Driving Growth
in Japan and Overseas

ANNUAL REPORT 2012
For the year ended March 31, 2012

PROFILE
Kurita Water Industries Ltd. is a leader in the industrial water field. Kurita’s
globally unique business portfolio is a balanced combination of water
treatment chemicals, water treatment facilities, and maintenance services.
Moreover, since its establishment in 1949, Kurita has also accumulated ahigh level of technological expertise and know-how. Today, Kurita leverages these assets to provide customers across a wide range of industries
with high-value-added products and services.
As customers and society at large face the urgent tasks of improving
productivity and reducing environmental impact, Kurita is providing
comprehensive water treatment solutions in line with its corporate philosophy, “study the properties of water, master them, and we will create anenvironment in which nature and man are in harmony.” Looking ahead,
Kurita will continue seeking to become an advanced water and environmental management company from a global perspective. To this end,
Kurita remains focused on working towards realizing a sustainable society.

WATER TREATMENT
FACILITIESWATER TREATMENTCHEMICALS

Cautionary Statement with Respect to
Forward-Looking Statements
This annual report contains forward-looking statements regarding forecasts, plans, strategies and business performance in the
future. These forward-looking statements represent judgments
made by the Company based on information currently available
to it and involve a variety of risks and uncertainties.
Actual results may be materially different from these forwardlooking statements. Such risks and uncertainties include (but are
not limited to) changes in the economic environment, businessconditions, market, demand and currency exchange rates.

Kurita FACT BOOK 2012
Kurita’s Fact Book 2012 provides a wide range oflong-term, historical data, including financial indicatorsand quantitative management data.

http://www.kurita.jp/pdf/factbook_2012.pdf

CONTENTS
Inside cover PROFILEHIGHLIGHTS

02 What We Do
04 Consolidated Financial Highlights
05 Business Review
STRATEGY

06 To All Our Stakeholders

Leveraging Unrivaled Strength in Driving Businesses to Pursue Global Growth

10 Feature: The Take Action 2014 (TA-14) Medium-term Management Plan

The basic theme of the Kurita Group’s medium-term management plan, Take Action 2014 (TA-14),
is encapsulated by two words: “Execution and Evolution.” The Group will collectively carry out the TA-14 planover the three years starting April 2012 with the goal of growing and evolving into an enterprise that beats
the competition globally.

11 Seeking Global Growth and Group Evolution

Global business expansion is the key to the Kurita Group’s growth. In order to establish a competitive
advantage for growth, we will efficiently commit management resources domestically and overseas andfacilitate the Kurita Group’s evolution going forward, which will include strengthening product development
and management systems.
MANAGEMENT

14 Sustainable Management Framework
14

Corporate Governance18

Environmental Improvement Activities

20 Board of Directors and Corporate Auditors
FINANCIAL

21 Six-Year Financial Summary
22 Management’s Discussion And Analysis
32 Consolidated Balance Sheets
34 Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
35 Consolidated Statements of Changes in Net Assets
36 Consolidated Statements of Cash Flows
37 Notes to Consolidated Financial Statements
55 Report of Independent Certified Public Accountants
56 Corporate Data
57 Investor Information
Kurita Water Industries Ltd. Annual Report 2012 01

What We Do
When our customers need solutions involving water, they turn to us for products and services that
boost their productivity and reduce the environmental impact of their activities. You’ll find Kurita
helping in many areas to realize a sustainable society.
Water treatment
Industrial water

Ultrapure water production systems
These systems remove ions, microscopic particles,
and bacteria from water to produce ultrapure waterthat is as close as possible to theoretically pure H2O.

Pure water production systems
These systems produce water for a variety of industrial uses including medical-grade water for injectable drugs and eye medications, drinking water foralcoholic beverages and soft drinks, and boiler water
for the electric power and steel industries.

Wastewater reclamation systems
These systems reclaim wastewater discharged frommanufacturing processes and treat it for reuse inplants as pure water or cooling water.

