to the community as a good corporate citizen.
■ Environmental Management
Environmental Management System
Important items related to environmental protection are put forward and discussed by the Central Committee for Environmental
Management, in which the senior managing directors and managing directors participate.
Furthermore, the Environment and Safety Promotion Committee
meets every year, bringing together the people who directly guideand manage environmental and safety initiatives in each Group
company. At these meetings, the Committee aims to fulfill four basic purposes: (1) Convey and ensure the enforcement of decisions
made by the Environmental Management Committee; (2) Help improve the competency of environmental protection supervisors at
each Group company; (3) Prevent accidents and disasters throughconcerted efforts to share 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 regular annual “Environment and Safety Audits.” The aim of such audits is to emphasize“preventative measures” rather than “correctional measures.”Fiscal 2016 marked the 13th year of these annual audits. In addition to regular site audits, we sought to formulate future policies
and responses regarding matters previously pointed out for which
response measures were not properly taken.
In the event of a major disaster or ongoing disasters, we closely
monitor the local situation and provide guidance on safety- andenvironment-related matters. When an accident happens, weundertake proper discussion with the onsite manager to determine
the cause, then formulate measures to prevent a recurrence. In
these and other ways, we work continuously to ensure safety inthe workplace.
Biodiversity Action Guidelines
The Furukawa Company Group places importance on biodiversity
and in September 2012 formulated its Biodiversity Action Guidelines, a set of specific guidelines aimed at contributing to sustainable social development as outlined in its Basic Environmental
Management Principle.
At present, we areworking to foster anunderstanding of theimportance of biodiversity among all employees and to grasp how
biodiversity is impacted
by the Group’s ongoing
At the Ashio Honzan Refinery
business activities.
■ Environmental Protection Activities
The Furukawa Company Group’s energy-saving activities center onachieving medium-term targets for energy and resource consumption set every five years. We are currently pursuing activities basedon our third medium-term reduction targets (fiscal 2014–2018) asshown to the right.
14

Third Medium-Term Reduction Targets (Base year: Fiscal 2013)
Category

Fiscal 2018 target

CO2 emissions*

3%

Water

2%

Waste discharge

5%* Forms of electricity used: Gasoline, kerosene, diesel oil, heavy oil, LPG, city gas, and electricity■ Highest-Level Environmental Rating Received from DBJ
for Second Consecutive YearThe Development Bank of Japan Inc. (DBJ) assigns DBJ Environmental Ratings to companies receiving financing, and the Furukawa
Company Group obtained DBJ’s highest-level environmental rating.
DBJ developed a screening (rating) system that evaluates companies on the level of their environmental management and applies
financing conditions based on such evaluations. The bank was thefirst in the world to incorporate environmental ratings into a financing menu. The Furukawa Company Group obtained this ratingin recognition of its “especially advanced efforts in consideration of the environment.”
This represents DBJ’s high assessment of ourvarious diligent initiatives based on environmental impact analyses of each manufacturing process, including use of recycled raw
materials in the electronic materials businessand use of waste heat in the chemicals business. It was the second consecutive year for
the Group to receive the top rating.
■ Social Contribution Activities
The Furukawa Company Group seeks to live in harmony with local
communities through stewardship and maintenance of forests
owned by Furukawa and involvement in afforestation programs.
We also participate in factory neighborhood cleanup activities andpreservation of Nikko-Suginamiki (“Cedar Avenue of Nikko”), as
well as accept internships and host factory visits. Other initiatives
include fund-raising activities, arranging blood-donor drives, sponsorship of community events, helping preserve biodiversity, holding
original environmental activities, and loaning our land for free tolocal environmental associations.
● Seventh Ashio Cherry Tree-Planting Drive
As part of an independent forestation initiative, in March 2009
the Furukawa Company Group formed the Ashio Cherry Blossom
Planting Group with the aim of planting 1,000 cherry blossom
seedlings on land owned by Furukawa in Ashio-machi, Tochigi
Prefecture. The tree-planting activity has been held annually sincethen, except in 2011 when theevent was cancelled due to theGreat East Japan Earthquake.
In March 2016, many Group
employees and their families
took part in the Seventh Ashio
Cherry Tree-Planting Drive.

Corporate GovernanceThe basic corporate governance policies of the Furukawa Company Group are to raise management transparency, continue corporate structural innovations to build an efficient management system, generate stable income to increase corporate value, and contribute to the interests of shareholders and other stakeholders.
Under these basic policies, each company in the Group will pursue flexible management based on clear asset management and profit/loss responsibilities while maintaining the Group as a united entity. Our aim is to maximize the corporate
value of the entire Group by offering products and services that satisfy customers.
■ System of Corporate Governance
The Board of Directors oversees the execution of the Furukawa Company Group’s operations and in principle meets once every month, withadditional meetings held as required. It has six full‐time members andtwo outside directors.
To clearly separate management oversight functions from executive functions, accelerate decision-making, and clarify responsibilities,
Furukawa has adopted an executive officer system. Executive officers,
who are responsible for execution of business according to businessplans decided at Board of Directors’ meetings, give progress reports to
the Board of Directors and the Management Committee. At present,
we have 11 executive officers, two 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, whichmeets monthly to discuss the execution of business operations of
Furukawa and its core companies, and provides a consideration anddirection. Decisions made by the Management Council on important
issues with large-scale financial amounts or other important management issues must be discussed and approved by a resolution of theBoard of Directors. Furthermore, important matters that have been
determined by individual Group companies are discussed and reviewed
by the Board of Directors and other relevant bodies.
Furukawa uses a company auditor, with an Audit & Supervisory Board composed of two full-time members and two outside
members. Pursuant to an audit policy formulated by the Audit &Supervisory Board, members attend meetings of the Board of Directors, the Management Council, the Management Committee, andother important management meetings. In addition, they receive
business reports from directors, audit business sites and subsidiaries,
and monitor the performance of duties carried out by directors. The
audit function is further reinforced by the Internal Audit Department,
the organization in charge of internal auditing. The Internal Audit
Department is composed of six members who engage in auditingof Group-wide activity management and the execution of business
operations.
The Internal Audit Department, Audit & Supervisory Board, andAccounting Auditors exchange information from time to time and interact with each other in an effort to reinforce Group-wide governance.

■ Compliance and System of Risk Management
The Furukawa Company Group has formulated a Corporate
Conduct Charter and the Directors’ and Employees’ Code of
Behavior. Every effort is made to ensure that all executives andemployees of the Group are fully aware of and practice theprinciples contained in each. Recognizing effective risk management as an important aspect of its business activities,
Furukawa identifies and assesses potential risk and formulates
preventive and response measures, as well as remedial initiatives.
We also established the Compliance Committee and the Risk
Management Committee to comprehensively study ways to improve
the Group’s compliance and risk management, including formulation ofbasic policies and establishment of relevant frameworks.

● Corporate Governance and Internal Control Systems

As of June 29, 2016

Annual General Meeting of Shareholders
Appoints/recalls

Appoints/recalls
Reports

Accounting Auditors

Exchanges opinions/information

AuditsBoard of Directors

Reports

8 members(6 full-time, 2 outside)

Reports

Representative Director
Reports

Directs

Oversees

Management
Committee
Reports

Audit & Supervisory Board
4 members(2 full-time, 2 outside)

Reports

AuditsReports

Appoints/recalls

Reports

Management
CouncilAuditsDirects

Executive Officers(11 members)

AuditsInternal Control DivisionInternal Audit
Department

AuditsCSR Promotion Meeting

Business execution

Accounting Dept.,
othersAuditsAuditsReports

All Divisions and Group Companies
15

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

2016/3For the year:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Profit (Loss) before income taxes
Profit (Loss) attributable to owners of parent¥ 161,799
136,447
25,352
17,363
7,989
6,631
5,056

2015/3

2014/3

2013/3

2012/3

2011/3¥ 172,544 ¥ 163,026 ¥ 165,540 ¥ 157,566 ¥ 165,638
146,657
139,777
144,225
138,097
146,364
25,887
23,24921,315
19,46919,274
16,962
16,363
17,952
17,314
16,453
8,925
6,886
3,363
2,155
2,821
6,160
7,092
5,433
(2,663)
447
9,793
3,976
2,976
(1,659)563

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

7,652(2,855)(8,166)

10,241(10,892)
3,318

1,983
(3,129)(4,562)5,491(2,253)252

4,978(3,153)(3,782)

3,743(1,644)(5,703)

Capital expenditures
Depreciation and amortization
Research and development expenses
At year-end:
Total assets
Current assets
Current liabilities
Total equity
Net assets
Interest-bearing liabilities
Per share amounts:
Basic earnings (loss)
Cash dividends
Net assets
Profitability:
Cost of sales margin (%)
Gross margin (%)
SG&A expense margin (%)
Operating margin (%)
Return on sales (%)
Efficiency and soundness:
Return on equity (ROE) (%) (Note 1)
Return on assets (ROA) (%) (Note 2)
Debt-to-equity (D/E) ratio (Times) (Note 3)
Equity ratio (%) (Note 4)
Investment indicators:
Dividend payout ratio (%) (Note 5)
Dividends on equity (DOE) ratio (%) (Note 6)
Price book value ratio (PBR) (Times) (Note 7)
Stock price at fiscal year-end (Yen)

2,869
3,191
2,680

2,557
3,223
2,227

11,430
2,828
2,539

2,926
3,015
2,559

3,588
3,329
2,622

2,112
3,290
2,225

¥ 195,650
76,31559,75066,45968,262
76,241

Yen¥

Notes: 1. Return on equity (ROE) = Profit (Loss) attributable to owners of parent /		 Average total equity × 100
2. Return on assets (ROA) = Profit (Loss) attributable to owners of parent /		 Average total assets × 100
3.	Debt-to-equity (D/E) ratio = Interest-bearing liabilities (fiscal year-end) /Total equity [Shareholders’ equity] (fiscal year-end)
4.	Equity ratio = Total equity [Shareholders’ equity] (fiscal year-end) /Total assets (fiscal year-end) × 100

16¥ 207,317 ¥ 199,408 ¥ 186,076 ¥ 193,971 ¥ 196,234
80,56476,83879,50881,49780,19963,87073,97674,43974,80770,456
68,78354,695
50,111
46,02245,84970,581
56,31351,50747,66847,622
82,054
77,22080,63585,79689,26512.51
5.00
164.48¥24.23 ¥
9.84 ¥
7.37 ¥(4.11) ¥
1.39
5.00
3.00
2.00
0.00
0.00
170.22135.34123.99113.88113.45
%

84.3
15.7
10.7
4.9
3.1

85.0
15.0
9.8
5.2
5.7

85.7
14.3
10.0
4.2
2.4

87.1
12.9
10.8
2.0
1.8

87.6
12.4
11.0
1.4
(1.1)

88.4
11.6
9.9
1.7
0.3

7.5
2.5
1.1
34.0

15.9
4.8
1.2
33.2

7.6
2.1
1.4
27.4

6.2
1.6
1.6
26.9

(3.6)
(0.9)
1.9
23.7

1.2
0.3
1.9
23.4

40.0
2.9
1.0
166

20.6
3.2
1.2
212

30.5
2.2
1.4
186

27.2
1.6
0.9
109

—
—
0.7
80

—
—
0.8
86

5. Dividend payout ratio = Total cash dividends / Profit attributable to owners of parent × 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

