SETTING OUR FOCUS ON PROFITABILITY

ANNUAL REPORT 2004

Profile>> In 1875 Furukawa Co., Ltd. was established. Over the ensuing 129 years, theCompany has developed a diverse portfolio of businesses in the fields ofmachinery, metals, electronic materials, chemicals, and fuels. Grounded inits management philosophy—Innovation, Creativity, and Harmony—theCompany has moved forward with innovation in its corporate structure andtechnological development. Furukawa strives to offer appealing products
and services to its customers, and to contribute to the creation of aprosperous society that is in harmony with the environment.
>> Fiscal 2004, ended 31st March, 2004, was marked by Furukawa Co., Ltd.
deciding to withdraw from recent and prior unprofitable businesses, guided
by its medium-term management plan and rationalization plan. The Company
has cut personnel expenses and other costs; sold its hydroelectric businessand an office building in Tokyo, the Furukawa Building, using the liquidation
method; conducted a capital increase through third-party allocation of shares;
and took other measures to effect a sweeping restructuring of its businessbase. The Company’s profitability and financial position are improving
steadily.
>> Fiscal 2005 is the last year of our medium-term management plan, and isimportant in that it has been designated as the year we leap from therestructuring stage to the income generation stage. Furukawa will be taking
various measures to maximize the Group’s corporate value, including thespin-off of businesses into independent companies and a shift to a Groupmanagement structure.

Contents
Consolidated Financial Highlights>1

Financial Section>13

To Our Shareholders>2

Principal Subsidiaries and Affiliates>36

Setting Our Focus on Profitability>5

Board of Directors and Auditors>37

Review of Operations>8

Corporate Data

>37

Corporate Social Responsibility Activities >12

Furukawa Co., Ltd.

CONSOLIDATED FINANCIAL HIGHLIGHTS
For the years ended 31st March, 2004, 2003, and 2002

Millions of yen
2003

2004

Net sales
Operating income (loss)
Loss before income taxes andminority interests
Net loss¥ 153,513
2,024

Thousands of
U.S. dollars

Percentchange2004’04 / ’03

2002

¥ 151,630 ¥ 149,436 $1,448,236(1,591)(4,678)19,095(22,032)(17,000)(35,238)(27,634)(27,962)(18,696)

Per share amounts (yen and U.S. dollars):
Net loss:
Basic
DilutedCash dividends¥ (84.61)——¥ (67.88) ¥ (74.56) $————Total assets
Shareholders’ equity¥ 206,250
28,660¥ 252,856
33,665¥ 278,174
49,791

1.2%—(332,433)(260,698)——(0.80)—————$1,945,755
270,377(18.4)%(14.9)

Note: U.S. dollar amounts are translated from yen for convenience only at the rate of ¥106=$1.

180

Net Sales

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

138.1 144.3 149.4 151.6 153.5

1.5

7.5

5.0

Total Assets(Billions of yen)

(4.7)

(1.6)

2.0

320

135

5.0

240

90

2.5

160

45

0

80

-5.0

0

2000 2001 2002 2003 2004

255.8 294.0 278.2 252.9 206.3

02000 2001 2002 2003 2004

2000 2001 2002 2003 2004

Forward-Looking Statements: This annual report contains forward-looking statements such as the plans, strategies and statements related to theoutlook for future results. These forward-looking statements are not historical facts. They are expectations, estimates, forecasts and projections based on
information currently available to the Company and are subject to various risks, uncertainties and assumptions. As such, actual results may differ materiallyfrom those projected.

1

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Furukawa Co., Ltd.

TO OUR SHAREHOLDERS

We are confident that these
efforts will reverse the deterioration of the Company’s
performance.

We are forced to report that in fiscal 2004, ended March 31, 2004, Furukawa suffereda record net loss of ¥27,634 million. We offer our profoundest apologies to our shareholders for this performance.
However, most of the expense of halting operations at PKC (as called for by
our rationalization plan) was written off to the reserve against losses, and we aretaking various measures to erect a new business structure, including spinning off
business divisions to become separate companies. We are confident that these efforts will reverse the deterioration of the Company’s performance.

Fiscal 2004 Consolidated Performance—First Operating Income Recordedin Two Years
Net sales rose 1.2% to ¥153,513 million this fiscal year. In our core Machinery Division, stiffer exhaust-gas regulations spurred replacement demand for trucks, and revenues from sales of UNIC cranes grew substantially. Higher sales to major electric
power utilities brought revenue growth in the Fuels Division. This was sufficient tocover the loss in revenue from the halt in operations at PKC and allow growth in total
sales revenues. Profit growth in the UNIC and construction and mining machinery
operations, together with a reduced operating loss at PKC, allowed the Company topost operating income of ¥2,024 million, its first in two years. However, the write-offFurukawa Co., Ltd.

of significant losses suffered by PKC resulted in an overall net loss.
I deeply regret to announce that Furukawa is unable to declare a dividend forthis fiscal year.

Furukawa took steps to increase its profitability andshore up its financial position,
guided by its medium-term
management plan.

Accomplishments in Fiscal 2004—Progress in Restructuring
Under these difficult operating conditions, Furukawa took steps to increase its profitability and shore up its financial position, guided by its medium-term management
plan (which designates the period through fiscal 2005 as one of restructuring theCompany’s business foundation) and the rationalization plan announced in April 2003.
The main steps taken this fiscal year are discussed below.
The most important decision taken this fiscal year was to halt operations at
PKC, which was suffering the largest losses in its history, and place the company in a
repair and maintenance phase. We are now in negotiations with new investors, who
are needed to quickly minimize the Company’s loss burden. As a result of the shutdown, PKC’s fixed assets have been written down, and ¥53,137 million posted against
the reserve against losses. This resulted in an increase in accumulated losses and a
decline in shareholders’ equity. The Company took several measures to correct thisdangerous situation and maintain the health of its financial position.
Furukawa reduced costs through an early retirement program that reduced
the labor force, and through continued and expanded cuts in salaries. Next, the Company merged with Furukawa Real Estate Co., Ltd. and absorbed that company’s retained earnings. Furukawa’s hydroelectric operations were sold, as were some marketable securities, land, and other assets, the revenues from which, offset the net
loss. To restore the Company’s heavily dented shareholders’ equity, capital was increased by ¥9.2 billion through a third-party allocation of new shares.
The foundry products operations was spun off, and at the Osaka Plant themoney-losing titanium dioxide manufacturing business was terminated and those facilities turned to the production of sapphire substrates and other electronic materials. In the construction and mining machinery operations, service and support business were bolstered and rationalized, and domestic marketing and service subsidiaries were integrated.

Business Strategy—Moving into the Income Generation Stage
Although there were macroeconomic indications of a domestic recovery, price competition in our industry is expected to intensify. Prices of ferrous and non-ferrous
metals have soared, along with those of petroleum and other materials, which havecreated an extremely adverse operating environment for the Furukawa Group. To
achieve further growth and generate profits in the face of these headwinds, we arecontinually working to increase our cost competitiveness, and to deal with the issues
outlined below.

To maximize the corporate
value of the entire Group,
Furukawa will work to offer
services and products precisely tailored to customer
needs.

Building a new business structure
The first of our important themes is the building of a new business structure that willallow us to strengthen our business base and achieve further growth. Accordingly, in
March 2005 the Company plans to spin off its Machinery Division (industrial machinery, construction and mining machinery, and UNIC, truck-mounted cranes), Metals
Division, Electronics Division, and Chemicals Division into six independent companies, and switch to a group management structure. This will clarify responsibilities
for asset management and performance, while infusing a nimble and dynamic management style adapted to the scope and characteristics of our various businesses.
Spinning off businesses, including associated manufacturing plants will unify operations from manufacturing to sales.
To maximize the corporate value of the entire Group, Furukawa will work to3

4

Furukawa Co., Ltd.

offer services and products precisely tailored to customer needs. Factory sites transferred to the new companies will be treated as investments in kind, and by using
gains on revaluation of land and additional paid-in capital, we hope to resume dividends at the earliest possible time.

The expansion of exports andthe fostering of overseas
manufacturing and sales organizations, as the platform for
new growth have assumed
greater importance.

Engagement in growth markets and industries

Furukawa is working to restore performance at the earliest possible date, and tobuild a strong earnings structure that will not be vulnerable
to the vagaries of changes inthe business environment.

A Closing Word to Our Shareholders

The second theme of our business strategy is engagement in new growth markets
and growth industries. Public spending is forecast to contract, and the hollowing-outof the manufacturing industries continues, which precludes expectations of domestic sales on a large scale. Therefore. We are working to expand sales of UNIC machinery in overseas markets, as in our September 2003 establishment of manufacturing
and sales subsidiary, Taian Furukawa Machinery Co., Ltd., to serve China’s rapidly
growing market. We have also established an office in Shanghai to promote overseas
sales of rock drills.
In another growth field, Furukawa is concentrating management resources in
the private-sector industrial technology engineering business. In the electronic materials business, the Company is expanding sales of crystalline products, chiefly, highpurity metallic arsenic and sapphire substrates for blue and white LEDs, for whichmarket expansion is predicted.

This business environment is definitely an adverse one, but through innovation the
Company has retained its vigor. The downturn in performance has been a trial, but
through the business strategy discussed above Furukawa is working to restore performance at the earliest possible date, and to build a strong earnings structure thatwill not be vulnerable to the vagaries of changes in the business environment.
Furukawa requests the understanding and support of its shareholders in these endeavors.

September 2004

Tetsuo Yoshino,
President and Representative Director

Furukawa Co., Ltd.

Setting Our Focus on Profitability
Status of Progress in the Implementation of the Medium-Term Management
Plan and the Rationalization Plan
During this fiscal year, Furukawa permanently withdrew
from recent and prior unprofitable businesses, cut personnel expenses and other costs, sold its hydroelectricbusiness, and sold a Tokyo office building, the Furukawa
Building, using the liquidation method. This, together witha capital increase through third-party allocation of shares,
steadily improved its profitability and its financial position.

1

Operations Suspended at PKC, Losses Written Off

2

Improving and Strengthening our Financial Position

In August 2003, Furukawa halted operations at Australian subsidiary Port Kembla
Copper Pty. Ltd. (PKC), and PKC has entered a care and maintenance phase. In
operation since February 2000, PKC encountered some problems with older equipment, and the inexperience of the labor force prevented sufficient uptime and caused
capacity utilization to decline. This, together with slumping copper prices and losses,
has been the largest factor in the deterioration of Furukawa’s consolidated performance and financial position.
We are now in negotiations with new investors, who are needed to quickly
minimize the Company’s loss burden. As a result of the shutdown, PKC's fixed assets have been written down, and ¥53,137 million posted against the reserve against
losses. This resulted in a ¥1.8 billion positive effect on operating income.

