Well-Grounded for
the Future
Annual Report
Year ended March 31, 2007

2007

Furukawa Co., Ltd. was established in 1875, and over its 132-year history it
has developed a diverse portfolio of businesses in the fields of machinery, metals,
electronic materials, chemicals and fuels. Grounded in its management philosophy—Innovation, Creativity, and Harmony—the Company has
moved forward with innovation in its corporate structure and technological development. Furukawa strives to offer appealing products and services to its customers
and to contribute to the creation of a prosperous society that is in harmony withthe environment.

In fiscal 2007, ended March 31, 2007, we achieved historic highs inboth revenues and profit owing primarily to an expansion in revenues in the Metals
Division, which has been operating in an environment of high copper and metal
prices, as well as to improved earning capacity in major divisions, thanks to theimplementation of our “selection and concentration”strategy.

Fiscal 2008 marks the final year of the April 2005–March 2008 Medium-Term
Management Plan. To complement our determination to implement the Plan successfully, we will also undertake greater efforts to build a solid path toward future
growth.

Consolidated Financial Highlights

1

To Our Shareholders

2

Feature—R&D: Groundwork for Growth4

Business at a Glance

7

Review of Operations

8

Environmental Protection and Social Contribution Activities

12

Corporate Governance

13

Financial Section

14

Principal Subsidiaries and Affiliates

36

Corporate Data

37

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

CONSOLIDATED FINANCIAL HIGHLIGHTS
Furukawa Co., Ltd. and consolidated subsidiaries
Years ended March 31, 2007, 2006 and 2005

Millions of yen

2007

Thousands of
U.S. dollars

Percent change

2007 / 2006

2006

2005

2007

¥ 181,938
12,130¥ 147,237
7,383$1,701,263
143,212

9,810
5,309

4,199
2,257

94,297
148,763

13.4
230.6

¥ 213,046
43,072¥ 204,651
31,335$1,839,212
441,8311.9
21.0

For the year:

Net sales ..................................................................... ¥ 200,749
Operating income ...................................................
16,899
Income before income taxes andminority interests ..............................................
11,127
Net income ................................................................
17,554
At year-end:
Total assets ................................................................ ¥ 217,027
Net assets ..................................................................
52,136Yen

Per share amounts:
Net income:Basic ....................................................................... ¥Diluted ..................................................................
Cash dividends .........................................................

43.42
—
5.00

¥

10.3%
39.3

U.S. dollars

13.12
12.37
3.00

¥

5.57
5.03
—

$

0.37
—
0.04

230.9
—
66.7

Notes 1. U.S. dollar amounts are translated from yen for convenience only at the rate of ¥118=US$1.00.
2. From the fiscal year ended March 31, 2007, what was formerly recorded as “shareholders’ equity” is now recorded as “net assets,” in line with revisions to Japanese
accounting standards as detailed in the Accounting Standards Board of Japan’s (ASBJ) “Accounting Standard for Presentation of Net Assets in the Balance Sheet”(ASBJ Statement No. 5, December 9, 2005) and its implementation guidance, “Guidance on Accounting Standard for Presentation of Net Assets in the Balance
Sheet” (ASBJ Guidance No. 8, December 9, 2005).
Figures for fiscal 2005 to fiscal 2006 represent total shareholders’ equity.

Operating Income (Loss)

Total Assets(Billions of yen)(Billions of yen)

200.7

Net Sales(Billions of yen)

’04

’05

217.0

204.7

12.1

206.3

250

15

213.0

252.9

16.9

181.9

150

300

20

147.2

151.6

153.5

200

’06

’07

200
7.4

10
150

100

2.0

5
100

50
0
(1.6)

50

0

’03

’04

’05

’06

’07

-5

’03

’04

’05

’06

’07

0

’03

Machinery
MetalsElectronic Materials and Chemicals
Real Estate
Fuels and Others

FURUKAWA Annual Report 2007

1

TO OUR SHAREHOLDERS

Furukawa Co., Ltd. and its consolidated subsidiaries
recorded historic highs in both revenue and profit in
the fiscal year ended March 31, 2007. Making themost of this new growth spurt, Furukawa plans toaccelerate its efforts toward establishing a foundation
for greater growth and expansion, as it aims tobroaden its business and enhance corporate value.
Left:
Chairman and Representative Director,
Tetsuo Yoshino

Performance in Fiscal 2007

Right:
President and Representative Director,
Nobuyoshi Somation in interest-bearing liabilities.

In the Machinery Division, despite a decline in net sales owing to a

In the fiscal year under review, consolidated net sales andfall off in the industrial machinery business sales, healthy overseas

operating income already surpassed these targets, owing to greater-

shipments exhibited by the rock drill business and improved prof-

than-expected expansion of earnings in the Metals Division on theitability in the industrial machinery business supported an increaseback of high metal prices carried over from the previous fiscal year.

in income. Sales and income in the Metals Division grew significant-At the fiscal year-end, interest-bearing liabilities (corporate bonds

ly in the fiscal year under review owing to high-priced copper, gold,and long-term debt) stood at ¥89,389 million, a reduction ofsilver, and correspondingly, improvements in Treatment and¥27,462 million from March 31, 2005, exhibiting a steady decline

Refining Charge (T/C, R/C). Electronic Materials and Chemicals

in interest-bearing liabilities.

Division profit increased due to steady sales of high-purity metallic
arsenic and cuprous oxide.

In fiscal 2008, the final year of the Plan, while working to builda revenue base resilient to fluctuations in the metals market by

As a result, consolidated net sales rose 10.3% year on year toenhancing the profitability of the Machinery Division, the Electronic¥200,749 million, while operating income grew 39.3% to ¥16,899

Materials and Chemicals Division and other divisions, we are also

million. Furukawa recorded ¥3,032 million in losses related to its

working to develop our next medium-term management plan withcopper smelting business in Australia. After accounting for deferred

the aim of further Group expansion and growth.

income taxes of ¥6,793 million, net income amounted to ¥17,554
million, a threefold increase—precisely 3.3 times—compared to theprevious fiscal year.

Building a Foundation to Facilitate Our Next
Stage of Growth

Reflecting an overall robust performance, annual dividends

Current efforts in the Machinery Division include bolstering overseas

increased ¥2.00 per share, for dividend payments of ¥5.00 per

development of hydraulic rock breakers, crawler drills and drill jum-share.

bos for mine development. In order to meet a surge in demand, weare implementing capital investment for the installation of new

2

Medium-Term Management Plan Progress
Updateequipment and machinery upgrades at the Takasaki and Yoshii

Fiscal 2007 was the intermediate year of our April 2005–March

the market for hydraulic rock breakers and crawler drills, lifting it

2008 Medium-Term Management Plan, which designates the pur-from approximately 30% in fiscal 2006 to 40% within the next few

suit of maximum corporate value for the entire Group through ayears. In fiscal 2007, we acquired new orders from Russia for drill

shift to an operating holding company system and additional

jumbos, a product for which we command an overwhelming sharestrengthening of Furukawa’s financial position through increasedof the Japanese market. In an operating environment where mine

profitability as priority issues. Performance goals for fiscal 2008 set

development has intensified on the back of worldwide expansion inunder the Plan include consolidated net sales of ¥165,000 million,

demand for resources and energy, we are striving to establish an

operating income of ¥10,500 million and a ¥30,000 million reduc-overseas sales and service structure to facilitate growth in sales.

FURUKAWA Annual Report 2007

Plants. The goal of these efforts is to increase our global share of

● Progress of Medium-Term Management Plan (April 2005 to March 2008)

Interest-Bearing Liabilities

Net Sales by Business Division(Billions of yen)2008 (Target)

75,50035,00022,0003,800
28,700165,000

2006

2007

2008 (Target)

4,244
5,779
1,498
905
(69)
(227)
12,130

5,902
8,837
2,088
839
(415)
(352)
16,899

4,800
2,000
2,300
1,300
200
(100)
10,50089.4

Machinery
MetalsElectronic Materials and Chemicals
Real Estate
Fuels and Others
Eliminations and corporate
Total

120

Millions of yen

99.4

Operating Income by Business Division

150

90

60

Note: Interest-bearing liabilities = Long- and short-term debt + Corporate bonds

’04

’05

’06

’07

86.8

2007

67,79684,754
15,902
2,936
29,361200,749

116.9

2006

70,32952,662
21,2283,107
34,612
181,938

124.0

Machinery
MetalsElectronic Materials and Chemicals
Real Estate
Fuels and Others
Total

Millions of yen’08(Target)In the UNIC machinery business, we built a facility for knock-ing company system and has since continued to work to maximize

down production at our factory in Thailand as well as newly estab-management efficiency and corporate value. As a result, in the fiscal

lished a sales subsidiary there to meet increased demand inyear ended March 31, 2006, Furukawa realized its most pressing

Southeast Asia. We are confident that this, along with our efforts togoal of resuming cash dividend payments, and additionally, declared

reduce costs by selectively allocating production to our factories in

an increase in dividends in the fiscal year under review.

China and Thailand, will lead to increased sales in overseas markets.

Furthermore, concerning the withdrawal from the copper smelting

In the Electronic Materials and Chemicals Division, we are look-business in Australia, settlement seems to be in sight.

ing to develop and release high-value-added crystal products to the

Newly appointed President Nobuyoshi Soma is known formarket. Specifically, by the middle of fiscal 2008, we plan tobeing able to demonstrate sound judgment and decisiveness andachieve mass production of gallium nitride substrates, which arepossesses a wealth of experience from his appointment as an exec-

expected to become a key material for the generation of blue-violet

utive director in our machinery and materials-related businesses.

laser diodes (LDs), the core of next-generation DVD players, andUnder its new leadership, the Furukawa Company Group will remain

high-intensity white light-emitting diodes (LEDs).

steadfast in its commitment to growth and expansion, ongoing

In addition, as we aim to bring about sustainable growth over the
medium to long term, we are promoting Group R&D activities geareddevelopment of strong overseas businesses, and raising corporate
value.

to fortifying Furukawa’s core technologies. At the same time, while ourefforts will continue to be focused on expanding existing businesses,

We ask for the continued support and understanding of our

we will also concentrate on the generation of new business.

shareholders.

A New Management Structure

September 2007

At the General Shareholders’ Meeting and the Board of Directors’Meeting held on June 28, 2007, Tetsuo Yoshino, who had held theposition of President and Representative Director, was appointed
Chairman of the Board of Directors and Representative Director,

Tetsuo Yoshino,while Managing Director Nobuyoshi Soma was newly appointed as

Chairman and Representative Director

President and Representative Director. During Tetsuo Yoshino’s termas President and Representative Director, Furukawa overcame harshbusiness conditions and implemented business-restructuring efforts
based on a selection and concentration strategy, which was theimpetus behind halting operations at a copper smelting business inNobuyoshi Soma,

Australia that had incurred large-sum losses. In March 2005,

President and Representative Director

Furukawa spun off its businesses and shifted to an operating hold-

FURUKAWA Annual Report 2007

3

FEATURE

R&D: Groundwork for
As R&D plays such an indispensable role in boosting corporate competitiveness, we asked
Akira Usui, executive officer and general manager of the Furukawa Company Group R&D
Division, to outline the Group’s R&D activities, strengths and strategies.

Q.1

Please tell us about the Furukawa Company Group’s R&D
activities and structure.

The R&D activities of the Furukawa Company Groupmachinery and materials fields. In the area ofare twofold. While each of our businesses engages

machinery, we are developing mechatronics-related

in product development to support today’s busi-

TV camera carrier robots, semiconductor depositionness, our R&D Division conducts research into theequipment, protein crystallization equipment, andnew products and technologies of tomorrow. The

3-D Zone Positioning Systems (ZPSs). In the area of

R&D Division is part of Furukawa Co., Ltd., and com-materials, we are working on the development ofprises the Techno-Research Laboratory, Materials

nitride semiconductor crystals, scintillator crystals

Research Laboratory and Semiconductor Growth

and thermoelectric conversion materials in relation

System Department, which actually execute R&D

to the electronic chemicals business.

projects, as well as the R&D Planning andWith technological innovation accelerating atIntellectual Property Departments, both of whichsuch a rapid pace, it is even more vital that our R&D

support the R&D activities of the other departments

activities directly relate to business, markets andand laboratories.

customers. It is from this perspective that we plan

The R&D Division is currently focused on the

Akira Usui
Executive Officer and General Manager,
R&D Division

to further enhance our undertakings in R&D.

Q.2

What do you consider to be Furukawa’s
essential technologies?

