Printed in Japan

表4

表1

C M Y K

H2-H3̲10月3日修正 03.10.21 4:30 PM ページ 表2

PROFILE
During the more than 125 years since its establishment in 1875, Furukawa Co., Ltd. has achieved steady growth inits business. While developing and expanding its business, the Company has spawned a number of companies,
such as The Furukawa Electric Co., Ltd. and Fuji Electric Co., Ltd. Today, Furukawa’s principal businesses include
the manufacture and sale of industrial machinery, electronic materials, chemicals, fuel sales, electric power
generation, and the smelting and refining of nonferrous metals. In response to the dramatic changes in theeconomic environment, the Company is working to ensure its prosperity in the 21st century by continuing topromote reforms of its corporate structure and developing new technologies based on the management principles
of innovation, creativity, and harmony. With an eye toward the future, Furukawa aims to be a company that offers
products and services that appeal to customers, and to contribute to the creation of a prosperous society that is inharmony with the environment.

Consolidated Financial Highlights
For the years ended 31st March, 2003, 2002, and 2001

Net sales

2003

Millions of yen
2002

2001

Thousands of
U.S. dollars
2003

Per cent.
change’03/’02¥151,630¥149,436¥144,333$1,263,583

1.5%

Operating income (loss)(1,591)(4,678)5,023(139,266)—

Income (loss) before income taxes and minority interests(22,032)(27,962)(5,760)(183,600)—

Net income (loss)(17,000)(18,696)(4,191)(141,667)

—

Basic

¥(67.88)¥(74.56)¥(16.71)$(0.57)—

Diluted

—

—

—

—

—

Cash dividends

—

—

3.00

—

—

¥252,856¥278,174¥294,020$2,107,133

33,66549,791

61,491

280,542Per share amounts (yen and U.S. dollars):
Net income (loss):

Total assets
Shareholders’ equity(9.1)%(32.4)

Note: U.S. dollar amounts are translated from yen for convenience only at the rate of ¥120=$1.

CONTENTS
1

To Our Shareholders

14

Consolidated Statements of Operations

2

At a Glance

15

Consolidated Statements of Shareholders’ Equity

4

Divisional Highlights

16

Consolidated Statements of Cash Flows6

Reform, Strategy and Outlook

18

Notes to Consolidated Financial Statements

9

Financial Section

31

Report of Independent Auditors

9

Consolidated Five-Year Financial Summary

32 Principal Subsidiaries and Affiliates

10

Consolidated Financial Review

33 Board of Directors and Auditors

12

Consolidated Balance Sheets

33 Corporate Data

Forward-Looking Statements: This annual report contains forward-looking statements such as the plans, strategies and statements related to the 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 from those projected.

古河機械金属AR03̲10月6日修正 03.10.21 4:18 PM ページ 1

2003 ANNUAL REPORTTo Our Shareholders

During fiscal 2003, ended 31st March, 2003, conditions in the Japanese economy remained
difficult, characterized by weak consumer spending and private sector capital investment,a slump in exports from a deceleration in the U.S. economy and the stronger yen, and a plungein the stock market. To respond to this exceedingly harsh economic environment, theFurukawa Group made every effort to rebuild its business foundation by aiming to strengthen its marketing structure, increase management efficiency, reduce costs including personnel
expenses, and promote the development of new products.
In the mainstay Machinery Division, sales of environment-related operations increased,and exports of rock drills were favorable. Although replacement demand emerged in the second half of fiscal 2003 for UNIC cranes due to stricter exhaust gas regulations for trucks, sales
declined during the fiscal year under review, owing to a fall in sales in the first half. Moreover,sales were adversely affected by the liquidation of a construction machinery subsidiary inEurope. Overall, sales in the Machinery Division declined substantially. The Electronic
Materials and Chemicals Division recorded an increase in sales due to 100% capacity utilization on the back of robust demand for gallium phosphorus polycrystals and other crystal
products. In the Metals Division, sales grew due to higher shipments of electrolytic copper

TETSUO YOSHINO,

at our copper smelting subsidiary in Australia. The Fuels and Others Division posted an

President and Representative Director

increase in sales due to higher prices and the development of new customers.
As a result of the aforementioned operations, consolidated net sales increased ¥2,194
million to ¥151,630 million. Furukawa posted an operating loss of ¥1,591 million, an improvement of ¥3,087 million from the previous fiscal year, owing to the withdrawal from unprofitablebusinesses and other cost reduction effects. The Company recorded an extraordinary lossof ¥16,838 million from write-down of investments in securities due to the drop in stock market prices. Therefore, after the application of tax-effect accounting, Furukawa posted a net
loss of ¥17,000 million, an improvement of ¥1,696 million from the previous fiscal year.
Net loss per share amounted to ¥67.88, compared with a net loss per share of ¥74.56
in the previous fiscal year. The Company regrets that it will be obliged to forgo the paymentof cash dividends.
Despite these results in fiscal 2003, we will work together to implement four specific measures aimed at increasing Furukawa’s corporate value, ensuring the satisfaction andhappiness of customers, shareholders, and employees, and becoming a company that contributes to the creation of a prosperous society that functions in total harmony with theenvironment. Specifically, Furukawa will 1) expand its offerings of innovative high-value-added
products and services; 2) raise the percentage of sales accounted for by new products andnew businesses by promoting the development of such products and businesses; 3) significantly reduce the costs of existing products through such measures as shortening leadtimes and enhancing technological capabilities; and 4) scale down or cease unprofitable operations and promote tie-ups with other companies.

Furukawa Co., Ltd. - 1

古河機械金属AR03̲10月6日修正 03.10.21 4:18 PM ページ 2

2003 ANNUAL REPORTAt a Glance

39.4%

Machinery

The Machinery Division manufactures and sells a wide range of products,

including products that preserve and improve the environment, such as high-Sales of Machinery (Billions of Yen)
80

performance systems for the treatment of gas pollutants, and sewage treatment
65.5

facilities for rural communities that play a role in preserving and enhancing theenvironment. The division also manufactures and sells such industrial machin-

65.8

65.6

63.8
59.7

60

ery as pumps and stone crushers, as well as steel bridges, multistory parking
systems, and foundry products. Products of this division also include rock drills,
including hydraulic rock breakers and crawler drills, for which Furukawa holds

40

the top market share in Japan. In addition, the division manufactures andsells such civil-engineering and construction-use products as construction
machinery and truck-mounted cranes. The division handles remote data

20

inspection systems for facilities that integrate IT, which contributes to an
improvement in work efficiency and labor-saving operations.
0
1999

2000

2001

Sales of Metals (Billions of Yen)
48.2

50

40

37.1

49.9

38.2

32.9%

35.8

Metals30

Furukawa imports copper ore into Japan, where it is smelted at the facilities

of affiliated companies that produce copper, gold, silver, and sulfuric acid for20

sale to the Company. Overseas, Furukawa also smelts copper in Australia,
which offers strong advantages in terms of resource supply and sales. To
10ensure stable supplies of copper ore, we are also engaged in overseas minedevelopment projects.

0
1999

2000

2001

2002

2003

2 - Furukawa Co., Ltd.

2002

2003

古河機械金属AR03̲10月6日修正 03.10.21 4:19 PM ページ 3

2003 ANNUAL REPORTAt a Glance
Sales of Electronic Materials andChemicals (Billions of Yen)
20

16.0

Electronic Materials and Chemicals

15.7
14.5

14.4

15

9.6%

The Electronic Materials and Chemicals Division manufactures and sells products forelectronics-related sectors. These products include high-purity metallic arsenic, for which

12.2

the Company holds the top share of the world market, as well as functional materials
for displays, noise filters, and electrolytic aluminum capacitor foil. This division also man-10

ufactures and sells such chemical products as titanium dioxide, cuprous oxide, andfunctional materials for photocatalysts. In addition, this division is working to develop
5high-value-added products, and these efforts include beginning the manufacture andsale of such semiconductor manufacturing equipment as metal-organic chemical
vapor deposition (MOCVD) systems.

0
1999

2000

2001

2002

2003

Real Estate

2.9%

The Real Estate Division focuses its operations on therental of office buildings in Tokyo, Osaka, and Fukuoka,

Sales of Real Estate (Billions of Yen)
6and secures stable profits that contribute to Furukawa’s

5.1

5.3

5.2

5

business results.

4.6

4.4

4

3

2

1

0
1999

2000

2001

2002

2003

Sales of Fuels and Others (Billions of Yen)
25

23.0

Fuels and Others

20.6
19.7

20

15.2%

The Fuels and Others Division engages

mainly in the purchase and sales of petro-

15.1
15

leum products, petrochemicals, liquefied
11.5

petroleum gas (LPG), coke, and aggregate. The division also engages in freight10

services and trading as well as e-businessand other services.

5

0
1999

2000

2001

2002

2003

Furukawa Co., Ltd. - 3

古河機械金属AR03̲10月6日修正 03.10.21 4:19 PM ページ 42003 ANNUAL REPORTDivisional Highlights

Machinery
The Machinery Division posted consolidated sales of ¥59,699 million, down 6.4% from the previous fiscal year, due in part to the liquidation of a construction machinery subsidiary inEurope. This division recorded operating income of ¥1,353 million, an improvement of ¥2,822
million from an operating loss in the previous fiscal year, owing to withdrawal from unprofitablebusinesses and cost reductions.
Regarding industrial machinery, in environment-related products, sales increased considerably, reflecting stronger marketing efforts, with higher demand for high-performance dioxinremoval equipment and pumps for agricultural irrigation facilities and wastewater processing
plants. Despite tougher competition, sales of steel bridges grew, and shipments of multistory
parking systems were favorable. Shipments of foundry products declined, however, as the production switch to high-value-added products fell behind expectations.
In such development machinery as rock drill and construction machinery, business con-

Drainage Water Treatment Facilities
for Agricultural Communities
Drainage water treatment facilities for
agricultural communities process drainage
water and ensure water quality,
contributing substantially to theimprovement of living conditions in ruralcommunities.

ditions were severe due to cuts in public spending and a fall in private-sector capital investment in Japan. However, exports of hydraulic rock breakers and hydraulic crawler drills
increased to the Middle East, North America, China and Southeast Asia. To continue aggressive efforts to expand overseas rock drill operations, we signed anagreement with Sandvik Coromant in Sweden, which has a strong
sales network around the world.
Although replacement demand emerged in the second half offiscal 2003, shipments of UNIC cranes declined in the first half due
to a delay in the application of new and stricter exhaust gas regulations for trucks, which restrained users from making new purchases, and reveue decreased.