Revenue and Expenses
In fiscal 2016, ended March 31, 2016, consolidated net sales totaled ¥161,799 million, down 6.2% compared with the previous fiscal year. The Industrial Machinery
segment posted a 10.7% decrease in sales, to ¥14,927 million, due to completion in
mid-September 2015 of soil transportation work in projects to facilitate relocation tohigher ground in earthquake-affected areas. The UNIC Machinery segment recorded
a 4.0% decrease in sales, ¥27,229 million, due to weak shipments of its mainstay
UNIC cranes amid soft demand. The Metals segment posted a 9.0% decline in sales,to ¥74,193 million, due mainly to falling market prices of electrolytic copper. By
contrast, sales in the Real Estate segment rose 20.1%, to ¥3,045 million, owing to thefull-scale contribution of rental business from the Muromachi Furukawa Mitsui Building, which was completed in February 2014.
Cost of sales declined 7.0%, to ¥136,447 million, and the cost of sales margin
edged down 0.7 percentage point, to 84.3%.
Selling, general and administrative (SG&A) expenses rose 2.4%, to ¥17,363 million.
As a result, operating income was down 10.5% from the previous fiscal year, to¥7,989 million. Main contributors to earnings were the Rock Drill Machinery segment,with an 81.0% surge in operating income, to ¥2,217 million, thanks to improved
overseas earnings, and the Real Estate segment with a 64.6% jump in operating income, to ¥1,277 million, thanks to full-scale contribution of rental business from the
Muromachi Furukawa Mitsui Building. However, the Electronic Materials segment
posted an operating loss of ¥368 million, from operating income of ¥53 million in theprevious year, due to the declining profitability of coil products; the UNIC Machinery
segment reported a 27.3% decrease in operating income, to ¥2,627 million; and theIndustrial Machinery segment posted a 39.3% fall in operating income, to ¥1,038
million. Accordingly, the operating margin was down 0.3 percentage point, to 4.9%.
Among other income, we made a ¥309 million gain on sales of noncurrent assets
and received ¥391 million in compensation income for harmful rumors stemmingfrom the Fukushima nuclear power plant accident. Among other expenses, there wasa ¥207 million impairment loss. As a result, profit before income taxes increased
7.6%, to ¥6,631 million. In the previous fiscal year, the forgiveness of debt of aconsolidated subsidiary led to a decline in tax expenses. Due to the absence of such a
decline in the year under review, total income taxes amounted to ¥1,467 million. As
a result, loss attributable to non-controlling interests was ¥108 million, and profit attributable to owners of parent declined 48.4%, to ¥5,056 million.
Return on equity (ROE) fell 8.4 percentage points, to 7.5%, and basic earnings per
share declined from ¥24.23 to ¥12.51.
Financial Position
At March 31, 2016, total assets amounted to ¥195,650 million, down 5.6% from ayear earlier. The decline stemmed mainly from a decrease in investment securities due
to falling prices of our shareholdings.
Total liabilities declined 6.8%, to ¥127,388 million. This was due mainly to decreases in long-term debt and accrued payables. The fiscal year-end balance of interestbearing liabilities (debt) was down 7.1%, to ¥76,241 million.
Net assets at fiscal year-end stood at ¥68,262 million, down 3.3% from a year earlier. This was mainly due to decrease in unrealized holding gain on securities, net ofincome taxes. Consequently, total equity amounted to ¥66,459 million, and the equity ratio rose 0.8 percentage point, to 34.0%. The debt-to-equity (D/E) ratio declined
from 1.2 to 1.1 times.

Net Sales(Billions of yen)
200

157.5

165.5 163.0

172.5

161.8

150

100

50

0

'12/3 '13/3 '14/3 '15/3 '16/3

Operating Income
Operating Margin(Billions of yen)
9

（％）
9

8.9
8.0
6.9

6

3

4.9

4.2

3.4

3

2.2

2.0

1.4
0

6

5.2

'12/3 '13/3 '14/3 '15/3 '16/30Profit (Loss) Attributable to
Owners of Parent
Return on Sales(Billions of yen)
10

（％）
6

9.8
5.7
3.1

5

3.0

4.0
1.8

5.1

2.4

0

3

0

(1.7)

(1.1)

-5

-3

'12/3 '13/3 '14/3 '15/3 '16/3

17

R&D and Capital Expenditures
The Furukawa Company Group is actively engaged in R&D on new materials and highvalue-added products that meet diversified market needs. In the year under review,
total research and development expenses amounted to ¥2,680 million, up 20.3%
from the previous year. Of this total, ¥77 million was allocated to the Industrial Machinery segment, ¥811 million to the Rock Drill Machinery segment, ¥350 million to
the UNIC Machinery segment, ¥1,268 million to the Electronic Materials segment, and¥172 million to the Chemicals segment.
Capital expenditures (including purchase of intangible fixed assets) amounted to¥2,869 million. Of this total, ¥360 million was allocated to the Industrial Machinery
segment, ¥424 million to the Rock Drill Machinery segment, ¥602 million to the UNIC
Machinery segment, ¥291 million to the Metals segment, ¥383 million to the Electronic Materials segment, and ¥329 million to the Chemicals segment, aimed primarily at improvements in production efficiency. In addition, ¥192 million was allocatedto the Real Estate segment, mainly for maintenance of buildings, and ¥285 million
went to the Others segment, mainly for vehicles to be used in the transportation sector. Funds for these expenditures are sourced from internal funds and borrowings.
Depreciation and amortization edged down 1.0%, to ¥3,191 million.
The Group’s capital expenditure budget is based on comprehensive considerationof various factors, including demand forecasts, production plans, and investment benefits. From the year ending March 31, 2017, the Group plans to invest a total of¥10,700 million, mainly for the purchase of new facilities and repair of existing ones.
We expect to procure these funds via borrowings and/or internal funds.

Basic Earnings (Loss) per Share
(Yen)
30

24.23

15

7.37

12.51

9.84

0

(4.11)-15'12/3 '13/3 '14/3 '15/3 '16/3

Total Assets
Return on Assets (ROA)(Billions of yen)
210

194.0

186.1

199.4

207.3

（％）

195.7

4.8

140

Cash Flows
In the year under review, net cash provided by operating activities amounted to¥7,652 million. Main factors included profit before income taxes and an increase inpayables—trade.
Net cash used in investing activities totaled ¥2,855 million. The primary factor waspurchases of property, plant and equipment.
Net cash used in financing activities was ¥8,166 million. This was mainly due torepayments of long-term debt.
As a result, cash and cash equivalents at the end of the fiscal year totaled ¥12,163
million, down ¥3,553 million, or 22.6%, from a year earlier.

6

3

2.5

2.1

1.6
70

0

(0.9)

0

'12/3 '13/3 '14/3 '15/3 '16/3-3

Net Assets
Return on Equity (ROE)（％）(Billions of yen)
90

20

70.6
60

47.7

51.5

15.9
68.3

56.3

6.2

10

7.6

7.5

0

30

(3.6)
0

18

'12/3 '13/3 '14/3 '15/3 '16/3-10

Financial Review

Capital Strategies
Furukawa places great importance on improving returns of profits to all shareholders.
Our basic policy is to appropriate profits after comprehensive consideration of various
factors, including retained earnings required to finance capital expenditures andresearch and development expenses necessary to bolster earnings, as well as
future business development and other factors. In principle, we appropriate retained
earnings to shareholders twice a year in the form of interim and year-end cash
dividends.
The decision-making body for the year-end dividend is the Annual General Meetingof Shareholders, while that for the interim dividend is the Board of Directors’ meeting.
The Articles of Incorporation states that “subject to resolution of the Board of Directors, interim dividends may be paid, with September 30 of each year as the date ofrecord.”For fiscal 2016, the Company has declared a year-end dividend of ¥5.00 per share.
Facing rapidly changing economic conditions in Japan and overseas, we will deploy
retained earnings to further enhance our business performance and improve ourfinancial position. Specifically, we will make careful and effective investments aimed
at strengthening the technological capabilities of our Machinery business while promoting further business development overseas. In the Metals segment, meanwhile,
we will invest in mines and promote development activities aimed at new productcommercialization.
Business Risks(1) Foreign Exchange Fluctuations
The Furukawa Company Group engages in production and sales activities in Japanand overseas, and therefore is at risk of foreign exchange fluctuations in connection
with its export business, the import of raw materials, primarily copper ore, and smelting and processing income. While the Group utilizes foreign exchange contracts andother methods to mitigate this risk, its operating results and financial position may be
adversely affected by movements in exchange rates.
(2) Fluctuations in Nonferrous Metals Markets
International prices of electrolytic copper, a mainstay product of the Group, and othernonferrous metals are decided by the London Metals Exchange (LME) in U.S. dollars toreflect international market conditions. Such prices fluctuate according to the international supply-demand balance, speculative transactions, international political andeconomic circumstances, and the like. The Group utilizes forward delivery transactions
and other hedging techniques to minimize the impact of fluctuating LME prices. However, movements in such prices may adversely affect the Group’s operating results andfinancial position.

Equity Ratio
(%)
36

34.0
33.2

24

26.9

27.4

23.7

12

0

'12/3 '13/3 '14/3 '15/3 '16/3

Debt-to-Equity (D/E) Ratio(Times)
3

2

1.9
1.6

1.4

'12/3 '13/3 '14/3 '15/3 '16/3

Dividends on Equity (DOE)
Ratio
(%)
4.5

3.2
2.9
1.6

1.5

0.0

(4) Investment Securities and Land
Historically, the Furukawa Company Group has maintained relatively high balances ofmarketable securities and land. As of March 31, 2016, the carrying value of investment

1.1

0

3.0

(3) Interest Rates
The Group’s fiscal year-end balance of interest-bearing liabilities (debt) was ¥76,241
million, equivalent to 39.0% of total assets. Any increase in debt-related costs arisingfrom changes in interest rates may adversely affect the Group’s operating results andfinancial position.

1.2

1

2.2

0.0
'12/3 '13/3 '14/3 '15/3 '16/3

19

Financial Review

securities as stated in the balance sheets was ¥21,620 million, while land stood at¥55,129 million. Accordingly, the Group’s operating results and financial position are
at risk of impairment losses, losses from devaluation, and losses on sales due to movements in stock and land prices.
(5) Retirement Benefit Obligation
The employees of the Furukawa Company Group are covered by defined benefit corporate pension plans, and non-contributory funded employee pension plans. Liability
for 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.
In calculating retirement benefit obligation, the Group adopts assumptions in connection with the discount rate and expected rate of return on plan assets, as well asother assumptions. Accordingly, the Group’s operating results and financial position
are at risk in the event the actual discount rate and expected rate of return on plan
assets differs materially from the assumptions, as well as in the event of a change in
the assumptions on which retirement benefit obligation are made.
(6) Earthquakes and Other Natural Disasters
Earthquakes and other natural disasters, as well as major accidents, could cause substantial damage to the Group’s production facilities and procurement sources, leading
to failure of its production equipment and distribution network. Such an event may
prevent the Group from supplying products in a reliable manner, which could affectits operating results and financial position.