Furukawa developed Japan’s first rock drill in 1914.

specifically, can be said to form a significant part ofSince then, not only have we remained the top

the Furukawa Company Group’s origins.

maker of mine machinery, we have also continued

Another of our core technologies is our com-to unearth advanced know-how in machinery

bined capabilities in materials manufacturing anddesign, manufacturing and integrated mechatronics

processing, which we have cultivated throughthat is the technology behind machinery control

experience acquired in copper smelting. Although

and automation. We take pride in being able to

Furukawa no longer operates a copper smelting

draw on this expertise and these abilities. Grinding

business per se and exclusively outsources its cop-and excavation rock drill-related technologies,

per smelting to other companies, we possess sub-Research and Development Structure

R&D

Techno-ResearchLaboratory

Hino City, Tokyo

Engages in technological research and product development in mechatronics, robotics andother machinery-related fields, as well as in communications technology, e.g. ZPS

Materials ResearchLaboratory

Tsukuba City,
Ibaraki Prefecture

Handles all materials-related research, from basic to applied research. Develops semiconductormaterials, oxide scintillator crystals and materials for energy conversion

Semiconductor Growth

Tsukuba City,
Ibaraki Prefecture

Conducts semiconductor crystal-related product development and develops equipment for metalorganic chemical vapor deposition (MOCVD), liquid crystal-related production and solar battery manufacture

Division System Department

4

FURUKAWA Annual Report 2007

R&D Planning Department Chiyoda-ku, Tokyo

Develops all R&D policies and strategies. Formulates plans for commercialization of R&DIntellectual Property
Department

Manages patents and intellectual property

Chiyoda-ku, Tokyo

Growthstance separation and crystallization know-how

strates and scintillator crystals.

that has been handed down through our long his-

The Furukawa Company Group believes thattory in the materials business. These capabilities

applying these core technologies in the fields ofhave borne fruit in the form of a top share inmachinery and materials will lead to the further

the field of high-purity metallic arsenic anddevelopment of new products and technology andcuprous oxide manufacturing and advances inplans to move forward with this in mind.

next-generation compound semiconductor sub-Q.3

How do you regard collaborative research with other companies andorganizations and what kind of projects are you currently involved in?
Collaborations with other organizations are indispen-

Furukawa is taking part in a consortium, mainly cen-sable to expeditious development and make thetered around Tohoku University, as well as in themost of limited resources and time. At present,

Next-Generation Gallium Nitride Substrate

Furukawa is participating in seven separately themed

Development Project headed by the New Energy

industry-academia joint research projects and fourand Industrial Technology Development Organization

national level projects. For example, we are partici-(NEDO). Furukawa’s research into the development

pating in research endeavors with Shimaneof high-performance scintillator crystals is also con-

University and the Japan Science and Technology

tributing to its involvement in a JST regional R&D

Agency (JST) that are targeting the development of

resource utilization program focused on the develop-

deposition equipment for zinc oxide thin films. Zinc

ment of next-generation mammography equipment

oxide is marked for use as a low-cost blue LED

to aid in the detection of breast cancer.

material. In projects related to gallium nitride,

Q.4

Please tell us about your efforts in managing intellectual property.
All intellectual property is managed by the Intellectual

moting activities such as licensing to other compa-

Property Department, which also discovers and man-nies. Also, in order to increase engineers’ motivation

ages patents for new products and materials. The

and prompt greater advances in R&D, Furukawa has

Furukawa Company Group currently holds about

set specific company guidelines for the payment of

300 patents, which we aim to use effectively by pub-remunerative rewards to inventors.

licizing them through our Web site and actively pro-

Q.5

Lastly, what would you like to say to shareholders and investors?
Since being founded in 1875, the Furukawa

to boldly take on new challenges. As we continue toCompany Group has long supported an essential

promote efficient development processes, we hopepart of Japan’s industrial sector. Today, Furukawa is

to germinate the seeds of development that will

making the most of its wealth of knowledge insupport our next stage of growth. Our stakeholders

machinery and materials, its core technological areas

should expect to see some outstanding new devel-of expertise, and its access to a rich lode of trust-

opments in the years ahead.

based relationships that span a variety of industries

FURUKAWA Annual Report 2007

5

1.

Robot Dolly

Robot Dolly is an intelligent, robotic, mobile TVdelivered to NHK, where their use is being incorpo-

camera system that was jointly developed by

rated into the filming of TV programs.

Furukawa and the Science & Technical Research

We anticipate that this kind of intelligent robot

Laboratories of the Japan Broadcasting Corporation

camera system will play a role in any filming that(NHK). Controls programmed into the system

involves repetitive motion, overcoming the ineffi-

enable automatic Robot Dolly carrier and verticalciencies of manual filming. By customizing thecamera movements as well as make possible faith-robots to precisely meet the needs of customers,

ful repetition of any pre-programmed movements.

we are working to increase sales domestically, while

Already three of these camera systems have been

looking to expand into overseas markets.

2.

High-performance scintillator crystals

A single, two-inch LuAG crystal

3.

Furukawa is targeting the mass production ofCompared with conventional bismuth germanium

lutetium aluminum garnet (Lu3Al5O12 [LuAG]) as aoxide (BGO), the light yield of incident gamma rays

scintillator crystal for the detection of gamma rays in

is more than three times higher with LuAG crystals,

next-generation breast cancer equipment.

resulting in shorter luminescence decay time, more

Scintillator crystals play a vital role in positron emis-

precise diagnosis and facilitating the early detection

sion tomography (PET) and are likewise anticipatedof small cell carcinomas.

to become essential to mammography equipment

Furukawa, which will be continuing develop-

used to detect cancer. LuAG, which Furukawa isments aimed at increasing the size of the scintillator

seeking to mass produce, is a high-performance

crystals from the current two-inch diameter to four

scintillator crystal developed by a team of profes-

inches, is planning to commence mass productionsors led by Tsuguo Fukuda at Tohoku University.

during fiscal 2009.

Gallium nitride substrates

Furukawa is working to develop and manufacture

substrates using the hydride vapor phase epitaxy

gallium nitride substrates for blue-violet laser diodes(HVPE) method for growing crystals that gasifies,(LDs) used in next-generation DVD players andtransports and causes a reaction in the raw material

high-intensity, white light-emitting diodes (LEDs)

used. Sample shipments of these gallium nitride

that are expected to be used in illumination

substrates to electronics manufacturers are alreadydevices. When compared with existing sapphire

under way. Furthermore, Furukawa is targeting mass

substrates, gallium nitride substrates generate lessproduction by the end of fiscal 2008, while improv-

crystal defects and are well suited to the production

ing production technology and establishing a pro-of high-output LDs and LEDs. Furukawa is making

duction structure.

progress with the development of gallium nitride

6

Robot Dolly on the set at an NHK studio

FURUKAWA Annual Report 2007

A two-inch diameter gallium nitride substrateBUSINESS AT A GLANCE% of Net Sales

Machinery

33 .8 %

Businesses

Core Business Company

Main Products

Industrial
Machinery

Furukawa Industrial
Machinery Systems
Co., Ltd.

Pumps, environmental treatment facilities, plants,
multistory parking systems, steel structures, castings, stone crushers and semiconductor production
equipmentRock Drills
Furukawa Rock Drill(Construction &Co., Ltd.
Mining Machinery)

Rock drills (hydraulic rock breakers, hydrauliccrawler drills, tunnel drill jumbos, etc.) and environmental machinery

UNIC Machinery

Furukawa UNIC
Corporation

Truck-mounted cranes (UNIC cranes, UNICPAL,
UNIC carriers and mini crawler cranes, etc.)

MetalsFurukawa Metals &Resources Co., Ltd.

Copper, gold, silver and sulfuric acid

Electronic
Materials

Furukawa Denshi
Co., Ltd.

High-purity metallic arsenic, aluminum nitride
ceramics, core coil for line filters and laser-use
lenses, and optical parts

Chemicals

Furukawa Chemicals
Co., Ltd.

Cuprous oxide, sulfuric acid, aluminum sulfate,sapphire substrates and titanium dioxide

Real Estate

Furukawa Co., Ltd.

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

Fuels

Furukawa Co., Ltd.

Petroleum, petroleum-related products,
LPG, coke, aggregate

OthersFurukawa Co., Ltd.

Transportation service by trucks anddomestic shipping

Metals42 .2 %
Electronic Materials
and Chemicals

7 .9 %
Real Estate

1 .5 %
Fuels and
Others

14 .6 %FURUKAWA Annual Report 2007

7

REVIEW OF OPERATIONS

Machinery

Net Sales

67.8

62.3

63.2

59.7

80

70.3

(Billions of yen)

Yasuji Tomiyama

Yoichiro Kato

Susumu Nakamura

President and Representative
Director
Furukawa Industrial
Machinery Systems Co., Ltd.

President and Representative
Director
Furukawa Rock Drill Co., Ltd.

President and Representative
Director
Furukawa UNIC Corporation

In fiscal 2007, the year ended March 31, 2007, the Machinery Division
posted a 3.6% decrease in sales compared with the previous fiscal year, to¥ 67,796 million. Operating income increased, rising 39.1%, year on year,
to ¥ 5,902 million, while the operating margin improved by 2.7 percentage
points to 8.7%.

60

40

20

0

’03

’04

’05

’06

’07

Operating Income
5.9(Billions of yen)

6

3.5

4.2

4.3

5
4

2

1.4

3

In the industrial machinery business, Furukawa con-resources and energy sources around the world. Sales

tinued to promote cost reductions and Group busi-

in the rock drill business rose a slight 0.8% to ¥33,046

ness reorganization based on a selection and con-

million thanks to an increase in overseas sales, whichcentration strategy, while plagued by harsh operatingoffset a decline of ¥2,810 million as a result of theconditions and intensified price competition. Revenues

withdrawal from the domestic sales of wheel loaders.

in our core business of pump products increased,

In the first half of the fiscal year under review,

owing to the sale of a pump plant to a water andthe UNIC business experienced an increase in domes-

sewage treatment facility. Conditions were further exac-

tic shipments of UNIC cranes. This was attributable toerbated by changes in bidding methods in the bridge

a rise in the number of trucks sold as a result of pres-construction business. As a result, sales in the industrial

sure to meet gas emission regulations. In the end,

machinery business fell 17.0% to ¥14,119 million.

however, domestic demand declined, after demand

In the rock drill business, overseas sales of break-associated with gas emission regulations subsided in

ers and crawler drills significantly expanded, owing to

the second half of the fiscal year. Within this environ-continued efforts to strengthen Furukawa’s sales net-

ment, Furukawa worked to expand sales of its newwork. Shipments were buoyant, particularly to Europe,fuel-efficient U-can ECO crane series, released in1

the United States and the Middle East. Despite slowed

October 2006. In overseas business, while promoting0

demand for drill jumbos in Japan due to fewer public-

expansion into new markets, Furukawa aimed to

sector construction projects, Furukawa acquired orders

reduce costs associated with international divisions ofOperating Margin

from Russia as a result of its concentration on devel-labor by launching factory upgrades to accommodate(%)

oping business in overseas mining markets.

knockdown manufacturing in Thailand, following sim-

Furthermore, Furukawa looks forward to future growthilar moves made in China. As a result, UNIC productin this business owing to increased activity in mining

sales rose 0.4%, year on year, to ¥20,629 million.

’03

’04

’05

’06

8.7

10

’07

6

developments attributable to a rise in demand for

6.0

5.7

6.8

8

2

0

2.3

4

’03

’04

’05

’06

’07

General-purpose slurry pump

8

FURUKAWA Annual Report 2007

Drill jumbo for mine development

Fuel-efficient U-can ECO craneMetals

Yoshihito Emoto
President and Representative
Director
Furukawa Metals & Resources
Co., Ltd.

Net Sales(Billions of yen)

84.8

100

The Metals Division recorded a 60.9% surge in sales year on year to¥ 84,754 million. Operating income grew 52.9% to ¥ 8,837 million, while
the operating margin dipped 0.6 of a percentage point to 10.4%.

40

52.7
35.9

42.2

60

49.9

80

20

0

’03

’04

’05

’06

’07

Operating Income (Loss)
8.8(Billions of yen)

10

6

tract smelters’ enhanced manufacturing capabilities.

2006, but later succumbed to a softening trend.

Under these circumstances, Treatment & Refining

Toward the end of the fiscal year, however, the priceCharge (T/C, R/C) for smelters improved owing toonce again began to rise due to strong demand, com-

negotiations that took place at the end of 2005, whileing primarily from China. Its domestic market pricegreatly appreciated copper prices helped significantly

during the same period reached a record high ofimprove copper prices on a sliding-scale system.

