Moving Forward
With a Focus on
The Future

LINTEC ANNUAL REPORT 2017
For the fiscal year ended March 31, 2017

Contents
1 To All Our Stakeholders
2 COVER STORY
		- 2	LINTEC’s History
		 - 4	LINTEC’s Distinct Features
		 - 6	LINTEC’s Business Model
8 Performance Highlights
10 MANAGEMENT STRATEGY		 - 10	A Message from the President		 - 14	A Message from the CFO
16	SPECIAL FEATURE
			The LINTEC Global Network
20 CORPORATE VALUE INITIATIVES		 - 20 LINTEC’s Value Creation
		- 22	Sales		 - 30	Research and Development
		- 34	Production
		- 38	
Human Resources
40 THE BASE THAT SUPPORTS GROWTH
		- 40	
Corporate Governance		 - 47	A Message from an Outside Director
		- 48	Corporate Officers

Editorial Policy
This report is meant to help shareholders and other investors
understand the LINTEC Group and its quest to achieve sustainablegrowth and contribute to the further development of society as a whole.
Based on the International Integrated Reporting Framework releasedby the International Integrated Reporting Council in December 2013, in
addition to performance and financial information, this report also
introduces the technological capabilities, human resources, and other“intangible assets” accumulated by the LINTEC Group that are of thevariety not listed in the financial statements.

50 FINANCIAL SECTION
		 - 51	Management’s Discussion and Analysis
		- 53	Operating Risks
		- 54	Financial Summary
		 - 56	Consolidated Balance Sheet		 - 58	Consolidated Statement of Income
		 - 58	Consolidated Statement ofComprehensive Income
		 - 59	Consolidated Statement of Changes in
Net Assets
		 - 60	Consolidated Statement of Cash Flows
		 - 61	Notes to Consolidated Financial
Statements
		 - 84	Management’s Report on Internal
Control over Financial Reporting		 - 85	Report of Independent Auditors

Information that could not be contained within this report is available on
the following websites.
IR Website

CSR Website

http://www.lintec-global.com/ir/

http://www.lintec-global.com/csr/

87 Investor Information
REPORTING PERIODThis report covers the period from April 1, 2016 to March 31, 2017.
However, some of the information includes content from April 2017 onward.
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements, such as forecasts of business results,
based on information currently held and assumptions that have been judged as reasonable
by the Company. The Company cannot guarantee the accuracy of these statements ordefinitively assure the realization of future numerical targets and policies. Actual businessresults, etc., may vary due to various factors and circumstances.

LINTEC ANNUAL REPORT 2017

To All Our Stakeholders
LINTEC has a 90-year history of building on original technologies andhuman resources to deliver a diverse product lineup ranging fromadhesive products for labels for food and daily necessities to products
for the semiconductor and optical display industries.
The name LINTEC reflects our employees’ commitment to linking
together people and technology to open up new business domains andplay a part on the global stage. Our motto, “Sincerity and Creativity,”
expresses our fundamental values as a manufacturer—openness to all
our stakeholders and a spirit of innovation as we take on the challenges of new product development.
We will continue to strive for sustainable growth driven by the social
contribution from value that only LINTEC can create.
Hiroyuki Nishio
Representative Director
President, CEO and COO

Company Motto

Sincerity and Creativity

Mission Statement
The company name LINTEC derives from “linkage” and “technology,” two key components of our business philosophy,
which emphasizes the importance of close relations, inside and outside the company, and leading-edge R&D programs.
By bringing these together to develop innovative solutions, we have established a reputation in Japan and overseas as adynamic and reliable company that contributes to the prosperity of our stakeholders, to the growth of our industry, andto a brighter future for society as a whole. And underpinning all of our business activities is an unwaveringemphasis on “Sincerity and Creativity,” the twin values enshrined in our company motto.

For tomorrow we build today
LINTEC ANNUAL REPORT 20171

COVER STORYLINTEC’s History
Since our founding in 1927 as FUJI SHOKAI, we have steadily grown through constant development of technologies and products that anticipate the needs of the times. Since the 1990 merger of three companies to form
LINTEC Corporation, the Group has been stepping up globalization. Today, LINTEC products play important roles
in a wide range of countries.

Accumulated Technology Capabilities
Established in 1927 as a manufacturer of gummed tape for packaging, FUJI SHOKAI significantly expanded its businesses due to thedemand for cardboard boxes, which were rapidly being used as a replacement for wooden boxes. In 1960, we began selling adhesive
papers for labels and subsequently entered the adhesive film field, thereby laying the foundations of our current mainstay businesses.
In the 1970s, the Company diversified into products for motorcycles, automobiles, and interior / exterior decoration. After changing its nameto FSK CORPORATION, the Company entered the semiconductor field in 1986 through the development of innovative products. In theseways, the Company’s business domains broadened as times changed. LINTEC Corporation came into being in 1990 through a three-way
merger with SHIKOKU PAPER CO., LTD. and SOHKEN KAKO CO., LTD. This led to significant extension of the technology domain into
upstream areas such as papermaking.

Time of establishment

Gummed tape

UV curable dicing tape

Net Sales¥102,608 million

FSK CORPORATION+

Apr. 1990+

Formed through themerger of three companies

SHIKOKU PAPER CO., LTD.
SOHKEN KAKO CO., LTD.

LINTEC Corporation

FY1991

1992

1993

1994

1995

1996

1997

1998

1999

Main Highlights

2

Apr. 1927
FUJI SHOKAI established in
Sugamo, Tokyo
Started production and sales ofgummed tape for packaging

Mar. 1960
Started production and sales ofadhesive papers for labels andlater commenced production andsales of adhesive films

Oct. 1934
The Company reorganized toestablish FUJI SHIKOCORPORATION

1970s
Expanded business in industrial
fields such as decorative materials
for interiors and exteriors,
motorcycles, automobiles andothersLINTEC ANNUAL REPORT 2017

Oct. 1984
Company name changed to
FSK CORPORATION

1991
Made full-scale entry into LCDrelated product field

1986
Developed UV curable dicing tapeand made full-scale entry into thesemiconductor-related product field

Feb. 1994
Singapore Office opened
May 1994
PT. LINTEC INDONESIA
established as manufacturingbase for adhesive products forlabels2000

2

Globalization and Reinforcement of R&D Capabilities Usher in a New Growth Phase
Following the merger, LINTEC entered the field of optically functional films for Liquid Crystal Displays (LCDs) in 1991. It was around thistime that the Company became proactive in setting up plants and offices overseas. A new building for the research center that is currently our core R&D facility was completed in 1995 in Saitama Prefecture.
Globalization has progressed further since the turn of the century with more rapid expansion of manufacturing and sales offices,principally in China and Southeast Asia. R&D capabilities were strengthened in 2015 with the addition of the Advanced Technology
Building, a new research facility. Three acquisitions in the U.S. and Europe in 2016 marked a big stride forward in our expansion and thestart of a new growth phase.

¥250,000 million

LINTEC KOREA, INC.

Advanced Technology Building

MACTAC AMERICAS, LLC¥205,975 million

2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018
(Forecast)(Forecast)(Fiscal year ended / ending March 31)

Dec. 1995
New building for Research Center
constructed in Saitama Prefecture
Apr. 2000
LINTEC INDUSTRIES (MALAYSIA)
SDN. BHD. established as
manufacturing base forelectronics-related products

Jun. 2002
LINTEC (SUZHOU) TECHCORPORATION in China establishedas manufacturing base for adhesive
products for labels
Sep. 2004
LINTEC KOREA, INC., established as
manufacturing base for electronicsrelated products

Jun. 2011
LINTEC (THAILAND) CO., LTD.,established as manufacturing basefor adhesive products for labels
Jan. 2015
LINTEC ASIA PACIFIC REGIONAL
HEADQUARTERS PRIVATE LIMITEDin Singapore establishedMay 2015
Advanced Technology Building
constructed in Saitama Prefecture
Dec. 2016
Acquired MACTAC AMERICAS, LLC
in the United States

LINTEC ANNUAL REPORT 20173

COVER STORYLINTEC’s Distinct Features

Cultivated Technologies Realize

Our Strengths

We are drawing on the original technological capabilities we have built up over the years to establish a firm position
as a leading company in adhesive products and specialty papers. Based on our philosophy of “customer first” andinnovative new ideas, we will continue to work on developing high-value-added products we can offer to customers
to meet their diverse range of needs.
LINTEC’s Competitive Advantages— Integrated Production System for Adhesive Products and Provision of Comprehensive Solutions
LINTEC’s expertise extends beyond adhesives development andproducts, we bring to market large numbers of unique products

coating to proprietary technology in the manufacture of base paper

designed for use with upstream technologies, such as industrial-use

for release papers, the development of release materials and related

release papers and films and specialty papers.

coating processes, and facestock improvement coating. The GroupWe also develop and manufacture equipment that fully leverages

has thus built an integrated production system for adhesive products.

the properties of our adhesive materials. This includes labeling

The resulting ability to manufacture and procure release papers andmachines that automatically apply labels to packaging and equipment

films for adhesive products in-house gives us advantages in quality,

used in semiconductor production. Comprehensive solutions incorpo-

costs, and delivery lead times. Additionally, by combining different

rating materials and such equipment are another advantage of theprocessing technologies, we are able to create adhesive products for

LINTEC Group.

use in a diverse range of fields. In areas other than adhesive

Integrated Production System
for Adhesive Products

Surface Improvement Processing

Adhesive Development andCoating, and Bonding

Surface Improvement
Facestock
Adhesive

Release Agent Development
and Coating
Papermaking

Release Agent
Base Paper

Base Paper / Film
Base Paper / Film

Printing
and Industrial
Materials
Products

4

LINTEC ANNUAL REPORT 2017

Electronic
and Optical
Products

Related Equipment Development

Paper
and Converted
Products

Stable Business Structure That Is Not Susceptible to Market Volatility in Any Single Industry
In recent years, the earnings drivers among LINTEC’s diverse range

The production of a wide range of products in growth and founda-of products have been products for the semiconductor, electroniction businesses and sales to a broad range of industries without

component, and LCD industries, which have undergone rapid market

reliance on any particular industry are the distinguishing characteris-

growth. Meanwhile, sales and profit fluctuations have been compara-tics of our business structure. The resulting steady earnings that are

tively small for mainstay adhesive materials for labels used for food,not susceptible to market volatility in any single industry are one ofdaily necessities, pharmaceuticals, stationery, and consumer elec-

our strengths.

tronics, and these products can be seen as foundation business thatprovides a firm underpinning for our earnings.

Food

Consumerelectronics

Daily necessities

Logistics

Automobiles

Pharmaceuticals

Printing

Semiconductors

Stationery

Architecture /Interior

Advertisement

Electronic
Components

27 consecutive years of operating income

LCDs¥20,000 million¥16,595 million¥4,687 million

FY1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

(Forecast)(Fiscal year ended / ending March 31)

LINTEC ANNUAL REPORT 2017

5

COVER STORYLINTEC’s Business Model

Business Model That Realizes Sustainable Growth

The numerous assets amassed by the LINTEC Group since the time of its founding are vital capital for our businessactivities and the driving force in our manufacturing as we respond to wide-ranging social needs. We will continue toreturn the resulting profits to our stakeholders and invest with an eye to the future as we seek to create new value.

Assets Buildup

Business Segments

CultivatedTechnologies

P.22-29

Printing andIndustrial Materials Products


P.30-33• Printing & Variable Information
Products Operations• Industrial & Material Operations

Comprehensive
Product supply system
in Japan and Overseas
P.34-37

Diverse Human
Resources andCorporate Culture

INPUT

Electronic and Optical
Products
• Advanced Materials Operations• Optical Products Operations

P.38-39

Solid Financial
BasePaper andConverted Products

P.50-83

Relationships ofTrust with
Stakeholders• Fine & Specialty Paper Products
Operations• Converted Products Operations

Cooperation
Partners

6

LINTEC ANNUAL REPORT 2017

Trinity of Business
Activities with
Sales, R&D and
Production
P.20-21OUTPUTAccumulation & Advancement

Main Products

Providing Value

Employees

Plants / Equipment

Solves Our
Customers’
Issues with Wide
Variety of Products

ProfitShareholders

Communities

LINTEC ANNUAL REPORT 20177

Performance Highlights
LINTEC Corporation and its consolidated subsidiaries
Fiscal years ended March 31

Net Sales

Operating Income / Operating Profit Margin¥ Billion
250¥206.0billion¥ Billion
25

Operating Income

206.0

200
150

¥16.6

billion

8.1

%

50
0

2013

2014

2015

2016

20

12

16.6
15

Operating Profit Margin

100

%
15

10

6

5

3

0

2017

9

8.1

2013

2014

2015

2016

2017

0

Operating Income
Operating Profit Margin (right)

Profit Attributable to Owners of Parent / Return on Equity (ROE)¥ Billion
15

Profit Attributableto Owners of Parent

¥11.5

%
10

11.5 812

billion

6.6

9

¥
200

Net Income per Share¥158.69

6

ROE

6.6

Net Income per Share / Cash Dividends per Share¥100

158.69

80

160

66
120

60

80

40

40

20

Cash Dividends per Share

%

6

4

3

2

0

2013

2014

2015

2016

2017

billion0
2017

Cash Dividends per Share (right)

274.2

240

178.7

¥ Billion
40

Net Cash Provided byOperating Activities

¥24.4

24.4
20

billion

Net Cash Used in
Investing Activities

120¥(48.4)

60

2013

2014

Total Assets
Net Assets

2015

2016

2017

Net Cash Provided by
Financing Activities¥5.3

billion

5.3
0–20

billion–40–60(48.4)
2013

2014

2015

2016

2017

Net Cash Provided by Operating Activities
Net Cash Used in Investing Activities
Net Cash Provided by (Used in) Financing
Activities

LINTEC ANNUAL REPORT 20172016

Cash Flows

0

8

2015

Net Income per Share

Net Assets

billion2014

ROE (right)

180¥178.7

2013

Profit Attributable to Owners of Parent¥ Billion
300¥274.200

Total Assets / Net Assets

Total Assets¥66

P. 54
Financial Summary
Please see pages 54–55.

Capital Expenditures

Depreciation and Amortization¥ Billion
15

¥10.8

billion¥ Billion
15

12

10.8

6

6

3

3

2013

2014

2015

2016

2013

2014

2015

2016

2017

Number of Employees¥ Billion
10

7.6

8

4,760

4,000
3,000
2,000
1,000

2
0

4,760

5,000

4

2013

2014

2015

2016

0

2017

CO2 Emissions

2013

2014

2015

2016

2017

Toluene Handling Volume / Toluene Emission Volume
Thousand tons
250

thousand tons

7.5

0

2017

6

195

12
9

R&D Expenses

billionbillion

9

0

¥7.6

¥7.5

Toluene Handling Volume

195

200

7,730

tons

150

Tons
10,000

7,730

8,000
6,000

Toluene Emission Volume

471

100
50

4,000

tons

2,000

471
0

2013

2014

2015

2016

2017

0

2013

2014

2015

2016

2017

Toluene Handling Volume
Toluene Emission Volume

LINTEC ANNUAL REPORT 20179

MANAGEMENT STRATEGY

A Message from the President

Moving Forward
With a Focus on
The Future

Hiroyuki Nishio
Representative Director
President, CEO and COO

10

LINTEC ANNUAL REPORT 2017

The whole company is working as one to achieve the goals of our new medium-term business plan, LINTEC INNOVATION
PLAN 2019 (LIP-2019), which was introduced in April 2017 and continues through the fiscal year ending March 31, 2020.
We will be approaching our tasks in a spirit of innovation and challenge throughout the plan’s three years.
Review of LIP-2016, our previous medium-term

overseas subsidiaries. Reorganization made little head-business plan

way at MADICO, INC. in the U.S., and LINTEC (TIANJIN)

We were able to build a platform for future growtheven though we fell short of numerical targets.

INDUSTRY CO., LTD. in China, and PT. LINTEC

A major achievement of the three years under LIP-2016

action. We were also affected by an economic slowdown in

was the completion of the Advanced Technology Building,

China and other emerging countries in Asia. As a result,state-of-the-art research facilities in Japan in May 2015.

we fell far short of the LIP-2016 targets of ¥240 billion in

Its large-scale pilot coaters, with their close resemblance

net sales and ¥20 billion in operating income in the fiscal

to mass-production facilities in our plants, and its cutting-year ended March 31, 2017, the plan’s final year.

INDONESIA suspended operations for a time due to strikeedge analytical equipment have significantly increased the
speed of the product development process. Overseas, weOverview of LIP-2019

lished a company in Singapore, LINTEC ASIA PACIFIC

We are building on the previous medium-termbusiness plan’s successes and disappointments
as we aim for new goals.

REGIONAL HEADQUARTERS PRIVATE LIMITED, to oversee

The new plan we have drawn up, LIP-2019, reflects our

inclusive overall business strategy planning and imple-

desire to learn from the successes and disappointments

mentation in this region. We were also active in strength-of LIP-2016 and move on to our next growth stage. Its

ening our business base in Europe and North America

basic policy is “Deepening innovation aimed at drivingwith three acquisitions in October–December 2016, buying

new growth.” The key numerical targets are consolidated

MACTAC AMERICAS, LLC and VDI, LLC in the U.S. andnet sales of ¥270 billion, operating income of ¥25 billion,

purchasing stock in LINTEC GRAPHIC FILMS LIMITED in

and an operating profit margin and ROE of more than 9%.

the United Kingdom.

The plan has four key initiatives, as shown on the next

fleshed out our production, sales, and delivery network in
Southeast Asia and India, and in January 2015 we estab-

However, there were weak performances from some

page.

LINTEC INNOVATION PLAN 2019 (LIP-2019)
Period: From April 2017 to March 2020
Basic Policy: Deepening innovation aimed at driving new growth
Quantitative Targets:
Major numerical targets in the final year of LIP-2019, the fiscal year ending March 31, 2020 (on a consolidated basis)

Net sales

Operating income

Operating profit margin

270.0 billion¥

25.0 billion

More than

¥

9%

ROE
More than

9%

LINTEC ANNUAL REPORT 201711

MANAGEMENT STRATEGY

A Message from the President

LIP–2019 Key Initiatives 
1 Strengthening of regional strategy( 1 ) Increase in the domestic share and development of new markets and new demands( 2 ) Strategic investment and business expansion in the Asian region( 3 ) Expansion of the existing fields in Europe and America and the pursuit of synergies with the acquired subsidiaries
2 Creation of new value( 1 ) Creation of products for differentiation which exceed customer needs( 2 ) Development of next-generation products anticipating market changes
3 Bolstering the corporate structure( 1 ) Ensuring soundness of the Group companies and continual increase in earnings( 2 ) Promotion of cross-sectional operational reforms( 3 ) Further promotion of cost structure reforms
4 Activities for realizing a sustainable society( 1 ) Promotion of business activities conducive to solving social concerns( 2 ) Promotion of work-style reforms, fostering of diverse human resources and encouragement of their active participationin the workplace

Key initiatives

analysis of the various issues facing our customers and

1 Strengthening of regional strategy

their specific requirements. To this end, it is important

Regional strategy is to be strengthened in global markets

that our sales personnel form a detailed picture of theirwith a focus on Printing and Industrial Materials Products.

customers’ requirements from day-to-day contact andIn Japan, where some markets have matured, LINTEC will

share the information with others in the Company so thatwork to expand share and create new demand by offeringbusiness operations and the R&D division can study it

new products and new applications while aiming for dif-

together. We will also aim to respond more promptly thanferentiation on cost and service in established products.

before to customer expectations by making full use of the

In Asia, LINTEC ASIA PACIFIC will be given increased

Advanced Technology Building’s testing facilities tofunctionality forging stronger links between manufacturingsmooth the transition from materials development to theand sales companies and we will seek to expand businessproposal of manufacturing processes. New materials

through such measures as increasing local raw materials

development centered on electronics, optics, automobiles,

procurement, launching new products tailored to local

the environment, and energy will be another priority as it

demand, and undertaking strategic M&A. Further develop-

will play a key role in future growth.

ment of our markets in Thailand, Indonesia, and India will
be a particular focus. In Europe and North America, we

3 Bolstering the corporate structure

will utilize the sales channels and technological strengths

In March 2017, we announced the liquidation of LINTEC

of our three 2016 acquisitions to the full and realize Group(TIANJIN) INDUSTRY CO., LTD., which is a label printing

synergies quickly. MACTAC AMERICAS products aremachine manufacturer and marketer, and we are also

already being offered to customers in Asia and we lookworking with some urgency to turn around other overseas

forward to further developments along these lines.

Group companies where earnings are weak. In June 2017,
under a radical management rationalization for MADICO,

12

2 Creation of new value

INC., we announced full withdrawal from PV backsheets,

We want to provide original LINTEC value-added products

restructuring of the production system, and downsizing ofand services derived from identification and careful

the workforce. We will be aiming to further strengthen the

LINTEC ANNUAL REPORT 2017

Group structure with measures including Group company
reorganization in Japan.
At the same time, we want to make effective use of the

A message to our shareholders and investors
Having fallen short of our previous medium-term business plan’s targets, we are aiming to keep the PDCA

information system infrastructure we have built and inte-

cycle* turning as we pursue the LIP-2019 targets, so that

grated into our operations to raise levels of efficiency in

we identify areas where we deviate from plan, investigate

our back-office operations, in particular, and optimize ourthe causes thoroughly, and respond promptly with correc-

allocation of human resources. We will also be paying

tive action. In line with the plan’s basic policy and with theheed to costs from the stage of product design and devel-

objectives of deepening the innovation LINTEC has built

opment onward and undertaking cost restructuring initia-

up over the years and generating new growth, we are pro-tives in procurement, production, and distribution. We

moting a radical rethink of individual employees’ mind-set

expect these measures to produce cost savings of ¥2.1 bil-and business practices.

lion over three years.

Increasing our employees’ level of satisfaction is crucial
to enhancing customer satisfaction and hence elevating

4 Activities for realizing a sustainable society

our earnings. We will therefore strive to create an even

LINTEC has long been an enthusiastic corporate citizen in

more rewarding and happier workplace for all our

respect of corporate social responsibility (CSR). We will be

employees in pursuit of sustained growth.

looking to further promote business activities with an awareness of the issues brought up in the Sustainable Development

As we move forward, we would like to ask our shareholders and investors for their continued support.

Goals (SDGs), such as environmental and population-related
issues, and we expect this effort to be reflected in LINTEC’s
growth and social development. At the same time, we believethat a dynamic workplace where a wide variety of people canwork together is essential for sustainable growth, and we will
strive to enhance the working environment with Group initia-

August 2017

tives in areas such as work-style reform, female participation

Hiroyuki Nishio

in business activities, jobs for persons with disabilities, andRepresentative Director

staff training at Group companies overseas.

President, CEO and COO

We are aiming to keep the
PDCA cycle turning as we
pursue the LIP-2019 targets.

*PDCA cycle: Plan-Do-Check-Act cycle for continuous process improvement
through repetition of its four phases

LINTEC ANNUAL REPORT 201713

MANAGEMENT STRATEGY

A Message from the CFO

Through active dialogue withshareholders and investors,
we will continue to improve
corporate value.

Hitoshi Asai
Director
Vice President Executive Officer and CFO

Review of performance in the fiscal year ended Marchcosts and the losses at the Chinese subsidiary currently

31, 2017 and performance outlook for the fiscal year

undergoing liquidation will not recur, and losses at PT.

ending March 31, 2018

LINTEC INDONESIA should narrow following the resolu-

Business conditions were severe in the fiscal year ended

tion of its labor issues. In addition, the three acquisitions

March 31, 2017, with a strong yen and a slowdown in China

will make a 12-month contribution to consolidated busi-

and other Asian emerging countries. Profits were also

ness results and our business related to semiconductors

squeezed by weak performances at some overseas sub-and electronic components is expected to trend strongly.

sidiaries and one-off costs arising from three acquisitions

We therefore project year-on-year growth of 21.4%, toin Europe and North America. As a result, consolidated¥250.0 billion, for net sales; growth of 20.5%, to ¥20.0 bil-

net sales declined 2.2% year-on-year, to ¥206.0 billion, andlion, for operating income; and growth of 17.9%, to ¥13.5

operating income declined 6.2%, to ¥16.6 billion. Profit

billion, for profit attributable to owners of parent.

attributable to owners of parent increased 5.1% year-onyear, to ¥11.5 billion, as there were gains on sales of invest-

FY 2017 Business Results and FY 2018 Forecasts (year-on-year)

ment securities and a boost from tax effect accounting.
The three acquisitions involved goodwill of approximately ¥33.5 billion, which is to be amortized 10 years.
Profits will be heavily impacted during this period and weare therefore seeking early realization of synergies insales channels and technology.
Major negative influences in the fiscal year ended March
31, 2017 should be eliminated in the fiscal year ending
March 31, 2018. The one-off, three-company acquisition

14

LINTEC ANNUAL REPORT 2017

FY2017FY2018 Forecasts

Net Sales¥206.0 billion(-2.2%)¥250.0 billion(+21.4%)

Operating Income¥16.6 billion(-6.2%)¥20.0 billion(+20.5%)

Profit Attributable to
Owners of Parent¥11.5 billion(+5.1%)¥13.5 billion(+17.9%)(Fiscal year ended / ending March 31)

Dividends form the basis of our thinking on returns toForeign exchange impact
Yen appreciation is positive for our procurement of pulp

shareholders, which we regard as one of the most impor-and petrochemical raw materials, but overall it is a disad-tant management issues. We aim to make stable and con-vantage because it reduces the yen translation of over-tinued returns while maintaining a balance with retainedseas subsidiaries’ earnings and has a negative impact onearnings to support a healthy balance sheet. In the fiscal

the LINTEC parent’s transactions with overseas subsidiar-

year ended March 31, 2017, we paid an annual dividend ofies. In the fiscal year ended March 31, 2017, the yen appre-¥66, an increase of ¥12 over the previous year. In the fiscal

ciation was a negative of approximately ¥6.8 billion foryear ending March 31, 2018, we plan to pay an annual divi-sales and ¥2.3 billion for operating income. The Group’s

dend of ¥66 based on our projection of net income per

overseas sales ratio was 37.8% and foreign exchangeshare of ¥187.11.

impact will now increase further following the consolidation of the three acquisitions.

Cash Dividends per Share

To date, operating income sensitivity to ¥1 movement
against the U.S. dollar has been around ¥100–¥200 million,
but it will increase as a result of the three-company consolidation. The Group undertakes many transactions in
Korean won, Chinese yuan, and Taiwan dollars and this
aspect of impact from foreign currency movement also
warrants attention.