Capital Expenditures
Depreciation andAmortization(Billions of yen)
15

11.4
10

5

3.6 3.3

0(8) Official Regulations
The Furukawa Company Group engages in business in Japan and overseas and thus issubject to legal regulations of various nations, including rules related to licensing,taxation, the environment, labor, antitrust, and security. The Group takes care tofaithfully comply with such official regulations, but the formulation of new regulations
or amendments to existing ones may lead to increased costs and affect the Group’sbusiness continuity, which could affect its operating results and financial position.
(9) Country Risk
The Furukawa Company Group conducts its production, procurement, and sales activities on a global basis in order to expand its sales network, strengthen cost-competitiveness, and reduce currency risk. Any number of local events could hamper theGroup’s smooth business operations. These include local political unrest, sharp economic slowdown, trade sanctions, cultural and legal differences, special labor-management relations, and terrorism. Such events could affect the Group’s operating results and financial position.
20

2.8 2.63.2 2.9 3.2'12/3 '13/3 '14/3 '15/3 '16/3

Cash Flows(Billions of yen)
12

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

10.2
7.7

6 5.0

(7) Environmental Protection
The Furukawa Company Group places the highest importance on environmental protection, environmental safety, and prevention of pollution at its various business sites,
both in Japan and overseas, respecting all laws and regulations. Furthermore, in Japan
the Group is vigilant in preventing water run-off from idle mines from contaminatingwater supplies and in preventing the buildup of slag or slurry. However, in the eventof changes in legislation and the like, there is a possibility that the Group’s performance results and its financial position could be influenced.

2.9 3.0

5.5
0.3

0

(3.2)
(3.8)

(2.3)

-6

3.3

2.0

(2.9)

(3.1)
(4.6)

(10.9)-12(8.2)'12/3 '13/3 '14/3 '15/3 '16/3

Cash Dividends per Share
(Yen)
6

5.00

5.00

4

3.00
2.00

2

0

0
'12/3 '13/3 '14/3 '15/3 '16/3

Fina ncial S e c tio n
Consolidated Balance Sheets

22

Consolidated Statements of Income

24

Consolidated Statements of Comprehensive Income

25

Consolidated Statements of Changes in Net Assets

26

Consolidated Statements of Cash Flows28

Notes to Consolidated Financial Statements

29

Independent Auditor’s Report

53

21

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
As of March 31, 2016 and 2015

Thousands of
U.S. dollars (Note 4)

Millions of yen

2016

ASSETS

2016

2015

Current Assets:
Cash and cash equivalents¥

12,163¥

15,716$

107,637

Receivables—trade

24,70224,758

218,602

Finished products

13,91014,441

123,097

Work in process

7,985

8,274

70,664

Raw materials and supplies

11,987

11,152106,080

Deferred tax assets (Note 14)

1,370

1,563

12,124

Other current assets

4,428

4,868

39,185

Allowance for doubtful accounts

(230)

(208)

(2,035)76,31580,564675,354

Land and timberlands

56,98057,155504,247

Buildings and structures

52,33852,033

463,168

Machinery and equipment

40,62939,488359,549

Lease assets (Note 10)

1,537

1,571

13,602

		Total current assets

Property, Plant and Equipment, at Cost (Notes 6 and 19):

242

368

2,142

151,726

150,615

1,342,708

Accumulated depreciation(66,412)(64,438)(587,717)

		 Property, plant and equipment, net

85,314

86,177754,991

Investment securities (Notes 5 and 6)

23,97130,727

212,133

Investments in affiliates

3,663

4,271

32,416Long-term loans receivable

3,739

3,106

33,088Deferred tax assets (Note 14)

1,616

1,459

14,301Other assets

1,617

1,728

14,310Construction in progress

Investments and Other Assets:

Allowance for doubtful accounts
		 Total investments and other assets
		Total assets

22

¥

(585)

(715)

(5,177)34,021

40,576

301,071

195,650¥

207,317$

1,731,416

Consolidated Balance Sheets

Thousands of
U.S. dollars (Note 4)

Millions of yen

LIABILITIES AND NET ASSETS
Current Liabilities:
Short-term debt (Note 6)
Current portion of long-term debt (Note 6)
Lease obligations (Note 6)
Payables—trade
Electronically recorded obligations
Income taxes payable
Deferred tax liabilities (Note 14)
Provision for environmental measures
Provision for deposition field restoration
Other current liabilities
		 Total current liabilities

2016

¥

Long-Term Liabilities:
Long-term debt (Note 6)
Lease obligations (Note 6)
Provision for environmental measures
Provision for deposition field restoration
Liability for retirement benefits (Notes 13)
Deferred tax liabilities (Note 14)
Deferred tax liabilities on surplus on the revaluation of land
(Note 14)
Asset retirement obligations
Other long-term liabilities
		 Total long-term liabilities
Net Assets (Note 7):
Shareholders’ equity:
Common stock without par value:
		Authorized—800,000,000 shares
		Issued—404,455,680 shares
Retained earnings
Treasury stock, at cost:		2016—398,486 shares		2015—373,806 shares
		 Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on securities, net of income taxes
Deferred gain (loss) on hedges
Surplus on the revaluation of land, net of income taxes
Translation adjustments
Retirement benefits liability adjustments
		 Total accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests (Note 3)
		 Total net assets
		 Total liabilities and net assets¥

12,65615,181259
14,012
7,877
361
1
9
—
9,394
59,750

2016

2015

¥

12,65815,751284
12,099
8,483
876
0
—
876
12,84363,870$112,000
134,345
2,292
124,000
69,7083,195
9
80—
83,132528,761

48,405
526
134
1,526
8,326
4,125

53,645
478
147
1,532
6,875
5,377

428,3634,655
1,186
13,50473,68136,504

1,831

2,017

16,204

214
2,551
67,638209
2,586
72,866

1,894
22,575598,566

28,20833,46728,20830,258249,628
296,169(63)—
61,612(58)—
58,408(558)—
545,239

4,514
157
3,583
543
(3,950)
4,847
—
1,803
68,262
195,650

9,427
(235)
3,655
1,263
(3,735)
10,37553
1,745
70,581
207,31739,948
1,389
31,708
4,805(34,956)
42,894—
15,956604,089
1,731,416¥$

The accompanying notes are an integral part of these statements.

23

Consolidated Statements of Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

Thousands of
U.S. dollars (Note 4)

Millions of yen

2016

Net Sales¥

Cost of Sales (Note 16)

2016

2015

161,799¥(136,447)

172,544$

1,431,850(1,207,496)(146,657)

		Gross profit

25,352

25,887224,354

Selling, General and Administrative Expenses (Note 9)(17,363)(16,962)(153,655)

7,989

8,925

70,699Interest and dividend income

642

536

5,681

Equity in earnings (losses) of affiliates

(142)

(921)

(1,257)

Interest expense

(807)

(913)

(7,142)Other income (expenses), net (Note 17)(1,051)(1,467)(9,300)		 Profit before income taxes

6,631

6,160

58,681

Current(1,162)(1,263)(10,283)

Deferred

(305)

5,018

(2,699)

		 Total income taxes(1,467)

3,755(12,982)

Profit

5,164

9,915

45,699Profit Attributable to Non-controlling Interests

(108)

(122)

(956)

		Operating income
Other Income (Expenses):

Income Taxes (Note 14):

Profit Attributable to Owners of Parent

¥

5,056

¥

9,793

$

Yen

44,743
U.S. dollars (Note 4)

Basic Earnings per Share:
Basic
DilutedNet Assets per Share
The accompanying notes are an integral part of these statements.

24

¥

12.51

¥

24.23

$

0.11

—

23.84

—

164.48170.22

1.46

Consolidated Statements of Comprehensive Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

Thousands of
U.S. dollars (Note 4)

Millions of yen

2016

Profit

¥

2016

2015

5,164

¥

9,915

$

45,699Other Comprehensive Income (Loss):(4,918)3,545(43,522)

Deferred gain (loss) on hedges

393

(251)

3,478

Surplus on the revaluation of land

103

206

912

Translation adjustments

(281)

2,090

(2,487)Retirement benefits liability adjustments
Share of other comprehensive income (loss) of associates­accounted for using equity method
		 Total other comprehensive (loss) income (Note 8)

(215)

96

(1,903)

(470)

178

(4,159)(5,388)

5,864(47,681)(224)

15,779(1,982)(298)

15,606(2,637)

74

173

655

Unrealized holding gain (loss) on securities, net of income taxes

Comprehensive Income (Loss)
Comprehensive Income (Loss) Attributable to:
Owners of parent
Non-controlling interests
The accompanying notes are an integral part of these statements.

25

Consolidated Statements of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

For the year ended March 31, 2016

Millions of yen
Number ofshares ofcommonstock(thousands)

Balance at beginning of year
Cumulative effects of changes
in accounting principle
Restated balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Net change during the year
Balance at end of year

Shareholders’ equity
Commonstock

404,456¥

28,208¥Retainedearnings

Treasury stock,at cost30,258

¥

(58)

Total
shareholders’equity¥58,408

—

—

—

—

—

404,456————

28,208————30,258(2,020)
5,056
—
173

(58)
—
—
(5)
—

58,408(2,020)
5,056
(5)
173

—

—

(0)

—

(0)

—
404,456¥—
28,208For the year ended March 31, 2016¥—
33,467

—
(63)

¥

—
61,612¥Millions of yen
Accumulated other comprehensive income
Unrealized
holding gain
Deferred gain
(loss) on(loss) on
securities, net
hedgesof income taxes

Balance at beginning of year
¥ 9,427 ¥Cumulative effects of changes—
in accounting principle
Restated balance at beginning of year
9,427
Cash dividends paid—
Profit attributable to owners of parent—
Purchase of treasury stock—Reversal of surplus on the revaluation of land—
Change in treasury shares of parent arising from—transactions with non-controlling shareholders
Net change during the year
(4,913)
Balance at end of year
¥ 4,514 ¥Surplus on therevaluation ofland, net ofincome taxes

Translation
adjustments

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
Non-controllingsharesincome(Note 13)interests

1,263 ¥ (3,735) ¥ 10,375 ¥(235) ¥

3,655 ¥

—

—

—

—

—

—

—

—

(235)
—
—
—
—

3,655
—
—
—
—

1,263
—
—
—
—

(3,735)————

10,375
—
—
—
—

53
—
—
—
—

1,745
—
—
—
—

70,581(2,020)
5,056
(5)
173

—

—

—

—

—

—

—

(0)

392
157 ¥

(72)
3,583 ¥

(53)58
— ¥ 1,803(5,523)¥68,262

(720)
(215)
(5,528)543 ¥ (3,950) ¥ 4,847 ¥For the year ended March 31, 201526

¥70,581Millions of yen
Number ofshares ofcommonstock(thousands)

Balance at beginning of year
Cumulative effects of changes
in accounting principle
Restated balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Net change during the year
Balance at end of year