¥1,000,000 per ton with a quoted average of

These factors, coupled with high gold and silver¥860,000 per ton, a substantial ¥350,000 per ton

prices and a weak yen, contributed to large increases

increase compared to the previous fiscal year. The

in both sales and operating income.

tons on a year-on-year basis to 88,521 tons in line
(6.0)

(5.0)

1.0

4
2

with increased production that was attributable to con-reached an historic high at US$8,800 per ton in May

sales volume of electrolytic copper increased 4,056

5.8

8The price of electrolytic copper in overseas markets

’03

’04

’05

0
-2
-4
-6

’06

’07

Operating Margin
10.4

12

11.0

(%)

’06

’07

Copper and gold mine, Batu Hijau Mine
(Indonesia) in which Furukawa Co., Ltd.
invests

2.9

8
4

-8
-12

(12.0)-4’03(12.0)

0

’04

’05

Onahama Smelting & Refining Co., Ltd. inwhich Furukawa Metals & Resources Co.,
Ltd. has capital participation

Hibi Kyodo Smelting Co., Ltd. in which Furukawa Metals & Resources
Co., Ltd. has capital participation

FURUKAWA Annual Report 20079

Electronic Materials and Chemicals

Net Sales(Billions of yen)

14.0

15

14.5

20

15.9

17.5

21.2

25

10

5

0

’03

’04

’05

’06

’07

Operating Income

Yasuhei Konagaya

Fumio Kato

President and Representative
Director
Furukawa Denshi Co., Ltd.

President and Representative
Director
Furukawa Chemicals Co., Ltd.

Sales in the Electronic Materials and Chemicals Division declined due tothe termination of electrolytic aluminum capacitor foil consignment sales
at the end of previous fiscal year. They totaled ¥ 15,902 million, a 25.1%
year-on-year decline. Operating income increased 39.4% to ¥ 2,088 million owing to steady shipments of high-purity metallic arsenic andcuprous oxide. The operating margin improved by 6.0 percentage points
to 13.1%.
Shipments of high-purity metallic arsenic, which ispolymeric ferric sulfate solution, an aggregating agent

mainly used in gallium arsenate semiconductors,

used to treat wastewater, remained steady owing towere robust owing to strong demand for their use instable public-sector demand. As a result of theseelectronic devices for mobile phones and LED lamps.

combined factors, operating income expanded.

Demand for other crystal products grew, leading to(Billions of yen)

an increase in revenues. The unit price of cuprous
2.1

2.5

oxide, which is used in paints for ship bottoms,

1.5

expanded significantly owing to high copper prices
and resulted in growth in earnings. Shipments of

1.1

1.3

1.5

1.7

2.0

1.0

0.5

0

’03

’04

’05

’06

’07

Operating Margin

13.1

(%)

High-purity metallic arsenic
7.1

7.6

9.1

10

9.9

15

5

0

10

’03

’04

’05

’06

’07

FURUKAWA Annual Report 2007

Cuprous oxide

Real Estate
Real Estate Division sales in the fiscal year under review declined 5.5% to¥ 2,936 million, while operating income waned by 7.3%, year on year, to¥ 839 million. The operating margin fell by 0.5 of a percentage point to28.6%.
In the division’s core office-building business, brisk

located. Within this environment, Furukawa worked

corporate sector demand for office space improved in

to reduce vacancies by acquiring new tenants andthe Tokyo metropolitan area, followed by the Osaka

simultaneously to reduce expenses.

29.1

35.9

1.4

40

3

0.8

0.9

30
1.0

2

20
0.5

1

0

41.5

1.7

1.5

2.9

3.1

4

50

3.8

4.1

2.0

43.8

Operating Margin
(%)

1.9

Operating Income(Billions of yen)

4.4

5

Net Sales(Billions of yen)

28.6

region, where Furukawa’s mainstay buildings are

’03

’04

’05

’06

0

’07

10

’03

’04

’05

’06

0

’07

’03

’04

’05

’06

’07

Fuels and Others
The Fuels and Others Division recorded a 15.2% decrease in sales year on
year to ¥ 29,361 million. In addition, after recording allowance for doubtful accounts, operating loss worsened, dropping from ¥69 million in theprevious fiscal year to ¥ 415 million.
In Fuels, crude oil prices in August 2006 reached an

sumption volumes attributable to fuel transitions, par-all-time high in Dubai, but thereafter entered a cor-

ticularly away from Bunker A.

rection phase. In terms of supply and demand,
Furukawa exerted efforts to maintain a steady supply

In Others, primarily transport and new business,sales increased, but income declined.

amid the severe conditions caused by reduced conOperating Income (Loss)

Operating Margin(Billions of yen)

(%)

0

’03

’04

’05

’06

’07

’04

’05

(0.4)

-0.4

’06

’07

(1.4)

’03

-1.0

(1.2)

-0.3

-0.5

(0.3)

10

(0.2)

-0.2

(0.2)

(0.1)

-0.1

20

0

(0.2)

0

(0.6)

29.4

27.7

30

23.0

30.0

40

(0.8)

34.6

Net Sales(Billions of yen)

-1.5

’03

’04

’05

’06

’07

FURUKAWA Annual Report 200711

ENVIRONMENTAL PROTECTION AND SOCIAL CONTRIBUTION ACTIVITIESThe protection of the environment is one of the most important management issues at the Furukawa
Company Group. Our fundamental policy is that each employee should strive in all corporate activities
to perform in harmony with the environment, consider the improvement of the environment, and contribute to the development of a sustainable society. We are aware of the important role we play in givingback to the community as a corporate citizen and strive to contribute in every way we can with the
involvement of every Furukawa employee.
Environmental Management

Environment-Friendly Products●Environmental management system

The Furukawa Company Group vigorously develops products related to

The senior decision-making body for environmental-protection activities isthe environment that contribute to the realization of an environmental-

the Central Committee for Environmental Management, in which everyone

ly conscious society. Among these is the Group’s low-noise, low-vibra-

from the president on down participates. The Environmental Managementtion hydraulic rock breaker that improves environments in and around

Subcommittee studies, proposes, directs and monitors environmental

construction-site areas. Furthermore, in October 2006, Furukawa newly

protection activities.

added the fuel-efficient U-can ECO series to its lineup of cranes that

The companies of the Furukawa Company Group have each established their own Environmental Management Committees, chaired bytheir own top management, to formulate environmental protection plansand direct environmental protection programs.

realizes reduced fuel consumption during crane operation for mediumand large-sized trucks.
Other endeavors include collaborative efforts such as our participation
with Shimane University, Japan Pionics Co., Ltd. and the Japan Science

Furthermore, the Committee of Environmental Protection Supervisors

and Technology Agency (JST) targeting the development of deposition

meets every year, bringing together the people who directly guide andequipment for zinc oxide thin films. White lighting realized through high-manage environmental and safety initiatives in each group company. At

intensity blue LEDs using gallium nitride, zinc oxide and other materials

these meetings, the committee aims to fulfill three basic purposes: 1. toconsumes comparatively less energy than conventional lighting without

help improve the competency of environmental protection supervisors;

the use of mercury and arsenic, boosting its appeal as an energy-efficient

2. to prevent accidents resulting from Furukawa’s business activities

and environmentally sound product.

through concerted efforts to share information; and 3. to verify revisions
to environment-related regulations.

●Environmental protection auditing
As of March 31, 2005, the Furukawa Company Group’s principal business sites had obtained ISO14001 certification. Internal and external
audits are now being conducted in order to effect continuous improve-

Fuel-efficient U-can ECO craneZinc oxide thin film deposition equipment

ment in environmental protection activities. External audits are being

Social Contribution Activities

conducted by an accredited ISO14001 certification body, while inter-

The bedrock of Furukawa’s social contribution activities as a good corpo-

nal audits are implemented once a year by Furukawa’s Environmental

rate citizen is the “spirit of harmony,” which is one of its management

Control Department.

philosophies. The Furukawa Company Group seeks to maintain good relationships and to live in harmony with local communities through stew-

Environmental Protection Activities

ardship and maintenance of forests owned by Furukawa, afforestation

The Furukawa Company Group is striving to lessen environmental bur-programs, beach cleanup operations, preservation of the “Nikko-

den by working to meet the targets it has set for fiscal 2009, the year

Suginamiki” (Avenue of Cedars in Nikko), accepting internships, hosting

ending March 31, 2009. Targets are based on a comparison of fiscal

factory visits, conducting fund-raisers, arranging blood-donor drives, and2004 consumption levels and aim to reduce natural resources andloaning its land for free to local environmental associations.

energy consumption.
Furukawa’s ZPS-BW is contributing to safety and peace of mind within nursing facilities and hospitals as a nurse-call transmittance system. The ZPS-BW uses a 3-D

12

Category

Fiscal 2009 (target)

Electricity

40% reduction of fiscal 2004 consumption

Heavy oil

25% reduction of fiscal 2004 consumption

Natural gas

10% reduction of fiscal 2004 consumption

Water

25% reduction of fiscal 2004 consumption

Total discharge ofindustrial waste, etc.

35% reduction of fiscal 2004 consumption

FURUKAWA Annual Report 2007

detection system that senses changes in ultrasonic wave reflections to “watch” overpatient beds. Nurses are called upon when the system detects irregular movementby patients.

CORPORATE GOVERNANCE

The basic policy of the Furukawa Company Group is to contribute to society, our shareholders andother stakeholders by building an efficient management structure that will yield stable profits andincreased corporate value through greater management transparency and continuous innovation in our
corporate structure. This policy binds the Group’s businesses together to ensure Group integrity, while
enabling them to manage their individual operations under a flexible management structure with a clear
focus on accountability for gain and loss. At the same time, the Group businesses leverage collective
strengths to maximize corporate value by providing products and services that achievecustomer satisfaction.
System of Corporate Governancemeetings of the Board of Directors, the Management Council, theTo clearly separate management oversight functions from executive func-

Management Committee, and other important management meetings.

tions, accelerate decision-making and clarify responsibilities, Furukawa

In addition, they audit business sites and subsidiaries and monitor thehas adopted an executive officer system. Furukawa’s executive officers

performance of duties carried out by directors. The audit function ishave become representative directors at six core companies in the inter-

further reinforced by the Audit Office, an organization in charge of inter-est of promoting an agile management structure. As of July 28, 2007, thenal auditing. The Audit Office is composed of six members who engage

system comprised 16 executive officers, six of whom concurrently holdin auditing Group-wide operations management and the execution of

positions as directors.

business operations. In order to ensure the efficiency and effective-

The Board of Directors has a membership of nine, of whom one

ness of the audit function, Furukawa continuously works to reinforce

is an outside director, with the Board overseeing the execution of thecooperation between the Audit Office, auditors and accounting auditors,

Furukawa Company Group’s operations. The Management Council sets

who together devise audit plans, review audit results and share otherthe Furukawa Company Group’s fundamental management policies andaudit-related information.

strategies and makes decisions on important matters. There is also a
Management Committee, which meets monthly to discuss the opera-

System of Risk Management

tions of Furukawa and its core companies, and provides direction.

Furukawa recognizes effective risk management as an important aspect

Decisions made by the Management Council that involve the allocationof its business activities and conducts stringent risk assessment andof funds or other important management issues must be approved by aanalysis of its business operations. Additionally, Furukawa establishedresolution of the Board of Directors.

the Risk Management and Compliance Committee for the purpose of

Furukawa uses an auditor system, with a Board of Auditors com-ensuring earnest and responsible business operations from a social andposed of two statutory auditors and two outside auditors. Pursuant toethical perspective.

an audit policy formulated by the Board of Auditors, auditors attend●Corporate Governance Organization Chart
Shareholders’ Meeting
Appoints/recalls

Independent
Auditors

Appoints/recalls

Reports

Appoints/recalls/oversees
Reports

Directs/
oversees

AuditsReports

Reports
Directs

Directs/
oversees

Reports

Management
Committee

Appoints/recalls

Board of Auditors
4 members(2 statutory, 2 external)

President

Appoints/recalls

Reports

AuditsBoard of Directors
9 members(8 internal, 1 external)

Reports

Risk Management& Compliance
Committee

Approves appointments/recalls

Reports
AuditsAudit Office

Management
CouncilAuditsAuditsAuditsExecutive Officers(16 members)

AuditsAll Divisions and Group Companies

FURUKAWA Annual Report 2007

13

FINANCIAL SECTION

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

Millions of yen

2007

2006

2005

2004

2003

For the year:
Net sales ............................................................................................................
Cost of sales .....................................................................................................
Selling, general and administrative expenses ......................................
Operating income (loss) .............................................................................
Income (loss) before income taxes and minority interests ...........
Net income (loss) ..........................................................................................
Cash flows from operating activities ........................................................
Cash flows from investing activities .........................................................
Cash flows from financing activities ........................................................
Capital expenditures ......................................................................................
Depreciation and amortization ..................................................................