Wastewater treatment

Who Uses Our Products and Services?
Customers in generalindustries

Customers in theelectronics industry

Officebuildings
Waterway andsewage discharge

Pulp & Paper

Steel

LCDs

Food &
Beverages

Oil Refining & Pharmaceuticals
Petrochemicals

 oiler water treatment
Bchemicalsn Cooling water treatment
chemicalsn Wastewater treatment chemicals
n Process treatment chemicals
n Incinerator chemicals
n Equipment and systems forwater treatment chemicals
n Packaged water treatment
management contracts• Cooling water / Boiler water supply
contracts• Comprehensive wastewater treatment contracts

02 Kurita Water Industries Ltd.

(regional heating /cooling centers)

Industrial waste

Electronic
Components

Water Treatment Facilities

Water Treatment ChemicalsnSemiconductors

For the Electronics Industry

 ltrapure water production systems
Un Wastewater reclamation systemsn Wastewater treatment systemsn Electrolyzed sulfuric acid generatorn Tool cleaning services
n Maintenance services
n Ultrapure water supply businessn

For General Industries

 ure water production systems
PWastewater reclamation systems
n Wastewater treatment systems
n Soil remediation services
n Chemical cleaning services
n Maintenance servicesnnAnnual Report 2012E lectrolyzed Sulfuric Acid Generator Aids
Semiconductor Manufacturing Process
Kurita’s electrolyzed sulfuric acid generator GREEN SULFACEED KD™
helps to raise productivity in the semiconductor manufacturing
process by enabling stable resist removal. At the same time, theproduct helps to reduce both environmental impact and costs by
reducing the consumption of liquid chemicals for processing.
GREEN SULFACEED KD™ has won highpraise for these features from major
semiconductor manufacturers, opening the way for Kurita to enter thesemiconductor manufacturing process field.

The achievement ofa sustainable society

OFFICE

Solutions for water-related issues
on a global scale
Cooling tower

Cooling water treatment chemicals
Cooling water treatment chemicals help
keep cooling systems in factories and officebuildings running smoothly to ensure efficient operation.

Manufacturing line

Boiler water treatment chemicals
BoilerKurita’s boiler water treatment chemicals
prevent boiler problems for customers in awide range of industries, helping to promote
safe operations and energy efficiency.

Wastewater treatment systems
These systems treat many kinds of industrial
wastewater to ensure that it does not affectthe environment.

Wastewater treatment chemicals

Maintenance services
Kurita provides preventive maintenance services to ensure continued high performance of water treatment systems supplied toclients. Kurita also proposes modifications to help clients boost
productivity and reduce their environmental impact.

Kurita’s wastewater treatment chemicals help toreduce environmental impact by performing
functions such as removal of suspended solids
and deodorization.

E nhanced-Safety RO Membrane Water Treatment
Chemicals
Reverse osmosis (RO) membrane water treatment chemicals prevent
slime and scaling that degrade membrane performance, thereby
contributing to efficient operations of RO membrane equipment indrinking water production, as well as helping to lower maintenanceand management costs. During the fiscal year under review, Kurita
expanded its lineup of RO membranewater treatment chemicals featuring
enhanced levels of safety. We expect
these chemicals to become widely usedin the desalination and food and beverage fields in the future.

 naerobic Wastewater Treatment Technology
A
Potential for Widespread Industrial Application
Anaerobic wastewater treatment offers advantageous energy savings andwaste emission reductions in treatment of high-concentration organic
wastewater. Kurita has recently launched Kurita Anaerobic Wastewater
Treatment System-BS-TK, which uses newly developed carriers to allow
anaerobic treatment to stably treat low-concentration organic
wastewater— previously a difficult
application to achieve. This breakthrough will effectively widen the poolof potential users of the technology fromexisting users such as food factories andbreweries to include chemical plants,
pulp & paper factories, and LCD andsemiconductor factories.
Kurita Water Industries Ltd. Annual Report 2012 03

CONSOLIDATED FINANCIAL HIGHLIGHTS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
Years ended March 31
Thousands of
U.S. dollars(Note 1)Millions of yen
2012

2011

2010

2012

For the year:¥ 193,792¥ 181,234¥ 178,520$2,363,320   Water Treatment Chemicals

56,44356,73553,743688,334   Water Treatment Facilities

137,348

124,499

124,777

1,674,985

Operating income

29,382

27,131

26,358358,324

Income before income taxes and minority interests

29,676

27,84428,178361,914

Net income

16,54817,13817,288201,806

Total assets

271,141

253,298

251,620

3,306,605

Equity (Note 2)

208,891

198,042

192,588

2,547,463

Net sales

At year-end:%

Ratio:ROE (Return on equity) (Note 3)