PKC’s substantial losses and the write off of losses accruing from the shutdown were the principal causes ofa decline in Furukawa’s financial soundness. To correct this critical situation, we implemented a number ofmeasures to strengthen the Company’s financial position.
The first of these is the reduction of personnel expenses and other costs. An early retirement programfor employees 57 and older has been instituted to reduce the labor force, and cuts in the compensation of all
executives and employees (salaries and bonuses) continue and intensify. Personnel expenses have been reduced by approximately ¥1.0 billion in comparison with fiscal 2003 figures. The second measure involves thestrengthening of the Group’s capabilities and the rationalization of the Real Estate Division. The Company
merged with subsidiary Furukawa Real Estate Co., Ltd., and consolidated profit from the merger of ¥8.6
billion was posted to additional paid-in capital. Third, the Company sold its
Interrest-Bearing Debt (Billions of yen)hydroelectric business (Furukawa Nikko Power Generation Co., Ltd.) to
163.6
146.3
140.3
123.9
117.0
Furukawa Electric Co., Ltd. for ¥10.0 billion, and posted ¥6.9 billion in income from the sale. Fourth, the Company strengthened shareholders’ equity through a ¥9.2 billion third-party allocation of shares. Lastly, to increase
asset efficiency, we realized income of ¥1.2 billion on the ¥9.0 billion liquidation of the Furukawa Building and associated land. By March 31, 2004,
2001
2002
2003
2004
2005
interest-bearing liabilities had declined by ¥16.4 billion to ¥123.9 billion.
(Target)5

6

Furukawa Co., Ltd.

3

Rationalization of Operations
The Company moved forward with its withdrawal from unprofitable businesses this fiscal year, and took
decisive action to rationalize its operations.
In the Chemicals Division, we shut down the unprofitable titanium dioxide manufacturing operation
at the Osaka Plant, and shifted marketing emphasis to OEM and other consignment operations. In an effort
to regain profitability at the earliest possible date, the plant is moving quickly into the production of sapphire and other electronic materials, where growth is predicted.
In the construction and mining machinery operations, we merged a domestic service subsidiary with
Furukawa Machinery Sales Co., Ltd. to strengthen service and support divisions and rationalize administrative divisions.
Furukawa’s foundry products’ operation was spun off to become an independent company. Thatcompany’s product line was slimmed down for greater efficiency, and its labor force was rationalized. In
addition, it achieved efficiencies of scale and strengthened its marketing capabilities through an alliancewith subsidiary, Otsuka Iron Works, Ltd., a manufacturer of rock crushers.

Medium- and Long-term Business Strategies
During this fiscal year, Furukawa moved forward vigorously with restructuring, based on its medium-term management plan and rationalization plan, posting an operating income for the first time in two years. This recovery
in performance has just begun, however, and sustained
growth has yet to be accomplished. To achieve our goals,
we are on a trajectory for a new business structure, andare taking a number of measures to build a foundation
for renewed development.

1

Shifting to a Group Management Structure
Furukawa believes that quickly building a strong business structure is necessary to its reform. Accordingly,
in March 2005 the Company plans to spin off its machinery Division (industrial machinery, construction andmining machinery, UNIC products), Metals Division, Electronics Division, and Chemicals Division into six
independent companies, and switch to a group management structure. When each business division becomes an autonomous firm, the Group will retain its unity though the business-specific control of management resources and accountability for performance will be greatly clarified. And, to maximize the corporate
value of the entire Group, Furukawa will work to offer services and products that satisfy the needs of themarket.

The Business Structure After the Shift to Group Management
After the shift to group management, Furukawa Co., Ltd., as the parent company of the Group, will formulate management strategy for the entire Group, and will directly operate the fuel sales and real estate businesses, research and development divisions, environmental control divisions, and administrative divisions.
In the Machinery Division, the industrial machinery operations, construction and mining machinery
operations, and UNIC truck-mounted crane operations will be taken over by Furukawa Industrial Machinery
Systems Co., Ltd., Furukawa Machinery Sales Co., Ltd. (to be renamed Furukawa Rock Drill Co., Ltd. following the spin-off), and Furukawa UNIC Corporation. The Metals Division will be taken over by Furukawa
Metal & Resources Co., Ltd. The Electronics Materials and Chemicals Division were spun off to becomeFurukawa Co., Ltd.

Furukawa Denshi Co., Ltd. and Furukawa Chemicals Co., Ltd. Employees in the spun-off divisions will remain Furukawa employees, and will be regarded as seconded to the new companies.

2

3

Establishing an Overseas Business Base for Civil Engineering, Mining, andConstruction Machinery
Furukawa is bolstering its overseas manufacturing and marketing organizations, particularly in the areas of civil engineering, mining, and construction
machinery, to serve as a foundation for growth.
UNIC products command a large share of the domestic market, and theCompany is working to expand sales by increasing exports to the UnitedStates, Europe, and Southeast Asia. Demand for trucks is forecast to grow,particularly in China with its striking economic growth. Positioning itself toserve the rapidly growing Chinese market, Furukawa has established a loA loaded UNIC crane in Taian, China
cal joint venture to engage in the production and sale of UNIC cranes. This
joint venture, Taian Furukawa Machinery Co., Ltd., has a factory site of
90,000m2. The plant is now under construction. Meanwhile, Taian Furukawa is building its own marketingand service network, concentrating on major cities, and is building up its ability to market to large firms in
the electric power, railway, freight service, and construction industries, who have purchasing power but
demand high quality. Output and sales should reach 3,000 units after four years of local manufacturing, andlocally manufactured products should hold a 30% share of the market.
The market for rock drills is growing in Korea, and to allow us to correctly and quickly grasp movements in that market, we established Furukawa Rock Drill Korea Co., Ltd. inJune 2003. Expanding public expenditures are anticipated as China preparesfor the 2008 Beijing Olympics, and in preparation we have established an
office in Shanghai to handle rock drills. This office opened in February 2004.
In fiscal 2005 the Company is seeking a 10% growth in overseas sales of rock
drills.
Furukawa is expanding its overseas business, but at the same time
we have learned important lessons from our experiences with European
Hydraulic Rock Breakermachinery operations and the PKC business, and are taking every step tominimize business risks.

Electronic Materials—Strengthening the Earnings Base and Introducing New
Materials
The Electronic Materials and Chemical Division is working to strengthen its earnings base by expanding
sales in the liquid crystal field, where Furukawa possesses high-level technology, with an emphasis on highpurity metallic arsenic. In addition, the Company is advancing rapidly in its metal-organic chemical vapor
deposition (MOCVD) business, sales of health-care products that were developed jointly with other companies, and other new businesses for new chemical products such as aluminum sulfate.
In addition, the Company has established a mass-production system for sapphire substrates and is
working to expand the sales of this product for blue and white LEDs. Significant growth in demand forsapphire substrates is predicted as they are increasingly used in mobile telephones, automobile taillights,
and as a substitute for fluorescent lighting. Blue-violet laser diodes (LDs)grown by metal-organic chemical vapor deposition on sapphire substrates
are seen as the most promising technology for next-generation DVD pickup
lasers based on the Blu-ray Disc standard and the AOD standard. Furukawa
has commenced the development of gallium nitride substrates for blue LEDs
and high-intensity white LEDs. At present, the Company is moving forwardwith the establishment of a low-cost, high-quality mass production system
for these substrates.

7

8

Furukawa Co., Ltd.

REVIEW OF OPERATIONS

Machinery
41.1%

Net sales in the Machinery Division increased 5.8% to ¥63,174 million. Operating income shot up 318.0% to ¥4,303 million, primarily as a result of the higher sales of
UNIC products and cost reductions. The operating margin increased 4.5 percentage
points to 6.8%.
The Machinery Division is engaged in three businesses: industrial machinery, construction andmining machinery, and UNIC machinery. With the shift to a group management system in March
2005, these will be spun off to independent companies.
Sales of industrial machinery were boosted by a major contract for conveyor-belt facilities
for mineral coal, and by making Otsuka Iron Works, Ltd. a consolidated subsidiary. However, reduced public spending produced a substantial decline in sales of sewage treatment facilities forrural communities and other environmental businesses, and of steel bridges.
Export sales of construction and mining machinery, principally to North America and China,rose steadily, owing to the reform of agency policies and other measures to expand sales. However, domestic shipments declined as a result of cutbacks in public projects. As a result, sales of
construction and mining machinery declined. However, the reduction of lead time and the rationalization of labor forces at factories allowed an increase in operating income.
In UNIC product operations, the Tokyo metropolitan area’s stricter regulation of exhaust
gasses boosted sales of trucks to 115,000 units, a 50 to 60% gain over the previous fiscal year.
Shipments of UNIC cranes were 70% higher, and the effects of the increased output, together with
reductions in costs, lowered the break-even point and allowed substantial gains in both revenues
and profits.
Net Sales (Billions of yen)

Operating Income (Billions of yen)

Operating Margin (%)

65.9

65.6

63.8

59.7

63.2

(1.8)

0.7

(1.5)

1.4

4.3

(2.7)

1.0

(2.3)

2.3

6.8

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

Furukawa Co., Ltd.

Metals27.5%

In the Metals Division, net sales declined 15.5% to ¥42,188 million, and an operating
loss of ¥5,046 million was posted. The operating margin was a negative 12.0%, unchanged from the last fiscal year.

This represents improvement of ¥966 million in comparison to the previous fiscal year. Factors
included a ¥6,714 million decline in net sales and a ¥1,806 million contribution to operating income resulting from the operations halt at PKC.
Demand for electrolytic copper is strong in China, but with the mine incident in Indonesia,
supplies are growing tight. LME inventories are rapidly shrinking, and prices in overseas markets
grew continuously throughout the fiscal year. At the end of the term, domestic prices were at¥370,000 per ton, an increase of ¥40,000 from a year earlier. At the same time, though, copper ore
is supplied not only by Thailand, but also by China and India, forcing us to sell ore at the lowest
prices ever.
In response to these conditions, in March 2004 we established a wholly owned subsidiary,
Furukawa Metal & Resources Co., Ltd., to engage in the smelting and refining of metals. We alsoplan to heighten competitiveness by improving management efficiency, and expanding the scopeof our recycling operations and other environment-related businesses.