Hydraulic Rock Breaker
and Crawler Drill
Furukawa is the sole rock drill
manufacturer in Japan, and boasts
a number one market share under
its brand name in Japan. The
Company has worked to expand
sales in Asia, the Middle East, theUnited States and Europe. To further
develop overseas operations, Furukawa
formed a business alliance with Sandvik
Coromant of Sweden.

MetalsSales amounted to ¥49,932 million, up 3.6% from the previous fiscal year. The division’s operating loss widened ¥700 million to ¥6,012 million.
Overseas prices for electrolytic copper edged up slightly, although still low, due to
expectations for an increase in demand in Asia. As a result, the average quoted price for copper per metric ton during the year rose ¥1,000 to ¥234,000. The mining ore market remains
in a tight supply/demand balance, creating unfavorable charges for treatment and refining ofcopper concentrates. As a result, profits in smelting operations deteriorated. Sales of electrolytic
copper rose from the previous fiscal year, as an increase in sales from Port Kembla Copper
Pty. Ltd. in Australia compensated for a decline in domestic sales.
Port Kembla Copper improved operating capacity after periodic maintenance was conducted in August and September 2002, but has yet to achieve full capacity utilization.
Compounded by worsened charges for treatment and refining of copper concentrates, the company recorded considerable losses.

4 - Furukawa Co., Ltd.

古河機械金属AR03̲10月6日修正 03.10.21 4:19 PM ページ 5

2003 ANNUAL REPORTDivisional Highlights

Electronic Materials and Chemicals
Sales in the Electronic Materials and Chemicals Division rose 18.9% from the previous fiscal
year, to ¥14,515 million. Operating income increased ¥956 million to ¥1,322 million.
There was a turnaround in demand for high-purity metallic arsenic, but the recovery
was weak, leading to flat growth in shipments. Market prices rebounded sharply for gallium
phosphorous polycrystals and electrolytic aluminum capacitor foil, and demand remained high—our plants continue to operate at maximum capacity. Furukawa began to increase facility capacity in response to increasing demand for crystal products. Shipments of titanium dioxide, sulfuric
acid and polymer iron inorganic aggregation materials declined because of slumping market
prices and intense competition.

Gallium Phosphorous Polycrystals
Gallium phosphate, a type of chemical
semiconductor used in light-emitting
diodes, is expected to be in great demandin the future.

Real Estate
Sales of the Real Estate Division decreased 4.2% to ¥4,437 million, and operating income
increased ¥42 million from the previous period to ¥1,943 million.
In the market for the rental of office buildings—the core of our real estate business—vacancy
rates increased, causing downward pressure on rents for existing buildings, due to theadverse effects of a large supply of new office buildings on the market and cutbacks in officesize due to corporate restructuring. Under these conditions, the Company focused efforts on
acquiring new tenants, maintaining rent levels and reducing expenses.

Fuels and Others
Sales increased 12.0% to ¥23,047 million. An operating loss of ¥188 million was recorded, virtually unchanged from the previous fiscal year.
In the fuels business, crude oil prices were rising due to reduced production in oil-producing
nations in the first half of the fiscal year under review. In the second half, crude oil prices rose
further due to the Iraq war, leading to an increase in fuel prices in Japan. Under these circumstances, we worked to pass on higher supply costs to sales prices, and to develop new
customers.

Furukawa Co., Ltd. - 5

古河機械金属AR03̲10月6日修正 03.10.21 4:19 PM ページ 6

2003 ANNUAL REPORT

Reform, Strategy and Outlook

Business Reform and Growth Strategy
Demand is waning in Japan due to declines in both public- and private-sector capital investment. In response, the Machinery Division is concentrating management resources on operations that support the provision of solutions in line with customer needs for water treatment
facilities. In rock drills, the Company aims to increase production efficiency at its manufacturingbases and streamline and integrate the sales and service operations of two subsidiaries. In
foundry products, in which profitability is declining due to competition with imports, we are looking to increase efficiency through spin-offs, and at the same time are pursuing synergies bystrengthening the connection between production and marketing of Otsuka Iron Works, Ltd.,
which became a subsidiary through a capital tie-up.

Drill Jumbo

Amid high expectations for market growth in East Asia, especially China, we aim to
expand sales in UNIC and rock drill operations, leveraging our brand name and making useof optimal production locations to keep costs down through alliances with other companies.
Further, in South Korea we plan to bolster sales of rock drills through the establishment of a
new sales company.
In the Electronic Materials and Chemicals Division, we are filling out our product lineup
through the manufacture and sale of semiconductor crystal formation equipment, as well as
the development and sale of new products for new electrical materials using such equipment.
Through these efforts, we aim to build the business into an earnings pillar based on operations
in high-value-added electrical materials. At our Osaka Plant, where we produce titanium

Furukawa received orders from China for 8 new
two-boom and three-boom all-hydraulic wheeltype drill jumbos. These machines are the largest
in the world and are able to drill large-diametertunnels in one sweep. They are to be used in
the construction of a dam on the Mekong river in
Yunnan Province.
The drill jumbo can be effectively used for awide variety of applications, including tunnel
construction for high-specification roads that
require large-diameter excavation, undergroundaccumulation tanks and other projects for theconstruction of large-scale underground spaces.
We expect significant demand in the future forlarge-scale civil engineering projects in overseas
markets, including the expanding Chinese market.

oxide, we aim to improve profitability by accelerating the move to electrical material products
and halting production of titanium oxide.
Furukawa is implementing measures to reduce overall personnel expenses. These measures
include personnel cuts through business streamlining and the integration of marketing bases,
introducing an early retirement program for employees over the age of 57, and enlarging thepercentage of cuts to annual salaries of management and other professionals in 2003.
To slim down total assets, the Company is proceeding with the sale of securities and idle realestate. In the Real Estate Division, on 1st August, 2003, we absorbed subsidiary Furukawa Real
Estate Co., Ltd. in an aim to bolster Group management and rationalize peripheral divisions.

Geopus Cone Crusher Made by Otsuka Iron Works, Ltd.

UNIC Crane U-CAN

Crusher machinery manufacturer Otsuka Iron Works, Ltd. became aconsolidated subsidiary in March 2003. The company handles conecrushers, jaw crushers, hammer crushers and other crushingmachinery, as well as such pulverizing machinery as briquetting
machines. We aim to expand the business under a division-of-laborstructure and generate synergistic effects in technological exchange
and marketing through a stronger relationship with the Company’s
industrial machinery division.

Furukawa has developed the U-CAN System, acomputer-controlled radio remote control system,
and began marketing the U-CAN Series of UNIC
cranes with the system as standard equipment.
The crane offers substantial improvements inefficiency and labor savings in crane operations,
thanks to its superior operability and reliability.
We plan to quickly promote businessdevelopment in China in addition to Japan.

6 - Furukawa Co., Ltd.

古河機械金属AR03̲10月6日修正 03.10.21 4:19 PM ページ 7

2003 ANNUAL REPORT

Reform, Strategy and Outlook

Metal-Organic Chemical
Vapor Deposition Equipment
Furukawa
establishedtheSemiconductor Equipment Business
Department and began selling metalorganic chemical vapor deposition
equipment (MOCVD) for growing
chemical semiconductor crystals.

Sapphire Substrates
The main application for sapphire
substrates is white and blue LEDs.
Sapphire substrates are used as lightsources in instrumentation panels forcars, backlights for LCD panels incellular phones, and otherapplications. Compared withconventional lighting sources, whiteand blue LEDs have a longer lifespanand lower power consumption. Basedon these benefits, they may someday
replace fluorescent lights, backlightsources, and white lightbulbs.

Port Kembla Copper Pty. Ltd. (PKC), our copper smelting and refining subsidiary in New South
Wales in Australia, has been posting substantial losses due to a slump in copper prices andunstable operations since it began trial operations in February 2000. Furukawa holds a71.44% interest in PKC, which is capitalized at A$369.5 million.
The operating environment in the copper smelting and refining industry has never been
worse. Copper prices and charges for treatment and refining of copper concentrates continue
to deteriorate. Despite some signs of a recovery in copper prices, there are no expectations
for a meaningful increase owing to lackluster conditions in the IT market and a delayed
recovery in the global economy. Meanwhile, charges for treatment and refining of copper concentrates have deteriorated over the past several years, falling to a historical low. Future charges
are expected to remain under severe conditions owing to a soft supply-demand balance.
On the operations side, the PKC plant was upgraded to a capacity of 120,000 tons after
idle facilities were purchased and improved with some fine-tuning. However, after thesefacilities were put into operation PKC encountered some problems with older equipment, resulting in a considerable delay in increasing operational capacity. A major overhaul last year put
PKC back on the right track, but more time and investment is needed to sustain a high rateof capacity utilization.
Under these circumstances, Furukawa continues to search for new investors in PKC in order
to lighten its investment burden and losses. The principal shareholders of PKC have all
agreed that the best step to take at this time is to halt operations at PKC, enter a repair andmaintenance phase, and keep a close eye on market conditions.
The Company is also advancing other business reforms including a review of unprofitable operations, the reinforcement of existing operations and entering new businesses.

Furukawa Co., Ltd. - 7

古河機械金属AR03̲10月6日修正 03.10.21 4:19 PM ページ 82003 ANNUAL REPORT

Reform, Strategy and Outlook

Outlook for Fiscal 2004
The Machinery Division is concentrating management resources in environment-related
operations despite expectations for poor conditions to continue for demand inJapan. We expect to see the emergence of truck replacement demand related toexhaust gas regulations for our UNIC products throughout fiscal 2004. The Company
will continue to focus efforts on the development of overseas markets for its machinery products.
In the Metals Division, Furukawa expects soft prices for electrolytic copper andpoor conditions for buyers of mining ore to continue.
In the Electronic Materials and Chemicals Division, the Company expects favorable performance to continue for polycrystal products, and scant prospects for a fullscale recovery in demand for high-purity metallic arsenic.
Furukawa expects to record a consolidated extraordinary loss of ¥39.3 billion inline with the halt of operations at PKC. As this will adversely affect the shareholders’equity portion of the balance sheet, Furukawa plans to refortify its financial position
and raise capital through several measures. First, the Company aims to increase shareholders’ equity (approximately ¥14 billion and ¥9 billion on a non-consolidated andconsolidated basis, respectively) in a merger with Furukawa Real Estate Co., Ltd.
Second, the Company plans to spin off its power generation business into a subsidiaryand sell all its shareholdings to The Furukawa Electric Co., Ltd. for ¥6.8 billion.
Moreover, Furukawa is examining the feasibility of raising capital to reinforce shareholders’ equity during fiscal 2004.
For the 2004 fiscal year, ending 31st March, 2004, Furukawa forecasts consolidated net sales of ¥153,000 million, operating income of ¥2,000 million, and a net
loss of ¥29,000 million yen.