¥
80

66
60

40

42

48

66

54

34

20

Growth investments and shareholder returns

0

We intend to continue making proactive use of cash for2013

capital expenditures in growth areas and M&A. Where
necessary, we will finance business expansion with loans.

2014

2015

2016

2017
2018
(Forecast)(Fiscal years ended / ending March 31)

Dialogue with shareholders and investors

I believe there are various views on ROE enhancement

We believe a good understanding of LINTEC is the key

and our view is basically that ROE will rise if we increase

prerequisite for constructive dialogue with shareholders

profits steadily.

and investors. LINTEC is sometimes difficult to understand due to the wide diversity of its business, and views
differ depending on the observer. It is important for every-

ROE

one to have a proper understanding of the true situation,

%
8

6

7.2
5.6

6.4

5.8

6.6

and its weaknesses. To this end, we have to communicate
information at appropriate times and in appropriate ways.
We will seek to maintain diverse forms of active dialogue4with shareholders and investors that will lead to sustained
growth for LINTEC, enhancement of corporate value over20including LINTEC’s special characteristics, its strengths,

the medium and long term, and appropriate pricing of our
2013

2014

2015

2016

2017

shares.

(Fiscal years ended March 31)

LINTEC ANNUAL REPORT 201715

SPECIAL FEATURE

The LINTEC Global Network
LINTEC has been very active in globalizing its business in recent years and currently has plants and offices in
19 countries and regions. “Strengthening of regional strategy” is a key initiative in the medium-term­business plan LIP-2019 as LINTEC strives to build up businesses in Japan and overseas. Below we outline thehistory of LINTEC’s overseas business expansion and profile the three companies in Europe and North
America that became subsidiaries in 2016.

Overseas Business History
In its endeavors to establish a label market in Japan, the Company sought to obtain information on advanced adhesive label technologies in Europe and the U.S. from an early stage in its history. “A-100 type” label printing machine the Company developed in1973 as part of its efforts to expand sales of adhesive products for labels attracted great attention from Europe, the U.S., and Asia.
LINTEC’s first overseas office was an office in Beijing that opened in 1985. In addition to cultivating label markets in China, theCompany commenced development of overseas business in window films for automobiles and buildings with the acquisition of
MADICO, INC. in the U.S. in 1987.
In 1994, LINTEC opened a sales office in Singapore to expand sales of semiconductor-related products. The following year thisoffice was incorporated as LINTEC SINGAPORE PRIVATE LIMITED and its business was extended to products such as adhesive
products for labels. It subsequently became the strategy center for sales network expansion in Southeast Asia.
On the manufacturing side, the Group’s first Asian adhesive products plant, PT. LINTEC INDONESIA, was also established in
1994. Thereafter the product supply structure was strengthened by building plants in Malaysia, China, South Korea, and Taiwan
based on the concept of local production, which means that we manufacture closer to the customer and thereby provide our customers with a stable supply of products.
Following the establishment of a production base in Thailand in 2011, sales offices were set up in quick succession acrossSoutheast Asia and in India, and in January 2015 LINTEC ASIA PACIFIC was established in Singapore to oversee all sales bases in
the region.
In 2016, LINTEC secured a foothold for full-scale business development in the European and North American markets withthree acquisitions in the U.S. and the U.K.

16

LINTEC ANNUAL REPORT 2017

Manufacturing subsidiary‌Sales subsidiary, OfficeHolding company, Regional headquarters
Plants, Branch offices, and R&D offices of subsidiaries

Overseas Sales / Overseas Sales Ratio
The Group’s overseas sales in the fiscal year ended March 31, 2017 were ¥77.8 billion, an increase of approximately ¥36 billion
compared with 10 years previously. The overseas sales ratio rose from 21.8% in the fiscal year ended March 31, 2007 to 37.8%.
It is expected to be close to 50% from the fiscal year ending March 31, 2018, as it will include the full-year consolidated contribution of the three companies converted to subsidiaries in the fiscal year ended March 31, 2017.
Performance trends

Overseas sales have increased approximately ¥36 billion
over the last 10 years with average annual growth of 6.4%.
Overseas

Overseas¥41.9 billion¥77.8 billion

FY2007
Net Sales¥

Approx.
1.9 times

192.7 billion

FY2017
Net Sales¥

206.0 billion
Fiscal year ended
March 31

Fiscal year ended
March 31

Japan

Japan

21.8%

Ratio of overseas sales to net sales

37.8%

LINTEC ANNUAL REPORT 201717

SPECIAL FEATURE

Focus
We profile the three 2016 acquisitions in the U.S. and the U.K. with comments from company representatives.

MACTAC AMERICAS, LLC
Adhesive materials manufacturer MACTAC has a solid position in
North America, where the market is growing at a steady 2%–3%
annually and accounts for an approximately 30% share of the global
adhesive label materials market. Working with three manufacturingbases in the U.S. and Mexico, it has good relationships with its morethan 1,000 customers and possesses a long supply record andstrong brand. In addition to adhesive products for labels, MACTAC
handles decorative graphic sheets that can be used as wall hang-Head officeings and a variety of industrial and medical tapes. Its sales total
approximately ¥35 billion.
MACTAC complements LINTEC’s strengths in adhesive films with afocus on adhesive papers and excels in hot-melt adhesive formulation
technology that the LINTEC Group did not possess before. It also
brings high-speed coating facilities to the Group for the first time. The
company’s extensive sales network in North America will facilitate therollout of LINTEC products in this market, and by engaging in productdevelopment that combines the two companies’ technologies, LINTEC
will seek to grow business in other regions as well.

Columbus Plant

MACtac Americas, LLC
Head office: Ohio, U.S.A.
Established: 1959
Number of employees: 496(As of December 31, 2016)
Net sales: ¥34.2 billion
Operating income: ¥3.6 billion(Year ended December 31, 2016)
Acquisition price: Approx. $270 million(Debt assumption is not included)

Edward LaForge, President
The true strength of MACTAC comprises our employees, technology, and culture. The innovative
spirit and strong R&D team at MACTAC have led to unique technology solutions, including our hotmelt adhesive formulation. We believe combining LINTEC and MACTAC technologies will strengthen
our market positions, and we are confident that “our products,” including LINTEC’s, will extend theirglobal reach. What’s more, we hope to fuse our respective corporate cultures, technologies, andstrategies to generate the benefits of positive synergy early on, and contribute to the Group.

18

LINTEC ANNUAL REPORT 2017

VDI, LLC
Based in the U.S. state of Kentucky, VDI is a manufacturer of functional films. The company uses metallizing technology, which forms
thin metal layers on film surfaces, to make metal vapor deposition
films and sputtering* films that it markets itself. As it is a supplier to
MADICO, LINTEC’s window film manufacturing subsidiary in the U.S.,
there is potential for cost savings in materials procurement. The
LINTEC Group has not had metallizing technologies before and will be

VDI, LLC

using them in product development to roll out business in new fields.

Head office: Kentucky, U.S.A. Established: 1971
Number of employees: 36 (As of December 31, 2016)
Net sales: ¥1,070 million
Operating income: ¥20 million (Year ended December 31, 2016)
Acquisition price: $26 million (Debt assumption is not included)* Sputtering: The ejection of particles by bombarding materials such as metals and oxides athigh energies in a vacuum and the deposition of the particles on films and other surfaces.

David Bryant, President
We believe “Quality, Innovation, and Service” are three keys to our success. Producing quality
products generates satisfied customers; innovation allows us to serve many markets across theglobe; and excellent client service generates future business. We believe VDI and LINTEC have
many things in common, as manufacturers. We both are very active in the window film market
and look for new technologies to broaden opportunity. From now on, we at VDI, as a LINTEC family
member, will absorb various things and contribute to the family with better performances.

LINTEC GRAPHIC FILMS LIMITED
LINTEC GRAPHIC FILMS signed a trademark licensing agreementwith LINTEC in 2010, thereby adopting the Company’s name, and is
the U.K. sales company for adhesive products, with a focus on the
Company’s adhesive products for labels, graphic sheets, andwindow films. Its name will be changed to LINTEC EUROPE (UK)
LIMITED before the Group exhibits at the world’s largest label event,Labelexpo Europe 2017, in late September in Belgium. LINTEC will

Lintec Graphic Films Limited

be aiming to accelerate new customer acquisition in Europe by

Head office: Buckinghamshire, U.K. Established: 1993
Number of employees: 18 (As of October 31, 2016)
Net sales: ¥850 million
Operating income: ¥130 million (Year ended October 31, 2016)
Acquisition price: £7.3 million

making even more effective use than before of the company’s marketing strengths and wide-ranging sales network.

Andrew James Voss, Managing Director
LINTEC’s corporate culture is ethical, creative, and positive. The underlying culture of LINTEC
GRAPHIC FILMS, LINTEC’s business partner, is very similar to that of the LINTEC Group. Having
strengthened our ties with LINTEC EUROPE B.V. through our change of name, we will be aiming
to expand sales in Europe. It’s highly rewarding work. We will continue providing our customers
better products and services to help LINTEC become recognized in Europe as an innovation
leader.

LINTEC ANNUAL REPORT 201719

CORPORATE VALUE INITIATIVES

LINTEC’s Value Creation

Three Divisions
Working as One
As a manufacturer, LINTEC conducts its business primarily through the Sales
Division, which interfaces with customers on a day-to-day basis; theResearch & Development Division, which creates new technologies and products;
and the Production Division, which is responsible for the stable supply of high-quality
products. The three divisions work in unison within all processes, from development
to sales, enabling LINTEC to create original value and provide products that makecustomers happy. Research personnel accompany sales staff to customers to get a
precise picture of customer requirements, while sales and research staff visit
production sites to consult on solutions for particular issues that arise.

20

LINTEC ANNUAL
ANNUALREPORTREPORT2017
2017

SalesLINTEC’s six business operations
produce a wide diversity of products. Materials and equipment
are combined to offer comprehensive solutions to issues facedby customers.

Customer

Research and Development

Production

Original technologies developed over many
years are fused at sophisticated levels in thedevelopment of groundbreaking new products. Market-dialogue R&D, where researchstaff communicate directly with the customer,
is one of LINTEC’s strengths.

State-of-the-art production facilities,
original production technology, andrigorous supply chain management
are deployed to supply a steadystream of safe and high-quality
products to customers.

Human Resources
Our employees lie at the heart of our concerted business activities.
LINTEC seeks to foster human resources, which it regards as an important asset,
and provide them with a congenial working environment.

LINTEC ANNUAL REPORT 201721

CORPORATE VALUE INITIATIVESSales
The Business Administration Division, which is responsible for sales, provides customer coverage throughout Japan
from 11 offices. The Iidabashi office is the largest, with approximately 300 staff in Tokyo, and the network also includes
Osaka and Nagoya. The LINTEC Group has more than 50 production and sales offices in Asia, Europe, and North
America, supplying LINTEC products worldwide.
The Group’s business is divided into six operations, each of which conducts sales activities based on its own strategies. These operations are classified under three segments—Printing and Industrial Materials Products, Electronic
and Optical Products, and Paper and Converted Products—in accordance with product, technology, and market.

Printing & Variable Information Products Operations

Printing and Industrial Materials Products
Industrial & Material Operations

Advanced Materials Operations

Electronic and Optical Products
Optical Products Operations

Fine & Specialty Paper Products Operations

Paper and Converted Products
Converted Products Operations

22

LINTEC ANNUAL REPORT 2017

Share of Net Sales
Paper andConverted Products

Share of Operating Income
Printing andIndustrial Materials
Products¥ 37.1 billion¥ 85.7 billion

18.0 %Net Sales

41.6 %

Paper andConverted Products

Printing andIndustrial Materials
Products¥ 5.8 billion¥ 1.7 billion

34.7 %

Operating Income¥ 206.0 billion¥ 16.6 billion

Fiscal year ended
March 31, 2017

Fiscal year ended
March 31, 2017

Electronic and
Optical ProductsElectronic and
Optical Products¥ 83.2 billion¥ 9.2 billion

40.4 %

10.1 %

55.2 %

Note: Operating income composition data is based on figures before the elimination of intra-segment transactions.

A Message from theGeneral Manager

Makoto Hattori
Director, Managing Executive Officer
General Manager, Business Administration Div.

I became General Manager in April 2017 and feel a strong sensematerials, technology, and services originate from Japan. Japanof responsibility for achieving the goals of the medium-term

therefore remains an important market that merits continued

business plan LIP-2019. The numerical targets of the plan’s final

effort. In Asia, the subsidiaries that have been put in place inyear were compiled on a bottom-up basis so that if each opera-

Southeast Asia and India in recent years are not yet functioning

tion reaches its targets the Group will too. Having failed to reachat full strength, and we will be reorganizing the network in accor-

the targets of the previous medium-term business plan, I intend

dance with changes in market conditions. In Europe and Northto put a structure in place for thorough analysis of the causes if

America, we will aim to expand sales in Printing and Industrial

our performance deviates from target and rapid remedial action.

Materials Products in conjunction with the three companies that“Strengthening of regional strategy” is a key LIP-2019 initia-

became subsidiaries in 2016. In all markets, the most important

tive. It requires us to think about Japan, Asia, Europe, and North

thing is to understand the true demands of the markets, and to

America, for example, as individual markets. This is not a Japan /this end we will take steps to strengthen our communication

overseas divide. Although Japan is said to be a mature market,

with customers.

many of our businesses have a domestic emphasis and most

LINTEC ANNUAL REPORT 201723

CORPORATE VALUE INITIATIVES

Printing and Industrial Materials Products

Printing & Variable Information Products Operations
These operations manufacture and sell the Group’s mainstay adhesive papers and films for labels. In particular, they have an approximately 60% share of Japan’s adhesive film market. Overseas, a manufacturing and sales network is being expanded in China andSoutheast Asia, and in 2016 business expansion also included making U.S. company MACTAC AMERICAS, LLC a LINTEC subsidiary.

Main Products• Adhesive papers and films
for labels

Sales
Results of Fiscal Year 2017

Goal for Fiscal Year 2020

55.1 billion
26.7%

¥

Net Sales¥ 206.0 billion¥

95.5 billion

55.1

Fiscal year ended
March 31, 2017

FY2017

FY2020 (Forecast)(Fiscal years ended / ending March 31)

Business Strategies
The Japanese market for adhesive papers and films for labels is maturing, but we will aim forfurther growth in share by stepping up sales activities tailored to specific regions. Overseas, in thefiscal year ended March 31, 2017, our business was impacted heavily by the economic slowdown in
China and strike action at PT. LINTEC INDONESIA. We plan to review our sales strategies forSoutheast Asia, with LINTEC ASIA PACIFIC playing the central role, while also launching new
products that use local materials. In Europe, we will be aiming to expand sales by exhibiting at theMasaaki Yoshitake
Executive Officer
General Manager, Printing &Variable Information Products
Operations, Business
Administration Div.

24

LINTEC ANNUAL REPORT 2017

world’s largest label event, Labelexpo Europe 2017, in autumn in Belgium, and drawing on themarketing strengths of U.K. company LINTEC GRAPHIC FILMS. In the U.S., we will use MACTACAMERICAS’ sales channels to market LINTEC products while also rolling out MACTAC products inSoutheast Asia.

Industrial & Material Operations
These operations provide an extremely wide range of products, from window films with various functions such as cutting out heatand ultra-violet light when they are attached to building and automobile windows through to automobile-use adhesive products forvehicle body decoration and protection, industrial-use adhesive tapes for bonding components in mobile and other devices,­barcode printers used in production lines and distribution, labeling machines for automated labeling, films for outdoor signs andadvertising, and interior finishing mounting sheets.

Main Products• Window films• Automobile-use adhesive products• Industrial-use adhesive tapes• Barcode printers• Labeling machines• Films for outdoor signs
and advertising• Interior finishing mounting sheets

Sales
Results of Fiscal Year 2017

Goal for Fiscal Year 2020

30.6 billion
14.9%¥

Net Sales¥

30.6

41.5 billion¥ 206.0 billion
Fiscal year ended
March 31, 2017

FY2017

FY2020 (Forecast)(Fiscal years ended / ending March 31)

Business Strategies
A major topic for Industrial & Material Operations is strengthening our overseas business foundation
centered on window films and motorcycle- and automobile-use adhesive products. We have established a good reputation for product quality overseas, and now we need to collaborate with LINTECASIA PACIFIC and the three U.S. and European companies that became subsidiaries in 2016 on fleshing out our sales network and raising brand awareness. Training globally oriented staff and developing
products adapted to local requirements are pressing tasks in this regard. Fundamental business manShuji Morikawa
Director, Executive Officer
General Manager, Industrial &Material Operations,
Business Administration Div.

agement rationalization has been announced for MADICO in the U.S., which is still performing weakly,
and we will also work with our manufacturing bases in Thailand and Suzhou, China to build an optimum
production and sales structure for window films and other products.
In Japan we will be focusing on distribution and automotive applications, and we will also step up oursales promotion activities for signs and graphic sheets in anticipation of growth in demand.

LINTEC ANNUAL REPORT 201725

CORPORATE VALUE INITIATIVESElectronic and Optical Products

Advanced Materials Operations
We are building a unique position in the electronics industry with products such as specialized adhesive tapes that are essential insemiconductor chip manufacturing and mounting processes, and we also make equipment that leverages these tapes’ special
features fully. In addition, we produce release films that are crucial in the production of multilayer ceramic capacitors, which aretiny electronic components. The development of new, next-generation sheet materials is another of our focuses.

Main Products• Semiconductor-related adhesive
tapes and equipment• Multilayer ceramic
capacitor-related tapes

Sales
Results of Fiscal Year 2017

Goal for Fiscal Year 2020

43.0 billion
20.9%
¥

43.0

¥

53.0 billion

Net Sales¥ 206.0 billion
Fiscal year ended
March 31, 2017

FY2017

FY2020 (Forecast)(Fiscal years ended / ending March 31)

Business Strategies
The electronics industry is vibrant but products that are selling well now may not do so in the future. We
constantly strives to anticipate needs so that we can supply our customers with products that meettheir requirements just when they need them. Demand for quality in our products continues to rise year
after year as end products increase in sophistication and capacity while becoming thinner. We will bestrengthening our ties with suppliers as we strive for a stable supply of high-quality products.
We think that demand for semiconductors and electronic components will rise significantly going
Takeshi Kaiya
Executive Officer
General Manager, Advanced
Materials Operations,
Business Administration Div.

26

LINTEC ANNUAL REPORT 2017

forward due to the growth of the Internet of Things (IoT) and the introduction of next-generation,
high-speed communications. We will aim to meet our targets by developing next-generation
products, such as optically clear adhesive sheets for automobile panels, as a fourth pillar of operations to stand alongside our established pillars of semiconductor-related adhesive tapes and equipment and multilayer ceramic capacitor-related tapes.

Optical Products Operations
We deploy our development technologies for special adhesives and surface coating materials and precision coating technology
and use cutting-edge production facilities to provide adhesive processing for optically functional films such as polarizing films andretardation films that are used in LCDs. We also undertake surface improvement processing for polarizing films, such as antiglare
hard coat processing, which protects films from scratches and reduces reflectivity.

Main Products• Polarizing films and retardation films(adhesive processing)• Polarizing films(surface improvement processing)

Sales
Results of Fiscal Year 2017

Goal for Fiscal Year 2020

40.2 billion
19.5%¥

40.2 ¥ 40.0 billion
Net Sales¥ 206.0 billion
Fiscal year ended
March 31, 2017

FY2017

FY2020 (Forecast)(Fiscal years ended / ending March 31)

Business Strategies
The optical display market is in a period of major change as organic light-emitting diode (OLED)
displays become more widespread and Chinese LCD panel makers emerge. To survive this difficult
period successfully, we believe it is important to listen to our customers and then think and act.
While the market shift from LCDs to OLED displays is gradually progressing, the market size forthese displays is still small, meaning that they do not have a significant impact on our businessat the moment. However, we must pay close attention to the level of quality that will be demanded
Shinji Ito
General Manager, Optical
Products Operations,
Business Administration Div.

in the future and to how volume and cost will change. We will continue to strengthen ties with ourGroup customer, an optical functional film manufacturer, as we seek to supply high-quality products
utilizing the cutting-edge facilities that started up in 2016 and build an optimal global production
structure for market change.

LINTEC ANNUAL REPORT 201727

CORPORATE VALUE INITIATIVES

Paper and Converted Products

Fine & Specialty Paper Products Operations
We have the leading share in the Japanese market for color papers for envelopes and colored construction papers. We also manufacture and sell specialty papers including oil resistant papers used in food packaging, dust-free papers for use in places such as
clean rooms, high-grade printing papers with special textures, and high-grade papers for paper products used in business cards andpostcards. Our business is currently centered on Japan but we will be undertaking sales activities with an eye on overseas markets.

Main Products• Color papers for envelopes• Colored construction papers• Special function papers• High-grade printing papers• High-grade papers for paper products

Sales
Results of Fiscal Year 2017

Goal for Fiscal Year 2020

16.5 billion
8.0%¥

Net Sales

16.5 ¥ 18.0 billion¥ 206.0 billion
Fiscal year ended
March 31, 2017

FY2017

FY2020 (Forecast)(Fiscal years ended / ending March 31)

Business Strategies
Our market is shrinking as the paperless trend gains traction, and to secure earnings in thisenvironment LINTEC’s medium-term business plan LIP-2019 calls for new product launches tosustain and expand current business in Japan combined with proactive development of newmarkets, including overseas markets.
The market environment is harsh for our mainstay color papers for envelopes, but sales of products that prevent the contents from being seen from the outside are growing steadily. Our new waterToshimi Sugaya
Executive Officer
General Manager, Fine &Specialty Paper Products
Operations, Business
Administration Div.

28

LINTEC ANNUAL REPORT 2017

repellent products have been well received and we want to continue developing and offering suchhigh-value-added products. We will work to expand sales of special function papers, which represent
one of our fortes, in overseas markets, where these papers have yet to fully penetrate.

Converted Products Operations
We endow papers and films with special functions, such as releasability and resistance to water, heat, and abrasion to create
release papers and films that protect the adhesive surfaces of a variety of adhesive products. We also produce casting papers thatare used as patterning papers for placing designs on synthetic leather and casting papers used in the manufacture of carbon fiber
composite material sheets from fibers.

Main Products• Release papers for general-use• Release films for optical-related
products• Casting papers for synthetic leather• Casting papers for carbon fiber
composite materials

Sales
Results of Fiscal Year 2017

Goal for Fiscal Year 2020

20.6 billion
10.0%¥

20.6 ¥ 22.0 billion
Net Sales¥ 206.0 billion
Fiscal year ended
March 31, 2017

FY2017

FY2020 (Forecast)(Fiscal years ended / ending March 31)

Business Strategies
Our business environment is extremely severe due to a variety of factors. These include intensifying price competition due to globalization, the emergence of Chinese manufacturers for casting
papers for synthetic leather, and the temporary decline in demand for passenger planes that use
carbon fiber composite materials brought about by lower crude oil prices.
Amid these conditions, we will strive to increase profits not by engaging in price competition to
respond to the cheap prices of rival companies but rather by offering differentiated quality and services
Yutaka Iwasaki
Executive Officer
General Manager, Converted
Products Operations,
Business Administration Div.

to our customers. To this end, we need to promote our business at an unrivaled pace in terms of everything from launching new products to improving quality and responding to customer inquiries.
Going forward, we will make concerted efforts in product development and improvement focusing
on various key issues, such as developing casting papers for synthetic leather using a brand-new
embossing method, enhancing the durability of casting papers for carbon fiber composite materials,
and increasing the number of solvent-free release papers to respond to the environment.

LINTEC ANNUAL REPORT 201729

CORPORATE VALUE INITIATIVES

Research and Development
As a technology-centered company, we realize that strengthening R&D capabilities is one of our most important management strategies for achieving sustainable growth. Two approaches help us to create both productsthat resolve our customers’ technological issues and products that are unprecedented, innovative, and lead themarket: the developing of functional materials and related processing technologies that leverage our proprietary technological capabilities and a market-dialogue style of research that emphasizes user needs. Goingforward, we will further strengthen our R&D systems to accelerate the speed of product development andcreate new technologies.

Adhesive applications
Surface improvement

Through the development of adhesives and substrates and the com-Through the chemical and physicalbination of related technologies, we

processing of the surfaces of paper

are expanding the range of ﬁelds inand ﬁlm, we are enhancing their

which the basic functions of adhe-characteristics and adding new

sive products, primarily adhesion

functionality.

and release, are utilized.

Four CoreTechnologies
System development

Specialty papers andrelease materials
production

Through the systemization of

We use original papermaking

machinery and equipment andbuilding high-level systems thatdraw on the distinctive characteristics of materials, we are providing
advanced solutions.

technologies and coating, impregnation, and laminating technologies to develop special function
papers and high-value-added
materials that transcend traditional
concepts of paper.

30

Research and Development Structurethat closely resemble factory mass production facilities, in 2015,

The Research & Development Division’s research center has notprovided a structure for smooth flow from R&D to mass produc-

only state-of-the-art research facilities but also a clean room withtion. Approximately 200 research personnel are at work in eightthe same semiconductor-related equipment that is found in thelaboratories and other departments. In addition, the Nano-

production environment of our customers. The addition of the

Science & Technology Center in the U.S. state of Texas is engaged

Advanced Technology Building, with its large-scale pilot coaters

in research in new fields outside our current technology domain.

LINTEC ANNUAL REPORT 2017

R&D Achievements
In the fiscal year under review, R&D expenses incurred by the Group amounted to ¥7.6 billion. The following is an overview of theprincipal R&D activities conducted by each operational segment.
Printing and Industrial Materials ProductsElectronic and Optical Products

Printing and Variable Information Materials

Semiconductor-Related Materials

We continued with our development of functional label materials

Semiconductor packages with flip chips connected by bumps

designed to meet our customers’ required specifications with(protruding electrodes on the circuit) have come into widespreadthe aim of supplying label materials for a diverse range of appli-

use as electronic devices such as smartphones have become

cations precisely when customers need them. We developed athinner and achieved higher performance. We enhanced ourlabel material suitable for cold environments as low as minus

lineup with back grinding tape that protects wafer surfaces

196°C in medical and pharmaceutical fields. It is intended forwithin production processes and can be used with bumps of any

displays and management labels on blood and cell samples andheight. Meanwhile, we also launched a new backside coating

vaccines that are preserved in a frozen state. For displays andtape for flip chips that supports manufacturing processes.

process management in the distribution, medical and pharma-

Functional tapes are essential in the production of intelligent

ceutical sectors, we developed asensors and 3D NAND flash memories that use thin wafers, andgeneral-use new label material thatby bringing such products to market, we play a part in the social

allows for variable information print-

development of IoT.

ing and publishing from small lots.
This new product features tolerabilityof heat, humidity, and alcohol and

Optical Functional Materials

supports direct thermal printers.

