Annual Report 2011
For the year ended March 31, 2011

DAIKEN CORPORATION

Company ProﬁleEver since the founding of the company in September 1945, the core focus of ourbusiness has always been the development and provision of materials for residential
housing and construction. Daiken has continued corporate activities that cover abroad and diverse range, including the manufacturing and sales of materials forresidential housing and construction as well as materials for industrial use, activities
that have led Daiken to grow into one of the world’s foremost comprehensive
manufacturers of building materials.
Through its highly-motivated research and development, Daiken is
continuously working with the latest materials, concepts andtechnologies. With a core oftechnological andmaterial-supply capabilities
for building materials, thevery basis for the housingﬁeld in which Daiken
specializes, Daiken shallcontinue to provide its
customers with new
generations of technologies
and products.

Contents
Financial Highlights ..................................... 1
A Message from the President ................... 2
Review of Operations .................................. 4
Topics ......................................................... 6
Highlights ................................................... 7
Consolidated Balance Sheets ....................... 8
Consolidated Statements of Income ............ 10
Consolidated Statements of
Changes in Net Assets .......................... 10
Consolidated Statements ofCash Flows ............................................ 11
Notes Related to Consolidated
Financial Statements .............................. 12

Financial Highlights

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2011, 2010 and 2009

Millions of Yen and Thousands of U.S. Dollars

Net sales ................................................
Operating income ..................................
Ordinary income ....................................
Net income ............................................
Net assets ..............................................
Total assets ............................................

2011

2010

2009

2011

¥ 141,506
4,349
4,373
1,375
36,839115,969¥ 140,936¥ 150,325
1,830
1,331
598
34,562125,080$ 1,701,815
52,30352,591
16,536443,042
1,394,696

3,010
2,819
511
36,663
123,862

Yen and U.S. Dollars

Net income per share ...........................

¥

10.88

¥

4.01

¥

4.64

$

0.13

Note: The translations into U.S. dollars are based on $1= ¥83.15, the approximate exchange rate on March 31, 2011
Note: Net income per share is computed based upon the weighted average number of shares of common stock outstanding
during each ﬁscal year.

1

Net sales

2009

Total assets

Net income

2010

2011

2009

2010

2011

2009

Net income per share

2010

2011

2009

Daiken Corporation

2010

2011

Annual Report 2011

A Message from the President

We herein present our shareholders and persons
concerned with a report on the consolidated
business results for the Daiken Corporation inﬁscal year 2010.

Business Progress and Results

2

In regard to the consolidated business results forthe year in review, we achieved net sales totaling¥141,506 million (an increase of 0.4% comparedwith the previous year), operating income of¥4,349 million (an increase of 44.5% comparedwith the previous year), ordinary income of¥4,373 million (an increase of 55.2% comparedwith the previous year) and a net income of¥1,375 million (an increase of 168.7% comparedwith the previous year).
With a ﬁnancial crisis in Europe as
background to this ﬁscal year, the outlook for theJapanese economy continued to be opaque interms of capital investment as well as theemployment situation. Despite this, there has
been a gentle upturn in exports, a recovery indomestic demand, etc. that is reﬂected in
improved business results, and it seems that theJapanese economy has started on the road torecovery after a long period of stagnation.
However, the Great East Japan Earthquake,
which struck on March 11th, caused
unprecedented devastation to the Tohoku(north-eastern) region of Japan, completelychanged the economic climate into one oflooming tension.
With regard to the housing market, thanks
to the success of various policies to stimulate
house purchases, condominiums andowner-occupier homes maintained steadyprogress and showed some upward momentum
compared with the signiﬁcant decrease during
the previous term, however in ﬁscal 2010 thenumber of new housing starts, with a total of
819,000 units (an increase of 5.6% on theprevious year), is still transitioning at a low level.
Under these business conditions, the Daiken
Group needs to construct a secondary pillar ofincome outside of the new housing market, andto this end we are moving forward with actively
investing our management resources indeveloping areas where growth is predicted, such

Daiken Corporation

Annual Report 2011

as the remodeling market, markets overseas, theindustrial materials market and the engineering
market. Environmental concepts are the lynchpinof our eco-friendly materials (insulation boards,
Dai-Lotone, MDF, Dailite, hardboard, tatami
surfacing and eco-baseplates). These materials
are our response to market needs forenvironmentally sensitive products. They combine
environmental friendliness and functionality andwe plan to expand sales by actively targetingthese products at each market and sector.
Furthermore, due to the impact of the Great
East Japan Earthquake, as the areas affected haveno distribution capability our product shipments
to the Tohoku and Kanto regions were
temporarily disrupted, but we were able tomaintain sales at the same level as the lastconsolidated ﬁscal year.
On the other hand, by strengthening ourcorporate constitution, we have been able toreduce our ﬁxed costs, starting with our humanresource expenses, as well as consolidating our
Head Ofﬁce administration locations and ourbusiness locations, in addition to establishing aDistribution Reform Head Ofﬁce with the aim ofreforming our distribution system in order
reducing our distribution costs, etc. These efforts
have served to bring down our break-even point
as a business. Thanks to these reforms, we havemade progress in strengthening our corporate
constitution and our proﬁtability has showed alarge-scale improvement.