¥200,749
167,507
16,343
16,89911,127
17,554
12,648(4,367)(8,910)
3,905
2,626

¥181,938
153,281
16,527
12,130
9,810
5,309
8,254
(336)
(18,086)
1,777
2,595

¥147,237
124,586
15,268
7,383
4,199
2,257
7,698
7,620
(8,227)
2,994
3,026

¥153,513
135,872
15,6172,024(35,238)(27,634)(3,083)25,602(14,962)
2,995
6,533

¥151,630
136,509
16,712(1,591)(22,032)(17,000)(2,153)(4,538)
1,108
5,814
6,261

At year-end:
Total assets .......................................................................................................
Current assets ..................................................................................................
Current liabilities .............................................................................................
Net assets* .......................................................................................................

¥217,027
94,86589,29352,136¥213,046
89,05588,22043,072¥204,651
92,197
104,439
31,335¥206,250
83,777
81,213
28,660¥252,856
79,552
94,056
33,665¥ (84.61)
—
—
70.86

¥ (67.88)——
134.23Yen

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

¥

43.42
—
5.00
139.13

¥

13.12
12.37
3.00
106.52

¥

5.57
5.03
—
77.49
Percent

Financial indicators:
Operating margin ...........................................................................................
Return on sales ...............................................................................................
Equity ratio ........................................................................................................
Return on equity .............................................................................................

8.4%
8.7
25.9
35.3

6.7%
2.9
20.2
14.3

5.0%
1.5
15.3
7.5

1.3%
(18.0)
13.9(88.7)(1.0)%(11.2)
13.3(40.7)* Figures for fiscal 2003 to fiscal 2006 represent total shareholders’ equity.

Operating Income (Loss)/

Net Income (Loss)/(Billions of yen)(Billions of yen)(Billions of yen)

Operating Margin (%)

Return on Sales (%)
20

20

15

10

10

0

0

5

-10

-10

0

-20

-5

-30

16.9

’04

’05

FURUKAWA Annual Report 2007

’06

’07

’03

’04

’05

’06

’07

(18.0)-20(27.6)

-5

8.7

5.3
2.3
1.5
8.4

1.3
(1.6)
(1.0)

14

’03

(17.0)(11.2)

0

6.7

50

5.0

5
2.0

100

0

20

10

12.1
10
7.4

150

15

147.2

153.5

151.6

200

200.7

181.9

20

2.9

250

17.6

Net Sales

’03

’04

’05

’06

’07

-30

Financial Review
Revenue and Expenses

Under other income and expenses, ¥798 million in interest andConsolidated net sales in the fiscal year ended March 31, 2007

dividend income and ¥2,478 million in interest expense weretotaled ¥200,749 million, an increase of 10.3% compared withrecorded. Other principal items include a loss on the copper smelting

the previous fiscal year. This total was the result of a 60.9% jumpbusiness in Australia of ¥3,032 million and a loss on the disposal

in net sales of the Metals Division on the continued strength ofand devaluation of inventories of ¥699 million.

high copper prices, although there were decreases in all otherAs a result of the above factors, income before income taxes

major divisions. Net sales in the Machinery Division decreased

and minority interests increased by 13.4% year on year to

3.6% because of a reduction in revenues from industrial machinery¥11,127 million. After accounting for ¥6,793 million in deferred

products, while net sales in the Electronic Materials and Chemicals

income taxes, Furukawa reported a surge in net income of

Division dropped 25.1% due to the termination of electrolytic

230.6%, to ¥17,554 million.

aluminum capacitor foil consignment sales at the end of theAccordingly, Furukawa distributed full-year dividend payments ofprevious fiscal year. Net sales of the Fuels Division declined¥5.00 per share, (including an interim dividend payment of ¥2.00

16.0% year on year as a result of a drop in sales volume.

per share), a ¥2.00 increase compared to the previous fiscal year.

Cost of sales increased by 9.3% to ¥167,507 million, with thecost of sales margin dipping 0.8 of a percentage point to 83.4% year

Financial Positionon year. This improvement was due mainly to an improvement in

Total assets as of the end of the fiscal year ended March 31, 2007

the profit margin for the industrial machinery business and thestood at ¥217,027 million, a 1.9% increase compared to the end

Electronic Materials and Chemicals Division. Selling, general andof the previous fiscal year. Current assets increased 6.5% toadministrative expenses decreased 1.1% to ¥16,343 million,¥94,865 million, mainly because of increases in inventories,

primarily owing to a decrease in the provision for employees’

particularly of metals, and deferred income taxes. Total investments

retirement benefits, as well as salaries and allowances. Operating

declined 6.5% to ¥47,146 million owing to a decrease in investment

income surged 39.3% compared to the previous fiscal year tosecurities attributable to a fall in the market value of shareholdings.

¥16,899 million. This is due in large part to higher operating

Property, plant and equipment grew by 2.0% to ¥75,016 million

income in the Metals Division and Machinery Division, which grew

due to the implementation of capital investment.

52.9% and 39.1%, respectively.

Total Assets

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

300

60

43.1

50

-25

150

30

-50

100

20

50

10

-100

’03

(84.61)

-75

’04

’05

’06

’07

0

’03

’04

’05

’06

’07

0

31.3

40

28.7

200

(67.88)

0

33.7

217.0

213.0

204.7

250
206.3

5.57

25

13.12

252.9

50

52.1

43.42

Net Income (Loss) per Share

’03

’04

’05

’06

’07

FURUKAWA Annual Report 200715

Total liabilities decreased by 7.4% to ¥164,891 million owing

efficiency. In addition, ¥318 million was allocated to the Real Estate

to decreases in corporate bonds and debt and deferred income

Division for maintenance on leased buildings and ¥31 million totaxes. As a result, the fiscal year-end balance of interest-bearing

the Fuels and Others Division for the purchase of vehicles for use

liabilities (corporate bonds and debt) was reduced by ¥10,029

in the transportation business.

million to ¥89,389 million.

Cash Flows

Net assets at the fiscal year-end stood at ¥52,136 million. This
was attributed to an increase in retained earnings from net

Net cash provided by operating activities during the fiscal year

income. In addition, Furukawa has presented minority interests

under review totaled ¥12,648 million, an increase of ¥4,394 million

and other items that comprise net assets in the balance sheet incompared to the previous fiscal year, mainly owing to an increase

accordance with the adoption of a new accounting standard, which

in income before income taxes and minority interests and a

was put into effect on April 1, 2006. The equity ratio grew 5.7

decrease in trade receivables.

percentage points to 25.9%.

Net cash used in investing activities amounted to ¥4,367 million,a ¥4,031 million increase compared to the previous fiscal year,

R&D and Capital Expenditures

chiefly due to an increase in expenditures for purchases of property,

Research and development expenses for the fiscal year underplant and equipment.

review were ¥1,888 million, representing 0.9% of consolidated

Net cash used in financing activities dropped ¥9,176 million

net sales. Of this, ¥1,022 million was allocated to the Machineryfrom the previous fiscal year to ¥8,910 million, principally owing toDivision and ¥866 million to the Electronic Materials anda decline in the repayment of notes.
As a result, cash and cash equivalents at end of year were

Chemicals Division.

¥16,333 million, a 2.4% decrease year on year.

Capital expenditures (including investments in intangible fixed
assets) amounted to ¥3,905 million. Of this total, ¥2,333 million
was allocated to the Machinery Division, ¥159 million to the
Metals Division and ¥753 million to the Electronic Materials andChemicals Division, primarily for improvements in manufacturing

Capital Expenditures/
Depreciation and Amortization

Cash Flows(Billions of yen)

6.3

12.6

3.9

1.1

-10

(0.3)
(8.2)

2

(3.1)

(2.2)

1.8

-60

0

(4.5)

2.6

3.0
3.0

3.0

4

2.6

(40.7)

-40

7.7
7.6

10

-20

16

’03

’04

’05

FURUKAWA Annual Report 2007

’06

’07

0

’03

’04

’05

’06

’07

-20

(15.0)(88.7)

-80

-100

(4.4)

0

20

(8.9)

6

25.6

30

5.8

7.5

20

8

14.3

40

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

6.5

35.3

(Billions of yen)

8.3

(%)

(18.1)

Return on Equity

’03

’04

’05

’06

’07

Business Risks

Accrued Employees’ Retirement Benefits

Port Kembla Copper Pty. Ltd. (Australia)

The employees of the Furukawa Company Group are covered byOperations at Port Kembla Copper Pty. Ltd. (PKC) were halted inunfunded employee retirement benefit plans and non-contributory

August 2003. In the ensuing period, the company was placed in afunded employee pension plans as defined-benefit plans. Accrued

care and maintenance status with efforts now directed at conducting

employees’ retirement benefits are provided at an amount calcu-

an orderly withdrawal and resolving related environmental issues.

lated based on the retirement benefit obligation and the fair value

While estimated losses relating to the suspension of operationsof pension plan assets at the balance sheet date. In calculating

have been brought to account, potential risks that may affect theaccrued employees’ retirement benefits, the Furukawa Company

Furukawa Company Group’s operating results and financial position

Group adopts assumptions in connection with the discount rate andinclude costs in connection with cleanup activities at plants, sites

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

and other areas, and the decided upon withdrawal method.

Accordingly, the Furukawa Company Group’s operating results andfinancial position are at risk in the event the actual discount rate

Fluctuations in the Foreign Exchange andand expected rate of return on plan assets differs materially from theMetals Markets

assumptions, as well as in the event of a change in the assumptions

The Furukawa Company Group is at risk of foreign exchange

on which accrued employees’ retirement benefits are made.

fluctuations in connection with its export business, the import of
raw materials, primarily copper ore, and smelting and processing

Earthquake and Natural Disasters

income. In addition, the Furukawa Company Group’s stock of

The Furukawa Company Group’s operating results and financial

nonferrous metal inventories, an internationally traded commodity,

position are at risk in the event of a suspension in operations andis subject to market movements. While the Furukawa Company

delays in shipments due to damage to manufacturing bases andGroup utilizes foreign exchange contracts and forward delivery

facilities from earthquakes and other natural disasters.

transactions as a hedge against the aforementioned risks, its
operating results and financial position may be adversely affected

Environmental Protection

by movements in exchange rates and nonferrous metal markets.

The Furukawa Company Group places the highest importance on
environmental protection, environmental safety, and prevention of

Investments in Securities and Land

pollution, and it has implemented stringent measures at all businessHistorically, the Furukawa Company Group has maintained relatively

sites, both in Japan and overseas, respecting all laws and regulations.

high balances of marketable securities and land. In recent years,

Furthermore, in Japan the Group is vigilant in preventing water

however, the Group has worked to streamline assets and has soldrun-off from idle mines from contaminating water supplies and ina portion of its marketable securities and idle assets. As of Marchpreventing the build up of slag or slurry. The Furukawa Company

31, 2007, the carrying value of investments in securities wasGroup also maintains tight security at metals deposition sites.

¥30,102 million, while land stood at ¥46,539 million. Accordingly,

However, in the event of new legislation or similar directives, there

the Furukawa Company Group’s operating results and financial

is a possibility that the Group’s performance results and its financial

position are at risk of impairment losses, losses from devaluation

standing could be influenced.

and losses on sale due to movements in stock and land prices.

FURUKAWA Annual Report 200717

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
March 31, 2007 and 2006

Thousands of
U.S. dollars (Note 4)

Millions of yen

ASSETS

2007

2006

2007

¥ 16,743$ 138,415
265,610

Current Assets:
Cash and cash equivalents (Note 7) ................................................................................................................... ¥ 16,333
Receivables, trade (Note 7):
Notes and accounts ...............................................................................................................................................

31,34233,078Affiliates ......................................................................................................................................................................

932

1,348

7,898

Inventories (Notes 5 and 7) ...................................................................................................................................

32,31828,349273,881Deferred income taxes (Note 13) ........................................................................................................................

1,982

936

16,797

Other current assets (Note 7) ................................................................................................................................

12,4809,361

105,763

Allowance for doubtful accounts ...........................................................................................................................

(522)

(760)

(4,423)

Total current assets ...........................................................................................................................................

94,86589,055803,941

Investments:
Investments in securities (Notes 6 and 7) ........................................................................................................

36,04738,460305,483

Investments in affiliates .............................................................................................................................................

2,065

1,852

17,500Loans receivable ..........................................................................................................................................................

979

1,411

8,297

Deferred income taxes (Note 13) ........................................................................................................................

41

61

347

Other investments (Note 8) ...................................................................................................................................

9,152

9,651

77,559Allowance for doubtful accounts ...........................................................................................................................

(1,138)(991)(9,644)

Total investments ..............................................................................................................................................

47,14650,444

399,542

48,39548,425410,127

Property, Plant and Equipment—at Cost (Notes 7 and 8):
Land and timberlands ................................................................................................................................................
Buildings and structures ............................................................................................................................................

40,54538,763

343,602

Machinery and equipment .......................................................................................................................................