September 2003

Tetsuo Yoshino
President and Representative Director

8 - Furukawa Co., Ltd.

2003 ANNUAL REPORT

Financial Section

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

2003

Net sales

2002

2001

2000

1999

¥151,630 ¥149,436 ¥144,333 ¥138,146 ¥133,897

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

2,811(4,223)Per share amounts (yen):
Net income (loss):
Basic¥ (67.88) ¥ (74.56) ¥ (16.71) ¥Diluted11.21 ¥ (16.84)

—

—

—

10.26

—

Cash dividends

—

—

3.00

3.00

3.00

Net assets

134

199

245

229

229

Current assets¥ 79,552 ¥ 87,081 ¥109,335 ¥143,329 ¥133,561

Current liabilities

94,056100,298

98,15574,61375,137

Total assets

252,856

278,174

294,020

255,779

241,154

Shareholders’ equity

33,66549,791

61,491

57,35457,536Return on equity (%)(40.7)(33.6)

(7.1)

4.9

(6.8)

Net Sales

Net Income (Loss)

Shareholders’ Equity

Billions of yen

Billions of yen

Billions of yen

Return on Equity
%

180

3

80

16

135

0

60

8

90

–3

40

0

45

–6

20

–8

0

–20

’99 ’00 ’01 ’02 ’03

0’99 ’00 ’01 ’02 ’03

Furukawa Co., Ltd. - 9-45’99 ’00 ’01 ’02 ’03

’99

’00

’01

’02

’03

2003 ANNUAL REPORT

Financial Section

Consolidated Financial Review
Net Sales

operating income to ¥2,749 million, an increase of ¥2,733

In fiscal 2003, ended 31st March, 2003, consolidated net

million from the previous fiscal year. However, consolidated

sales amounted to ¥151,630 million, an increase of ¥2,194

operating losses continued for the second consecutive fiscal

million compared with the previous fiscal year.

year on account of maintenance costs at Port Kembla Cop-

By segment, sales in the Machinery Division declined

per, which has yet to reach full capacity, and burgeoning¥4,136 million to ¥59,699 million, owing to slack demand

personnel expenses compounded by the effect of more ad-for UNIC cranes in the first half of the term and the impact

verse circumstances charges for the treatment and refiningof dissolving a construction machinery subsidiary. How-of copper concentrates.

ever, sales in the environment-related business grew as a

In other income and expenses, interest expense de-result of efforts in new businesses, and favorable exports

clined ¥931 million to ¥3,298 million. In other expenses,

of rock drills. Replacement demand for UNIC cranes be-

the Company recorded a gain on foreign exchange of

gan to emerge in the second half of the term due to stricter¥3,022 million, mainly related to loans to Port Kembla

exhaust gas regulations for trucks. In the Electronic Materi-

Copper, but posted a write-down of investments in securi-

als and Chemicals Division, sales expanded ¥2,308 million

ties of ¥16,838 million due to a drop in share prices. As ato ¥14,515 million, reflecting robust demand for gallium

result, net loss was ¥17,000 million.

phosphorous polycrystals. In the Metal Division, sales rose

Financial Position¥1,742 million to ¥49,932 million, owing to higher shipments of electrolytic copper at an Australian copper-smelt-

As of 31st March, 2003, total assets stood at ¥252,856

ing subsidiary. In Fuels, efforts to develop new customers

million, a decline of ¥25,318 million from a year earlier. The

and higher prices resulted in a sales increase of ¥2,572

decline was due mainly to a reduction in inventories and amillion to ¥22,245 million.

drop in the current value of investments in securities.
Total current assets decreased ¥7,529 million to

Income¥79,552 million. Cash was allocated for the redemption of

In fiscal 2003, Furukawa recorded an operating loss ofbonds, and as a result cash and cash equivalents fell

¥1,591 million, a contraction of ¥3,087 million from the pre-¥5,663 million to ¥11,817 million. Notes and accounts re-vious fiscal year. The Company focused efforts on with-ceivable increased ¥2,031 million to ¥32,822 million in line

drawing from unprofitable businesses and cutting personnel

with growth in net sales. Inventories decreased ¥4,736 mil-expenses, resulting in a sharp rebound in non-consolidated

lion to ¥24,873 million due to measures to reduce inventories of copper ore and machinery.

Operating Income (Loss)

Return on Sales

Billions of yen%

Total Assets
Billions of yen

7.5

5.0

300

5.0

0

225

2.5

-5.0

150

0

-10.0

075

–15.0

-5.0

’99 ’00 ’01 ’02 ’03

000’99 ’00 ’01 ’02 ’03

10 - Furukawa Co., Ltd.

’99 ’00 ’01 ’02 ’03

2003 ANNUAL REPORT

Financial Section

capital expenditures for stabilizing operations at Port

Total investments dropped ¥14,543 million to ¥42,906
million, owing mainly to a decrease of ¥16,486 million in in-

Kembla Copper in Australia. In the Electronic Materials andvestments in securities on the write-down and loss on theChemicals Division, the Company earmarked ¥701 million

sale of investments in securities stemming from substantial

for improving productivity. In the Real Estate Division,

declines in stock prices.

maintenance of office buildings for lease required ¥838 million. Depreciation totaled ¥6,261 million.

Property, plant and equipment amounted to ¥130,398
million, a decline of ¥3,246 million from a year earlier. Land

Cash Flows

decreased ¥1,762 million to ¥60,614 million due to thesale of certain land.

During fiscal 2003, net cash used in operating activities

Total liabilities stood at ¥209,219 million, down ¥8,443

was ¥2,153 million, compared with net cash provided bymillion from the end of the previous fiscal year. Total current

operating activities of ¥4,269 million in the previous fiscal

liabilities decreased ¥6,242 million to ¥94,056 million, andyear. The primary factors were an increase in receivables,

the current ratio was 84.6%, a decline of 2.2 percentage

trade and a decrease in payables, trade.

points compared with the previous term. Total long-term li-

Net cash used in investing activities amounted toabilities decreased ¥2,201 million to ¥115,163 million.

¥4,538 million, compared with ¥7,967 million a year earlier.

Total shareholders’ equity contracted ¥16,126 million

The primary uses of cash were for purchases of invest-

to ¥33,665 million. This was mainly due to a deficit ofments in securities and purchases of property, plant and¥18,651 million resulting from the net loss of ¥17,000 mil-equipment, mainly for expanding facilities in the Electronic

lion. As a result, the shareholders’ equity ratio declined 4.6

Materials and Chemicals Division and acquiring research

percentage points to 13.3%. Shareholders’ equity per

and development equipment.

share was ¥134.23, a decline of ¥64.35 compared withNet cash provided by financing activities totaled ¥1,108

the previous fiscal year.

million, compared with net cash used in financing activities of¥12,191 million in the previous term. A net increase in long-

Capital Expenditures

term loans offset the repayment of short-term bank loans.
As a result, cash and cash equivalents at end of year

During fiscal 2003, capital expenditures totaled ¥5,814 million. In the Machinery Division, the Company invested

totaled ¥11,817 million, a decrease of ¥5,663 million from¥705 million to increase production efficiency. In the Metal

the end of the previous fiscal year.

Division, Furukawa allocated most of the ¥3,346 million in

Net Assets per ShareNet Income per Share

Yen

Yen

Capital Expenditures
Billions of yen

300

15

20

225

10

15

150

5

10

75

0

5

–80

0

’99 ’00 ’01 ’02 ’03

0’99 ’00 ’01 ’02 ’03

Furukawa Co., Ltd. - 11

’99 ’00 ’01 ’02 ’03

2003 ANNUAL REPORT

Financial Section

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
31st March, 2003 and 2002

Millions of yen

ASSETS

2003

Current Assets:
Cash and cash equivalents (Notes 6 and 14)
Receivables, trade (Notes 6 and 16):
Notes and accounts
Affiliates
Inventories (Notes 4 and 6)
Deferred income taxes (Note 11)
Other current assets (Note 6)
Allowance for doubtful accounts

Investments:
Investments in securities (Notes 5 and 6)
Investments in affiliates
Deferred income taxes (Note 11)
Other investments (Note 7)
Allowance for doubtful accounts
Total investments

Property, Plant and Equipment—at Cost (Notes 6 and 7):
Land
Buildings and structures
Machinery and equipment
Construction in progress
Accumulated depreciation
Property, plant and equipment, net

The accompanying notes are an integral part of these statements.

2002¥ 11,817 ¥ 17,480

Total current assets

12 - Furukawa Co., Ltd.

Thousands of
U.S. dollars (Note 3)

2003

$

98,47532,822
1,855
24,873
1,843
6,836
(494)

30,791
1,775
29,609699
8,020(1,293)

273,517
15,458207,275
15,35856,967(4,117)79,55287,081

662,933

25,549
2,855
6,915
9,260
(1,673)42,035
2,483
4,057
10,291(1,417)

212,908
23,792
57,625
77,167(13,942)

42,90657,449357,550

60,614
48,987
81,630760

62,37647,37278,756
1,394

505,117408,225680,250
6,333

191,991

189,898

1,599,925(61,593)(56,254)(513,275)

130,398

133,644

1,086,650¥252,856 ¥278,174$2,107,133

2003 ANNUAL REPORT

Financial Section

Thousands of
U.S. dollars (Note 3)

Millions of yen

LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITYCurrent Liabilities:
Short-term loans (Note 6)
Current portion of long-term debt (Note 6)
Payables, trade (Note 16):
Notes and accounts
Affiliates
Accrued expenses
Accrued income taxes (Note 11)
Deferred income taxes (Note 11)
Other current liabilities (Notes 5 and 6)

2003

2002

2003

¥ 25,374 ¥ 31,486
23,887
21,795

Total current liabilities
Long-term Liabilities:
Long-term debt (Note 6)
Accrued employees’ retirement benefits (Note 10)
Deferred income taxes (Note 11)
Deferred income taxes on surplus on the revaluation of land (Note11)
Other long-term liabilities (Note 6)
Total long-term liabilities
Minority Interests in Consolidated Subsidiaries$ 211,450
199,058

20,878
349
9,221
800
19
13,52824,573393
11,517179
33
10,322

173,983
2,908
76,842
6,667
158
112,734

94,056100,298

783,800

91,128
1,588
385
13,866
8,196

93,052
1,286
200
15,192
7,634

759,400
13,233
3,208
115,550
68,300115,163

117,364

959,691

9,972

10,721

83,10023,608
11,435(18,651)
21,136(2,291)(1,566)

23,60815,517(6,921)
21,857(3,635)(633)

196,734
95,292(155,425)
176,133(19,092)(13,050)

33,67149,793

280,592

(6)

(2)

(50)

33,66549,791

280,542¥252,856 ¥278,174$2,107,133

Contingent Liabilities (Note 12)
Shareholders’ Equity:
Common stock:
Authorized—800,000,000 shares
Issued—250,751,680 shares
Capital surplus
DeficitSurplus on the revaluation of land, net of income taxes
Net unrealized holding loss on securities, net of income taxes
Translation adjustments
Treasury stock
Total shareholders’ equity

The accompanying notes are an integral part of these statements.