We are engaging in the development of adhesives for opticaldisplays. We developed a vehicle display adhesive that preventsthe formation of bubbles on plastic and is resistant to heat,humidity, and bleaching; an adhesive that inhibits corrosion ofCommercial and Industrial Materials

indium tin oxide and other materials used in touch sensors while

We are constantly engaged in the development of functional adhe-also cutting out UV and blue light; and a functional adhesive forsive materials for use in many different industries. Using the lightlarge-screen televisions. As a result of customizing features todiffusion film technology which we have developed for opticalproduce superior performance in areas that particular custom-

displays, we succeeded in developing vision control films that are

ers require, we are close to the adoption of our specialty light

uniquely designed for window glass. With these films, customers

diffusion films, which control the diffusional field, in many differ-

are able to control areas they wish to hide from view without

ent types of reflective displays. They have also been adopted ascompromising on glass transparency or natural lighting. Because

projection screens at airports and other locations. As thesewindows appear either transparent or frosted depending on thescreens can be attached to the surface of existing structures, weviewing angle, privacy can be protected while preserving the viewexpect them to be widely used.

from the window. The films are suitable for use in offices andshops, as well as on windows, doors and partitions in houses, due

Through these and other R&D activities, this segment incurred
R&D expenses of ¥3.7 billion.

to the fact that they reduce the likelihood of fragments scattering
if a window is broken and also cut out UV.
Through these and other R&D activities, this segment incurred
R&D expenses of ¥2.7 billion.

Reflective LCD using LINTEC’s light diffusion film (right)

Example of light diffusion film in application(left: looking downwards; right: looking upwards)

LINTEC ANNUAL REPORT 201731

CORPORATE VALUE INITIATIVES

Research and Development
Paper and Converted Products
We developed and commenced sales of a new white craft paperthat has excellent water-repellent characteristics and is suitablefor offset printing and laser printers as a new version of an existing product that was launched in 2015. The new version is also
ideal for envelopes because of its concealment feature of morethan 99% and the fact that it can protect important information
they contain from view.
Through these and other R&D activities, this segment incurred
R&D expenses of ¥1.3 billion.

Column: LINTEC Semiconductor-Related Adhesive Tapes
LINTEC entered the semiconductor business field in 1986 through the development of
UV curable dicing tape that controls adhesion via UV radiation. This groundbreaking
tape adheres strongly when thin wafers are being diced into chips to prevent the chips
from scattering and reduces adhesion through UV radiation for easy removal when thechips are picked up. It currently has a global market share of around 50%.
Surface protective tapes have been gaining market share in recent years. They areused to protect circuits on wafer surfaces when the backside is being ground to makeDicing tape

the wafer thinner. LINTEC tapes are winning plaudits for quality and performance as
wafers become thinner and circuits become finer and more complex.
Our global share in backside coating tape for flip chips is almost 100%. Flip chips
have protruding electrodes on their circuit, which are flipped for direct mounting on
the substrate. LINTEC was the first mover in developing tapes with a view to reinforcing the backside surfaces of flip chips as chips became thinner.
We will aim to raise our presence further in the semiconductor industry through thecontinuous provision and development of innovative new products with consistently

Backside coating tape for flip chips

high quality.

Tape
Chip
Bump
Adhesive
Flip chip

Semiconductor chip manufacturing back-end processes
Wafer following
circuit formation

Back grinding(wafer thinning)

Lamination of surface
protective tapeLamination ofdicing tape

ReverseDicing(wafer cutting)

32

LINTEC ANNUAL REPORT 2017

UV irradiation of tape

Removal of surface
protective tape

ReversePicking up

Die bonding

Molding

Substrate

Intellectual Property Activities

Number of Patents

The LINTEC Group aims to increase corporate value by developing original products that fully satisfy customer needs. We therefore position intellectual property, including patents, trademarks,
and design rights, acquired through these development activities
as important management resources. While placing the utmost
emphasis on respecting the rights of other companies, theIntellectual Property Department of the Research & Development
Division promotes Companywide and strategic intellectual prop-

2,000

1,848
1,599

1,600
1,200
800
400

erty activities that include identification of new candidates forinvention at R&D sites to add to our intellectual property rights,
which are the lifeblood of a technology-centered company.
Accordingly, while linking activities such as patent portfolio

0

2013

2014

2015

2016
2017
(Fiscal years ended March 31)

Japan
Overseasbuilding for our foundation and growth business domains withour business strategy, we aim to improve profitability based on
intellectual property.

A Message from theGeneral Manager

Tatsuya Tsukida
Executive Officer
General Manager,
Research & Development Div.

Under our previous medium-term business plan, LIP-2016, webasic tenets of “front-loading design”1 and “one-stop develop-

sowed the seeds for bringing groundbreaking products from ourment”2 fully into the medium- and long-term development

laboratories to market. The Advanced Technology Building com-

process to give concrete shape to the research activities of eachpleted in 2015, which enabled us to conduct testing on large-

lab without delay. Our research staff are instructed to deliverscale pilot coaters instead of on facilities in our plants, wasmarketable products in the area on which they are working withextremely effective in improving development speed. As testing in

the aim of creating as many new products as possible to contrib-

the research center can be done without stopping existing facili-

ute to business. The globalization of LINTEC business hasties, we avoid production losses on lines in our plants and we are

increased the importance of having research staff stationed

also able to obtain more detailed data. We also have coating

overseas. Such staff not only provide technological support for

facilities for use in developing mass production processes foroverseas customers but are also very effective in obtaining an

next-generation products, and I think we will achieve striking

accurate picture of customer requirements. We therefore intend

results in the next three years.
Our first step under the new medium-term business plan,
LIP-2019, was to bring a planning department under the wing of
the research center in April 2017. The aim was to incorporate ourto second research staff to our subsidiaries overseas.
1 “Front-loading design” involves identifying development issues and risks as far as possible
in the initial stages of product development and devising early responses to minimize thenecessity for revisions at a later stage.
2 “One-stop development” consists of developing mass production processes in parallel withnew materials development.

LINTEC ANNUAL REPORT 201733

CORPORATE VALUE INITIATIVES

Production
The LINTEC Group utilizes sophisticated clean room facilities, cutting-edge manufacturing facilities, andoriginal production technologies in making products appropriate for wide-ranging customer requirements.
While establishing good relationships with our suppliers, we are actively making efforts to operate quality,
environmental, and business-continuity management systems. In doing so, we deliver peace of mind andreliability to our customers.
Production Structure
In Japan, our large and diverse product lineup is manufactured at 10 production plants. Keeping our eye on market needs, we areconstantly striving to enhance efficiency in production by introducing the latest facilities to replace older ones and reconstructing
plant layouts. Each plant also works on its own reforms and takes steps to increase yield and reduce costs. Overseas, we havemore than 10 production plants, which link with their Japan counterparts to form an optimal production network.

1 Agatsuma Plant

5 Shingu Plant

2 Kumagaya Plant

6 Komatsushima Plant

1

28

3

54
7

34

6

3 Chiba Plant

7 Mishima Plant

4 Tatsuno Plant

8 Ina Technology Center

LINTEC ANNUAL REPORT 2017

Zero Accident Culture

Fair Transactions

Safety is the top priority in LINTEC Group plants, which are

LINTEC has a basic policy for fair and transparent transactions

operated to preempt injuries to personnel. Our practices

based on the principle of free competition among suppliers,

include risk assessment, which enables us to put safety stan-and our procurement activities comply with all relevant laws

dards in place, and hazard prediction exercises as we pursue

and regulations and social norms. For major suppliers, we

our 5S* program of organizing, clearing up, cleaning, cleanli-require evaluations through self-audit check sheets for assess-ness, and discipline. Safety and hygiene committees holding suppliers based on quality, chemical substance manage-

monthly meetings at all our sites in Japan and overseas toment, administration and services, and CSR. We periodicallyenable us to ascertain progress in our safety activities andreview our purchasing processes while maintaining andshare information. In April 2017, a safety conference was held

strengthening partnerships.

for domestic plant safety officers for the exchange of information about each plant’s initiatives. We will continue activities on

Green Procurement

multiple fronts in accordance with our zero accident culture.

The LINTEC Group is committed to procurement that aims to* 5S: Seiri (organizing), Seiton (clearing up), Seiso (cleaning), Seiketsu (cleanliness),
and Shitsuke (discipline) in Japanese

reduce environmental impact through rigorous chemical substance management for raw materials, parts, and secondary
materials. When procuring a new material or responding to a

Thorough Quality Management

new regulation, we ask for suppliers’ understanding in con-

The LINTEC Group has acquired ISO 9001 certification, theducting ingredient examinations to monitor for the presence ofinternational standard for quality management systems, for 21

regulated substances. In the fiscal year ended March 31, 2017,

sites in Japan and overseas. We are working to further rein-

we carried out such examinations on approximately 5,000

force our quality assurance system by obtaining ISO 9001 foritems. In addition, we request that suppliers engage in proac-other departments and acquiring integrated certification fortive environmental preservation activities and undertake rigor-

related sites. When comparing major quality incidents by year,

ous chemical substance management.

if the fiscal year ended March 31, 2004, is set as 100 in an index
of major quality incidents, the level has been 20 or less for theEnvironmental Management

past five years. We construct and implement management

We have acquired global integrated certification under interna-

systems that enable us to take swift action if a quality incident

tional standard ISO 14001 for a total of 25 sites, including theshould occur, collecting information, analyzing causes, and

LINTEC head office and plants, Research Center, Group com-taking steps to prevent recurrence. This framework is in placepany TOKYO LINTEC KAKO, INC., and 11 overseas Group com-in Japan and overseas.

panies. Following the 2015 revision of ISO 14001, we areworking to achieve compliance with the revised standards andRatio of Quality Incidents to the Number Recorded
100

will continue to promote the acquisition of global integrated
certification by overseas Group companies as we strengthen

100

Companywide engagement in environmental preservation.

80
60
40
20
0

2004

20

18

2013

2014

14
2015

12

13

2016
2017
(Fiscal years ended March 31)

LINTEC ANNUAL REPORT 201735

CORPORATE VALUE INITIATIVES

Production
Reduction of Environmental Impact

Compliance with Environmental Laws, Directives,

The LINTEC Group is working toward the realization of a sus-

and Regulations

tainable society with manufacturing that has low environmental

The LINTEC Group seeks to be compliant with environmental

impact. CO2 emissions were reduced to 195,000 tons in thelaws, directives, and regulations in Japan and overseas andfiscal year ended March 31, 2017, from 200,000 tons in the

reduce chemical substances that are harmful to the environ-previous year. Although the amount of waste generated in pro-ment. In addition to responding to restricted substances stipu-

duction increased, the final landfill ratio was approximately

lated by REACH1 and RoHS,2 we conduct environmental impact

0.03% and we have achieved zero emissions with rates below

examinations of raw materials that we purchase and disclose

1.0% for 10 years. In papermaking, the amount of water usednecessary information to our customers.

per unit of production improved by 6.8% over the previous year.

In the fiscal year ended March 31, 2017, we reported nine

We are also constantly seeking to reduce the amount of volatile

substances under the PRTR system.3 The total volume wasorganic compounds (VOCs) including organic solvents that are

7,826 tons, of which 7,730 were toluene. Toluene emitted into

released into the atmosphere.

the air amounted to 471 tons, an increase of 30 tons over theprevious year, while the quantity transferred (treated as waste)
was 27 tons less than in the previous year, at 467 tons.

Fiscal Year 2017 Emission and Transfer of Toluene

Emission
into the air:

471 tons
LINTEC plants

Quantity
eliminated:
Exhaust processing equipment

Toluene handled:

7,730 tons

Manufacturing processes forrelease papers and adhesive
products

6,792 tons
(Elimination rate:
93.5%)

Toluene flow
Quantitytransferred(Treated as waste):
Note: Elimination rate = eliminated amount / (handled amount – transferred amount) ×100

1 REACH: EU regulation for the Registration, Evaluation, Authorisation andRestriction of Chemicals
2 RoHS: EU directive on the Restriction of the use of certain Hazardous Substances

3P
 RTR system: The Pollutant Release and Transfer Register system that requires
companies to estimate the volume of chemical substances they have released andtransferred in waste and report the data to the government

Environmentally Friendly Products

to meet a wide range of environmental needs. Our environmen-

The LINTEC Group has embraced the rise in environmental

tally friendly product lineup pays heed to reuse, recycling, andawareness of recent years, and continues to develop productsenergy saving.

Label material using recycled PET derived from used
PET bottles

36

467 tons

LINTEC ANNUAL REPORT 2017

Window film that cuts thermal energy from sunlight

High-adhesion removable-type label material that gives
consideration to reuse and recyclingEfforts toward Business Continuation

business operations, we can ensure the safety of our employ-

The Group is building a system that enables business opera-

ees and then recommence the supply of products promptly,

tions to continue or restart quickly if struck by a disaster. All

minimizing impact on our customers and other stakeholders.

the Company’s locations in Japan, subsidiaries TOKYO LINTEC

We also evaluate the business continuity capabilities of sup-

KAKO, INC., and LINTEC SPECIALITY FILMS (TAIWAN), INC.,

pliers of raw materials that are critical in securing stable sup-have obtained certification under ISO 22301:2012, the interna-

plies of our products. Additionally, we request that thesetional standard for business continuity management system

suppliers introduce a business continuity plan (BCP) and estab-(BCMS). BCMS study meetings and drills are held at all sites solish a system for implementing it on an organization-wide basis.

that, in the event of a natural disaster or accident that disrupts

A Message from theGeneral Manager

Gohei Kawamura
Director, Managing Executive Officer
General Manager, Production Div.

In production, our goals revolve around safety, quality, and yield.

formulation and VDI’s vapor depositing are attractive technolo-

As production General Manager, I will be pursuing our goals while

gies, and I want us to create synergies in these areas in thealso emphasizing speed in implementing necessary measures.

course of LIP-2019.

Under the medium-term business plan LIP-2019, I want to

LINTEC has consistently promoted on-site reform initiatives.

put our plants in Japan on an even more solid footing. Keeping

In April 2017, a conference was held for our plant safety officers

an eye on market trends, I will be giving consideration to invest-

in Japan to report on their safety activities and exchange views

ments designed to strengthen our production base for theon safety. This led to the discovery of points for improvement

future. This includes reconstructing plants and renewing facili-

and to the best activities being rolled out in other plants. I will

ties. Our overseas plants are growing in importance as our

be looking to maintain a rigorous safety approach as we boost

overseas sales ratio rises. The Printing and Industrial Materials

our plants’ strengths.

Products manufacturing bases in China and Southeast Asia arehaving difficulties, and the Production Division will be giving its
full support to these bases to improve earnings. In the U.S., the
key will be to realize synergies quickly with the two companies
that became subsidiaries in 2016. MACTAC AMERICA’s hot-melt

LINTEC ANNUAL REPORT 201737

CORPORATE VALUE INITIATIVES

Human Resources
The LINTEC Group employs more than 5,000 people in Japan and overseas including staff at non-­consolidated
companies. Diverse human resources are precious Group assets. During its 90-year history, LINTEC has
sought to foster a culture that values harmonious working relationships and also “stand out in the crowd”
individuality. This culture and a deeply rooted Companywide innovation mind-set are key Group strengths.
In its efforts to provide a congenial workplace for all, LINTEC pays constant attention to ­enhancing its systems and training employees.
Respect for Diversity and Human Rights

also run theme-specific group and correspondence courses to

The LINTEC Group avoids discriminatory treatment of employ-promote objectives such as second-language acquisition andees based on race, creed, gender, education, nationality, reli-encouraging women to take on a more active role in the work-

gion, or age, thereby respecting the diversity of individuals. In

place. At the same time, the Company’s intranet offers e-learn-

the areas of recruitment and employment, the Group complies

ing programs to increase all our employees’ understanding ofstrictly with labor laws and regulations, including the prohibi-

topics such as the environment, product quality, BCMS, andtion of unfair discrimination, child labor, and harassment, andCSR.

endeavors to promote an environment where all employees cango about their work in a positive and energized frame of mind.

Work-Life Balance

In 2017, we conducted a Groupwide survey of human rights and

LINTEC is active in promoting balance between work and per-working conditions that confirmed we are strong on compliancesonal life for employees to enable them to carry out their workand show respect for basic human rights. We plan to make thiswithout stress and exercise their abilities to the full. In additiona regular annual survey.

to careful labor management designed to deter employees

We have a helpline through which employees can consult

from working excessively long hours, and the implementation

with the General Affairs & Human Resources Division or aof a flextime system, LINTEC aims to enable employees tolawyer if they have any concerns or have witnessed illegal

match their work style to their lifestyle by augmenting pro-behavior in the workplace. Access was extended to overseas

grams such as planned vacation, which encourages employees

Group companies in 2015 and an English-language helpline is

to take their paid leave. In the fiscal year ended March 31, 2017,

also available.

we continued to promote the creation of environments in which
employees can work with peace of mind through such mea-

Employee Educationsures as extending the length of periods of leave and shorten-

LINTEC has a Companywide training system based on rank, as

ing work hours through the family care program, in addition tohuman resource education programs tailored to years of

expanding the field of eligibility for shorter work hours using

continuous service and career. To foster a globally oriented

the childcare program.

workforce and advance the careers of female employees, weEmployment of People with Disabilities
The Group’s employment ratio for people with disabilities
reached 2.06% in the fiscal year ended March 31, 2017, surpassing the legally mandated ratio of 2.0%. We will endeavor toincrease the ratio further with measures such as improvements
to on-site facilities as required.

Training seminar

38

LINTEC ANNUAL REPORT 2017

Rehiring Systems

a spouse’s transfer to a different location. We also have a

To expand work-style options for its employees, the Groupsystem that enables employees who wish to continue working

operates a “job return” program for rehiring people who arebeyond the mandatory retirement age of 60 to work on one-year

still able to fill posts effectively after resigning for personal

contracts to a maximum age of 65.

reasons such as childbirth, nursing care of a family member, or

A Message from theGeneral Manager

Tsunetoshi Mochizuki
Director, Managing Executive Officer
General Manager, General Affairs &Human Resources Div.

To increase labor productivity, it is essential to have diverse

In fostering human resources I have the image of a moun-human resources with a dynamic and healthy work style. Work-tain, with specialty work knowledge at the summit and broader

style reform has become a national theme in Japan and at

knowledge and understanding of related areas at the foot. The

LINTEC we have achieved results with our thorough labor man-Company as a whole supports career advancement with train-

agement aimed at deterring employees from working too manying courses tailored to the employee’s level and theme-specifichours and our planned vacation system, which has increased

courses.

employees’ use of paid leave.

I want people to take pride in being a LINTEC employee andIn regard to diversity, we established a committee to study

family member 10, 20, and 30 years from now and have a smile

the promotion of diversity in 2016, and we are seeking to pro-on their face as they go about their daily life. I also want to main-

vide support and an appropriate work environment for employ-tain an open corporate culture where people can speak theirees in situations such as caring for family members andminds. To these ends, I will be making adjustments to the work

bringing up small children. Our promotion of greater female

environment and improvements to human resources systems.

participation includes initiatives to change female employees’
way of thinking, a system for returning to work after having
children, and the expansion of the female ratio of hired graduates, managers, and section chiefs.

LINTEC ANNUAL REPORT 201739

THE BASE THAT SUPPORTS GROWTH

Corporate Governance

Basic Philosophy

comprising executive officers (including directors serving concur-

The Company believes that the fundamentals of corporate governancerently) responsible for the execution of business, management meet-

are to achieve thorough legal compliance, to increase management

ings are also held once a month and endeavor to streamline business

transparency and promote corporate ethics, and to make prompt

operations through the sharing of information among all businessdecisions and effectively execute operations. By enhancing anddivisions.

reinforcing corporate governance, we aim to further increase our

The Audit & Supervisory Committee meets once a month and con-corporate value and joint profits with shareholders.

ducts monitoring audits that focus on matters reported from the
Audit Office, which is the Company’s internal control division. In addi-

Corporate Governance Systemtion to performing audits covering the appropriateness and legality of

1. Corporate Governance System

the execution of directors’ duties, each and every Audit & Supervisory

The Company has selected the Company with Audit & Supervisory

Committee member also plays a role in supervising the execution ofCommittee system described in the Companies Act of Japan for its

the directors’ duties through the exercise of the voting rights on theorganizational structure. The Company has placed directors that are

Board of Directors.

also Audit & Supervisory Committee members with voting rights on
its Board of Directors in order to strengthen the Board’s supervisory• Evaluation of Board of Directors’ effectiveness

function, with a view to stepping up corporate governance and to

In April 2017, the Company conducted an evaluation of the effective-

streamlining management even further. The Company has appointed

ness of the Board of Directors. Details are as follows.

16 directors, of whom four are Audit & Supervisory Committee mem-

Overview

bers and four are outside directors.

Based on the principles of Japan’s Corporate Governance Code, all 16
directors filled out a survey on matters such as the structure andHeld once a month to make important decisions with regard to
management, Board of Directors’ meetings are also held on an ad hoc

operation of the Board of Directors, which included some open-ended

basis as necessary to strive for rapid decision making. Primarily

questions. The results of these surveys were analyzed byGeneral Meeting of Shareholders
Appointment /Dismissal

Appointment /Dismissal

Management decisions
Informing / Reporting

Board of Directors(Directors)

Auditing /Supervision

Representative Directors

Appointment /Dismissal

Audit &
Supervisory
Committee(Directors
serving as Audit &Supervisory
Committee
members)

Cooperation

Management Meetings(Executive Officers)

Operational Execution Divisions
CSR Management Office• Corporate Ethics Committee• Customer Satisfaction Committee• Social Contribution Committee

Promotion• Administrative Division• Marketing Division• Production Division• Technical Division• Domestic and Overseas
Subsidiaries
Operational execution

40

LINTEC ANNUAL REPORT 2017

Cooperation

Internal
Auditing

Informing

Audit Office

Independent
AuditorAccount
Auditing /Internal
ControlAuditingrepresentative directors, and a final evaluation was received from

Incorporation and that a sense of ethics is maintained, the Company

outside directors, who are independent officers of the Company. In

established its motto of “Sincerity and Creativity,” on which its Codethis final evaluation, outside directors stated that the survey ques-of Conduct was based. To ensure the effectiveness of the compliancetions and method were rational overall and that the measures in thesystem with regard to laws and regulations as well as the Articles offiscal year under review (earlier distribution of documents, elimina-

Incorporation, the Audit Office—an organization under the president’s

tion of overlaps between the Board of Directors and management

direct supervision—investigates and verifies, by means of audits

meetings, enhancement of discussion at meetings of the Board ofbased on the Internal Audit Regulations, whether all of the

Directors), which were taken based on the results of the previous

Company’s operations are being appropriately and reasonably imple-

fiscal year’s survey, were producing improvements. However, the final

mented and pursuant to laws, the Articles of Incorporation, internal

evaluation included suggestions for further improvements and arules and regulations. The results of those audits are regularly

request for consideration of methods of addressing the governancereported to directors.

themes that were set out in the fiscal year under review’s survey.
Based on this feedback, we will take steps to develop an environmentthat facilitates improved Board of Directors’ effectiveness.

• System for storing and managing information related to the­execution of directors’ duties
Documents are stored and managed in accordance with rules determined• Director training policies

for each document type, including those documents stipulated by law.

(1) New director training
After assuming their position, new directors are provided training
from outside institutions to endow them with the legal, accounting,• Regulations and other systems pertaining to management of risksof lossand other knowledge necessary to management.

By promoting the issue of manuals by division and facilitating their(2) Regular training

thorough use, the Company makes preemptive efforts to reduce orOnce or twice a year, directors undergo training on contemporary

avoid risk. In the case of specific risks, the Company promotes

issues from lawyers or other outside lecturers. These training ses-reviews of and improvements to response measures as risks arise.

sions serve as opportunities to hone the sense of judgment that is

For emergency situations, such as the occurrence of a disaster, thecrucial to members of the Board of Directors.

Company has established the Companywide Crisis Management(3) Special training

regulations, in addition to a BCMS, which is based on these regula-

When necessary, directors participate in seminars at the Company’s

tions. These are separate from risk management initiatives con-expense to acquire the specialized insight required to perform theirducted through normal operations, and we strive to ensure that aduties.

crisis management organization can be quickly established in theevent of an emergency.

2. Internal Control System
With regard to an internal control system to ensure that the executionof directors’ duties is in compliance with laws and regulations as well

• System to ensure that the execution of the duties of directors is
efficiently conducted

as the Articles of Incorporation, and a system to ensure the appropri-

In addition to setting out the duties for which directors are responsible

ateness of the execution of other business, the Company decided on

for and that correspond to the allocation of roles of each organization,

the following matters at the Board of Directors’ meeting held on June

based on the Regulations on the Division of Duties, the Company

24, 2015.

works to separate management from execution and accelerate
decision making by the introduction of an executive officer system.

• System to ensure that the execution of the duties of directors andMoreover, the Company reviews internal organizations as necessary

employees is in compliance with laws and regulations as well as

to be able to respond to environmental changes and works to

the Articles of Incorporation

maintain efficiency in the execution of the duties of directors by such

To ensure that the execution of the duties of directors and employees

means as the setting up of cross-organizational committees on anis in compliance with laws and regulations as well as the Articles ofas-required basis.