Issues and Policies for the Future
Looking forward, we see continued low levels of
new housing starts, and even with the gentle
upswing trend that was predicted for new
housing, the natural disaster in the ﬁrst half of
the ﬁscal year is expected to lead to delays inconstruction and as a result the future remains
unclear. The prediction for the latter half of theﬁscal year is that due to the recovery efforts
following the natural disaster, there will be a risein the demand for new housing, but with thecost of raw materials at very high levels and dueto the natural disaster some raw materials andresources may be difﬁcult to procure. There aremany factors for concern on the production level,
which has led companies to consider the use of

alternative materials that leads on to thedevelopment of new production techniques.
Companies at a certain level in this industry arehaving to work hard, as this severe businessclimate looks set to continue.
In April the Daiken Group established a
Recovery Support Ofﬁce (location: Sendai) as afocus for our activities and our contribution to
the recovery effort following the natural disasterwas to try to ensure the stable provision of ourbuilding materials, especially our eco-materials, tothe market. At the same time, the mid-term
management plan is due to start in ﬁscal 2011and based on this plan, we will actively invest
management resources into expanding andgrowing markets, as well as planning for an
expansion of our operations.

Accordingly, for the consolidated businessresults projected for the ﬁscal year ending at theend of March 2012, our goal is to achieve net
sales totaling ¥146,000 million, an operating
income of ¥4,500 million, an ordinary income of¥4,300 million, and a net income of ¥1,700
million.
We sincerely hope that we may continue tolook forward to the support and encouragementof all of our shareholders and persons concerned.

September 20113

Ryoji Sawaki,
Representative Director, President
Chief Executive Ofﬁcer

Daiken Corporation

Annual Report 2011

Review of Operations

Housing Business4

In regard to the consolidated
business results in this ﬁeld forthe ﬁscal year in review, weachieved net sales totaling¥76,477 million (an increase of
2.6% compared with theprevious year) and an ordinary
income of ¥3,134 million (anincrease of 46.5% comparedwith the previous year).
In May last year we enteredinto a business collaboration
with Panasonic Electric WorksCo., Ltd., with a plan toreinforce our costcompetitiveness in the housingbusiness by reducing costs
through the joint procurementof materials such as plywood,
sheeting and adhesives, etc. aswell as engaging in mutual
OEM production to make themost of each other’s strengths
in each other’s respective ﬁelds.
With regard to our interiormaterials business ﬁeld, which
is focused on ﬂooring materials,

in addition to aforementioned
collaboration with PanasonicElectric Works Co., Ltd., bothcompanies are working
together towards making our
ﬂooring base materials more
eco-friendly, with a plan toﬁrmly establishing theseproducts on the market.
Furthermore, with regard to the
Daiken Group’s shipping of
eco-friendly base plates(ﬂooring base materials madefrom combining plywood
obtained from planted trees
with our special MDF), we areapproaching a 100% adoption
rate for this product due to oursteady activities, in addition to
our plans to improve matterson the revenue side by ensuring
stable production throughrationalization of our businesssystems through consolidating
our production locations.
With regard to our homefurnishings and equipment

business, we have madeprogress by actively
strengthening our constitution
through a general cost
reduction program including
procurement from overseas, aswell as a review of our
production locations, inaddition to reducing theamount of stock carried bycreating a system for rapid
completion and delivery oforder-made and special orderproducts.
On the sales side, our sales
strategy is to meet the varieddemands of our customers andto increase customer
satisfaction and to this end wehave launched ‘My Door’, asystem that makes it easy toorder the size and design ofyour door and allows customers
to choose from 108 colors anddesigns.

Precious wood-pattern design ﬂooring ‘Graphy Art’

The easy-to-order ‘My Door’ series
Eco base plates

Daiken Corporation

Annual Report 2011

Eco-BusinessIn regard to the consolidated
business results in this ﬁeld forthe ﬁscal year in review, weachieved net sales totaling¥44,535 million (an increase of
5.0% compared with theprevious year) and an ordinary
income of ¥1,318 million (anincrease of 160.6% comparedwith the previous year).
With respect to our
eco-business, one of the corebusinesses of the Daiken
Group, due to the decrease inconstruction projects involving
building and shop market, net
sales of Dai-Lotone as used aceiling material showed adecrease on the previous
consolidated ﬁscal year. With
regard to insulation board,
despite the fact that one of our
production locations, theTakahagi Plant run by the Tobu

Daiken Corporation, was forced
to cease production due to thenatural disaster, our net sales inthis ﬁeld showed an increase on
the previous consolidated ﬁscal
year. Furthermore, shipments ofDailite to the area affected by
the natural disaster were
temporarily delayed, but
despite this our net sales in thisﬁeld showed an increase on theprevious consolidated ﬁscal year
and due to continued progressin our production technology
we were able to makesigniﬁcant improvements interms of proﬁtability. With
regard to MDF, we have madelarge gains in our sales thanks
to the progress we have madein developing new uses for our
products, such as our
eco-friendly base plates thathave permeated the Japanese

domestic market.
Moreover, the Tobu Daiken
Corporation’s Takahagi Plant
that was affected by the natural
disaster restarted production on
May 30th 2011.