8.1

8.8

9.3

ROA (Return on assets) (Note 3)

6.3

6.8

7.0

Equity ratio

77.0

78.2

76.5
U.S. dollars(Note 1)Yen

Per share of common stock:¥  130.65

Net income (Note 4)$ 1.59¥  134.38

40.00

38.00

36.00

0.49

1,649.24

1,563.57

1,496.98

20.11

Cash dividends applicable to the year
Equity¥  134.02

Notes: 1. The U.S. dollar amounts are given solely for convenience at the rate of ¥82 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market
on March 31, 2012.
2. Equity represents net assets less minority interests.
3. ROE = Net income ÷ Equity (Average) ×100
ROA = Net income ÷ Total assets (Average) ×100
4. Net income and cash dividends per share are calculated using the average number of shares for the year under review. Calculation of equity
per share is based on the number of shares at year-end (excluding treasury stock).

Net sales

Operating income /Operating income margin(Millions of yen)

Net Income(Millions of yen)

(Millions of yen/%)

204,875 199,706

193,792
178,520 181,234

14.9
30,468

2008

04 Kurita Water Industries Ltd.

2009

Annual Report 2012

2010

2011

2012

2008

14.0

14.8

15.0

15.2

27,935 26,358 27,131 29,382

18,297

16,299 17,288 17,138 16,548

2012

2008

2009

2009

2010

2011

2010

2011

2012

BUSINESS REVIEW Segment Highlights

Water Treatment Chemicals

Water Treatment Facilities

In the fiscal year ended March 31, 2012, domestic
sales of boiler water treatment chemicals, coolingwater treatment chemicals, and chemicals for use inproduction processes all declined as capacity utilization at customers’ plants fell, mainly in the first half,
due to the impact of the Great East Japan Earthquake and ensuing power-saving measures. As aresult, domestic sales declined by 2% year on year.
Overseas sales, meanwhile, climbed 6% year on year
due to sales growth, mainly in Asia and Europe. As aresult, overall sales for the Water Treatment Chemicals segment were approximately the same as in theprevious fiscal year. However, segment operating
income declined 8% year on year due to higher raw
material prices and selling, general and administrative (SG&A) expenses.

During the fiscal year ended March 31, 2012, sales inJapan surged as Kurita saw growth in orders andsales for water treatment facilities for electric power
plants as it worked to meet demand related toreconstruction following the Great East Japan Earthquake. Maintenance services also saw increased
sales, mainly for repairs and modifications. Overseas,
the segment saw growth in orders and sales forultrapure water production systems and electrolyzed
sulfuric acid generators, mainly for use by a major
semiconductor manufacturer. As a result, orders for
the Water Treatment Facilities segment jumped 12%
year on year, while sales increased by 10%. Segment
operating income increased 18% year on year, as
higher SG&A expenses were covered by the sales
growth.
See p. 22 Management’s Discussion and Analysis

OrdersOrders(Millions of yen)

(Millions of yen)

59,029 58,470

53,370 56,714 56,748

149,659

2008

2010

2012

2008

2009

2011

136,595

140,507
121,791 125,237

2009

2010

Sales

Sales

(Millions of yen)

(Millions of yen)

58,646 58,331

53,743 56,735 56,443

2008

2010

2009

2011

2012

137,348
124,777124,499

2008

2010

2009

Operating Income(Millions of yen)

(Millions of yen)

2008

10,099

8,417

8,177

2009

2010

2011

2012

146,228141,374

Operating Income

9,525

2011

9,268

20,939 19,517

2012

2008

2009

2011

18,181 17,032

2010

2011

2012

20,1272012(Years ended March 31)

Kurita Water Industries Ltd. Annual Report 2012 05

To all our stakeholders

Leveraging Unrivaled Strength inDriving Businesses to Pursue
Global Growth

Toshiyuki Nakai
President and Representative Director

The Kurita Group has launched Take Action 2014 (TA-14), a new three-year management plan. Under
the plan, we are working to resolve various issues for customers in Japan and overseas to achieve
global expansion and growth.

