Annual Report 2014
Year ended March 31, 2014

Bridging to the Future

Business Domains of the Furukawa Company Group
Since its establishment in 1875, Furukawa has emerged from its origins in mine development to build a broad rangeof businesses while constantly addressing the needs of the times. In our businesses, which can be broadly classified
into the fields of machinery and materials, we deliver attractive products to diverse markets. Going forward, we will
expand our involvement in rapidly growing businesses, while adhering to our basis corporate policies, which are to“strengthen the technical capabilities of the Machinery business and promote further overseas development” and“promote development activities aimed at new product commercialization.”

MachineryBusiness

INDUSTRIAL
MACHINERY

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

CONSTRUCTIONANDMINING
MACHINERY(ROCK DRILLS)
Rock drills (hydraulic breakers, hydraulic crawler drills,
tunnel drill jumbos, etc.)

Materials
Business

METALSElectrolytic copper, gold, silver, sulfuric acid

ELECTRONIC
MATERIALS

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

UNIC
MACHINERYCHEMICALSUNIC cranes, mini crawler cranes, UNIC carriers,
UNICPAL

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

Cover photo: Long-distance belt conveyor (turning conveyor) system delivered to Rikuzentakata City, Iwate Prefecture. The system can movelarge volumes of earth and rock at high speed. In this project, which entails relocation of communities to higher ground, the system enables the
project to be completed in one-third of the time normally required. The Company’s technologies are being deployed extensively in restoration
projects.

Furukawa’s Technological Genealogy
Drilling
technologies

CONSTRUCTION AND
MINING MACHINERY(ROCK DRILLS)

Hydraulic control
technologies

UNIC MACHINERY

Exploitation
technologies

Transport / Mineralprocessing
technologies
Smelting
technologies
Miningtechnologies

Machinery Business

Slurry transportation
technologies
INDUSTRIAL MACHINERY

Grinding technologies
Exhaust gas treatment
technologies
Flash smelting technologies

METALS

Sulfuric acid production
technologies

CHEMICALSElectric technologies

ELECTRONIC MATERIALS

Materials Business

Financial Highlights
For the years ended March 31
Millions of yen

2014/3

2013/3

2012/3

2011/3

2010/3¥ 163,026¥ 165,540¥ 157,566¥ 165,638¥ 142,925

For the year:
Net sales
Operating income
Income (loss) before income taxes andminority interests
Net income (loss)

6,886

3,363

2,155

2,821

1,598

7,092
3,976

5,433
2,976

(2,663)(1,659)

447
563

886
585

Capital expenditures

11,430

2,926

3,588

2,112

2,545

Depreciation and amortization

2,828

3,015

3,329

3,290

3,244

Research and development expenses

2,539

2,559

2,622

2,225

1,862

Total assets¥ 199,408¥ 186,076¥ 193,971¥ 196,234¥ 204,774

Net assets

56,31351,50747,66847,62250,855

At year-end:

Per share amounts:
Net income (loss)
Cash dividends
Net assets

Yen

¥

9.84

7.37 ¥(4.11) ¥

1.39

3.00

¥

2.00

0.00

0.00

¥

0.00

1.45

135.34123.99113.88113.45120.96Return on equity (ROE) (%)

7.6

6.2

(3.6)

1.2

1.3

Equity ratio (%)

27.4

26.9

23.7

23.4

23.9

Annual Report 20141

To Our Stakeholders

Business Conditions and Performance
In fiscal 2014, ended March 31, 2014, the Japanese economy began breaking out of its deflationary spiral and entering a moderate
recovery thanks to fiscal and monetary measures taken by thegovernment and the Bank of Japan. However, weakness among
overseas economies led to the risk of downward pressure on thedomestic economy.
Facing these conditions, the Furukawa Company Group implemented a number of proactive business strategies, centering on
its three machinery-based businesses: Industrial Machinery, Construction and Mining Machinery (Rock Drills), and UNIC Machinery. These measures included advancing our overseas operations,relentlessly seizing opportunities arising from domestic economic
recovery, reducing costs, and enhancing business efficiency.
For the fiscal year, the Industrial Machinery, Construction and
Mining Machinery (Rock Drills), and UNIC Machinery segments together generated a 25.1% year-on-year increase in sales. However,overall revenue was affected by the Group’s withdrawal from thefuels business in October 2012 and the paints business in March
2013. As a result, consolidated net sales amounted to ¥163,026
million, down 1.5% from fiscal 2013. In the previous fiscal year,
the fuels business posted sales of ¥3,771 million, and the paints
business generated sales of ¥15,079 million, for a total of ¥18,850
President and Representative Director

Naohisa Miyakawa

million.
Operating income jumped 104.8%, to ¥6,886 million, owing mainly to increased sales of the three machinery-based
businesses—supported by healthy construction-related demand inJapan—as well as the weak yen, which helped the Metals businesssegment. Turning to other income, the Group posted ¥600 million,
due to gain on foreign exchange stemming from the weakened
yen. Furthermore, there was ¥1,095 million in compensation
income. In other expenses, the Group posted a ¥1,078 million
interest expense, ¥565 million on payments for idle mines, and a¥187 million impairment loss. Furthermore, we posted losses in theform of a ¥101 million loss on sales and retirement of noncurrent
assets. Consequently, net income increased 33.6%, to ¥3,976
million.
Future Initiatives
In fiscal 2014, the Group’s performance benefited significantly
from domestic construction-related demand centered on the threemachinery-based businesses, as well as infrastructure-related demand related to economic recovery.
During the year, we received strong praise for the comprehensive engineering expertise of our Industrial Machinery business. This
related to our involvement in a large-scale project for relocating
people to higher ground in Rikuzentakata City, Iwate Prefecture.
Since our founding, we have amassed extensive technological expertise in such areas as rock crushing, transportation, and bridges.
By integrating these technologies, we are able to successfully carryout such high-ground relocation projects, which are rare anywhere2

To Our Stakeholders

in the world. We have also inherited and enhanced various

Net Sales

technologies from our history in mine development, which we will

(Billions of yen)

deploy to address new needs arising from the changing times.
The Group expects demand to remain strong in the future forseveral reasons. In addition to full-fledged economic recovery,
these include renewal of aging infrastructure to enhance earth-

165.6
142.9

157.6

165.5 163.0

quake resistance under the Building National Resilience Plan, as
well as construction of transport infrastructure, such as new Shinkansen lines and the planned Linear Chuo Shinkansen Line. Major
civil engineering projects are also planned ahead of the 2020
Summer Olympics in Tokyo. Our strategy is to effectively exploit
such domestic demand. At the same time, we will build a futureoriented foundation for our three machinery-based businesses,with particular emphasis on overseas infrastructure and resource
development, which are expected to constitute a growing market.

'10/3 '11/3 '12/3 '13/3 '14/3
Machinery Business

Materials Business

Others BusinessOur three materials-based businesses—Metals, Electronic Materials, and Chemicals—represent another cornerstone of our operations. Here, we will consider investing in mines to enable reliable
Operating Income

procurement of ore and secure mining rights, and we will build a(Billions of yen)framework to complement our refining business. In addition, we
will reassess our approach to research and development with the

6.9

aim of swiftly commercializing new products and materials, especially in the Electronic Materials business.
Dividend Policy
Furukawa places great importance on improving returns of profits
to all shareholders while retaining earnings required to financecapital expenditures and research and development expenses nec-

3.4

2.8
2.2
1.6

essary to bolster earnings. Our basic policy is to appropriate profits
after comprehensive consideration of future business development
and various other factors.

'10/3 '11/3 '12/3 '13/3 '14/3

In fiscal 2014, the Company declared a year-end cash dividendof ¥3.00 per share, up ¥1.00 from the previous year. In fiscal 2015,
we plan to pay a year-end dividend of ¥3.00 per share, with nointerim dividend scheduled.

Net Assets

Going forward, we will continue pursuing our business opera-(Billions of yen)tions with strategic priority on our two fundamental policies, which
are to “strengthen the technical capabilities of the Machinery business and promote further overseas development” and “promote
development activities aimed at new product commercialization.”

56.3
50.9

47.6

47.7

51.5

We look forward to the understanding and support of all stakeholders as we embrace the challenges of the future.

August 2014'10/3 '11/3 '12/3 '13/3 '14/3

Naohisa Miyakawa
President and Representative Director
Annual Report 20143

Committed to Infrastructural Development

Supporting Disaster Recovery in Rikuzentakata City
The Great East Japan Earthquake in March 2011 caused major damage in Rikuzentakata City, Iwate Prefecture. As part of the disaster recovery effort, a project is inplace to relocate the community to higher ground. This project involves slicing into
adjacent mountains to create an elevated foundation for construction of residential units. Earth and gravel cut from the mountains are used to fill and elevate lowlaying areas, forming a base for development of commercial facilities and parks.
It is a huge project designed to protect the city from future tsunami. The Furukawa Company Group’s Industrial Machinery business has been employed to help
restore the disaster-affected area as swiftly as possible. With a history of mining
development technologies and innovation built up since our establishment, we areon the ground assisting in this important infrastructural project.

Project scheme

1. Large-scale crushing system
3. Suspension bridge
Site for higher-groundrelocation

2. Long-distance belt conveyor system

Site subject to elevation

The Group’s involvement in the Rikuzentakata City restoration project covers provision of three types of machinery:a large-scale crushing system for crushing earth and gravel,
a long-distance belt conveyor system for transporting large
volumes of earth and gravel to holding areas, and a suspension bridge for getting materials across a river that lies in
between.
Our large-scale crushers are a culmination of crushing andpulverizing technologies amassed since our days in mining
development. With eight feeders, eight screens, and eightcrushers, it has a crushing and processing capacity of 8,000
tons per hour, among the highest in Japan.
Also large in scale, our long-distance belt conveyor system
is used to transport earth and gravel, crushed by our largescale crushers, to provisional holding areas. It is 1.8 meters
wide, 3 kilometers long, and can transport materials at 15
kilometers per hour. In other words, this large-capacity,
high-speed system can transport up to 6,000 tons of crushedgravel per hour. It can also transport materials in one-third of
the time taken using 10-ton dump trucks, thus reducing theperiod of this project by around six years. In the restoration
business, shortening the project period is an overriding
priority, and our high-speed, long-distance belt conveyor

4

makes this possible. Our belt conveyor is also the result ofmineral ore transportation technologies developed during
our history in mine development.
Our suspension bridge, made specifically for our belt conveyor, serves as a temporary bridge for transporting materials
over the Kesen River. The suspension bridge configuration
was adopted in consideration of the environmental impact on
the river and demonstrates our expertise in this area amassed
over many years.
The Group has also accumulated significant project execution and equipment installation expertise in its bridgerelated business. These attributes gave us a competitive edge
over other makers of crushers and belt conveyors, extending
beyond mere sale of equipment.
By combining multiple original technologies developed
over the years in crushing, transportation, and bridge-related
technologies, the Group is able to provide comprehensive
responses encompassing execution, installation, and operational management, in addition to equipment manufactureand sale. We have become a leader in the disaster recovery
business by drawing on technologies and innovative concepts,
as we have done since our foundation.

Special Feature1

2. Long-distance belt conveyor system
Earth and rocks that have passed through the large-scale crushing system are thentransported to a temporary holding area using our long-distance belt conveyor system.
The system is 3 kilometers long and 1.8 meters wide. It consists of eight extractor conveyors, 10 main conveyors, and five turning conveyors. It can move material at up to
250 meters per minute, or 15 kilometers per hour, and has a total conveying capacityof 6,000 tons per hour. Compared with using 10-ton dump trucks, transportation timeis reduced by around one-third.

3. Suspension bridge
The “Miracle Pine” The suspension bridge has been made specifically for the long-distance belt conveyor,of Rikuzentakata
with the aim of transporting materials over the Kesen River, which divides the mounCity
tains from elevated areas. In consideration of the potential environmental impact on
the river, where salmon are said to swim upstream, we decided to use a suspension
bridge, which does not require support pillars driven into the river bed. With a main
span of 220 meters, the structure has been named “Bridge of Hope” and has become
a symbol of the recovery project alongside the “Miracle Pine” of Rikuzentakata City.

1. Large-scale crushing system
This system consists of eight crushing lines. Each combines a feeder for physicallywithdrawing earth and rocks cut from the mountains, a screen that separates
rocks larger than 300 millimeters in diameter from the rest, and a crusher for pulverizing those larger rocks into pieces less than 300 millimeters in diameter. The
total capacity is 8,000 tons per hour, one of the largest in Japan. The resulting
earth and crushed rocks are then fed onto the belt conveyor system.

The Group’s involvement in the project is not limited to industrial machinery.
We also provide hydraulic crawler drills to make blasting holes in the mountains, as well as UNIC cranes for moving materials onsite.