Dailite, the durable surface material

5Engineering BusinessIn regard to the consolidated
business results in this ﬁeld forthe ﬁscal year in review, weachieved net sales totaling¥11,618 million (a decrease of
29.3% compared with theprevious year) and an ordinary
loss of ¥110 million (comparedwith an ordinary loss for theprevious ﬁscal year of ¥35
million).
With regard to thecondominium, building andshop market, last December weacquired Sankei Co., Ltd., acompany renowned for its workin ﬂooring construction.
Originally this market had beenorder-based and mostly
ceiling-focused, but we havebeen able to strengthen ourorder-based sales system toaccommodate composite ordersthat include ﬂoor construction.
Moreover, in the metropolitan
area we have been working tostrengthen our sales anddevelop new orders, butrevenues have worsened due tothe ongoing long-term slump in
the building and condominium
market. Interior construction

work projects have declined,
along with the amount of work
as well as a drop in the unit
price of this work.
With regard to single-unit
homes, we have made progresswith developing our sales andmarketing focus on latching onto the demand for remodeling,
but this stops short ofcompensating for the decreasein order numbers andsingle-unit construction on
sub-lots, and the money
available for these construction
projects has decreased.

Daiken Corporation

Annual Report 2011

Topics

1 TDY Green Remodel Fair

TopicsThe TDY Green Remodel Fair wasan event jointly hosted by TOTO,DAIKEN and YKK AP in Nagoya(October 2010), Osaka (November2010) and Fukuoka (February2011). The event attracted astrong turnout of 48,000 people
in total across the three locations.
The fair showcased “Green
Remodeling*” the shared themeof the TDY cooperative as well assome actual proposals that werehighlighted in the Green

Remodeling Evaluation area. This
area featured an actual model of ahome that had been reformed
following an evaluation for theproperty prior to Green
Remodeling. Image-wise, it madeit easy to understand how thereforms had made the property
more comfortable for continued
living in the longrun. Moreover, theDaiken corner wasa well thought-out

exhibition space that featured
humidity regulating building
materials, scratch-resistant ﬂooringand interior doors, etc. that visitors
could touch and experience ﬁrst
hand. Visitors were able to gain adeeper understanding of Daiken
products at the fair.

*Green Remodeling6

By combining the technologies of TOTO, DAIKEN and YKK AP, Green
Remodeling proposes products and housing concepts based on threethemes: health considerations, durable residences and reduction of CO2
emissions. Embracing the many lifestyle variations of families and the
dreams of how they want to live, Green Remodeling looks to make ourlives comfortable and also beneﬁt the environment.

2

Topics
TopicsOur eco-materials displayed at Japan’s largest
environmental exhibition: Eco Products 2010

For three days from December 9th
to 11th 2010, Daiken eco-materials
showcased their possibilities at Eco
Products 2010, Japan’s largest
environmental exhibition, held at
the Tokyo Big Site. Products shown
included shirasu balloon (madewith volcanic ash foam) and woodﬁber boards.
Eco Products 2010 featured
exhibits from many organizations
and businesses from across Japanlooking to showcase their eco
projects, and many people from adiverse range of industries andﬁelds were in attendance. This
year’s exhibition, the twelfth andone of the largest environmental
exhibitions in Japan, focused on
the target of reducing greenhouse

Daiken Corporation

Annual Report 2011

gas emissions by 25 percent fromthe 1990 level by 2020, as well as
looking at what we can do right
now to make a sustainable societya reality.
The Daiken corner focused on
our environmentally friendly
materials and their unique uses,

such as our water-holding woodﬁber boards for use in tree
planting, shirasu balloons as awater puriﬁcation agent, as well astatami surfacing made fromJapanese paper.

Highlights

Event held at the Showroomsin East and West Japan!
Appealing proposals acrossa broad range of products
In September 2009 Daiken opened the Tokyo
Showroom in Akihabara, followed by the TDY
Osaka Collaboration Showroom in July 2010, in
collaboration with TOTO and YKK AP.
The showroom acts as an information basewhere we can listen and respond to customer
requirements and opinions ﬁrst-hand, as well as
the location for many different events, seminars
and training sessions. Daiken is on hand to
showcase its products and propose solutions
here, for example at noise reduction advice

meetings, earthquake-prooﬁng counselingsessions, and seminars devoted to storage space,etc.
In March 2011 the Osaka showroom played
host to a counseling session on earthquake-proof
remodeling, featuring Daiken’s most appropriate
earthquake-proof technology known as
Kabe-Taisho.