47,75445,826404,695

712

587

6,034

137,406

133,601

1,164,458

Accumulated depreciation .......................................................................................................................................

(62,390)(60,054)(528,729)

Property, plant and equipment, net ...........................................................................................................

75,01673,547635,729

Total assets .......................................................................................................................................................... ¥217,027¥ 213,046$1,839,212

Construction in progress ...........................................................................................................................................

18

FURUKAWA Annual Report 2007

Thousands of
U.S. dollars (Note 4)

Millions of yen

LIABILITIES AND NET ASSETS

2007

Current Liabilities:
Short-term loans (Note 7) ....................................................................................................................................... ¥ 16,750
Current portion of long-term debt (Note 7) ......................................................................................................
22,947
Payables, trade:
Notes and accounts (Note 7) ...........................................................................................................................
33,266
Affiliates ......................................................................................................................................................................
17
Accrued expenses .......................................................................................................................................................
10,441
Accrued income taxes (Note 13) ..........................................................................................................................
696
Deferred income taxes (Note 13) ........................................................................................................................
11
Other current liabilities ...............................................................................................................................................
5,165

2006

2007

¥ 17,713
21,510$ 141,949
194,466

29,9384
11,069
4,291
2
3,693

281,915
144
88,483
5,898
93
43,772

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

89,29388,220756,720

Long-term Liabilities:
Long-term debt (Note 7) .........................................................................................................................................
Accrued employees’ retirement benefits (Note 12) ......................................................................................
Accrued directors’ and statutory auditors’ retirement benefits ...................................................................
Deferred income taxes (Note 13) ........................................................................................................................
Deferred income taxes on surplus on the revaluation of land (Note13) ..............................................
Other long-term liabilities (Note 7) ......................................................................................................................

49,692
1,138
347
7,669
3,157
13,59560,1951,219
41
14,7293,184
10,528421,119
9,644
2,941
64,992
26,754
115,211

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

75,59889,896640,661

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

—(8,142)

—

—
—
—
—
—

28,208
2,634
3,871
8,412
(37)

—
—
—
—
—

—

43,088—Contingent Liabilities (Note 14)
Shareholders’ Equity:
Common stock without par value:
Authorized—800,000,000 shares
Issued—404,455,680 shares ...........................................................................................................................
Retained earnings ........................................................................................................................................................
Surplus on the revaluation of land, net of income taxes ..............................................................................
Net unrealized holding gain on securities, net of income taxes ................................................................
Translation adjustments .............................................................................................................................................
Treasury stock, at cost
2006—147,830 shares ...........................................................................................................................................

—

(16)

—

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

—

43,072—

Total liabilities, minority interests and shareholders’ equity .........................................................

—¥ 213,046—

28,20818,194——

239,051
154,186

(24)

—

(203)

Total shareholders’ equity .........................................................................................................................
Valuation, Translation Adjustments and Others:
Net unrealized holding gain on securities, net of income taxes ...........................................................
Deferred gains (losses) on hedges .................................................................................................................
Surplus on the revaluation of land, net of income taxes .........................................................................
Translation adjustments .......................................................................................................................................

46,378—393,034

6,270
371
3,838
(611)

—
—
—
—

53,136
3,144
32,525(5,178)

Total valuation, translation adjustments and others ........................................................................
Minority Interests in Consolidated Subsidiaries ................................................................................................

9,868(4,110)——83,627(34,830)

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

52,136—441,831

Total liabilities and net assets .................................................................................................................. ¥217,027—$1,839,212

Net Assets:
Shareholders’ Equity:
Common stock without par value:
Authorized—800,000,000 shares
Issued—404,455,680 shares ......................................................................................................................
Retained earnings ...................................................................................................................................................
Treasury stock, at cost:
2007—179,522 shares .................................................................................................................................

The accompanying notes are an integral part of these statements.

FURUKAWA Annual Report 200719

Consolidated Statements of Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2007 and 2006

Thousands of
U.S. dollars (Note 4)

Millions of yen

2007

2006

2007

Net Sales ............................................................................................................................................................................. ¥ 200,749¥ 181,938$ 1,701,263

Cost of Sales (Note 9) ..................................................................................................................................................

(153,281)(1,419,551)(167,507)

Gross profit ...............................................................................................................................................................

33,24228,657281,712Selling, General and Administrative Expenses (Note 9) .............................................................................

(16,343)(16,527)(138,500)

Operating income ..................................................................................................................................................

16,89912,130143,212

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

798

490

6,763

Equity in earnings of affiliates .................................................................................................................................

358

191

3,034

Interest expense ...........................................................................................................................................................

(2,478)(2,267)(21,000)

Other, net (Note 15) .................................................................................................................................................

(4,450)(734)(37,712)

Income before income taxes and minority interests .................................................................................

11,127

9,810

94,297

Current .............................................................................................................................................................................

(1,026)(4,757)(8,695)

Deferred ..........................................................................................................................................................................

6,793

567

57,568

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

5,767(4,190)48,873

Minority Interests ............................................................................................................................................................

660

(311)

Income Taxes (Note 13):

Net income ............................................................................................................................................................... ¥17,554

¥

5,593
$

5,309

Yen

148,763

U.S. dollars (Note 4)

Net Income per Share:
Basic ................................................................................................................................................................................. ¥

43.42

¥

$

13.12

0.37

Diluted .............................................................................................................................................................................

—

12.37

—

Cash Dividends per Share ..........................................................................................................................................

5.00

3.00

0.04

Net Assets per Share ....................................................................................................................................................

139.13106.52

1.18

The accompanying notes are an integral part of these statements.

Consolidated Statement of Shareholders’ Equity
Furukawa Co., Ltd. and consolidated subsidiaries
For the year ended March 31, 2006

Commonstock

Balance as of March 31, 2005 .......................................... 404,456

Retainedearnings

Surplus on
the revaluationof landNet
unrealized
holding gain
on securities

Translation
adjustments

Treasury stock,at cost¥28,208¥(2,871)¥4,387¥2,026¥(404)

¥(11)

—

(313)

—

—

—
—

Decrease due to the change in the Company’sownership interests in the affiliate ...............................

——

Reversal of surplus on the revaluation of land ..........

—

—

203

(203)

—

—

Net income for the year .....................................................

—

—

5,309

—

—

—

—

Bonuses to directors and statutory auditors ...............

—

—

(7)

—

—

—

—

Net change during the year ..............................................

—

—

—

—

6,386

367

(5)

Balance as of March 31, 2006 .......................................... 404,456¥28,208¥ 2,634¥3,871¥8,412¥ (37)¥(16)

The accompanying notes are an integral part of these statements.

20

Millions of yen
Number ofshares ofcommon stock(thousands)

FURUKAWA Annual Report 2007

Consolidated Statement of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the year ended March 31, 2007

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

Balance as of March 31, 2006 ................................................................................................ 404,456
Cash dividends paid ...................................................................................................................
—
Bonuses to directors and statutory auditors ......................................................................
—Net income for the year ...........................................................................................................
—
Acquisition of the treasury stock ............................................................................................
—
Reversal of surplus on the revaluation of land .................................................................
—Net change during the year .....................................................................................................
—
Balance as of March 31, 2007 ................................................................................................ 404,456

Retainedearnings

Treasury stock,at costTotal
shareholders’equity¥2,634(2,020)(7)
17,554—33—¥ 18,194¥ (16)
—
—
—
(8)
—
—
¥ (24)¥ 30,826(2,020)(7)
17,554(8)
33—¥ 46,378

Total valuation,translation
adjustments
and others

Minority
interests inconsolidated
subsidiaries

Total
net assets

Commonstock¥ 28,208
—
—
—
—
—
—
¥ 28,208
Millions of yen

Valuation, translation adjustments and others
Net unrealized
holding gain on
securities, netof income taxes

Balance as of March 31, 2006 .......................................... ¥ 8,412
Cash dividends paid ............................................................
—
Bonuses to directors and statutory auditors ...............
—Net income for the year .....................................................
—
Acquisition of the treasury stock .....................................
—
Reversal of surplus on the revaluation of land ..........
—Net change during the year ..............................................
(2,142)
Balance as of March 31, 2007 .......................................... ¥ 6,270

Deferred
gains (losses)on hedges

¥

—
—
—
—
—
—
371
¥ 371

Surplus on
the revaluationof land, net ofincome taxes¥ 3,871
—
—
—
—
(33)
—
¥ 3,838

Translation
adjustments

¥

(37)
—
—
—
—
—
(574)
¥ (611)¥ 12,246 ¥ (8,142)
—
—
—
—
—
—
—
—
(33)
—
(2,345)
4,032¥ 9,868 ¥ (4,110)¥ 34,930(2,020)(7)
17,554(8)—
1,687¥ 52,136

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

Commonstock

Balance as of March 31, 2006 ............................................................................................................................ $239,051
Cash dividends paid ..............................................................................................................................................
—
Bonuses to directors and statutory auditors .................................................................................................
—Net income for the year .......................................................................................................................................
—
Acquisition of the treasury stock .......................................................................................................................
—
Reversal of surplus on the revaluation of land ............................................................................................
—Net change during the year ................................................................................................................................
—
Balance as of March 31, 2007 ............................................................................................................................ $239,051

Retainedearnings

Treasury stock,at costTotal
shareholders’equity$ 22,322(17,119)(60)
148,763—280—$154,186$(136)
—
—
—
(67)
—
—
$(203)$261,237(17,119)(60)
148,763(67)280—$393,034

Minority
interests inconsolidated
subsidiaries

Total
net assets

Thousands of U.S. dollars (Note 4)
Valuation, translation adjustments and others
Net unrealized
holding gain on
securities, netof income taxes

Balance as of March 31, 2006 .......................................... $ 71,289
Cash dividends paid ............................................................
—
Bonuses to directors and statutory auditors ...............
—Net income for the year .....................................................
—
Acquisition of the treasury stock .....................................
—
Reversal of surplus on the revaluation of land ..........
—Net change during the year .............................................. (18,153)
Balance as of March 31, 2007 .......................................... $ 53,136

Deferred
gains (losses)on hedges

$

—
—
—
—
—
—
3,144
$3,144

Surplus on
the revaluationof land, net ofincome taxes

Translation
adjustments

Total valuation,translation
adjustments
and others$32,805
—
—
—
—
(280)
—
$32,525$ (314)—————(4,864)$(5,178)$103,780 $(69,000)
—
—
—
—
—
—
—
—
(280)
—
(19,873)
34,170$ 83,627 $(34,830)$296,017(17,119)(60)
148,763(67)—
14,297$441,831

The accompanying notes are an integral part of these statements.

FURUKAWA Annual Report 200721

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2007 and 2006

Thousands of
U.S. dollars (Note 4)

Millions of yen

2007
Cash Flows from Operating Activities:
Income before income taxes and minority interests ...................................................................................... ¥ 11,127
Adjustments to reconcile income before income taxes and minority interests
to net cash provided by operating activities:
Depreciation and amortization ...............................................................................................................................
2,626
Increase (Decrease) in allowance for doubtful accounts, net ....................................................................
(94)
Increase in accrued employees’ retirement benefits .....................................................................................
174
Loss on disposal and sales of property, plant and equipment ...................................................................
—
Gain on sales of property, plant and equipment .............................................................................................
(20)
Gain on sales of investments in securities .........................................................................................................
(7)
Equity in earnings of affiliates .................................................................................................................................
(358)
Interest and dividend income .................................................................................................................................
(798)
Interest expense ...........................................................................................................................................................
2,478
Loss on impairment of fixed assets ......................................................................................................................
29
Changes in operating assets and liabilities:
Receivables, trade ..................................................................................................................................................
2,279
Inventories .................................................................................................................................................................
(3,802)
Payables, trade ........................................................................................................................................................
3,103
Other ................................................................................................................................................................................
5,634

¥

9,810

$

94,297

2,595
177
701
138
(178)
(1,009)
(191)
(490)
2,267
302

22,254
(797)
1,475
—
(169)
(59)
(3,034)(6,763)21,000246(902)(4,710)5,788(2,737)

19,314(32,220)
26,29747,744

Subtotal ......................................................................................................................................................................
Interest and dividends received .............................................................................................................................
Interest paid ...................................................................................................................................................................
Payments related to copper smelting business in Australia ........................................................................
Income taxes paid .......................................................................................................................................................
Income taxes refunded .............................................................................................................................................
Other ................................................................................................................................................................................

22,371985(2,505)(407)(7,432)10(374)

11,561501(2,636)
(406)
(827)
253
(192)

189,585
8,347(21,229)(3,449)(62,983)85(3,170)Net cash provided by operating activities .................................................................................................