Overview of the Fiscal Year Ended March 31, 2012
In the fiscal year ended March 31, 2012, the Kurita Group demonstrated its strengths in generating stableearnings despite an adverse operating climate. Total consolidated order bookings climbed 8.4% from ayear earlier, to ¥197,256 million. Net sales rose 6.9% to ¥193,792 million. Operating income increased
8.3% to ¥29,382 million, our second highest result ever. Net income declined 3.4% to ¥16,548 million,
however, as taxes increased owing to revisions to the tax system. Net income per share was ¥130.65,
down from ¥134.02 in the previous year.
During the year under review, the overall business environment in Japan came to a temporary standstill.
The impact of floods in Thailand and a stronger yen came as the nation was in the process of recoveringfrom the March 2011 Great East Japan Earthquake. Low capacity utilization at customer factories, mainly inthe first half of the year, reduced demand in the Water Treatment Chemicals business. At the same time,
facility consolidations and the offshoring of customer production units as a result of unstable power supplies and the high yen dampened domestic capital spending, and sapped demand in the Water Treatment
Facilities business.
Kurita responded to this situation by undertaking Group wide efforts to help customers swiftly restore
quake-damaged factories and electric power plants. Overseas, prospects for the global economy looked
uncertain due to the European debt crisis, but the Group expanded its operations, seizing business opportunities from economic progress in emerging nations and capital spending increases in East Asia’s electronics
sector.

06 Kurita Water Industries Ltd.

Annual Report 2012Results of MP-11(Billions of yen)

Net Sales
199.7
58.3

Overseas SaleslSecured stable profits via

proposed solutions for boostingproductivity and reducing
environmental impact

29.3

193.8
26.0
56.4

98.9

100.5

42.5

36.7

2009

2012

ServiceBusiness
Revenue

Water Treatment Chemicals
Water Treatment Facilities (services)
Water Treatment Facilities (hardware)lSteady overseas businessexpansion overall centered in
Asia; confirmed several key issues
lLeveraged electrolyzed sulfuric

2009

acid generators as a point ofentry into semiconductor
manufacturing processes

2012(Years ended March 31)

Review of Previous Medium-term Management Plan, “Make Progress 2011
(MP-11)”
The three-year medium-term management plan, Make Progress 2011 (MP-11), ended March 31, 2012.
We launched the plan when the impact of the Lehman Shock of September 2008 was still strong. Our
performance bottomed out in the fiscal year ended March 31,

We achieved notable results in termsof two key strategies, which were“expanding and evolving our service
business” and “expanding global
operations.”

2010, and our results have been recovering steadily. Nonetheless, we recognize the need to address our inability to generate
growth exceeding the initial net sales targets of MP-11. We
achieved notable results in terms of two key strategies, whichwere “expanding and evolving our service business” and“expanding global operations.”
In expanding and evolving our service business, we firmly

established a solutions proposal business approach to address customers’ needs, specifically improving productivity and reducing environmental impact. This approach enabled the service business to contribute tostable profits. In terms of expanding global operations, the Water Treatment Chemicals business has grownby expanding its operations in the various countries where it conducts business. At the same time, the Water
Treatment Facilities business received large project orders from electronics manufacturers in China andSouth Korea, increasing our market share. In this process, our electrolyzed sulfuric acid generator has won
top marks for its contributions to customers’ semiconductor manufacturing processes by achieving thedesired effect. Our new entry into the semiconductor field manufacturing processes was a major step
toward developing our business in this leading-edge industry.

Kurita Water Industries Ltd. Annual Report 2012 07

Orders

Net Sales

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

240.0
197.3

2012

2015
(Projection)

36.0

235.0
29.4

193.8

2012

2015
(Projection)

2012

2015
(Projection)(Years ended March 31)

Overview of the New Medium-term Management Plan, “Take Action 2014
(TA-14)”In April 2012, the Kurita Group launched Take Action 2014 (TA-14) as its new three-year management
plan. The basic theme of the plan is “Execution and Evolution” to realize sustainable growth by evolving
into a business group capable of competing successfully on the international stage.
Although customers in Japan are restoring capacity utilization at their facilities to pre-earthquake levels,
they are also moving their production offshore at an increasing pace. We will respond by expanding ourbusinesses in growth areas such as China, Southeast Asia, and Brazil, and in North America and Europe,
which offer greater economic scale. To this end, our priorities are to dramatically expand overseas business,increase market share in our domestic operations, and to create new products and businesses.

In the final year of TA-14, we seek toincrease overseas revenues to 27.4%
of consolidated net sales, from 15.1%
in the year ended in March 31, 2012.