7

At the showroom seminars and training sessions are held forregular visitors, as well as professionals involved in distribution
and construction.

Daiken Corporation

Annual Report 2011

Consolidated Balance Sheets

Daiken Corporation and Consolidated Subsidiaries
March 31, 2011 and 2010

Millions of Yen
2011
2010

ASSETS
Current assets:
Cash and deposits .........................................................................
Notes and accounts receivable—trade...........................................
Merchandise and ﬁnished goods...................................................
Work in process ............................................................................
Raw materials and supplies ...........................................................
Partly-ﬁnished work ......................................................................
Deferred tax assets........................................................................
Other ............................................................................................
Allowance for doubtful accounts ..................................................
Total current assets .......................................................................

8

Thousands of
U.S. Dollars
2011

5,733
28,734
11,730
1,962
3,515
836
1,078
1,802
(160)
55,233¥ 10,987 $
28,025
10,817
1,652
3,323
850
1,024
3,556
(148)
60,09068,947345,568
141,070
23,59542,273
10,054
12,964
21,671(1,924)664,257

Noncurrent assets:
Property, plant and equipment
Buildings and structures, net....................................................
Machinery, equipment and vehicles, net ..................................
Land ........................................................................................
Lease assets, net ......................................................................
Construction in progress..........................................................
Other, net ................................................................................
Total property, plant and equipment .......................................

10,728
10,68015,997
347
380
1,515
39,64911,665
11,951
15,505
388
700
1,336
41,548129,019
128,442
192,387
4,173
4,570
18,220476,837

Intangible assets............................................................................
Goodwill ..................................................................................
Software ..................................................................................
Other .......................................................................................
Total intangible assets..............................................................

1,095
733
196
2,026

1,182
466
296
1,945

13,1688,815
2,357
24,365Investments and other assets ........................................................
Investment securities................................................................
Long-term loans receivable ......................................................
Prepaid pension cost ................................................................
Deferred tax assets...................................................................
Other .......................................................................................
Allowance for doubtful accounts .............................................
Total investments and other assets ..........................................
Total noncurrent assets .................................................................
Deferred assets...................................................................................
Bond issuance cost ........................................................................
Total assets.........................................................................................

9,733
2
2,988
4,305
2,770
(837)
18,96360,63996
96¥ 115,969

Daiken Corporation

Annual Report 2011

¥

9,698
117,0532
24
3,229
35,935
5,274
51,7732,897
33,313(865)(10,066)
20,236228,057
63,730729,272
40
1,154
40
1,154
¥ 123,862 $ 1,394,696

Millions of Yen
2011
2010

LIABILITIESCurrent liabilities:
Notes and accounts payable—trade ..............................................
Short-term loans payable ..............................................................
Current portion of long-term loans payable ..................................
Lease obligations...........................................................................
Accounts payable—other ..............................................................
Income taxes payable ....................................................................
Accrued consumption taxes ..........................................................
Provision for bonuses ....................................................................
Provision for business structure improvement................................
Provision for loss on ofﬁce transfer ...............................................
Provision for loss on disaster .........................................................
Deferred tax liabilities....................................................................
Other ............................................................................................
Total current liabilities ...................................................................

Thousands of
U.S. Dollars
2011

17,624
9,027
6,168
34
17,129
433
105
1,531
84
–
130
23
2,870
55,162¥ 15,187
14,2664,903
32
21,030
794
413
1,552
111
75
–
–
2,998
61,366$ 211,954
108,562
74,179408
206,001
5,207
1,262
18,412
1,010
–
1,563
276
34,515
663,403

Noncurrent liabilities:
Bonds payable...............................................................................
Long-term loans payable ...............................................................
Lease obligations...........................................................................
Deferred tax liabilities....................................................................
Provision for product warranties....................................................
Provision for retirement beneﬁts ...................................................
Provision for environmental measures ...........................................
Negative goodwill .........................................................................
Other ............................................................................................
Total noncurrent liabilities .............................................................
Total liabilities.....................................................................................

10,000
8,163
327
1,666
260
2,904
161
117
366
23,967
79,1305,000
14,842
362
1,510
137
3,163
161
128
527
25,83287,199120,264
98,171
3,932
20,036
3,126
34,924
1,936
1,407
4,401
288,238
951,653

NET ASSETS
Shareholders’ equity:
Capital stock .................................................................................
Capital surplus ..............................................................................
Retained earnings .........................................................................
Treasury stock ...............................................................................
Total shareholders’ equity .............................................................

13,15011,8509,758(1,179)33,58013,15011,8509,018(730)
33,288158,147
142,513
117,354(14,179)
403,848

Accumulated other comprehensive income:
Valuation difference on available-for-sale securities................................
Deferred gains or losses on hedges.....................................................
Foreign currency translation adjustment ..............................................
Total accumulated other comprehensive income ..................................
Minority interests ............................................................................
Total net assets .....................................................................................
Total liabilities and net assets...................................................................