LINTEC ANNUAL REPORT 201741

THE BASE THAT SUPPORTS GROWTH

Corporate Governance• System to ensure the appropriateness of business in the corporategroup comprising the Company and its subsidiaries• System relating to the reporting of cases to the Audit & Supervisory
Committee and system for ensuring that the submitting of such

Based on the Affiliate Company Operational Regulations, thereports is not seen as reason enough for the person who submitted

Company works to maintain the appropriateness of its operations asthem to be subjected to disadvantageous treatmenta group entity by having each of its principal business divisions

With regard to cases that are likely to significantly damage thecontrol the operations of Group companies. Based on the Affiliate

Company or a Group company, such as violations of laws or regula-Company Operational Regulations, the Company works to maintain ations, all Group directors and employees are to report such cases tosystem for receiving corporate performance, risk, and other important

the Company’s Audit & Supervisory Committee. In addition, it isreports from each Group company regularly or on an as-required

deemed that the Audit & Supervisory Committee will be able tobasis. Providing business management and support from thedirectly demand business-related reports for all Group directors andappropriate division as necessary, the Company promotes management

employees. Under the Company’s Internal Reporting Systemefficiency in each company. To ensure that Group companies are inOperation Regulations and its Global Internal Reporting Systemcompliance with laws and regulations as well as the Articles ofRegulations, the Company has established a helpline that can be

Incorporation, audits are conducted by each company’s internal audit

used by all Group directors and employees and endeavors to maintainsystem and by the Company’s Audit Office.

a system to ensure that the submitting of such reports is not seen as
reason enough for the person who submitted said notification or• Matters relating to the employees who are tasked to assist thereport to be subjected to disadvantageous treatment. In the event of

duties of the Audit & Supervisory Committee, matters relating toan internal notification via the helpline, this will be reported to thethe independence of said employees from directors, and matters

Audit & Supervisory Committee.

relating to ensuring the effectiveness of Audit & Supervisory
Committee instructions with respect to said employees
To further raise the effectiveness of Audit & Supervisory Committee
audits and maintain a system to carry out audit duties more smoothly,• Matters concerning policy relating to the handling of costs or liabilities arising from the execution of duties of Audit & Supervisory
Committee members

the Company has established the Audit & Supervisory Committee

When an Audit & Supervisory Committee member invoices thesecretariat, which supports and takes on Audit & Supervisory

Company for the prepayment or redemption of expenses incurred forCommittee duties. It is assumed that the Audit & Supervisory

the execution of their duties, said costs or liabilities will be promptly

Committee’s consent has to be obtained for transfers of personnel tohandled following discussions in the department responsible, with

the Audit & Supervisory Committee secretariat staff, personnel eval-

the exception of cases in which said costs have been recognized asuations, and disciplinary action. The instructions and orders given to

being not necessary for the execution of said Audit & Supervisory

Audit & Supervisory Committee secretariat staff are also deemed toCommittee member’s duties. In addition, should Audit & Supervisory

be given by directors serving as Audit & Supervisory Committee

Committee members deem that independent outside experts (suchmembers. With regard to said instructions and orders received fromas lawyers, certified public accountants, etc.) are necessary as advis-

Audit & Supervisory Committee members, with the exception of thoseers to the Audit & Supervisory Committee, the Company will bear

instructions and orders that are not necessary for the duties of Audit

those costs, with the exception of cases in which said costs have been

& Supervisory Committee members, it is assumed that Audit &recognized as being not necessary for the execution of said Audit &Supervisory Committee secretariat staff do not receive instructions

Supervisory Committee’s duties.

and orders from directors or other employees.
• Other system for ensuring that the Audit & Supervisory Committee
carries out audits effectively
With a view to ensuring a system so that Company information
reaches the Audit & Supervisory Committee unhindered, theCompany works to maintain an environment in which information is42

LINTEC ANNUAL REPORT 2017

received not only from directors (excluding directors serving as Audit

Internal Audits and Audit & Supervisory Committee Audits& Supervisory Committee members) and from employees but also

1. Internal Audits

from independent auditors, corporate lawyers, tax accountants, and

The Audit Office regularly implements internal audits of divisions,other specialists. The Company has a system in place to ensure regu-

work sites, plants, and affiliated subsidiaries in addition to verifying

lar meetings with representative directors and venues for importantthat operational execution processes and results comply with the law

discussions, such as management and strategy meetings, for Audit &and internal regulations. The status of these internal audits is

Supervisory Committee members to attend and state opinions.

reported when necessary to the Audit & Supervisory Committee, andopinions are exchanged on the results of the audits.

3. Basic Policies and Systems for Preventing Relationships with
Antisocial Forces

2. Audit & Supervisory Committee Audits

The Company stands in firm opposition to all antisocial forces and

The Company’s Audit & Supervisory Committee comprises four direc-

organizations that threaten to disrupt the order and safety of civil

tors serving as Audit & Supervisory Committee members, of whom

society while practicing a strict policy of non-association with such

three are outside directors. While utilizing the internal control

entities. We have made this commitment clearly apparent in thesystem, the Audit & Supervisory Committee cooperates with the Audit

LINTEC Compliance Guidelines and are taking steps to ensure thor-

Office and the independent auditor, receives the necessary reports,ough awareness with this regard among all directors and employees.

and conducts audits of the directors’ business execution throughWe reject any illegitimate requests from antisocial forces andsuch methods as exchanges of opinions. Each Audit & Supervisoryorganizations and maintain close collaborative relationships with theCommittee member attends management and other meetings,

police, centers for the removal of criminal organizations, lawyers, andobtains the information needed for the audits, attends Board ofother specialists to combat such requests. Should we be approached

Directors’ meetings as a director, and supervises the directors in theby antisocial forces or organizations, we will closely coordinate withexecution of their duties by stating opinions and participating in reso-

such institutions, organizations, lawyers, or other specialists tolutions through their voting rights.

­furnish a quick, organization-wide response.

Audit & Supervisory Committee members Hiroshi Okada and Toru
Nozawa have considerable knowledge of finance and accounting,

4. Risk Management Systemhaving gained many years of experience in their respective roles at

The Company has established the Companywide Crisis Management

the Company’s administrative and audit divisions and Nippon Paper

Regulations as well as a risk management system for minimizing theIndustries Co., Ltd.’s administrative division.

possible impact and damage to corporate value if a major problem
arises. It has also implemented and oversees the Information

Outside Directors

Security Management Rules and the Trade Secret Management

The Company has selected Kazumori Fukushima, Toru Nozawa,

Rules for the preservation and management of information. There

Satoshi Ohoka, and Kanako Osawa as its four outside directors. With

are also Companywide risk assessments centered on the CSR

the exception of Kazumori Fukushima, the other three are also Audit

Management Office.

& Supervisory Committee members.

5. Limited Liability Contracts

1. Human, Financial, and Business Relationships and Other Shared

In accordance with Article 427, Paragraph 1 of the Companies Act, theInterests between the Outside Directors and the Company

Company has entered into a contract with each of its non-executive

There are no particular shared interests between the Company anddirectors—outside directors Kazumori Fukushima, Toru Nozawa,

Kazumori Fukushima, but Nippon Paper Industries Co., Ltd., where

Satoshi Ohoka, and Kanako Osawa—that limits liability for compen-

he serves as an executive officer, is a major trading partner of thesation for damages under Article 423, Paragraph 1 of the Companies

Company, which purchased ¥2,145 million worth of raw materials

Act. Based on this contract, liability for compensation for damages isfrom and sold ¥42 million worth of products to Nippon Paper (bothlimited to ¥10 million or the minimum liability amount stipulated byresults from the fiscal year ended March 31, 2017). In addition, Nippon

law, whichever is greater.

Paper is a major shareholder in the Company; its holding amounted

LINTEC ANNUAL REPORT 201743

THE BASE THAT SUPPORTS GROWTH

Corporate Governanceto 21,737,792 shares (28.39% of the total number of Company shares
outstanding) on March 31, 2017.

By utilizing her specialist expertise and extensive knowledge
gained as an attorney, along with the knowledge and experience

There are no particular shared interests between the Company

gained through her career in corporate legal affairs both at home andand Satoshi Ohoka, who is an independent committee member as

abroad, Kanako Osawa is able to audit and supervise the Company’s

stipulated in the Company’s rules of large-scale purchase to deal

Board of Directors. She is thus considered qualified to be a director

with an act of large-scale purchase.

serving as an Audit & Supervisory Committee member. She is also

There are no particular shared interests between the Company
and Toru Nozawa, but Nippon Paper Industries Co., Ltd., where hedesignated as an independent director based on the criteria stipulated by TSE.

serves as a director and an executive officer, is a major trading partner of the Company, which purchased ¥2,145 million worth of raw
materials from and sold ¥42 million worth of products to Nippon

3.	The Company’s Basic Way of Thinking with Regard to the
Independence of Outside Directors

Paper (both results from the fiscal year ended March 31, 2017). In

The Company does not have its own set standards and policies withaddition, Nippon Paper is a major shareholder in the Company; its

regard to the independence of outside directors and refers instead toholding amounted to 21,737,792 shares (28.39% of the total number ofthe standards stipulated by TSE. Since appointment is based on a

Company shares outstanding) on March 31, 2017.

request from the Company, we recognize that independence from

There are no particular shared interests between the Company

management is to be ensured.

and Kanako Osawa, who is an independent committee member as
stipulated in the Company’s rules of large-scale purchase to deal
with an act of large-scale purchase.

4.	Outside Directors’ Supervision of Directors’ Execution of Duties
and Internal Auditing, Mutual Cooperation with Audit &Supervisory Committee Audits and Accounting Audits, and2. Functions Performed and Roles Served by Outside Directors in
the Company’s Corporate Governance

Relationship with the Internal Control Division
In addition to attending Board of Directors’ meetings and making

By utilizing knowledge and experience from his directorship experi-

necessary and effective remarks as appropriate during agenda delib-ence at Nippon Paper Industries Co., Ltd., and his many years oferations, outside directors cooperate with the Internal Audit Divisionbusiness experience in this company’s production and sales divisions,and the independent auditor as well as oversee directors in the exe-

Kazumori Fukushima is able to strengthen the Company’s Board of

cution of their duties.

Directors’ supervisory function. He is thus considered qualified to be
an outside director.
By utilizing knowledge and experience from his directorship expe-

Remuneration of Corporate Officers
1. Total Remuneration by Corporate Officer Typerience at Nippon Paper Industries Co., Ltd., and his many years ofbusiness experience in this company’s administrative divisions, Toru

Corporate officer typean Audit & Supervisory Committee member.
By utilizing his long years of policy-based finance experience, hisrich international experience, his specialist academic experience, andhis knowledge and experience gained as an outside director in industries different to that of the Company, Satoshi Ohoka is able to audit
and supervise the Company’s Board of Directors. He is thus considered qualified to be a director serving as an Audit & Supervisory
Committee member. He is also designated as an independent director
based on the criteria stipulated by Tokyo Stock Exchange, Inc. (TSE).

44

LINTEC ANNUAL REPORT 2017

Total remuneration by type(Millions of yen)

Number ofpeoplereceiving
Bonusesremuneration

Basic
remuneration

Stock
options

450

353

11

85

11

(Audit & Supervisory
Committee members)(excluding outside directors)

19

19

—

—

1

Outside officers

16

16

—

—

4

Nozawa is able to audit and supervise the Company’s Board of
Directors. He is thus considered qualified to be a director serving as

Total
remuneration(Millions of yen)

Directors(excluding Audit &Supervisory Committee
members and outside directors)

Directors

2.	Policy Regarding Decisions on Amounts of Director Remuneration

Policy on Holdings of Capital Tie-Up Shares(1)	Director remuneration (excluding Audit & Supervisory Committee

The Company views the establishment and maintenance of stable,

members)

long-term relationships with business partners as a matter of impor-

Remuneration of directors (excluding Audit & Supervisory Committee

tance. For this reason, shares of stock are held to form capital tie-members) consists of the following.

ups when deemed appropriate based on a comprehensive evaluation

Basic remunerationof factors such as the Company’s business relationship with the part-• Fixed amount determined based on rank as well as contributions to

ner in question. We only acquire such holdings when increasing trust

the director shareholding associationand coordination with the business partner through holdings is• Long-term incentives provided by enabling directors to periodicallyjudged as an effective means of mutually raising corporate value, andpurchase and hold shares of Company stock through the director

these holdings are reviewed based on this perspective when neces-shareholding association based on contributions madesary. In exercising voting rights, the Company respects the manage-

Bonusesment policies of the investee and votes for or against proposals based• The Company has established short-term incentives (remuneration

on a careful examination of whether or not the proposal will contrib-

linked to business performance) paid in amounts adjusted based on

ute to improved corporate value and shareholder returns.

consolidated business results. However, the total amount paid does
not exceed ¥150 million.

Stockholdings

Stock options

Stocks held for purposes other than pure investment• Long-term incentives provided together with the director

Number of issues: 56 issues­shareholding association

Total amounts recorded on balance sheet: ¥2,544 million

The amounts of remuneration are decided by the Board of

Fiscal Year under Review
Specific Investment Shares

Directors in accordance with the Company’s internal rules on director
remuneration and based on the duties and responsibilities of eachdirector (excluding Audit & Supervisory Committee members), within
totals approved at the General Meeting of Shareholders.
The remuneration assessment advisory meeting has been established as an advisory body for the president and CEO on mattersregarding the assessment of and decisions on remuneration for
directors (excluding Audit & Supervisory Committee members) withthe aim of improving objectivity and transparency.
This body, which has members including external specialists, provides
advice and makes suggestions to the president and CEO when necessary.
(2)	Director (Audit & Supervisory Committee member) remuneration
Audit & Supervisory Committee member remuneration is dis-

Top 10 issues

Toray Industries, Inc.

Number ofshares(Thousands)
1,160

Amounts
recorded onbalance sheet(Millions of yen)

Purpose of holding

1,144

To strengthen business
relationships

AMANO Corporation

224

499

Same as above

Fujipream Corporation

936

286

Same as above

Mitsubishi UFJ Financial Group, Inc.

159

111

Same as above

KING JIM CO., LTD.

76

66

Same as above

Soken Chemical & Engineering Co., Ltd.

35

55

Same as above

IMURA ENVELOPE CO., INC.

100

48

Same as above

Mizuho Financial Group, Inc.

206

42

Same as above

OZU CORPORATION

15

34

Same as above

ASAHI PRINTING CO., LTD.

1232

Same as above

cussed and decided by the Audit & Supervisory Committee inaccordance with the Company’s internal rules on director remuneration and based on each member’s duties and responsibilities,
within totals approved at the General Meeting of Shareholders.

LINTEC ANNUAL REPORT 201745

THE BASE THAT SUPPORTS GROWTH

Corporate GovernanceIntroduction of Takeover Defense Measures(4)	Opinions and concerns of shareholders and other investors solic-

The Company has introduced takeover defense measures (rules of

ited through IR activities are relayed to management by the rele-large-scale purchase). These measures remain in effect due to thevant divisions via quarterly business reports at the Board ofsubmission to and approval by the General Meeting of Shareholders

Directors’ meetings or reported appropriately to management onheld on June 24, 2015, of proposal No. 6. For details, please see thean as-required basis.

General Meeting of Shareholders section of the Company’s website(http://www.lintec-global.com/ir/stock/meeting.html). Further, the(5)	In interactions with shareholders and other investors, we practiceeffective period of takeover defense measures is three years (until thestringent management of information in accordance with theend of the General Meeting of Shareholders to be held in June 2018).

internal Insider Trading Prevention Regulations to ensure that
insider information is not disclosed. In addition, the Company’s

Shareholder Interactions

disclosure policy stipulates that we will observe a quiet period that

The Company seeks to engage in constructive interactions with

begins approximately one month prior to the announcement ofshareholders and other investors that contribute to sustainable

quarterly financial results to avoid leaks of financial results and to

growth and medium- to long-term improvements in corporate value.

maintain fairness. During this period, we will not answer questions

The Company has established an investor relations (IR) activity

or make comments on our financial results and forecasts.

system and advances proactive initiatives based on the following policies to facilitate this endeavor.
(1)	The officer responsible for IR implements and oversees theCompany’s various IR activities, including individual meetings withshareholders and investors. In regard to responses to requests forindividual meetings, members of senior management or directors
will meet with shareholders or investors requesting meetings
based, whenever appropriate, on the desires and interests of therequester. In the fiscal year ended March 31, 2017, we held individual meetings with more than 180 domestic and overseas institutional investors and analysts.
(2)	The Public Relations Office, Finance & Accounting Department,
General Affairs & Legal Department, and Corporate Strategic
Office will play a central role in advancing the Company’s various
IR activities. Relevant divisions pursue close coordination withthese offices and departments, exchanging information on a daily
basis and meeting with members of senior management as
appropriate to share necessary information.
(3)	In addition to individual meetings, the Company’s IR activities
include regular briefings on financial results and medium-termbusiness plans, visits to overseas investors, participation in IR
conferences at which overseas investors gather, business explanatory forums, and Company briefings for individual investors. In thefiscal year ended March 31, 2017, the Company participated in a
total of four IR conferences held in Tokyo. We seek to expand therange of information provided to domestic and overseas shareholders and other investors by publishing shareholder newslettersand annual reports and posting information in the IR section of ourcorporate website. At the same time, we collect feedback from awide range of shareholders and other investors through surveys
that are attached to shareholder newsletters and made available
on the IR website.

46

LINTEC ANNUAL REPORT 2017

A Message from an Outside Director

Helping to Strengthen
Governance from an
Outsider’s Perspective
Kanako Osawa
Outside Director,
Audit & Supervisory Committee Member

Effectiveness of the Board of Directors

standpoint. It also seems that my asking questions makes it easierAs LINTEC’s Board of Directors moves with the times in corporate

for company management to ask each other questions. As a member

governance, I think it is becoming more of a body that engages inof the Audit & Supervisory Committee, I receive a wide variety ofdebate rather than one that simply makes decisions. In addition to

information from the Audit Office, and when there are things I am not

Board of Directors’ meetings, monthly management meetings areclear about I make a point of asking questions at forums such asheld and attended not only by directors but also executive officers with

Board meetings.

responsibility for business execution, and the Board ultimately reflects

Management inevitably involves risk, and I think that using mythe results of the information sharing that takes place between

knowledge of corporate law to appropriately identify hidden risks is

directors and executive officers. As an outside director, I make every

another important part of my role. I aim to help management ineffort to attend these meetings and deepen my understanding ofdeciding whether risk is tolerable or should be quickly eliminated.

LINTEC’s businesses. Board meetings and management meetings
were previously held on the same day but now are held on separate

Toward Sustained Growthdays, and as a result, I have time to fully digest the management

Having been an outside director for two years, I realize that LINTEC

meeting discussions. Also, I can obtain Board meeting materials

has technology that other companies cannot match and a solid

prior to the meeting, so I endeavor to promote thoughtful discussion

structure where each business division makes a profit. Growthwith probing questions.

strategies that embrace the whole company can be difficult to formu-

I think there are two types of corporate governance—defensive,late due to the wide range of businesses and large number of nichewith a system of mutual checks, and offensive, where risk is taken

products, but I think that making three U.S. and European companies

and consideration is given regarding the direction of management.

subsidiaries in 2016 sent a clear message to investors and employees

LINTEC’s Board strives to achieve a good balance between the two,

about LINTEC’s global growth intentions. In the run-up to the decision,

in my view.

I was of course able to ask many questions at Board of Directors’
meetings from an outside director’s point of view and take part in full

The Role of an Independent Outside Director Who is a Member ofdiscussion of the suitability of taking this step from a risk and

the Audit & Supervisory Committee

opportunity standpoint. The issue now is the synergies that can be

As an attorney at law, I am frequently engaged in corporate law cases

created, and I hope to provide full support using the knowledge I have

involving manufacturers, but I have little specialist knowledge ofaccumulated so far and my outsider’s perspective.

LINTEC’s adhesive product and specialty paper sectors. However, thatmeans I am able to promote lively discussions at Board of Directors’
meetings by putting candid questions from a non-specialist

LINTEC ANNUAL REPORT 201747

THE BASE THAT SUPPORTS GROWTH

Corporate Officers
As of June 22, 2017

Representative Director, Chairman and CEO

Akihiko Ouchi (Date of Birth: Jan. 2, 1945)
Mar. 1967 Joined the Company
Apr. 1994 General Manager, Nagoya Branch OfficeJun. 2000	Director, Plant Manager, Tatsuno Plant, Production Div.
Jun. 2004 Representative Director, President
Apr. 2014	Representative Director, Chairman and CEO(current position)

Takashi Nakamura (Date of Birth: Dec. 23, 1953)
Apr. 1976 Joined the Company
Jun. 2011	Executive Officer, General Manager, Fine & Specialty
Paper Products Operations, Business Administration
Div. and in charge of Converted Products Operations
Apr. 2017	Director, Managing Executive Officer, AssistantGeneral Manager, Business Administration Div.
(current position)

Representative Director, President, CEO and COO

Hiroyuki Nishio (Date of Birth: Oct. 18, 1954)
Apr. 1978 Joined the Company
Jun. 2010	Director, General Manager, Corporate Strategic Office
Apr. 2014	Representative Director, President, CEO and COO(current position)

Gohei Kawamura (Date of Birth: Jan. 12, 1956)
Apr. 1979 Joined the Company
Jun. 2011	Executive Officer, Chairman and President, LINTEC(SUZHOU) TECH CORPORATION (seconded)
Apr. 2017	Director, Managing Executive Officer, General
Manager, Production Div. and in charge of Quality
Assurance & Environmental Protection Div.
(current position)

Director, Vice President Executive Officer and CFO

Hitoshi Asai (Date of Birth: Mar. 7, 1948)
Feb. 1985 Joined the Company
Jun. 2002	Director, Assistant General Manager, Administration
Div. and General Manager, Finance & Accounting Dept.
Oct. 2015	Director, Vice President Executive Officer, General
Manager, Administration Div. (current position)

Jan. 1983 Joined the Company
Jun. 2011	Executive Officer, General Manager, General Affairs& Human Resources Div., General Manager, General
Affairs & Legal Dept. and Human Resources Dept.
Jun. 2015	Director, Managing Executive Officer, General
Manager, General Affairs & Human Resources Div.
(current position)

Directors, Managing Executive Officers

Directors, Executive Officers

Makoto Hattori (Date of Birth: Oct. 12, 1957)

Shuji Morikawa (Date of Birth: Dec. 30, 1955)

Apr. 1980 Joined the Company
Apr. 2014	Executive Officer, General Manager, Advanced
Materials Operations, Business Administration Div.
Apr. 2017	Director, Managing Executive Officer, General
Manager, Business Administration Div.
(current position)

Kazuyoshi Ebe (Date of Birth: Jan. 26, 1953)
Mar. 1975 Joined the Company
Jun. 2008	Director, Assistant General Manager, Research &Development Div., General Manager, Research Centerand Intellectual Property Dept.
Apr. 2016	Director, Managing Executive Officer, AssistantGeneral Manager, Business Administration Div. andin charge of Optical Products Operations(current position)

48

Tsunetoshi Mochizuki (Date of Birth: May 12, 1958)

LINTEC ANNUAL REPORT 2017

Apr. 1979 Joined the Company
Apr. 2013	Executive Officer, General Manager, Industrial &Material Operations, Business Administration Div.
Jun. 2015	Director, Executive Officer, General Manager,
Industrial & Material Operations, Business
Administration Div. (current position)

Junichi Nishikawa (Date of Birth: Sep. 12, 1955)
Apr. 1978 Joined the Company
Apr. 2013	Executive Officer, Plant Manager, Kumagaya Plant,
Production Div. and General Manager, Fine &Specialty Paper Production Dept.
Jun. 2017	Director, Executive Officer, Assistant General Manager,
Production Div. and Plant Manager, Kumagaya Plant(current position)

Outside Directors / Audit & Supervisory Committee Members

Takehiko Wakasa (Date of Birth: Jun. 23, 1956)

Toru Nozawa (Date of Birth: Mar. 10, 1959)

Apr. 1980 Joined the Company
Apr. 2013	Executive Officer, Plant Manager, Chiba Plant,
Production Div.
Jun. 2017	Director, Executive Officer, Assistant General
Manager, Production Div. and Plant Manager,
Tatsuno Plant (current position)

Apr. 1981 Joined Jujo Paper Co., Ltd.
Jun. 2014 Outside Audit & Supervisory Board Member of		the Company
Jun. 2014	Director, Executive Officer, General Manager,
Corporate Planning Div. and in charge of Subsidiaries
and Affiliated Companies, Nippon Paper Industries
Co., Ltd. (current position)
Jun. 2015	Outside Director / Audit & Supervisory Committee
Member of the Company (current position)

Outside Director

Kazumori Fukushima (Date of Birth: Feb. 12, 1958)
Apr. 1980	Joined Sanyo-Kokusaku Pulp Co., Ltd.
Apr. 2013	Executive Officer, General Manager, Kushiro Mill,
Nippon Paper Industries Co., Ltd.
Jun. 2016	Executive Officer, General Manager, BusinessCommunication & Industrial Paper Sales Div.,
Nippon Paper Industries Co., Ltd. (current position)
Jun. 2017	Outside Director of the Company (current position)

Satoshi Ohoka (Date of Birth: Apr. 24, 1951)
Apr. 1975 Joined Japan Development Bank
Apr. 2003	Lecturer, Chuo University, Graduate School ofCommerce (current position)
Jun. 2006 Outside Director, Ryobi Limited (current position)
Jun. 2007	Member of LINTEC Independent Committee(current position)
Jun. 2012 Outside Director of the Company
Jun. 2015	Outside Director / Audit & Supervisory Committee
Member of the Company (current position)

Director / Audit & Supervisory Committee Member

Hiroshi Okada (Date of Birth: Aug. 25, 1954)

Kanako Osawa (Date of Birth: Dec. 22, 1970)

Apr. 1979 Joined the Company
Oct. 2012 General Manager, Audit OfficeJun. 2017	Director / Audit & Supervisory Committee Member(current position)

Apr. 1998	Certified as an Attorney, joined Kajitani Law Offices(to present)
Oct. 2005 Admitted to practice law in the State of New York, U.S.
Jun. 2015	Outside Director / Audit & Supervisory Committee
Member of the Company (current position)
Jun. 2015	Member of LINTEC Independent Committee(current position)

Executive Officers

Toru Onishi

Masahiro Oshima

Toshimi Sugaya

Plant Manager, Mishima Plant,
Production Div. and General Manager,
Administration Dept.

President, LINTEC USA HOLDING, INC.

General Manager, Fine & Specialty Paper
Products Operations, Business
Administration Div. and General Manager,
Fine & Specialty Paper Sales Dept.

Norio Murata

Sumio Morimoto

Hiroyuki Matsuo

General Manager, Osaka Branch Office,Business Administration Div., in charge ofWestern Japan and General Manager,
Converted Production Sales Dept.

President, LINTEC ASIA PACIFICREGIONAL HEADQUARTERS PRIVATELIMITED

Plant Manager, Agatsuma Plant,
Production Div.

Shigeru Uematsu

Tatsuya Tsukida

Takeshi Kaiya

General Manager, Public Relations Office

General Manager, Research &Development Div. and Research Center

General Manager, Advanced Materials
Operations, Business Administration Div.