Annual Report 20145

Committed to Infrastructural Development

Strategies to Expand Our Machinery-Related Businesses
The business environment surrounding the Furukawa Company Group is benefiting from multiple
domestic infrastructure-related projects alreadyunder way or being planned. These include fullscale disaster recovery projects, new Shinkansen
lines and the planned Linear Chuo Shinkansen Line,and projects related to the 2020 Summer Olympics
in Tokyo. There are also various public works projects under the Building National Resilience Plan.
Our aim is to advance our machinery-related businesses by deploying our accumulated experienceand expertise in infrastructural projects, which
apply our mine development technologies amassed
since our foundation. Specifically, we will focus on
three key areas: tunnel projects, concrete, and civilengineering and construction worksites. Below is a
description of how our offerings relate to theseareas of focus.

● Areas of Focus in Infrastructure Market
Areas of Focus

Main Sites

Tunnel projects

Reconstruction roads and service roads Tunnel drill jumbos
New Shinkansen lines
Shield pumps
Linear Chuo Shinkansen LineConcrete

Quarries
Quarrying plants

Hydraulic crawler drills
Hydraulic breakers
Crushers

Civil engineering andconstruction
worksites

Civil project worksites
Building construction sites
Building demolition sites

UNIC cranes
Mini crawler cranes
Hydraulic breakers

Tunnel projects
The role of tunnels is to make way for roads
and railway lines. When tunneling into
mountains where the rock is hard, a drilland-blast construction method is usuallyemployed. Our leading-edge tunnel drill
jumbos are ideally suited to such projects.
The job of a tunnel drill jumbo is to drill
holes into hard rock. Explosives are inserted
into the holes so the rock can be blasted.
Many projects in Japan have employed thismethod, including the Seikan Tunnel, Hakkoda Tunnel, and Kanetsu Tunnel.
At present, a multitude of transport infrastructure projects are under way in Japan’s
Tohoku District, including reconstruction

Relevant Products

Shield pumps

roads and service roads. These are progressing at a rapid pace, with the aim of opening
the roads in six or seven years. A number of
new Shinkansen lines are also scheduled toopen between 2022 and 2035 in Hokkaido,
Hokuriku, and Kyushu, which will require
tunnels totaling around 238 kilometersin length. Then there is the Linear Chuo
Shinkansen Line linking Tokyo and Nagoya.
Scheduled to open in 2027, it will include

246 kilometers of tunnels.
Since many of these tunnels will be built
in the mountains, we expect our tunnel drill
jumbos to be widely employed. As Japan’ssole manufacturer of such equipment, wehave an important role to play, and we willcontinue improving the safety and precisionof our machines. To this end, we alreadydeveloped state-of-the-art technologies—
such as an automatic tracking and perforation guidance system, auto-drilling system,and perforation data recording system—inpreparation for upcoming projects.
For the portion of the Linear Chuo
Shinkansen Line to be built under the Tokyo
Metropolitan Area, the shield method will
be used for tunnel excavation. We expectthat our shield pumps, which are used todischarge excavated soil mixed with water,
will play a role here. We will exploit ouroverwhelming share of the domestic market
to attract orders for these projects.

● Types of Tunnel Projects
Tunnel Type

Tunnel drill jumbos

6

Excavation Method

Relevant Products

Track Record

Mountain tunnel

Blasting method

Tunnel drill jumbos

Hakkoda Tunnel
Seikan Tunnel
Kanetsu Tunnel, etc.

UndergroundtunnelShield method

Shield pumps

Tokyo Bay Aqua Line
Tsukuba Express
Bosporus Strait (Turkey), etc.

Special Feature

Concrete

Concrete is an essential component of many
structures, including buildings and roads,
and the volume of concrete shipments hasgrown sharply in recent years in line with
progressive infrastructural development.
Therefore, we expect demand to remain
firm for gravel and limestone, which arebasic materials used to make concrete.

Hydraulic crawler drills

Hydraulic breakers

At many open-cut gravel and limestone
quarries, our hydraulic crawler drills are used
to drill holes into the rock. The rock is thenblasted using explosives inserted into theholes. Moreover, large rocks created fromsuch blasts are broken into smaller pieces
using our hydraulic breakers. The Furukawa Company Group has a 65% domestic
market share for hydraulic crawler drills anda 40% share for hydraulic breakers.
Our crushing machines, which include
jaw crushers and corn crushers, are usedin many plants where excavated rock is
crushed. Here, our screens are also used to

Civil engineering andconstruction worksites
The Furukawa Company Group predicts
that the number of civil engineering andconstruction worksites will increase steadily
in line with various large-scale projects inprogress or being planned. In addition to
full-scale restoration projects, these include

UNIC cranes

Mini crawler cranes

construction of new Shinkansen lines andthe planned Linear Chuo Shinkansen Line,the 2020 Summer Olympics in Tokyo, andpublic works projects under the Building
National Resilience Plan.
The Group’s UNIC cranes are used extensively in conveying, loading, unloading, andplacement of materials uses at such civilengineering and construction worksites.
Each machine can perform multiple roles,
providing a level of convenience that is2

separate rocks according to size. Indeed, avariety of our machines, created using our
expertise in mine development, are hard atwork all over Japan.
Demand for concrete is expected togrow, and gravel, a key element of cocrete,
will also become an important material for
construction of infrastructure in such areas
as road paving and railway track bedding.
We will continue promoting sales aimed
at addressing new demand for our machinery and components for use at various
worksites.

Crushers

highly praised in the industry. We also havemini crawler cranes that are compact andversatile and can perform in places inaccessible by truck, as well as inside buildings.
Many construction projects require demolition work. Here, our hydraulic breakers,
which are attached to hydraulic shovels,
serve a useful function.
Going forward, we will work hard to address growing demand at civil engineeringand construction worksites for our offerings, especially our UNIC cranes, which havea 50% share of the domestic market.

Hydraulic crushers

The Furukawa Company Group has a full range of machinery to meet diversifying infrastructure-related demand, in both upstream anddownstream areas. Our experience and technological expertise, which support the foundations of society, are already playing an importantrole. In addition to addressing strong demand in Japan, we will endeavor to meet diversified social needs overseas, where demand is also
expected to grow in the areas of mine development and infrastructure-related construction.

For an overview of the Group’s initiatives, please refer to the “Welcome to the Furukawa Planet” sectionof the corporate website:

http://www.furukawakk.co.jp/fkkplanet/e/ (also features a YouTube video).

Annual Report 2014

7

Review of Operations● Industrial Machinery
In fiscal 2014, the industrial machinery business booked sales frommachinery ordered in the previous fiscal year, namely for largescale crushing equipment to facilitate relocation to higher groundin earthquake-affected areas, as well as long-distance belt conveyors. We also reported healthy sales of crushers and other generalindustrial machinery. As a result, the segment posted sales of¥18,528 million, up 43.7% from the previous fiscal year. Operating
income jumped 137.6%, to ¥1,851 million.
Going forward, we will focus on completing projects for relocation to higher ground and operational control. In the public sector,
we will target pumps for sewage treatment plants associated with
infrastructure projects, as well as bridge-related projects and otherinitiatives. In the private sector, we will continue expanding salesof crushing equipment for the gravel and cement sectors, which
provide raw materials for concrete. In addition, we will reinforce
our sales systems for solutions and section plants, while strengthening our components business in order to raise customer satisfaction levels.
Overseas, we will broaden our sales channels by reinforcing
alliances with Japanese companies, engineering firms, and water
treatment equipment manufacturers.

43.6%% of Net Sales

Machinery
Construction and
Mining Machinery(Rock Drills)
Hydraulic crawler drills

Japanese
MarketShare

65％

Hydraulic breakers

30％

GlobalMarketShare

Sludge pump used in sewage treatment
plantsTunnel drill jumbos

Japanese
MarketShare

Japanese
MarketShare

40％

Bridges

80％

Industrial Machinery
Net Sales

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

Vehicle carriers(UNIC carriers)12.9 12.9

12.8
10.7

Japanese
MarketShare

50％

Japanese
Market
Share

50％

0.7

0.8

0.4

(0.0)

'10/3 '11/3 '12/3 '13/3 '14/3
8

1.9

18.5

UNIC Machinery
Truck-mounted cranes(UNIC cranes)

Crushers'10/3 '11/3 '12/3 '13/3 '14/3

Machinery/Review

ofOperations● Construction and Mining Machinery (Rock Drills)● UNIC Machinery

In the domestic rock drills business, we reported increased shipments of hydraulic breakers and hydraulic crushers on the back ofbuoyant demand in the construction sector. Shipments of hydrauliccrawler drills were also healthy thanks to increased demand forgravel and limestone, leading to growth in sales of tunnel drill
jumbos. As a result, the Construction and Mining Machinery (RockDrills) segment posted a 15.2% increase in sales, to ¥26,843 million, and operating income of ¥341 million, compared with anoperating loss of ¥68 million in the previous year.
In Japan, we will focus on sales of tunnel drill jumbos for tunnel
projects as construction of disaster-related service and support
roads gets into full swing. We will also strengthen our service
network, including by establishing a sales office in Miyako City,
Iwate Prefecture. In addition, we will actively gather informationand make approaches to general contractors related to railway
lines scheduled to start construction, including new Shinkansen
lines and the Linear Chuo Shinkansen Line.
Overseas, we will seek to expand sales channels by forming
alliances with agencies to strengthen our service capabilities,
despite continued weakness in demand for natural resources. We
will also strive to bolster sales of high-value-added machinery,such as the new FXJ Series of hydraulic breakers, while enhancing
business profitability through cost reduction efforts.

In fiscal 2014, domestic truck registrations grew 16.6% year
on year on the back of economic recovery and disaster recovery
demand. The percentage of crane-mounted trucks also remained
high, leading to significant year-on-year growth in sales of UNIC
cranes. Moreover, we reported an increase in shipments of vehicle
carriers (UNIC carriers). Overseas, we generated higher revenue
thanks to increased shipments of mini crawler cranes and the weakyen. As a result, sales in the UNIC Machinery segment climbed
24.6% year on year, to ¥25,741 million, and operating income
rose 42.0%, to ¥3,142 million.
Going forward, we expect domestic sales of trucks to remain
mostly unchanged. We also look forward to continued healthy salesof UNIC cranes. In addition, we will promote sales of mini crawler
cranes, which do not require regular trucks for transportation, as
well as shipbuilding cranes and UNICPAL cranes. Overseas, we will
target sales expansion in various nations and regions by producing machinery tailored to demand in each market and building arobust global sales system. Here, we will leverage our global production system with operations in Japan, China, and Thailand.

Truck-mounted UNIC cranes

Hydraulic crawler drills used in domestic andoverseas mines and infrastructure projects

Hydraulic breakers attached to a hydraulicshovelUNIC carriers

Highly functional andversatile mini crawler cranes

Tunnel drill jumbos used in mountaintunnel projects for roads and railways

Construction and Mining Machinery (Rock Drills)

UNIC Machinery

Net Sales

Operating Income (Loss)

Net Sales

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

25.7

26.8
23.9

24.1 23.3

3.1
2.2

20.7

20.4
16.1
0.3

0.3

11.1

0.9

12.5

(0.1)

(0.2)

(0.4)

(0.9)

(2.6)

'10/3 '11/3 '12/3 '13/3 '14/3'10/3 '11/3 '12/3 '13/3 '14/3'10/3 '11/3 '12/3 '13/3 '14/3'10/3 '11/3 '12/3 '13/3 '14/3
Annual Report 20149

● Metals

55.3%% of Net Sales

Materials● Copper Prices and Foreign Exchange Rates

After starting the year at US$7,434.50/ton on April 1, 2013,
the price of electrolytic copper seemed likely to fall below the
US$7,000 mark amid deteriorating world economic conditions.
Subsequently, however, the price undulated in the US$7,000–
7,400 range, buoyed by the U.S. economy, but ended the year at
US$6,636.00/ton on March 31, 2014, due to the worsening situation in the Ukraine.
During the year, we enjoyed firm demand for copper amongautomakers and producers of air conditioners and other home
appliances. Demand for electric cable was also solid, bolstered byredevelopment projects in the Tokyo Metropolitan Area, as well as
earthquake resistance reinforcement projects and construction ofmega-solar facilities.
In fiscal 2014, the Company’s sales of electrolytic copper involume terms declined 1,823 tons, to 94,966 tons. Overall sales in
the Metals segment edged up 0.9%, to ¥78,685 million, boosted
by the weak yen. Operating income surged 431.1%, to ¥1,503
million.
Earnings of copper refining companies are now improving
thanks to gradual recovery in purchasing conditions, coupled withthe weak yen. However, there are also some concerns, such as theimpact of rising electricity prices. Overseas mines in which theCompany has mining rights make a valuable contribution to
current revenue (under other income). However, we must closely
monitor copper prices and nationalistic tendencies with respect tonatural resources. Therefore, we will seek to secure new mining
rights and work in other ways to ensure reliable copper concentrates procurement and stabilize profits.
2010/3

2011/3

2012/3

2014/3

2013/3

LME copper price (average; US$ / ton)

6,101

8,139

8,485

7,855

7,104

JPY rate per US$ (average for fiscal year)¥92.85¥85.71¥79.07¥83.10¥100.24● Copper Production and Sales Volume*

2010/3

2011/3

2012/3

2013/3

2014/3Copper production volume (tons)

84,45589,52376,896

90,38787,767

Copper sales volume (tons)

89,45689,17682,597

96,78994,966* Furukawa Metals & Resources Co., Ltd.