Furukawa Co., Ltd. - 13

2003 ANNUAL REPORT

Financial Section

Consolidated Statements of Operations
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended 31st March, 2003 and 2002

Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

2002

2003

Net Sales¥ 151,630 ¥ 149,436$ 1,263,583

Cost of Sales (Note 7)(136,509) (135,405)(1,137,575)

Gross profit

15,121

14,031126,008(16,712)(18,709)(13,258)(1,591)(4,678)(139,266)Interest and dividend income

565

719

4,708

Equity in earnings (losses) of affiliates (Note 17)

179(7,121)

1,492

Interest expense(3,298)(4,229)(27,483)

Other, net (Note 13)(17,887)(12,653)(149,059)(22,032)(27,962)(183,600)

Current(1,035)(660)(8,625)

Deferred

4,806

6,098

40,050

Total

3,771

5,438

31,425

1,261

3,828

10,508¥ (17,000) ¥ (18,696)$ (141,667)

Yen

U.S. dollars (Note 3)

Selling, General and Administrative Expenses (Note 7)
Operating loss
Other Income (Expenses):

Loss before income taxes and minority interests
Income Taxes (Note 11):

Minority Interests
Net loss

Net Loss per Share:
Basic

¥

DilutedCash Dividends per Share
The accompanying notes are an integral part of these statements.

14 - Furukawa Co., Ltd.

(67.88) ¥(74.56)$(0.57)

—

—

—

—

—

—

2003 ANNUAL REPORT

Financial Section

Consolidated Statements of Shareholders’ Equity
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended 31st March, 2003 and 2002

Number ofshares ofcommonstock(thousands)

Millions of yen

Commonstock

Balance as of 31st March, 2001
Recognition of surplus on therevaluation of land
Reversal of surplus on therevaluation of land
Net loss for the year
Cash dividends paid
Bonuses to directors and statutory
auditors
Net change during the year

250,752 ¥23,608

Retainedearnings(deficit)

Capitalsurplus

Surplus on
the revaluationof land¥15,517 ¥12,452 ¥Net unrealized
holding
gain (loss)
Translation
on securities adjustments

634¥ 11,747¥(2,467)

—

—

—

—

21,319

—

—

—
—
—

—
—
—

—
—
—

96
(18,696)
(752)

(96)
—
—

—
—
—

—
—
—

—
—

—
—

—
—

(21)
—

—
—

—
(15,382)—
1,834

Balance as of 31st March, 2002
Increase due to the change in the
tax rate
Reversal of capital surplus
Reversal of surplus on therevaluation of land
Net loss for the year
Bonuses to directors and statutory
auditors
Net change during the year

250,752

23,60815,517(6,921)

21,857(3,635)

(633)

—
—

—
—

—
(4,082)

—
4,082

487
—

—
—

—
—

—
—

—
—

—
—

1,208
(17,000)(1,208)
—

—
—

—
—

—
—

—
—

—
—

(20)
—

—
—

—
1,344

—
(933)

Balance as of 31st March, 2003

250,752 ¥23,608¥11,435 ¥(18,651) ¥ 21,136¥ (2,291) ¥(1,566)

Thousands of U.S. dollars (Note 3)

Commonstock

CapitalsurplusRetainedearnings(deficit)

Surplus on
the revaluationof land

Net unrealized
holding
gain (loss)
Translation
on securities adjustments

Balance as of 31st March, 2002
Increase due to the change in the tax rate
Reversal of capital surplus
Reversal of surplus on the revaluation of land
Net loss for the year
Bonuses to directors and statutory auditors
Net change during the year

$196,734 $129,309 $ (57,675)$ 182,142 $(30,292) $ (5,275)
—
—
—
4,058
—
—
— (34,017) 34,017————— 10,067 (10,067)———— (141,667)
—
—
—
—
—
(167)
—
—
—
—
—
—
—
11,200(7,775)

Balance as of 31st March, 2003

$196,734 $ 95,292 $(155,425)$ 176,133 $(19,092) $(13,050)

The accompanying notes are an integral part of these statements.

Furukawa Co., Ltd. - 15

2003 ANNUAL REPORT

Financial Section

Consolidated Statements of Cash Flows
Furukawa Co., Ltd.and consolidated subsidiaries
For the years ended 31st March, 2003 and 2002

Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

2002

2003

¥(22,032)¥(27,962)$(183,600)

Unrealized exchange (gain) loss on foreign currency items(2,837)

2,361(23,642)

Depreciation and amortization

6,261

5,782

52,175

Write-down of investments in securities

16,8381,267

140,317(555)

26(4,625)

Increase in accrued employees’ retirement benefits

72

655

600

Gain from establishment of trust for retirement benefits plans—(1,393)—Gain on sales of property, plant and equipment(254)(2,592)(2,117)

Gain on repurchase of convertible notes

(224)

(343)

(1,867)

Loss on sales of investments in securities

1,345

9,332

11,208Equity in (earnings) losses of affiliates

(179)

7,121

(1,492)

Interest and dividend income

(565)

(719)

(4,708)Interest expense

3,298

4,229

27,483(Increase) decrease in receivables, trade(1,453)

3,177(12,108)

Decrease in inventories

5,221

5,442

43,508(Decrease) increase in payables, trade(3,220)1,598(26,833)

499

3,215

4,159

2,215

11,196

18,458

505

719

4,208

Interest paid

(3,302)(4,359)(27,517)

Payments for closing mines(1,062)(2,262)(8,850)

Income taxes paid

(419)

(595)

(3,492)

Other

(90)

(430)

(749)

¥ (2,153)¥ 4,269$ (17,942)

Cash Flows from Operating Activities:
Loss before income taxes and minority interests
Adjustments to reconcile loss before income taxes and minority
interests to net cash (used in) provided by operating activities:(Decrease) increase in allowance for doubtful accounts, net

Changes in operating assets and liabilities:

Other
SubtotalInterest and dividends received

Net cash (used in) provided by operating activities

16 - Furukawa Co., Ltd.

2003 ANNUAL REPORT

Financial Section

Thousands of
U.S. dollars (Note 3)

Millions of yen

2003

2002

2003

Cash Flows from Investing Activities:
Increase in time deposits

¥

(136)

¥ (1,286)

740

615

6,167

Purchases of property, plant and equipment(6,113)(7,419)(50,942)

Proceeds from sales of property, plant and equipment

2,338

3,644

19,483Purchases of intangible assets

(436)

(127)

(3,633)—176—

Purchases of investments in securities(1,544)(10,539)(12,867)

Proceeds from sales of investments in securities

1,166

6,573

9,717

183

—

1,525

the scope of consolidation

(345)

(23)

(2,875)

Increase in loan receivables

(842)

(16)

(7,017)

Other

451

435

3,758

(4,538)(7,967)(37,817)

Proceeds from long-term loans payable

25,167

6,692

209,725

Repayment of long-term loans payable(11,473)(6,598)(95,608)

Proceeds from short-term loans

8,632

17,176

71,933

Repayment of short-term loans(14,556)(25,559)(121,300)

Repayment of notes(11,742)(11,319)(97,850)

Proceeds from sale-lease back transactions

305

689

2,542

Repayment of financial lease obligations

(180)

(162)

(1,500)

—

(752)

—

—

2,613

—

4,990

5,000

41,583

(35)

29

(292)

Net cash provided by (used in) financing activities

1,108(12,191)

9,233

Effect of exchange rate changes on cash and cash equivalents

(80)

166

(666)

Net decrease in cash and cash equivalents(5,663)(15,723)(47,192)

Cash and Cash Equivalents at Beginning of Year

17,48033,203

145,667¥ 11,817¥ 17,480$ 98,475

Decrease in time deposits

Proceeds from sales of marketable securities$(1,133)

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

Net cash used in investing activities
Cash Flows from Financing Activities:

Cash dividends
Proceeds from issuance of common stock of a consolidated subsidiaryto a minority shareholder
Deposits received for securities lending transactions
Other

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

Furukawa Co., Ltd. - 17

2003 ANNUAL REPORT

Financial Section

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
31st March, 2003

1. Basis of Presentation
The accompanying consolidated financial statements of Furukawa
Co., Ltd. (the “Company”) and consolidated subsidiaries (together
the “Furukawa Group”) have been prepared in accordance with accounting principles and practices generally accepted in Japan andhave been compiled from those prepared by the Company as required under the Securities and Exchange Law of Japan (the“Law”). The accompanying consolidated financial statements havebeen prepared from the accounts maintained by the Company inaccordance with the provisions set forth in the Japanese Commercial Code and in conformity with accounting principles and practices generally accepted and applied in Japan, which may differ incertain material respects from accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.
In addition, the notes to the consolidated financial statements include information which is not required under accounting principles
generally accepted in Japan but is presented herein as additional

information.
In preparing these statements, the Company has made certain
reclassifications and rearrangements to the consolidated financial
statements prepared in Japan in order to present these statements
in a form which is more familiar to readers outside Japan.
Due to the amendment of Regulations Concerning the Terminology, Forms and Preparation Methods of Consolidated Financial
Statements, the company discloses the shareholders’ equity section in the consolidated balance sheet as of 31st March, 2003 and2002, the consolidated statement of capital surplus and retained
earnings for the years ended 31st March, 2003 and 2002 in accordance with the revised regulations.
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
The Company had 40 subsidiaries as of 31st March, 2003 (43 asof 31st March, 2002). The consolidated financial statements included the accounts of the Company and 40 subsidiaries as of
31st March, 2003 (43 as of 31st March, 2002).
Compared with the previous year, the number of subsidiaries increased by 1 due to acquisition of shares and decreased by 4 due
to sale of shares, liquidation and so on. During the year ended 31st
March, 2003, a consolidated subsidiary became an affiliate due tothe decrease in the Company’s ownership percentage resulting
from issuance of its shares to a third party.
For the purpose of preparing the consolidated financial statements, all significant inter-company transactions, account balances
and unrealized profits among the Furukawa Group have been eliminated.
Certain foreign subsidiaries have a 31st December year-end. Necessary adjustments have been made for significant transaction withsuch subsidiaries during the period from 1st January to 31st March.
Although the Company had 13 affiliates as of 31st March, 2003
(13 affiliates as of 31st March, 2002), the equity method was applied to 6 affiliates as of 31st March, 2003 (6 as of 31st March,
2002) in preparing the consolidated financial statements. Compared with the previous year, the number of affiliates to which theequity method is applied decreased by 1 due to sale of shares andincreased by 1 due to decrease in the Company’s controlling financial interest. The investments in the remaining affiliates are not material in the aggregate and, therefore, are carried at cost.