Yutaka Iwasaki

Yohei Hoshikawa

Masaaki Yoshitake

General Manager, Converted Products
Operations, Business Administration Div.

General Manager, Corporate Strategic
OfficeGeneral Manager, Printing & Variable
Information Products Operations,
Business Administration Div.

LINTEC ANNUAL REPORT 2017

49

FINANCIAL
SECTION– 51 Management’s Discussion and Analysis– 53 Operating Risks– 54 Financial Summary– 56 Consolidated Balance Sheet– 58 Consolidated Statement of Income– 58 Consolidated Statement of Comprehensive Income– 59 Consolidated Statement of Changes in Net Assets– 60 Consolidated Statement of Cash Flows– 61 Notes to Consolidated Financial Statements– 84 Management’s Report on Internal Control
over Financial Reporting– 85 Report of Independent Auditors

50

LINTEC ANNUAL REPORT 2017

FINANCIAL SECTIONManagement’s Discussion and Analysis

As a result of the above, net sales in Printing and Industrial

Revenues and Expenses
In the fiscal year under review, consolidated net sales declined 2.2%

Materials Products declined 2.3% year-on-year, to ¥85.7 billion, andyear-on-year, to ¥206.0 billion, due mainly to sluggish demand result-operating income declined 39.9%, to ¥1.7 billion.

ing from an economic slowdown in China and Southeast Asia and toforeign currency translation differences involving a strong yen.

Electronic and Optical Products

Gross profit benefited from a decline in fuel and raw material

In Advanced materials operations, sales of semiconductor-related

prices but decreased 1.4% year-on-year, to ¥52.9 billion, due to factors

adhesive tapes and equipment were maintained at the same level assuch as lower sales. Operating income declined 6.2%, to ¥16.6 billion,

the previous fiscal year, owing to a recovery in demand for products

due to costs related to the acquisition of three companies in Europe

for smartphones and other devices from the second quarter.

and the United States and foreign currency translation differences.

Multilayer ceramic capacitor-related tapes experienced a recovery in

Profit before income taxes decreased 8.3%, to ¥15.4 billion, due todemand from the autumn but declined year-on-year due to a weaklosses arising from fixed-asset disposal and the liquidation of subsid-

first half.

iaries. Profit attributable to owners of parent increased 5.1%, to ¥11.5

In Optical products operations, sales of LCD-related adhesive

billion, owing mainly to a 30.5% decline, to ¥4.2 billion, in income

products were low due to sluggish demand for products for large

taxes following the application of tax effect accounting.

televisions and others.

Net income per share increased from ¥151.07 in the previous fiscal

As a result of the above, net sales in Electronic and Optical
Products were down 2.6% year-on-year, at ¥83.2 billion, and operating

year to ¥158.69, and ROE rose from 6.4% to 6.6%.

income decreased 13.3%, to ¥9.2 billion.
Performance by Business Segment
Printing and Industrial Materials Products

Paper and Converted Products

In Printing & variable information products operations in Japan,

In Fine & specialty paper products operations, sales of mainstay

adhesive products for seals and labels were impacted by unseason-color papers for envelopes were low and there were also declines forable weather conditions for food-use products but sales of medical-

construction material papers and oil resistant papers.

and distribution-use products were solid. Overseas, sales were

In Converted products operations, sales of casting papers forcarbon fiber composite materials were solid for aircraft use. Sales ofimpacted by an economic slowdown, mainly in China.
In Industrial & material operations, equipment for mail-orderbusiness sold well, but sales of motorcycle- and automobile-use
adhesive products and window films were sluggish due to an eco-release papers for FPC cover lay films and release films for opticalrelated products were also steady.
As a result of the above, net sales in Paper and Converted
Products declined 0.9% year-on-year, to ¥37.1 billion, while operating

nomic slowdown in emerging countries in Asia.

income rose 34.0%, to ¥5.8 billion.

Net Sales

Operating Income¥ Billion¥ Billion

210.5

2016

Printing andIndustrial
Materials
Products–2.0

17.7
Electronic
andOpticalProducts–2.2

Adjustment–0.0
Paper andConverted
Products–0.3

Printing andIndustrial
Materials
Products
–1.1

206.0

2017
(Fiscal years ended March 31)

2016Electronic
andOpticalProducts
–1.4

16.6

Paper andConverted
Products+1.5

2017(Fiscal years ended March 31)

LINTEC ANNUAL REPORT 2017

51

FINANCIAL SECTIONManagement’s Discussion and Analysis

Financial Position

Cash Flows

AssetsCash and cash equivalents as of March 31, 2017, amounted to ¥41.3

Total assets as of March 31, 2017, were ¥274.2 billion, an increase ofbillion, a decrease of ¥19.0 billion year-on-year.

¥33.5 billion from the end of the previous fiscal year. The mainchanges were as follows:

Cash Flows from Operating Activities· Cash and deposits-¥20.7 billion· Trade notes and accounts receivable	+¥4.5 billion

on-year, to ¥24.4 billion. The principal movements were as follows.

· Inventories+¥3.5 billion·P rofit before income taxes· Property, plant and equipment

+¥9.0 billion·D epreciation and amortization

-¥1.3 billion· Goodwill+¥34.5 billion·T rade notes and accounts receivable

-¥2.5 billion·T rade notes and accounts payable

+¥5.0 billion· Income taxes paid

+¥1.7 billion

Liabilities

Net cash provided by operating activities increased ¥4.4 billion year-¥1.4 billion

Total liabilities as of March 31, 2017, were ¥95.5 billion, an increase of¥26.9 billion from the end of the previous fiscal year. The main

Cash Flows from Investing Activities

changes were as follows:

Net cash used in investing activities decreased ¥38.5 billion year-on-· Trade notes and accounts payable

+¥5.4 billion

year, to ¥48.4 billion. The principal movements were as follows.

· Short-term loans payable

-¥1.1 billion· Payments into time deposits-¥1.2 billion· Current portion of long-term loans payable

+¥3.1 billion· Proceedsfrom withdrawal of time deposits	+¥2.2 billion· Long-term loans payable

+¥17.8 billion· Purchaseof property, plant and equipment

-¥3.2 billion·P urchase of shares and membership interests of subsidiaries
resulting in change in scope of consolidation

Net Assets-¥36.9 billion

Net assets as of March 31, 2017, were ¥178.7 billion, an increase of ¥6.6
billion from the end of the previous fiscal year. The main changes

Cash Flows from Financing Activities

were as follows:

Net cash provided by financing activities amounted to ¥5.3 billion· Retained earnings

+¥7.5 billion

compared with net cash used of ¥4.0 billion in the previous fiscal year.
The principal movements were as follows.
· Short-termloans payable

Net Assets
178.7
Share
subscription
rightsTotal accumulated+0.0
other comprehensive
income–0.7+¥20.9 billion· Repayments
of long-term loans payable

-¥9.3 billion

2016

LINTEC ANNUAL REPORT 2017

¥ Billion
Net cash used ininvesting activities–48.4

Noncontrollinginterests
–0.3

60.3

Total
shareholders’equity+7.5

52· Proceeds from long-term loans payable

Cash Flows¥ Billion

172.1-¥1.7 billion

Net cashprovided byoperatingactivities
+24.4

2017
(Fiscal years ended March 31)

2016

Effect ofexchange ratechange on cash
and cashequivalents
Decrease in+0.0
cash andcash equivalents
resulting from
Net cashexclusion of subsidiaries
provided byfrom consolidation
financing activities
–0.3
+5.3
41.3

2017
(Fiscal years ended March 31)

Operating Risks

The following is a summary of risks that could affect the LINTEC Group’s(4) Outbreaks of contagious diseases

operations. This summary provides specific examples of major risks(5) Unpredictable changes in laws and regulations, such as thosethat are anticipated, but it does not include all risks.

involving tax systems, foreign exchange, or customs(6) Problems arising between the Group and its business associates

1. Changes in Economic Conditions

or in the collection of accounts receivable due to differences in

The Group’s operations include development in a wide range ofcultures or business practices

industries. Therefore, domestic and overseas economic conditions affect
the Group’s operations directly and indirectly. As a result, future trends

6. New Product Developmentin economic conditions could affect the Group’s business results.

The Group pursues R&D activities with a view to realizing comprehensive

Furthermore, global trends in the electronics industry affect the Group’s

technological capabilities that cater to market demand and bringing

electronics-related products business. Future market trends could

to market competitive, high-value-added products. Accordingly, theaffect the Group’s business results.

Group is stepping up allocations of management resources to increase
its number of researchers and to pursue such initiatives as joint research

2. Changes in Selling Prices
Due to intense competition in both the domestic and overseas

with other companies and academic institutions.
However, there is no guarantee that such investment of management

markets in which the Group operates, the Group may be unable toresources in R&D will result in the development of new products ormaintain selling prices to preserve sufficient earnings or sales share.

increase operating income. Due to such factors as extended development

Furthermore, the Group’s business results could be affected byperiods, it could become necessary to discontinue development, anddifficulties related to cost reductions aimed at maintaining profits

if product development costs cannot be recovered, it could affect theand recovering its share by refining customer services.

Group’s business results.

3. Changes in Raw Material Prices

7. Intellectual Property Rights

The Group uses a large quantity of pulp for paper and petrochemical

The Group takes necessary measures to protect intellectual property

products as raw materials and fuel. The prices of these materials andrights in Japan and overseas for various original production technologies

fuels fluctuate in accordance with market conditions, such as inven-that it has developed. However, legal measures alone do not provide

tories and the supply–demand balance. The Group purchases raw

complete protection, possibly preventing the Group from effectively

materials in light of careful monitoring of market trends. However,protecting the rights it has obtained. Furthermore, in the event thata dramatic change in raw material prices could affect the Group’s

a lawsuit is filed by a third party regarding intellectual property rights

business results.

infringement associated with the Group’s products, the Group’s businessresults could be affected.

4. Changes in Foreign Exchange Rates
The Group conducts foreign currency-denominated procurement and8. Significant Lawsuits

sales overseas as well as finance transactions between both domestic

In conducting business in Japan and overseas, the Group may be subject

and overseas Group companies. Therefore, changes in foreign

to lawsuits or other claims related to product liability, environmental,

exchange rates could affect the Group’s business results.

or intellectual property rights issues. Lawsuits or claims, dependingon their content, could affect the Group’s business results.

5. Overseas Operations
The Group conducts manufacturing and business operations in markets

9. Legal and Regulatory Systems

worldwide. In these countries, the following events could affect theIn the countries in which it conducts business operations, the Group isGroup’s business results.

subject to various legal and regulatory systems, and as such is working(1) Political instability or a deterioration in security due to such factors

to ensure rigorous compliance with these systems. In the event that theas terrorism, a political change, or a coup d’état(2) Labor disputes, such as those involving strikes or boycotts

systems are strengthened or changed, the Group’s business activities
could be restricted or the Group’s business results could be affected.

(3) Infrastructure failures, such as those related to electric power,
water, or communications
LINTEC ANNUAL REPORT 2017

53

FINANCIAL SECTION

Financial Summary
LINTEC Corporation and its consolidated subsidiaries
Years ended March 31

2017

2016

2015

2014

For the year:
Net sales
Operating income% of net sales
Profit before income taxes
Profit attributable to owners of parent
Return on equity
Return on assets¥205,975
16,595
8.1%
15,39811,450
6.6%
6.1%¥210,501
17,692
8.4%
16,79910,8996.4%
7.4%¥207,255
16,881
8.1%
17,555
11,6597.2%
7.8%¥203,242
13,766
6.8%
12,883
8,501
5.8%
6.0%

Per share data (yen):
Net income
Net assets
Cash dividends¥   158.69
2,465.43
66.00¥   151.07
2,370.49
54.00¥   161.63
2,363.81
48.00¥   114.22
2,100.87
42.00

Depreciation and amortization
Purchase of property, plant and equipment
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities¥ 7,466(13,049)
24,361(48,378)
5,257¥ 8,800(9,810)19,928(9,898)(4,044)¥ 8,713(6,299)15,485(5,104)(3,135)¥10,055(5,508)16,309(6,952)(8,020)At year-end:
Current assets
Current liabilities
Working capital
Cash and cash equivalents
Property, plant and equipment, net
Long-term debt, less current portion% of shareholders’ equity
Total assets
Net assets% of total assets¥151,449
64,40187,04841,28473,871
17,795
10.3%
274,199
178,69064.9%¥163,647
56,389107,258
60,32364,859——240,720
172,101
71.1%¥163,017
57,058105,958
56,05061,503——
237,444
171,67471.8%¥149,396
54,82094,57544,99261,456——225,073
152,61067.3%

76,564,240
4,760

76,564,240
4,246

76,564,240
4,413

76,564,240
4,223¥85,721
83,27852,632¥88,100
85,89554,576¥86,826
83,28154,564¥86,310
79,14352,781

1,672
9,155
5,767

2,785
10,5624,303

2,878
10,071
3,996

2,290
6,846
4,645

Number of shares outstanding
Number of employees
Segment information:
Net sales:
Printing and Industrial Materials ProductsElectronic and Optical Products
Paper and Converted Products
Segment income:Printing and Industrial Materials ProductsElectronic and Optical Products
Paper and Converted Products(Supplementary information)
Effective the year ended March 31, 2011, the “Accounting Standard for Disclosure about Segments of an Enterprise and Related Information” (Accounting Standards Board of Japan (ASBJ)
Statement No. 17, issued by ASBJ on March 27, 2009) and the “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Guidance
No. 20, issued by ASBJ on March 21, 2008) have been applied.
Since it is impracticable to restate segment information of the fiscal years of 2010 and before complying revised accounting standards for segment information, only reportable segment
information for the year ended March 31, 2011 onward have been presented.

54

LINTEC ANNUAL REPORT 2017

Millions of yen, except per share data, number of shares, and number of employees

2013

2012

2011

2010

2009

2008

¥190,844
10,564
5.5%
10,836
7,681
5.6%
5.2%

¥200,905
13,975
7.0%
13,382
8,648
6.6%
6.5%

¥212,733
20,8899.8%
19,565
13,62210.9%
9.7%¥189,348
11,576
6.1%
11,399
7,284
6.2%
6.1%

¥194,901
8,498
4.4%
5,215
3,391
2.9%
3.0%

¥202,297
14,8947.4%
13,191
9,308
8.0%
6.6%

¥  102.83
1,909.57
34.00¥  115.26
1,766.60
40.00¥  180.21
1,715.78
40.00¥ 96.36
1,596.37
24.00¥ 44.86
1,497.58
20.00¥ 123.15
1,598.30
24.00¥ 10,141(13,823)
19,619(13,966)(2,877)¥ 10,079(8,760)18,910(12,262)(5,099)¥10,178(8,237)23,307(9,926)(2,820)¥10,537(7,777)22,259(9,253)(3,454)¥11,286(9,584)
12,979(9,752)(2,300)¥ 9,011(14,700)
17,739(15,071)(769)¥138,505
56,911
81,59340,73964,915——
216,048
143,569
66.0%¥137,229
62,07575,15336,03662,273——
210,203132,84762.8%¥132,891
60,46572,42635,18861,888——206,188
130,57662.9%¥121,451
58,65462,79725,387
63,33754
0.0%
195,656
121,502
61.7%¥ 95,937
43,65552,282
15,37067,010107
0.1%
172,854
113,93065.5%¥120,028
67,631
52,397
17,31573,711201
0.2%
204,852
121,635
59.4%

76,564,240
4,270

76,564,240
4,286

76,564,240
4,198

76,564,240
4,037

76,564,240
3,987

76,564,240
3,802¥82,785
72,37252,061¥90,143
73,92553,225¥91,936
81,19355,317

—
—
—

—
—
—

—
—
—

2,380
3,196
4,980

5,213
3,942
4,846

7,990
6,732
6,129

—
—
—

—
—
—

—
—
—

LINTEC ANNUAL REPORT 2017

55

FINANCIAL SECTION

Consolidated Balance Sheet
LINTEC Corporation and its consolidated subsidiaries
March 31, 2017 and 2016

ASSETS

Millions of yen

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

Current assets:¥   45,060¥   65,733$   401,641

Trade notes and accounts receivable (Note 14)

Cash and deposits (Notes 12, 14)

66,801

62,331

595,431

Inventories (Note 3)

34,58431,066308,267

Deferred tax assets (Note 19)

1,614

1,121

14,390

Other (Notes 14, 16)

3,530

3,538

31,225

Allowance for doubtful accounts

(114)

(143)

(1,017)

151,449

163,647

1,349,938

Buildings and structures

71,54569,970637,716

Machinery, equipment and vehicles

124,185

116,352

1,106,920

Land

11,057

10,18498,564

Construction in progress

2,163

2,864

19,286

		Total current assets

Non-current assets:
Property, plant and equipment (Notes 6, 10, 13):

Other

12,511

12,070111,517

221,463

211,4421,974,005(147,592)(146,583)(1,315,557)

73,87164,859658,447

Goodwill

34,55822

308,039

Other (Note 13)

4,000

2,334

35,66038,5592,357

343,700

Investment securities (Notes 14, 15)

3,102

3,126

27,657

Deferred tax assets (Note 19)

5,063

4,978

45,137

Other

2,256

1,854

20,116

Allowance for doubtful accounts

(105)

(103)

(937)

Accumulated depreciation		Property, plant and equipment, net

Intangible assets:

		

Total intangible assets

Investments and other assets:

		

Total investments and other assets

10,318

9,855

91,974

		Total non-current assets

122,749

77,072

1,094,122¥ 274,199¥ 240,720$ 2,444,061

Total assets
The accompanying notes are an integral part of the consolidated financial statements.

56

LINTEC ANNUAL REPORT 2017

Millions of yen

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

¥ 45,057¥ 39,683$  401,622

641

1,695

5,720

Current portion of long-term loans payable (Notes 14, 16, 26)

3,051

—

27,202

Accrued income taxes (Notes 14, 19)

3,098

2,272

27,621

90

93

804

12,46012,644

111,065

64,401

56,389574,035

17,795—

158,616

135

137

1,204

12,362

11,476110,189

814

614

7,261

31,107

12,228277,272

95,50868,618851,308

23,201

23,201

206,803

Capital surplus

26,82926,829239,141

Retained earnings

131,247

123,7131,169,870(7,714)(7,712)(68,762)

173,563

166,032

1,547,052

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable (Note 14)
Short-term loans payable (Notes 14, 26)

Provision for directors’ bonuses
Other (Notes 14, 16, 26)
		Total current liabilities

Non-current liabilities:
Long-term loans payable (Notes 14, 16, 26)
Provision for environmental measures
Net defined benefit liability (Notes 7, 8, 17)
Other (Note 26)
		Total non-current liabilities

		Total liabilities
Commitments and contingent liabilities (Note 2)
Net assets:
Shareholders’ equity (Note 25):
Common stock:		

Authorized: 300,000,000 shares in 2017 and 2016

		Issued: 76,564,240 shares in 2017 and 2016

Less: treasury stock, at cost:		

4,412,515 shares in 2017 and 4,411,475 shares in 2016		Total shareholders’ equity

Accumulated other comprehensive income
Net unrealized holding gain on securities

775

701

6,909

Foreign currency translation adjustments

6,938

7,812

61,844Remeasurements of defined benefit plans (Notes 7, 8, 17)(3,392)(3,509)(30,240)

		

4,320

5,005

38,514

Share subscription rights (Note 18)

186

169

1,665

Non-controlling interests

619

895

5,520

Total net assets

178,690

172,101

1,592,752

Total liabilities and net assets¥274,199¥240,720$2,444,061

		

Total accumulated other comprehensive income

LINTEC ANNUAL REPORT 2017

57

FINANCIAL SECTION

Consolidated Statement of Income
LINTEC Corporation and its consolidated subsidiaries
Years ended March 31, 2017 and 2016

Millions of yen

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Notes 4, 5)
Operating income
Non-operating income:Interest income
Dividend income
Rent income
Gain on sales of non-current assets
Insurance income
Other income
		 Total non-operating income
Non-operating expenses:
Interest expenses
Loss on retirement of non-current assets
Compensation expenses
Foreign exchange losses
Other expenses
		 Total non-operating expenses
Ordinary income
Extraordinary gain:
Gain on sales of investment securities (Note 15)
Gain on sales of non-current assets (Note 6)
Gain on liquidation of subsidiaries
		 Total extraordinary gain
Extraordinary loss:
Loss on liquidation of subsidiaries
Impairment loss (Note 10)
Loss on sales of investment securities (Note 15)
Special retirement expenses (Note 7)
Loss on abolishment of retirement benefit plan (Note 8)
Loss on temporary suspension of production (Note 9)
		Total extraordinary losses
		 Profit before income taxes
Income taxes (Note 19):
Current
Deferred		Total income taxes
ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent (Note 25)

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

¥205,975
153,115
52,85936,264
16,595¥210,501
156,877
53,62435,932
17,692$1,835,953
1,364,790
471,162
323,243
147,919

218
91
43
20
226
274
875

308
59
58
7
42
276
752

1,951
817
391
179
2,019
2,445
7,805

73
785
107
473
345
1,786
15,684

18
357
129
124
189
820
17,623

654
7,003
957
4,221
3,083
15,921
139,802

190
121
17
329

—
11
—
11

1,696
1,086
153
2,937

568
34
13
—
—
—
615
15,398

—
—
—
438
265
131
835
16,799

5,068
304
116
—
—
—
5,488
137,251

5,383(1,191)
4,192
11,206(244)¥ 11,450

5,339
689
6,029
10,769(129)¥ 10,899

47,985(10,618)
37,367
99,884(2,175)$  102,060

Millions of yen

Thousands of
U.S. dollars(Note 1)

Consolidated Statement of Comprehensive Income
LINTEC Corporation and its consolidated subsidiaries
Years ended March 31, 2017 and 2016

ProfitOther comprehensive income (Note 11)
Net unrealized holding gain on securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans (Notes 7, 8, 17)
Total other comprehensive income
Comprehensive income(Comprehensive income attributable to:)Owners of parent
Non-controlling interests
The accompanying notes are an integral part of the consolidated financial statements.

58

LINTEC ANNUAL REPORT 2017

2017

2016

2017

¥11,206¥10,769$99,884

73
(907)
118
(716)
¥10,489(130)(3,443)(2,975)(6,549)¥ 4,220656(8,091)
1,052(6,382)$93,501

10,765
(275)

4,318
(97)

95,959(2,458)

Consolidated Statement of Changes in Net Assets
LINTEC Corporation and its consolidated subsidiaries
Years ended March 31, 2017 and 2016

Thousands

Millions of yen
Shareholders’ equity

Balance as at April 1, 2015

Accumulated other comprehensive income

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Net
Total unrealized
Treasury shareholders’ holding gain
stock
equity on securities

76,564¥23,201¥26,830¥116,638¥(7,741)¥158,928

¥832

Total
Foreign Remeasure­ accumulated
currency
ments of other com­translation
definedprehensive
adjustments benefit plansincome¥11,256¥(503)¥11,586

Share
subscription
rights

Noncontrollinginterests

Total net
assets¥166¥992¥171,674

Changes during the year:
Cash dividends(3,823)(3,823)(3,823)

10,89910,899Profit attributable to ownersof parent

10,899Purchase of treasury stock
Disposal of treasury stock

(0)

(2)

(2)

(2)

31

30

30

—

—

Change of scope of consolidation
Net changes in items other(130)(3,443)(3,006)(6,580)2(97)

Total changes during the year

than shareholders’ equity
—

—

(0)

7,075

29

7,103

(130)

(3,443)(3,006)(6,580)2(97)(6,676)427

Balance as at March 31, 2016

76,564¥23,201¥26,829¥123,713¥(7,712)¥166,032¥701¥7,812¥(3,509)¥5,005¥169¥895¥172,101

Changes during the year:
Cash dividends(4,329)(4,329)(4,329)Profit attributable to ownersof parent

11,450Purchase of treasury stock
Disposal of treasury stock0

Change of scope of consolidation

11,45011,450

(2)

(2)

(2)

0

0

0

413

413

413

Net changes in items other
73

(874)

116

(684)

17

(275)

(942)

Total changes during the year

than shareholders’ equity
—

—

0

7,533

(2)

7,531

73

(874)

116

(684)

17

(275)

6,589

Balance as at March 31, 2017

76,564¥23,201¥26,829¥131,247¥(7,714)¥173,563¥775¥6,938¥(3,392)¥4,320¥186¥619¥178,690

Thousands

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Balance as at April 1, 2016

Number ofshares ofcommonstock

Commonstock

76,564$206,803

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Net
Total unrealized
Treasury shareholders’ holding gain
stock
equity on securities$6,253

Total
Foreign Remeasure­ accumulated
currency
ments of other com­translation
definedprehensive
adjustments benefit plansincome$69,640$(31,279)$44,614

Share
subscription
rights$1,508

Noncontrollinginterests

Total net
assets$239,141 $1,102,716$(68,741) $1,479,919$7,978 $1,534,021(38,587)(38,587)(38,587)

Changes during the year:
Cash dividends
Profit attributable to ownersof parent

102,060

Purchase of treasury stock
Disposal of treasury stock0

Change of scope of consolidation

102,060

102,060

(21)

(21)

(21)

0

0

0

3,681

3,681

3,681

Net changes in items otherthan shareholders’ equity
Total changes during the year——

Balance as at March 31, 2017

76,564$206,803

067,153$239,141 $1,169,870

656(7,795)

1,038(6,100)157(2,458)(8,401)

67,132656(7,795)

1,038(6,100)157(2,458)58,731$(68,762) $1,547,052$6,909$61,844$(30,240)$38,514$1,665(21)$5,520 $1,592,752

The accompanying notes are an integral part of the consolidated financial statements.

LINTEC ANNUAL REPORT 2017

59

FINANCIAL SECTION

Consolidated Statement of Cash Flows
LINTEC Corporation and its consolidated subsidiaries
Years ended March 31, 2017 and 2016

Cash flows from operating activities:
Profit before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in net defined benefit liability
Increase (decrease) in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Loss (gain) on sales of property, plant and equipment
Loss on retirement of property, plant and equipment
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Loss (gain) on sales of investment securities
Increase (decrease) in provision for environmental measures
Loss (gain) on liquidation of subsidiaries
Impairment loss
Special retirement expenses
Loss on abolishment of retirement benefit plan
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes (paid) refund
Special retirement expenses paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from liquidation of subsidiaries
Payments of loans receivableCollection of loans receivable
Purchase of shares and membership interests of subsidiaries resulting in change inscope of consolidation (Note 12)
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Cash dividends paid
Purchase of treasury stock
Repayments of lease obligations
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents from newly consolidated subsidiary
Decrease in cash and cash equivalents resulting from exclusion of subsidiaries
from consolidation
Cash and cash equivalents at end of year (Note 12)
The accompanying notes are an integral part of the consolidated financial statements.