The Kurita Group’s greatest strength is its unique balance of threewater treatment functions: water treatment chemicals, water treatment facilities, and maintenance services. By integrating these threecapabilities, we aim to leverage our unrivalled strength in Japan andoverseas to drive our business forward. To this end, we will prioritize
the following key strategies.

The first key strategy is overseas business expansion. Here, we will organically connect business growthfrom delivering hardware in the Water Treatment Facilities business with securing maintenance contracts
and expansion of the Water Treatment Chemicals business. We are targeting sustainable business growth bysecuring contracts that encompass all aspects of water management at customer factories from the inlet tothe outlet. In the final year of TA-14, we seek to increase overseas revenues to 27.4% of consolidated net sales,from 15.1% in the year ended in March 31, 2012.
The second key strategy is domestic share growth. Here, we will focus on improving the quality of products, technologies, and services as keys to helping customers to tackle issues such as boosting productivity
and reducing environmental impact. In this way, we will endeavor to enhance customer trust so we can
expand our market share and reinforce our revenue base.
Our third key strategy is creation of new products and businesses. We will speedily develop products andtechnologies that match customer needs in Japan and overseas. At the same time, we will create new businesses or business models that can drive new growth. Moreover, we will strengthen core technologies toboost innovation over the medium and long terms.

08 Kurita Water Industries Ltd.

Annual Report 2012

Improving Corporate Value
Augmenting these strategies, we intend to improve capital efficiency under TA-14.
Our top priority is to invest cash in growth fields, particularly in bolstering our overseas business foundations. Specifically, we will focus our investments on facilities needed to accommodate customer needs andefforts to expand and train personnel. We also look to inject cash into building alliances to reinforce local
production systems and in M&A, to broaden our marketing networks and obtain outstanding technologies
and products.
At the same time, we will endeavor to further enhance returns toThis marks the eighth consecutive yearof increased dividends.

our shareholders so as to retain their trust and fulfill their expectations. Our basic policy is to continue to pay a stable dividend, whileaiming to return profits to shareholders through dividend increases
after considering business performance and reinvestment needs.

Based on this policy, we have increased the annual dividend for the fiscal year ended March 31, 2012 by ¥2from the previous year to ¥40. This marks the eighth consecutive year of increased dividends.
We will make flexible and agile judgments on prospective share buybacks, taking into account ourcapital funding requirements, cash position and share price levels.

Kurita’s Social Mission and Vision
We expect the world’s population to continue growing, with emerging economies contributing to further economic expansion. At the same time, securing water resources and reducing environmental loads
are becoming urgent challenges. As a leader in water treatment, we believe that it is our social mission
to help resolve global challenges relating to water and the environment.
At the same time, our long-term corporate vision is to realize advanced water management based on
years of expertise in water treatment, as well as our leading-edge products, technologies, and services. The
Kurita Group thus offers optimal industrial water management, including in reclaiming and reusing water, tohelp overcome global issues in securing water resources and lowering environmental impact.
I ask for the ongoing support and understanding of all stakeholders, including our shareholders andother investors, for the Group’s management direction.
July 2012

Toshiyuki Nakai
President and Representative Director

Kurita Water Industries Ltd. Annual Report 2012 09

Feature

The Take Action 2014 (TA-14)
Medium-term Management Plan

The basic theme of the Kurita Group’s medium-term management plan, Take
Action 2014 (TA-14), is encapsulated by two words: “Execution and Evolution.” The Group will collectively carry out the TA-14 plan over the three years
starting April 2012 with the goal of growing and evolving into an enterprisethat beats the competition globally.
Basic Theme: Execution and Evolution
Priority Measures for the Kurita Group Over Three Years
Dramatic growth ofoverseas business

Unparalleled trust and market
share expansion in JapanNet Sales (Billions of yen)

Operating Performance Targets
2012

2015
(Projection)

3 Year Average
Growth Rate

Orders

197.3

240.0

+ 6.7%Net Sales

193.8

235.0

+ 6.6%

Operating Income

29.4

36.0

+ 7.0%Net Income

16.5

22.0

+ 10.0%Net Sales (Overseas)

29.3

64.4

+ 30.2%

Overseas Sales Ratio

15.1%

27.4%

–

(Billions of yen)Creation of new products andbusinesses that help solve
water, energy and food issues