MetalsElectrolytic copper

Hibi Kyodo Smelting Co., Ltd.

Net Sales

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

80.0
71.1

77.9 78.7

3.2

68.1

1.5

1.5
Gibraltar Copper Mine in Canada

Onahama Smelting and Refining Co., Ltd.

0.3
'10/3 '11/3 '12/3 '13/3 '14/3
10

0.3'10/3 '11/3 '12/3 '13/3 '14/3

Materials/Review

ofOperations● Electronic Materials● Chemicals

In the year under review, sales of high-purity metallic arsenic,a mainstay product in this segment, struggled in pricing andvolume terms both in Japan and overseas, due to harmful rumors
stemming from the Fukushima nuclear power plant accident.
However, sales of coils, aluminum nitride, and optical components
were firm. As a result, the Electronic Materials segment posted a
7.9% increase in sales, to ¥5,381 million, and an operating loss of¥124 million, compared with operating loss of ¥263 million in theprevious year.
Going forward, our aim is to expand our businesses in coils,
aluminum nitride, and optical components while maintaining solid
profits from our mainstay high-purity metallic arsenic andscintillator crystal businesses. In particular, we plan to grow ourcoil products business into a major pillar supporting the Electronic
Materials segment. To this end, we will focus on all aspects of thatbusiness, including product development, production facilities,
and product inspections and quality assurance. In addition, we
will step up sales activities aimed at commercializing new products
transferred from our R&D entities.

In fiscal 2014, we reported a year-on-year increase in sales ofcuprous oxide for paints applied to the bottoms of ships, thanks
to rising copper prices and demand. Sales of titanium dioxide
were also up. As a result, the Chemicals segment posted a 19.7%
increase in sales, to ¥6,097 million, and a 3.9% growth in operating income, to ¥316 million.
Looking ahead, we will improve the quality of our sulfuric
acid products by modernizing our manufacturing facilities while
expanding sales channels to address new applications. We expect
to maintain a certain level of sales volume for cuprous oxide usedin paints for energy-efficient ships. Here, we will adjust prices inorder to boost profits. In addition, we will focus on developing
new products and cultivating peripheral businesses with a view tothe future.

High-purity
metallic arsenic

Cuprous oxide

Japanese
MarketShare

GlobalMarketShare

70％

Japanese(Production)
Market
Share

50％

45％

High-purity metallic arsenic—high-purity
Core coils used in automobile electronic
gallium arsenide semiconductor materials
control devices
used in mobile phones and other electronic
devices, red laser diodes, and LEDs

Cuprous oxide is a red powdery substanceused to prevent corrosion on the undersideof marine vessels.

Electronic Materials

Cupric oxide used for copper plating

Chemicals

Net Sales

Operating Income (Loss)

Net Sales

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

1.3

7.1

6.1

6.0
4.6

5.0

5.4

0.7

5.0

5.1

5.2

5.1
0.3

(0.2) (0.3)'10/3 '11/3 '12/3 '13/3 '14/3(0.1)'10/3 '11/3 '12/3 '13/3 '14/3

0.3

0.3

0.3

0.1

'10/3 '11/3 '12/3 '13/3 '14/3'10/3 '11/3 '12/3 '13/3 '14/3
Annual Report 2014 11

R e a l E st a t eandOthers/Review

ofOperations

In the Real Estate category, revenue from rental buildings in the
Osaka area was sluggish as vacancy rates failed to improve. In
Tokyo, meanwhile, the Muromachi Furukawa Mitsui Building wascompleted on schedule in February 2014. However, one-time
expenses associated with the opening of the building led to an
operating loss. In summary, sales declined 4.3%, to ¥1,013 million, and operating loss was ¥43 million, compared with operating
income of ¥220 million in the previous year.
Total sales in the Real Estate and Others segment, which also
includes the transport business, decreased 3.3%, to ¥1,751 million.
The segment posted an operating loss of ¥103 million, comparedwith operating income of ¥157 million in the previous fiscal year.

1.1%

Real Estate and Others% of Net Sales

Real Estate
and Others

Net Sales

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

0.8
2.9
0.5

2.4
2.0

Real Estate

1.8

1.8

0.3
0.2

Construction / sales, mediation / brokerage,
other related services for office buildings(0.1)

OthersTransportation service bytrucks and domestic shipping'10/3 '11/3 '12/3 '13/3 '14/3'10/3 '11/3 '12/3 '13/3 '14/3

C olumn

Muromachi Furukawa Mitsui Building completed
Together with other landowners, Furukawa is a participant in the Nihonbashi-Muromachi Eastern District Redevelopment Project, a large-scale, multiple-use complex in Tokyo’s Nihonbashi district. As part of the project,
the Muromachi Furukawa Mitsui Building was completed on February 1, 2014, and COREDO Muromachi 2, acommercial facility containing cinemas, was opened on March 20.
The Muromachi Furukawa Mitsui Building, which began construction in November 2011, consists of 22
floors above ground and four below. It has three zones: commercial facilities (floors 1–6), office space (floors
7–17), and rental accommodation (floors 18–21). The office floors are quite spacious for the Nihonbashi
district, with each standard floor measuring around 1,840 square meters with 3-meter ceiling heights. The
office floors also have environmentally friendly fittings, such as LED lighting and solar power-controlled electricwindow shades. Disaster-related information is transmitted via digital signage in the elevator hall, and there isa 72-hour electricity supply backup in the event of power outage. The highly
functional offices also have disaster prevention storage spaces on all floors tofacilitate business continuity planning (BCP) for tenant corporations.
Nihonbashi-Muromachi is Furukawa’s birthplace, where founder Ichibe Furukawa opened the Company’s first head office in 1877. The former Furukawa
Building was later built on the same site. We expect the Muromachi Furukawa
Mitsui Building to help strengthen our earnings foundation as a new pillar of
our real estate business.
COREDO Muromachi 2

12

Muromachi Furukawa Mitsui Building

Corporate Social Responsibility

Corporate Social Responsibility■ Corporate Principles

Innovation
Creativity
Harmony

Future-oriented awareness reforms
Driven by a spirit of challenge, we shall work constantly to transform ourselves as a global company.

Powerful product manufacturing capabilities
We shall earn the trust of customers in Japan and overseas by pursuing technologies that
anticipate their needs and acquiring powerful product manufacturing capabilities.

Social and environmental contribution
Respecting the laws and behavioral standards of Japan and other nations, we shall help
create a sustainable, environmentally friendly society through transparent corporate
activities and close communication with our various stakeholders.

The Furukawa Company Group’s corporate principles are 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 the Corporate Conduct Charter and the Director and Employees’ Code of
Behavior*. Every effort is made to ensure that all members of theGroup are fully aware of and practice the principles contained ineach. 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 that involves setting core priorities for initiatives to be undertaken.
* Formulated on December 2005, the Director and Employees’ Code of Behavior
sets out behavioral standards for Group executives and employees aimed atfulfilling basic objectives outlined in the Corporate Principles and Corporate
Conduct Charter.

■ Relationships with Stakeholders
In the course of strengthening CSR activities and demonstrating
our Corporate Principles, 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
societyComplianceresponsibility

Localcommunities

Business
partners

Economic responsibility
12

3

Shareholders
andother investors

Employees

1. Corporate Principles 2. Corporate Conduct Charter
3. The Director and Employees’ Code of Behavior● Responsibility to Shareholders
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 throughand othercommunications focusing on timely, appropriate informainvestors
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.

Local
We shall build and maintain favorable relationships ofcommunities trust by pursuing social contribution activities aimed atharmonious coexistence with local communities.
GlobalWe shall protect biodiversity by developing environmenenvironment tally friendly technologies and products while minimizing
the environmental impact of our activities through savingsof energy and resources and reduction of waste.
Annual Report 2014 13

Environmental Protection and Social Contribution Activities

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, the Group 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.” Infiscal 2014, these audits gave priority to the theme of preventative
measures aimed at maintaining effective environmental protection,
safety, and hygiene. Under a system introduced in fiscal 2011,
meanwhile, each factory and site was checked for legal compliancewith the relevant rules using various checklists, including one with
100 workplace audit items. The aim of the checklists is to quantify
the environmental and safety initiatives of each factory and siteand help them understand the level of their activities vis-à-vis otherGroup members.
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, we undertake 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 are working to foster an understanding of the importance of biodiversity among all employees

Japanese serow (goat-antelope)
living near the Company’s former
Kune Mine near Hamamatsu City,
14
Shizuoka Prefecture

and to grasp how biodiversity is impacted by the Group’s ongoing
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. The results for the second set of targets(fiscal 2010–fiscal 2014) are shown below. From fiscal 2015, we
will pursue activities based on the third set of targets.
Second Medium-Term Reduction Targets (Base year: Fiscal 2006)
Category

Fiscal 2014 (target)

CO2 emissions*

5% reduction of fiscal 2006 consumption

Water

5% reduction of fiscal 2006 consumption

Waste discharge

10% reduction of fiscal 2006 consumption* Forms of electricity used: Gasoline, kerosene, diesel oil, heavy oil, LPG, city gas, and electricity■ 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.
Fifth Ashio Cherry Tree-Planting Drive
In March 2009, the newly formed Ashio Cherry Blossom Planting
Group got together to begin planting 1,000 cherry blossom seedlings on land owned by Furukawa in Ashio-machi in Tochigi Prefecture. The tree-planting activity has been held annually since then,except in 2011 when the event was cancelled due to the Great
East Japan Earthquake. In March 2014, 79 Group members—madeup of Furukawa employees and their families—took part in theFifth Ashio Cherry Tree-Planting Drive.

Cherry trees planted in March 2010(second tree-planting drive)Corporate GovernanceCorporate GovernanceThe basic policy of the Furukawa Company Group is to contribute to society, its shareholders, and other stakeholders by building
an efficient management structure that will yield stable profits and increased corporate value through greater managementtransparency and continuous innovation in its corporate structure. This policy binds the Group’s businesses together to ensure
Group integrity, while enabling them to manage their individual operations under a flexible management structure with aclear focus on asset management and accountability for gain and loss. At the same time, Group businesses leverage collective
strengths to maximize corporate value by providing products and services that achieve customer satisfaction.
■ System of Corporate GovernanceFurukawa maintains a Board of Directors comprising eight members, one of whom is appointed from outside the Group. The
Board of Directors oversees the execution of the Furukawa Company Group’s operations and in principle meets once every month,with additional meetings held as required.
To clearly separate management oversight functions from executive functions, accelerate decision-making, and clarify responsibilities, Furukawa has adopted an executive officer system. At present,
we have 13 executive officers, five of whom concurrently holdpositions as directors.
The Management Council sets the Furukawa Company Group’s
fundamental management policies and strategies and makes decisions on important matters. There is also a Management Committee, which meets monthly to discuss the operations of Furukawa
and its core companies, and provides direction. Decisions madeby the Management Council that involve the allocation of funds
or other important management issues must be discussed andapproved by a resolution of the Board 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 an auditor system, with an Audit & Supervisory
Board composed of two statutory auditors and three outside auditors. Pursuant to an audit policy formulated by the Audit & Supervisory Board, auditors attend meetings of the Board of Directors,
the Management Council, the Management Committee, and otherimportant 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 Audit Office, theorganization in charge of internal auditing. The Audit Office iscomposed of five members who engage in auditing Group-wide
operations management and the execution of business operations.
In order to ensure the efficiency and effectiveness of the audit
function, Furukawa continuously works to reinforce cooperation
between the Audit Office, auditors, and independent auditors,
who together devise audit plans, review audit results, and shareother audit-related information.

■ Compliance and System of Risk Management
The Furukawa Company Group has formulated a Corporate Conduct Charter and the Director and Employees’ Code of Behavior.
Every effort is made to ensure that all members of the Group are
fully aware of and practice the principles contained in each.
Recognizing effective risk management as an important aspect ofits 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 of basic policies and establishment ofrelevant frameworks.