Net Sales (Billions of yen)

Operating Income (Billions of yen)

Operating Margin (%)

35.8

38.2

48.2

49.9

42.2

(0.4)

(0.3)

(5.3)

(6.0)

(5.0)

(1.2)

(0.7)

(11.0)(12.0)(12.0)

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

9

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Furukawa Co., Ltd.

Electronic
Materials and Chemicals
9.1%

Net sales in the Electronic Materials and Chemicals Division fell 3.8% to ¥13,966 million. Operating income dropped 20.1% to ¥1,056 million, and the operating margin
shrunk 1.5 percentage points to 7.6%.

With the shift to a group management structure, scheduled for March 2005, the electronic materials business and the chemicals business will be spun off to become independent companies.
The recovery in demand for high-purity metallic arsenic is weak. This, together with higher
yield ratios at customers’ plants, held shipments to last fiscal year’s level. However, while secondgeneration mobile telephones were silicone based, it is expected that silicone will be replacedwith gallium arsenate in third-generation mobile telephones. Accordingly, growth in demand forthis product is forecast, including demand in the European and U.S. markets as well. Gallium
phosphorous polycrystals and other crystalline products were not able to maintain shipments atlast fiscal year’s high levels.
Furukawa was unable to restore the profitability of its titanium dioxide manufacturing operations. Therefore, those operations were terminated in September 2003. Those facilities will beshifted to OEM and other consignment manufacturing. With material prices rising, the Company iseliminating low-priced exports. As a result, shipments of cuprous oxide declined. There is fierce
price competition in the market for polymeric ferric sulfate, but net sales were maintained at theprevious fiscal year’s level.

Net Sales (Billions of yen)

Operating Income (Billions of yen)

Operating Margin (%)

16.0

15.7

12.2

14.5

14.0

1.4

2.5

0.4

1.3

1.1

8.5

15.7

3.0

9.1

7.6

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

Furukawa Co., Ltd.

11

In the office building market, Tokyo had anexcess supply of large, new buildings, which
resulted in rapidly rising vacancy rates. At
the same time, the decline in rental fees further accelerated. This made for difficult circumstances, but the division strove to reduce
commissions paid, and to reduce costs
through the rationalization of administrative
divisions.
To increase asset efficiency andstrengthen its financial position, in March
2004 the division sold an office building inTokyo, the Furukawa Building, using the liquidation method.

Real Estate
2.7%

In the Real Estate Division, net sales contracted by 6.7% to ¥4,139 million, and operating income sank 11.5% to ¥1,719 million. The operating margin declined 2.3 percentage points to 41.5%.

Net Sales (Billions of yen)

Operating Income (Billions of yen)

Operating Margin (%)

5.3

5.2

4.6

4.4

4.1

2.2

2.3

1.9

1.9

1.7

41.5

43.4

41.1

43.8

41.5

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

Fuels and Other
19.6%

Net sales soared 130.4% to ¥30,046 million, but an operating loss of ¥164 million was posted. This
represents an improvement of ¥23 million from a year earlier. The operating margin improved by
0.2 percentage points to a negative 0.6%.
The price of crude oil rose as a result of highly charged conditions in the Middle East, andthe division’s sales prices have accordingly gone up. In addition, shipments have increased because the volume of fuel oil sales to electric power plants has grown, and the division has developed new customers. With the increase in sales volume, the division reevaluated its procurement
prices.
Net Sales (Billions of yen)

Operating Income (Billions of yen)

Operating Margin (%)

15.1

19.7

20.6

23.0

30.0

0.1

(0.1)

(0.2)

(0.2)

(0.2)

(0.5)

(0.7)

(0.9)

(0.8)

(0.6)

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

2000

2001

2002

2003

2004

12

Furukawa Co., Ltd.

CORPORATE SOCIAL RESPONSIBILITY ACTIVITIESBased on the Furukawa Group’s management philosophy, “Innovation, Creativity, and Harmony,”
the Company is emplacing systems and organizations to promote and pursue environmental management and corporate citizenship activities, as well as corporate governance.

Corporate GovernanceTakasaki Plant and the Yoshii Plant. The Company plans
to complete the certification of all plants and researchfacilities during fiscal 2005, and will be intensifying its
environmental protection programs. Furukawa is energetically working to bring all its manufacturing activities into harmony with environmental management
objectives.

For the sake of putting its corporate philosophy into
practice and in pursuit of highly ethical and transparent management, the Furukawa Group has strengthened its corporate governance systems and made compliance an important theme in all its business activities. At the time of the scheduled implementation of aGroup management system in March 2005, we will
clarify the responsibilities and authority of each operation, in an endeavor to emplace a fast-moving management system that can deal with changes in the business environment.
Also, in fiscal 2001 we established a Risk Management Committee to study the risks associated withour business activities. Then, in April 2004, we reorganized this into the Risk Management and Compliance
Committee, whose role is to ensure that our corporate
activities are socially responsible and sincerely ethical,
and to strengthen corporate governance.

Environmental Protection
As a corporate citizen, Furukawa holds environmental
problems to be one of the gravest management issues
it faces, and strives to display social responsibility as it
strives for sustainable operations. For full particulars,
see the Company’s Environmental Report.

Community Support
It the spirit of one element of our management philosophy—harmony—Furukawa pursues an active community support program. The Company strives to maintain good relations with communities through afforestation programs, helping to preserve the famous Nikko
Suginamiki, seaside cleanups, planting greenery, andother activities. With each employee steeped in
Furukawa’s management philosophy, the Company willcontinue to devote its efforts to maintaining harmony
with the regions in which it operates through community support programs.

ISO 14001
Pursuing its basic environmental management policy,
Furukawa obtained ISO 14001 certification of its Sakura
UNIC products plant in 2001. Since that time, certification has been received by the industrial and environmental machinery operations of the Oyama Plant, theMaterials Research Laboratory of the R&D Divisions,and the rock drill manufacturing operations of the

Onuma Forest

Usuiso Seaside Cleanup

Shonan Bridge(Painting at sponsored art
gallery about miners)

Ashio Lions Club Afforestation Activity

Tochi no Kyoboku(Furukawa takes care of this giant
Japanese horse chestnut tree and is
thinking about applying for its
recognition as a natural monument.)Furukawa Co., Ltd.

FINANCIAL SECTION

Consolidated Five-Year Financial Summary
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended 31st MarchMillions of yen, except for per share amounts and return on equity

2004

2003

2002

2001

2000

Net sales¥153,513¥151,630¥149,436¥144,333¥138,146

Net income (loss)(27,634)(17,000)(18,696)(4,191)

2,811¥ (84.61)¥ (67.88)¥ (74.56)¥ (16.71)

—

—

—

—

10.26

Cash dividends

—

—

—

3.00

3.00

Net assets

71

134

199

245

229

Current assets¥ 83,777¥ 79,552¥ 87,081¥109,335¥143,329

Current liabilities

81,213

94,056100,298

98,15574,613

Total assets

206,250

252,856

278,174

294,020

255,779

Shareholders’ equity

28,66033,66549,791

61,491

57,354Return on equity (%)(88.7)(40.7)(33.6)(7.1)

4.9

Per share amounts (yen):
Net income (loss):
Basic
Diluted180

Net Sales

Net Income (Loss)

Shareholders Equity(Billions of yen)(Billions of yen)(Billions of yen)

138.1 144.3 149.4 151.6 153.5

2.8

57.4

10

(4.2) (18.7) (17.0) (27.6)

80

61.5

(%)
49.8

33.7

28.7

16

0

60

8

90

-10

40

0

45

-20

20

-8

-30

2000 2001 2002 2003 2004

02000 2001 2002 2003 2004

11.21

Return on Equity

135

0

¥

4.9

(7.1) (33.6) (40.7) (88.7)-100

2000 2001 2002 2003 2004

2000 2001 2002 2003 2004

13

14

Furukawa Co., Ltd.

Financial Review
Revenue and Expenses

Financial Position

During fiscal 2004, ended March 31, 2004, net sales in-

Furukawa pursues financial policies that are intended tocreased 1.2% to ¥153,513 million. However, cost of sales

accomplish the goals of maintaining liquidity at suitable

was reduced by 0.5% to ¥135,872 million, and the cost oflevels, securing the funds needed for business activities,

sales margin declined 1.5% to 88.5%. This was the result ofand preserving the soundness of its balance sheets. Most

an improved cost rate, the halt in operations at PKC, in-importantly, interest-bearing liabilities at the end of thecreased production (primarily in the Machinery Division),year were reduced by 11.7% to ¥123,995 million, in accor-

and reductions in personnel expenses and other costs.

dance with the importance placed on the reduction of as-

Selling, general and administrative expenses were cur-sets in our medium-term management plan.

tailed by 6.6%, falling to ¥15,617 million, while the SGA ra-

Total assets at year’s end were ¥206,250 million, down

tio improved by 0.8% to 10.2%. As a result of the

18.4% from a year earlier. Increased management effi-

foregoing, operating income of ¥2,024 million was posted.

ciency brought a reduction in notes and accounts receiv-

This is the first time in two years that the Company has

able and inventories, but cash and cash equivalents

posted an operating profit.

increased, which resulted in a 5.3% rise to ¥83,777 million

Under Other Income and Expenses, a loss of ¥35,040

in current assets. Property, plant and equipment declined

million was posted under Other, Net. This was the result

34.6% to ¥85,216 million, primarily due to the write-off ofof expenses of ¥53,137 million incurred in connection

fixed assets at our Australian copper refining subsidiarywith the halt in operations at our Australian copper refin-

and the sale of the Furukawa Building using the liquida-

ing subsidiary, only partially offset by gains on sales of in-tion method. Current liabilities contracted 13.7% tovestment securities of ¥9,097 million, and ¥6,911 million¥81,213 million, as a result of reductions in notes and ac-in proceeds from the sale of our hydroelectric business.

counts payable, short-term loans, and other factors. Long-

These factors resulted in a loss before income taxes

term liabilities were reduced 10.1% to ¥103,554 million,

and minority interests of ¥35,238 million. After income

primarily as a result of the contraction of long-term debt.

taxes and equity in earnings of affiliates, a net loss of

Furukawa conducted a capital increase through a¥27,634 million was posted.

third-party allocation of shares, and merged with subsidiary, Furukawa Real Estate Co., Ltd., and absorbed thatcompany’s retained earnings. However, retained earnings
declined as a result of the fiscal year’s net loss. Shareholders’ equity, therefore, fell 14.9% to ¥28,660 million,
but the shareholders’ equity ratio rose 0.6% to 13.9%.