60

LINTEC ANNUAL REPORT 2017

Millions of yen

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

¥ 15,398
7,466
315
947
(24)
(310)
73
(132)
482
(1,565)
812
3,470
(177)
(2)
551
34
—
—
1,789
29,128325(16)(4,809)(265)
24,361¥16,799
8,800
71
788
(72)
(367)
18
(9)
163
966
582
(1,485)
(0)
(2)
—
—
438
265
(792)
26,166382(18)(6,534)(66)
19,928$ 137,251
66,553
2,809
8,445
(216)
(2,769)654(1,178)
4,296(13,953)
7,242
30,930(1,580)
(23)
4,914
304
—
—
15,954
259,6342,902(150)(42,870)(2,366)217,149(10,897)
12,164(13,049)
181
(199)
(5)
361
24
(2)
4

(9,653)
9,957(9,810)
26
(455)
(15)
0
—
(5)
2

(97,138)
108,427(116,312)
1,613(1,776)
(51)
3,226
222
(17)
36

(36,909)—(328,994)(50)(48,378)

56(9,898)(451)(431,216)(1,748)20,850(9,253)(4,328)
(2)
(258)
0
5,257
35
(18,723)
60,323————(3,824)(2)(217)
0(4,044)(1,712)
4,273
56,0500(15,589)
185,846(82,484)(38,582)(21)(2,302)
046,866313(166,887)
537,693—(315)¥ 41,284—¥60,323(2,815)$ 367,990

Notes to Consolidated Financial Statements
LINTEC Corporation and its consolidated subsidiaries
March 31, 2017

1. Summary of Significant Accounting Policies(a) Basis of presenting financial statements
LINTEC Corporation (the “Company”) maintains its accounting records
and prepares its consolidated financial statements in accordance withaccounting principles generally accepted in Japan, which are different incertain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards. The accompanying consolidated financial statements have been compiled from the consolidated
financial statements prepared by the Company as required by the
Financial Instruments and Exchange Act of 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.
For the convenience of the readers, the accompanying consolidated
financial statements have been presented in U.S. dollars by translating all
Japanese yen amounts at the rate of ¥112.19=U.S.$1, the prevailingexchange rate as of March 31, 2017. This translation should not be
construed as a representation that the Japanese yen amounts could be
converted into U.S. dollars at this or any other rate of exchange.
As permitted under the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen have been omitted. As aresult, the totals shown in the accompanying consolidated financial statements do not necessarily agree with the sum of the individual amounts.
Certain reclassifications of previously reported amounts have been
made to conform to the consolidated financial statements for the year
ended March 31, 2017 presentation.
(b) Consolidation
The accompanying consolidated financial statements include the accountsof the Company and its 41 significant subsidiaries as of March 31, 2017,
but exclude subsidiaries whose total assets, net sales, profit and retained
earnings are not material in relation to the comparable amounts in thesestatements. All significant intercompany accounts and transactions havebeen eliminated in consolidation.
Goodwill is amortized over periods of the useful lives (mainly 5 years)
on a straight-line basis.
Investments in subsidiaries and affiliates, which are not consolidated or
accounted for by the equity method, are carried at cost. Where there has
been a permanent decline in the value of such investments, the Company
has written down the investments.
Certain subsidiaries are consolidated on the basis of fiscal period
ending December 31, which differ from that of the Company. The necessary adjustments are made to the financial statements of such
subsidiaries to reflect any significant transactions from their respective
fiscal year ends to March 31.
(c) Foreign currency translation
Receivables, payables and securities denominated in foreign currencies
are converted into Japanese yen at the exchange rates at fiscal year end.
Transactions in foreign currencies are recorded based on the prevailingexchange rates on the transaction dates and the resulting translation
gains or losses are included in statement of income.
In respect of the financial statement items of overseas subsidiaries, allassets and liabilities accounts are translated into Japanese yen by
applying the exchange rates in effect at the fiscal year end. All income andexpense accounts are translated into Japanese yen by applying the
average exchange rates during the fiscal year.
Translation differences after allocating to non-controlling interest for
portions attributable to non-controlling interest are reported as foreign
currency translation adjustments in a separate component of net assets
in the accompanying consolidated balance sheet.
(d) Investment securities
Securities with market value are stated at fair value, and changes in fairvalue are recorded as a separate component of net assets at an amount,net of tax, and the moving average method is used to calculate theoriginal cost. Securities without market value are stated at cost determined by the moving average method.
(e) Derivatives
Derivatives are stated at fair value.
(f) Inventories
Inventories mainly apply the cost method based on the weighted-averagemethod, which determines the amount of the inventories shown on the
consolidated balance sheet by writing them down based on the decreasein their profitability.
Machinery applies the cost method based on the specific identification
method, which determines the amount of the inventories shown on the
consolidated balance sheet by writing them down based on the decreasein their profitability.
(g) Property, plant and equipment (Excluding leased assets)
Depreciation is computed by the straight-line method over the useful livesof the respective assets.
The significant useful lives are summarized as follows:		 Buildings and structures
3–50 years
		 Machinery, equipment and vehicles
3–17 years(h) Intangible assets (Excluding leased assets)
Capitalized costs of software for internal use are amortized using thestraight-line method over useful lives (5 years).
(i) Leased assets
Leased assets arising from finance lease transactions which transfer
ownership to the lessees are depreciated as the same as the owned
property, plant and equipment.
Leased assets arising from finance lease transactions which do nottransfer ownership to the lessees are depreciated to a residual value ofzero by the straight-line method using the contract term as the useful life.
(j) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at the amount of estimateduncollectible accounts, based on individual collectability with respect toidentified doubtful receivables and past experience of doubtful receivables.
(k) Provision for directors’ bonuses
Bonus to directors is accrued at the year end and to be paid in thefollowing year when such bonuses are attributable.
(l) Accounting method for retirement benefits(1) Method of attributing expected retirement benefits to periods
	In calculating retirement benefit obligations, the benefit formula basis
is used to attribute expected retirement benefits to periods throughthe end of the fiscal year.
(2) Method of amortizing actuarial gain and loss and prior service cost	Actuarial gain and loss are amortized in the year following the year
in which the gain or loss is recognized by the straight-line method
principally over 15 years. Prior service cost is being amortized by thestraight-line method principally over 15 years.
(m) Provision for environmental measures
The provision for environmental measures is estimated and recorded toprovide for future potential costs, such as costs related to removal anddisposal of toxic substances based on related legal requirements.
(n) Accounting for consumption taxes
Transactions subject to consumption taxes are recorded at amounts
exclusive of consumption taxes.
(o) Cash and cash equivalents
Cash and cash equivalents are composed of cash and time deposits
having maturities within three months from acquisition, all of which are
low-risk, short-term financial instruments readily convertible into cash.
(p) Research and development costs
Research and development costs are charged to income when incurred.
(q) Income taxes
Deferred tax assets and liabilities are determined based on differences
LINTEC ANNUAL REPORT 2017

61

FINANCIAL SECTION

between financial reporting and tax bases of assets and liabilities and aremeasured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
(r) Shareholders’ equity
The Corporation Law of Japan provides that an amount equal to 10% of
the amount to be distributed as distributions of capital surplus (other thanthe capital reserve) and retained earnings (other than the legal reserve)
be transferred to the capital reserve and the legal reserve, respectively,
until the sum of the capital reserve and the legal reserve equals 25% of
the common stock account. Such distributions can be made at any time byresolution of the shareholders or by the Board of Directors if certain
conditions are met, but neither the capital reserve nor the legal reserve isavailable for distributions.
(s) Hedge accounting(1) Hedge accounting method	The exceptional accounting treatment (the “Tokurei-shori”) is appliedwith respect to interest rate swaps that meet the requirements tohedge the cash flow volatility of certain foreign currency-denominatedloans. The Tokurei-shori and the designated hedge accounting (the“Furiate-shori”) are applied with respect to interest rate and currency
swaps that meet the requirements to hedge the cash flow volatility
caused by foreign exchange rate fluctuations on certain foreign
currency-denominated loans.
(2) Hedging instruments and hedged items
1Hedging instruments......Interest rate swaps
	  Hedging items.................Foreign currency-denominated loans
2Hedging instruments......Interest rate and currency swaps
	  Hedging items.................Foreign currency-denominated loans(3) Hedging policy	In accordance with the internal regulation, risk of fluctuations ininterest rates and foreign exchange is hedged.
(4) Method of evaluating the effectiveness of hedges
	The evaluation of effectiveness is omitted for interest rate swaps
accounted for under the Tokurei-shori and for interest rate and currency
swaps accounted for under the Tokurei-shori and Furiate-shori.
(t) Changes in accounting principles(Changes in accounting principles that are difficult to distinguish fromchanges in accounting estimates)(Change in the depreciation method of property, plant and equipment)
The Company and its domestic consolidated subsidiaries had conventionally used the declining-balance method (straight line method for thebuildings (excluding attached facilities) acquired on or after April 1, 1998)
as the depreciation method of property, plant and equipment (excluding
leased assets), which has been changed to the straight line method fromthis consolidated fiscal year.
Based on its medium-term business plan “LIP-2016”, which wasannounced in 2014, the LINTEC Group (the “Group”) has been further
promoting its global development and actively investing its management
resources in growth areas such as innovative new products that will
support the next generation.
As part of these efforts, the Group has added a new research building
and testing and research facilities, and when these new facilities

commenced full operation in 2016, the Group re-examined its depreciation
method, which appropriately reflected the condition of the use of theGroup’s property, plant and equipment. As a result, the Group determinedthat comprehensively considering the following changes and altering thedepreciation method to the straight-line method would enable more
appropriate cost distribution throughout the period of use.
(1)	The latest, large testing and research facilities were installed during
the addition of the research building in order to improve the Group’s
development simulation capability, which resulted in an increase in thepercentage of research and development facilities in its property, plantand equipment. Such R&D facilities will include large test coaters
associated with factory mass production facilities, advanced analysis
equipment, and other devices, which are expected to substantiallyaccelerate the process from the initial stage of research to mass
production. The Group plans to engage in development for the establishment of the mass production process, and these R&D facilities will
be operated steadily every fiscal year.
(2)	High-function products have been increasing as a proportion of theCompany’s products in recent years, and improvements and additions
to the coaters, which are major facilities in the Company’s property,
plant and equipment, have been made in line with this increase. These
manufacturing facilities as a whole wear at an average rate every fiscal
year due to improvements in manufacturing technology thanks to
R&D, etc. and the modification of the production system. In addition,
operations are expected to be steady given the Company’s active
improvement of facilities to meet rising demand in growth areas.
As a result, the depreciation of this consolidated fiscal year decreasedby ¥2,685 million (U.S. $23,933 thousand) from those using the conventional method, and operating income, ordinary income, and profit before
income taxes have each increased by ¥2,399 million (U.S. $21,390 thousand).
(u) Changes in presentation(Consolidated Balance Sheet)“Goodwill,” which was included in “Intangible assets” in the previous
consolidated fiscal year, is separately presented in this consolidated fiscal
year due to its increased materiality of the amount. To reflect this change
in presentation, ¥2,357 million presented as “Intangible assets” in the
consolidated balance sheet of the previous fiscal year has been reclassified
into ¥22 million of “Goodwill” and ¥2,334 million of “Other.”(Consolidated Statement of Income)“Insurance income,” which was included in “Other income” under“Non-operating income” in the previous consolidated fiscal year, isseparately presented in this consolidated fiscal year due to its increased
quantitative materiality. To reflect this change in presentation, ¥318 million
presented as “Other income” under “Non-operating income” in the consolidated statement of income of the previous fiscal year has been reclassified
into ¥42 million of “Insurance income” and ¥276 million of “Other income.”(v) Additional information
The Accounting Standards Board of Japan (ASBJ) Guidance No. 26 issued
the Implementation Guidance on Recoverability of Deferred Tax Assets on
March 28, 2016, and the guidance has been applied from this consolidated
fiscal year.

2. Commitments and Contingent Liabilities
The Company and its consolidated subsidiaries had unused lines of credit for short-term financing aggregating ¥23,194 million (U.S. $206,743 thousand)and ¥22,208 million at March 31, 2017 and 2016, respectively.

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LINTEC ANNUAL REPORT 2017

3. Inventories
Merchandise and finished goods, work in process, and raw materials and supplies as of March 31, 2017 and 2016 were as follows:
Millions of yen

Thousands of
U.S. dollars

Merchandise and finished goods

2017¥13,0312016¥10,9562017$116,156

Work in process

11,951

11,513

106,527

Raw materials and supplies

9,601

8,596

85,583¥34,584¥31,066$308,267

Millions of yen

Thousands of
U.S. dollars

2016¥ 5,2742017$ 45,682

Total

4. Selling, General and Administrative Expenses
Major items included in selling, general and administrative expenses for the years ended March 31, 2017 and 2016 were as follows:2017¥ 5,125

Transportation and warehousing expenses
Provision for allowance for doubtful accounts
Salaries and allowances

(12)

48

(109)

7,743

8,011

69,021
3,774

Retirement benefit expenses

423

284

Provision for directors’ bonuses

95

93

853

Depreciation and amortization

1,092

1,068

9,740

Research and development expenses

7,639

7,644

68,094Other

14,156

13,507

126,185¥36,264¥35,932$323,243

Total

5. Research and Development Expenses
Research and development expenses, all of which were included in selling, general and administrative expenses, for the years ended March 31, 2017 and2016 were ¥7,639 million (U.S.$68,094 thousand) and ¥7,644 million, respectively.
6. Gain on Sales of Noncurrent Assets
Gain on sales of noncurrent assets was related to sales of land for the year ended March 31, 2017 and sales of buildings and structures for the year
ended March 31, 2016.
7. Special Retirement Expenses
The Company has recognized special retirement expenses for downsizing of consolidated subsidiaries in the U.S. for the year ended March 31, 2016.
8. Loss on Abolishment of Retirement Benefit Plan
The Company has recognized settlement loss for partial settlement of a retirement benefit plan of consolidated subsidiaries in the U.S. for the year
ended March 31, 2016.
9. Loss on Temporary Suspension of Production
The Company has recognized extraordinary loss for temporary suspension of production at a manufacturing plant operated by a subsidiary in Indonesia
due to a labor strike for the year ended March 31, 2016.
10. Impairment Loss on Property, Plant and Equipment
The Company has recognized impairment loss on the following classes of assets for the year ended March 31, 2017:
Major use

Location

Category

Pressure-sensitive adhesive related
products manufacturing equipment

Massachusetts State, U.S.A.

Machinery, equipment and vehicles

Millions of yen

Thousands of
U.S. dollars

¥34

$304

(1) Circumstances leading to the recognition of impairment loss
The impairment loss above has been recognized because the asset has decreased in profitability.
(2) Method of calculating recoverable amounts
The recoverable amounts of the assets above are the net realizable value and based on a third-party appraisal value.

LINTEC ANNUAL REPORT 2017

63

FINANCIAL SECTION

11. Comprehensive Income
Reclassification adjustment and tax effect of other comprehensive income for the years ended March 31, 2017 and 2016 were as follows:
Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

Amount incurred during the fiscal year

¥ 340¥  (202)$ 3,037

Reclassification adjustment

(177)

(0)

(1,580)

163

(202)

1,456

		Tax effect

(89)

71

(800)

		

73

(130)

656

Amount incurred during the fiscal year(453)

(3,443)(4,042)

Reclassification adjustment

(454)

―

(4,048)(907)(3,443)(8,091)

―

―

—

(907)

(3,443)(8,091)

Amount incurred during the fiscal year(229)

(4,656)(2,049)Reclassification adjustment

397

381

3,546

167

(4,274)

1,497

		Tax effect

(49)

1,299

(445)

		

118

(2,975)

1,052¥(716)¥(6,549)$(6,382)

Net unrealized holding gain on securities:		

Prior to deducting tax effectNet unrealized holding gain on securities

Foreign currency translation adjustments:

		Prior to deducting tax effect		Tax effect		Foreign currency translation adjustments

Remeasurements of defined benefit plans:		

Prior to deducting tax effectRemeasurements of defined benefit plans

Total other comprehensive income

12. Cash and Cash Equivalents
1. Reconciliation between cash and cash equivalents in the consolidated statement of cash flows and cash and deposits in the consolidated balance
sheet as of March 31, 2017 and 2016 were as follows:

Cash and deposits
Time deposits with maturity of more than 3 months
Cash and cash equivalents

2017¥45,060

Millions of yen

Thousands of
U.S. dollars

2016¥65,733

2017$401,641(3,775)(5,409)(33,650)¥41,284¥60,323$367,990

2. Assets and liabilities of newly acquired consolidated subsidiaries through acquisition of shares or membership interests for the year ended March 31,2017 was as follows:(1) Assets and liabilities of VDI, LLC (a newly acquired consolidated subsidiary through acquisition of membership interests) at the inception of its
consolidation, the acquisition cost of its membership interest and the related expenditures (net) for the acquisition were as follows:
Millions of yen

Thousands of
U.S. dollars¥    473$ 4,2232017
Current assets
Non-current assets

1,713

15,272

Goodwill

1,839

16,398(222)(1,987)

Current liabilities
Non-current liabilities(1,102)(9,830)Acquisition cost of membership interests¥ 2,701$24,076

Cash and cash equivalents
Net expenditures for acquisition

64

LINTEC ANNUAL REPORT 2017

(95)

(848)

¥ 2,605$23,227

(2) Assets and liabilities of MACtac Americas, LLC (another newly acquired consolidated subsidiary through acquisition of membership interests) at the
inception of its consolidation, the acquisition cost of its membership interest and the related expenditures (net) for the acquisition were as follows:
Millions of yen

Thousands of
U.S. dollars¥ 9,066$ 80,817

2017
Current assets
Non-current assets

6,820

60,793

Goodwill

30,889275,330

Current liabilities(4,794)(42,738)

Non-current liabilities(7,564)(67,427)

Acquisition cost of membership interests¥34,417$306,776

Cash and cash equivalents(775)(6,910)Accrued amount of the acquisition cost of membership interests(301)(2,684)¥33,340$297,182

Net expenditures for acquisition(3) Assets and liabilities of Lintec Graphic Films Limited (the other newly acquired consolidated subsidiary through acquisition of shares) at the inceptionof its consolidation, the acquisition cost of its shares and the related expenditures (net) for the acquisition were as follows:
Millions of yen

Thousands of
U.S. dollars¥   378$ 3,375

Non-current assets

144

1,286

Goodwill

733

6,539

Current liabilities(171)(1,531)

2017
Current assets

Non-current liabilities
Acquisition cost of shares
Cash and cash equivalents
Net expenditures for acquisition

(59)

(534)

¥1,024$ 9,136

(61)

(551)

¥   963$ 8,584

There is no disclosure applicable for the year ended March 31, 2016.
3. Assets and liabilities related to finance lease transactions newly recognized for the years ended March 31, 2017 and 2016 were ¥183 million (U.S.
$1,639 thousand) and ¥105 million, respectively.
13. Leases(Lessee’s accounting)For finance lease transactions that transfer ownership, leased assets recognized as property, plant and equipment are mainly production facilities for theyears ended March 31, 2017 and 2016, and are depreciated in the same way as the owned property, plant and equipment.
For finance lease transactions that do not transfer ownership, leased assets recognized as property, plant and equipment are mainly production facilities and vehicles, and those recognized as intangible assets are mainly software for the years ended March 31, 2017 and 2016. These leased assets are
depreciated to a residual value of zero by the straight-line method using the contract term as the useful life.
The minimum lease payments under noncancellable operating leases as of March 31, 2017 and 2016 were as follows:

Due within 1 year
Due after 1 year
Total

2017
¥   419

Millions of yen

Thousands of
U.S. dollars

2016
¥312

2017
$3,741

595

343

5,311

¥1,015¥655$9,052LINTEC ANNUAL REPORT 2017

65

FINANCIAL SECTION

All of the trade payables–trade notes and accounts payable–are due within
1 year.
The Group has commitment line contracts with financial institutions andthe short-term loans payable are raised mainly for business activities andcapital investments.
The long-term loans payable are raised for corporate acquisitions. Interest
rate swaps and interest rate and currency swaps are used to manage
exposure to market risks from changes in interest rates and foreign currency
exchange rate of the long-term loans payable.
The Group is exposed to liquidity risk from its business-related obligations
and loans but the Company and its consolidated subsidiaries prepare andimplement financing plans to manage the liquidity risk.
The Group conducts and manages derivative transactions based oninternal rules and regulations. Director of administration division is in chargeof managing derivative transactions and related reports are submitted to top
management for each case.
In addition, the contract amounts of derivative transactions described
below in Note 16, “Derivatives,” do not represent the market risk associatedwith derivative transactions.

14. Financial Instruments
1. Status of financial instruments(1) Policy regarding financial instruments
The LINTEC Group (the “Group”) limits the scope of its cash and fundmanagement activities to short-term deposits and has a policy of relying
principally on bank loans.
The Group makes use of derivatives only to reduce risk of foreign currency
exchange fluctuations and has a policy of not engaging in derivative transactions
for speculative purposes.
(2) Details of financial instruments and associated risk and risk management
system
In the course of its business activities, the Group is exposed to credit risk
arising from trade notes and accounts receivable that are outstanding fromits customers. Regarding the risk pursuant to the internal regulations for
managing its credit exposure and trade receivables, due dates and balances
are managed appropriately for each customer, to mitigate risks of uncollectible accounts.
Investment securities are stocks being exposed to market price risk, andthese are mainly the stocks of companies with which the Group has business
relationships and they are periodically confirmed the market value.

2. Estimated fair value and other matters related to financial instruments
Carrying value on the consolidated balance sheet as of March 31, 2017 and 2016 along with their fair value and the variance were shown in the following table.
Thousands of
U.S. dollars

Millions of yen

2017(1) Cash and deposits(2) Trade notes and accounts receivable

Carrying value

Estimated
fair value

Variance¥ 45,060¥ 45,060¥—

66,80166,801—

Carrying value

Estimated
fair value

Variance$ 401,641$ 401,641$ —595,431595,431—(3) Investment securities
Other securities

2,519

2,519

—

22,45522,455—(45,057)(45,057)—(401,622)(401,622)

—

(641)

(641)

—

(5,720)(5,720)—(6) Accrued income taxes(3,098)(3,098)—(27,621)(27,621)—(7) Long-term loans payable(20,847)(20,888)41(185,819)(186,190)

371

(37)

(37)

—

(331)

(331)

—

(4) Trade notes and accounts payable(5) Short-term loans payable(8) Derivatives

Notes: i. Figures shown in parentheses are liability items.
ii. The current portion of long-term loans payable is included in long-term loans payable.
iii. The value of assets and liabilities arising from derivatives is shown by net value.
Millions of yen

2016(1) Cash and deposits(2) Trade notes and accounts receivable

Carrying value

Estimated
fair value

Variance¥ 65,733¥ 65,733¥—

62,331

62,331—(3) Investment securities
2,469

2,469

—

(4) Trade notes and accounts payable

Other securities(39,683)(39,683)—(5) Short-term loans payable(1,695)(1,695)—(6) Accrued income taxes(2,272)(2,272)—(7) Long-term loans payable

—

—

—

(8) Derivatives

4

4

—

Notes: i. Figures shown in parentheses are liability items.
ii. The value of assets and liabilities arising from derivatives is shown by net value.

66

LINTEC ANNUAL REPORT 2017

Note 2: Financial instruments for which obtaining an estimated fair value is deemed to be
extremely difficult:

Note 1:	Method of computing the estimated fair value of financial instruments, securities andderivatives(1) Cash and deposits; (2) Trade notes and accounts receivable	Since these items are settled in a short period of time and have estimated fair values
that are virtually the same as the carrying value on the ledger, the carrying value has
been used.
(3) Investment securities
	The market value of investment securities is determined by the price of the stock
traded on an exchange market.
	(4) Trade notes and accounts payable; (5) Short-term loans payable; (6) Accrued
income taxes	Since these items are settled in a short period of time and have estimated fair values
that are virtually the same as the carrying value on the ledger, the carrying value has
been used.
(7) Long-term loans payable	The fair value of long-term loans payable is measured as the net present value of
estimated cash flows by discounting the amount of principal and interest value using
the assumed interest rate applied to a new similar loan. The fair value of long-termloans payable with variable interest rates hedged by interest rate swaps subject tothe special treatment or interest rate and currency swaps subject to the totaltreatment are calculated based on the net present value of the total amount ofprinciple and interest, accounted for together with the interest rate swap or interest
rate and currency swap transactions, discounted by the interest rate rationallyestimated for a similar loan.
(8) Derivatives
Please see Note 16, “Derivatives.”