● Corporate Governance and Internal Control Systems

As of June 27, 2014

Annual General Meeting of Shareholders
Appoints/recalls

Appoints/recalls
Reports

Independent Auditors

Exchanges opinions/information

AuditsBoard of Directors

Reports

8 members(7 internal, 1 outside)

Reports

Representative Director
Reports

Directs

Reports

Reports

Management
Council

Oversees

Management
Committee

Audit & Supervisory Board
5 members(2 statutory, 3 outside)

Reports

AuditsReports

Appoints/recalls

AuditsDirects

Executive Officers(13 members)

AuditsInternal Control Division
Audit Office

AuditsCSR Promotion Meeting

Business execution

Accounting Dept.,
othersAuditsAuditsReports

All Divisions and Group Companies
Annual Report 2014 15

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

2014/3For the year:
Net sales¥ 163,026
Cost of sales
139,777
Gross profit
23,249Selling, general and administrative expenses
16,363Operating income
6,886
Income (loss) before income taxes and minority interests
7,092
Net income (loss)
3,976

2013/3

2012/3

2011/3

2010/3

2009/3¥ 165,540 ¥ 157,566 ¥ 165,638 ¥ 142,925 ¥ 161,858
144,225
138,097
146,364
127,302
143,651
21,315
19,46919,274
15,623
18,207
17,952
17,314
16,453
14,025
15,904
3,363
2,155
2,821
1,598
2,303
5,433
(2,663)447
886(2,618)2,976(1,659)563
585(5,917)

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

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

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

3,743(1,644)(5,703)9,083(3,643)(4,769)5,112(11,539)
12,116

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:
Net income (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)

11,430
2,828
2,539

2,926
3,015
2,559

3,588
3,329
2,622

2,112
3,290
2,225

2,545
3,244
1,862

17,1183,145
1,752¥ 199,408
76,83873,97654,69456,31377,220¥ 186,076 ¥ 193,971 ¥ 196,234 ¥ 204,774 ¥ 188,361
79,50881,49780,19982,61777,50974,43974,80770,45673,73364,27650,111
46,02245,84948,88544,58551,50747,66847,62250,85545,74280,63485,79689,26594,714
92,475

¥

¥

Yen

9.84
3.00
135.34

%

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

89.1
10.9
9.8
1.1
0.4

88.8
11.2
9.8
1.4
(3.7)

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

1.3
0.3
1.9
23.9

(12.0)
(3.1)
2.1
23.7

30.5
2.2
1.4
186

27.2
1.6
0.9
109

—
—
0.7
80

—
—
0.8
86

—
—
0.9
114

—
3.2
0.7
82

Notes: 1. Return on equity (ROE) = Net income / Average total equity × 100
2. Return on assets (ROA) = Net income / 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

7.37 ¥(4.11) ¥1.39 ¥
1.45 ¥ (14.64)
2.00
0.00
0.00
0.00
4.00
123.99113.88113.45120.96110.31

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

Financial Review

Revenue and Expenses
In fiscal 2014, ended March 31, 2014, consolidated net sales totaled ¥163,026 million, down 1.5% compared with the previous fiscal year. The decrease in revenue
stemmed from the Group’s withdrawal from the fuels business in October 2012 andthe paints business in March 2013. In the previous year, sales in the fuels and paints
businesses were ¥3,771 million and ¥15,079 million, respectively, for a total of¥18,850 million. By contrast, sales in the three machinery-based businesses increased
significantly. Specifically, the Industrial Machinery segment posted a 43.7% jump insales, to ¥18,528 million, owing largely to projects for relocation to higher ground inearthquake-affected areas. The Construction and Mining Machinery (Rock Drills) segment reported a 15.2% rise in sales, to ¥26,843 million, thanks mainly to robust
construction-related demand in Japan and the weak yen, which benefited our overseas business. The UNIC Machinery segment recorded a 24.6% increase in sales, to¥25,741 million, benefiting from a rise in domestic truck registrations amid economic
recovery and solid reconstruction demand.
Cost of sales declined 3.1%, to ¥139,777 million, and the cost of sales margin was
down 1.4 percentage points, to 85.7%.
Selling, general and administrative (SG&A) expenses fell 8.9%, to ¥16,363 million.
As a result, operating income jumped 104.8% from the previous fiscal year, to¥6,886 million. Contributing to earnings were the Industrial Machinery segment, with
137.6% growth in operating income, to ¥1,851 million; the Construction and Mining
Machinery (Rock Drills) segment, with operating income of ¥341 million (comparedwith an operating loss of ¥68 million in the previous year); the UNIC Machinery
segment, with operating income rising 42.0%, to ¥3,142 million; and the Metals
segment, with a 431.1% surge in operating income, to ¥1,503 million. Accordingly,
the operating margin rose 2.2 percentage points, to 4.2%.
Turning to other income, the Group posted ¥600 million, due to gain on foreignexchange stemming from the weakened yen. Furthermore, there was ¥1,095
million in compensation income. In other expenses, the Group posted a ¥1,078 million interest expense, ¥565 million on payments for idle mines, and a ¥187 million
impairment loss. Furthermore, we posted losses in the form of a ¥101 million loss on
sales and retirement of noncurrent assets.
As a result, the Group reported income before income taxes and minority interestsof ¥7,092 million. Total income taxes—the sum of inhabitants’ tax, enterprise tax, andcorporate income tax adjustments—amounted to ¥2,933 million, and minority interests totaled ¥183 million. Accordingly, the Group posted net income of ¥3,976 million, up 33.6% from the previous year.
Return on equity (ROE) improved 1.4 percentage points, to 7.6%, and net income
per share grew from ¥7.37 to ¥9.84.

Financial Position
At March 31, 2014, total assets amounted to ¥199,408 million, up 7.2% from a year
earlier. The increase stemmed mainly from a rise in property, plant and equipment
related to the completion of the Muromachi Furukawa Mitsui Building, as well as anincrease in investment securities thanks to rising prices of listed shareholdings.

Net Sales(Billions of yen)

200
165.6

157.6

165.5 163.0

150 142.9

100

50

0

'10/3 '11/3 '12/3 '13/3 '14/3

Operating Income
Operating Margin(Billions of yen)

(%)

8

8
6.9

6

6
4.2

4
2.8
2.2

2 1.6
1.1

0

4

3.4

1.7

2

2.0
1.4

'10/3 '11/3 '12/3 '13/3 '14/3

0

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

4.0 (%)
4

4
3.0

2.4

2

1.8

0.6

0.4

0

2

0.6
0.3

0
(1.1)

-2

(1.7)

'10/3 '11/3 '12/3 '13/3 '14/3-2

Annual Report 2014 17

Total liabilities grew 6.3%, to ¥143,095 million. This was due primarily to an increase in liability for retirement benefits. The fiscal year-end balance of interest-bearing liabilities (debt) declined 4.2%, to ¥77,220 million.
Net assets at fiscal year-end stood at ¥56,313 million, up 9.3% from a year earlier.
This was mainly due to an increase in shareholders’ equity boosted by higher retained
earnings. Consequently, the equity ratio edged up 0.5 percentage point, to 27.4%,
and the debt-to-equity (D/E) ratio declined from 1.6 to 1.4 times.

Net Income (Loss) per Share
(Yen)

9.84

10
7.37
5
1.45

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 ¥2,539 million, down 0.8%
from the previous year. Of this total, ¥111 million was allocated to the Industrial Machinery segment, ¥689 million to the Construction and Mining Machinery (Rock Drills)
segment, ¥326 million to the UNIC Machinery segment, ¥1,320 million to the Electronic Materials segment, and ¥90 million to the Chemicals segment.
Capital expenditures amounted to ¥11,430 million. Of this total, ¥296 million was
allocated to the Industrial Machinery segment, ¥841 million to the Construction and
Mining Machinery (Rock Drills) segment, ¥392 million to the UNIC Machinery segment, ¥769 million to the Metals segment, ¥694 million to the Electronic Materials
45
segment, and ¥122 million to the Chemicals 2,100
segment, aimed primarily at improvements in production efficiency. In addition, ¥7,769 million was allocated to the Real
Estate segment, mainly for the Nihonbashi-Muromachi Eastern District Redevelop1,400
30
ment Project, and ¥543 million went to the Others segment, mainly for solar power
generation equipment for the purpose of selling electricity. Depreciation and amortization declined 6.2%, to ¥2,828 million.
700
15
The Group’s capital expenditure budget is based on comprehensive considerationof various factors, including demand forecasts, production plans, and investment benefits. In the year ending March 31, 2015, the Groupplans to invest a total of0¥3.6
0billion, mainly for the purchase of new facilities and repair of existing ones. We expect
to procure these funds via borrowings and/or internal funds.
Cash Flows
In the year under review, net cash provided by operating activities amounted to¥1,983 million, down 63.9% from the previous year. The main factor was a decreasein payables-trade, which contrasted with income before income taxes and minority
interests.
12 the600¥3,129 million, up 38.9% from
Net cash used in investing activities totaled
previous year. The primary component was purchases of property, plant andequipment.
400
6
Net cash used in financing activities was ¥4,562 million, compared with net cash
provided by financing activities of ¥252 million in the previous year. This was mainly
due to repayment of long-term debt.
200
0
As a result, cash and cash equivalents at the end of the fiscal year totaled ¥12,734
million, down ¥5,230 million, or 29.1%, from a year earlier.
0

18

-6

1.39

0

-5

(4.11)'10/3 '11/3 '12/3 '13/3 '14/3

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

2,100 204.8 196.2 194.0

186.1

199.4 3.0
2.1

1.6

1,400

0.3

1.5

0.3

0

700
(0.9)

0

'10/3 '11/3 '12/3 '13/3 '14/3-1.5

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

56.3 1260
50.9

47.6 47.7

51.5

40

6.2
1.3

20

7.6
6

1.2

0
(3.6)

0

'10/3 '11/3 '12/3 '13/3 '14/3-6

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 and research and development expenses necessary to bolster earnings, as well as futurebusiness 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 Meeting of
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 2014, the Company has declared a year-end dividend of ¥3.00 per share,up ¥1.00 from the previous year. Facing rapidly changing economic conditions in Japan and overseas, we will deploy retained earnings to further enhance our businessperformance and improve our financial position. Specifically, we will make careful andeffective 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 product commercialization.

Equity Ratio
(%)

30

26.9
23.9

23.4

27.4

23.7

20

10

0

'10/3 '11/3 '12/3 '13/3 '14/3

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

Business Risks(1) Fluctuations in the Foreign Exchange and Nonferrous Metals Markets
The Furukawa Company Group is at risk of foreign exchange fluctuations in connection with its export business, the import of raw materials, primarily copper ore, andsmelting and processing income. In addition, the Furukawa Company Group’s stockof nonferrous metal inventories, an internationally traded commodity, is subject tomarket movements. While the Group utilizes foreign exchange contracts and forward
delivery transactions as a hedge against the aforementioned risks, its operating results
and financial position may be adversely affected by movements in exchange rates andnonferrous metal markets.
(2) Investment Securities and Land
Historically, the Furukawa Company Group has maintained relatively high balances ofmarketable securities and land. As of March 31, 2014, the carrying value of investment securities as stated in the balance sheets was ¥22,714 million, while land stoodat ¥55,400 million. Accordingly, the Group’s operating results and financial position
are at risk of impairment losses, losses from devaluation, and losses on sales due tomovements in stock and land prices.
(3) 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

2
1.9

1.9

1.9
1.6

1.4

1

0

(%)

'10/3 '11/3 '12/3 '13/3 '14/3

Dividends on Equity (DOE)
Ratio

3.0
2.2
1.6

1.5

0.0

0.0

0.0

0.0

'10/3 '11/3 '12/3 '13/3 '14/3

Annual Report 2014 19

Financial Review

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.

Capital Expenditures
Depreciation andAmortization(Billions of yen)

(4) Earthquakes and Other Natural Disasters
The Furukawa Company Group’s operating results and financial position are at risk inthe event of a suspension in operations and delays in production and/or shipments
due to damage to manufacturing bases and facilities from earthquakes and othernatural disasters.

15
11.4
10

5

(5) 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.
(6) Dilution of Shares Due to Exercise of New Stock Acquisition Rights
The Furukawa Company Group seeks to procure investment capital in a flexible manner to fund overseas investments and other initiatives. To this end, the Board of Directors, at its meeting held on December 20, 2010, passed a resolution to issue newstock acquisition rights in a third-party allotment, with the recipient being Mizuho
Securities Co., Ltd. The new stock acquisition rights were subsequently issued on
January 5, 2011. In the event that said rights are exercised, the per-share value of theCompany’s shares may become diluted.