(48)
26
(251)
(273)
3,533
36,839¥ 115,969

¥

125
(577)
(9)
312
(191)
(3,018)(75)(3,283)3,449
42,48936,663443,042¥ 123,862 $ 1,394,696

Daiken Corporation

Annual Report 20119

Consolidated Statements of Income

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2011 and 2010

Millions of Yen
2011
2010

Net sales.............................................................................................
Cost of sales .......................................................................................
Gross proﬁt ...................................................................................
Selling, general and administrative expenses ......................................
Operating income .........................................................................
Non-operating income........................................................................
Non-operating expenses .....................................................................
Ordinary income.................................................................................
Extraordinary income..........................................................................
Extraordinary loss ...............................................................................
Income before income taxes and minority interests ............................
Total Income taxes..............................................................................
Minority interests in income ...............................................................
Net income.........................................................................................

10

Consolidated Statements of Changes
in Net Assets

140,936
104,325
36,61033,600
3,010
871
1,062
2,819
150
2,890
79
(461)
29
¥
511

¥ 141,506 ¥

102,345
39,161
34,812
4,349
982
957
4,373
1,354
2,263
3,464
1,995
93
¥
1,375

Thousands of
U.S. Dollars
2011$ 1,701,815
1,230,847
470,968
418,665
52,303
11,80911,50952,591
16,283
27,21541,65923,992
1,118$
16,536

Daiken Corporation and Consolidated Subsidiaries
Year ended March 31, 2011

Millions of Yen
Capitalstock

Capitalsurplus

Balance at the end of
previous period ........................... ¥ 13,150 ¥ 11,850
Changes of items during the period
Dividends from surplus......................
Net income .......................................
Purchase of treasury stock.................
Disposal of treasury stock..................
(0)Change of scope of consolidation .....
Net changes of items otherthan shareholders’ equity ...............
Total changes of items during
the period ......................................
–(0)
Balance at the end ofcurrent period.............................. ¥ 13,150 ¥ 11,850

Retainedearnings

Deferred
Valuation
Total
Treasurydifference on gains orshareholders’ available-for- losses onstockequitysale securities hedges

Total
Foreignaccumulated Minority
currency
otherinterests
translation
adjustment comprehensive
income¥ 9,018¥ (730)¥ 33,288¥ (191) ¥

(449)
0

(634)
1,375
(449)
0

(634)
1,375

740
¥ 9,758

(449)

¥

¥ (9)

(75) ¥ 3,449 ¥ 36,663
(634)
1,375
(449)
0

291

¥(1,179) ¥ 33,580

125

Total net
assets

¥

(174)

35

(59)

(198)

83

(115)

(174)

35

(59)

(198)

83

176

(48)

¥ 26

¥ (251) ¥(273) ¥ 3,533 ¥ 36,839

Thousands of U.S. Dollars
Capitalstock

CapitalsurplusRetainedearnings

Deferred
Valuation
Total
Treasurydifference on gains orshareholders’ available-for- losses onstockequitysale securities hedges

Balance at the end of
previous period ......................... $ 158,147 $142,513 $ 108,454 $ (8,779) $ 400,336 $Changes of items during the period
Dividends from surplus....................
(7,624)(7,624)
Net income .....................................
16,536
16,536
Purchase of treasury stock...............
(5,399)(5,399)
Disposal of treasury stock................
(0)0
0Change of scope of consolidation ...
Net changes of items otherthan shareholders’ equity .............
Total changes of items during
the period ....................................
–
(0)
8,899
(5,399)3,499
Balance at the end ofcurrent period............................ $ 158,147 $142,513 $ 117,354 $ (14,179) $ 403,848 $

Daiken Corporation

Annual Report 2011

Total
Foreigncurrency accumulated Minority
otherinterests
translation
adjustment comprehensive
income1,503 $ (108) $ (2,297) $Total net
assets(901) $ 41,479 $ 440,926(7,624)
16,536(5,399)0(2,092)

420

(709)

(2,381)998(1,383)(2,092)

420

(709)

(2,381)