12,648

8,254

107,186

Cash Flows from Investing Activities:
Increase in time deposits .........................................................................................................................................
Decrease in time deposits .......................................................................................................................................
Purchases of property, plant and equipment ....................................................................................................
Proceeds from sales of property, plant and equipment ...............................................................................
Decrease in restricted deposits ..............................................................................................................................
Purchases of investments in securities ................................................................................................................
Proceeds from sales of investments in securities ...........................................................................................
Proceeds from rental of real estate ......................................................................................................................
Proceeds from the collection of the loan ...........................................................................................................
Other ................................................................................................................................................................................

——(3,862)24—(1,332)
526
108
425
(256)

(5)
22
(1,767)639
15(1,896)
2,513
150
24
(31)

—
—
(32,729)203—(11,288)
4,458
915
3,602
(2,170)Net cash used in investing activities ...........................................................................................................

(4,367)(336)(37,009)15,000(20,676)
10,600(10,816)(1,000)—(2,022)

31,588(19,587)
6,797(11,745)(25,196)(161)—

127,119(175,220)
89,831(91,661)(8,475)—(17,136)

68
(64)

232
(14)

576
(542)

Net cash used in financing activities ..........................................................................................................
Effect of exchange rate changes on cash and cash equivalents .............................................................

(8,910)219(18,086)
303(75,508)
1,856

Net decrease in cash and cash equivalents ......................................................................................................
Cash and Cash Equivalents at Beginning of Year ..........................................................................................

(410)
16,743(9,865)26,608(3,475)
141,890

Cash and Cash Equivalents at End of Year ........................................................................................................ ¥ 16,333¥ 16,743$ 138,415

Cash Flows from Financing Activities:
Proceeds from long-term loans payable .............................................................................................................
Repayment of long-term loans payable ..............................................................................................................
Proceeds from short-term loans ............................................................................................................................
Repayment of short-term loans .............................................................................................................................
Repayment of notes ...................................................................................................................................................
Repayment of finance lease obligations .............................................................................................................
Cash dividends .............................................................................................................................................................
Proceeds from issuance of common stock of a consolidated subsidiaryto a minority shareholder .......................................................................................................................................
Other ................................................................................................................................................................................

The accompanying notes are an integral part of these statements.

22

2007

2006

FURUKAWA Annual Report 2007

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
March 31, 2007

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

In addition, the notes to the consolidated financial statements include

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

information which is not required under accounting principles generally“Furukawa Group”) have been prepared in accordance with accounting

accepted in Japan but is presented herein as additional information.

principles generally accepted in Japan, which are different in certain

In preparing these statements, the Company has made certain

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

International Financial Reporting Standards, and have been compiled

statements prepared in Japan in order to present these statements infrom those prepared by the Company as required under the Securities

a form which is more familiar to readers outside Japan.

and Exchange Law of Japan.

In addition, certain amounts in the prior year’s financial statements
have been reclassified to conform to the current year’s presentation.

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

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

The Company had 37 subsidiaries as of March 31, 2007 (39 as ofby the moving average method.

March 31, 2006). The consolidated financial statements included theaccounts of the Company and 37 subsidiaries as of March 31, 2007

(4) Inventories(39 as of March 31, 2006).

Finished copper products and work in process relating to copper

Compared with the previous year, the number of subsidiaries
decreased by 2 due to liquidation.
For the purpose of preparing the consolidated financial statements, allproducts are stated at cost determined by the moving averagemethod. Other inventories are mainly stated at cost determined by theaverage method.

significant inter-company transactions, account balances and unrealized
profits among the Furukawa Group have been eliminated.

(5) Allowance for Doubtful Accounts

Certain foreign subsidiaries have a December 31 year-end. Relevant

In order to cover probable losses on collection, the allowance foradjustments have been made for significant transactions with suchdoubtful accounts is calculated based on the historical default rates for

subsidiaries during the period from January 1 to March 31.

normal receivables plus estimate of uncollectible amounts determined

Although the Company had 12 affiliates as of March 31, 2007 (11affiliates as of March 31, 2006), the equity method was applied to 5

by reference to specific doubtful receivables from customers who areexperiencing financial difficulties.

affiliates as of March 31, 2007 (4 as of March 31, 2006) in preparing
the consolidated financial statements, and investments in the rest of(6) Property, Plant and Equipment, and Depreciation

those affiliates are carried at cost or less.

Property, plant and equipment is stated at cost. Depreciation is mainly
calculated by the straight-line method based on the estimated useful(2) Cash and Cash Equivalents

lives of the assets. The range of useful lives of property, plant andCash and cash equivalents include all highly liquid investments with aequipment are summarized as follows:

maturity of three months or less when purchased.

Buildings and structures 5 to 60 years
Machinery and equipment 2 to 25 years(3) Marketable Securities and Investments in Securities
Securities other than equity securities issued by subsidiaries and affiliates

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

are classified into three categories: trading, held-to-maturity or othersecurities. The Furukawa Group does not hold any trading or held-to-(7) Leases

maturity securities as of March 31, 2007 and 2006. Marketable securities

Non-cancelable lease transactions entered into by the Company andclassified as other securities are carried at fair value with changes indomestic consolidated subsidiaries are accounted for as operating leases

unrealized holding gain or loss, net of the applicable income taxes,(whether such leases are classified as operating or finance leases),

included directly in net assets (shareholders’ equity in 2006). Fair

except that lease agreements which stipulate the transfer of ownershipvalue is determined based on the average of the market value duringof the leased assets to the lessees are accounted for as finance leases.

the last month of the fiscal year. Non-marketable securities classified as

However, leases of foreign consolidated subsidiaries are generallyclassified and accounted for as either finance or operating leases.

FURUKAWA Annual Report 200723

(8) Retirement Benefit Plans

adjustments. The carrying value of the land after revaluation exceeded

The employees of the Company and most of its domestic consolidated

its fair value by ¥1,591 million ($13,483 thousand) and ¥1,401 million

subsidiaries are covered by unfunded employee retirement benefit

as of March 31, 2007 and 2006, respectively.

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

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

Current income taxes comprising corporation tax, enterprise tax andwere instituted to replace a certain portion of the benefits under the

inhabitants’ taxes are provided for based on amounts currently payable

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

mandatory retirement age. Certain consolidated subsidiaries (bothbetween financial reporting and tax bases of the assets and liabilities,

domestic and foreign) have defined contribution plans.

which were measured using the enacted tax rates and laws which will

Accrued employees’ retirement benefits have been provided at an
amount calculated based on the retirement benefit obligation and thefair value of the pension plan assets at the balance sheet dates, asadjusted for unrecognized actuarial gain or loss and unrecognized prior

be in effect when the temporary differences are expected to reverse,
are reflected in the consolidated financial statements.
The Company and its domestic wholly-owned subsidiaries files a
consolidated corporation tax returns.

service cost. The retirement benefit obligation has been attributed toeach period by the straight-line method over the years of service of the(12) Amounts per Shareeligible employees.

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

Prior service cost is being amortized by the straight-line method overavailable for distribution to shareholders of common stock and thea period of principally 15 years, which is shorter than the average

weighted-average number of shares of common stock outstanding

remaining years of service of the employees. Actuarial gain and loss isduring the year. Diluted net income per share is computed based on

amortized in the year following the year in which the gain or loss isthe net income available for distribution to the shareholders and therecognized by the straight-line method over the period of mainly 15

weighted-average number of shares of common stock outstanding

years, which is shorter than the average remaining years of service ofduring each year after giving effect to the dilutive potential of shares ofthe employees.

common stock to be issued upon the conversion of convertible bonds.
In the year ended March 31, 2007, diluted net income per share is(9) Accrued Directors’ and Statutory Auditors’ Retirement Benefits

not disclosed because it is anti-dilutive.

Directors and statutory auditors of the Company and certain domestic

Cash dividends per share represent the cash dividends declaredconsolidated subsidiaries are customarily entitled to lump-sum payments

as applicable to the respective years together with the interim cash

under their respective unfunded retirement benefits plans. The accrual

dividends paid.

for retirement benefits for these directors and statutory auditors is

Net assets per share are computed based on the net assets excluding

recorded at the amount which would have been paid in accordance

stock minority interests and the number of common stock outstanding

with the internal rules if they had resigned their offices as of the balanceat the year end.

sheet date.
(13) Foreign Currency Translation

24(10) Surplus on the Revaluation of Land

Foreign currency denominated monetary assets and liabilities are

Pursuant to the “Law Concerning the Revaluation of Land,” land usedtranslated into Japanese yen using the rates of exchange in effect at

for the Company’s business operations was revalued on March 31,

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

2002. The income tax effect of the difference between the book value

charged to income as incurred.

and the revalued amount has been presented under liabilities as

The balance sheet accounts of the foreign consolidated subsidiaries“Deferred income taxes on surplus on the revaluation of land” and theare translated into yen at the rates of exchange in effect at the balanceremaining balance has been presented under shareholders’ equity as

sheet date, except for the components of net assets excluding minority“Surplus on the revaluation of land” in the accompanying consolidated

interests (shareholders’ equity in 2006) which are translated at theirbalance sheets. Revaluation of land was determined based on thehistorical exchange rates. Revenue and expense accounts are translated

official notice prices published by the Commissioner of the Nationalat the average rate of exchange in effect during the year. Differences

Tax Authorities in accordance with Paragraph 4, Article 2 of thearising from the translation are presented as translation adjustments“Enforcement Ordinance Concerning Land Revaluation,” with relevant

and minority interests in its consolidated financial statements.

FURUKAWA Annual Report 2007

(14) Hedging Activities

differences paid or received on the interest rate swaps are recognized

The Furukawa Group uses derivative financial instruments for the purpose

as adjustments to interest expense or income over the life of eachof hedging the risks of adverse fluctuations in foreign exchange rates,

swap, thereby adjusting the effective interest rate on the hedged items.

commodity prices and interest rates on the receivables, payables andforecast transactions denominated in foreign currencies. All derivative(15) Shareholders’ Equity

financial instruments except below are stated at fair value and related

The new Company Law of Japan (the “Law”), which superseded mostgain or loss on the changes in the fair values of derivative financialof the provisions of the Commercial Code of Japan, came into effectinstruments is deferred as a component of net assets (an asset or liability

on May 1, 2006. The Law provides that an amount equal to 10% of

in 2006) in the balance sheet until the recognition of gain or loss on

the amount to be distributed as distributions of capital surplus (otherhedged items when those derivative financial instruments qualify forthan the capital reserve) and retained earnings (other than the legal

hedge accounting.

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

Trade receivables, trade payables and forecast transactions denomi-

respectively, until the sum of the capital reserve and the legal reservenated in foreign currencies are translated at the contracted rates if theequals 25% of the common stock account. Such distributions can be

relating forward contracts qualify for hedge accounting.

made at any time by resolution of the shareholders, or by the Board of

The interest rate swaps which qualify for hedge accounting andmeet specific matching criteria are not carried at fair value but any

Directors if certain conditions are met, but neither the capital reserve
nor the legal reserve is available for distributions.

3. Accounting Changes(1) Accounting for the Presentation of Net Assets in the Balance
Sheets(2) Accounting for Accrued Directors’ and Statutory Auditors’
Retirement Benefits

Effective April 1, 2006, the Company adopted a new accounting

Until the year ended March 31, 2006, retirement benefits for directors

standard for presentation of net assets in the balance sheet and related

and statutory auditors were charged to income when the payments

implementation guidance. Shareholders’ equity under the previous

were approved by the shareholders’ meeting and made. Effective April

presentation method amounted to ¥55,875 million ($473,517 thou-

1, 2007, the Company and certain consolidated subsidiaries started tosand) as of March 31, 2007. In addition, effective the year ended

provide for the retirement benefits at the amount which would have

March 31, 2007, the Company is required to prepare consolidated

been required to be paid if those directors and statutory auditors had

statement of changes in net assets instead of consolidated statements

resigned their offices as of the balance sheet date. The effect of thisof shareholders’ equity.

change was to decrease operating income and income before income
taxes and minority interests by ¥56 million ($475 thousand) and ¥306
million ($2,593 thousand), respectively, for the year ended March 31,
2007 as compared to the corresponding amounts which would havebeen recorded if the previous method were followed. The effect of thischange on the segment information is immaterial.

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

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

¥118=US$1.00, the exchange rate prevailing on March 31, 2007. Thisdollars at the above or any other rate.

FURUKAWA Annual Report 200725

5. Inventories
Inventories as of March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2007

2006

2007
$109,958

Finished products ..................................................................................................................................................................

¥12,975¥12,961

Work in process ......................................................................................................................................................................

6,440

5,483

54,576

Raw materials and supplies ...............................................................................................................................................