0

3.2
3.3 3.6 3.3 2.9 3.0
2.5
2.1

2.8

'10/3 '11/3 '12/3 '13/3 '14/3

Cash Flows
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities(Billions of yen)

10 9.1
5.0

5

5.5

3.7
2.0
0.3

0
(1.6)

-5 (3.6)(4.8)
-10

(5.7)

(2.3)
(3.2) (3.8)
(3.1)
(4.6)

'10/3 '11/3 '12/3 '13/3 '14/3

Cash Dividends per Share
(Yen)

4
3.00

3
2.00

2

1

0

20

0.00

0.00

0.00

'10/3 '11/3 '12/3 '13/3 '14/3

Financial Section
22
Consolidated Balance Sheets
24
Consolidated Statements of Operations
25
Consolidated Statements of Comprehensive Income
26
Consolidated Statements of Changes in Net Assets
28
Consolidated Statements of Cash Flows
29
Notes to Consolidated Financial Statements
52
Independent Auditor's Report

Annual Report 2014 21

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
As of March 31, 2014 and 2013
Thousands of
U.S. dollars (Note 4)

Millions of yen

2014

ASSETS

2014

2013

Current Assets:
Cash and cash equivalents¥

12,734¥

17,964$

123,631

Receivables—trade:
25,796

Notes and accounts

250,447

22,942

902

572

8,757

Finished products

12,604

12,761

122,369

Work in process

7,220

6,961

70,097

Raw materials and supplies

13,244

11,818

128,583

Deferred tax assets (Note 14)

885

1,299

8,592

Other current assets

3,656

5,291

35,495

Allowance for doubtful accounts

(203)

(100)

(1,971)

76,83879,508746,000

Land and timberlands

57,25656,863555,883

Buildings and structures

51,52541,498500,243

Machinery and equipment

48,40746,364

469,971

Lease assets (Note 10)

1,671

1,616

16,223

Construction in progress

240

2,894

2,330

Affiliates

		Total current assets

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

159,099

149,235

1,544,650

Accumulated depreciation(71,900)(70,212)(698,058)

		 Property, plant and equipment, net

87,19979,023

846,592

48

65

466

Investment securities (Notes 5 and 6)

25,092

19,878

243,612Investments in affiliates

5,034

4,804

48,874Long-term loans receivable

2,328

1,725

22,602

Deferred tax assets (Note 14)

1,857

69

18,029Other assets

1,644

1,996

15,961

Investments and Other Assets:
Goodwill

Allowance for doubtful accounts
		 Total investments and other assets
		Total assets

22

¥

(632)

(992)

(6,136)35,371

27,545

343,408

199,408¥

186,076$

1,936,000

C o n s o l i d at e d B a l a n c e S h e e t s

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:
Notes and accounts
Affiliates
Accrued expenses
Income taxes payable
Deferred tax liabilities (Note 14)
Other current liabilities
		 Total current liabilities

2014

¥

Long-Term Liabilities:
Long-term debt (Note 6)
Lease obligations (Note 6)
Accrued employees’ retirement benefits (Note 13)
Provision for environmental measures
Liability for retirement benefits (Notes 3 and 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:		2014—329,062 shares		2013—318,422 shares
		 Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain (loss) 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
Minority interests
		 Total net assets
		 Total liabilities and net assets¥

12,74817,861
311

2014

2013

¥

10,73825,652
274$

123,767
173,408
3,019

21,552
4
17,341
2,422
2
1,735
73,976

24,529
3
9,289
1,058
14
2,882
74,439209,24339
168,359
23,51519
16,845718,21446,611
692
—
149
5,672
8,902

44,244
578
1,050
163
163
8,255

452,534
6,718
—
1,447
55,06886,427

2,253
205
4,635
69,119

2,346
201
3,293
60,13021,8741,990
45,000671,058

28,20821,91728,20818,581

273,864
212,786(48)—
50,077(47)—
46,742(466)—
486,184

5,882
15
3,504
(953)
(3,831)
4,617
53
1,566
56,313
199,408

2,727
(390)
3,673
(2,641)
—
3,369
53
1,343
51,507
186,076

57,106
146
34,019(9,252)(37,194)
44,825515
15,204
546,728
1,936,000¥$

The accompanying notes are an integral part of these statements.

Annual Report 2014 23

Consolidated Statements of Operations
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2014 and 2013
Thousands of
U.S. dollars (Note 4)

Millions of yen

2014

Net Sales¥

Cost of Sales (Note 16)

2014

2013

163,026¥(139,777)

165,540$

1,582,777(1,357,059)(144,225)

		Gross profit

23,24921,315

225,718

Selling, General and Administrative Expenses (Note 9)(16,363)(17,952)(158,864)

6,886

3,363

66,854

413

369

4,010

		Operating income
Other Income (Expenses):
Interest and dividend income

(137)

(332)

(1,330)Interest expense(1,078)(1,259)(10,466)

Other income (expenses), net (Notes 17 and 19)

1,008

3,292

9,786

		 Income (Loss) before income taxes and minority interests

7,092

5,433

68,854Current(3,067)(1,366)(29,776)

Deferred

134

(912)

1,301

		 Total income taxes(2,933)(2,278)(28,475)

Income (Loss) Before Minority Interests

4,159

3,155

40,379Minority Interests

(183)

(179)

(1,777)

Equity in earnings (losses) of affiliates

Income Taxes (Note 14):

		 Net income (loss)

¥

3,976

¥

2,976

$

Yen

38,602
U.S. dollars (Note 4)

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

24

¥

9.84

¥

7.37

$

0.10

9.59

—

0.09

135.34123.991.31

Consolidated Statements of Comprehensive Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2014 and 2013
Thousands of
U.S. dollars (Note 4)

Millions of yen

2014

Income (Loss) Before Minority Interests

¥

2014

2013

4,159

¥

3,155

$

40,379Other Comprehensive Income (Loss):
Unrealized holding gain (loss) on securities, net of income taxes

3,161

559

30,689

407

(196)

3,951

Translation adjustments
Share of other comprehensive income (loss) of associates­accounted for using equity method
		 Total other comprehensive income (Note 8)

1,383

450

13,427

351

320

3,408

5,302

1,133

51,475Comprehensive Income

9,461

4,288

91,854

9,225

4,081

89,563

236

207

2,291

Deferred gain (loss) on hedges

Comprehensive Income (Loss) Attributable to:Shareholders of Furukawa Co., Ltd.
Minority interests
The accompanying notes are an integral part of these statements.

Annual Report 2014 25

Consolidated Statements of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2014 and 2013

For the year ended March 31, 2014

Millions of yen
Number ofshares ofcommonstock(thousands)

Balance at beginning of year

Shareholders’ equity
Commonstock

404,456¥

28,208¥Retainedearnings

Treasury stock,at cost18,581

¥

(47)

Total
shareholders’equity¥46,742

Cash dividends paid

—

—

(808)

—

(808)

Net income (loss) for the year

—

—

3,976

—

3,976

Purchase of treasury stock

—

—

—

(1)

(1)

Reversal of surplus on the revaluation of land

—

—

168

—

168

Net change during the year

—

—

—

—

—

28,20821,917

Balance at end of year

404,456¥

For the year ended March 31, 2014

¥

(48)

¥

50,077

Minority
interests

Total
net assets

53 ¥ 1,343¥51,507

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¥

Surplus on therevaluation ofland, net ofincome taxes

2,727 ¥(390) ¥Cash dividends paid

—

—

—

Net income (loss) for the year

—

—

—

Purchase of treasury stock——Reversal of surplus on the revaluation of land

—

—

3,155
5,882 ¥Net change during the year
Balance at end of year¥

Translation
adjustments

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
sharesincome(Note 13)

3,673 ¥ (2,641) ¥— ¥3,369 ¥

—

—

—

—

—

(808)

—

—

—

—

—

3,976

—

—

—

—

—

—

(1)

—

—

—

—

—

—

168

405

(169)

1,688

(3,831)

1,248

—

223

1,471

15 ¥

3,504 ¥

(953) ¥ (3,831) ¥4,617 ¥

53 ¥ 1,566¥56,313

For the year ended March 31, 2013

Millions of yen
Number ofshares ofcommonstock(thousands)

Balance at beginning of year
Cash dividends paid

404,456

Shareholders’ equity
Commonstock¥—

28,208¥Retainedearnings

Treasury stock,at cost15,704

¥

(46)

Total
shareholders’equity¥43,866————

Net income (loss) for the year

—

—

2,976

—

2,976

Purchase of treasury stock

—

—

—

(1)

(1)
(99)

Reversal of surplus on the revaluation of land

—

—

(99)

—

Net change during the year

—

—

—

—

Balance at end of year26

404,456¥

28,208¥18,581

¥

(47)

—
¥

46,742

C o n s o l i d at e d S tat e m e n t s o f C h a n g e s i n N e t A s s e t s

For the year ended March 31, 2013

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¥

Surplus on therevaluation ofland, net ofincome taxes

2,162 ¥(191) ¥Cash dividends paid

—

—

—

Net income (loss) for the year

—

—

—

Purchase of treasury stock

—

—

—

Translation
adjustments

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
sharesincome(Note 13)

3,578 ¥ (3,393) ¥Minority
interests

Total
net assets

53 ¥ 1,593¥47,668— ¥2,156 ¥

—

—

—

—

—

—

—

—

—

—

—

2,976

—

—

—

—

—

(1)

Reversal of surplus on the revaluation of land

—

—

—

—

—

—

—

—

(99)

Net change during the year

565

(199)

95

752

—

1,213

—

(250)

963

2,727 ¥(390) ¥

— ¥3,369 ¥

53 ¥ 1,343¥51,507

Balance at end of year¥

3,673 ¥ (2,641) ¥For the year ended March 31, 2014

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

Balance at beginning of year

Commonstock

Retainedearnings$ 273,864$ 180,398

Total
shareholders’equityTreasury stock,at cost$(456)$ 453,806

Cash dividends paid—

(7,845)—(7,845)

Net income (loss) for the year—

38,602—38,602

Purchase of treasury stock

—

—

(10)

(10)

Reversal of surplus on the revaluation of land

—

1,631

—

1,631

Net change during the year

—

—

—

—

$ 273,864$ 212,786(466)$ 486,184

Balance at end of year$

The accompanying notes are an integral part of these statements.

For the year ended March 31, 2014

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

Balance at beginning of year

Surplus on therevaluation ofland, net ofincome taxes

Translation
adjustments

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
sharesincome(Note 13)

$ 26,476 $ (3,786) $ 35,660 $ (25,640) $Minority
interests

Total
net assets— $ 32,709 $515 $13,039 $500,069

Cash dividends paid

—

—

—

—

—

—

—

—

(7,845)

Net income (loss) for the year

—

—

—

—

—

—

—

—

38,602

Purchase of treasury stock

—

—

—

—

—

—

—

—

(10)

—

—

—

—

—

—

—

—

1,631

Net change during the year

30,6303,932(1,641)

16,388(37,194)

12,116—2,165

14,281

Balance at end of year

$ 57,106 $Reversal of surplus on the revaluation of land

146 $ 34,019 $ (9,252) $ (37,194) $ 44,825 $515 $15,204 $546,728

Annual Report 2014 27

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2014 and 2013
Thousands of
U.S. dollars (Note 4)

Millions of yen

2014

Operating Activities:
Income (Loss) before income taxes and minority interests
Foreign exchange (gains) losses
Depreciation and amortization
Decrease in allowance for doubtful accounts, net
Increase (Decrease) in accrued employees’ retirement benefits
Increase in net defined benefit liability
Gain (Loss) on sales of investment securities
Gain on sales of subsidiaries' stocks
Compensation income
Interest and dividend income
Interest expense
Impairment loss on property, plant and equipment
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

¥

7,092
(236)
2,828
(232)
(4,499)
5,672
(42)
—
­
(1,094)
(413)
1,078
187

2014

2013

¥

5,433
3,015
3,015
(247)
1,248
—
(994)
(824)
(1,264)
(369)
1,259
331

$

68,854(2,291)
27,456(2,252)(43,680)
55,068(408)—(10,621)(4,010)10,466
1,816(2,632)(28)(4,146)
(315)
3,220
403
(1,090)(1,793)
149
1,094
1,983

794
(2,549)3,914(3,916)
5,671
388(1,287)
(846)
301
1,264
5,491

(25,553)(272)(40,252)(3,059)31,262
3,913(10,583)(17,408)
1,447
10,621
19,252

Investing Activities:
Increase in time deposits
Decrease in time deposits
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investments
Increase in long-term loans receivables
Proceeds from sales of investments in subsidiaries resulting in change inscope of consolidation
Other
		 Net cash used in investing activities(0)304(2,668)837(1,704)
630
—
(566)

(300)
—
(2,439)429(3,032)
2,531
505
(340)

(0)
2,951
(25,903)
8,126(16,544)
6,117—(5,495)—38(3,129)321
81(2,253)—369(30,379)

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

20,280(25,705)
5,722(3,712)
(804)
(329)
(14)
(4,562)479(5,229)17,963
12,734

16,860(18,130)
10,743(8,851)
—
(360)
(10)
252
320
3,810
14,154
17,964

196,893(249,562)
55,553(36,039)(7,806)(3,194)(136)(44,291)
4,650(50,768)
174,399
123,631

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, 2014 and 2013

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 accordance withaccounting 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 35 subsidiaries and 11 affiliates as of March
31, 2014 (47 subsidiaries and 16 affiliates as of March 31,2013). The consolidated financial statements included theaccounts of the Company and 35 subsidiaries as of March 31,
2014 (47 as of March 31, 2013).
Compared with the previous year, the number of subsidiaries
decreased by 12 subsidiaries mainly due to the transfer of stocks.
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, 2014
and 2013. 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 theinformation 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.

market 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.
(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 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.”(7) 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
5 to 60 years
Machinery and equipment
2 to 22 years

Annual Report 2014 29

Amortization is calculated by the straight-line method for
intangible assets except for lease assets.
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.
(8) Amortization of Goodwill
Goodwill is amortized by the straight-line method over five
years.
(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 ¥1,849 million ($17,951
thousand) and ¥1,768 million as of March 31, 2014 and 2013,
respectively.
(11) Income Taxes
Current income taxes comprising corporation tax, enterprise tax
and inhabitants’ taxes are provided for based on amounts

30

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 which will be in effect when thetemporary differences are expected to reverse, are reflected in
the consolidated financial statements.
The Company and its domestic wholly-owned subsidiaries
file a consolidated corporation tax return.
(12) Amounts per Share
Basic net income (loss) per share is computed based on the net
income (loss) available for distribution to shareholders ofcommon stock and the weighted-average number of shares ofcommon stock outstanding during the year. Diluted net income
per share is not presented since no dilutive instruments were
issued and outstanding for the year ended March 31, 2013.
Net assets per share are computed based on the net assets
excluding minority 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 ofoperations.
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 minority interests, which are translated attheir historical exchange rates. Revenue and expense 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 minority interests 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

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

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.