53 ¥ 1,745

Total
net assets

404,456

Shareholders’ equity
Commonstock¥

28,208¥Retainedearnings

Treasury stock,at cost21,917

¥

(48)

Total
shareholders’equity¥50,077

—

—

(296)

—

(296)

404,456————

28,208————21,621(1,212)
9,793
—
56

(48)
—
—
(10)
—

49,781(1,212)
9,793
(10)
56

—

—

—

—

—

—
404,456¥—
28,208¥—30,258

¥

—
(58)

¥

—
58,408

Consolidated Statements of Changes in Net Assets

For the year ended March 31, 2015

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

Balance at beginning of year¥
Cumulative effects of changes
in accounting principle
Restated balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Net change during the year
Balance at end of year¥

Surplus on therevaluation ofland, net ofincome taxes

Translation
adjustments

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
Non-controllingsharesincome(Note 13)interests(953) ¥ (3,831) ¥4,617 ¥

53 ¥ 1,566

Total
net assets

5,882 ¥

15 ¥

3,504 ¥

—

—

—

—

—

—

—

—

(296)

5,882
—
—
—
—

15
—
—
—
—

3,504
—
—
—
—

(953)
—
—
—
—

(3,831)
—
—
—
—

4,617
—
—
—
—

53
—
—
—
—

1,566
—
—
—
—

56,017(1,212)
9,793
(10)
56

—

—

—

—

—

—

—

—

—

3,545
9,427 ¥

(250)
(235) ¥

151
3,655 ¥—
179
53 ¥ 1,745

5,937¥70,581

2,216
96
5,758
1,263 ¥ (3,735) ¥ 10,375 ¥For the year ended March 31, 2016

¥56,313

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

Balance at beginning of year
Cumulative effects of changes
in accounting principle
Restated balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Net change during the year
Balance at end of year

Commonstock

Retainedearnings$ 249,628$ 267,770—

Total
shareholders’equityTreasury stock,at cost$(513)$ 516,885———

249,628————

267,770(17,876)
44,743
—
1,532

(513)
—
—
(45)
—

516,885(17,876)
44,743
(45)
1,532

—

(0)

—

(0)

—
$ 249,628—$ 296,169

—
(558)

—
$ 545,239$

The accompanying notes are an integral part of these statements.

For the year ended March 31, 2016

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

Surplus on therevaluation ofland, net ofincome taxes

Translation
adjustments

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
Non-controllingsharesincome(Note 13)interests

Balance at beginning of year
$ 83,425 $ (2,080) $ 32,345 $ 11,177 $ (33,053) $ 91,814 $Cumulative effects of changes
—
—
—
—
—
—
in accounting principle
Restated balance at beginning of year
83,425(2,080)32,345
11,177(33,053)
91,814
Cash dividends paid
—
—
—
—
—
—
Profit attributable to owners of parent
—
—
—
—
—
—
Purchase of treasury stock
—
—
—
—
—
—
Reversal of surplus on the revaluation of land
—
—
—
—
—
—
Change in treasury shares of parent arising from
—
—
—
—
—
—
transactions with non-controlling shareholders
Net change during the year
(43,477)
3,469
(637)
(6,372)(1,903) (48,920)
Balance at end of year
$ 39,948 $ 1,389 $ 31,708 $ 4,805 $ (34,956) $ 42,894 $The accompanying notes are an integral part of these statements.

Total
net assets

469 $15,442 $624,611
—

—

—

469
—
—
—
—

15,442————624,611(17,876)
44,743
(45)
1,532

—

—

(0)

(469)
514 (48,876)— $15,956 $604,08927

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

Thousands of
U.S. dollars (Note 4)

Millions of yen

2016

Operating Activities:
Profit before income taxes
Foreign exchange (gains) losses
Depreciation and amortization
Equity in losses of affiliates
Impairment loss
Increase in net defined benefit liability
Gain on sales of property, plant and equipment
Compensation income
Gain on transfer of business
Increase (Decrease) in provision for deposition field restoration
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

¥

6,631
196
3,191
142
207
1,321
(230)
(391)
—
(883)
(642)
807

2016

2015

¥

6,160
(271)
3,223
921
71
1,251
(116)
(819)
(530)
2,409
(536)
913

$

58,681
1,735
28,238
1,257
1,832
11,690(2,035)(3,460)—(7,814)(5,681)
7,142

(576)
(396)
2,409
(3,423)
8,363
626
(816)
(2,258)
1,346
391
7,652

2,329
(188)
(1,716)891
13,992529(933)(4,166)—819
10,241(5,097)(3,504)
21,318(30,293)
74,0095,540(7,221)(19,982)
11,911
3,460
67,717

Investing Activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Increase in long-term loans receivables
Proceeds from transfer of business
Other		 Net cash used in investing activities(2,575)
478
(6)
(789)
—
37
(2,855)(10,007)274(1,065)
(698)
548
56
(10,892)(22,787)
4,230(53)(6,982)—327(25,265)

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

10,000(15,746)
6,324(6,326)(2,014)(318)(86)(8,166)(184)(3,553)
15,716
12,16322,785(17,861)
14,226(14,316)(1,209)
(304)
(3)
3,318
315
2,982
12,734
15,71688,496(139,345)
55,965(55,982)(17,823)(2,814)(762)(72,265)(1,629)(31,442)
139,079
107,637

The accompanying notes are an integral part of these statements.

28

¥

¥

$

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

1. Basis of Presentation
The accompanying consolidated financial statements of Furukawa
Co., Ltd. (the “Company”) and consolidated subsidiaries(together, the “Furukawa Group”) are prepared in accordancewith accounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, andare compiled from those prepared by the Company as required
under the Financial Instruments and Exchange Law of Japan.
The notes to the consolidated financial statements include

2. Summary of Significant Accounting Policies(1) Principles of Consolidation
The Company had 37 subsidiaries and 11 affiliates as of March
31, 2016. The consolidated financial statements included theaccounts of the Company and 37 subsidiaries as of March 31,
2016.
For the purpose of preparing the consolidated financial
statements, all significant inter-company transactions, accountbalances and unrealized profits among the Furukawa Group
have been eliminated.
Certain foreign subsidiaries have been included on the basisof a fiscal year ended on December 31, but prior to the parent
company’s fiscal year ended on March 31. Relevant adjustments
have been made for significant transactions with such
subsidiaries during the intervening period from January 1 toMarch 31.
Investments in subsidiaries and affiliates which are notaccounted for by the equity method are carried at cost becauseof their immaterial impact on the consolidated financial
statements.
(2) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investmentswith a maturity of three months or less when purchased.
(3) Short-Term Investments and Investment Securities
Securities other than equity securities issued by subsidiaries andaffiliates are classified into three categories: trading, held-tomaturity or other securities. The Furukawa Group does not holdany trading or held-to-maturity securities as of March 31, 2016
and 2015. Marketable securities classified as other securities arecarried at fair value with changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net
assets. Fair value is determined based on the average of themarket value during the last month of the fiscal year. Nonmarketable securities classified as other securities are carried atcost. Cost of securities sold is determined by the moving averagemethod.

information which is not required under accounting principles
generally accepted in Japan but is presented herein as additional
information.
In preparing these statements, the Company makes certain
reclassifications and rearrangements to the consolidated financial
statements prepared in Japan in order to present these statements
in a form which is more familiar to readers outside Japan.
Certain amounts in the prior year’s financial statements havebeen reclassified to conform to the current year’s presentation.

(4) Inventories
Finished products and work in process relating to copper
products are stated at cost determined by the moving averagemethod (the balance sheet amounts of inventories are stated at
the lowered book values reflecting potential decline inprofitability). Other inventories are mainly stated at cost
determined by the average method (the balance sheet amounts
of inventories are stated at the lowered book values reflecting
potential decline in profitability).
(5) Allowance for Doubtful Accounts
In order to cover probable losses on collection, the allowance for
doubtful accounts is calculated based on the historical default
rates for normal receivables plus estimate of uncollectible
amounts determined by reference to specific doubtful receivablesfrom customers who are experiencing financial difficulties.
(6) Provision for Deposition Field Restoration
Provision for deposition field restoration is provided to cover thestabilization costs with respect to the earthquake protection.
(7) Provision for Environmental Measures
Provision for environmental measures is provided to cover the
disposal costs anticipated to be incurred with respect to the“Law Concerning Special Measures for Promotion of Proper
Treatment of PCB Wastes.”(8) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciationof property, plant and equipment except for lease assets ismainly calculated by the straight-line method based on theestimated useful lives of the assets. The range of useful lives ofproperty, plant and equipment is summarized as follows:
Buildings and structures
2 to 60 years
Machinery and equipment
2 to 22 years
Amortization is calculated by the straight-line method for
intangible assets except for lease assets.

29

Depreciation of lease assets arising from finance leasetransactions that do not involve transfer of ownership is
calculated by the straight-line method over the lease term withno residual value. Finance lease transactions that do not involve
transfer of ownership, entered into on and before March 31,
2008, by the Company and domestic consolidated subsidiaries
are accounted for as operating leases.
(9) Retirement Benefits
The retirement benefit obligation for employees is attributed toeach period by the straight-line method over the estimated yearsof service of the eligible employees.
Actuarial gain or loss is amortized in the year following theyear in which the gain or loss is recognized primarily by thestraight-line method over periods (mainly 15 years), which areshorter than the average remaining years of service of theemployees.
Prior service cost is being amortized as incurred by thestraight-line method over periods (mainly 15 years), which areshorter than the average remaining years of service of theemployees.
(10) Surplus on the Revaluation of Land
Pursuant to the “Law Concerning the Revaluation of Land,”land used for the Company’s business operations was revalued
on March 31, 2002. The income tax effect of the difference
between the book value and the revalued amount has beenpresented under liabilities as “Deferred tax liabilities on surplus
on the revaluation of land” and the remaining balance has beenpresented under net assets as “Surplus on the revaluation ofland, net of income taxes” in the accompanying consolidatedbalance sheets. Revaluation of land was determined based on
the official notice prices published by the Commissioner of the
National Tax Authorities in accordance with Paragraph 4, Article
2 of the “Enforcement Ordinance Concerning Land Revaluation,”with relevant adjustments. The carrying value of the land after
revaluation exceeded its fair value by ¥1,793 million ($15,867
thousand) and ¥1,855 million as of March 31, 2016 and 2015,
respectively.
(11) Income Taxes
Current income taxes comprising corporation tax, enterprise tax
and inhabitants’ taxes are provided for based on amounts
currently payable for each year. Deferred income taxes arisingfrom temporary differences between financial reporting and tax
bases of the assets and liabilities, which were measured using
the enacted tax rates and laws that will be in effect when thetemporary differences are expected to reverse, are reflected in
the consolidated financial statements.