(2) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments witha maturity of three months or less when purchased.
(3) Marketable Securities and Investments in Securities
The Furukawa Group has been adopted “Accounting Standards for
Financial Instruments”. Under this standard, securities are classified
into three categories: trading, held-to-maturity or other securities.
The Furukawa Group does not hold any trading or held-to-maturity
securities as of 31st March, 2003 and 2002. Under this standard,marketable securities classified as other securities are carried at fairvalue with changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in shareholders’ equity. Fairvalue is determined based on the average of the market value during the last month of the fiscal year. Non-marketable securities
classified as other securities are carried at cost. Cost of securities
sold is determined by the moving average method.
(4) Inventories
Finished copper products and work in process relating to copper
products held by the Company are stated at cost determined by
the moving average method and those held by a foreign consolidated subsidiary are stated at cost determined by the first-in, firstout method. Other inventories are mainly stated at cost determinedby the average method.
Until the year ended 31st March, 2001, the Company stated finished copper products and work in process related to copper products at cost determined by the last-in, first-out method in order toreflect the significant market fluctuation of copper prices in the

18 - Furukawa Co., Ltd.

2003 ANNUAL REPORT

Financial Section

statements of operations on a timely basis. Effective 1st April, 2001,
the Company changed its method of accounting for them to themoving average method considering that its foreign consolidated
subsidiary, which engages in copper smelting and refining, commenced commercial production during the year ended 31st March,
2002 and that the copper products manufactured by such subsidiary became available to the Company in addition to the products
purchased from domestic smelters and that the copper price of has
become more stable than in previous years. The effect of thischange was to increase loss before income taxes and minority interests by ¥307 million for the year ended 31st March, 2002.
(5) Allowance for Doubtful Accounts
In order to cover probable losses on collection, the allowance for
doubtful accounts is calculated based on the historical default
rates for normal debts plus estimate of uncollectible amounts determined by reference to specific doubtful receivables from customers which are experiencing financial difficulties.
(6) Property, Plant and Equipment, and Depreciation
Property, plant and equipment is stated at cost. Depreciation ismainly calculated by the straight-line method based on the estimated useful lives of the assets. The useful lives of property, plantand equipment are summarized as follows:
Buildings and structures
5 to 57 years
Machinery and equipment
2 to 30 years
Depreciation is calculated by straight-line method for intangible
assets.
(7) Leases
Non-cancelable lease transactions by the Company and domestic
consolidated subsidiaries are accounted for as operating leases(whether such leases are classified as operating or finance leases),
except that lease agreements which stipulate the transfer of ownership of the leased assets to the lessees are accounted for as finance leases. However, leases of the foreign consolidated
subsidiaries are generally classified and accounted for as either finance or operating leases.
(8) Retirement Benefit Plans
The employees of the Company and most of its domestic consolidated subsidiaries are covered by unfunded employee retirement
benefit plans and non-contributory funded employee pension plans
as defined benefit plans. The employee retirement benefit plansprovide for lump-sum payments. The employee pension plans,
which are funded, were instituted to replace a certain portion of thebenefits under the retirement benefit plans with respect to employees who retire at the mandatory retirement age. Certain consolidated subsidiaries, (both domestic and foreign) have defined
contribution plans.
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 as of 31st March, 2003 and2002 as adjusted for unrecognized net retirement benefit obligation
at transition, unrecognized actuarial gain or loss and unrecognizedprior service cost. The retirement benefit obligation has been attrib-

uted to each period by the straight-line method over the years of service of the eligible employees. The Company established a trust andthe Company’s net retirement benefit obligation at transition was fully
charged to operations for the year ended 31st March, 2001. The net
retirement benefit obligation at transition of the domestic consolidated subsidiaries of ¥560 million is being amortized by the straightline method over a period of 5 years from 2001.
Prior service cost is being amortized by the straight-line method
principally over a period of 15 years which are shorter than the average remaining years of service of the employees. Actuarial gain
and loss is amortized in the year following the year in which thegain or loss is recognized by the straight-line method over theperiod of mainly 15 years which are shorter than the average remaining years of service of the employees.
(9) Surplus on the Revaluation of Land
Pursuant to the “Law Concerning the Revaluation of Land”, land
used for the Company’s business operations was revalued on 31st
March, 2002. The income tax effect of the difference between thebook value and the revalued amount has been presented under liabilities as “Deferred income taxes on surplus on the revaluation ofland” and the remaining balance has been presented under shareholders’ equity as “Surplus on the revaluation of land” in the accompanying consolidated balance sheets. Revaluation of land wasdetermined based on the official notice prices published by theCommissioner of the National Tax Authorities in accordance with
Paragraph 4, Article 2 of the “Enforcement Ordinance Concerning
Land Revaluation,” with certain necessary adjustments. The carrying value of the land after revaluation exceeded its fair value by¥3,357 million ($27,975 thousand) as of 31st March 2003.
A domestic affiliate of the Company also revalued its land andthe difference between the book value and the revalued amount,net of the applicable income taxes, multiplied by the Company’sownership percentage, was included in “Surplus on the revaluationof land.” The carrying value of the land of this affiliate after revaluation exceeded its fair value by ¥775 million ($6,458 thousand) as of
31st March, 2003.
(10) Income Taxes
Current income taxes comprising corporation tax, enterprise tax
and inhabitants’ taxes are provided for based on amounts currently
payable for each year. Deferred income taxes arising from temporary differences between financial reporting and tax bases of theassets and liabilities are reflected in the consolidated financial
statements.
(11) Net Income (Loss) per Share
Until the year ended 31st March, 2002, basic net income (loss) per
share was computed based on the net income (loss) reported in
the consolidated statements of operations and the weighted average number of shares of common stock outstanding during eachyear, and diluted net income (loss) per share was computed basedon the net income (loss) reported and the weighted average number of shares of common stock outstanding during each year after
giving effect to the dilutive potential of shares of common stock to

Furukawa Co., Ltd. - 19

2003 ANNUAL REPORT

Financial Section

be issued upon the conversion of convertible notes. Amounts per
share of net assets were computed based on the net assets reported in the consolidated balance sheets and the number ofshares of common stock outstanding at each balance sheet date.
In accordance with a new accounting standard for earnings per
share which became effective 1st April, 2002, basic net income(loss) per share was computed based on the net income (loss) attributable to shareholders of common stock and the weighted average number of shares of common stock outstanding during theyear, and diluted net income (loss) per share was computed basedon the net income (loss) attributable to the shareholders and theweighted average number of shares of common stock outstanding
during each year after giving effect to the dilutive potential of sharesof common stock to be issued upon the conversion of convertible
notes for the year ended 31st March, 2003.
Amounts per share of net assets at 31st March, 2003 was computed based on net assets available for distribution to the shareholders and the number of shares of common stock outstanding at
the year end. If the new method of computation had been followed
for the year ended 31st March, 2002, basic net loss per share andamounts per share of net assets would have been ¥74.64 and¥198.50, respectively. No diluted net loss per share is presented
for the years ended 31st March, 2003 and 2002 because theCompany recorded net loss for those years.
(12) Foreign Currency Translation
Foreign currency amounts are translated into Japanese yen on thebasis of the rates of exchange in effect at the balance sheet date formonetary assets and liabilities. Gains or losses resulting from translation of foreign currency transactions are credited or charged to income as incurred.
Assets, liabilities, revenue and expense accounts of the foreign
consolidated subsidiaries are translated at the rates of exchange in
effect at the balance sheet date. Shareholders’ equity is translated
at the historical rate. Differences arising from translation are included in minority interests and translation adjustments.
(13) Appropriation of Retained Earnings
Cash dividends, and bonuses to directors and statutory auditors
are recorded in the fiscal year in which the proposed appropriationsof retained earnings are approved by the board of directors and/or
shareholders’ meeting.
(14) Hedging Activities
The Furukawa Group uses derivative financial instruments for the
purpose of hedging the risks of adverse fluctuations in foreign exchange rates, commodity prices and interest rates on the receivables, payables and forecast transactions denominated in foreign
currencies. All derivative financial instruments except below arestated at fair value. The Furukawa Group defers gain or loss on thechanges in the fair values of derivative financial instruments on thebalance sheet until the recognition of gain or loss on hedged items.
Trade receivables, trade payables and forecast transactions denominated in foreign currencies are translated at the contracted
rates if the relating forward contracts qualify for hedge accounting.
The interest rate swaps which qualify for hedge accounting andmeet specific matching criteria are not carried at fair value but any
differences paid or received on the interest rate swaps are recognized as adjustments to interest expense or income over the life ofeach swap, thereby adjusting the effective interest rate on thehedged items.
(15) Shareholders’ Equity
In accordance with the Commercial Code of Japan (the “Code”),
the Company has provided a legal reserve, which was included inretained earnings (deficit). The Code provides that an amount equal
to at least 10% of the amount to be disbursed as distributions ofearnings be appropriated to the legal reserve until the total of suchreserve and the capital surplus account equals 25% of the common stock account. The legal reserve amounted to ¥11,435 million($95,292 thousand) and ¥18,762 million as of 31st March, 2003
and 2002, respectively.
The Code provides that neither capital surplus nor the legal reserve is available for dividends, but both may be used to reduce or
eliminate a deficit by resolution of the shareholders or may betransferred to common stock by resolution of the Board of Directors. On 1st October, 2001, an amendment (the “Amendment”) to
the Code became effective. The Amendment provides that if thetotal amount of capital surplus and the legal reserve exceeds 25%of the amount of the common stock, the excess may be distributed
to the shareholders either as a return of capital or as dividends
subject to the approval of the shareholders. In addition, theAmendment eliminates the stated par value of the Company’s outstanding shares, which resulted in all outstanding shares having nopar value as of 1st October, 2001. The Amendment also provides
that all shares issuances after 30th September, 2001 will be ofshare with no par value. Prior to the date on which the Amendment
came into effect, the Company’s shares had a par value of ¥50.
(16) Accounting for Treasury Stock and Reversal of Legal
Reserves
Effective 1st April, 2002, the Company adopted Financial Accounting Standard No.1, “Accounting Standard on Treasury Stock andReversal of Legal Reserves”. The adoption of the new standard
had no effect on the operating results for the year ended 31st
March, 2003.