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.

(15) Shareholders’ Equity
The Company Law of Japan provides that an amount equal to
3. Accounting Changes
The Company adopted “Accounting Standard for Retirement
Benefits” (ASBJ Statement No.26 of May 17,2012) and“Guidance on Accounting Standard for Retirement Benefits”(ASBJ Guidance No. 25 of May 17, 2012) (except for certain
provisions described in the main clause of Section 35 of thestandard and in the main clause of Section 67 of the guidance)
as of the end of the year ended March 31, 2014. The accounting
standard requires entities to apply a revised method for recording
the retirement benefit obligation, after deducting pension plan
assets, as a liability for retirement benefits. In addition,
unrecognized actuarial differences and unrecognized priorservice costs are recorded as a liability for retirement benefits.
Concerning the application of the “Accounting Standard for
Retirement Benefits”, based on the provisional treatment set
out in Clause 37 of the standard, the effects of such changes in
the current fiscal year have been recorded in retirement benefits
liability adjustments in accumulated other comprehensive
income. As a result of this change, a liability for retirement
benefits was recognized in the amount of ¥5,672 million($55,068 thousand) and accumulated other comprehensive
income decreased by ¥3,831 million ($37,194 thousand) as ofMarch 31, 2014. In addition, net assets per share decreased by¥9.48 ($0.09).
Unapplied Accounting Standard, etc.
On May 17, 2012, the ASBJ issued “Accounting Standard for

Retirement Benefits” (ASBJ Statement No. 26) and “Guidanceon Accounting Standard for Retirement Benefits” (ASBJ
Guidance No. 25), which replaced the Accounting Standard for
Retirement Benefits that had been issued by the BusinessAccounting Council in 1998 with an effective date of April 1,
2000 and the other related practical guidance, being followedby partial amendments from time to time through 2009.
(1) Overview
The standard provides guidance for the accounting forunrecognized actuarial differences and unrecognized priorservice costs, the calculation methods for retirement benefit
obligation and service costs, and enhancement of disclosures
taking into consideration improvements to financial reportingand international trends.
(2) Scheduled date of adoption
The revised accounting standard and guidance were adopted asof the end of the year ended March 31, 2014. However, revisions
to the calculation methods for the retirement benefit obligationand service costs are scheduled to be adopted from the
beginning of the year ending March 31, 2015.
(3) Impact of adopting revised accounting standard and guidance
The impact on the consolidated financial statements as a resultof this adoption is minimal.

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 ¥103=US$1.00, the exchange rate prevailingon March 31, 2014. 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.

Annual Report 2014 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,
2014 and 2013 were as follows:
Millions of yen

Thousands of U.S. dollars

2014
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks

¥

2014

Acquisition cost

21,598 ¥13,555

Unrealized gain
(loss)

Carrying value¥$ 209,689 $ 131,602 $8,043

Acquisition cost

Unrealized gain
(loss)

78,087

Government bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

21, 598

13,555

8,043

209,689

131,60278,087

1,116

1,266

(150)

10,835

12,291(1,456)

—

—

—

—

—

—

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

¥

—

—

—

—

—

—

1,116

1,266

(150)

10,835

12,291(1,456)22,714 ¥14,821 ¥7,893$ 220,524 $ 143,893 $

76,631Millions of yen

2013
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks¥ 13, 838 ¥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)

9,743 ¥
—

4,095
—

—

—

—

13, 838

9,743

4,095

3,629

3,914

(285)

17

17

—

51

51

—

3,697

3,982

(285)

17,535 ¥13,725 ¥3,810

Gain on sales of securities classified as other securities with aggregate gains for the years ended March 31, 2014 and 2013 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2014

Sales proceeds

¥

2014

2013

548

¥

2,531

$

5,320

Aggregate gains

42

994

408

Aggregate losses

—

—

—

32

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

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 0.6% and 0.6%
as of March 31, 2014 and 2013.
Long-term debt as of March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2014 to 2029¥

64,47264,472¥(17,861)

Current portion of long-term debt¥

46,611

¥

2013

2014

69,89669,896$ 625,942
625,942(25,652)(173,408)

44,244$ 452,534

The average interest rates applicable to the above debt amounting to ¥64,472 million ($625,942 thousand) and ¥69,896 million
were 1.0% and 1.2% as of March 31, 2014 and 2013, respectively.
The aggregate annual maturities of long-term debt subsequent to March 31, 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen

2014Years ending March 31,¥

17,861$ 173,408

2016

13,956

135,495

2017

11,070107,476

2015

2018

7,493

72,748201912,125

117,7182020 and thereafter

1,967

19,09764,472$ 625,942¥
Lease obligations as of March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

Lease obligations due 2014 to 2023

¥

1,003

¥

1,003
¥

692

$

852

(3,019)

(274)
¥

578

9,737
9,737

852

(311)

Current portion of lease obligations

2014

2013

$

6,718

The aggregate annual maturities of lease obligations subsequent to March 31, 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen

2014Years ending March 31,

2015

¥

311

$

3,019

2016

269

2,612

2017

177

1,718

2018

107

1,039

2019 and thereafter

139
¥

1,003

1,350
$

9,738

Annual Report 2014 33

the unused balances under these credit facilities amounted
to ¥12,656 million ($122,874 thousand) and ¥18,804 million($182,563 thousand), respectively, as of March 31, 2014 andamounted to ¥19,756 million and ¥30,658 million, respectively,
as of March 31, 2013.

The Company and certain consolidated subsidiaries haveentered into overdraft and loan commitment agreements
amounting to ¥31,460 million ($305,437 thousand) with 24
banks and ¥50,414 million with 24 banks as of March 31,
2014 and 2013, respectively. The borrowings outstanding andAssets pledged as collateral and liabilities with collateral pledged as of March 31, 2014 and 2013 were as follows:(a) Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

2014

Investment securities

493

¥

1,844

¥

859

1,351

Property, plant and equipment, net

2014

2013

¥

$

13,117

1,546
¥

2,405

4,786

$

17,903(b) Liabilities with collateral pledged
Thousands of
U.S. dollars

Millions of yen

2014

¥

Long-term debt (including current portion)

2014

2013

791

¥

1,004

$

7,680

7. Net Assets(1) Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2013

Increase

Decrease

As of March 31,
2014

Shares issued:
Common stock		 Total

404,455——

404,455

404,455­——

404,455

318

10

—

329

318

10

—

329

Treasury stock:
Common stock (Note)		 Total

Note: The increase of 10 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

Details of
subscription rights
to shares (*)

Type of shares
to be issued upon
exercise of rights

Subscription rights
to shares due 2016

Commonstock

Note: All subscription rights to shares can be exercised.

34

Millions of yen

Number of shares subject to be issued upon exercise of rights
As of March 31,
2013

Increase

Decrease

As of March 31,
2014

100,000——

100,000

100,000——

100,000

Balance as ofMarch 31, 2014

¥

53
53

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

8. Other Comprehensive Income
Reclassification adjustment and tax effects allocated to each component of other comprehensive income for the years ended March
31, 2014 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

2014

2014

2013

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

¥

4,125

¥

2,611

$

40,049(42)(1,057)(408)

Amounts before tax effect

4,083

1,554

39,641

Tax effect

(922)

(995)

(8,952)

Unrealized holding gain (loss) on securities

3,161

559

30,689Amounts arising during the year(755)

(1,610)(7,330)Adjustment on the acquisition cost of assets

1,323

1,347

12,845

Amounts before tax effect

568

(263)

5,515

Tax effect

(161)

67

(1,564)

Deferred gain (loss) on hedges

407

(196)

3,951

—

—

—

1,383

450

13,427

Reclassification adjustments for gains and losses included in net income

Deferred gain (loss) on hedges:

Surplus on the revaluation of land, net of income taxes:
Tax effectTranslation adjustments:
Amounts arising during the year
Share of other comprehensive income (loss) of associates accounted forusing equity method:Amounts arising during the year
Reclassification adjustments for gains and losses included in net income
Share of other comprehensive income (loss) of associates accounted for using
equity method
Total other comprehensive income

¥

451

341

4,379

(100)

(21)

(971)

351

320

3,408

5,302

¥

1,133

$

51,475

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, 2014 and 2013 amounted to ¥2,539 million ($24,650 thousand) and ¥2,559 million, respectively.

Annual Report 2014 35

10. Leases
Leases’ accounting
Finance lease transactions that do not involve transfer of ownership
1. Leased asset quality(a) Tangible assets
		Mainly production installations (Machinery and equipment) in the machinery segment and distribution vehicles (Machinery andequipment) in the others segment(b) Intangible assets
		Mainly software
2. Depreciation method of leased assets	Refer to “(7) Property, Plant and Equipment and Depreciation” in “2. Summary of Significant Accounting Policies.” Finance leasetransactions that do not involve transfer of ownership, entered into on and before March 31, 2008, by the Company and its
domestic consolidated subsidiaries are accounted for as operating leases.
The pro forma amounts representing acquisition costs, accumulated depreciation and net carrying value for the machinery andequipment and others held under the finance leases currently accounted for as operating leases as of March 31, 2014 and 2013 wereas follows:
Thousands of
U.S. dollars

Millions of yen

2014

Acquisition costs¥

Net carrying value

¥

1,198

Accumulated depreciation
¥

2014

2013

1,361
163

1,954

$

11,631

1,530
¥

424

13,214$

1,583

Lease payments relating to finance leases accounted for as operating leases amounted to ¥262 million ($2,544 thousand) and¥295 million for the years ended March 31, 2014 and 2013, 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, 2014 and2013 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2014

Within one year

¥
¥

36

149

¥

14

Over one year

163

2014

2013

261

$

1,447

$

1,583

136

163
¥

424

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

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 bondissues. 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, theFurukawa 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 ofother companies with which the Furukawa Group has business relationships.
			 Substantially all trade payables—trade notes and accounts payables—have payment due date within one year.
			 Short-term 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 Grouputilizes rate swap transactions as a hedging instrument for each contract. The assessment of effectiveness is omitted since itmeets conditions of specific matching criteria for interest rate swap.
			 Regarding derivatives, the Furukawa Group enters into forward foreign exchange contracts to reduce the foreign currency
exchange risk arising from the receivables and payables denominated in foreign currencies. The Furukawa Group also enters into
interest rate swap transactions to reduce fluctuation risk deriving from interest payable for debt bearing interest at variable rates.
The Furukawa Group also enters into forward commodity exchange contracts to reduce fluctuation risk of commodity price of
inventories. Information regarding the method of hedge accounting, hedging instruments, hedged items, hedging policy andthe assessment of effectiveness of hedging activities is found in “(14) Hedging Activities” in “2. Summary of Significant
Accounting Policies.”(3) Risk management for financial instruments		 (a) 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 whichhave high credit to reduce credit risk.
		 (b) Monitoring of market risks (the risks arising from fluctuations in foreign exchange rates, interest rates and others)			For trade receivables and payables denominated in foreign currencies, the Furukawa Group identifies the foreign currency
exchange risk for each currency on a monthly basis and principally enters into forward foreign exchange contracts to hedge
such risk. In order to mitigate the interest rate risk for loans payable and bonds bearing interest at variable rates, theFurukawa 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 oftransaction-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.