7.5

Operating Income (Loss)

Return on Sales(Billions of yen)

(%)

1.5

5.0

(4.7)

(1.6)

2.0

5

2.0

Total Assets(Billions of yen)

(2.9) (12.5) (11.2) (18.0)

320

5.0

0

240

2.5

-5

160

0

-10

80

-5.0

-20

2000 2001 2002 2003 2004

255.8 294.0 278.1 252.9 206.3

02000 2001 2002 2003 2004

2000 2001 2002 2003 2004

Furukawa Co., Ltd.

R&D and Capital Expenditures

Cash FlowsIn response to rapid changes in the social and economic

Net cash used in operating activities during the fiscal year

environment, the Furukawa Group is engaged in researchrose to ¥3,083 million, chiefly as a result of the larger net

and development of a wide range of new materials andloss before income taxes and minority interests, and a de-high-value-added products to meet the needs of the mar-crease in accrued employees’ retirement benefits.

ket. Research and development expenses for the fiscal

Net cash provided by investing activities was ¥25,602

year were ¥1,794 million, 1.2% of consolidated net sales.

million, mainly the proceeds from the sale of investment

Of this, ¥873 million was allocated to the Machinery Divi-

securities, the Company’s hydroelectric business, and tan-sion, ¥56 million to the Metals Division, and to ¥864 mil-gible fixed assets. A portion of these funds was used tolion the Electronic Materials Division.

pay down interest-bearing liabilities.

Capital investment (investments in intangible fixed as-

Net cash used in financing activities totaled ¥14,962

sets included) totaled ¥2,995 million. Of this total, ¥701

million. Income from the stock issue did not offset a de-million was allocated to the Machinery Division for im-

cline in deposits received for securities lending transac-

provements in manufacturing efficiency, ¥925 million totions, repayments of long-term debt (net), and the cost of

the Metals Division for maintenance on plant and equip-

redemption of the Company’s bonds.

ment at PKC, ¥717 million to the Electronic Materials Di-

As a result, cash and cash equivalents at the end of thevision for improvements in manufacturing efficiency,

fiscal year were up 64.6% from a year earlier, at ¥19,454¥501 million to the Real Estate Division for maintenancemillion.

on lease buildings, and ¥149 million to the Fuels and Others Division.

180

Net Assets per ShareNet Income (Loss) per Share

Capital Expenditures

(Yen)

(Yen)

(Billion of yen)

229

245

199

134

71

15

11.21 (16.71) (74.56) (67.88)(84.61)

12

135

10

9

90

5

6

45

0

3

2000 2001 2002 2003 2004

11.6

7.8

5.8

3.0

0

-5

0

10.9

2000 2001 2002 2003 2004

2000 2001 2002 2003 2004

15

16

Furukawa Co., Ltd.

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
31st March, 2004 and 2003

Thousands of
U.S. dollars (Note 3)

Millions of yen

ASSETS

2004

2003

2004

¥ 19,454¥ 11,817$ 183,528

Notes and accounts

31,96832,822

301,585

Affiliates

1,958

1,855

18,472Inventories (Notes 4 and 6)

20,521

24,873

193,594

Deferred income taxes (Note 12)

1,985

1,843

18,726

Other current assets (Note 6)

8,631

6,836

81,425

Allowance for doubtful accounts

(740)

(494)

(6,981)

83,77779,552

790,349

Investments in securities (Notes 5 and 6)

25,53225,549240,868

Investments in affiliates

3,050

2,855

28,774Loans receivable

2,190

2,315

20,660

955

6,915

9,009

Current Assets:
Cash and cash equivalents (Notes 6 and 15)
Receivables, trade (Note 6):

Total current assets

Investments:

Deferred income taxes (Note 12)
Other investments (Note 7)

7,364

5,128

69,472

Allowance for doubtful accounts(1,834)(1,673)(17,302)37,25741,089351,481Land and timberlands

57,32962,431

540,840

Buildings and structures

40,681

48,987383,783

Machinery and equipment

38,901

81,630366,991

Construction in progress

116

760

1,094

137,027

193,808

1,292,708(51,811)(61,593)(488,783)

85,216132,215803,925¥206,250¥252,856$1,945,755

Total investments

Property, Plant and Equipment—at Cost (Notes 6 and 7):

Accumulated depreciation
Property, plant and equipment, net

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

Furukawa Co., Ltd.

Thousands of
U.S. dollars (Note 3)

Millions of yen

LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY

2004

2003

2004

¥ 24,269¥ 25,374$ 228,953

23,25823,887

219,415

17,937

20,878169,217

210

349

1,981

Current Liabilities:
Short-term loans (Note 6)
Current portion of long-term debt (Note 6)
Payables, trade:
Notes and accounts (Note 6)
Affiliates
Accrued expenses

8,218

9,221

77,528

Accrued income taxes (Note 12)

281

800

2,651

Deferred income taxes (Note 12)

4

19

38

7,036

13,52866,377

81,213

94,056766,160

Long-term debt (Note 6)

76,46891,128721,396

Accrued employees’ retirement benefits (Note 11)

1,020

1,588

9,623

Other current liabilities (Notes 5 and 6)
Total current liabilities
Long-term Liabilities:

379

385

3,575

Deferred income taxes on surplus on the revaluation of land (Note 12)

Deferred income taxes (Note 12)

13,466

13,866

127,038

Other long-term liabilities (Note 6)

12,221

8,196

115,293

Total long-term liabilities

103,554

115,163

976,925(7,177)

9,972(67,707)

Issued—404,455,680 shares in 2004 and 250,751,680 shares in 2003
Capital surplus

28,20829,53423,608
11,435

266,113
278,623

Deficit(50,390)(18,651)(475,377)

Surplus on the revaluation of land, net of income taxes

20,172

21,136

190,302

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

1,349(2,291)

12,726

Translation adjustments(206)(1,566)(1,944)

28,66733,671

270,443

(7)

(6)

(66)

28,66033,665

270,377¥206,250¥252,856$1,945,755

Minority Interests in Consolidated Subsidiaries
Contingent Liabilities (Note 13)
Shareholders’ Equity:
Common stock:
Authorized—800,000,000 shares

Treasury stock, at cost
Total shareholders’ equity
Total liabilities, minority interests and shareholders’ equity
The accompanying notes are an integral part of these statements.

17

18

Furukawa Co., Ltd.

Consolidated Statements of Operations
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended 31st March, 2004 and 2003

Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

2003

2004

Net Sales¥ 153,513 ¥ 151,630$ 1,448,236

Cost of Sales (Note 8)(135,872)(136,509)(1,281,811)

Gross profit

17,641

15,121

166,425(15,617)(16,712)(147,330)

2,024(1,591)

19,095Interest and dividend income

502

565

4,736

Equity in earnings of affiliates

103

179

972

Interest expense(2,827)(3,298)(26,670)

Other, net (Note 14)(35,040)(17,887)(330,566)(35,238)(22,032)(332,433)

Current(550)(1,035)(5,189)Deferred(4,138)4,806(39,038)

Total(4,688)3,771(44,227)

12,292

1,261

115,962¥ (27,634) ¥ (17,000)$ (260,698)

Yen

U.S. dollars (Note 3)

Selling, General and Administrative Expenses (Note 8)
Operating income (loss)
Other Income (Expenses):

Loss before income taxes and minority interests
Income Taxes (Note 12):

Minority Interests
Net loss

Net Loss per Share:
Basic

¥

(84.61) ¥ (67.88)$(0.80)

Diluted———Cash Dividends per Share

—

—

—

The accompanying notes are an integral part of these statements.

Furukawa Co., Ltd.

Consolidated Statements of Shareholders’ Equity
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended 31st March, 2004 and 2003

Millions of yen
Number ofshares ofcommonstock(thousands)

Surpluson therevaluationof landNet
unrealized
holding
gain (loss)
Translation
on securities adjustments

Treasurystock,
at cost¥15,517 ¥ (6,921) ¥21,857¥(3,635) ¥ (633)¥(2)

Commonstock

Balance as of 31st March, 2002 250,752
Increase due to the change
in the tax rate—
Used to reduce a deficit—
Reversal of surplus on therevaluation of land—
Net loss for the year—
Bonuses to directors andstatutory auditors—
Net change during the year—

¥23,608

Capitalsurplus

Deficit———(4,082)

—
4,082

487
—

—
—

—
—

—
—

—
—

—
—

1,208
(17,000)(1,208)
—

—
—

—
—

—
—

—
—

—
—

(20)
—

—
—

—
1,344

—
(933)

—
(4)

Balance as of 31st March, 2003 250,752
Increase due to third-party
allotment
79,304
Increase due to merger
74,400Decrease due to the change
in the tax rate—
Reversal of surplus on therevaluation of land—
Net loss for the year—
Bonuses to directors andstatutory auditors—
Net change during the year—

23,608

11,435(18,651)

21,136(2,291)(1,566)

(6)

4,600
—

4,600
13,499—(4,896)

—
—

—
—

—
—

—
—

—

—

—

(155)

—

—

—

—
—

—
—

809
(27,634)

(809)
—

—
—

—
—

—
—

—
—

—
—

(18)
—

—
—

—
3,640

—
1,360

—
(1)

Balance as of 31st March, 2004 404,456¥28,208¥29,534 ¥(50,390) ¥20,172¥ 1,349¥ (206)¥(7)

Net
unrealized
holding
gain (loss)
Translation
on securities adjustments

Treasurystock,
at costBalance as of 31st March, 2003
Increase due to third-party allotment
Increase due to merger
Decrease due to the change in the tax
rate
Reversal of surplus on the revaluationof land
Net loss for the year
Bonuses to directors and statutory
auditors
Net change during the year

$222,717 $107,877 $(175,953) $199,396 $(21,613) $(14,774)
43,39643,396————— 127,350 (46,188)
—
—
—

$(57)
—
—

Balance as of 31st March, 2004

Thousands of U.S. dollars (Note 3)

Commonstock

Capitalsurplus

DeficitSurpluson therevaluationof land———(1,462)

—

—

—

—
—

—
7,632
— (260,698)(7,632)
—

—
—

—
—

—
—

—
—

—
—

—
—

—
34,339—12,830—(9)$266,113 $278,623 $ (475,377) $190,302 $ 12,726 $ (1,944)$(66)

The accompanying notes are an integral part of these statements.

(170)
—

19

20

Furukawa Co., Ltd.