20 - Furukawa Co., Ltd.

2003 ANNUAL REPORT

Financial Section

3. U.S. Dollar Amounts
The Company and its domestic consolidated subsidiaries maintaintheir accounting records in yen. The U.S. dollar amounts includedin the accompanying financial statements and notes thereto represent the arithmetic results of translating yen into dollars at the rateof ¥120=US$1, the approximate rate of exchange on 31st March,

2003. The inclusion of such U.S. dollar amounts is solely for theconvenience of certain readers and is not intended to imply that theassets and liabilities which originated in yen have been or could
readily be converted, realized or settled in U.S. dollars at that or
any other rate.

4. Inventories
Inventories at 31st March, 2003 and 2002 consisted of the following:

Millions of yen

Finished products
Work in process
Raw materials and supplies

Thousands of
U.S. dollars

2003

2002

2003

¥13,302
6,704
4,867¥24,873¥15,2445,744
8,621¥29,609$110,850
55,86740,558$207,275

5. Investments in Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of 31st March,
2003 and 2002 were as follows:
Millions of yen

Thousands of U.S. dollars

2003

2003

Acquisition
cost

Carrying
value

Unrealized
gain (loss)

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥ 3,64243—¥ 5,13846—¥ 1,4963—$ 30,350
358—$ 42,817
383—$ 12,467
25
—

3,685

5,184

1,499

30,70843,20012,492

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

18,501——

14,729——(3,772)——

154,175——

122,742——(31,433)——

18,501

14,729(3,772)

154,175

122,742(31,433)

Total¥22,186¥19,913¥(2,273)$184,883$165,942$(18,941)

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

Furukawa Co., Ltd. - 21

2003 ANNUAL REPORT

Financial Section

Millions of yen

2002

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

Securities whose acquisition costexceeds their carrying value:
Listed corporate stocks
Government bonds
Corporate bonds
Total
Sales of securities classified as other securities amounted to¥1,161 million ($9,675 thousand) and ¥6,573 million with an aggregate gain of ¥6 million ($50 thousand) and ¥27 million and loss of¥1,345 million ($11,208 thousand) and ¥9,319 million for the years
ended 31st March, 2003 and 2002, respectively.
“Investments in securities” in the accompanying consolidatedbalance sheets includes securities lent amounting to ¥13,182 mil-Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥10,36343—¥15,32448—¥ 4,9615—

10,406

15,372

4,966

29,572—
5

20,963—
5(8,609)—(0)

29,577

20,968(8,609)¥39,983¥36,340¥(3,643)

lion ($109,850 thousand) and ¥7,720 million at 31st March, 2003
and 2002, respectively. “Other current liabilities” in the accompanying consolidated balance sheets includes deposits received of¥9,990 million ($83,250 thousand) and ¥5,000 million for such securities lending transactions at 31st March, 2003 and 2002, respectively.

6. Short-Term Loans and Long-Term Debt
Short-term loans, most of which are unsecured, represented notes payable to banks, with the average interest rates of 1.0 per cent. and 1.3
per cent. as of 31st March, 2003 and 2002, respectively.
Long-term debt at 31st March, 2003 and 2002 consisted of the following:

Millions of yen

0.90 per cent. yen convertible notes due 2006
2.10 per cent. yen notes due 2002
2.23 per cent. yen notes due 2002
1.47 per cent. yen notes due 2003
1.45 per cent. yen notes due 2004
1.91 per cent. yen notes due 2005
2.21 per cent. yen notes due 2007
Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2003 to 2018
Current portion of long-term debt

22 - Furukawa Co., Ltd.

Thousands of
U.S. dollars

2003

2002

2003

¥ 20,196
—
—
5,000
5,000
5,000
4,900

¥ 22,077
5,000
5,000
5,000
5,000
5,000
5,000

$ 168,300——
41,667
41,667
41,667
40,83374,91962,770624,324

115,015(23,887)

114,847(21,795)

958,458(199,058)¥ 91,128¥ 93,052$ 759,400

2003 ANNUAL REPORT

Financial Section

The 0.9 per cent. yen convertible notes are convertible intoshares of common stock at the option of the holder on any date up
to 30th March, 2006 at the conversion price of ¥419 ($3.49) per
share. The above conversion price is subject to adjustment incertain circumstances, including stock splits. If all convertible notes
had been converted at the then current conversion price at 31st

March, 2003, 48,200 thousand new shares of common stock
would have been issuable.
The average interest rate of the above loans amounting to¥74,919 million ($624,324 thousand), was 2.2 per cent.
as of 31st March, 2003.

The aggregate annual maturities of long-term debt subsequent to 31st March, 2003 were as follows:Year ending 31st March,Millionsof yenThousands of
U.S. dollars

2004
2005
2006
2007
2008 and thereafter¥ 23,887
20,60640,256
16,027
14,239$199,058
171,717335,467
133,558
118,658¥115,015$958,458

The Company and certain consolidated subsidiaries have entered into overdraft and loan commitment agreements amounting
to ¥33,582 million ($279,850 thousand) with 27 banks and¥40,923 million with 30 banks at 31st March, 2003 and 2002, respectively. The borrowings outstanding and the unused balances
under these credit facilities amounted to ¥19,371 million ($161,425

thousand) and ¥14,211 million ($118,425 thousand), respectively,
at 31st March, 2003 and amounted to ¥24,188 million and¥16,735 million, respectively, at 31st March, 2002. In addition, thefollowing lease obligations are included in “Other current liabilities”
and “Other long-term liabilities” in the accompanying consolidatedbalance sheets.

Millions of yen

Current portion
Non current portion

Thousands of
U.S. dollars

2003

2002

2003

¥ 91
4,644

¥ 162
4,405

$ 758
38,700Assets pledged as collateral for payables, trade of ¥172 million ($1,433 thousand) and ¥863 million, short-term debt of ¥1,339 million($11,158 thousand) and ¥5,646 million, long-term debt (including current portion of long-term debt) of ¥23,755 million ($197,958 thousand)and ¥24,868 million and lease obligations of ¥4,294 million ($35,783 thousand) and ¥4,360 million at 31st March, 2003 and 2002, respectively, consisted of the following:

Millions of yen

Cash and cash equivalents
Receivables, trade
Inventories
Other current assets
Investments in securities
Property, plant and equipment, net

Above assets include one consolidated foreign subsidiary’s assets which are pledged as collateral for lease obligations and which

Thousands of
U.S. dollars

2003

2002

2003

¥ 1,450
1,706
4,850
241
518
87,327¥ 2,018
2,086
5,639
51
747
80,297$ 12,083
14,21740,417
2,008
4,317
727,725¥96,092¥90,838$800,767

are at such company’s disposal except for property, plant andequipment leased under the lease contracts.

Furukawa Co., Ltd. - 23

2003 ANNUAL REPORT

Financial Section

7. Depreciation and Amortization
Depreciation and amortization for the years ended 31st March, 2003 and 2002 consisted of the following:

Millions of yen

Property, plant and equipment
Other investments

Thousands of
U.S. dollars

2003

2002

2003

¥6,17190¥5,727
55$51,425
750¥6,261¥5,782$52,175

8. Leases
The Furukawa Group leases certain machinery and equipment under non-cancellable finance lease agreements, of which ownershipis all non-transferable.

The pro forma amounts representing acquisition costs, accumulated depreciation and net carrying value for the machinery and equipment
held under the finance leases, which are currently accounted for as operating leases as of 31st March, 2003 and 2002 were as follows:

Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Acquisition costs
Less accumulated depreciation¥1,596891¥1,690734$13,300
7,425

Net carrying value

¥ 705

¥ 956

$ 5,875

Lease payments relating to finance leases accounted for as operating leases amounted to ¥294 million ($2,450 thousand) and¥317 million for the years ended 31st March, 2003 and 2002,

respectively, which were equal to the depreciation expense ofleased assets computed by the straight-line method over the leaseterms.

Future rental payments including an interest element under the finance leases outstanding as of 31st March, 2003 and 2002 aresummarized as follows:

Millions of yen

Within one year
Over one year

Thousands of
U.S. dollars

2003

2002

2003

¥236
469

¥289
667

$1,967
3,908

¥705

¥956

$5,875

9. Financial Instruments
The Furukawa Group entered into swap agreements to manage interest rate risks. Interest rate swaps convert fixed rate long-term
debt to a floating basis, and then reconvert floating rate to a fixedbasis. The Furukawa Group also entered into forward foreign exchange contracts to hedge against transactions in foreign currencies. For copper products, the Furukawa Group also entered into
futures contracts to reduce the risks of fluctuations of commodity
price.

There are market risk in these derivatives. As the counterparties
to the derivative transactions are major financial institutions andtrading companies, the Group believes that their derivative financial
instruments entails minimal credit risks. Furthermore, the Furukawa
Group does not use derivative financial instruments that would increase market risks.
As of 31st March, 2003 and 2002, there is no balance of derivative transaction for which hedge accounting is not applied.

24 - Furukawa Co., Ltd.