Annual Report 2014 37

2. Estimated fair value of financial instruments
	Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2014 and 2013 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

2014

2014

Carrying value

Estimated fair value¥ 12,734¥ 12,734

Difference

Carrying value

Estimated fair value$ 123,631$ 123,631

Difference

Assets(1) Cash and cash equivalents

¥

—

$

—

(2) Trade notes and accounts receivable

26,69826,698—259,204

269,204—(3) Investment securities

22,71422,714—

220,524

220,524—

62,146

62,146—603,359

603,359—¥ 21,556¥ 21,556—$ 209,282$ 209,282

12,74812,748—

123,767

123,767

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

¥

¥

$

—
—

64,47264,665

193625,942

627,816

1,874

98,776

98,969193

958,991

960,865

1,874

(44)

¥

(44)

¥

—

$

427

$

427

$

—

Millions of yen

2013
Carrying value

Estimated fair value

Difference

Assets(1) Cash and cash equivalents¥

17,964¥

17,964¥—(2) Trade notes and accounts receivable

23,514

23,514—(3) Investment securities

17,535

17,535—59,01359,013—

Total assets
Liabilities(1) Trade notes and accounts payable¥

24,532¥

24,532¥—(2) Short-term debt (*1)

10,738

10,738—(3) Long-term debt (*1)

69,896

70,237341

Total liabilities
Derivatives (*2)

105,166¥(524)

105,507
¥

(524)

341
¥

—

(*1) Current portion of long-term debt is included in long-term debt.
(*2) The value of assets and liabilities arising from derivatives is shown at net value, with the amount in parentheses representing net
liability position.
Notes:
1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
Assets(1) Cash and cash equivalents, (2) Trade notes and accounts receivable
		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(3) 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) Trade notes and accounts payable, (2) Short-term debt
		 Since these items are settled in a short period of time, their carrying value approximates fair value.
38

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s(3) Long-term debt
		The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into.
Derivative transactions
Please refer to “12. Derivative Transactions” to the consolidated financial statements.
2. Financial instruments of which it is extremely difficult to determine the fair value as of March 31, 2014 and 2013
Thousands of
U.S. dollars

Millions of yen

2014

¥

Unlisted stocks

2014

2013

7,413

¥

7,147

$

71,971

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, 2014 and 2013 are as follows:
For the year ended March 31, 2014
Due in one
year or lessMillions of yen

Cash deposit¥

Trade notes and accounts receivable

12,670Due after one year
through five years

Due after five years
through ten years

¥

¥

—

—

Due after
ten years¥—

26,698————Investment securities
Other securities with maturity		(1) Bonds (Municipal bonds)

—

—

—

		

(2) Bonds (Corporate bonds)

—

—

—

¥

Total

39,368

¥

—

¥

—

—
¥

—

For the year ended March 31, 2013
Due in one
year or lessMillions of yen

Cash deposit¥

Trade notes and accounts receivable

18,231

Due after one year
through five years

Due after five years
through ten years

¥

¥

—

—

Due after
ten years¥—

23,514

—

—

—

—

17

—

—

Short-term investments and investment securities
Other securities with maturity(1) Bonds (Municipal bonds)(2) Bonds (Corporate bonds)
Total

—
¥

41,745

—
¥

17

—
¥

—

51
¥

51

For the year ended March 31, 2014
Thousands of U.S. dollars

Cash deposit
Trade notes and accounts receivable

Due in one
year or less

$ 123,019

Due after one year
through five years

Due after five years
through ten years

$

$

—

—

Due after
ten years$—

259,204

—

—

—

—

—

—

—

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

		(2) Bonds (Corporate bonds)

Total

—
$ 382,223

—
$

—

—
$

—

—
$

—

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

Annual Report 2014 39

12. Derivative Transactions
The notional amounts and estimated fair value of the derivative instruments outstanding at March 31, 2014 and 2013 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, 2014
Contract amounts

Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

¥

80
102
11,395

—
—
—

¥

(2)
1
(83)

Accounts receivable
Accounts receivable

¥

260
459

—
—

(*)
(*)

Accounts payable

¥

3,326

—

(*)

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, 2013
Contract amounts

Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

¥

1,836
205
6,835

—
—
—

¥

(78)
(4)
7

Accounts receivable
Accounts receivable

¥

167
536

—
—

(*)
(*)

Accounts payable

¥

3,396

—

(*)

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, 2014
Contract amounts

Maturing after one year

Fair value

Accounts receivable
Accounts receivable
Accounts payable

$

777
990
110,631

—
—
—

$

(19)
(10)
806

Accounts receivable
Accounts receivable

$

2,524
4,456

—
—

(*)
(*)

Accounts payable$

33,291—(*)

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

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

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, 2014
Contract amounts¥

29,506

Maturing after one year¥

Fair value

22,217(*)

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, 2013
Contract amounts¥

34,550Maturing after one year¥

Fair value

20,108(*)

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, 2014
Contract amounts$

286,466

Maturing after one year$

Fair value

215,699(*)(*) 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, 2014
Contract amounts¥

Raw material

Maturing after one year

5,952

—

—

—

Fair value

¥

128
—

Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell		Copper
Buy
		Copper

Major object of hedge

As of March 31, 2013
Contract amounts

Raw material
Raw material¥

Maturing after one year——

12,463—

Fair value

—
¥

(448)

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, 2014
Contract amounts$

Maturing after one year

57,786———

Fair value

$

1,243
—

Note: The fair values of forward product contracts are based on the price provided by trading companies.
(*) Since short position trade is dependent on copper price at the time when copper will be received, contract amount and the fairvalue as of March 31, 2014 and 2013 does not exist and is not disclosed.

Annual Report 2014 41

13. Retirement Benefit Plans
For the year ended March 31, 2014
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, 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligation at April 1, 2013
Service cost
Interest cost
Actuarial loss
Retirement benefit paid
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2014

2014

2014

¥ (15,373)
746
288
175
(850)
360
100
¥ 16,192$ 149,252
7,243
2,796
1,699
(8,252)
3,495
971$ 157,204

Millions of yen

Thousands of
U.S. dollars

The changes in plan assets during the year ended March 31, 2014 are as follows:
2014

Plan assets at April 1, 2013
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2014

¥

¥

8,609
146
1,429
477
(359)
212
6
10,5202014$

83,583
1,417
13,874
4,631(3,485)2,058
58$ 102,136

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2014 for the Company’s and the consolidated subsidiaries’ defined benefit plans: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

Thousands of
U.S. dollars

2014

2014

15,593(10,520)
5,073
599
5,672
5,672
¥
5,672

$ 151,388(102,136)
49,252
5,816
55,06855,068$ 55,068¥

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

The components of retirement benefit expense for the year ended March 31, 2014 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

2014

2014

¥

¥

746
288
(146)
28
1,134
2,050

$

$

7,243
2,796
(1,417)272
11,01019,904

Note: Retirement benefit expenses 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
are included in “Service cost.”
Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen

2014

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥
¥

196
5,417
5,613

2014

$
$

1,903
52,59254,495

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2014 are as follows:
2014

Bonds
StocksCash on hand and in banks
Other
Total

16%
63%
13%
8%
100%

Note:
56% 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 1.5%
Expected rates of return on plan assets mainly 2.0%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the fiscal year is ¥9 million.

Annual Report 2014 43

The balances of the retirement benefit obligation and plan assets, funded status and the amounts recognized in the consolidatedbalance sheets as of March 31, 2013 is summarized as follows:
Millions of yen

2013

Retirement benefit obligation
Plan assets at fair value
Unfunded status
Unrecognized net obligation at transition
Unrecognized actuarial loss
Unrecognized prior service cost
Prepaid pension costAccrued employees’ retirement benefits¥ (15,373)
8,609(6,764)—
7,629
224(2,139)¥ (1,050)

The components of retirement benefit expenses for the year ended March 31, 2013 was as follows:
Millions of yen

2013

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

¥

¥
¥

780
309
(111)
28
1,119
132
2,257
8
2,265

The assumptions used in accounting for the above plans were as follows:
2013

Discount rates
Expected return on plan assets

mainly 1.6%
mainly 2.0%

14. Income Taxes
The reconciliation between the effective tax rates reflected in the consolidated statements of operations and the statutory tax rates forthe years ended March 31, 2014 and 2013 were summarized as follows :Statutory tax rate
Non-deductible expenses for tax purposes
Non-taxable dividends and other income
Inhabitants per capital tax
Equity in earnings and losses of affiliates
Amortization of goodwill and negative goodwill
Gain on sales of subsidiaries' stocks
Changes in valuation allowance
Tax deduction such as R&D expenses
Tax credits
Different tax rates applied to subsidiaries
Other
Effective tax rate
44

2014

2013

38.0%
0.7
(0.9)
1.1
0.7
0.1
­—
4.6
—
(3.4)
(0.4)
0.9
41.4%

38.0%
0.8
(0.3)
1.8
2.3
1.2
­ (5.1)
9.4
(1.8)
—
(4.6)
0.2
41.9%

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

Deferred tax assets and liabilities as of March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

Deferred tax assets:
Accrued employees’ retirement benefits
Liability for retirement benefits
Impairment loss on property, plant and equipment
Investment securities
Net operating loss carryforwards
Land
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Statutory reserves provided for tax purposes
Gain from establishment of trust for retirement benefit plans
Land
Unrealized holding gain (loss) on securities
Capitalized interest of a foreign subsidiary
Other
Total deferred tax liabilities
Net deferred tax liabilities
Deferred tax liabilities on surplus on the revaluation of land

¥

2014

2013

—
8,056
2,123
2,262
11,5692,177
1,086
27,273(17,457)
9,816(1,247)(3,515)(8,158)(2,001)(807)(250)(15,978)¥ (6,162)¥ (2,253)

¥

5,829
—
2,426
3,317
14,106
2,175
1,372
29,225(21,069)
8,156(1,117)(3,729)(8,158)(1,079)(777)(197)(15,057)¥ (6,901)¥ (2,346)$—
78,214
20,612
21,961
112,320
21,136
10,543
264,786(169,485)
95,301(12,107)(34,126)(79,204)(19,427)(7,835)(2,427)(155,126)$ (59,825)$ (21,874)

15. Contingent Liabilities
Contingent liabilities as of March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

Notes receivable discounted and endorsed
Loans guaranteed

¥

367
2,838

2014

2013

¥

456
2,713

$

3,563
27,553

16. Write-Down of Inventories
The amount of write-down of inventories, included in cost of sales for the year ended March 31, 2014, totaled ¥21 million ($204
thousand). For the year ended March 31, 2013, the Company reversed write-down in the amount of ¥46 million and credited it to costof sales.

Annual Report 2014 45

17. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

Gain on foreign exchange
Gain on sales of disused articles
Gain on sales of investment securities
Compensation income
Gain on sales of subsidiaries’ stocks
Payments for idle mines
Loss on sales and retirement of noncurrent assets
Impairment loss
Write-down of investment securities
Other, net

¥

¥

600
237
42
1,095
­—
(565)
(101)
(187)
—
(113)
1,008

2014

2013

¥

¥

966
262
994
1,264
824
(541)
(63)
(331)
(3)
(80)
3,292

$

$

5,825
2,301
408
10,631—(5,485)(981)(1,816)—(1,097)
9,786

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, Construction and Mining Machinery (Rock Drills), 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, plants, stone crushers, steel bridges and castings(b) Construction and Mining Machinery (Rock Drills)
		 Manufacture and sale rock drills such as breakers, crushers, crawler drills and tunnel drill jumbos(c) UNIC Machinery
		 Manufacture and sale truck-mounted cranes (UNIC cranes) and vehicle carriers (UNIC carriers)(d) Metals
		After buying ore, sale electrolytic copper, gold, silver and sulfuric acid which is smelted on consignment by joint smelting
company(e) Electronic Materials
		Manufacture and sale high-purity metallic arsenic, gallium phosphide polycrystals, cores and coils, and aluminum nitride
ceramics, optical components(f) Chemicals
		 Manufacture and sale cuprous oxide, ferric polysulfate solution, sulfuric acid, titanium dioxide and functional materials(g) Real Estate		 Lease real estate
In addition, the Company withdrew from the fuels business by transferring all the shares of Furukawa Commerce Co., Ltd., which
previously composed the Fuels segment, to Usami Koyu Corp., on October 1, 2012.
The Company withdrew from the paints business with the completion of the takeover bid of Tohpe Corporation, which previously
composed the Paints segment, by transferring all its shares to Zeon Corporation, on March 27, 2013.
Accordingly, the Furukawa Group excluded the Fuels and Paints from reportable segments for the year ended March 31, 2014.
The accounting method used for reportable segments is the same as the method stated in “2. Summary of Significant Accounting46

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

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, 2014 and 2013 was as follows:
Millions of yen

Year ended March 31, 2014

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

UNIC
Machinery

Electronic
Materials

Metals¥ 18,528 ¥ 26,843 ¥ 25,741 ¥ 78,685 ¥ 5,381
2,584
176
83
402
12
21,11227,01925,82479,0875,393
341 ¥ 3,142 ¥ 1,503 ¥ (124)¥ 1,851 ¥¥ 18,352 ¥ 29,931 ¥ 21,765 ¥ 28,780 ¥ 7,394
330
618
516
319
287
—
—
24
—
—
—
—
34
4,215
504
307
750
290
449
131
Millions of yen