12,903

9,905

109,347

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

¥32,318¥28,349$273,881

6. Investments in Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of March 31, 2007 and2006 were as follows:
Millions of yen

Thousands of U.S. dollars

2007

2007

Acquisition
cost

Carrying
value

Unrealized
gain (loss)

Acquisition
cost

Carrying
value

Unrealized
gain (loss)

Securities whose carrying value exceeds
their acquisition cost:
Listed corporate shares .............................................................

¥15,960¥26,587¥10,627$135,254$225,314

Government bonds ....................................................................

—

—

—

—

—

$90,060—

Corporate bonds ..........................................................................

—

—

—

—

—

—

15,96026,587

10,627135,254

225,31490,060

Securities whose acquisition cost exceeds
their carrying value:
Listed corporate shares .............................................................

3,604

3,441

(163)

30,542

29,161(1,381)Government bonds ....................................................................

16

15

(1)

136

127

(9)

Corporate bonds ..........................................................................

59

59

—

500

500

—

3,679

3,515

(164)

31,17829,788(1,390)Total ......................................................................................................

¥19,639¥30,102¥10,463$166,432$255,102$88,670

Millions of yen

2006
Acquisition
cost

Carrying
value

Unrealized
gain (loss)

Listed corporate shares .............................................................

¥18,062¥32,328¥14,266

Government bonds ....................................................................

—

—

—

Securities whose carrying value exceeds
their acquisition cost:

Corporate bonds ..........................................................................

—

—

—

18,06232,32814,266

Listed corporate shares .............................................................

498

432

(66)

Government bonds ....................................................................

16

15

(1)

Securities whose acquisition cost exceeds
their carrying value:

Corporate bonds ..........................................................................
Total ......................................................................................................

26

FURUKAWA Annual Report 2007

—

—

—

514

447

(67)

¥18,576¥32,775¥14,199

Proceeds from sales of securities classified as other securities with aggregate gain and loss for the years ended March 31, 2007 and 2006 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

¥8

¥ 2,456$68

Aggregate gain ........................................................................................................................................................................

7

1,009

59

Aggregate loss .........................................................................................................................................................................

—

—

—

Sales proceeds ........................................................................................................................................................................

7. Short-Term Loans and Long-Term Debt
Short-term loans, most of which are unsecured, represented notes payable to banks, with the average interest rates of 1.3% and 1.6% as ofMarch 31, 2007 and 2006, respectively.
Long-term debt as of March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2007
0.37% yen notes due 2006 .............................................................................................................................................

¥

2007

2006
—

¥

1,000

$

—

2.21% yen notes due 2007 .............................................................................................................................................

4,100

4,100

34,746

0.65% yen notes due 2008 .............................................................................................................................................

500

500

4,237

Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2007 to 2022 .....................................................................................................

68,03976,105

576,60272,63981,705615,585

Current portion of long-term debt ...................................................................................................................................

(22,947)(21,510)(194,466)¥ 49,692¥ 60,195$ 421,119

The average interest rate applicable to the above loans amounting to ¥68,039 million ($576,602 thousand) was 1.9% as of March 31, 2007.
The aggregate annual maturities of long-term debt subsequent to March 31, 2007 were as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2008 ......................................................................................................................................................................................................................

¥22,947$194,466

2009 ......................................................................................................................................................................................................................

16,896

143,187

2010 ......................................................................................................................................................................................................................

13,398113,5422011 ......................................................................................................................................................................................................................

8,979

76,0932012 and thereafter ........................................................................................................................................................................................

10,41988,297¥72,639$615,585

FURUKAWA Annual Report 2007

27

The Company and certain consolidated subsidiaries have entered¥16,187 million ($137,178 thousand), respectively, as of March 31,

into overdraft and loan commitment agreements amounting to2007 and amounted to ¥12,819 million and ¥16,426 million, respec-¥29,939 million ($253,720 thousand) with 25 banks and ¥29,245

tively, as of March 31, 2006. In addition, the following lease obligations

million with 25 banks as of March 31, 2007 and 2006, respectively.

are included in “Other long-term liabilities” in the accompanying

The borrowings outstanding and the unused balances under these

consolidated balance sheets.

credit facilities amounted to ¥13,752 million ($116,542 thousand) andThousands of
U.S. dollars

Millions of yen

Non current portion ..............................................................................................................................................................

2007

2006

2007

¥6,424¥ 5,602$54,441

Assets pledged as collateral for payables, trade of ¥1,425 million

million and lease obligations (included in other long-term liabilities) of($12,076 thousand) and ¥1,296 million, short-term debt of ¥740

¥6,424 million ($54,441 thousand) and ¥5,602 million as of March 31,

million ($6,271 thousand) and ¥1,070 million, long-term debt (including

2007 and 2006, respectively, consisted of the following:

current portion) of ¥5,203 million ($44,093 thousand) and ¥7,494
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

Cash and cash equivalents ................................................................................................................................................

¥ 4,864¥ 1,048$ 41,220

Receivables, trade ..................................................................................................................................................................

85

92

720

Inventories ................................................................................................................................................................................

—

28

—

Other current assets .............................................................................................................................................................

254

3,699

2,153

Investments in securities .....................................................................................................................................................

2,445

3,411

20,720Property, plant and equipment, net ................................................................................................................................

20,696

20,165

175,390¥28,344¥28,443$240,203

The above assets include those of a foreign consolidated subsidiary

contracts and restricted deposits (partly time deposit and included inwhich are pledged as collateral for lease obligations. The foreignother current assets) with the aggregated carrying value of ¥3,930

consolidated subsidiary has discretionary powers to dispose of thesemillion ($33,305 thousand) and ¥3,463 million as of March 31, 2007

assets other than machinery and equipment leased under the leaseand 2006, respectively.

8. Depreciation and Amortization
Depreciation and amortization for the years ended March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

Property, plant and equipment .......................................................................................................................................

¥2,601¥ 2,569$22,042

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

25

26

212

¥2,626¥ 2,595$22,254

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, 2007
and 2006 amounted to ¥1,888 million ($16,000 thousand) and ¥1,859 million, respectively.

28

FURUKAWA Annual Report 2007

10. Leases
The Furukawa Group leases certain machinery and equipment under

depreciation and net carrying value for the machinery and equipment

non-cancellable finance lease agreements, of which ownership is all

and others held under the finance leases currently accounted for as

non-transferable.

operating leases as of March 31, 2007 and 2006 were as follows:

The pro forma amounts representing acquisition costs, accumulated
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007
$19,508

Acquisition costs .....................................................................................................................................................................

¥2,302¥ 1,552

Less accumulated depreciation ........................................................................................................................................

926

638

7,847

Net carrying value ..................................................................................................................................................................

¥1,376¥ 914$11,661

Lease payments relating to finance leases accounted for as operating

the straight-line method over the lease terms.

leases amounted to ¥294 million ($2,492 thousand) and ¥264 million

Future minimum lease payments including an interest element

for the years ended March 31, 2007 and 2006, respectively, which

under the finance leases outstanding as of March 31, 2007 and 2006

were equal to the depreciation expense of leased assets computed by

are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

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

¥ 357

¥ 253

$ 3,025

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

1,019

661

8,636

¥1,376¥ 914$11,661

The future minimum lease payments under lease agreements other than finance leases as of March 31, 2007 and 2006 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

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

¥ 781

¥ 785

$6,619Over one year .........................................................................................................................................................................

7

787

59

¥ 788

¥ 1,572$6,678

11. Derivative Financial Instruments
The Furukawa Group entered into swap agreements to manage interest

the derivative transactions are major financial institutions and trading

rate risks. Interest rate swaps convert floating rate of long-term debt tocompanies, the Furukawa Group believes that their derivative financial

a fixed basis. The Furukawa Group also entered into forward foreign

instruments entail minimal credit risks. Furthermore, the Furukawa

exchange contracts to hedge against transactions in foreign currencies.

Group does not use derivative financial instruments that would

For copper products, the Furukawa Group also entered into futures

increase market risks.

contracts to reduce the risks of fluctuations of commodity price.
There are market risks in these derivatives. As the counterparties to

As of March 31, 2007 and 2006, there is no derivative transaction
for which hedge accounting is not applied.

FURUKAWA Annual Report 200729

12. Retirement Benefits
The balances of the retirement benefit obligation and plan assets, funded status and the amounts recognized in the consolidated balance sheets asof March 31, 2007 and 2006 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

Retirement benefit obligation ............................................................................................................................................

¥(14,356)¥(14,353)$(121,661)

Plan assets at fair value .......................................................................................................................................................

16,011

19,477

135,686

Unfunded status .....................................................................................................................................................................

1,655

5,124

14,025

Unrecognized actuarial loss ...............................................................................................................................................

4,183

910

35,449Unrecognized prior service cost .......................................................................................................................................

107

81

907

Prepaid pension expenses .................................................................................................................................................

(7,083)(7,334)(60,025)

Accrued employees’ retirement benefits ......................................................................................................................

¥ (1,138)¥ (1,219)$(9,644)The components of retirement benefit expenses for the years ended March 31, 2007 and 2006 were as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007
$ 5,390

Service cost ..............................................................................................................................................................................

¥ 636

¥ 668

Interest cost .............................................................................................................................................................................

396

372

3,356

Expected return on plan assets .......................................................................................................................................

(224)

(182)

(1,898)

Amortization of prior service cost ....................................................................................................................................

9

8

76

Amortization of actuarial loss .............................................................................................................................................

290

749

2,457

Retirement benefit expenses ............................................................................................................................................

1,107

1,615

9,381

Employees’ contributions to the defined benefit pension plans .........................................................................

10

9

85

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

¥1,117¥ 1,624$ 9,466

The assumptions used in accounting for the above plans are as follows:
2007

2006

Discount rates .........................................................................................................................................................................

mainly 2.4%

mainly 2.4%

Expected return on plan assets ........................................................................................................................................

mainly 2.0%

mainly 2.0%

13. Income Taxes
The reconciliation between the statutory tax rate and the effective tax rate of the Furukawa Group for the year ended March 31, 2007 was summarized
as follows:30

Statutory tax rate ......................................................................................................................................................................................................................

40.7%

Non-deductible expenses for tax purposes ...................................................................................................................................................................

0.7

Non-taxable dividends and other income ......................................................................................................................................................................

(0.2)

Inhabitants per capita tax .....................................................................................................................................................................................................

0.7

Equity in earnings of affiliates .............................................................................................................................................................................................

(1.3)

Amortization of goodwill .......................................................................................................................................................................................................

(0.9)

Gain from forgiveness of debt by minority interests ..................................................................................................................................................

17.3

A devaluation loss of investment in subsidiaries and allowance for doubtful accounts ...............................................................................

(65.5)

Changes in valuation allowance ........................................................................................................................................................................................

(43.6)

Other ............................................................................................................................................................................................................................................

0.3

Effective tax rate .......................................................................................................................................................................................................................

(51.8)%FURUKAWA Annual Report 2007

The above information for 2006 has not been presented because the difference between the statutory tax rate and the effective tax rate was lessthan 5% of the statutory tax rate.
Deferred tax assets and liabilities as of March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2007

2007

2006

Deferred tax assets:
Allowance for doubtful accounts ................................................................................................................................

¥

312

¥

662

$

2,644

Accrued employees’ retirement benefits .................................................................................................................

4,767

4,528

40,398Investments in securities ...............................................................................................................................................

—

8,430

—
94,568Loss on impairment of fixed assets ...........................................................................................................................

11,15910,605

Unrealized gains on sales of property, plant and equipment ..........................................................................

434

612

3,678

Net operating loss carryforwards .................................................................................................................................

25,07815,249212,526

Land .......................................................................................................................................................................................

1,753

1,754

14,856

Accrued enterprise tax ....................................................................................................................................................

150

416

1,271

Other .....................................................................................................................................................................................

980

567

8,305

Total gross deferred tax assets ....................................................................................................................................

44,63342,823

378,246

Valuation allowance .........................................................................................................................................................

(28,985)(33,836)(245,636)

Total deferred tax assets ................................................................................................................................................

15,648

8,987

132,610

Net unrealized holding gain on securities ...............................................................................................................

(4,199)(5,772)(35,585)

Statutory reserves provided for tax purposes .........................................................................................................

(321)

(188)

(2,720)Gain from establishment of trust for retirement benefit plans ........................................................................

(4,327)(4,327)(36,669)

Land .......................................................................................................................................................................................

(9,225)(9,225)(78,178)

Capitalized interest of a foreign subsidiary ..............................................................................................................

(2,694)(2,760)(22,831)

Other .....................................................................................................................................................................................

(539)

(449)

(4,568)

Total deferred tax liabilities ............................................................................................................................................

(21,305)(22,721)(180,551)

Net deferred tax liabilities ..............................................................................................................................................

(5,657)(13,734)(47,941)

Deferred income taxes on surplus on the revaluation of land ........................................................................