235.0
193.8

69.0

56.4

166.0

137.3

2012

2015

(Projection)

Water Treatment Chemicals
Water Treatment Facilities(Years ended March 31)

The Kurita Group is the only water treatment company in the world to develop its business based on a goodbalance of three distinct functions: water treatment chemicals, water treatment facilities, and maintenanceservices. By organically combining these three capabilities, we will leverage our unrivalled strength to drive
our business forward. With the business environment remaining unpredictable both domestically and overseas, the Kurita Group will seek to achieve sustained growth by harnessing this advantage. Under the TA-14
plan, dramatic overseas business expansion, domestic share growth, and creation of new products andbusinesses will be promoted as priorities. We will strive to rapidly execute business expansion overseas while
reinforcing the earnings base of our domestic businesses, which account for a large proportion of theGroup’s overall income. We will invest management resources in the infrastructure needed to achieve thiswhile also working to strengthen product development and management systems.

10 Kurita Water Industries Ltd.

Annual Report 2012

Seeking Global Growth and Group
Evolution
Global business expansion is the key to the Kurita Group’s growth. In order to establish a competitive advantage for growth, we will efficiently commit management resources domesticallyand overseas and facilitate the Kurita Group’s evolution going forward, which will include
strengthening product development and management systems.

Strengthening Business and Earnings Bases
Under the TA-14 plan, we will aggressively invest required management resources to strengthen our business baseoverseas in order to maximize the Group’s business strengths and generate results.
We will first make investments that enable us to provide services that match the needs of markets overseas.
Specifically, in addition to capital investments in advanced water analysis, we will invest in quality management
systems for ion-exchange resins and various membranes used in water treatment, coupled with localized productapplication testing. These actions will guide our efforts to develop customer-focused service systems.
Second, we plan to increase local personnel overseas and reinforce human resources development programs.
Hiring significant numbers of local employees with strong problem-solving ability will help increase service quality and earn customer trust.
Third, we will endeavor to strengthen ties with local partners, establish alliances and execute mergers andacquisitions (M&A). M&A in water treatment chemicals will proceed around a policy of acquiring sales networks
and superior products and technologies. In water treatment facilities, we will consider alliances with partnercompanies for the purpose of improving design, construction and engineering capabilities in Asia.
Through these initiatives for strengthening our business base, we willseek to boost facility orders to increase our business scale overseas, mutually linking this with the acquisition of maintenance service contracts anddemand growth for water treatment chemicals to further increase sustained earnings.
In addition, domestically, the TA-14 plan calls for strengthening theearnings base by increasing our market share. High growth cannot be
expected in the domestic market, but even under such conditions we will
work to earn the trust of customers by precisely identifying changes inissues and needs related to water treatment facilities and production facilities and by providing optimal solutions in a timely manner.
Dramatic Growth of Overseas Business / Sustainable Profits

Investment Necessary
to Bolster Overseas
Business Foundation

Chemicals
MaintenanceHardwareConnect the Kurita
Group’s strengths toachievements

Dramatic andContinuousBusiness Growth

Kurita Water Industries Ltd. Annual Report 2012 11

USFeatureOverseas Strategy by Region
Under the TA-14 plan, we will carry out strategies tailored to conditions ineach region in which business is being developed.

BrazilFirst, in the Asian region, substantial demand continues to be forecasted forthe electronics industry in Korea, China and Taiwan. In particular, electrolyzed sulfuric acid generators, which have enabled our entry into the semiconductor manufacturing process sector, are expected to provide an opening for the creation of newmarkets and development of new customers. In Southeast Asia, we will propose ways toimprove productivity and lower environmental impact with wastewater reclamation systems, targeting general industrial markets such as automobiles, steel, oil refining, petrochemicals, and pulp and paper.
We have positioned China as our top priority in the Asian region, and in April 2012 an executive position with responsibility for China was established. We will manage three Group companies in China, for water treatment chemicals, water
treatment facilities, and maintenance services, and develop business in an integrated manner. In China, demand growth isprojected for wastewater recycling against a backdrop of water shortages and more stringent wastewater regulations.
With wastewater reclamation systems and chemicals for reverse osmosis (RO)membranes positioned as strategic products, we will endeavor to create markets not only for the aforementioned electronics industry but also general industrial sectors such as petroleum, petrochemicals and automobiles. In particular,
highly safe RO chemicals launched on the market in the year to March 2012 arealso expected to be applied to desalination plants used to render seawater
drinkable.
In addition, although their markets are mature, the U.S. and Europe haveenormous economies, so they still constitute major markets with growth opportunities for the Kurita Group. Both markets possess much potential for acquiring
technologies and sales networks through M&A, and we plan to pursue promising investment opportunities. Moreover, in Brazil, where we doubled production
capacity for water treatment chemicals during the previous fiscal year, we willseek scale growth against a backdrop of economic growth.
Sales by Region(Billions of yen)