998

2,116

(577) $ 312 $ (3,018) $ (3,283) $ 42,489 $ 443,042

Consolidated Statements of Cash Flows

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2011 and 2010

Thousands of
U.S. Dollars

Millions of Yen
2011
2010

Net cash provided by (used in) operating activities
Income before income taxes and minority interests.............................
Depreciation and amortization............................................................
Impairment loss ..................................................................................
Amortization of bond issuance cost ....................................................
Loss on retirement of noncurrent assets..............................................
Loss (gain) on sales of noncurrent assets.............................................
Loss (gain) on sales of investment securities........................................
Loss (gain) on valuation of investment securities .................................
Loss on valuation of golf club memberships........................................
Amortization of goodwill ....................................................................
Gain on negative goodwill ..................................................................
Increase (decrease) in allowance for doubtful accounts.......................
Increase (decrease) in provision for bonuses........................................
Increase (decrease) in provision for business structure improvement ...
Increase (decrease) in provision for loss on ofﬁce transfer ...................
Increase (decrease) in provision for loss on disaster.............................
Increase (decrease) in provision for product warranties .......................
Increase (decrease) in provision for retirement beneﬁts.......................
Interest and dividends income.............................................................
Interest expenses ................................................................................
Foreign exchange losses (gains) ..........................................................
Equity in (earnings) losses of afﬁliates .................................................
Decrease (increase) in notes and accounts receivable-trade.................
Decrease (increase) in inventories........................................................
Increase (decrease) in notes and accounts payable-trade ....................
Decrease (increase) in consumption taxes refund receivable................
Increase (decrease) in accrued consumption taxes...............................
Other, net ...........................................................................................
Subtotal ........................................................................................
Interest and dividends income received...............................................
Interest expenses paid.........................................................................
Income taxes paid ...............................................................................
Net cash provided by (used in) operating activities ...................................
Net cash provided by (used in) investing activities
Decrease (increase) in time deposits....................................................
Purchase of property, plant and equipment ........................................
Proceeds from sales of property, plant and equipment .......................
Purchase of investment securities........................................................
Proceeds from sales of investment securities.......................................
Purchase of investments in subsidiaries resulting in change in scopeof consolidation ...............................................................................
Other, net ...........................................................................................
Net cash provided by (used in) investing activities.....................................
Net cash provided by (used in) ﬁnancing activities
Net increase (decrease) in short-term loans payable ............................
Proceeds from issuance of bonds ........................................................
Proceeds from long-term loans payable ..............................................
Repayment of long-term loans payable...............................................
Repayments of ﬁnance lease obligations.............................................
Purchase of treasury stock ..................................................................
Cash dividends paid ............................................................................
Cash dividends paid to minority shareholders .....................................
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 period....................................
Increase in cash and cash equivalents from newly consolidated
subsidiary...............................................................................................
Cash and cash equivalents at end of period .............................................

¥

¥

79 $
4,197
310
14
255
44
642
349
0
220
–
321
226
(738)
(148)
–
(49)
234
(187)
682
(35)
(43)
(3,095)
5,133(3,441)
(33)
44
(93)
4,891
190
(662)
(1,277)3,141

41,65955,009
9,079
192
2,754
(14,876)
(24)
2,405
0
901
(1,046)
(493)
(276)
(324)
(901)
1,563
1,467
(553)
(2,285)
7,300
(192)
(541)
11,028(11,316)(21,719)(805)(3,692)(2,152)
72,122
2,285(7,504)(13,529)53,37335(3,549)
1,450
(513)
407

(12)
(3,000)
31
(220)
51

420
(42,681)
17,438(6,169)
4,894

(128)
(320)
(2,618)–(135)(3,286)(1,539)(3,848)(31,485)(5,574)4,927
600(5,930)
(33)
(449)
(634)
–
0
(7,095)(24)(5,299)10,935463–
5,600(4,136)
(24)
(77)
(638)
(50)
0
1,135
209
1,199
9,730

(67,035)
59,254
7,215(71,316)(396)(5,399)(7,624)–
0(85,327)(288)(63,728)
131,509

3,464
4,574
755
16
229
(1,237)
(2)
200
1
75
(87)
(41)
(23)
(27)
(75)
130
122
(46)
(190)
607
(16)
(45)
917
(941)
(1,806)
(67)
(307)
(179)
5,997
190
(624)
(1,125)
4,438

81
5,716

¥

2011

¥

4
10,935

Daiken Corporation$

974
68,743

Annual Report 201111

Notes Related to Consolidated
Financial Statements

Summary of signiﬁcant accounting policies
1.Securities
Held-to-maturity securities are carried and calculated by theamortized cost method (straight-line method).
Marketable securities classiﬁed as other securities are carriedat fair value, based on market prices on settlement date ofaccounts, with any changes in unrealized holding gain or loss
directly charged to net assets. Cost of securities sold is
calculated principally by the moving average method.
Non-marketable securities classiﬁed as other securities arecarried at cost determined principally by the moving averagemethod.
2. Derivatives
Derivatives are carried at fair value.
3.Inventories
In principle, inventories of the Company and its consolidated
subsidiaries are calculated as costs, as determined by the moving
average method. (The value in the consolidated balance sheets is
calculated by the method of reduction in book value based on
decline in proﬁtability.) Furthermore, for the real estate for sale, aseparate method is applied, calculated as costs. (The value in the
consolidated balance sheets is calculated by the method of
reduction in book value based on decline in proﬁtability.) For partly
ﬁnished work, a separate method is applied, calculated as costs.