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended 31st March, 2004 and 2003

Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

2003

2004

¥(35,238)¥(22,032)$(332,433)

Unrealized exchange gain on foreign currency items(5,471)(2,837)(51,613)

Depreciation and amortization

6,533

6,261

61,632

Write-down of investments in securities

239

16,8382,255

Increase (decrease) in allowance for doubtful accounts, net

461

(555)

4,349

(Decrease) increase in accrued employees’ retirement benefits(1,859)72(17,538)

Gain on sales of property, plant and equipment(1,194)(254)(11,264)

Gain on sales of investments in securities(9,097)(6)(85,821)

Interest and dividend income

(502)

(565)

(4,736)

Interest expense

2,827

3,298

26,670Gain on sales of hydroelectricity business(6,911)—(65,198)

Reduction of plant value to recoverable amount

41,428—390,830

Decrease (increase) in receivables, trade

1,024(1,453)

9,660

Decrease in inventories

5,200

5,221

49,057

Decrease in payables, trade(4,194)(3,220)(39,566)

9,372

1,447

88,414

2,618

2,215

24,698

484

505

4,566

(4,267)(3,302)(40,255)—(1,062)—(1,179)(419)(11,123)

(739)

(90)

(6,971)¥ (3,083)¥ (2,153)$ (29,085)

Cash Flows from Operating Activities:
Loss before income taxes and minority interests
Adjustments to reconcile loss before income taxes and minority
interests to net cash used in operating activities:

Changes in operating assets and liabilities:

Other
SubtotalInterest and dividends received
Interest paid
Payments for closing mines
Income taxes paid
Other
Net cash used in operating activities

Furukawa Co., Ltd.

Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

2003

2004

Cash Flows from Investing Activities:
Increase in time deposits¥ (3,563)

Decrease in time deposits(136)$ (33,613)

319

740

3,009

Purchases of property, plant and equipment(2,837)(6,113)(26,764)

Proceeds from sales of property, plant and equipment

9,760

2,338

92,075

(56)

(436)

(528)

Purchases of investments in securities(2,620)(1,544)(24,717)

Proceeds from sales of investments in securities

15,575

1,166

146,934

Proceeds from sales of hydroelectricity business

10,000—94,340

Proceeds from rental of real estate

196

248

1,849

Payments for investments

(200)

—

(1,887)(1,000)—(9,434)—183—

in the scope of consolidation

—

(345)

—

Increase in loans receivable

(2)

(842)

(19)

Other

30

203

283

25,602(4,538)

241,528

Proceeds from long-term loans payable

19,12925,167

180,462

Repayment of long-term loans payable(27,381)(11,473)(258,311)

Proceeds from short-term loans

23,817

8,632

224,689

Repayment of short-term loans(24,833)(14,556)(234,274)

Proceeds from issuance of notes

1,000

—

9,434

Repayment of notes(5,713)(11,742)(53,896)

Proceeds from issuance of common stock

9,132

—

86,151

Proceeds from sale-lease back transactions

—

305

—

Repayment of financial lease obligations

(178)

(180)

(1,679)(9,990)4,990(94,245)

55

(35)

518

(14,962)

1,108(141,151)

80

(80)

755

Net increase (decrease) in cash and cash equivalents

7,637(5,663)72,047

Cash and Cash Equivalents at Beginning of Year11,817

17,480111,481¥ 19,454¥ 11,817$ 183,528

Purchases of intangible assets

Payments for long-term deposits¥

Proceeds from purchases of subsidiaries’ stock resulting
in changes in the scope of consolidation
Decrease from sales of subsidiaries’ stock resulting in changes

Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:

Net (decrease) increase deposits for securities lending transactions
Other
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents

Cash and Cash Equivalents at End of Year (Note 15)
The accompanying notes are an integral part of these statements.

21

22

Furukawa Co., Ltd.

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
31st March, 2004

1. Basis of Presentation
The accompanying consolidated financial statements of
Furukawa Co., Ltd. (the “Company”) and consolidated subsidiar-include information which is not required under accounting principles generally accepted in Japan but is presented herein as addi-

ies (together the “Furukawa Group”) have been prepared in accordance with accounting principles generally accepted in Japan,
which are different in certain respects as to the application andtional information.
In preparing these statements, the Company has made certain
reclassifications and rearrangements to the consolidated financial

disclosure requirements of International Financial ReportingStandards, and have been compiled from those prepared by theCompany as required under the Securities and Exchange Law ofstatements prepared in Japan in order to present these statements
in a form which is more familiar to readers outside Japan.
In addition, certain amounts in the prior year’s financial state-

Japan.
In addition, the notes to the consolidated financial statements

ments have been reclassified to conform to the current year’s presentation.

2. Summary of Significant Accounting Policies(1) Principles of Consolidation
The Company had 41 subsidiaries as of 31st March, 2004 (40 as of(3) Marketable Securities and Investments in Securities
The Furukawa Group has been adopted “Accounting Standards

31st March, 2003). The consolidated financial statements included
the accounts of the Company and 41 subsidiaries as of 31st
March, 2004 (40 as of 31st March, 2003).

for Financial Instruments”. Under this standard, securities areclassified into three categories: trading, held-to-maturity or othersecurities. The Furukawa Group does not hold any trading or

Compared with the previous year, the number of subsidiaries
increased by 3 due to establishment and decreased by 2 due to liquidation and so on. During the year ended 31st March, 2003, aheld-to-maturity securities as of 31st March, 2004 and 2003. Under
this standard, marketable securities classified as other securities
are carried at fair value with changes in unrealized holding gain orconsolidated subsidiary became an affiliate due to the decrease in
the Company’s ownership percentage resulting from issuance of
its shares to a third party.

loss, net of the applicable income taxes, included directly inshareholders’ equity. Fair value is determined based on the average of the market value during the last month of the fiscal year.

For the purpose of preparing the consolidated financial statements, all significant inter-company transactions, account balances and unrealized profits among the Furukawa Group haveNon-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined by the moving
average method.

been eliminated.
Certain foreign subsidiaries have a 31st December year-end.
Necessary adjustments have been made for significant transaction(4) Inventories

with such subsidiaries during the period from 1st January to 31st
March.
Although the Company had 13 affiliates as of 31st March, 2004

products held by the Company are stated at cost determined by
the moving average method and those held by a foreign consolidated subsidiary are stated at cost determined by the first-in, first-(13 affiliates as of 31st March, 2003), the equity method was applied to 6 affiliates as of 31st March, 2004 (6 as of 31st March,
2003) in preparing the consolidated financial statements.

out method. Other inventories are mainly stated at cost
determined by the average method.

(2) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investmentswith a maturity of three months or less when purchased.

Finished copper products and work in process relating to copper(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 which are experiencing financial difficulties.

Furukawa Co., Ltd.

(6) Property, Plant and Equipment, and Depreciation
Property, plant and equipment is stated at cost. Depreciation is(9) Surplus on the Revaluation of Land
Pursuant to the “Law Concerning the Revaluation of Land”, land

mainly calculated by the straight-line method based on the estimated useful lives of the assets. The useful lives of property, plantand equipment are summarized as follows:

used for the Company’s business operations was revalued on 31st
March, 2002. The income tax effect of the difference between thebook value and the revalued amount has been presented under li-

Buildings and structures
5 to 57 years
Machinery and equipment
2 to 30 years
Depreciation is calculated by straight-line method for intangible

abilities as “Deferred income taxes on surplus on the revaluationof land” and the remaining balance has been presented undershareholders’ equity as “Surplus on the revaluation of land” in theassets.
(7) Leases

accompanying consolidated balance sheets. Revaluation of land
was determined based on the official notice prices published by
the Commissioner of the National Tax Authorities in accordanceNon-cancelable lease transactions by the Company and domestic
consolidated subsidiaries are accounted for as operating leases(whether such leases are classified as operating or financewith Paragraph 4, Article 2 of the “Enforcement Ordinance Concerning Land Revaluation,” with certain necessary adjustments.
The carrying value of the land after revaluation exceeded its fairleases), except that lease agreements which stipulate the transferof ownership of the leased assets to the lessees are accounted for
as finance leases. However, leases of the foreign consolidated

value by ¥6,878 million ($64,887 thousand) as of 31st March 2004.
A domestic affiliate of the Company also revalued its land andthe difference between the book value and the revalued amount,subsidiaries are generally classified and accounted for as either finance or operating leases.

net of the applicable income taxes, multiplied by the Company’sownership percentage, was included in “Surplus on the revaluation of land.” The carrying value of the land of this affiliate after(8) Retirement Benefit Plans
The employees of the Company and most of its domestic consolidated subsidiaries are covered by unfunded employee retirement

revaluation exceeded its fair value by ¥1,063 million ($10,028
thousand) as of 31st March, 2004.

benefit 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(10) Stock Issue Costs
Stock issue costs are expensed when incurred.

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.

(11) Income Taxes
Current income taxes comprising corporation tax, enterprise tax
and inhabitants’ taxes are provided for based on amounts cur-

Certain consolidated subsidiaries, (both domestic and foreign)
have defined contribution plans.
Accrued employees’ retirement benefits have been provided at

rently payable for each year. Deferred income taxes arising from
temporary differences between financial reporting and tax basesof the assets and liabilities are reflected in the consolidated finan-

an amount calculated based on the retirement benefit obligationand the fair value of the pension plan assets at the balance sheet
dates, as adjusted for unrecognized net retirement benefit obliga-

cial statements.

tion at transition, unrecognized actuarial gain or loss and unrecognized prior service cost. The retirement benefit obligation has
been attributed to each period by the straight-line method over

Basic net income (loss) per share is computed based on the net
income (loss) attributable to shareholders of common stock andthe weighted average number of shares of common stock out-

the years of service of the eligible employees. The Company established a trust and the Company’s net retirement benefit obligation at transition was fully charged to operations for the year

standing during the year, and diluted net income (loss) per shareis computed based on the net income (loss) attributable to theshareholders and the weighted average number of shares of com-ended 31st March, 2001. The net retirement benefit obligation attransition of the domestic consolidated subsidiaries of ¥560 million is being amortized by the straight-line method over a period

mon stock outstanding during each year after giving effect to thedilutive potential of shares of common stock to be issued upon
the conversion of convertible notes.

of 5 years from 2001.
Prior service cost is being amortized by the straight-line
method principally over a period of 15 years which are shorter
than the average remaining years of service of the employees. Actuarial gain and loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method
over the period of mainly 15 years which are shorter than the average remaining years of service of the employees.

(12) Amounts per Share

23

24

Furukawa Co., Ltd.