¥ (3,157)¥ (3,184)$ (26,754)

Deferred tax liabilities:

14. Contingent Liabilities
Contingent liabilities as of March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

Notes receivable discounted and endorsed ................................................................................................................

¥3,679¥ 2,495$31,178

Loans guaranteed ..................................................................................................................................................................

1,376

1,721

11,661FURUKAWA Annual Report 200731

15. Other Income (Expenses)—Other, Net
Other Income (Expenses)—Other, net for the years ended March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2007

2006

108

¥ 150

Gain on foreign exchange ..................................................................................................................................................

205

448

1,737

Gain on sales of property, plant and equipment .......................................................................................................

20

178

169

Rental income from real estate ........................................................................................................................................

¥

2007
$

915

Gain on sales of investments in securities ...................................................................................................................

7

1,009

59

Gains on business transfer .................................................................................................................................................

50

—

424

Payments for closing mines ...............................................................................................................................................

(373)

(192)

(3,161)

Loss on impairment of fixed assets ................................................................................................................................

(29)

(302)

(246)

Loss on disposal and devaluation of inventories .......................................................................................................

(699)

(568)

(5,924)

Loss on copper smelting business in Australia ...........................................................................................................

(3,032)(464)(25,695)

Loss on disposal and sales of property, plant and equipment .............................................................................

(264)

(138)

(2,237)

Loss on reorganization of local businesses ..................................................................................................................

—

(536)

—

Payment related to antitrust laws ....................................................................................................................................

(4)

(280)

(34)

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

(439)

(39)

(3,719)¥(4,450)¥ (734)$(37,712)

16. Segment Information
The business of the Furukawa Group is divided into the following six categories: machinery, metals, electronic materials and chemicals, real estate,
fuels and others.
The business segment information of the Furukawa Group for the years ended March 31, 2007 and 2006 was as follows:Year ended March 31, 2007

Millions of yen

Machinery

MetalsElectronic
Materials andChemicals

Real Estate

Fuels

OthersEliminations
andCorporate

Consolidated¥ 200,749

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

¥ 67,796¥ 84,754¥ 15,902¥ 2,936¥ 28,206¥ 1,155—

Intersegment ................................................

786

527

164

114

363

1,388

¥ (3,342)—

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

68,58285,281

16,066

3,050

28,5692,543(3,342)200,749

Costs and expenses........................................

(62,680)(76,444)(13,978)

Operating income (loss)...............................

¥ 5,902¥ 8,837¥ 2,088¥(2,211)
839¥(28,683)(2,844)(114)¥ (301)

¥

2,990
(352)

(183,850)¥

16,899II. Assets, depreciation andcapital expenditures

32

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

¥ 72,206¥ 33,782¥ 28,049¥14,138¥ 7,084¥ 2,231¥59,537

Depreciation .................................................

1,135

218

783

292

25

59

114

2,626

Capital expenditures ..................................

2,333

159

753

318

8

23

311

3,905

FURUKAWA Annual Report 2007

¥ 217,027

Thousands of U.S. dollars

MetalsElectronic
Materials andChemicals

Real Estate

Fuels

Others

Outside customers..................................... $ 574,542$ 718,254$ 134,763$ 24,881$ 239,034$ 9,789—$ 1,701,263

6,661

4,466

1,390

966

3,076

11,763$ (28,322)—

Machinery

Eliminations
andCorporate

Consolidated

I. Sales and operating income (loss)
Intersegment ................................................
Total.................................................................

581,203722,720

136,153

25,847242,110

21,552(28,322)1,701,263

Costs and expenses........................................

(531,186)(647,830)(118,458)(18,737)(243,076)(24,103)

25,339(1,558,051)

Operating income (loss)............................... $50,017$74,890$17,695

$

7,110

$

$

(966) $ (2,551) $ (2,983) $143,212

II. Assets, depreciation andcapital expenditures
Total assets ................................................... $ 611,915$ 286,288$ 237,703$119,814

60,034$ 18,907$504,551$ 1,839,212

Depreciation .................................................

9,619

1,847

6,636

2,475

212

499

966

22,254

Capital expenditures ..................................

19,771

1,347

6,381

2,695

68

195

2,636

33,093Eliminations
andCorporate

Consolidated¥ 181,938

Year ended March 31, 2006

Millions of yen

Machinery

MetalsElectronic
Materials andChemicals¥ 70,329¥ 52,662¥ 21,228

Real Estate

Fuels

Others¥ 3,107¥ 33,589¥ 1,023—

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

766

554

181

46

367

1,353

¥ (3,267)—

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

71,09553,216

21,4093,153

33,956

2,376(3,267)

181,938

Costs and expenses........................................
Operating income (loss)...............................

(66,851)¥

4,244(47,437)¥

5,779(19,911)¥

1,498(2,248)¥(33,806)(2,595)

905

¥

150

¥ (219)

¥

3,040

¥

(227)

(169,808)¥

12,130

II. Assets, depreciation, impairment loss
on fixed assets andcapital expenditures
Total assets ...................................................

¥ 70,982¥ 26,913¥ 28,671¥14,277

7,744¥ 2,367¥62,092¥ 213,046

Depreciation .................................................

1,041

237

787

317

25

66

122

2,595

Impairment loss on fixed assets............

3

—

—

78

17

—

204

302

Capital expenditures ..................................

516

182

513

73

6

383

104

1,777

The geographic segment information for the years ended Marchdomestic consolidated subsidiaries and sales (other than exports to

31, 2007 and 2006 has not been presented, because the amounts

Japan) of the foreign consolidated subsidiaries, totaled ¥33,246 millionof operating revenues and total assets in Japan exceed 90% of($281,746 thousand) and ¥24,530 million or 16.6% and 13.5% ofconsolidated totals.

the consolidated net sales for the years ended March 31, 2007 andOverseas sales, which include exports of the Company and its

2006, respectively.

FURUKAWA Annual Report 200733

17. Subsequent Event
The following appropriations of retained earnings of the Company were approved at a shareholders’ meeting held on June 28, 2007:
Thousands of
U.S. dollars

Millions of yen

34

2007

2006

2007

Year-end cash dividends (¥3.00 = $0.025 per share).............................................................................................

¥1,213¥ 1,212$10,280

Transfer to legal reserve .......................................................................................................................................................

121

122

1,025

¥1,334¥ 1,334$11,305

FURUKAWA Annual Report 2007

Report of Independent Auditors
The Board of Directors
Furukawa Co., Ltd.

We have audited the accompanying consolidated balance sheets of Furukawa Co., Ltd. and consolidated subsidiaries as of March 31,
2007 and 2006, and the related consolidated statements of income and cash flows for the years then ended, changes in the net
assets for the year ended March 31, 2007 and shareholders’ equity for the year ended March 31, 2006, all expressed in yen. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Furukawa Co., Ltd. and consolidated subsidiaries as of March 31, 2007 and 2006, and the consolidated results of their operations
and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2007 arepresented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made on the basis described in Note 4.

June 28, 2007

FURUKAWA Annual Report 2007

35

PRINCIPAL SUBSIDIARIES AND AFFILIATES

Company Name

Principal Business

Paid-in Capital

Furukawa Industrial Machinery Systems Co., Ltd.

Sales and manufacture of machinery

JPY 300 million

Furukawa Rock Drill Co., Ltd.

Sales and manufacture of rock drills

JPY 400 million

Furukawa UNIC Corporation

Sales and manufacture of UNIC products

JPY 200 million

Furukawa Metals & Resources Co., Ltd.

Copper smelting

JPY 100 million

Furukawa Denshi Co., Ltd.

Sales and manufacture of electronic materials

JPY 300 million

Furukawa Chemicals Co., Ltd.

Sales and manufacture of chemical products

JPY 300 million

Furukawa Transportation Co., Ltd.

Transportation

JPY 150 million

Furukawa Otsuka Co., Ltd.

Sales and manufacture of crushers

JPY 140 million

Oita Mining Co., Ltd.

Mining and sales of limestone

JPY 125 million

Ashio Smelting Co., Ltd.

Copper smelting and industrial waste treatment

JPY 100 million

Subsidiaries

Furukawa Commerce Co., Ltd.

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

JPY 95 million

Furukawa Castec Co., Ltd.

Sales and manufacture of castings and industrial machines

JPY 50 million

Tsubame Industrial Community Limited

Manufacture of machine tools and industrial machinery

JPY 40 million

Construction Co., Ltd.

Construction and installation of various types of plants

JPY 30 million

Gunma Kankyo Recycle Center Co., Ltd.

Industrial medical waste treatment

JPY 400 million

Ashio Construction Co., Ltd.

Civil engineering and construction

JPY 30 million

Furukawa Plant Engineering and

UNIC Kanto Sales Co., Ltd.

Sales of UNIC cranes

JPY 30 million

UNIC Kyushu Sales Co., Ltd.

Sales of UNIC cranes

JPY 30 million

UNIC Tohoku Sales Co., Ltd.

Sales of UNIC cranes

JPY 16 million

Ashio Rock Drill Co., Ltd.

Manufacture and repair of rock drills and industrial machinery

JPY 100 million

Iwaki Kosan Co., Ltd.

Administration of real estate

JPY 10 million

Dojima Jitsugyo Co., Ltd.

Maintenance of buildings

JPY 10 million

Wellness Co., Ltd.

Sales of health-care products

JPY 10 million

Furukawa Rock Drill Korea Co., Ltd.

Sales of rock drills machinery

KRW 300 million

Furukawa Rock Drill (Shanghai) Co., Ltd.

Sales and manufacture of hydraulic breakers

JPY 50 million

Port Kembla Copper Pty. Ltd. (Australia)

Copper smelting (Operations currently suspended)

AUD 369.5 million

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

Manufacture of UNIC cranes, parts, and accessories

THB 200 million

Furukawa Rock Drill Europe B.V. (The Netherlands)

Sales of breakers and crawler drills

EUR 0.9 million

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

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

USD 59.5 million

Taian Furukawa Machinery Co., Ltd.

Sales of UNIC cranes

USD 4.9 million

Tohpe Corporation

Production of paints

JPY 2,087 million

Iwaki Semiconductors Co., Ltd.

Production of semiconductors, such as gallium arsenate semiconductors JPY 60 million

Hibi Kyodo Smelting Co., Ltd.

Copper smelting

Affiliates

36

FURUKAWA Annual Report 2007

JPY 4,700 million

CORPORATE DATA
(As of March 31, 2007)

Directors and Auditors (As of June 28, 2007)
Chairman and Representative Director Tetsuo Yoshino
President and Representative Director Nobuyoshi Soma

Company Name: Furukawa Co., Ltd.
Head Office: 2-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo
100-8370, Japan

Senior Managing Director

Nakao Yamashita

Managing Director

Yasuhei Konagaya

Managing Director

Hiroyuki Shiaku

Managing Director

Yoichiro Kato

Director

Junnosuke Furukawa

Director

Manabu Zama

Director

Yoshihito Emoto

Number of Shares Authorized: 800,000,000 shares

Statutory Auditor

Ryoji Ohnuma

Number of Shares Outstanding: 404,455,680 shares

Statutory Auditor

Masafumi Miyata

AuditorFuminori Anai

AuditorTamiki Ishihara

TEL: +81-3-3212-6570 FAX: +81-3-3212-6578
Date of Foundation: August 1875
Date of Establishment: April 1918

Stock Exchange Listing: Tokyo, Osaka
Securities Code Number: 5715
Employees: Consolidated 2,279; Non-consolidated 206

Executive Officers (As of June 28, 2007)

Stock Transfer Agent: The Chuo Mitsui Trust and Banking
Company, Limited
33-1, Shiba 3-chome, Minato-ku, Tokyo
105-8574, Japan

Senior Managing Executive Officer

Nakao Yamashita

Managing Executive Officer

Yasuhei Konagaya

Managing Executive Officer

Hiroyuki Shiaku

Managing Executive Officer

Yoichiro Kato

Senior Executive Officer

Manabu Zama

Senior Executive Officer

Yoshihito Emoto

Senior Executive Officer

Susumu Nakamura

Executive Officer

Taketsugu Saitsu

Executive Officer

Toshikazu Nakagawa

Executive Officer

Toshio Matsumoto

Executive Officer

Yasuji Tomiyama

Executive Officer

Makoto Iwasaki

Executive Officer

Akira Usui

Foreign Institutions

Executive Officer

Naohisa Miyakawa

6.80%

Executive Officer

Fumio Kato

Executive Officer

Masaya KouzakiComposition of Shareholders:
Other JapaneseCompanies

Financial Institutions

22.88%

25.82%

Securities
Companies

6.17%

38.33%
Individuals and Others

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

FURUKAWA Annual Report 200737

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

Printed in Japan on recycled paper.