12

4.Method of calculating the depreciation of important
assets to be amortized
1) Property, plant and equipment (excluding leased assets)
At Daiken Corporation and its domestic consolidated
subsidiaries, the depreciation is primarily computed by the
declining-balance method, with the exception of buildings(excluding attached ﬁttings and structures) acquired on orafter April 1, 1998, the depreciation of which is computed by
the straight-line method. The foreign consolidated
subsidiaries use the straight-line method to calculate
depreciation.
The principal estimated useful lives are as follows:
Buildings and structures
mainly 3 to 60 years
Machinery, equipment and vehicles mainly 4 to 15 years
2) Intangible assets (excluding leased assets)
The depreciation of intangible assets is computed by thestraight-line method. Expenditures related to computer
software for internal use are amortized by the straight-line
method over their estimated useful lives in the company, a5-year period.
3) Leased assets
The depreciation of leased assets is computed by thestraight-line method, with the lease period as the useful life
period and the remaining value at the end of the lease period
is taken as zero. Finance leases, other than those for which
the ownership of the leased asset will be transferred to thelessee, commenced on or before March 31, 2008, areaccounted for by a method similar to that applicable toordinary operating leases.
4) Deferred assets
The amortization of bond issuance cost is computed using thestraight-line method for the 5-year period until redemption.
5.Provisions and allowances
1) Allowance for doubtful accounts
In order to prepare irrecoverable accounts such as accounts
and loans receivable, provisions for doubtful accounts are
generally made on the basis of historical default rates. Claims
whose possibility of collection is deemed doubtful areprovided for in the expected uncollectible amounts, giving
due consideration to the speciﬁc circumstances.
2) Provision for bonuses
In order to prepare primarily for the payment of bonuses to
employees, provisions are based on the expected amounts of
payment.

Daiken Corporation

Annual Report 2011

Daiken Corporation and Consolidated Subsidiaries
March 31, 2011

3) Provision for business structure improvements
In order to prepare for the payment of expenses expected tooccur for business structure improvements, provisions are
made for estimated improvement expenses at the end of theterm under review.
4) Provision for loss on disasterIn order to prepare for the payment of expenses expected tooccur related to the restoration of facilities damaged bydisaster, provisions have been made for the estimated amountof restoration costs.
5) Provision for product warranties
In order to prepare primarily for the payment of expenses
expected to occur after the delivery of products, provisions for
estimated repairing costs during the term of warranty are
made.
6) Provision for retirement beneﬁts
Provisions for employees’ retirement beneﬁts are made in theamount deemed necessary at the term end, based on
estimated retirement obligations and plan assets. (Regarding
the company pension plan, a prepaid pension expense has
been appropriated, as the value of the pension plan assets
exceeds the amount of the retirement beneﬁt obligation as
adjusted for unrecognized prior service cost and net
unrecognized actuarial gain or loss.)
Net unrecognized actuarial gain or loss is amortizedcommencing the ﬁscal year following the consolidated ﬁscal
year in which the gain or loss was recognized by thestraight-line method over the estimated average remaining
years of service of the eligible employees (mainly 10 years).
7) Provision of environmental measures
In order to prepare primarily for the payment of expenses
expected to occur for environmental measures, provisions are
made for estimated expenses.
6. Criteria for appropriating important incomes andexpenses
Criteria for appropriating the amounts and costs of completedwork:1) Work conﬁrmed as certain to be progressed partly by the endof the current ﬁscal term: The criterion is the progress of said
work. (The rate of progress is estimated using the cost
proportion method.)2) Other work: The criterion is the completion of said work.
7. Criteria of translations into Japanese yen amounts ofimportant assets or liabilities denominated in foreign
currencies
The monetary credits and debts denominated in foreign
currencies are translated into Japanese yen at the current
exchange rate on the consolidated settling date and translationdifference is treated as gain or loss. The assets and liabilities offoreign consolidated subsidiaries are translated into Japanese yenat the current exchange rate on the settling date of subsidiaries,
and gain or loss is also translated into Japanese yen at thecurrent exchange rate on the subsidiaries' settling date. Anytranslation differences are included in the translation adjustment
account and minority interests in the net assets section.
8. Important methods of hedge accounting
1) Method of hedge accounting
The deferred method of hedge accounting is adopted. As forforeign exchange forward contracts and foreign currency
option contracts, the allotment process is adopted if therequired conditions are satisﬁed. As for interest rate swap
contracts, the exception process is adopted if the requiredconditions for this process are satisﬁed.
2) Hedging measures and objectives
Hedging measures are foreign exchange forward contracts
and foreign currency option contracts. The objectives areaccounts receivable and payable and anticipated transactions
denominated in foreign currencies. Interest rate swap
contracts are other measures, the objectives of which areloans and debts.