30

The Company and its domestic wholly-owned subsidiaries
file a consolidated corporation tax return.
(12) Amounts per Share
Basic earnings per share is computed based on the profit
available for distribution to shareholders of common stock andthe weighted-average number of shares of common stock
outstanding during the year.
Net assets per share are computed based on the net assets
excluding non-controlling interests and the number of common
stock outstanding at the year-end.
(13) Foreign Currency Translation
Foreign currency-denominated monetary assets and liabilities
are translated into Japanese yen using the rates of exchange in
effect at the balance sheet date. Differences arising from thetranslation are included in the consolidated statements ofincome.
The balance sheet accounts of the foreign consolidated
subsidiaries are translated into yen at the rates of exchange in
effect at the balance sheet date, except for the components of
net assets excluding non-controlling interests, which aretranslated at their historical exchange rates. Revenue andexpense accounts are translated at the average rate of exchange
in effect during the year. Differences arising from the translation
are presented as translation adjustments and non-controllinginterests in the consolidated financial statements.
(14) Hedging Activities
The Furukawa Group uses derivative financial instruments forthe purpose of hedging the risks of adverse fluctuations inforeign exchange rates on the trade receivables, trade payables
and forecast transactions denominated in foreign currencies,
commodity prices and interest rates. All derivative financial
instruments except those below are stated at fair value andrelated gain or loss on the changes in the fair values of derivative
financial instruments is deferred as a component of net assets inthe balance sheet until the recognition of gain or loss on hedged
items when those derivative financial instruments qualify forhedge accounting.
Trade receivables, trade payables and forecast transactions
denominated in foreign currencies are translated at thecontracted rates if the relating forward contracts qualify forhedge accounting.
The interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not carried at fair value,
but any differences paid or received on the interest rate swaps
are recognized as adjustments to interest expense or income
over the life of each swap, thereby adjusting the effective
interest rate on the hedged items.

Notes to Consolidated Financial Statements(15) Shareholders’ Equity
The Company Law of Japan provides that an amount equal to
10% of the amount to be distributed as distributions of capitalsurplus (other than the capital reserve) and retained earnings(other than the legal reserve) be transferred to the capital reserveand the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the common stock
account. Such distributions can be made at any time byresolution of the shareholders or by the Board of Directors if
certain conditions are met, but neither the capital reserve nor
the legal reserve is available for distributions.

3. Accounting Changes
The Company adopted “Revised Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21 of September
13, 2013), “Revised Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22 of September 13,2013) and “Revised Accounting Standard for Business
Divestitures” (ASBJ Statement No. 7 of September 13, 2013)
effective from April 1, 2015. As a result, under these revised
accounting standards, the accounting treatment for any changes
in a parent’s ownership interest in a subsidiary when the parent

retains control over the subsidiary was revised. In addition, thepresentation method of profit attributable to owners of parent
was amended, the reference to “minority interests” was changed
to “non-controlling interests.”
The cumulative impact of the retroactive application of the
new accounting policies over all past periods at April 1, 2015 wasreflected in capital surplus and retained earnings.
The effect of this change on retained earnings and net assets
per share as of March 31, 2016 is insignificant.

4. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is
included solely for convenience, as a matter of arithmetic computation only, at ¥113=US$1.00, the exchange rate prevailingon March 31, 2016. This translation should not be construed asa representation that yen have been, could have been or couldin the future be converted into U.S. dollars at the above or any
other rate.

31

5. Investment Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of March 31,
2016 and 2015 were as follows:
Millions of yen

Thousands of U.S. dollars

2016
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks

¥

2016

Acquisition cost

18,677 ¥

12,434

Unrealized gain
(loss)

Carrying value¥$ 165,283 $ 110,035 $6,243

Acquisition cost

Unrealized gain
(loss)

55,248Government bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

18,677

12,434

6,243

165,283

110,035

55,248

2,944

3,455

(511)

26,05330,575(4,522)

—

—

—

—

—

—

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

¥

—

—

—

—

—

—

2,944

3,455

(511)

26,05330,575(4,522)

21,621 ¥15,889 ¥5,732$ 191,336 $ 140,610 $

50,726

Millions of yen

2015
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks¥

Government bonds
Corporate bonds

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

¥

Acquisition cost

Unrealized gain
(loss)

25,058 ¥12,295 ¥——12,763————25,05812,295

12,763

3,319

3,588

(269)

—

—

—

—

—

—

3,319

3,588

(269)

28,377 ¥15,883 ¥12,494Gain on sales of securities classified as other securities with aggregate gains for the years ended March 31, 2016 and 2015 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Sales proceeds

¥

2016

2015

0

¥

3

$

0

Aggregate gains

0

1

0

Aggregate losses

—

—

—

32

Notes to Consolidated Financial Statements

6. Short-Term Debt, Long-Term Debt and Lease Obligations
Short-term debt, most of which are unsecured, represented notes payable to banks, with the average interest rate of 0.5% and 0.5%
as of March 31, 2016 and 2015, respectively.
Long-term debt as of March 31, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016

Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2017 to 2031¥

63,586
63,586¥(15,181)

Current portion of long-term debt¥

48,405

¥

2015

2016

69,396
69,396$ 562,708
562,708(15,751)(134,345)

53,645$ 428,363

The average interest rates applicable to the above debt amounting to ¥63,586 million ($562,708 thousand) and ¥69,396 million
were 0.8% and 0.8% as of March 31, 2016 and 2015, respectively.
The aggregate annual maturities of long-term debt subsequent to March 31, 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Years ending March 31,

15,181$ 134,345

2018¥13,110116,018

2019

26,430233,893

2020

6,318

55,912

2021

1,827

16,16820172022 and thereafter
¥

720

6,372

63,586$ 562,708

Lease obligations as of March 31, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016

Lease obligations due 2016 to 2021¥

Current portion of lease obligations
¥

785

2016

2015

¥

$

762

6,947

785

762

6,947

(259)

(284)

(2,292)

526

¥

478

$

4,655

The aggregate annual maturities of lease obligations subsequent to March 31, 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Years ending March 31,

2017

¥

259

$

2,292

2018

188

1,664

2019

150

1,327

2020

121

1,071

2021

67

593

¥

785

$

6,947

33

the unused balances under these credit facilities amounted
to ¥12,656 million ($112,000 thousand) and ¥22,436 million($198,549 thousand), respectively, as of March 31, 2016, andamounted to ¥12,656 million and ¥22,436 million, respectively,
as of March 31, 2015.

The Company and certain consolidated subsidiaries haveentered into overdraft and loan commitment agreements
amounting to ¥35,092 million ($310,549 thousand) with 23
banks and ¥35,092 million with 23 banks as of March 31,
2016 and 2015, respectively. The borrowings outstanding andAssets pledged as collateral and liabilities with collateral pledged as of March 31, 2016 and 2015 were as follows:(a) Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

2016

Investment securities

237

¥

1,747

¥

—

¥

1,656

1,510

Property, plant and equipment, net

2016

2015

¥

$

2,097

$

15,46013,363

1,656(b) Liabilities with collateral pledged
Thousands of
U.S. dollars

Millions of yen

2016

¥

Long-term debt (including current portion)

2016

2015

1,010

¥

932

$

8,938

7. Net Assets(1) Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2015

Increase

Decrease

As of March 31,
2016

Shares issued:
Common stock		 Total

404,455——

404,455

404,455­——

404,455

374

24

—

398

374

24

—

398

Treasury stock:
Common stock (Note)		 Total

Note: The increase of 24 thousand shares of equity in treasury stock was due to the purchase of shares of less than a standard unit.			

(2) Subscription rights to shares
Thousands of shares

Attribution

Parentcompany
Total

34

Details of
subscription rights
to shares

Type of shares
to be issued upon
exercise of rights

Subscription rights
to shares due 2016

CommonstockMillions of yen

Number of shares subject to be issued upon exercise of rights
As of March 31,
2015

Increase

Decrease

As of March 31,
2016

100,000——

100,000

100,000——

100,000

Balance as ofMarch 31, 2016¥——

Notes to Consolidated Financial Statements

8. Other Comprehensive Income
Reclassification adjustment and tax effects allocated to each component of other comprehensive income for the years ended March
31, 2016 and 2015 are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2016

2015

Unrealized holding gain (loss) on securities:
Amounts arising during the year¥

(6,762)¥—

Reclassification adjustments for gains and losses included in profit

4,600$ (59,841)——(59,841)

Amounts before tax effect(6,762)4,600

Tax effect1,844(1,055)

16,319Unrealized holding gain (loss) on securities(4,918)3,545(43,522)

Deferred gain (loss) on hedges:
Amounts arising during the year

1,153

(2,201)

10,204

Adjustment on the acquisition cost of assets

(601)

1,853

(5,319)Amounts before tax effect

552

(348)

4,885

Tax effect

(159)

97

(1,407)

Deferred gain (loss) on hedges

393

(251)

3,478

103

206

912

(281)

2,090

(2,487)

Surplus on the revaluation of land, net of income taxes:
Tax effectTranslation adjustments:
Amounts arising during the year
Retirement benefits liability adjustments:
Amounts arising during the year

(1,190)(557)(10,531)

Reclassification adjustments for gains and losses included in profit

1,057

1,037

9,354

Amounts before tax effect

(133)

480

(1,177)

Tax effect

(82)

(384)

(726)

Retirement benefits liability adjustments

(215)

96

(1,903)

Share of other comprehensive income (loss) of associates accounted forusing equity method:Amounts arising during the year

(423)

250

(3,743)

(47)

(72)

(416)

(470)

178

(4,159)5,864$ (47,681)

Reclassification adjustments for gains and losses included in profit
Share of other comprehensive income (loss) of associates accounted for using
equity method
Total other comprehensive income (loss)¥(5,388)¥

9. 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, 2016 and 2015 amounted to ¥2,680 million ($23,717 thousand) and ¥2,227 million, respectively.