2003 ANNUAL REPORT

Financial Section

10. Retirement Benefits
The balances of the retirement benefit obligation and plan assets, funded status and the amounts recognized in the consolidated financial
statements as of 31st March, 2003 and 2002 are summarized as follows:

Millions of yen

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

Thousands of
U.S. dollars

2003

2002

2003

¥(15,467)
5,797¥(15,701)
10,081$(128,891)
48,308(9,670)224
12,359134(4,635)(5,620)
336
8,490
143
(4,635)(80,583)
1,866
102,992
1,117(38,625)¥ (1,588)¥ (1,286)$ (13,233)

The components of retirement benefit expenses for the years ended 31st March, 2003 and 2002 were as follows:

Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Amortization of net retirement benefit obligation at transition

¥ 850
412
(115)
12
551
112

¥ 824
465
(184)
13
350
112

$ 7,083
3,433
(958)
100
4,592
933

Retirement benefit expenses
Employees’ contributions to the defined benefit pension plans¥1,822
127¥1,580—$15,183
1,059

Total

¥1,949¥1,580$16,242

During the year ended 31st March, 2003, the Company made anamendment to its defined benefit plan which resulted in an increase

in benefits to be paid. As a result, prior service cost was incurred.

The assumptions used in accounting for the above plans are as follows:2003
mainly 2.4%
mainly 2.0%

Discount rates
Expected return on plan assets

Furukawa Co., Ltd. - 25

2002
mainly 2.4%
mainly 2.0%

2003 ANNUAL REPORT

Financial Section

11. Income Taxes
A reconciliation of the difference between the statutory tax rates andthe effective tax rates of the Furukawa Group has been omitted be-cause the Furukawa Group recorded a loss before income taxes andminority interests for the years ended 31st March, 2003 and 2002.

Deferred tax assets and liabilities as of 31st March, 2003 and 2002 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2003
Deferred tax assets:
Allowance for doubtful accounts in excess of limitation under Japanese tax laws
Accrued employees’ retirement benefits in excess of limitation under Japanese tax laws
Write-down of investments in securities
Expenses for closing mines
Unrealized gains on sales of property, plant and equipment
Net operating loss carryforwards
Other

¥

400
3,616
7,240
—
1,019
16,471
950

2002
¥

2003

358
3,330
393
654
316
16,859
1,131

$

3,333
30,13360,333—
8,492
137,258
7,918

Total gross deferred tax assets

29,69623,041

247,467

Valuation allowance(15,086)(11,838)(125,717)

14,610

11,203

121,750(6)(226)(3,629)(1,528)
(867)

(6)
(227)
(3,751)(2,356)(340)(50)(1,883)(30,242)(12,733)(7,225)

Total deferred tax assets
Deferred tax liabilities:
Net unrealized holding gain on securities
Statutory reserves provided for tax purposes
Gain from establishment of trust for retirement benefit plans
Capitalization of interest expense and others of a foreign subsidiary
Other
Total deferred tax liabilities(6,256)(6,680)(52,133)

Net deferred tax assets (liabilities)¥ 8,354¥ 4,523$ 69,617

Deferred tax liabilities on surplus on the revaluation of land¥(13,866)¥(15,192)$(115,550)

Japanese Local Tax Law was amended and will be effective 1st
April, 2004. The statutory tax rate used for the calculation of current deferred tax assets and liabilities, which is based on temporary
difference expected to be reversed by 31st March, 2004, was therate before the amendment.
Long-term deferred tax assets and liabilities expected to be reversed after 1st April, 2004 was calculated based on the rate after
the amendment.

Due to the change in tax rate, deferred tax assets and liabilities
as of 31st March, 2003 decreased by ¥280 million ($2,333 thousand) and ¥6 million ($50 thousand), respectively, and income
taxes deferred for the year ended 31st March, 2003 increased by¥273 million ($2,275 thousand). In addition, deferred income taxes
on surplus on the revaluation of land decreased by ¥468 million($3,900 thousand), and surplus on the revaluation of land (net of income taxes) increased by the same amount as of 31st March, 2003.

12. Contingent Liabilities
Contingent liabilities at 31st March, 2003 and 2002 consisted of the following:
The Company’s portion
agreed by joint guarantors

Total amountMillions of yen

Notes receivable discounted and endorsed
Loans guaranteed
Commitments to provide guarantees for loans

Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

2003

2002

¥3,784
2,957—¥5,065
2,267
272$31,533
24,642—¥3,784
2,957—¥5,0652,267
44

26 - Furukawa Co., Ltd.

2003 ANNUAL REPORT

Financial Section

13. Other Income (Expenses)—Other, Net
Other Income (Expenses)—Other, Net for the years ended 31st March, 2003 and 2002 consisted of the following:

Millions of yen

2003
Rental income from real estate
Gain on repurchase of convertible notes
Gain on foreign exchange
Gain on sales of property, plant and equipment
Gains arising from issuance of shares of common stock by a subsidiary
Loss on sales of investments in securities
Loss on withdrawal from construction machinery business in Europe
Write-down of investments in securities
Other, net

Thousands of
U.S. dollars

2002

¥

248
224
3,022
254
43
(1,345)(208)(16,838)(3,287)

¥

237
343
—
2,592
—
(9,332)(1,989)(1,267)(3,237)¥(17,887)¥(12,653)

2003
$

2,067
1,867
25,183
2,117
358(11,208)(1,733)(140,317)(27,393)$(149,059)

14. Consolidated Statements of Cash Flows—Supplementary Information
For the purpose of the statements of cash flows, the company considers all highly liquid investments with insignificant risk of changes invalue which have maturities of generally three months or less when purchased to be cash equivalents.
(a) Cash and cash equivalents at 31st March, 2003 and 2002 are reconciled to accounts reported in the consolidated balance sheets asfollowings:

Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

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

¥12,336(656)
137¥18,656(1,222)
46$102,800(5,467)
1,142

Cash and cash equivalents¥11,817¥17,480$ 98,475(b) Summary of assets and liabilities of a newly consolidated subsidiary as a result of acquisition of shares

Millions of yen

Thousands of
U.S. dollars

2003

2003

Current assets
Fixed assets¥1,536886$12,800
7,383

Total assets

2,422

20,183

427

7,775

¥ 785

$10,758

Long-term liabilities
Total liabilities(c) Summary of assets and liabilities of a subsidiary excluded following the issuance of shares in a private placement.

Millions of yen

Thousands of
U.S. dollars

2003

2003

Current assets
Fixed assets¥1,153347$ 9,608
2,892

Total assets

1,500

12,500

865
12

7,208
100

¥ 877

$ 7,308

Current liabilities
Long-term liabilities
Total liabilities

Furukawa Co., Ltd. - 27

2003 ANNUAL REPORT

Financial Section

15. Segment Information
The business of the Furukawa Group is divided into the following
six categories: machinery, metal, electronic materials and chemi-

cals, real estate, fuels and others.

The business segment information of the Furukawa Group for the years ended 31st March, 2003 and 2002 was as follows:Year ended 31st March, 2003

Millions of yen
Electronic
Materials
and Chemicals Real Estate

MachineryMetal¥ 59,699
308¥ 49,932
660¥ 14,515
179

Total
Costs and expenses

60,007(58,654)

50,592(56,604)

14,694(13,372)

4,586(2,643)Operating income (loss)¥ 1,353¥ (6,012)¥ 1,322¥ 1,943 ¥¥ 73,076
1,407
705¥ 73,878
3,163
3,346

¥ 29,902
867
701¥24,595 ¥ 8,391
735
47
838
92

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

II. Assets, depreciation and capital
expenditure
Total assets
Depreciation
Capital expenditureFuels¥ 4,437 ¥ 22,245
149
338

Others¥

22,583(22,792)
(209)

802
1,294

Eliminations
and Corporate

¥

2,096
(2,075)¥21¥

Consolidated—(2,928)¥ 151,630—(2,928)
2,919

151,630(153,221)(9)¥(1,591)¥ 1,92874132¥41,086(32)—¥ 252,856
6,261
5,814

OthersEliminations
and Corporate

Consolidated

Thousands of U.S. dollars
Machinery

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

Metal

Electronic Materials
and Chemicals Real Estate

Fuels$ 497,492 $ 416,100
2,566
5,500

$ 120,958
1,492

Total
Costs and expenses

500,058(488,783)

122,450(111,433)

Operating income (loss)$ 11,275 $ (50,100) $ 11,017$ 16,192 $$ 608,967 $ 615,650
11,72526,3585,875
27,883$204,958 $ 69,925 $ 16,067
6,125
392
617
6,983
767
1,100

II. Assets, depreciation and capital
expenditure
Total assets
Depreciation
Capital expenditure421,600(471,700)$ 249,183
7,225
5,842

$ 36,975 $ 185,375 $ 6,683
1,242
2,817
10,78338,217 188,192(22,025) (189,934)

Year ended 31st March, 2002

I. Sales and operating income (loss)
Outside customers
Intersegment
Total
Costs and expenses
Operating income (loss)
II. Assets, depreciation and capital
expenditure
Total assets
Depreciation
Capital expenditure$

17,466(17,291)(1,742) $175— $ 1,263,583(24,400)—(24,400)
24,325$

1,263,583(1,276,841)(75) $(13,258)$342,383 $ 2,107,133(267)
52,175—48,450Millions of yen
Electronic Materials
and Chemicals Real EstateMetal¥ 63,835
500
64,335(65,804)¥ (1,469)¥ 48,190
671
48,861(54,173)¥ (5,312)¥ 12,207
184
12,391(12,025)¥366¥ 4,630 ¥ 19,673
148
327
4,778
20,000(2,877) (20,200)¥ 1,901 ¥ (200)

¥

901
1,316
2,217
(2,205)¥12¥—(3,146)(3,146)3,170¥
24¥ 149,436—
149,436(154,114)¥ (4,678)¥ 75,847
1,545
1,390

¥ 78,837
2,680
3,148

¥ 29,662
725
2,408¥24,787 ¥ 7,704
725
39
826
43

¥ 1,49468
55¥59,843——¥ 278,174
5,782
7,870

28 - Furukawa Co., Ltd.

Fuels

OthersEliminations
and Corporate

Machinery

Consolidated

2003 ANNUAL REPORT

Financial Section

As a result of a change in the method of accounting for inventories as explained in Note 2 (4), operating expenses for “Metal” increased by ¥307 million and operating loss increased by the sameamount for the year ended 31st March, 2002 over the corresponding amount for the previous year.