Amounts per share of net assets are computed based on net assets available for distribution to the shareholders and the number(15) Hedging Activities
The Furukawa Group uses derivative financial instruments for theof shares of common stock outstanding at the year end. No diluted net loss per share is presented for the years ended 31st
March, 2004 and 2003 because the Company recorded net loss forpurpose of hedging the risks of adverse fluctuations in foreign exchange rates, commodity prices and interest rates on the receivables, payables and forecast transactions denominated in foreign

those years.
(13) Foreign Currency Translation

currencies. All derivative financial instruments except below arestated at fair value. The Furukawa Group defers gain or loss on
the changes in the fair values of derivative financial instruments

Foreign currency amounts are translated into Japanese yen on thebasis of the rates of exchange in effect at the balance sheet date
for monetary assets and liabilities. Gains or losses resulting fromon the balance sheet until the recognition of gain or loss onhedged items.
Trade receivables, trade payables and forecast transactions de-translation of foreign currency transactions are credited or
charged to income as incurred.
Assets, liabilities, revenue and expense accounts of the foreign

nominated in foreign currencies are translated at the contracted
rates if the relating forward contracts qualify for hedge accounting.

consolidated subsidiaries are translated at the rates of exchange
in effect at the balance sheet date. Shareholders’ equity is translated at the historical rate. Differences arising from translation

The interest rate swaps which qualify for hedge accounting andmeet specific matching criteria are not carried at fair value but
any differences paid or received on the interest rate swaps areare included in minority interests and translation adjustments.
(14) Appropriation of Retained Earnings

recognized as adjustments to interest expense or income over thelife of each swap, thereby adjusting the effective interest rate on
the hedged items.

Cash dividends, and bonuses to directors and statutory auditors
are recorded in the fiscal year in which the proposed appropriations of retained earnings are approved by the board of directors(16) Shareholders’ Equity
In accordance with the Commercial Code of Japan (the “Code”),

and/or shareholders’ meeting.

the Company has provided a legal reserve, which was included inretained earnings (deficit). The Code provides that an amountequal to at least 10% of the amount to be disbursed as distributions of earnings be appropriated to the legal reserve until the total of such reserve and the capital surplus account equals 25% of
the common stock account.
The Code provides that neither capital surplus nor the legal reserve is available for dividends, but both may be used to reduce or
eliminate a deficit by resolution of the shareholders or may betransferred to common stock by resolution of the Board of Directors.

3. U.S. Dollar Amounts
The Company and its domestic consolidated subsidiaries maintain

March, 2004. The inclusion of such U.S. dollar amounts is solely

their accounting records in yen. The U.S. dollar amounts includedin the accompanying financial statements and notes thereto represent the arithmetic results of translating yen into dollars at thefor the convenience of certain readers and is not intended to imply that the assets and liabilities which originated in yen havebeen or could readily be converted, realized or settled in U.S. dol-rate of ¥106=US$1, the approximate rate of exchange on 31stlars at that or any other rate.

Furukawa Co., Ltd.

4. Inventories
Inventories as of 31st March, 2004 and 2003 consisted of the following:

Millions of yen

Finished products
Work in process
Raw materials and supplies

Thousands of
U.S. dollars

2004

2003

2004

¥12,204¥13,302$115,132

3,653
4,664

6,704
4,867

34,46244,000¥20,521¥24,873$193,594

5. Investments in Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of 31st March,
2004 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2004

Acquisition
cost

Carrying
value

Unrealized
gain (loss)

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥ 6,485——¥ 9,623——¥3,138——$ 61,179——$ 90,783——$29,604
—
—

6,485

9,623

3,138

61,17990,78329,604

11,48416

10,498
16

(986)
(0)

108,340
151

99,038151(9,302)(0)

Securities whose carrying value
exceeds their acquisition cost:
Listed corporate stocks
Government bonds
Corporate bonds
Securities whose acquisition costexceeds their carrying value:
Listed corporate stocks
Government bonds
Corporate bonds
Total

—

—

—

—

—

—

11,50010,514(986)

108,491

99,189(9,302)¥17,985¥20,137¥2,152$169,670$189,972$20,302

Millions of yen

2003
Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥ 3,64243—¥ 5,13846—¥ 1,496
3
—

3,685

5,184

1,499

18,501——

14,729——(3,772)——

18,501¥22,186

14,729¥19,913(3,772)¥(2,273)

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

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

25

26

Furukawa Co., Ltd.

Sales of securities classified as other securities amounted to¥15,575 million ($146,934 thousand) and ¥1,161 million with an ag-“Investments in securities” in the accompanying consolidatedbalance sheets includes securities lent amounting to ¥13,182 mil-gregate gain of ¥9,097 million ($85,821 thousand) and ¥6 million
and loss of ¥313 million ($2,953 thousand) and ¥1,345 million forthe years ended 31st March, 2004 and 2003, respectively.

lion as of 31st March, 2003. “Other current liabilities” in the accompanying consolidated balance sheets includes deposits
received of ¥9,990 million for such securities lending transactions
as of 31st March, 2003.

6. Short-Term Loans and Long-Term Debt
Short-term loans, most of which are unsecured, represented notes payable to banks, with the average interest rates of 1.5 percent and 1.0
percent as of 31st March, 2004 and 2003, respectively.
Long-term debt as of 31st March, 2004 and 2003 consisted of the following:

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

¥ 20,196¥ 20,196$ 190,528

1.47 percent yen notes due 2003
1.45 percent yen notes due 2004
1.91 percent yen notes due 2005

—
5,000
5,000

5,000
5,000
5,000

—
47,17047,1700.37 percent yen notes due 2006
2.21 percent yen notes due 2007
Loans, principally from banks, insurance companies and government agencies,

1,000
4,100

—
4,900

9,434
38,679most of which are secured, due 2004 to 2019

64,43074,919607,830

99,726

115,015

940,811(23,258)(23,887)(219,415)¥ 76,468¥ 91,128$ 721,396

0.90 percent yen convertible notes due 2006

Current portion of long-term debt

The 0.90 percent yen convertible notes are convertible intoshares of common stock at the option of the holder on any date

The average interest rate of the above loans amounting to¥64,431 million ($607,840 thousand), was 2.1 percent as of 31st

up to 30th March, 2006 at the conversion price of ¥332 ($3.13) per
share. The above conversion price is subject to adjustment in certain circumstances, including stock splits. If all convertible notes

March, 2004.

had been converted at the then current conversion price as of 31st
March, 2004, 60,831 thousand new shares of common stock would
have been issuable.
The aggregate annual maturities of long-term debt subsequent to 31st March, 2004 were as follows:Year ending 31st March,Millionsof yenThousands of
U.S. dollars

2005
2006

¥23,258
42,534$219,415
401,2642007
2008
2009 and thereafter

14,421
11,031
8,482

136,047
104,066
80,019¥99,726$940,811

The Company and certain consolidated subsidiaries have entered into overdraft and loan commitment agreements amounting
to ¥35,041 million ($330,575 thousand) with 27 banks and ¥33,582

thousand) and ¥17,384 million ($164,000 thousand), respectively,
as of 31st March, 2004 and amounted to ¥19,371 million and¥14,211 million, respectively, as of 31st March, 2003. In addition,

million with 27 banks as of 31st March, 2004 and 2003, respectively. The borrowings outstanding and the unused balances under these credit facilities amounted to ¥17,657 million ($166,575

the following lease obligations are included in “Other current liabilities” and “Other long-term liabilities” in the accompanying
consolidated balance sheets.

Furukawa Co., Ltd.

Millions of yen

Current portion
Non current portion

Thousands of
U.S. dollars

2004

2003

2004

¥ 331
5,258

¥

$ 3,123
49,60491
4,644

Assets pledged as collateral for payables, trade of ¥178 million ($1,679 thousand) and ¥172 million, short-term debt of ¥1,189 million($11,217 thousand) and ¥1,339 million, long-term debt (including current portion of long-term debt) of ¥13,057 million ($123,179 thousand)and ¥23,755 million and lease obligations of ¥4,998 million ($47,151 thousand) and ¥4,294 million as of 31st March, 2004 and 2003, respectively, consisted of the following:

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

Cash and cash equivalents
Receivables, trade
Inventories¥ 4,350599
617¥ 1,450
1,706
4,850

$ 41,038
5,651
5,821

Other current assets
Investments in securities
Property, plant and equipment, net

3,807
2,919
21,138241518
87,32735,91527,537
199,415¥33,430¥96,092$315,377

Above assets include one consolidated foreign subsidiary’s assets which are pledged as collateral for lease obligations. The subsidiaryhas discretionary powers on these assets other than property, plant and equipment leased under the lease contracts and other current assets of ¥3,602 million ($33,981 thousand) as of 31st March, 2004.

7. Depreciation and Amortization
Depreciation and amortization for the years ended 31st March, 2004 and 2003 consisted of the following:

Millions of yen

Property, plant and equipment
Other investments

Thousands of
U.S. dollars

2004

2003

2004

¥6,47063¥6,171
90$61,038594¥6,533¥6,261$61,632

8. R&D Expenses
R&D expenses, included in selling, general and administrative expenses and cost of sales for the years ended 31st March, 2004 and 2003
amounted to ¥1,794 million ($16,925 thousand) and ¥2,003 million, respectively.

9. Leases
The Furukawa Group leases certain machinery and equipment under non-cancelable finance lease agreements, of which ownership is all
non-transferable.
The pro forma amounts representing acquisition costs, accumulated depreciation and net carrying value for the machinery and equipment held under the finance leases, which are currently accounted for as operating leases as of 31st March, 2004 and 2003 were as follows:

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

Acquisition costs
Less accumulated depreciation¥1,558874¥1,596891$14,698
8,245

Net carrying value

¥ 684

¥ 705

$ 6,453

27

28

Furukawa Co., Ltd.

Lease payments relating to finance leases accounted for as operating leases amounted to ¥265 million ($2,500 thousand) and ¥294 million for the years ended 31st March, 2004 and 2003, respectively, which were equal to the depreciation expense of leased assets computedby the straight-line method over the lease terms.
Future rental payments including an interest element under the finance leases outstanding as of 31st March, 2004 and 2003 are summarized as follows:

Millions of yen

Within one year
Over one year

Thousands of
U.S. dollars

2004

2003

2004

¥ 215
469

¥236
469

$ 2,028
4,425

¥ 684

¥705

$ 6,453

The amounts of outstanding future lease payments under lease agreements other than finance leases, including the interest portion, asof 31st March, 2004 and 2003 are summarized as follows:

Millions of yen

Within one year
Over one year

Thousands of
U.S. dollars

2004

2003

2004

¥ 747
2,319

¥3
0

$ 7,047
21,878¥3,066¥3$28,925

10. Financial Instruments
The Furukawa Group entered into swap agreements to manage interest rate risks. Interest rate swaps convert floating rate long-

There are market risk in these derivatives. As the counterparties
to the derivative transactions are major financial institutions andterm debt to a fixed basis. The Furukawa Group also entered into
forward foreign exchange contracts to hedge against transactions
in foreign currencies. For copper products, the Furukawa Group

trading companies, the Group believes that their derivative financial instruments entails minimal credit risks. Furthermore, theFurukawa Group does not use derivative financial instruments that

also entered into futures contracts to reduce the risks of fluctuations of commodity price.

would increase market risks.
As of 31st March, 2004 and 2003, there is no balance of derivative transaction for which hedge accounting is not applied.