35

10. Leases
Leases’ accounting
Finance lease transactions that do not involve transfer of ownership
1. Leased asset quality
Tangible assets
Production installations (Machinery and equipment) in the machinery segment
2. Depreciation method of leased assets
Refer to “(8) 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 andequipment and others held under the finance leases currently accounted for as operating leases as of March 31, 2016 and 2015 wereas follows:
Thousands of
U.S. dollars

Millions of yen

2016

Acquisition costs¥

Net carrying value¥—

Accumulated depreciation
¥

2016

2015

—
—

332

$

—
—

318
¥

14

$

—

Lease payments relating to finance leases accounted for as operating leases amounted to ¥14 million ($124 thousand) and ¥148
million for the years ended March 31, 2016 and 2015, respectively, which were equal to the depreciation expense of leased assets
computed by the straight-line method over the lease terms.
Future minimum lease payments including an interest element under the finance leases outstanding as of March 31, 2016 and2015 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Within one year

¥

—

¥

—

Over one year
¥

2016

2015

—

14

$

—

$

—

—

—
¥

14

11. Financial Instruments
1. Overview(1) Policy for financial instruments
		 In consideration of the annual financial plan, the Furukawa Group raises funds through mainly bank borrowings and bond		 issues. Further, the Furukawa Group raises short-term capital through mainly bank borrowings. The Furukawa Group uses		 derivatives for the purpose of reducing risk and does not enter into derivatives for speculative or trading 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 Group is exposed to foreign currency exchange risk arising from receivables denominated in foreign currencies. In		 principle, the foreign currency exchange risks deriving from the trade receivables denominated in foreign currencies are hedged
		 by forward foreign exchange contracts.
			 Investment securities are exposed to market risk. Those securities are composed of mainly the shares of common stock of		 other companies with which the Furukawa Group has business relationships.
			 Substantially all trade payables—trade notes, electronically recorded obligations and accounts payables—have payment due
		 date within one year.
			 Short-term debt is 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 Group36

Notes to Consolidated Financial Statements

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 the commodity price of
inventories. Information regarding the method of hedge accounting, hedging instruments, hedged items, hedging policy and theassessment 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) Monitoring of credit risk (the risk that customers or counterparties may default)
			 In accordance with the internal policies of the Furukawa Group for managing credit risk arising from receivables, each related
			 division monitors 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			 have high credit to reduce credit risk.
		 (b) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
			 For trade receivables and payables denominated in foreign currencies, the Furukawa Group identifies the foreign currency			 exchange risk for each currency on a monthly basis and principally enters into forward foreign exchange contracts to hedge
			 such risk. In order to mitigate the interest rate risk for loans payable and bonds bearing interest at variable rates, the			 Furukawa Group enters into interest rate swap transactions.
				 For investment securities, the Furukawa Group periodically reviews the fair values of such financial instruments.
				 In conducting or managing derivative transactions, each division makes transactions by approval of the directors of			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 priceavailable, 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 “12.
Derivative Transactions” are not necessarily indicative of the actual market risk involved in derivative transactions.
2. Estimated fair value of financial instruments
	Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2016 and 2015 and estimated fair value
are shown as follows. The following table does not include financial instruments for which it is extremely difficult to determine thefair value. (Please refer to Note 2 below.)
Millions of yen

Thousands of U.S. dollars

2016

2016

Carrying value

Estimated fair value

Assets:(1) Cash and cash equivalents(2) Receivables—trade(3) Investment securities
Total assets

Difference¥ 12,163
24,702
21,621
58,486¥ 12,163
24,702
21,621
58,486¥

Liabilities:(1) Payables—trade(2) Electronically recorded obligations(3) Short-term debt (*1)(4) Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥ 14,012
7,877
12,656
63,585
98,130¥248¥ 14,012
7,877
12,65663,90698,451¥
248¥¥

Carrying value

Estimated fair value

Difference

—
—
—
—

$ 107,637
218,602
191,336
517,575$ 107,637
218,602
191,336
517,575

$

—
—
—
—

—
—
—
321
321
—

$ 124,000
69,708112,000
562,699
868,407$
2,195$ 124,000
69,708112,000
565,540
871,248
$
2,195

$

—
—
—
2,841
2,841
—

$

37

Millions of yen

2015
Carrying value

Estimated fair value

Difference

Assets:(1) Cash and cash equivalents¥

15,716¥

15,716¥—(2) Receivables—trade

24,75824,758—(3) Investment securities

28,37728,377—

68,851

68,851—

Total assets
Liabilities:(1) Payables—trade¥

12,099¥12,099¥—(2) Electronically recorded obligations

8,483

8,483

(3) Short-term debt (*1)

12,65812,658—(4) Long-term debt (*1)

69,39569,395160

Total liabilities
Derivatives (*2)

102,635
¥

(304)

—

102,635
¥

(304)

160
¥

—

(*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) Receivables—trade		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(3) Investment securities		The fair value of stocks is based on market prices. For information on securities classified by holding purpose, please refer to“5. Investment Securities” to the consolidated financial statements.
Liabilities(1) Payables—trade, (2) Electronically recorded obligations, (3) Short-term debt
		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(4) 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.
Derivative transactions
Please refer to “12. Derivative Transactions” to the consolidated financial statements.

38

Notes to Consolidated Financial Statements

2. Financial instruments of which it is extremely difficult to determine the fair value as of March 31, 2016 and 2015
Thousands of
U.S. dollars

Millions of yen

2016

¥

Unlisted stocks

2016

2015

6,014

¥

6,621

$

53,221

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments
are not included in the above table of “(3) Investment securities.”
3. Redemption schedule for receivables and marketable securities with maturities after March 31, 2016 and 2015 are as follows:
For the year ended March 31, 2016
Due in one
year or lessMillions of yen

Cash deposit¥

12,048Due after one year
through five years

Due after five years
through ten years¥¥

24,702

Receivables—trade———

Due after
ten years

¥

—

—

—

Investment securities:
Other securities with maturity:		(1) Bonds (Municipal bonds)

—

—

—

—

		

(2) Bonds (Corporate bonds)

—

—

—

—

¥

Total

36,750

¥

—

¥

—

¥

—

For the year ended March 31, 2015
Due in one
year or lessMillions of yen

Cash deposit¥

Receivables—trade

15,638Due after one year
through five years

Due after five years
through ten years¥¥

24,758———Due after
ten years

¥

—

—

—

Investment securities:
Other securities with maturity:		(1) Bonds (Municipal bonds)

—

—

—

—

		

(2) Bonds (Corporate bonds)

—

—

—

—

Total

¥

40,396

¥

—

¥

—

¥

—

For the year ended March 31, 2016
Thousands of U.S. dollars

Cash deposit
Receivables—trade

Due in one
year or less

$ 106,619

Due after one year
through five years

Due after five years
through ten years

$

$

—

—

Due after
ten years$—

218,602

—

—

—

—

—

—

—

Investment securities:
Other securities with maturity:		(1) Bonds (Municipal bonds)

		(2) Bonds (Corporate bonds)

Total

—
$ 325,221

—
$

—

—
$

—

—
$

—

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

3912. Derivative Transactions
The notional amounts and estimated fair value of the derivative instruments outstanding as of March 31, 2016 and 2015 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

As of March 31, 2016
Contract amounts

Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

¥

248
56
6,820

—
—
—

¥

17
2
268

Accounts receivable
Accounts receivable

¥

311
349

—
—

(*)
(*)

Accounts payable

¥

2,681

—

(*)

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

As of March 31, 2015
Contract amounts

Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

¥

1
75
5,277

—
—
—

¥

(0)
4
(57)

Accounts receivable
Accounts receivable

¥

436
344

—
—

(*)
(*)

Accounts payable

¥

6,267

—

(*)

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

As of March 31, 2016
Contract amounts

Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

$

2,195
496
60,354

—
—
—

$

150
18
2,372

Accounts receivable
Accounts receivable

$

2,752
3,088

—
—

(*)
(*)

Accounts payable$

23,726—(*)

Note: The fair values of forward foreign exchange contracts are based on exchange rates or prices provided by financial institutions.
(*) The fair values by means of the allocation method for forward foreign exchange contracts are included in the fair values of thehedged accounts receivables and payables because the derivative transactions are treated as a part of hedged accounts receivables
and payables.
40

Notes to Consolidated Financial Statements

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

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2016
Contract amounts¥

26,304

Maturing after one year¥

Fair value

20,791(*)

Millions of yen
Method of hedge accounting

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2015
Contract amounts¥

32,237

Maturing after one year¥

Fair value

26,304(*)

Thousands of U.S. dollars
Method of hedge accounting

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2016
Contract amounts$

232,779

Maturing after one year$

Fair value

183,991(*)(*) The fair values by means of the special accounting procedure for interest rate swap contracts are included in the fair values of thehedged 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:		Copper
Buy:
		Copper

Major object of hedge

Raw material

As of March 31, 2016
Contract amounts¥—

Maturing after one year¥526

Raw material—

Fair value

¥

67

—
(39)

Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

Raw material

As of March 31, 2015
Contract amounts¥

Raw material

3,024

Maturing after one year

¥

—

—

Fair value

¥

(251)

—

—

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

Raw material
Raw material

As of March 31, 2016
Contract amounts

$

—
4,655

Maturing after one year

$

—
593

Fair value

$

—
(345)

Note: The fair values of forward commodity exchange contracts are based on the price provided by trading companies.
(*) Since some of the short position trades are dependent on copper price at the time when copper will be received, contract amountand the fair value as of March 31, 2016 and 2015 does not exist and is not disclosed.

4113. Retirement Benefit Plans
For the year ended March 31, 2016
The employees of the Company and most of its domestic consolidated subsidiaries are covered by defined benefit corporate pension
plans and non-contributory funded employee pension plans as defined benefit plans. The employee retirement benefit plans provide
for lump-sum payments. The employee pension plans, which are funded, were instituted to replace a certain portion of the benefits
under the retirement benefit plans with respect to employees who retire at the mandatory retirement age. Certain consolidated
subsidiaries (both domestic and foreign) have defined contribution plans.
The changes in the retirement benefit obligation during the year ended March 31, 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Retirement benefit obligation at April 1, 2015
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2016¥¥

17,937
872
206
1,523
(873)
(3)
—
19,6622016$ 158,735
7,717
1,823
13,478(7,726)(27)—$ 174,000

The changes in plan assets during the year ended March 31, 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Plan assets at April 1, 2015
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2016¥¥

11,063
80
473
572
(851)
0
—
11,337

2016$

97,902
708
4,186
5,062
(7,531)0—$ 100,327

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2016 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

Funded retirement benefit obligation
Plan assets at fair value¥

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet
Liability for retirement benefits
Net liability for retirement benefits in the balance sheet

42

¥

2016

2016

19,063(11,337)
7,726
600
8,326

$ 168,699(100,327)
68,372
5,309
73,681

8,326
8,326

$

73,68173,681

Notes to Consolidated Financial Statements

The components of retirement benefit expense for the year ended March 31, 2016 are as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Retirement benefit expense

Millions of yen

Thousands of
U.S. dollars

2016

2016

¥

¥

872
206
(80)
26
1,031
2,055

$

$

7,717
1,823
(708)
230
9,124
18,186

Note: Retirement benefit expense for consolidated subsidiaries adopting the simplified method which assumes retirement benefit
obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at fiscal year-end areincluded in “Service cost.”
Prior service cost and actuarial loss included in other comprehensive income (before tax effect) as of March 31, 2016 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2016

Prior service cost
Actuarial loss
Total

¥
¥

26
(159)
(133)

2016

$

230
(1,407)(1,177)$

Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥
¥

143
5,122
5,265

2016

$
$

1,265
45,32846,593

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2016 are as follows:
2016

Bonds
StocksCash on hand and in banks
Other
Total

22%
64%
2%
12%
100%

Note:
51% of total plan assets are in a “Retirement Benefit Trust” for corporate pension plans and non-contributory funded employee
pension plans.
Matters related to the actual assumption
Major actuarial assumptions at the end of the period:
Discount rates
mainly 0.3%
Expected rates of return on plan assets mainly 2.0%
Expected rates of salary increase
3.7%–5.3%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the fiscal year is ¥12 million($106 thousand).