Details of operations by geographic area for the years ended 31st March, 2003 and 2002 were as follows:Year ended 31st March, 2003

Millions of yen

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

Japan

Oceania

Other areas

Eliminations

Consolidated¥ 125,609
2,747
128,356(123,145)¥ 5,211¥ 18,512
398
18,910(25,243)¥ (6,333)¥ 7,509
132
7,641(8,033)¥ (392)¥—(3,277)(3,277)3,200¥ (77)¥ 151,630—
151,630(153,221)¥ (1,591)¥ 204,547¥ 48,267¥ 8,771¥(8,729)¥ 252,856

Japan

Oceania

Other areas

Eliminations

Consolidated$ 1,046,741
22,892
1,069,633(1,026,208)$
43,425$ 154,267
3,316
157,583(210,358)$ (52,775)$ 62,575
1,100
63,675(66,942)$ (3,267)$—(27,308)(27,308)
26,667$ (641)$ 1,263,583—
1,263,583(1,276,841)$ (13,258)$ 1,704,558$ 402,225$ 73,092$(72,742)$ 2,107,133

Japan

Oceania

Other areas

Eliminations

Consolidated¥ 122,583
2,967
125,550(123,221)¥ 2,329¥ 15,896
398
16,294(21,660)¥ (5,366)¥ 10,957
136
11,093(12,762)¥ (1,669)¥—(3,501)(3,501)
3,529¥
28¥ 149,436—
149,436(154,114)¥ (4,678)¥ 188,844¥ 51,322¥ 11,430¥26,578¥ 278,174

Thousands of U.S. dollars

I. Sales and operating income (loss)
Outside customers
Inter-area
Total
Costs and expenses
Operating income (loss)
II. Assets
Total assets
Year ended 31st March, 2002

Millions of yen

I. Sales and operating income (loss)
Outside customers
Inter-area
Total
Costs and expenses
Operating income (loss)
II. Assets
Total assets
As a result of a change in the method of accounting for inventories as explained in Note 2 (4), operating expenses for “Japan” increased by ¥307 million and operating loss increased by the sameamount for the year ended 31st March, 2002 over the corresponding amount for the previous year.
“Other areas” consists principally of Europe, Asia and North
America.

Overseas sales, which include exports of the Company and its
domestic consolidated subsidiaries and sales (other than exports
to Japan) of the foreign consolidated subsidiaries, totaled ¥40,254
million ($335,450 thousand) or 26.5% and ¥37,993 million or
25.4% of the consolidated net sales for the years ended 31st
March, 2003 and 2002, respectively.

16. Effect of Bank Holiday on 31st March, 2002
As financial institutions in Japan were closed on 31st March, 2002,
amounts that would be settled on 31st March, 2002 were collectedor paid on the following business day 1st April, 2002.

The following amounts are included in the balance as of 31st
March, 2002.
Notes receivable, trade¥489 million
Notes payable, trade¥47 million

Furukawa Co., Ltd. - 29

2003 ANNUAL REPORT

Financial Section

17. Others
Taisei Fire and Marine Insurance Company, one of the Company’s
affiliates, filed for bankruptcy protection from its creditors on 22nd
November, 2002 due to the impact of the 11th September terrorist
incident in the USA on its underwriting position. A write-down inequity resulted in a loss of ¥6,944 million which has been includedin “Equity in losses of non-consolidated subsidiaries and affiliates”
in the accompanying consolidated statement of operations for theyear ended 31st March, 2002.

18. Subsequent Events
On 23rd May, 2003, the Company and Furukawa Real Estate Co.,
Ltd., a consolidated subsidiary of the Company engaging in realestate business, entered into a merger agreement (the “Agreement”). The Agreement was approved by the general shareholders’meeting of the Company and Furukawa Real Estate Co., Ltd. heldin June 2003. The significant terms and conditions of the merger
are summarized as follows:
1. Effective 1st August, 2003 Furukawa Real Estate Co., Ltd. will
be merged into the Company and all assets, liabilities, rights andobligations of Furukawa Real Estate Co., Ltd. will be transferred to
the Company. The Company will be a surviving company andFurukawa Real Estate Co., Ltd. will be liquidated upon the merger.
2. 74,400,000 shares of the Company’s common stock will be issued in exchange for 240,000 shares of common stock ofFurukawa Real Estate Co., Ltd. held by minority shareholders.
However, no shares of the Company will be issued for Furukawa
Real Estate Co., Ltd.’s shares held by the Company.

The following summarizes Furukawa Real Estate Co., Ltd.’s key financial information for the year ended 31st March, 2003:

Net sales
Net income
Total assets
Total liabilities
Net assets

30 - Furukawa Co., Ltd.

Millions of yen

Thousands of
U.S. dollars

2003¥ 4,253965
27,124
11,099¥16,0252003$ 35,442
8,042
226,033
92,492$133,541

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

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

REPORT OF INDEPENDENT AUDITORSThe Board of Directors
Furukawa Co., Ltd.
We have audited the accompanying consolidated balance sheets of Furukawa Co., Ltd. and consolidated subsidiaries as of 31st March, 2003 and 2002, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended, all expressed in yen. These
financial statements are the responsibility of the Company’s management. Our responsibility is to independently express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally
accepted and applied in Japan. Those standards, procedures and practices require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Furukawa Co., Ltd. and consolidated subsidiaries at 31st March,
2003 and 2002, and the consolidated results of their operations and their cash flows for the years
then ended in conformity with accounting principles and practices generally accepted in Japan.
Supplemental Information
As described in Note 18 to the consolidated financial statements, the Company and Furukawa Real
Estate Co., Ltd., a consolidated subsidiary of the Company, entered into a merger agreement (the“Agreement”) on 23rd May, 2003. The Agreement was approved by the general shareholders’ meeting of the Company held on 27th June, 2003.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to theyear ended 31st March, 2003 are presented solely for convenience. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 3 to the consolidated financial statements.

Shin Nihon & Co.
27th June, 2003

See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial
statements of Furukawa Co., Ltd. and consolidated subsidiaries under Japanese accounting principles and practices.
Furukawa Co., Ltd. - 31

2003 ANNUAL REPORT

Principal Subsidiaries and Affiliates

Company Name

Principal Business

Paid-in Capital

Subsidiaries
Furukawa Machinery Sales Co., Ltd.

Sales of construction machinery and rock drills

JPY 400 million

Furukawa Real Estate Co., Ltd.

Sales and lease of real estate

JPY 300 million

Furukawa UNIC Corporation

Sales of UNIC cranes

JPY 200 million

Osaka Transportation Co., Ltd.

Transportation

JPY 150 million

Oita Mining Co., Ltd.

Mining and sales of limestone

JPY 125 million

Ashio Smelting Co., Ltd.

Copper smelting and industrial waste treatment

JPY 100 million

Furukawa Commerce Co., Ltd.

Sales of petroleum and management of gas stations, sales of industrial machineryand non–life insurance, and management of bowling alleys

JPY 95 million

Heiko Bridge Co., Ltd.

Construction of bridges

JPY 50 million

Furukawa Corporation

Tourist business

JPY 50 million

Tsubame Industrial Community Limited

Manufacture of machine tools and industrial machinery

JPY 40 million

Furukawa Plant Engineering and Construction Co., Ltd.

Construction and installation of various types of plants

JPY 30 million

Ashio Construction Co., Ltd.

Civil engineering and construction

JPY 30 million

UNIC Kanto Sales Co., Ltd.

Sales of UNIC cranes

JPY 30 million

UNIC Kyushu Sales Co., Ltd.

Sales of UNIC cranes

JPY 30 million

Furukawa Mansion Maintenance Co., Ltd.

Maintenance of apartments

JPY 20 million

UNIC Tohoku Sales Co., Ltd.

Sales of UNIC cranes

JPY 16 million

Ashio Rock Drill Co., Ltd.

Manufacture and repair of rock drills and industrial machinery

JPY 10 million

UNIC Hokuriku Sales Co., Ltd.

Sales of UNIC cranes

JPY 10 million

UNIC Shinshu Sales Co., Ltd.

Sales of UNIC cranes

JPY 10 million

Iwaki Kosan Co., Ltd.

Administration of real estate

JPY 10 million

Dojima Jitsugyo Co., Ltd.

Maintenance of buildings

JPY 10 million

Wellness Co., Ltd.

Sales of health-care products

JPY 10 million

Port Kembla Copper Pty. Ltd. (Australia)

Copper smelting

AUD 369.5 million

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

Manufacture of UNIC cranes, parts, and accessories

THB 200 million

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

Furukawa Services S.A.S. (France)

Service of construction machinery

EUR 5 million

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

Manufacture of hydraulic breakers

USD 1 million

Affiliates
Tohpe Corporation

Production of paints

JPY 2,087 million

Hitachi Furukawa Construction Machinery Ltd.

Manufacture of construction machinery

JPY 900 million

Iwaki Semiconductors Co., Ltd.

Production of semiconductors, such as gallium arsenate semiconductors

JPY 60 million

Hibi Kyodo Smelting Co., Ltd.

Copper smelting

JPY 4,700 million

Hitachi-Furukawa Loaders Europe S.A.S. (France)

Manufacture of construction machinery

EUR 6 million

Otsuka Iron Works, Ltd.

Production of crushers

JPY 140 million

32 - Furukawa Co., Ltd.

H2-H3̲10月3日修正 03.10.21 4:30 PM ページ 31

2003 ANNUAL REPORT

Corporate Information

Board of Directors and Auditors
As of 31st March, 2003

President and Representative Director
Senior Managing Director
Managing Directors

Tetsuo Yoshino
Isao Asada
Toshikatsu Uematsu
Kouji Toda

Directors

Junnosuke Furukawa
Yuichi Yokoo
Yasuhei Konagaya
Nakao Yamashita
Hiroyuki Shiaku

Statutory Auditors

Auditors

Shunji Fujii
Tsuyoshi Ishii
Yasuyuki Wakahara
Toshiharu Nagao

Corporate Data
As of 31st March, 2003

Head Office6-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8370, Japan
Phone: +81-3-3212-6570
Facsimile: +81-3-3212-6578

Composition of Shareholders

2.48%

Date of Foundation
August 1875

21.25%
32.87%

Date of Establishment
April 1918

2.32%
41.08%

Common Stock
Authorized: 800,000,000 shares
Issued: 250,751,680 shares
Stock Exchange Listings
Tokyo, Osaka, Nagoya
Number of Employees
1,417Transfer Agent
The Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku, Tokyo 105-0014, Japan

Furukawa Co., Ltd. - 33

Printed in Japan

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