Year ended March 31, 2014
Chemicals

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

Real Estate

OthersAdjustments

Consolidated

6,097 ¥ 1,013 ¥738 ¥— ¥163,026
45
136
1,581
(5,019)
—
6,142
1,149
2,319
(5,019) 163,026
316 ¥(43) ¥(60) ¥(40) ¥ 6,886¥ 15,893 ¥ 32,993 ¥ 3,955 ¥ 40,345 ¥199,408
213
252
72
8
2,615
—
—
—
—
173
—
—
236
—
4,989
131
552
30
75
2,715
Millions of yen

Year ended March 31, 2013

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

Construction
and Mining
Machinery(Rock Drills)

Construction
and Mining
Machinery(Rock Drills)

UNIC
Machinery

MetalsElectronic
Materials¥ 12,895 ¥ 23,306 ¥ 20,651 ¥ 77,945 ¥ 4,988 ¥
2,295
26
103
451
8
15,19023,332
20,75478,396
4,996
¥
779 ¥
(68) ¥ 2,213 ¥283 ¥ (263) ¥Chemicals

5,094
896
5,990
304

¥ 17,606 ¥ 28,294 ¥ 18,750 ¥ 27,951 ¥ 7,346 ¥ 16,118
327
634
466
249
286
223
—
(0)
19
—
—
—
—
—
25
3,785
628
—
173
424
164
208
228
117

Annual Report 2014 47

Millions of yen

Year ended March 31, 2013
PaintsSales and operating income (loss)
Outside customers
Intersegment
Total
Operating income (loss)
OthersSegment assets
Depreciation
Amortization of goodwill and negative goodwill
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

Real Estate¥— ¥ 25,078 ¥
316
198
154
—
—
—
212
855

Adjustments

Consolidated— ¥ 3,729 ¥ 41,204 ¥186,076
3
87
2
2,791
—
—
—
173
—
321
—
4,759
1
27
49
2,458
Thousands of U.S. dollars

Industrial
Machinery

Construction
and Mining
Machinery(Rock Drills)

UNIC
Machinery

Electronic
Materials

Metals$ 179,883 $ 260,612 $ 249,913 $ 763,932 $ 52,243
25,087
1,709
806
3,903
117
204,970 262,321 250,719 767,835
52,360$ 17,971 $ 3,311 $ 30,505 $ 14,592 $ (1,204)$ 178,175 $ 290,592 $ 211,311 $ 279,417 $ 71,786
3,204
6,000
5,010
3,097
2,786
—
—
233
—
—
—
—
330
40,922
4,893
2,981
7,282
2,816
4,359
1,272

Year ended March 31, 2014

Thousands of U.S. dollars
Chemicals

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

Others¥ 15,079 ¥ 1,059 ¥ 3,771 ¥752 ¥— ¥165,540
53
142
164
1,374
(5,512)—
15,132
1,201
3,935
2,126
(5,512) 165,540
66 ¥
220 ¥
(28) ¥(63) ¥(80) ¥ 3,363¥

Year ended March 31, 2014

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

Fuels

Real Estate

OthersAdjustments

Consolidated$ 59,194 $ 9,835 $ 7,165 $— $ 1,582,777
437
1,320
15,349(48,728)—
59,631 11,155
22,514(48,728) 1,582,777$ 3,068 $ (417) $ (583) $ (389) $ 66,854$ 154,301 $320,320 $ 38,398 $391,700 $1,936,000
2,068
2,447
699
77
25,388
—
—
—
—
233
—
—
2,292
10
48,437
1,272
5,359
291
727
26,359(Related information)
Years ended March 31, 2014 and 2013
1. Information regarding products and services
Year ended March 31, 2014

Millions of yen
CopperSales for outside customers¥

68,811Others¥Year ended March 31, 2013¥

64,364

Year ended March 31, 201448

163,026¥

165,540

Others¥101,176

Total

Thousands of U.S. dollars
CopperSales for outside customers

Total

¥

Millions of yen
CopperSales for outside customers

94,215$

668,068

Others$914,709

Total$1,582,777

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

2. Geographic segment information(1) Net sales
Year ended March 31, 2014
Millions of yen
Japan

¥

Asia

126,802¥

Others21,059¥Total

15,165¥

163,026¥

165,540

Year ended March 31, 2013
Millions of yen
Japan

¥

Asia

133,151¥

Others20,800¥Total

11,589Year ended March 31, 2014
Thousands of U.S. dollars
Japan

Asia

$ 1,231,087$

Others

204,456$

Total

147,234$ 1,582,777(2) Property, plant and equipment
The geographic segment information for the years ended March 31, 2014 and 2013 has not been presented, because the total assets
in Japan exceed 90% of consolidated totals.
3. Information regarding main customers
Year ended March 31, 2014
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥28,868

MetalsYear ended March 31, 2013
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥23,860

MetalsYear ended March 31, 2014
Thousands of U.S. dollars
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

$280,272

Metals

4. Impairment loss on property, plant and equipment
Millions of yen

Year ended March 31, 2014

Impairment loss onproperty, plant andequipment

Construction
and Mining
Machinery
UNIC
Industrial
Machinery (Rock Drills) Machinery

—

—

—

MetalsElectronic
Materials

Chemicals———

Real Estate¥

Others7¥

180

Adjustments Consolidated

— ¥

187

Millions of yen

Year ended March 31, 2013

Impairment loss onproperty, plant andequipment

Construction
and Mining
Machinery
UNIC
Industrial
Machinery (Rock Drills) Machinery

—

—

—

MetalsElectronic
Materials

Chemicals———

PaintsReal Estate

— ¥

52 ¥

Fuels

Others170 ¥109

Adjustments Consolidated

— ¥

331

Thousands of U.S. dollars

Year ended March 31, 2014

Impairment loss onproperty, plant andequipment

Construction
and Mining
Machinery
UNIC
Industrial
Machinery (Rock Drills) Machinery

—

—

—

MetalsElectronic
Materials

Chemicals———

Real Estate$

68

Others$1,748

Adjustments Consolidated— $1,816

Annual Report 2014 49

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

Year ended March 31, 2014

Balance as of March
31, 2014

Construction
and Mining
Machinery
UNIC
Industrial
Machinery (Rock Drills) Machinery—

MetalsElectronic
Materials

Chemicals

Real Estate

Others

—

—

—

—

—

— ¥48Adjustments Consolidated

— ¥

48

Millions of yen

Year ended March 31, 2013

Balance as of March
31, 2013

Construction
and Mining
Machinery
UNIC
Industrial
Machinery (Rock Drills) Machinery—

MetalsElectronic
Materials

Chemicals———— ¥65

PaintsReal Estate

—

—

Fuels

—

OthersAdjustments Consolidated—— ¥65

Thousands of U.S. dollars

Year ended March 31, 2014

Balance as of March
31, 2014

Construction
and Mining
Machinery
UNIC
Industrial
Machinery (Rock Drills) Machinery—

MetalsElectronic
Materials

Chemicals

Real Estate

Others

—

—

—

—

—

— $466

Adjustments Consolidated— $466

6. Gain on negative goodwill in reporting segments
Not applicable.
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, 2014, rental income was ¥132 million ($1,282 thousand), gain on sales of rental properties was ¥42 million ($408 thousand)and impairment loss on rental properties was ¥177 million ($1,718 thousand).
For the year ended March 31, 2013, rental income was ¥383 million, gain on sales of rental properties was ¥6 million, loss on
disposal was ¥40 million and impairment loss on rental properties was ¥164 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,
2014 and 2013 are as follows:Year ended March 31, 2014

Carrying value
As of March 31, 2013

Net change

Fair value
As of March 31, 2014

As of March 31, 2014

Millions of yen¥

28,079

¥

8,394

¥

36,473¥

34,953

Year ended March 31, 2013

Carrying value
As of March 31, 2012

Net change

Fair value
As of March 31, 2013

As of March 31, 2013

Millions of yen¥

28,618

¥

(539)

¥

28,079¥27,262

Year ended March 31, 2014

Carrying value
As of March 31, 2013

Net change

Fair value
As of March 31, 2014

As of March 31, 2014

Thousands of U.S. dollars$

272,612$81,495$354,107$339,350

Notes:
1. The carrying value represents the acquisition cost less accumulated depreciation and cumulative impairment loss.

50

N o t e s t o C o n s o l i d at e d F i n a n c i a l S tat e m e n t s

2. Net change in carrying value for the year ended March 31, 2014 mainly consists of increases related to acquisition of land and 		buildings in the amount of ¥9,223 million ($89,544 thousand) and decreases mainly due to amortization in the amount of ¥222 		
million ($2,155 thousand) and impairment loss on rental properties in the amount of ¥177 million ($1,718 thousand). Net change
in carrying value for the year ended March 31, 2013 mainly consists of increases related to a decrease in the property of the 		
consolidated subsidiary having been excluded from the consolidated balance sheet along with the sales of consolidated subsidiar ies’ stocks in the amount of ¥232 million, amortization in the amount of ¥178 million and impairment loss on rental properties in
the amount of ¥164 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 27, 2014
Millions of yen

Year-end cash dividends (¥3.00 = $0.029 per share)¥

Transfer to legal reserve

1,212

Thousands of U.S. dollars

$

121
¥

1,333

11,767
1,175$

12,942

Annual Report 2014 51

52

Annual Report 2014 53

Corporate Data
(As of March 31, 2014)

Directors and Auditors(As of June 27, 2014)
Chairman and Representative Director

Nobuyoshi Soma

Company Name:

Furukawa Co., Ltd.

President and Representative Director

Naohisa Miyakawa

Head Office:Executive Vice President Director

Manabu Zama

Tel:

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

Managing Director

Susumu Nakamura

Date of Foundation:

August 1875

Date of Establishment:

April 1918

Number of Shares Authorized:

800,000,000 shares

Number of Shares Outstanding:

404,455,680 shares

Managing Director

Toshio Matsumoto

Outside Director

Masao Yoshida

Director

Akinori Ota

Number of Shareholders:

28,071

Director

Minoru Iwata

Stock Exchange Listing:Tokyo

Statutory Auditor

Yoshihito Emoto

Securities Code Number:

5,715

Statutory Auditor

Masaya Kouzaki

Employees: Consolidated

2,413

Stock Transfer Agent:

Outside Company Auditor

Tamiki Ishihara

Outside Company Auditor

Nobuyuki Tomotsune

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

Outside Company Auditor

Ryoji Hatsuse

Executive Officers(As of June 27, 2014)
Vice President Executive Officer

Manabu Zama

Managing Executive Officer

Susumu Nakamura

Managing Executive Officer

Toshio Matsumoto

Senior Executive Officer

Akinori Ota

Senior Executive Officer

Minoru Iwata

Senior Executive Officer

Osamu Watanabe

Senior Executive Officer

Yasufumi Watanabe

Senior Executive Officer

Shigeo Matsudo

Senior Executive Officer

Kiyohito Mitsumura

Executive Officer

Naoki Kato

Executive Officer

Kiyohiko Ikebe

Executive Officer

Yoshinari Kuno

Executive Officer

Kazuo Inoue

Principal Shareholders
Number of
Shares(Thousands)

Percentage ofTotal Shares(%)

Japan Trustee Services Bank, Ltd. (trust account)

32,417

8.01

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

27,072

6.69

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
8.03%

Other JapaneseCompanies
24.89%

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)

3.00%

Financial Institutions

34.86%
Individuals
and Others

29.22%

Corporate History

1875

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

1877

Began the operation of the
Ashio Copper Mine in Tochigi.

1900

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

1914

Manufactured the first rock drillin Japan.

1918

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

1944

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

1951
1962

The Ashio Copper Mine iswhere the Furukawa Company
Group began.

The first domestic rock drill
was developed at Ashio.

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

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.

1990

1998

Established a sales company ofrock drill products in Holland.

2003

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

2005

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.

2006

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

Built the laboratory of the Nitride
Semiconductors Department inOyama.

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

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

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

1989

Established a manufacturer of
UNIC products / components
in Thailand.

Built the Takasaki Works of theRock Drill Division in Gunma.

The Furukawa / Outokumpu
flash smelting plant.

1987

1997

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

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

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.

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.

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

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

With the sale of all of its shares inFurukawa Commerce Co., Ltd.,the Group has withdrawn fromthe fuels business.

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

Bought an American breaker sales
and manufacturing company.

2010This is an affiliate company for
the UNIC business establishedin Rayong, Thailand, which
manufactures truck-mounted
cranes and other products.

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

2013
2014

The Group exited the paints business with the sale of all of its sharesin Tohpe Corporation.
Completed Muromachi Furukawa
Mitsui Building in Nihonbashi, Tokyo.

Muromachi Furukawa Mitsui Building, consisting of a commercial
facility (COREDO Muromachi 2),
offices, and rental accommodation.
Annual Report 2014 55

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