43

The changes in the retirement benefit obligation during the year ended March 31, 2015 are as follows:
Millions of yen

2015

Retirement benefit obligation at April 1, 2014
Cumulative effects of changes in accounting principle
Restated balance at April 1, 2014
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2015¥¥16,192460
16,652
855
259
723
(816)
258
6
17,937The changes in plan assets during the year ended March 31, 2015 are as follows:
Millions of yen

2015

Plan assets at April 1, 2014
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2015¥¥

10,520
180
269
451
(553)
196
—
11,063

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2015 for the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

2015

Funded retirement benefit obligation
Plan assets at fair value¥

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet
Liability for retirement benefits
Net liability for retirement benefits in the balance sheet

44¥

17,343(11,063)
6,280
595
6,875
6,875
6,875

Notes to Consolidated Financial Statements

The components of retirement benefit expense for the year ended March 31, 2015 are as follows:
Millions of yen

2015

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Retirement benefit expense

¥

855
259
(180)
28
1,009
1,971

¥

Note:
Retirement benefit expense for consolidated subsidiaries adopting the simplified method which assumes retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at fiscal year-end areincluded in “Service cost.”
Prior service cost and actuarial loss included in other comprehensive income (before tax effect) as of March 31, 2015 are as follows:
Millions of yen

2015

Prior service cost
Actuarial loss
Total

¥

28
453
481

¥

Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2015 are as follows:
Millions of yen

2015

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥

169
4,964
5,133

¥

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2015 are as follows:
2015

Bonds
StocksCash on hand and in banks
Other
Total

22%
62%
5%
11%
100%

Note:
51% of total plan assets are in a “Retirement Benefit Trust” for corporate pension plans and non-contributory funded employee
pension plans.
Matters related to the actual assumption
Major actuarial assumptions at the end of the period:
Discount rates
mainly 0.8%
Expected rates of return on plan assets mainly 2.0%
Expected rates of salary increase
3.2%–5.1%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the fiscal year is ¥11 million.
45

14. Income Taxes
The reconciliation between the effective tax rates reflected in the consolidated statements of income and the statutory tax rates for theyears ended March 31, 2016 and 2015 were summarized as follows :Statutory tax rate
Non-deductible expenses for tax purposes
Non-taxable dividends and other income
Tax deduction such as R&D expenses
Inhabitants’ per capital tax
Equity in earnings and losses of affiliates
Amortization of goodwill and negative goodwill
Changes in valuation allowance
Different tax rates applied to subsidiaries
Decrease in differed tax liability due to the revision of statutory income tax rate
Other
Effective tax rate

2016

2015

33.1%
0.6
(0.6)
(2.3)
1.2
0.7
—
(6.6)
1.9
(4.4)
(1.5)
22.1%

35.6%
0.6
(1.0)
(0.0)
1.3
5.3
0.2
(100.3)
0.7
(4.3)
1.0
(60.9)%

Deferred tax assets and liabilities as of March 31, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016

Deferred tax assets:
Liability for retirement benefits
Investment securities
Net operating loss carryforwards
Land
Provision for deposition field restoration
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
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities
Deferred tax liabilities on surplus on the revaluation of land

¥

7,533
2,168
7,199
1,866
471
989
20,226(8,658)
11,568(1,272)(3,020)(7,021)(1,212)(183)(12,708)¥ (1,140)¥ (1,831)

2016

2015

¥

7,616
1,855
8,657
1,972
765
1,418
22,283(9,522)
12,761(1,344)(3,189)(7,399)(3,056)(128)(15,116)¥ (2,355)¥ (2,017)$

66,664
19,186
63,70816,513
4,168
8,752
178,991(76,619)
102,372(11,257)(26,726)(62,133)(10,726)(1,618)(112,460)$ (10,088)$ (16,204)

The “Act to partially revise the Income Tax Act and Others” (Act No.15 of 2016) and the “Act to partially revise the Local Tax Act
and Others” (Act No.13 of 2016) were enacted on March 31, 2016. As a result, the effective statutory tax rate used to measure theCompany’s deferred tax assets and liabilities was changed from 32.3% to 30.9% and 30.6% for the temporary differences expected
to be realized or settled in the year beginning April 1, 2016 and 2017, and for the temporary differences expected to be realized or
settled from April 1, 2018, respectively. The effect of the announced reduction of the effective statutory tax rate was to decreasedeferred tax liabilities, after offsetting deferred tax assets by ¥290 million ($2,566 thousand), deferred income tax by ¥294 million($2,602 thousand) and retirement benefits liability adjustments by ¥74 million ($655 thousand), respectively, and increase deferredgains (losses) on hedges by ¥2 million ($18 thousand) and unrealized holding gain on securities, net of income taxes by ¥68 million($602 thousand). Also, deferred tax liabilities on surplus on the revaluation of land decreased by ¥103 million ($912 thousand) and46

Notes to Consolidated Financial Statements

surplus on the revaluation of land, net of income taxes increased by the same amount.
15. Contingent Liabilities
Contingent liabilities as of March 31, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016

Notes receivable discounted and endorsed¥

Loans guaranteed
Repurchase obligation of the securitization of receivables

2016

2015

154

¥

254

$

1,363

962

1,941

8,513

1,484

2,059

13,133

16. Write-Down of Inventories
The amount of write-down of inventories, included in cost of sales for the year ended March 31, 2016 totaled ¥60 million ($531
thousand). For the year ended March 31, 2015, the Company reversed write-down in the amount of ¥165 million and credited it tocost of sales.
17. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016

Gain on sales of disused articles
Subsidy income
Gain on sales of noncurrent assets
Compensation income
Gain on business withdrawal
Gain on transfer of business
Payments for idle mines
Loss on foreign exchange
Provision for deposition field restoration
Loss on sales and retirement of noncurrent assets
Impairment loss
Other, net

¥

¥

61
1
309
391
—
—
(601)
(797)
—
(79)
(207)
(129)
(1,051)

2016

2015

¥

¥

181
132
154
819
645
530
(560)
(545)
(2,409)
(74)
(71)
(269)
(1,467)

$

$

540
9
2,735
3,460
—
—
(5,319)(7,053)—(699)(1,832)(1,141)(9,300)18. Segment Information
The reportable segments are constituent units of the Furukawa Group for which separate financial information is available. The Boardof 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 seven reportablesegments are as follows: Industrial Machinery, Rock Drill Machinery, UNIC Machinery, Metals, Electronic Materials, Chemicals and Real
Estate.

Main products and services belonging to each segment are as follows:(a) Industrial Machinery
		 Manufacture and sale environmental machinery, pumps, industrial machinery, steel structures and heat-resistant and wear		resistant castings47

(b) Rock Drill Machinery
		 Manufacture and sale rock drill machines such as hydraulics breakers, hydraulics crushers, boring drills, tunnel and mining
		 drill jumbos, and environmental machinery(c) UNIC Machinery
		 Manufacture and sale UNIC cranes, mini crawler cranes, ocean cranes and UNIC carriers(d) Metals
		After buying ore, sale electrolytic copper, gold, silver and sulfuric acid which is smelted on consignment by joint smelting
company(e) Electronic Materials
		Manufacture and sale high-purity metallic arsenic, crystals, cores and coils, aluminum nitride ceramics, optical components andgallium nitrides(f) Chemicals
		 Manufacture and sale cuprous oxide, ferric polysulfate solution, aluminum sulfate, sulfuric acid, cuprous dioxide and copper		 dioxide, and sale titanium dioxide(g) Real Estate		 Trade, intermediate and lease of real estate
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, 2016 and 2015 was as follows:Year ended March 31, 2016

Millions of yen
Industrial
MachinerySales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Amortization of goodwill and negative goodwill
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

Rock Drill
Machinery

Electronic
Materials¥ 19,609 ¥ 30,976 ¥ 21,695 ¥ 27,645 ¥ 7,492
346
599
565
312
294
—
—
—
—
—
—
—
65
3,235
267
855
328
421
140
450
Millions of yen
Chemicals

48

Metals¥ 14,927 ¥ 30,077 ¥ 27,229 ¥ 74,193 ¥ 5,477
2,742
5
92
370
72
17,66930,082
27,321
74,563
5,549¥ 1,038 ¥ 2,217 ¥ 2,627 ¥ 1,155 ¥ (368)Year ended March 31, 2016

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Amortization of goodwill and negative goodwill
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

UNIC
Machinery¥¥

Real Estate

OthersAdjustments

Consolidated

5,974 ¥ 3,045 ¥877 ¥— ¥161,799
58
135
1,606
(5,080)
—
6,032
3,180
2,483
(5,080) 161,799
197 ¥ 1,277 ¥(73) ¥(81) ¥ 7,989¥ 16,056 ¥ 31,995 ¥ 3,514
193
588
66
—
—
—
—
—
51
183
93
81

¥36,668 ¥195,650
18
2,981
—
—
—
3,618
40
2,591

Notes to Consolidated Financial Statements

Year ended March 31, 2015

Millions of yen
Industrial
MachinerySales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Amortization of goodwill and negative goodwill
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

Rock Drill
Machinery

Millions of yen¥¥

Real Estate

OthersAdjustments

Consolidated

6,014 ¥ 2,536 ¥746 ¥— ¥172,544
51
138
1,644
(5,183)
—
6,065
2,674
2,390
(5,183) 172,544
268 ¥776 ¥ (130) ¥(43) ¥ 8,925¥ 15,876 ¥32,519 ¥ 3,729
205
592
65
—
—
—
—
—
135
183
7,273
42

Year ended March 31, 2016

¥47,625 ¥207,317
17
3,001
—
10
—
4,225
434
10,047

Thousands of U.S. dollars
Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials$ 132,097 $ 266,168 $ 240,965 $ 656,575 $ 48,469
24,266
44
814
3,274
637
156,363 266,212 241,779 659,849
49,106$ 9,186 $ 19,619 $ 23,248 $ 10,221 $ (3,257)$ 173,531 $ 274,124 $ 191,991 $ 244,646 $ 66,301
3,062
5,301
5,000
2,761
2,602
—
—
—
—
—
—
—
575
28,629
2,363
7,566
2,903
3,726
1,239
3,982

Year ended March 31, 2016

Thousands of U.S. dollars
Chemicals

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Amortization of goodwill and negative goodwill
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

Electronic
Materials¥ 18,466 ¥ 31,432 ¥ 22,542 ¥ 27,644 ¥ 7,484
326
615
530
347
304
—
—
10
—
—
—
—
57
3,658
375
227
353
776
122
637
Chemicals

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Amortization of goodwill and negative goodwill
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

Metals¥ 16,713 ¥ 30,911 ¥ 28,367 ¥ 81,514 ¥ 5,743
2,875
9
97
364
5
19,58830,92028,46481,878
5,748¥ 1,711 ¥ 1,225 ¥ 3,615 ¥ 1,450 ¥53

Year ended March 31, 2015

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Amortization of goodwill and negative goodwill
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

UNIC
Machinery

Real Estate

OthersAdjustments

Consolidated$ 52,868 $ 26,947 $ 7,761 $— $1,431,850
513
1,195
14,212(44,955)—
53,381
28,142
21,973(44,955) 1,431,850$ 1,743 $ 11,301 $(646) $
(716) $ 70,699$ 142,088 $283,142 $ 31,097 $324,496 $1,731,416
1,708
5,204
584
159
26,381
—
—
—
—
—
—
—
451
—
32,018
1,619
823
717
354
22,92949

(Related information)
Years ended March 31, 2016 and 2015
1. Information regarding products and services
Year ended March 31, 2016