Millions of yen

Unlisted stocks

Thousands of
U.S. dollars

2017

2016

2017

Carrying value

Carrying value

Carrying value

¥583

¥656

$5,202The unlisted stocks in the preceding table do not have market values, and as estimating
their future cash flows is deemed to be extremely difficult, they are not included in the abovetable “(3) Investment securities.”
Note 3:	Planned redemption amounts after the balance sheet date for held-to-maturity
securities and receivables were as follows:
Millions of yen

Cash and deposits
Trade notes and accounts
receivable
Total

Thousands of
U.S. dollars

2017

2016

2017

Within 1 year

Within 1 year

Within 1 year

¥ 45,038¥ 65,711$401,444

66,801¥111,839

62,331¥128,043

595,431$996,876

Note 4: Planned redemption amounts after the balance sheet date for borrowings were as follows:
Millions of yen

2017

Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable
Total

Within 1 year

Over 1 year
within 2 years

Over 2 years
within 3 years

Over 3 years
within 4 years

Over 4 years
within 5 years

Over 5 years¥   641
3,051—¥3,693

¥   —
—
3,058
¥3,058

¥   —
—
3,058
¥3,058

¥   —
—
9,321
¥9,321

¥   —
—
1,234
¥1,234

¥   —
—
1,121
¥1,121Thousands of
U.S. dollars

2017

Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable
Total

Within 1 year

Over 1 year
within 2 years

Over 2 years
within 3 years

Over 3 years
within 4 years

Over 4 years
within 5 years

Over 5 years$ 5,720
27,202—$32,922$    ——
27,263$27,263$    ——
27,263$27,263$    ——
83,089$83,089$    ——
11,000$11,000$    ——
10,000$10,000
Millions of yen

2016

Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable
Total

Within 1 year

Over 1 year
within 2 years

Over 2 years
within 3 years

Over 3 years
within 4 years

Over 4 years
within 5 years

Over 5 years¥1,695——¥1,695

¥—
—
—
¥—

¥—
—
—
¥—

¥—
—
—
¥—

¥—
—
—
¥—

¥—
—
—
¥—

LINTEC ANNUAL REPORT 2017

67

FINANCIAL SECTION

15. Marketable and Investment Securities
1. The carrying value and acquisition cost of other securities as of March 31, 2017 and 2016 were as follows:
Millions of yen

Thousands of
U.S. dollars

2017
Carrying value

Acquisition cost

Unrealized gain
(loss)

Carrying value

Acquisition cost

Unrealized gain
(loss)

Stocks¥2,180¥   975¥1,205$19,438$ 8,695$10,743

Bonds

—

—

—

—

—

—

Other

—

—

—

—

—

—

¥2,180¥   975¥1,205$19,438$ 8,695$10,743

Stocks¥   338¥   425¥    (86)$ 3,016$ 3,790$   (773)

Bonds

—

—

—

—

—

—

Other

—

—

—

—

—

—

Subtotal¥   338¥   425¥    (86)$ 3,016$ 3,790$   (773)

		Total¥2,519¥1,400¥1,118$22,455$12,485$ 9,969

Description

Securities whose carrying value
exceeds their acquisition cost
Subtotal
Securities whose acquisition costexceeds their carrying value

Millions of yen

2016
Carrying value

Acquisition cost

Unrealized gain
(loss)

Stocks¥2,143¥1,018¥1,124

Bonds

—

—

—

Other

—

—

—

¥2,143¥1,018¥1,124

Stocks¥   325¥   495¥  (169)

Bonds

—

—

—

Other

—

—

—

Subtotal¥   325¥   495¥  (169)

		Total¥2,469¥1,514¥   955

Description

Securities whose carrying value
exceeds their acquisition cost
Subtotal
Securities whose acquisition costexceeds their carrying value

2. Other securities sold during the year ended March 31, 2017:
Thousands of
U.S. dollars

Millions of yen

2017
Description

Sales amount

Aggregate gains

Aggregate losses

Sales amount

Aggregate gains

Aggregate losses

Stocks

¥361

¥190

¥13

$3,226$1,696

$116

Bonds

—

—

—

—

—

—

Other

—

—

—

—

—

—

¥361

¥190

¥13

$3,226$1,696

$116

Total

There is no disclosure applicable for the year ended March 31, 2016.
16. Derivatives
1. Derivatives to which the Company did not apply hedge accounting as of March 31, 2017 and 2016 were as follows:(Currency related)

Millions of yen

2017
Contract amounts
Nature of transaction

Off-market transactions

68

LINTEC ANNUAL REPORT 2017

Over 1 year

Unrealized gain
(loss)¥(14)

Forward exchange contracts to:
Sell: U.S. dollars (buy Japanese yen)

Total

Total

Estimated
Fair value¥   919¥—¥(14)

Buy: Korean won (sell U.S. dollars)

58

—

(2)

(2)

Sell: India rupee (buy Japanese yen)

345

—

(19)

(19)

¥1,323

¥—

¥(37)

¥(37)

Thousands of U.S. dollars

2017
Contract amounts
Nature of transaction

Off-market transactions

Total

Over 1 year

Estimated
Fair value

Unrealized gain
(loss)$(130)

Forward exchange contracts to:
Sell: U.S. dollars (buy Japanese yen)

$ 8,192$—$(130)

Buy: Korean won (sell U.S. dollars)

523

—

(22)

(22)

Sell: India rupee (buy Japanese yen)

3,081

—

(178)

(178)

$11,797$—$(331)$(331)

Total

Note: Method of computing the estimated fair value is based on information provided by financial institutions at the end of the fiscal year.
Millions of yen

2016
Contract amounts
Total

Over 1 year

Estimated
Fair value

Sell: U.S. dollars (buy Japanese yen)

¥422

¥—

¥5

¥5

Buy: Korean won (sell U.S. dollars)

114

—

(1)

(1)

Buy: Korean won (sell Japanese yen)

30

—

(0)

(0)

¥567

¥—

¥4

¥4

Nature of transaction

Off-market transactions

Unrealized gain
(loss)

Forward exchange contracts to:

Total

Note: Method of computing the estimated fair value is based on information provided by financial institutions at the end of the fiscal year.

2. Derivatives to which the Company applied hedge accounting as of March 31, 2017 were as follows:(Interest rate related)

Millions of yen

2017
Contract amounts
Hedge accounting method

Type of derivatives

Major hedged items

The Tokurei-shori forinterest rate swaps

Interest rate swaps
Variable rate receipt / Fixed rate payment

Long-term loans payable

Total

Over 1 year

Estimated
Fair value¥2,355¥2,131¥(Note)Thousands of U.S. dollars

2017
Contract amounts
Hedge accounting method

Type of derivatives

Major hedged items

Total

Over 1 year

Estimated
Fair value

The Tokurei-shori forinterest rate swaps

Interest rate swaps
Variable rate receipt / Fixed rate payment

Long-term loans payable

$21

$19

$(Note)Note: Interest rate swaps subject to the Tokurei-shori for interest rate swaps are treated together with the hedged long-term loans payable. Accordingly, the fair value of those interest rate
swaps is included in the fair value of the long-term loans payable.

There is no disclosure applicable as of March 31, 2016.
(Interest rate and currency related)

Millions of yen

2017
Contract amounts
Hedge accounting method

Type of derivatives

Major hedged items

The Tokurei-shori and
Furiate-shori for interest
rate and currency swaps

Interest rate and currency swaps
Variable rate receipt / Fixed rate payment
U.S.$ receipt / Japanese ¥ payment

Long-term loans payable

Total

Over 1 year

Estimated
Fair value¥6,581¥5,993¥(Note)Thousands of U.S. dollars

2017
Contract amounts
Hedge accounting method

Type of derivatives

Major hedged items

Total

Over 1 year

Estimated
Fair value

The Tokurei-shori and
Furiate-shori for interest
rate and currency swaps

Interest rate and currency swaps
Variable rate receipt / Fixed rate payment
U.S.$ receipt / Japanese ¥ payment

Long-term loans payable

$58

$53

$(Note)Note: Interest rate and currency swaps subject to the Tokurei-shori and Furiate-shori for interest rate and currency swaps are treated together with the hedged long-term loans payable.
Accordingly, the fair value of those interest rate and currency swaps is included in the fair value of the long-term loans payable.

LINTEC ANNUAL REPORT 2017

69

FINANCIAL SECTION

17. Retirement Benefits
The Company has defined benefit plans of a corporate pension fund plan under the Japanese Defined Benefit Corporate Pension Law and lump-sum
payment plan.
Domestic consolidated subsidiaries have lump-sum payment plans and certain foreign consolidated subsidiaries have defined contribution plans andlump-sum payment plans.
The following summarizes information related to retirement benefits for the years ended March 31, 2017 and 2016.
1. Defined benefit plans(1) Reconciliation statement for the beginning balance and the ending balance of retirement benefit obligations
Millions of yen

Thousands of
U.S. dollars

2017¥36,5492016¥33,518

2017$325,786

Service cost

1,754

1,352

15,641

Interest cost

187

426

1,670

Actuarial gains (losses)

(4)

3,971

(43)

Retirement benefits paid

(1,570)(1,390)(13,999)

Abolishment of retirement benefit plan―

(1,330)―

Increase (decrease) from foreign currency translation

(26)

(46)

(240)

Retirement benefit obligations at beginning of year

Other
Retirement benefit obligations at end of year

75

48

672

¥36,965¥36,549$329,486

Millions of yen

Thousands of
U.S. dollars

2016¥27,4882017$223,489

Note: For some of the consolidated subsidiaries, the simplified method is used to calculate retirement benefit obligations.

(2) Reconciliation statement for the beginning balance and the ending balance of plan assets

Plan assets at beginning of year2017
¥25,073

Expected return on plan assets

726

733

6,479

Actuarial gains (losses)

(239)

(802)

(2,134)Contributions from the employer

521

536

4,649

(1,479)(1,336)(13,186)

Abolishment of retirement benefit plan―

(1,361)―

Increase (decrease) from foreign currency translation

―

6

―

Retirement benefits paid

Other
Plan assets at end of year

―

(189)

―

¥24,603¥25,073$219,297(3) R econciliation statement for the ending balance of retirement benefit obligations and plan assets and net defined benefit liability or asset recorded in
the consolidated financial statements
Thousands of
U.S. dollars

Retirement benefit obligations of a funded pension plan2017
¥ 36,244

2016¥ 35,867

2017$ 323,059

Plan assets(24,603)(25,073)(219,297)

11,641

10,793

103,761

721

682

6,427

Net amount of liabilities and assets recorded in the consolidated balance sheet¥ 12,362¥ 11,476$ 110,189

Net defined benefit liability¥ 12,362¥ 11,476$ 110,189―――¥ 12,362¥ 11,476$ 110,189

Retirement benefit obligations of an unfunded pension plan

Net defined benefit asset
Net amount of liabilities and assets recorded in the consolidated balance sheet

70

Millions of yen

LINTEC ANNUAL REPORT 2017

(4) Components of retirement benefit expenses

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses (gains)
Amortization of prior service cost
Other
Retirement benefit expenses for the defined benefit plans
Special retirement expenses
Loss on abolishment of retirement benefit plan2017
¥1,754
187
(726)
681
(283)
(25)
¥1,587¥   ――Millions of yen

Thousands of
U.S. dollars

2016¥1,352
426
(733)
400
(284)
(7)
¥1,155¥   438265

2017$15,641
1,670(6,479)6,073(2,525)(228)$14,152$    ――

Notes: i. Retirement benefit expenses of consolidated subsidiaries using the simplified method are included in service cost.
ii. Employee’s contributions to the corporate pension fund are not included in the retirement benefit expenses for the defined benefit plans.
iii. “Special retirement expenses” and “Loss on abolishment of retirement benefit plan” are recognized in extraordinary loss.

(5) Remeasurements of defined benefit plans
Breakdown of items (before tax effect) recorded in other comprehensive income of remeasurements of defined benefit plans are as follows:

Prior service cost
Actuarial losses (gains)
Total

2017
¥ 283
(451)
¥(167)

Millions of yen

Thousands of
U.S. dollars

2016¥   284
3,990¥4,2742017$ 2,525(4,022)$(1,497)(6) Remeasurements of defined benefit plans
Breakdown of items (before tax effect) recorded in accumulated other comprehensive income of remeasurements of defined benefit plans are as follows:

Unrecognized prior service cost
Unrecognized actuarial losses (gains)
Total

2017
¥ (545)
5,434¥4,889Millions of yen

Thousands of
U.S. dollars

2016¥  (828)
5,886¥5,0572017$ (4,858)
48,442$43,583(7) Items related to plan assets
1. Breakdown of major items
		 The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2017 and 2016 was as follows:
Bonds
StocksAlternatives
Cash and deposits
Other
Total

2017
52.9%
22.9%
15.9%
5.1%
3.2%
100.0%

2016
56.8%
20.0%
19.4%
1.0%
2.8%
100.0%

Note: Alternatives are mainly investments on hedge funds.

2. Method for determining the expected long-term rate of return on plan assets
		In determining the expected long-term rate of return on plan assets, estimates are considered based on the current and expected allocation of plan
assets and the current and expected long-term rate of return from the various assets comprising the plan assets.
(8) Major actuarial assumptions as of March 31, 2017 and 2016 were as follows:
Discount rate
Expected long-term rate of return on plan assets
Expected rates of pay raises

2017
Mainly 0.5%
Mainly 3.5%
Mainly 2.8%

2016
Mainly 0.5%
Mainly 3.5%
Mainly 2.8%

2. Defined contribution plan
Some of the consolidated subsidiaries contributed ¥160 million (U.S. $1,426 thousand) and ¥171 million, for the years ended March 31, 2017 and 2016 to
the defined contribution plans, respectively.
LINTEC ANNUAL REPORT 2017

71

FINANCIAL SECTION

18. Stock Option Plan
Components of stock-based compensation expense for the years ended March 31, 2017 and 2016 were as follows:

Cost of sales
Selling, general and administrative expenses

Millions of yen

Thousands of
U.S. dollars

2017
¥ 2

2016
¥ 4

2017
$ 21

15

28

135

The following table summarizes contents of stock options as of March 31, 2017:
The 2006 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
The 2007 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
The 2008 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
The 2009 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
The 2010 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
72

LINTEC ANNUAL REPORT 2017

The Company
August 10, 2006
Directors, 17
Common stock 10,500 shares
August 25, 2006
Persons who have received allotment of share subscription rights must hold the position of directorof the Company at the time of grant.
—
From August 26, 2006 to August 25, 2026

The Company
August 9, 2007
Directors, 17
Common stock 9,300 shares
August 24, 2007
Persons who have received allotment of share subscription rights must hold the position of directorof the Company at the time of grant.
—
From August 25, 2007 to August 24, 2027

The Company
August 8, 2008
Directors, 14
Common stock 9,800 shares
August 25, 2008
Persons who have received allotment of share subscription rights must hold the position of directorof the Company at the time of grant.
—
From August 26, 2008 to August 25, 2028

The Company
August 7, 2009
Directors, 14
Common stock 15,000 shares
August 24, 2009
Persons who have received allotment of share subscription rights must hold the position of directorof the Company at the time of grant.
—
From August 25, 2009 to August 24, 2029

The Company
August 9, 2010
Directors, 16
Common stock 14,100 shares
August 24, 2010
Persons who have received allotment of share subscription rights must hold the position of directorof the Company at the time of grant.
—
From August 25, 2010 to August 24, 2030

The 2011 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
The 2012 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
The 2013 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
The 2014 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period
The 2015 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights
Period of providing service for stock options
Exercise period

The Company
August 9, 2011
Directors, 8Common stock 7,600 shares
August 24, 2011
Persons who have received allotment of share subscription rights must hold the position of directorof the Company at the time of grant.
—
From August 25, 2011 to August 24, 2031

The Company
August 8, 2012
Directors, 8 and Executive Officers, 12
Common stock 15,900 shares
August 23, 2012
Persons who have received allotment of share subscription rights must hold the position of director
or executive officer of the Company at the time of grant.
—
From August 24, 2012 to August 23, 2032

The Company
August 7, 2013
Directors, 10 and Executive Officers, 12
Common stock 22,000 shares
August 22, 2013
Persons who have received allotment of share subscription rights must hold the position of director
or executive officer of the Company at the time of grant.
—
From August 23, 2013 to August 22, 2033

The Company
August 6, 2014
Directors, 10 and Executive Officers, 12
Common stock 18,300 shares
August 21, 2014
Persons who have received allotment of share subscription rights must hold the position of director
or executive officer of the Company at the time of grant.
—
From August 22, 2014 to August 21, 2034

The Company
August 6, 2015
Directors, 11 and Executive Officers, 12
Common stock 14,600 shares
August 21, 2015
Persons who have received allotment of share subscription rights must hold the position of director
or executive officer of the Company at the time of grant.
—
From August 22, 2015 to August 21, 2035

LINTEC ANNUAL REPORT 2017

73

FINANCIAL SECTION

The 2016 plan
Name of Company
Date of approval of the Board of Directors
Position and number of grantees
Class and number of stocks
Date of grantCondition and settlement of rights

The Company
August 9, 2016
Directors, 11 and Executive Officers, 12
Common stock 12,200 shares
August 24, 2016
Persons who have received allotment of share subscription rights must hold the position of director
or executive officer of the Company at the time of grant.
—
From August 25, 2016 to August 24, 2036

Period of providing service for stock options
Exercise period

The following tables summarize the scale and movement of stock options for the years ended March 31, 2017 and 2016:(Non-vested stock options)

(unit: shares)

The 2006 plan The 2007 plan The 2008 plan The 2009 plan The 2010 plan The 2011 plan The 2012 plan The 2013 plan The 2014 plan The 2015 plan The 2016 plan

Stock options outstanding
at April 1, 2016
Stock options granted
Forfeitures	Conversion to vested
stock options
Stock options outstandingat March 31, 2017

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
12,200
—

—

—

—

—

—

—

—

—

—

—

12,200

—

—

—

—

—

—

—

—

—

—

—

(Vested stock options)

(unit: shares)
The 2006 plan The 2007 plan The 2008 plan The 2009 plan The 2010 plan The 2011 plan The 2012 plan The 2013 plan The 2014 plan The 2015 plan The 2016 plan

Stock options outstanding
at April 1, 2016
Conversion from nonvested stock options
Stock options exercised
Forfeitures
Stock options outstandingat March 31, 2017

3,300

2,900

5,200

7,700

7,200

6,800

13,60020,60017,20014,600

—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

12,200
—
—

3,300

2,900

5,200

7,700

7,200

6,800

13,60020,60017,20014,60012,200The following table summarizes the price information of stock options as of March 31, 2017:
The 2006 plan The 2007 plan The 2008 plan The 2009 plan The 2010 plan The 2011 plan The 2012 plan The 2013 plan The 2014 plan The 2015 plan The 2016 plan

Exercise price
Average market priceof the stock at the timeof exercise
Fair value at the date of grant¥    1¥    1¥    1¥    1¥    1¥    1¥    1¥    1¥    1¥    1¥    1

—
2,788

—
1,947

—
1,481

—
1,726

—
1,474

—
1,303

—
1,203

—
1,595

—
1,825

—
2,283

—
1,445

The fair value of stock options granted during the year ended March 31, 2017 was valued by using the Black Scholes option pricing model with thefollowing assumptions:
The 2016 plan

Volatility
Expected remaining period
Expected dividend per share
Risk free interest rate

The expected remaining period for stock options is assumed to be the mid-point of the exercise period.

74

LINTEC ANNUAL REPORT 201735.515%10 years¥54(0.078)%

19. Income Taxes
1. The Company and its consolidated subsidiaries are subject to a number of taxes based on income which, in the aggregate, resulted in a statutory tax
rate of approximately 30.86% and 33.06% for the years ended March 31, 2017 and 2016, respectively. Income taxes of the foreign consolidated subsidiaries
are based generally on the tax rates applicable in their countries of incorporation. The effective tax rates reflected in the consolidated statement ofincome for the years ended March 31, 2017 and 2016 differ from the statutory tax rate for the following reasons:201730.86%

2016
33.06%

0.39(16.68)0.37(5.14)(3.28)
1.56
18.12
―
1.03
27.23%

0.40(10.49)0.34(8.77)(2.93)
5.52
13.95
1.53
3.28
35.89%

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥    699
170
1,107
3,736
1,141
562
269
138
350
331
680
9,188
(959)
8,229

¥    698
135
720
3,462
1,348
497
269
121
371
385
575
8,587
(912)
7,675

$   6,235
1,521
9,872
33,302
10,174
5,015
2,398
1,232
3,126
2,953
6,068
81,904(8,549)73,355

(187)
(343)
(508)
(460)
(75)
(1,575)¥ 6,654

(192)
(253)
(211)
(846)
(97)
(1,601)¥ 6,074(1,667)(3,059)(4,533)(4,104)(675)(14,040)$ 59,314

Millions of yen

Thousands of
U.S. dollars

Statutory tax rate
Effect of:Permanently non-deductible expenses for income tax purposes such as entertainment expenses
Permanently non-taxable income for income tax purposes such as dividend income
Municipal Tax
The difference of tax rates applied to foreign subsidiaries
Tax deduction in accordance with special tax measures
Decrease of valuation allowance for such as net operating loss carryforward
Consolidating adjustment of dividend income from consolidated subsidiaries
Effect of revised corporate tax rate
Other, net
Effective tax rate

2. The significant components of deferred tax assets and liabilities as of March 31, 2017 and 2016 were as follows:

Deferred tax assets:
Accrued bonuses
Accrued enterprise taxes
Operating loss carryforwards
Net defined benefit liability
Retirement benefit trust
Research and development cost
Loss on valuation of inventories
Allowance for doubtful accounts
Unrealized gain
Excess of depreciation expense
Other
		 Gross deferred tax assets
Valuation allowance
Deferred tax liabilities:
Revaluation of fixed assets in accordance with special tax measures
Net unrealized holding gain on securities
Depreciation expense of subsidiaries
Dividend income from consolidated subsidiaries
Other
		

Net deferred tax assets

Note: The net deferred tax assets as of March 31, 2017 and 2016 were included in the following items on the consolidated balance sheets:

Current assets–Deferred tax assets

2017¥1,6142016¥1,121

2017$14,390

Noncurrent assets–Deferred tax assets

45,137

5,063

4,978

Current liabilities–Other

10

14

96

Noncurrent liabilities–Other

13

10

116

LINTEC ANNUAL REPORT 201775

FINANCIAL SECTION

20. Business Combinations
1. Business combination by acquisition(1) Outline of business combination
1 Name of the acquired company
		 Name of the acquired company: VDI, LLC (“VDI”)
		 Business description: Manufacture and sales of functional films
2 Major reasons for the business combination:		VDI maintains a manufacturing base in Kentucky, the United States.
VDI is producing functional films, such as metalized films andsputtering films, and selling them to customers in the United Statesand other countries.
		  The Company is convinced that VDI’s products can be expected to
produce synergies with window films and other functional films
manufactured by the Group and to contribute significantly to the
expansion of the Group’s business and the improvement of its
operating results in the future. The Company is planning to link
VDI’s acquisition to business development in new fields, utilizing
VDI’s outstanding metalizing technologies that had not existed in
the Group previously.
3 Effective date of the business combination:
		 October 31, 2016
4 Legal form of the business combination:
		 Acquisition of membership interests
5 Name of the acquired company after the combination:
		 VDI, LLC
6 Ratio of acquired voting rights:
		 100% (Ratio of membership interests 100%)
7 Major reasons for the determination of acquiring the company:		The determination was made because the Company acquired all of
the membership interests of VDI through LINTEC USA HOLDING,
INC., a wholly owned holding company in the United States, by theacquisition of membership interests in exchange for cash.
(2)	Period for which the operating results of the acquired company areincluded in the consolidated financial statements
From November 1, 2016 to December 31, 2016(3)	Acquisition cost of the acquired company and breakdown of consideration
for the acquisition by type
Consideration for the acquisition
Cash: U.S. $26 million (¥2,701 million)
Acquisition cost: U.S. $26 million (¥2,701 million)
Note: The yen amounts are conversions based on the exchange rate as of October 31, 2016.

(4) Content and amount of major acquisition-related costs
Advisory expenses and others: ¥52 million (U.S. $468 thousands)(5)	Amount of goodwill arising from the business combination, cause of
the goodwill, and amortization method and period
1 Amount of goodwill arising from the business combination		 ¥1,839 million (U.S. $16,398 thousands)
2 Cause of the goodwill		The goodwill arose due to VDI’s future additional earnings powerthat is expected from future business development.
3 Amortization method and period		By straight-line method over 10 years

76

LINTEC ANNUAL REPORT 2017(6)	Amounts of assets received and liabilities assumed on the date ofbusiness combination, and their major components
Millions of yen

Thousands of
U.S. dollars

Current assets
Non-current assets
Total assets¥  473
1,713¥2,1872017$ 4,223
15,272$19,496

Current liabilities
Non-current liabilities
Total liabilities¥  222
1,102¥1,325$ 1,987
9,830$11,818

2. Business combination by acquisition(1) Outline of business combination
1 Name of the acquired company
		Name of the acquired company: MACtac Americas, LLC (“MACtac”)		Business description: Manufacture and sales of label materials forprinting, VIP label materials, graphic sheets, industrial and medical
tapes, etc.
2 Major reasons for the business combination:
		MACtac maintains a manufacturing base in the United States and
Mexico and develops printing pressure sensitive labels and adhesive
films for the printing industry, mainly in North America. It has built
a solid position in the U.S. market by developing products using its
unique excellent adhesion formula and high-speed coating
technology. MACtac also deals with graphic sheets and various
kinds of industrial and medical tapes.
		  The Company is convinced that the full-scale entry in the North
American market for printing pressure sensitive labels andadhesive films and the proactive development of its original
products using its own technological development capabilities
through MACtac will contribute significantly to the acceleration of
the global development of Printing and Variable Information
Products Operations, the core business of the Group. The Company
is also planning to link MACtac’s acquisition to business enhancement and expansion in not only the North American market, butalso Japan and other regions, by utilizing MACtac’s unique technicalcapabilities and brand equity and maximizing synergy effect with theCompany’s technologies.
3 Effective date of the business combination:
		 December 1, 2016
4 Legal form of the business combination:
		 Acquisition of membership interests
5 Name of the acquired company after the combination:
		 MACtac Americas, LLC
6 Ratio of acquired voting rights:
		 100% (Ratio of membership interests 100%)
7 Major reasons for the determination of acquiring the company:		The determination was made because the Company acquired all of
the membership interests of MACtac through LINTEC USA HOLDING,
INC., a wholly owned holding company in the United States, by theacquisition of membership interests in exchange for cash.
(2)	Period for which the operating results of the acquired company areincluded in the consolidated financial statements
From December 1, 2016 to December 31, 2016(3)	Acquisition cost of the acquired company and breakdown of consideration
for the acquisition by type

Consideration for the acquisition
Cash: U.S. $306 million (¥34,417 million)
Acquisition cost: U.S. $306 million (¥34,417 million)
Note: The yen amounts are conversions based on the exchange rate as of November 31, 2016.