11. Retirement Benefits
The balances of the retirement benefit obligation and plan assets, funded status and the amounts recognized in the consolidated financial
statements as of 31st March, 2004 and 2003 are summarized as follows:

Millions of yen

Retirement benefit obligation

Thousands of
U.S. dollars

2004

2003

2004

¥(13,811)¥(15,467)$(130,292)

Plan assets at fair value

8,317

5,797

78,462

Funded status
Unrecognized net retirement benefit obligation at transition
Unrecognized actuarial loss

(5,494)
112
9,958(9,670)224
12,359(51,830)
1,057
93,943

Unrecognized prior service cost
Prepaid pension expenses

98(5,694)134(4,635)924(53,717)¥ (1,020)¥ (1,588)$ (9,623)

Accrued employees’ retirement benefitsFurukawa Co., Ltd.

The components of retirement benefit expenses for the years ended 31st March, 2004 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

2004

2003

2004

¥ 790
419
(147)

¥ 850
412
(115)

$ 7,453
3,953(1,387)

36
851
112

12
551
112

340
8,028
1,056

¥2,061¥1,822$19,443

114

127

1,076

¥2,175¥1,949$20,519

During the year ended 31st March, 2003, the Company made an amendment to its defined benefit plan which resulted in an increase inbenefits to be paid. As a result, prior service cost was incurred.
The assumptions used in accounting for the above plans are as follows:

Discount rates
Expected return on plan assets
Amortization of past service cost
Amortization of actuarial gain or loss

2004

2003

mainly 2.4%
mainly 2.0%

mainly 2.4%
mainly 2.0%

mainly 15 years (straight-line method)
mainly 15 years (straight-line method)

mainly 15 years (straight-line method)
mainly 15 years (straight-line method)

12. Income Taxes
A reconciliation of the difference between the statutory tax rates
and the effective tax rates of the Furukawa Group has been omitted because the Furukawa Group recorded a loss before income

taxes and minority interests for the years ended 31st March, 2004
and 2003.

Deferred tax assets and liabilities as of 31st March, 2004 and 2003 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2004
Deferred tax assets:
Allowance for doubtful accounts in excess of limitation under Japanese tax laws

¥

165

2003
¥

400

2004
$

1,557

Accrued employees’ retirement benefits in excess of limitation under Japanese tax laws
Write-down of investments in securities
Reduction of plant value to recoverable amount

3,613
1,368
11,776

3,616
7,240
—

34,085
12,906
111,094

Unrealized gains on sales of property, plant and equipment
Net operating loss carryforwards
Revaluation of land, as a result of the merger

798
27,3982,143

1,019
16,471—

7,528
258,472
20,217

471

950

4,443

Other
Total gross deferred tax assets

47,732

29,696450,302

Valuation allowance(38,186)(15,086)(360,246)

9,546

14,61090,056

Total deferred tax assets
Deferred tax liabilities:
Net unrealized holding gain on securities
Statutory reserves provided for tax purposes
Gain from establishment of trust for retirement benefit plans
Capitalization of interest expense and others of a foreign subsidiary
Other
Total deferred tax liabilities

(872)

(6)

(8,226)(186)(3,668)(1,567)(226)(3,629)(1,528)(1,755)(34,604)(14,783)

(696)

(867)

(6,566)(6,989)(6,256)(65,934)

Net deferred tax assets (liabilities)¥ 2,557¥ 8,354$ 24,122

Deferred tax liabilities on surplus on the revaluation of land¥(13,466)¥(13,866)$(127,038)

29

30

Furukawa Co., Ltd.

Japanese Local Tax Law was amended in March 2003 and became effective the fiscal year beginning 1st April, 2004. After thecome taxes on surplus on the revaluation of land decreased by¥468 million, and surplus on the revaluation of land (net of in-amendment, the statutory tax rate was changed.
Due to the change in tax rate, deferred tax assets and liabilities
as of 31st March, 2003 decreased by ¥280 million and ¥6 million,

come taxes) increased by the same amount as of 31st March,
2003. However, the effect of this tax rate change on the consolidated financial statements for the year ended 31st March, 2004

respectively, and income taxes deferred for the year ended 31st
March, 2003 increased by ¥273 million. In addition, deferred in-

was immaterial.

13. Contingent Liabilities
Contingent liabilities as of 31st March, 2004 and 2003 consisted of the following:
Total amountThousands of
U.S. dollars

Millions of yen

2004

2003

2004

Notes receivable discounted and endorsed¥4,538¥3,784$42,811Loans guaranteed

3,424

2,957

32,302

14. Other Income (Expenses)—Other, net
Other Income (Expenses)—Other, net for the years ended 31st March, 2004 and 2003 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Gain on foreign exchange
Gain on sales of property, plant and equipment
Gain on sales of investments in securities
Gain on sales of hydroelectricity business
Gains arising from issuance of shares of common stock by subsidiary
Payments for closing mines
Write-down of investments in securities
Loss on copper smelting business in Australia put into Care & Maintenance Status
Other, net

Loss on copper smelting business in Australia put into Care &Maintenance Status for the year ended 31st March, 2004 included
impairment loss on fixed assets of ¥41,428 million ($390,830 thou-

2004

2003

2004

¥ 4,259
1,194¥ 3,022254$ 40,179
11,264

9,097
6,911
—

6
—
43

85,821
65,198
—

(741)
(239)
(53,137)—(16,838)—(6,991)(2,255)(501,292)(2,384)(4,374)(22,490)¥(35,040)¥(17,887)$(330,566)

sand) and Care & Maintenance expense of ¥11,709 million($110,462 thousand).

Furukawa Co., Ltd.

15. Consolidated Statements of Cash Flows—Supplementary Information
For the purpose of the statements of cash flows, the Company
considers all highly liquid investments with insignificant risk ofchanges in value which have maturities of generally three months
or less when purchased to be cash equivalents.

(a) Cash and cash equivalents as of 31st March, 2004 and 2003 are reconciled to accounts reported in the consolidated balance sheets asfollowings:

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

Cash on hand and at bankTime deposits with a maturity in excess of three months
Short-term securities with maturity of three months or less

¥23,439(3,985)—¥12,336(656)
137$221,122(37,594)—

Cash and cash equivalents¥19,454¥11,817$183,528(b) Summary of assets and liabilities decreased by sales of hydroelectricity businessMillions of yen

Thousands of
U.S. dollars

2004¥

Fixed assets

3,007

28,36816

151

Current liabilities

98

2004

Current assets(c) Summary of assets and liabilities of a newly consolidated subsidiary as a result of acquisition of shares
Millions of yen

2003
Current assets
Fixed assets¥1,536886

Total assets

2,422

Current liabilities
Long-term liabilities
Total liabilities

358
427
¥ 785

(d) Summary of assets and liabilities of a subsidiary excluded following the issuance of shares in a private placement.
Millions of yen

2003
Current assets
Fixed assets¥1,153347

Total assets

1,500

Current liabilities
Long-term liabilities
Total liabilities

865
12
¥ 877

$

925

31

32

Furukawa Co., Ltd.

16. Segment Information
The business of the Furukawa Group is divided into the following six categories: machinery, metal, electronic materials and chemicals,
real estate, fuels and others.
The business segment information of the Furukawa Group for the years ended 31st March, 2004 and 2003 were as follows:Year ended 31st March, 2004

Millions of yen
Electronic
Materials andChemicals
Real EstateMetal¥ 63,174¥ 42,188¥ 13,966¥ 4,139¥ 29,163

319

611

98

102

226

1,326

(2,682)—

Total
Costs and expenses

63,493(59,189)

42,799(47,845)

14,064(13,008)

4,241(2,522)

29,389(29,606)

2,209(2,157)(2,682)
2,838

153,513(151,489)

Operating income (loss)¥ 4,304¥ (5,046)¥ 1,056¥ 1,719¥¥ 71,815
1,271
701¥ 31,068
3,660
926¥ 29,219
892
717¥19,757608
502¥ 9,085
43
68

I. Sales and operating income (loss)
Outside customers
Intersegment

Fuels

(217)

OthersEliminations
and Corporate

Machinery

¥

883

¥

52

¥

¥

—

156

Consolidated¥ 153,513

¥

2,024

II. Assets, depreciation and capital
expenditures
Total assets
Depreciation
Capital expenditures¥ 4,9806782¥40,326(8)—¥ 206,250
6,533
2,996

OthersEliminations
and Corporate

Consolidated

Thousands of U.S. dollars
Electronic
Materials andChemicals
Real Estate

MachineryMetal$ 595,981$ 398,000$ 131,755

3,010

5,764

924

Total
Costs and expenses

598,991(558,387)

403,764(451,368)

Operating income (loss)$ 40,604

I. Sales and operating income (loss)
Outside customers
Intersegment

Fuels$ 39,047 $ 275,123$ 8,330$—$ 1,448,236

2,132

12,510(25,302)—132,679(122,717)

40,009277,255(23,792) (279,302)

20,840(20,349)(25,302)
26,774

1,448,236(1,429,141)$ (47,604)$$ 16,217 $ (2,047) $$ 677,500
11,991$ 293,094
34,528$ 275,651
8,415

6,613

8,736

6,764

9,962

962

491

$

1,472

$

19,095

II. Assets, depreciation and capital
expenditures
Total assets
Depreciation
Capital expenditures
Year ended 31st March, 2003

$186,387 $ 85,708
5,736
406
4,736

$ 46,981
631$380,434(75)$ 1,945,755
61,632773—

28,264642

Millions of yen

MachineryMetal¥ 59,699
308¥ 49,932
660

Electronic
Materials andChemicals
Real Estate

Fuels

OthersEliminations
and Corporate

Consolidated

802
1,294

¥
—
(2,928)¥ 151,630—

I. Sales and operating income (loss)
Outside customers
Intersegment
Total¥ 14,515
179¥ 4,437149¥ 22,245
338¥

60,00750,592

14,694

4,586

22,583

2,096(2,928)

151,630

Costs and expenses(58,654)(56,604)(13,372)(2,643)(22,792)(2,075)

2,919(153,221)

Operating income (loss)¥ 1,353¥ (6,012)¥ 1,322¥ 1,943¥¥ 73,076¥ 73,878¥ 29,902¥24,595¥ 8,391¥ 1,928¥41,086¥ 252,856

1,407
705

3,163
3,346

867
701

735
838

47
92

74
132

(32)
—

6,261
5,814

II. Assets, depreciation and capital
expenditures
Total assets
Depreciation
Capital expenditures

(209)

¥

21

¥

(9)

¥

(1,591)

Furukawa Co., Ltd.