Millions of yen
Copper¥Sales for outside customers

60,687

Others¥Year ended March 31, 2015

101,112

Total¥

161,799¥

172,544

Millions of yen
CopperSales for outside customers¥

70,950Year ended March 31, 2016

Others¥101,594

Total

Thousands of U.S. dollars
Copper$Sales for outside customers

537,053

Others$894,797

Total$ 1,431,850

2. Geographic segment information(1) Net sales
Year ended March 31, 2016
Millions of yen
Japan

¥

Asia

123,038¥

Others21,739¥Total

17,022¥

161,799¥

172,544

Year ended March 31, 2015
Millions of yen
Japan

¥

Asia

130,833¥

Others

24,771¥

Total

16,940Year ended March 31, 2016
Thousands of U.S. dollars
Japan

Asia

$ 1,088,832$

192,381

Others$Total

150,637$ 1,431,850(2) Property, plant and equipment
The geographic segment information for the years ended March 31, 2016 and 2015 has not been presented, because the total assets
in Japan exceed 90% of consolidated totals.
3. Information regarding main customers
Year ended March 31, 2016
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥23,321

MetalsYear ended March 31, 2015
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥28,836

MetalsYear ended March 31, 2016
Thousands of U.S. dollars

50

Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

$206,381

MetalsNotes to Consolidated Financial Statements

4. Impairment loss on property, plant and equipment
Millions of yen
Year ended March 31, 2016

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Impairment loss onproperty, plant andequipment

—

—

—

—

—

Year ended March 31, 2015

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Impairment loss onproperty, plant andequipment

—

—

—

—

—

Year ended March 31, 2016

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Impairment loss onproperty, plant andequipment

—

—

—

—

—

Chemicals

Real Estate

— ¥

5 ¥

Others202

Adjustments Consolidated

— ¥

207

Millions of yen
Chemicals

Real Estate

— ¥

3 ¥

Others68

Adjustments Consolidated

— ¥

71

Thousands of U.S. dollars
Chemicals

Real Estate— $Others44 $ 1,738

Adjustments Consolidated— $ 1,832

5. Amortization of goodwill and unamortized goodwill in reportable segments
Millions of yen
Year ended March 31, 2016

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Chemicals

Real Estate

OthersBalance as of March
31, 2016

—

—

—

—

—

—

—

—

Year ended March 31, 2015

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Chemicals

Real Estate

OthersBalance as of March
31, 2015

—

—

—

—

—

—

—

—

Year ended March 31, 2016

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Chemicals

Real Estate

OthersBalance as of March
31, 2016

—

—

—

—

—

—

—

—

Adjustments Consolidated——

Millions of yen
Adjustments Consolidated——

Thousands of U.S. dollars
Adjustments Consolidated——

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

51

Notes to Consolidated Financial Statements

19. 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, 2016, rental income was ¥1,477 million ($13,071 thousand), gain on sales of rental properties was ¥300 million ($2,655
thousand), loss on disposal was ¥19 million ($168 thousand) and impairment loss on rental properties was ¥207 million ($1,832
thousand).
For the year ended March 31, 2015, rental income was ¥976 million, gain on sales of rental properties was ¥104 million, loss on
disposal was ¥1 million and impairment loss on rental properties was ¥71 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,
2016 and 2015 are as follows:Year ended March 31, 2016

Carrying value
As of March 31, 2015

Net change

Fair value
As of March 31, 2016

As of March 31, 2016

Millions of yen¥

35,758

¥

(608)

¥

35,150¥32,897

Year ended March 31, 2015

Carrying value
As of March 31, 2014

Net change

Fair value
As of March 31, 2015

As of March 31, 2015

Millions of yen¥

36,473

¥

(715)

¥

35,758¥35,234

Year ended March 31, 2016

Carrying value
As of March 31, 2015

Net change

Fair value
As of March 31, 2016

As of March 31, 2016

Thousands of U.S. dollars$

316,442$(5,380)$311,062$

291,124

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, 2016 mainly consists of increases related to acquisition of land and 		buildings in the amount of ¥193 million ($1,708 thousand) and decreases mainly due to amortization in the amount of ¥496
million ($4,389 thousand), impairment loss on rental properties in the amount of ¥207 million ($1,832 thousand) and sales ofland and buildings in the amount of ¥160 million ($1,416 thousand). Net change in carrying value for the year ended March 31,
2015 mainly consists of increases related to acquisition of land and buildings in the amount of ¥91 million and decreases mainly
due to amortization in the amount of ¥505 million, change of use in the amount of ¥217 million, impairment loss on rental
properties in the amount of ¥71 million and sales of land in the amount of ¥37 million.
3. The fair value is mainly estimated in accordance with appraisal standards for valuing real estate.
20. Subsequent Event
The following appropriations of retained earnings of the Company, which have not been reflected in the accompanying consolidated
financial statements, were approved at a shareholders’ meeting held on June 29, 2016:
Millions of yen

Year-end cash dividends (¥5.00 = $0.044 per share)

¥

2,020

¥

2,222

Transfer to legal reserve

52

Thousands of U.S. dollars$

17,876$

19,664

202

1,788

53

Corporate Data
(As of March 31, 2016)

Directors and Auditors(As of June 29, 2016)
Company Name:

Furukawa Co., Ltd.

Head Office:2-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-8370, Japan+81-3-3212-6570 Fax: +81-3-3212-6578

Chairman and Representative Director

Nobuyoshi Soma

President and Representative Director

Naohisa Miyakawa

Senior Managing Director

Toshio Matsumoto

Tel:Managing Director

Minoru Iwata

Date of Foundation:

August 1875

Date of Establishment:

April 1918

Outside Director

Masao Yoshida

Number of Shares Authorized:

Nobuyuki Tomotsune

800,000,000 shares

Outside Independent Director

Number of Shares Outstanding:

404,455,680 shares

Director

Shigeo Matsudo

Number of Shareholders:

27,880

Director

Kiyohito Mitsumura

Stock Exchange Listing:Tokyo

Audit & Supervisory Board Member

Yoshihito Emoto

Audit & Supervisory Board Member

Saburo Saruhashi

Securities Code Number:

5715

Employees:

2,521 (Consolidated)

Stock Transfer Agent:

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

Outside Audit & Supervisory Board Member Tetsuro Ueno
Outside Audit & Supervisory Board Member Masayuki Yamashita

Principal Shareholders

Executive Officers(As of June 29, 2016)
Senior Executive Officer

Shigeo Matsudo

Senior Executive Officer

Kiyohito Mitsumura

Senior Executive Officer

Kazuo Inoue

Executive Officer

Yoshinari Kuno

Executive Officer

Hiroyuki Abe

Executive Officer

Kiyoshi Sano

Executive Officer

Tatsuki Nazuka

Executive Officer

Masahiro Ogino

Executive Officer

Takeshi Miyajima

Executive Officer

Osamu Miyazaki

Executive Officer

Katsuhira Kawashita

Number of
Shares(Thousands)

Percentage ofTotal Shares(%)

Japan Trustee Services Bank, Ltd. (trust account)

31,876

7.88

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

26,085

6.44

Asahi Mutual Life Insurance Co.

23,734

5.86

Seiwa Sogo Tatemono Co., Ltd.

15,034

3.71

The Yokohama Rubber Company, Limited

13,411

3.31

Sompo Japan Insurance Inc.

10,756

2.65

Fujitsu Limited

9,617

2.37

Furukawa Electric Co., Ltd.

8,777

2.17

Fuji Electric Co., Ltd.

8,620

2.13

Chuo Real Estate Co., Ltd.

6,877

1.70

Composition of Shareholders
Foreign Institutions

10.12%

Other JapaneseCompanies

25.42%

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. Suchstatements reflect expectations, estimates, forecasts, projections, and plans based on information
currently available to the Company and are subject to various risks, uncertainties, and assumptions.
These changing factors may cause actual results to differ materially from those projected.

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

54

Financial Instruments Firms(Securities Companies)

3.59%

Financial
Institutions

36.19%
Individuals
and Others

24.68%

Corporate History

1875

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

1997

Established a manufacturer of
UNIC products / components
in Thailand.

1877

Began the operation of the
Ashio Copper Mine in Tochigi.

1998

Established a sales company ofrock drill products in Holland.

1900

Set up a machinery works at the
Ashio Copper Mine and enteredinto the machinery business.

2003

Established a joint company forthe manufacturing and distribution of UNIC cranes in China.

1914

Manufactured the first rock drillin Japan.

2005

1918

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

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

1944

1951
1962

1989
1990

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

Built the Takasaki Works of theRock Drill Division in Gunma.

Began manufacturing oftitanium dioxide and cuprous
oxide at Osaka Cementation
and Refining.

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.
Completed research anddevelopment of high-purity(99.999%) metallic arsenic andcommenced with the sale of it.

1987

The first domestic rock drill
was developed (for the Ashio
Copper Mine).

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

1950

The Ashio Copper Mine iswhere the Furukawa Company
Group began.

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

Established a rock drills sales
company in China.

2007

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

2008

Set up the Nitride Semiconductors Department as a GaN andrelated nitride semiconductorrelated research organization.

2009“UNIC” has become asynonym for truck-mounted
cranes in Japan.

Built the laboratory of the Nitride
Semiconductors Department inOyama.

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 establishedin Taian, Shandong, China,
which manufactures and distributes truck-mounted cranes
and other products.

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

2010

Acquired interest in Canadiancopper mine.

2011

Established a sales company ofrock drill products in India.

2012

Established a sales company ofrock drill products in Panama.
With the sale of all of its shares inFurukawa Commerce Co., Ltd.,the Group has withdrawn fromthe fuels business.

Arsenic is one of the byproducts generated during
the smelting stage of copper
concentrates.

The Japanese name changed
from Furukawa Kogyo Kabushiki Kaisha to Furukawa Kikai
Kinzoku Kabushiki Kaisha.
Bought an American breaker sales
and manufacturing company.

2006This is an affiliate company for
the UNIC business establishedin Rayong, Thailand, which
manufactures truck-mounted
cranes and other products.

2013

The Group exited the paints business with the sale of all of its sharesin Tohpe Corporation.

2014

Completed Muromachi Furukawa
Mitsui Building in Nihonbashi, Tokyo.

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

Muromachi Furukawa Mitsui Building, consisting of a commercial
facility (COREDO Muromachi 2),
offices, and rental accommodation.

Coil processing company establishedin Philippines.
Established the Tsukuba Development Center, which integrates atechnology research operation.

An affiliated company in theelectronic materials businessmakes coils in Bulacan Province,
Philippines.

“140 Years” Corporate Profile Videos Released
This year, we updated our corporate profile videos to mark the 140th anniversary of our founding. Consisting of four chapters, thevideos enable viewers to gain a quick understanding of Furukawa’s roots, social interactions, and product range. Please go to the “Investor Relations” section of our English website, click on “Welcome to the Furukawa Planet” icon, and scroll down to the videos.
● The entire four-part compilation can also be viewed via YouTube:
https://www.youtube.com/watch?v=U9vi3JBMEDI

55

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