3) Hedging policy
In accordance with our internal "Risk Management Policy,"
we hedge against foreign exchange rate ﬂuctuation risks.
4) Method of evaluating the efﬁciency of hedging
Accumulations of cash ﬂow ﬂuctuations of hedging objectives
or exchange rate ﬂuctuations are compared withaccumulations of cash ﬂow ﬂuctuations of hedging measures
or exchange rate ﬂuctuations for every half term. The
efﬁciency of hedging is evaluated on the basis of both these
ﬂuctuated values. However, for interest rate swap contracts
using the exception process, we omit this evaluation of
efﬁciency.
9. Method and term of calculating the depreciation of
goodwill
The depreciation of goodwill is computed in accordance with thestraight-line method for a period of 20 years.
10. Scope of funds in consolidated statements of cash ﬂows
Funds consist of money in hand, deposits that can be withdrawn
as required, and short-term investments with a redemption
period of within three months from the date of acquisition,
which are easy to realize and with minimal risk of value
ﬂuctuations.
11. Transaction of consumption tax
Consumption taxes and local consumption taxes withheld and/or
paid are not included in the accompanying statements ofoperations.

contracts and loan commitment contracts at the term end are
as follows:
Maximum overdraft amount andthe total amount of loan
commitment¥ 13,200 million
Executed loan amounts
–
Total

¥

Notes Related to Consolidated Statementsof Income
1. Primary selling, general and administrative expenses
Transportation and storage
expenses¥ 11,674 million
Transfer to allowancefor doubtful accounts¥
7 million
Salaries and allowances¥
7,698 million
Transfer to provision for bonuses¥
975 million
Expenses for retirement beneﬁts¥
1,462 million
2. Research and development costs
Research and development costs are included in the cost ofgeneral and administrative expenses and the cost of production
for the year ended March 31, 2011, totaling ¥1,464 million.
3. Contents of gain on sales of noncurrent assets
Machinery, equipment and vehicles¥
7 millionLand¥ 1,230 million
Other¥
0 million
Total

Notes Related to Consolidated Balance Sheets
1. Accumulated depreciation of property, plant andequipment¥ 58,113 million
2. Items for non-consolidated subsidiaries and afﬁliates
are as follows:
Investment securities (stocks)¥
871 million
3. Assets pledged as collateral
Buildings and structures
Machinery, equipment andvehiclesLand
Other current assets
Other noncurrent assets
Total¥ 1,109 million¥ 1,663 million¥ 3,171 million¥
997 million¥
198 million¥ 7,140 million

Loans corresponding to the above
Short-term loans payable¥
773 million
Current portion of long-termloans payable¥
441 million
Long-term loans payable¥ 1,009 million
Besides the above, investment securities amounting to ¥49
million are held as a deposit relating to our housing land andbuilding agency registration.
4. Guarantee obligations
Guarantees are provided for bank loans assumed
by the companies mentioned below, as follows:
For purchasers of houses from ourconsolidated subsidiaries(Bridge loans for housing loans)¥
22 million
5. Contingent liabilities
Liability for redemption following
liquidation of credit¥ 1,333 million

6. Endorsed bill transfer amount¥

13,200 million¥ 1,237 million

4. Contents of loss on retirement of noncurrent assets
Buildings and structures¥
7 million
Machinery, equipment and vehicles¥
169 million
Other¥
52 million
Total

¥

229 million

5. Impairment loss
Our group has reckoned up impairment losses in the following
assets groups for the consolidated ﬁscal year under review:
Location
Aizu Plant, Tobu Daiken
Corporation(located in
Aizu-Wakamatsu City,
Fukushima Pref.)Category
Fiberboard
manufacturing
plant

Sort
Buildings andstructures,
Machinery,equipment
and vehicles

Our group made grouping business assets, primarily for eachplant, on the basis of managerial accounting classiﬁcation, andgrouping idle assets individually.
In the consolidated ﬁscal year under review, regarding the
Tobu Daiken Corporation’s Aizu Plant (Aizu-Wakamatsu City,
Fukushima Pref.) as a business asset, deteriorated proﬁtability
caused by a worsening business environment has resulted in a
special loss of ¥755 million and this will be reckoned as an
impairment loss, where the amount of decrease caused by the
reduction in book value, to the extent of the amount collectible.
The breakdown is as follows:
Buildings and structures¥
251 million
Machinery, equipment and vehicles¥
503 million
The abovementioned collectible limit amount was measured
by the net sold amount, and the net sold amount was calculatedon the basis of ofﬁcial estimation for ﬁxed property by a third
party.

20 million

7. In order to efﬁciently raise working capital, the Company
concluded overdraft contracts and loan commitment
contracts with ﬁve of our ﬁnancial institutions.
The unexecuted loan balances related to such overdraft

Daiken Corporation

Annual Report 201113

DAIKEN CORPORATION
Registered Head Office:1-1, Inami, Nanto City, Toyama 932-0298, Japan
Phone: +81-763-82-5850
Operational Headquarters:
22F, Dojima Avanza
6-20, Dojima 1-chome Kita-ku, Osaka 530-8210, Japan
Phone: +81-6-6452-6000