Details of operations by geographic area for the years ended 31st March, 2004 and 2003 were as follows:Year ended 31st March, 2004

I. Sales and operating income (loss)
Outside customers
Inter-area
Total
Costs and expenses
Operating income (loss)
II. Assets
Total assets

Millions of yen
Japan

Oceania

Other areas

Eliminations
and Corporate

Consolidated¥ 134,491
3,928
138,419(132,004)¥ 6,415¥ 12,196—
12,196(16,722)¥ (4,526)¥ 6,826239
7,065(7,004)¥61—(4,167)(4,167)4,241¥
74¥ 153,513—
153,513(151,489)¥ 2,024¥ 225,024¥ 11,832¥ 7,917¥(38,523)¥ 206,250

Thousands of U.S. dollars

I. Sales and operating income (loss)
Outside customers
Inter-area
Total
Costs and expenses
Operating income (loss)
II. Assets
Total assets

Japan

Oceania

Other areas

Eliminations
and Corporate

Consolidated$ 1,268,783
37,0571,305,840(1,245,321)$
60,519$ 115,057—
115,057(157,755)$ (42,698)$ 64,396
2,254
66,650(66,074)$576—(39,311)(39,311)40,009$698$ 1,448,236—
1,448,236(1,429,141)$
19,095$ 2,122,868$ 111,623$ 74,689$(363,425)$ 1,945,755

Year ended 31st March, 2003

I. Sales and operating income (loss)
Outside customers
Inter-area
Total
Costs and expenses
Operating income (loss)
II. Assets
Total assets

Millions of yen
Japan

Oceania

Other areas

Eliminations
and Corporate

Consolidated¥ 125,609
2,747
128,356(123,145)¥ 5,211¥ 18,512
398
18,910(25,243)¥ (6,333)¥ 7,509
132
7,641(8,033)¥ (392)¥—(3,277)(3,277)3,200¥ (77)¥ 151,630—
151,630(153,221)¥ (1,591)¥ 204,547¥ 48,267¥ 8,771¥(8,729)¥ 252,856“Other areas” consists principally of Europe, Asia and North
America.
Overseas sales, which include exports of the Company and its

to Japan) of the foreign consolidated subsidiaries, totaled ¥29,157
million ($275,066 thousand) or 19.0% and ¥40,254 million or 26.5%of the consolidated net sales for the years ended 31st March, 2004

domestic consolidated subsidiaries and sales (other than exports

and 2003, respectively.

33

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Furukawa Co., Ltd.

17. Subsequent Events(a)
On 28th April, 2004 and on 19th May, 2004, the Company resolved
the plan of corporate separation. The plan was approved at thegeneral shareholders’ meeting of the Company held on 29th June,
2004.
The Company will separate six business categories (Industrial
machinery, Development machinery, UNIC crane, Metal, Electronic Materials, Chemicals) and transfer them to six companies(Furukawa Industrial Machinery Systems Co., Ltd., FURUKAWA
MACHINERY SALES CO., LTD., Furukawa UNIC Corporation,
Furukawa Metals & Resources Co., Ltd., Furukawa Denshi Co.,
Ltd., Furukawa Chemicals Co., Ltd.), respectively. The scheduled
date of the separation of Industrial Machinery business is 31st
March, 2005 and of other 5 businesses is 1st March, 2005. Whenthe plan of the separation is completed, FURUKAWA MACHINERY SALES CO., LTD. will change its name to Furukawa Rock
Drill Co., Ltd.
(b)
On 29th June, 2004, the shareholders of the Company approved
the use of the capital surplus amounting to ¥29,534 million($278,623 thousand) to reduce a deficit.

Furukawa Co., Ltd.

Certified Public Accountants
Hibiya Kokusai Bldg.
2-2-3, Uchisaiwai-cho,
Chiyoda-ku, Tokyo 100-0011
C.P.O. Box 1196, Tokyo 100-8641

Phone: 03 3503-1100
Fax:
03 3503-1197

REPORT OF INDEPENDENT AUDITORSThe Board of Directors
Furukawa Co., Ltd.
We have audited the accompanying consolidated balance sheets of Furukawa Co., Ltd. and consolidated subsidiaries as of 31st March, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended, all expressed in yen. These
financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Furukawa Co., Ltd. and consolidated subsidiaries as of 31st
March, 2004 and 2003, and the consolidated results of their operations and their cash flows for theyears then ended in conformity with accounting principles generally accepted in Japan.
Supplemental Information
As described in Note 17, the Company resolved the plan of corporate separation. In this spin-off,the Company will separate its six businesses, and transfer them to six subsidiaries. The plan wasapproved by the general shareholders’ meeting of the Company held on 29th June, 2004.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to theyear ended 31st March, 2004 are presented solely for convenience. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 3.
29th June, 2004

35

36

Furukawa Co., Ltd.

PRINCIPAL SUBSIDIARIES AND AFFILIATES
Company Name

Principal Business

Paid-in Capital

Subsidiaries
Furukawa Machinery Sales Co., Ltd.

Sales of construction machinery and rock drills

JPY 400 million

Furukawa Metal & Resources Co., Ltd.

Copper smelting

JPY 300 million

Furukawa UNIC Corporation

Sales of UNIC cranes

JPY 200 million

Osaka Transportation Co., Ltd.

Transportation

JPY 150 million

Otsuka Iron Works, Ltd.

Manufacture of crushers

JPY 140 million

Oita Mining Co., Ltd.

Mining and sales of limestone

JPY 125 million

Ashio Smelting Co., Ltd.

Copper smelting and industrial waste treatment

JPY 100 million

Furukawa Commerce Co., Ltd.

Sales of petroleum and management of gas stations, sales ofindustrial machinery and non–life insurance, and management of
bowling alleys

JPY 95 million

Furukawa Castec, Ltd.

Sales and manufacture of castings and industrial machines

JPY 50 million

Heiko Bridge Co., Ltd.

Construction of bridges

JPY 50 million

Furukawa Corporation

Tourist business

JPY 50 million

Tsubame Industrial Community Limited

Manufacture of machine tools and industrial machinery

JPY 40 million

Furukawa Plant Engineering and Construction
Co., Ltd.

Construction and installation of various types of plants

JPY 30 million

Ashio Construction Co., Ltd.

Civil engineering and construction

JPY 30 million

UNIC Kanto Sales Co., Ltd.

Sales of UNIC cranes

JPY 30 million

UNIC Kyushu Sales Co., Ltd.

Sales of UNIC cranes

JPY 30 million

Furukawa Mansion Maintenance Co., Ltd.

Maintenance of apartments

JPY 20 million

UNIC Tohoku Sales Co., Ltd.

Sales of UNIC cranes

JPY 16 million

Ashio Rock Drill Co., Ltd.

Manufacture and repair of rock drills and industrial machinery

JPY 30 million

Iwaki Kosan Co., Ltd.

Administration of real estate

JPY 10 million

Dojima Jitsugyo Co., Ltd.

Maintenance of buildings

JPY 10 million

Wellness Co., Ltd.

Sales of health-care products

JPY 10 million

Port Kembla Copper Pty. Ltd. (Australia)

Copper smelting

AUD 369.5 million

Furukawa Unic (Thailand) Co., Ltd. (Thailand)

Manufacture of UNIC cranes, parts, and accessories

THB 200 million(The Netherlands)

Sales of breakers and crawler drills

EUR 0.9 million

Gougler Industries, Inc. (U.S.A.)

Sales of breakers and crawler drills, production and sales of molds

USD 59.5 million

Furukawa Rock Drill Europe B.V.

Furukawa Services S.A.S. (France)

Service of construction machinery

EUR 5 million

Shenyang-Furukawa Rock Drill Co., Ltd. (China)

Manufacture of hydraulic breakers

USD 1 million

Taian Furukawa Machinery Co., Ltd.

Sales of UNIC cranes

USD 2.5 million

Tohpe Corporation

Production of paints

JPY 2,087 million

Hitachi Furukawa Construction Machinery Ltd.

Manufacture of construction machinery

JPY 900 million

Affiliates

Iwaki Semiconductors Co., Ltd.
Hibi Kyodo Smelting Co., Ltd.

Production of semiconductors, such as gallium arsenate
semiconductors

JPY 60 million

Copper smelting

JPY 4,700 million

Hitachi-Furukawa Loaders Europe S.A.S. (France) Manufacture of construction machinery

EUR 6 million

Otsuka Iron Works, Ltd.

JPY 140 million

Production of crushers

Furukawa Co., Ltd.

BOARD OF DIRECTORS AND AUDITORSAs of 31st March, 2004

President and Representative Director

Directors

Statutory Auditors

Tetsuo Yoshino

Junnosuke Furukawa
Yuichi Yokoo
Yasuhei Konagaya
Nakao Yamashita
Hiroyuki Shiaku

Tsuyoshi Ishii
Makoto Tanabe

Head Office

Stock Exchange Listings

Composition of Shareholders

6-1, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-8370, Japan
Phone: +81-3-3212-6570
Facsimile: +81-3-3212-6578

Tokyo, Osaka

Senior Managing Director

Isao AsadaManaging Directors

Auditors

Toshiharu Nagao
Tomoo Yamada

Toshikatsu Uematsu
Kouji Toda

CORPORATE DATA
As of 31st March, 2004

Number of Employees
1,220

Corporations
and Others

30.68%
Date of Foundation
August 1875

Transfer Agent

Date of Establishment

The Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku, Tokyo
105-0014, Japan

April 1918

Financial
Institutions

33.63%

Individuals
and Others

26.23%
Foreign Corporations and Individuals

Common Stock

6.63%

Authorized: 800,000,000 shares
Issued: 404,455,680 shares

Securities Companies

2.83%

37

6-1, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-8370, Japan

Printed in Japan