(4)	Content and amount of major acquisition-related costs
Advisory expenses and others: ¥652 million (U.S. $5,813 thousands)(5)	Amount of goodwill arising from the business combination, cause of
the goodwill, and amortization method and period
1 Amount of goodwill arising from the business combination		 ¥30,889 million (U.S. $275,330 thousands)
2 Cause of the goodwill		The goodwill arose due to MACtac’s future additional earnings
power that is expected from future business development.
3 Amortization method and period
		 By straight-line method over 10 years(6)	Amounts of assets received and liabilities assumed on the date ofbusiness combination, and their major components
Millions of yen

Thousands of
U.S. dollars

Current assets
Non-current assets
Total assets¥ 9,066
6,820¥15,8872017$ 80,817
60,793$141,611

Current liabilities
Non-current liabilities
Total liabilities¥ 4,7947,564¥12,359$ 42,738
67,427$110,165(7)	Approximate amount of impact on the consolidated statement ofincome for the fiscal year ended March 31, 2017 assuming that thebusiness combination was completed on the first day of the fiscal year
ended March 31, 2017, and the calculation method

Net sales
Operating income

Millions of yen

Thousands of
U.S. dollars¥31,584525

2017$281,526
4,682(Method of calculating the proforma information)
The proforma information is the difference between the amounts of net
sales and operating income on the consolidated statement of income
calculated assuming that the business combination was completed on thefirst day of the fiscal year ended March 31, 2017 and the impact of net
sales and operating income on the consolidated statement of income. In
addition, amortization is calculated by assuming the goodwill and otherintangible assets recognized upon the business combination were recognizedon the first day of the fiscal year ended March 31, 2017.
This note is not subject to independent audit.
3. Business combination by acquisition(1) Outline of business combination
1 Name of the acquired company
		Name of the acquired company: Lintec Graphic Films Limited(“LGF”)
		 Business description: Process and sales of adhesive products
2 Major reasons for the business combination:
		LGF engages in the processing and sales of the Company’s adhesive
products, such as label materials for printing, graphic materials,
and window films for the UK and other European regions.
		  LGF executed a license agreement with the Company on its trademarksin October 2010 and facilitated close collaborations when the Company

participated in LABELEXPO EUROPE 2015 on a large scale, theworld’s biggest label-related exhibition held in Belgium in September
2015. Thanks to these efforts, LGF is positioned as the most importantpartner to promote the Company’s brand strategy in Europe.
		  Following the acquisition of LGF, the Company will further accelerate
the cultivation of new customers by sharing and utilizing LGF’s
marketing capabilities and the broad distribution networks on agroup-wide basis. It will also release its original products with highlevel functionality to the European market ahead of others, making
the most of the Company’s notable technical development capabilities.
By doing so, the Group seeks to further promote the global development of its printing and industrial materials products business.
3 Effective date of the business combination:
		 November 30, 2016
4 Legal form of the business combination:
		 Acquisition of shares
5 Name of the acquired company after the combination:
		 Lintec Graphic Films Limited
6 Ratio of acquired voting rights:
		100%
7 Major reasons for the determination of acquiring the company:		The determination was made because the Company acquired all of
the voting rights of LGF through LINTEC EUROPE B.V., a wholly owned
European subsidiary, by the acquisition of shares in exchange for cash.
(2)	Period for which the operating results of the acquired company areincluded in the consolidated financial statements
From December 1, 2016 to December 31, 2016(3)	Acquisition cost of the acquired company and breakdown of consideration
for the acquisition by type
Consideration for the acquisition
Cash: U.S. $9,136 thousands (¥1,024 million)
Acquisition cost: U.S. $9,136 thousands (¥1,024 million)(4) Content and amount of major acquisition-related costs
Advisory expenses and others: ¥66 million (U.S. $595 thousands)(5)	Amount of goodwill arising from the business combination, cause of
the goodwill, and amortization method and period
1 Amount of goodwill arising from the business combination
		 ¥733 million (U.S. $6,539 thousands)
2 Cause of the goodwill		The goodwill arose due to LGF’s future additional earnings powerthat is expected from future business development.
3 Amortization method and period
		 By straight-line method over 5 years(6)	Amounts of assets received and liabilities assumed on the date ofbusiness combination, and their major components
Millions of yen

Thousands of
U.S. dollars

Current assets
Non-current assets
Total assets

¥378
144
¥523

2017
$3,375
1,286$4,662Current liabilities
Non-current liabilities
Total liabilities

¥171
59
¥231

$1,531534$2,065LINTEC ANNUAL REPORT 2017

77

FINANCIAL SECTION

21. Asset Retirement Obligations
There is no asset retirement obligation as of March 31, 2017 and 2016.
22. Rental Property
No specific disclosure for rental property has been made as of March 31, 2017 and 2016 because of its immateriality.
23. Segment Information
1. Overview of reportable segments(1) Decision procedures for reportable segments
The business segments of our group are subject to periodic review, because each of them provides its own financial information separately fromother business units of our group and the board of directors not only makes a decision on allocation of management resources, but also evaluates theperformance of them.
Our group consists of 6 business segments, each of which develops comprehensive strategies and conducts business activities in overseas anddomestic markets.
Based on product manufacturing methods and similarity of the markets where the products are introduced, we aggregate these business segments
into 3 distinguishable units, such as “Printing and Industrial Materials Products,” “Electronic and Optical Products,” and “Paper and Converted
Products,” to include in this report.
(2) Products and services handled in each segment
Products and services handled in each segment were as follows:
Reportable segments
Printing and Industrial Materials
Products

Main products and services
Adhesive products for seals and labels, Label materials for barcode, Barcode printers, Labeling machines,
Automobile-use adhesive products, Industrial-use adhesive tapes, Window films, Films for outdoor signs andadvertising, Interior finishing mounting sheets

Electronic and Optical Products

Semiconductor-related adhesive tapes, Semiconductor-related equipment, Multilayer ceramic capacitor-related tapes,
LCDs-related adhesive products

Paper and Converted Products

Color papers for envelopes, Colored construction papers, Special function papers, High-grade printing papers,
High-grade papers for paper products, Release papers for general-use, Release films for optical-related products,
Casting papers for synthetic leather, Casting papers for carbon fiber composite materials

2. Method of calculating sales and income (loss), assets, and other items by reportable segment reported
The reported information regarding business segments is processed mostly following the accounting procedures listed in “Significant Accounting
Policies” used as basis for preparing consolidated financial statements.
The profits of the segments reported are based on operating income.
The values for internal sales and transfers conducted between segments are given based on the market price for transactions between consolidated
companies, and on the first cost for transactions within the same company.
As stated in Note 1 (t), “Changes in accounting principles,” the depreciation method of property, plant and equipment has been changed from thisconsolidated fiscal year. Due to the change, the segment income of this consolidated fiscal year increases by ¥738 million (U.S.$6,578 thousand) in
Printing and Industrial Materials Products, ¥1,026 million (U.S.$9,148 thousand) in Electronic and Optical Products, and ¥635 million (U.S.$5,663
thousand) in Paper and Converted Products respectively compared with that using the conventional method.

78

LINTEC ANNUAL REPORT 2017

3. Information on sales and income (loss), assets, and other items by reportable segment for the years ended March 31, 2017 and 2016 are outlined as follows:
Millions of yen

2017
Printing andIndustrial Materials
Products

Electronic and
OpticalProducts

Paper andConverted
Products

Total

Adjustments

Consolidation¥85,661¥83,205¥37,108¥205,975¥     —

¥205,975

60

73

15,523

15,657(15,657)—¥85,721¥83,278¥52,632¥221,633¥(15,657)¥205,975¥ 1,672¥ 9,155¥ 5,767¥ 16,595¥     (0)¥ 16,595

Depreciation and amortization¥ 2,706¥ 2,748¥ 2,011¥  7,466¥     —¥  7,466

Amortization of goodwill¥   315¥    —¥    —¥    315¥     —

¥    315

Net sales
Net sales to external customers
Intra-segment sales and transfers
Total
Segment income
OthersThousands of U.S. dollars

2017
Printing andIndustrial Materials
Products

Electronic and
OpticalProducts

Paper andConverted
Products

Total

Adjustments

Consolidation$763,540$741,645$330,767$1,835,953$      —

$1,835,953

536

656

138,368

139,562(139,562)—$764,077$742,302$469,136$1,975,515$(139,562)$1,835,953$ 14,911$ 81,603$ 51,405$  147,919$      (0)$  147,919

Depreciation and amortization$ 24,124$ 24,498$ 17,930$   66,553$      —$   66,553

Amortization of goodwill$  2,809$     —

$     —

$    2,809$      —

$    2,809

Net sales
Net sales to external customers
Intra-segment sales and transfers
Total
Segment income
Others

Notes: i. Segment income adjustments show elimination of the amount of intra-segment transactions.
ii. Segment income is adjusted to be reported as operating income in the consolidated statement of income.
iii.	The amounts to be written off as depreciation and amortization of goodwill are allocated among the business segment on the basis of reasonable criteria.
iv. Since companies, offices, and factories serve as the base for administrative classification of segment’s assets, no allocation to the business segment is done.
Millions of yen

2016
Printing andIndustrial Materials
Products

Electronic and
OpticalProducts

Paper andConverted
Products

Total

Adjustments

Consolidation¥87,638¥85,422¥37,440¥210,501¥     —

¥210,501

461

473

17,135

18,070(18,070)—¥88,100¥85,895¥54,576¥228,572¥(18,070)¥210,501¥ 2,785¥10,562¥ 4,303¥ 17,651¥     40

¥ 17,692

Depreciation and amortization¥ 2,974¥ 3,068¥ 2,757¥  8,800¥     —¥  8,800

Amortization of goodwill¥    71¥    —¥    —¥     71¥     —

¥     71

Net sales
Net sales to external customers
Intra-segment sales and transfers
Total
Segment income
Others

Notes: i. Segment income adjustments show elimination of the amount of intra-segment transactions.
ii. Segment income is adjusted to be reported as operating income in the consolidated statement of income.
iii. The amounts to be written off as depreciation and amortization of goodwill are allocated among the business segment on the basis of reasonable criteria.
iv. Since companies, offices, and factories serve as the base for administrative classification of segment’s assets, no allocation to the business segment is done.

LINTEC ANNUAL REPORT 2017

79

FINANCIAL SECTION

Related Information
1. Information by product and service
Since the Company and its consolidated subsidiaries disclose the same information in its segment information section, it has been omitted.
2. Information by geographical segment
Millions of yen

Thousands of U.S. dollars

2017
Sales

Japan

Asia

Others

Total

Japan

Asia

OthersTotal¥128,203¥65,142¥12,629¥205,975$1,142,736$580,646$112,570$1,835,953

Note: Sales information is based on location of customers and it is classified by country or region.
Millions of yen

Thousands of U.S. dollars

2017

Property, plant and equipment

Japan

Asia

North
America¥54,155¥11,119¥8,403

Europe

Total

Japan

¥193

¥73,871$482,713

Asia

North
America

EuropeTotal$99,112$74,901$1,720$658,447

Millions of yen

2016
Sales

Japan

Asia

OthersTotal¥128,239¥70,301¥11,960¥210,501

Note: Sales information is based on location of customers and it is classified by country or region.
Millions of yen

2016

Property, plant and equipment

Japan

Asia

North
America¥50,303¥12,914¥1,597

EuropeTotal¥43¥64,859(Changes in presentation)
Property, plant and equipment of “North America,” which was included in “Others” in the previous consolidated fiscal year, is separately presented in thisconsolidated fiscal year due to its increased quantitative materiality. To reflect this change in presentation, ¥1,641 million presented as “Others” in the
consolidated balance sheet of the previous fiscal year has been reclassified into ¥1,597 million of “North America” and ¥43 million of “Europe.”
3. Information by principal customers
Millions of yen

Thousands of
U.S. dollars

2017
Name of the customer

Related reportable segment

Sumitomo Chemical Company, Limited

Electronic and Optical Products

Sales¥22,210$197,975

Since there are no outside customers that make up more than 10% of net sales on the consolidated statement of income for the year ended March 31,
2016, it has been omitted.

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LINTEC ANNUAL REPORT 2017

Information on impairment losses on noncurrent assets by reportable segment
Millions of yen

2017

Impairment loss

Printing andIndustrial Materials
Products

Electronic and
OpticalProducts

Paper andConverted
Products

Total

Consolidation

¥—

¥—

¥—

¥—

¥34

Thousands of U.S. dollars

2017

Impairment loss

Printing andIndustrial Materials
Products

Electronic and
OpticalProducts

Paper andConverted
Products

Total

Consolidation

$—

$—

$—

$—

$304

Note: Since companies, offices, and factories serve as the base for administrative classification of segment’s assets, no allocation to the segment of the enterprise is done.

There is no impairment loss on noncurrent assets for the year ended March 31, 2016.
Information related to the amount of amortization of goodwill and the unamortized amount of goodwill by reportable segment
Millions of yen

2017

Unamortized amount of goodwill

Printing andIndustrial Materials
Products

Electronic and
OpticalProducts

Paper andConverted
Products

Total

Consolidation

¥—

¥—

¥—

¥—

¥34,558

Thousands of U.S. dollars

2017

Unamortized amount of goodwill

Printing andIndustrial Materials
Products

Electronic and
OpticalProducts

Paper andConverted
Products

Total

Consolidation

$—

$—

$—

$—

$308,039

Notes: i. Since the Company and its consolidated subsidiaries disclose the same information of the amount of amortization of goodwill in the reportable segment information section, it has been omitted.
ii. Since companies, offices, and factories serve as the base for administrative classification of segment’s assets, no allocation to the segment of the enterprise is done.
Millions of yen

2016

Unamortized amount of goodwill

Printing andIndustrial Materials
Products

Electronic and
OpticalProducts

Paper andConverted
Products

Total

Consolidation

¥—

¥—

¥—

¥—

¥22

Notes: i. Since the Company and its consolidated subsidiaries disclose the same information of the amount of amortization of goodwill in the reportable segment information section, it has been omitted.
ii. Since companies, offices, and factories serve as the base for administrative classification of segment’s assets, no allocation to the segment of the enterprise is done.

Information on profit arising from negative goodwill by reportable segment
There is no profit arising from negative goodwill for the years ended March 31, 2017 and 2016.

LINTEC ANNUAL REPORT 201781

FINANCIAL SECTION

24. Related Party Transactions
The Company and its consolidated subsidiaries have transactions with NP Trading Co., Ltd., a subsidiary of Nippon Paper Industries Co., Ltd.
The transactions between the companies for the years ended March 31, 2017 and 2016 were as follows:
Millions of yen

For the year
Sales of fine & specialty paper products and converted products
Purchase of stencil, chemicals and equipment

At year-end

Thousands of
U.S. dollars

2017

2016

2017

¥11,422¥11,578$101,809

4,665

5,053

41,584

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

Trade notes and accounts receivable¥3,941¥4,085$35,132

Trade notes and accounts payable

1,835

1,979

16,360

3

33

27

Yen

U.S. dollars

Other liabilities

These related party transactions are carried out on an arm’s-length basis similar to third party transactions.
25. Amounts Per Share
The amounts per share of net assets and net income as of and for the years ended March 31, 2017 and 2016 were as follows:
2017

2016

2017

¥2,465.43¥2,370.49$21.98Net income (basic)

158.69151.07

1.41

Net income (diluted)

158.46150.86

1.41

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥11,450—¥11,450
72,152¥10,899—¥10,899
72,144$102,060—$102,060
72,152¥    —
106[106]¥    —
102[102]$      —106
[106]

Millions of yen

Thousands of
U.S. dollars

Net assets

The bases for calculation were as follows:(1) Basic and diluted net income per share

Net income (basic) per share:
Profit attributable to owners of parent
Amount not attributable to common shareholders
Profit attributable to owners of parent attributable to common shares
Weighted-average number of common shares issued during the year (thousand)Net income (diluted) per share:
Adjustment of profit attributable to owners of parent related to dilutive securities
Adjustment of dilutive securities (thousand)		 [Share subscription rights (thousand)](2) Net assets per share

Total net assets
Amount deducted from total net assets[Share subscription rights][Non-controlling interests]
Net assets attributable to common shares
Number of shares of common stock outstanding used in calculation of net assets per share (thousand)82

LINTEC ANNUAL REPORT 2017

2017

2016

2017

¥178,690
806
[186]
[619]
¥177,884
72,151¥172,101
1,064
[169]
[895]
¥171,037
72,152$1,592,752
7,185[1,665][5,520]$1,585,566
72,151

26. Short-Term loans payable, Long-Term loans payable and Other Interest-Bearing Debts
Short-term bank loans are represented generally by 30-day or 90-day notes issued by the Company and its consolidated subsidiaries to banks at annualinterest rates from 0.51% to 2.05% at March 31, 2017 and from 0.27% to 0.66% at March 31, 2016.
Short-term and long-term loans payable as of March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable

2017

2016

2017

¥   641
3,051
17,795¥21,488¥1,695——¥1,695$  5,720
27,202
158,616$191,539

Millions of yen

Thousands of
U.S. dollars

Other interest-bearing debts as of March 31, 2017 and 2016 consisted of the following:

Short-term lease obligation
Long-term lease obligation

2017

2016

2017

¥201
277

¥196
349

$1,7992,469

Planned repayment amounts after the balance sheet date (March 31, 2017) for long-term loans payable and lease obligation are as follows:
Millions of yen

Thousands of U.S. dollars

2017Long-term loans payable
Lease obligation

Over 1 year
within 2 years

Over 2 years
within 3 years

Over 3 years
within 4 years

Over 4 years
within 5 years

Over 1 year
within 2 years

Over 2 years
within 3 years

Over 3 years
within 4 years

Over 4 years
within 5 years¥3,058¥3,058¥9,321¥1,234$27,263$27,263$83,089$11,000

157

87

20

8

1,403

780

185

75

27. Subsequent Event
1. The following distribution of retained earnings was approved at a meeting of the board of directors held on May 8, 2017.
Millions of yen

Thousands of
U.S. dollars¥2,381$21,2222017
Cash dividends (¥33 per share)

2. About rationalization of management at a consolidated subsidiary in the United States
At a meeting of the board of directors held on June 22, 2017, the Company resolved to undertake a fundamental management rationalization to improve
the profitability of MADICO, INC. (“Madico”), its wholly owned consolidated subsidiary in the United States.
(1) Reasons to rationalize management
	Madico maintains manufacturing bases in Massachusetts and Florida, the United States and produces and distributes functional specialty films suchas window films and PV backsheets.
	  However, Madico is facing in a difficulty to secure profits due to a decline in orders and a rapid fall in prices along with the rapid commoditization of
PV backsheets that had led the performance of the business, and a significant operating losses has been recorded since 2012.
	  Despite the continuous work on rationalizing management until now, Madico has not achieved a great and expected effect and it is difficult torecover from the current situation of recording operating losses.
	  Consequently, the decision to undertake a fundamental management rationalization has been made including the withdrawal from PV backsheets business.
(2) Overview of rationalization of management
1 Withdrawal from PV backsheets business		 Madico will completely withdraw from this business that they manufacture and sell at the Massachusetts base.
2 Restructuring of production system
		Madico will integrate our production bases in the base of Florida, and will convert the Massachusetts base as a research and development centerfor new product development.
3 Employee reduction
		 Madico will reduce headcounts, mainly from employees at the Massachusetts base.
(3) Impact on the business results
The Company is currently examining the impact of mentioned above on its business results.

LINTEC ANNUAL REPORT 2017

83

FINANCIAL SECTIONManagement’s Report on Internal Control
over Financial Reporting

Basic Framework of Internal Control over Financial Reporting
Hiroyuki Nishio, Representative Director, President, CEO and COO of LINTEC Corporation, and Hitoshi Asai, Director, Vice President Executive Officer &Chief Financial Officer of LINTEC Corporation, are responsible for designing and operating adequate internal control over financial reporting forconsolidated financial statements of LINTEC Corporation and consolidated subsidiaries (the “Company”) in accordance with the basic framework set
forth in “Standards and Practice Standards for Management Assessment and Audit concerning Internal Control Over Financial Reporting” issued byBusiness Accounting Council.
Internal control achieves its objectives to a reasonable extent given that all individual components of internal control are integrated and function
as a whole. Internal control over financial reporting for consolidated financial statements may not completely prevent or detect misstatements infinancial reporting.
Scope of Assessment, Assessment Date and Assessment Procedure
We assessed the effectiveness of the Company’s internal control over financial reporting for the accompanying consolidated financial statements as ofMarch 31, 2017 in accordance with the standards for assessment of internal control over financial reporting generally accepted in Japan. For thisassessment, we first evaluated the company-level controls which would have a material impact on the reliability of overall financial reporting on aconsolidated basis. We then selected the process-level controls to be assessed based on the results of the company-level control assessment. For theprocess-level control assessment, we evaluated the effectiveness of internal control by analyzing processes in scope, identifying key controls that would
have a material impact on the reliability of the financial reporting, and assessing the design and operation of such key controls.
We determined the scope of assessment by selecting consolidated subsidiaries based on their materiality of impact on the reliability of financial
reporting. We determined their materiality of impact by considering both quantitative and qualitative aspects. The scope of our process-level control
assessment was determined based on the results of our assessment of company-level controls, which included its 16 consolidated subsidiaries. We
excluded 19 consolidated subsidiaries from the scope of the company-level control assessment since their quantitative and qualitative impacts weredeemed insignificant.
For the purpose of determining the scope of process-level controls assessment, we selected 2 consolidated subsidiaries as “Significant Business
Locations,” which contributed approximately two thirds of the Company’s net sales on a consolidated basis for the fiscal year ended March 31, 2016.
For the Significant Business Locations, we primarily included business processes related to sales, accounts receivable, and inventory in the scope ofassessment as the aforementioned accounts were closely associated with the Company’s business objectives. In addition, we included certain businessprocesses in the scope of assessment not only from “Significant Business Locations” but also from all subsidiaries and affiliates, which were related tosignificant accounts involving estimates and management’s judgment or include high-risk operations and/or transactions, as “business processes with amaterial impact on financial reporting.”
We did not include the evaluation of internal control over financial reporting of MACtac Americas, LLC and its consolidated subsidiaries (“MACtac”)
which became our wholly-owned subsidiaries on December 1, 2016 by the acquisition of membership interests in exchange for cash, in its assessmentof and conclusion on the effectiveness of our internal control over financial reporting as of March 31, 2017. Because we judged that the acquisition ofmembership interests was performed in the second half of this fiscal year and constituted an unavoidable circumstance under which the sufficient
assessment procedures for a certain part of the internal control over financial reporting could not be performed.
Assessment Result
Based on the results of our assessment mentioned scope in above, we concluded that the Company’s internal control over financial reporting for theaccompanying consolidated financial statements as of March 31, 2017 was effective although we could not perform the sufficient assessment procedures
for a certain part of the internal control over financial reporting in an unavoidable circumstance because the acquisition of membership interests of
MACtac, which became our wholly-owned subsidiaries on December 1, 2016, was performed in the second half of this fiscal year.

84

LINTEC ANNUAL REPORT 2017

Report of Independent Auditors

LINTEC ANNUAL REPORT 201785

FINANCIAL SECTION

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LINTEC ANNUAL REPORT 2017

Investor Information
As of March 31, 2017

Head Office23-23, Honcho, Itabashi-ku, Tokyo 173-0001, Japan
Phone: +81-3-5248-7711 Fax: +81-3-5248-7760
URL: http://www.lintec-global.com/

Major Subsidiaries * Consolidated Subsidiary
Domestic
LINTEC COMMERCE, INC.*
LINTEC SIGN SYSTEM, INC.*
FUJI-LIGHT, INC.*
LINTEC SERVICES, INC.
LINTEC CUSTOMER SERVICE, INC.
PRINTEC, INC.
TOKYO LINTEC KAKO, INC.

Established
October 15, 1934
Fiscal Year-End
March 31

Overseas
LINTEC USA HOLDING, INC.*
LINTEC OF AMERICA, INC.*
MACTAC AMERICAS, LLC*
MADICO, INC.*
VDI, LLC*
MACTAC MEXICO, S.A. DE C.V.*
MACTAC CANADA ULC*LINTEC EUROPE B.V.*
LINTEC GRAPHIC FILMS LIMITED*
LINTEC ADVANCED TECHNOLOGIES (EUROPE) GMBH*
LINTEC (SUZHOU) TECH CORPORATION*
LINTEC ADVANCED TECHNOLOGIES (SHANGHAI), INC.*
LINTEC SPECIALITY FILMS (TAIWAN), INC.*
LINTEC HI-TECH (TAIWAN), INC.*
LINTEC ADVANCED TECHNOLOGIES (TAIWAN), INC.*
LINTEC KOREA, INC.*
LINTEC SPECIALITY FILMS (KOREA), INC.*
LINTEC ADVANCED TECHNOLOGIES (KOREA), INC.*
LINTEC ASIA PACIFIC REGIONAL HEADQUARTERS PRIVATE LIMITED*
LINTEC SINGAPORE PRIVATE LIMITED*
PT. LINTEC INDONESIA*
PT. LINTEC JAKARTA*LINTEC (THAILAND) CO., LTD.*
LINTEC BKK PTE LIMITED*
LINTEC INDUSTRIES (MALAYSIA) SDN. BHD.*
LINTEC INDUSTRIES (SARAWAK) SDN. BHD.*
LINTEC KUALA LUMPUR SDN. BHD.*
LINTEC ADVANCED TECHNOLOGIES (MALAYSIA) SDN. BHD.*
LINTEC VIETNAM CO., LTD.*
LINTEC HANOI VIETNAM CO., LTD.*
LINTEC ADVANCED TECHNOLOGIES (PHILIPPINES), INC.*
LINTEC PHILIPPINES (PEZA), INC.*
LINTEC INDIA PRIVATE LIMITED*Net Assets¥178,690 million
Common Stock
Authorized: 300,000,000 shares
Issued: 76,564,240 shares
Stock Listing
Tokyo Stock Exchange, 1st Section
Securities Code: 7966
Shareholder Register Agent for Common Stock
Mitsubishi UFJ Trust and Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan
Number of Employees
4,760 (Consolidated)
2,539 (Parent company only)
Major Shareholders
Nippon Paper Industries Co., Ltd.

30.12%

Japan Trustee Services Bank, Ltd. (Trust Account)

5.15%

The Master Trust Bank of Japan, Ltd. (Trust Account)

3.56%

National Mutual Insurance Federation of Agricultural Cooperatives

3.18%

Tamie Shoji

2.49%

Ownership and Distribution of Shares

Share Price / Trading Volume
Share Price
Share Price
¥

¥
3,500
3,500
3,000
3,000

Financial Institutions.............................. 20.78%
Securities Companies............................... 1.00%
Other Companies.................................... 33.34%
Overseas Companies.............................. 22.52%
Individuals and Other.............................. 16.60%
Treasury Stock.......................................... 5.76%

2,500
2,500
2,000
2,000
1,500
1,500
1,000
0
Trading Volume
Trading Volume
Million shares
Million10 shares

10
8
8
6
6
4
4
2
2
0
0

Apr. 2014
Apr. 2014

Apr. 2015
Apr. 2015

Apr. 2016
Apr. 2016

LINTEC ANNUAL REPORT 201787

LINTEC Corporation
23-23, Honcho, Itabashi-ku,
Tokyo 173-0001, Japanwww.lintec-global.com/

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