64.4
Germany
DalianSouth Korea

4.2
2.5
3.2

ShanghaiSuzhouTaiwanWater Treatment Chemicals related companies
Water Treatment Facilities related companies

Thailand
Malaysia

Singapore
Indonesia

3.0
1.4
2.3

29.3
54.4

22.5

2012
Asia North America(Years ended March 31)

12 Kurita Water Industries Ltd.

Annual Report 20122015

(Projection)

EuropeOther regions

Development and Business Infrastructure Support Growth
Developmental support is essential to launching new competitive products and technologies and bringing about
global growth. The Kurita Group will engage in R&D from three perspectives under the TA-14 plan while remaining
committed to being a technology-oriented company.
First, we will quickly develop new products and technologies that match market needs in the regions wherebusiness development is taking place. High levels of trust will be earned by precisely identifying customer needs inJapan and overseas and helping solve the issues customers face. Second, we will focus on strengthening coretechnologies from a medium- to long-term perspective. Specifically, membrane technologies used in water treatment, polymer technologies, and advanced water quality analysis technologies, including for ultrapure water, will
be reinforced and developed into groundbreaking technological innovations. Third, we will work to create businesses with the potential to serve as new drivers of growth in the water sector but also in food and energy—thefoundations of society. In doing so, we will help solve issues facing society as a whole; specifically, improving foodproductivity and conserving energy. At the same time, from the standpoint of realizing our corporate philosophyof studying and mastering the properties of water, we have launched initiatives in the area of water in outer space.
Pursuing the potential of water treatment in space will enable us to polish cutting-edge technologies.
As another aspect of systems for global growth, the Group as

Creation of New Products and Businesses

New Growth
Drivera whole will also work to strengthen management functions.
This will entail reinforcing governance and internal control in line

New Market
Cultivation

with societal requirements, bolstering risk management andcompliance globally in conformance with regional businesspractices, and appropriately addressing intellectual property

Solve customers’issuesFood
water
Energywater

Quick development of
new products andbusiness models

risks. Overall, we will work to improve our responsiveness to theissues that arise in the course of proactive business development.
Space
water

Bolster Core Technologies
Membranes

Biotreatment

Polymers

Ultrapure
water

Advancedanalyticalsensing

Kurita Water Industries Ltd. Annual Report 2012 13

Sustainable Management Framework

Corporate Governance
Basic Policy

six directors including representative directors. The

Kurita and Kurita Group companies (“the Kurita

committee meets twice monthly as a general ruleGroup”) aim to contribute broadly to society andto deliberate on important management mattersmeet the expectations of their stakeholders, includ-

and assist the Board of Directors’ decision-making.

ing shareholders and investors, customers, regional

The Board of Directors has also established ancommunities, business partners and employees. The

authorization protocol based on authorization andGroup does this through corporate activities in thereview regulations to complement its

fields of water and environment in accordance withdecision-making.

the Kurita corporate philosophy, “study the proper-

In terms of operational execution, Kurita hasties of water, master them, and we will create an

employed an executive officer system since 2005

environment in which nature and man are in har-with the aims of realizing swift decision-making

mony.” To realize these aims, the Group has adopted

and strengthening operational execution capabili-a basic corporate governance policy with two main

ties. Kurita currently has six executive officers.

components. The first is establishing management
systems that improve management transparency

Corporate Auditor Systemand efficiency and sustainably increase corporate

Kurita employs a corporate auditor system. As

value over the long term. The second is rigorousof June 28, 2012, the Board of Corporate Auditors

oversight of management and operational

comprises three corporate auditors, including two

execution.

external corporate auditors. The Board of Corporate
Auditors decides on audit policies for the fiscal year,

Corporate Governance Structure

the allocation of duties to each corporate auditor,

As of June 28, 2012, Kurita’s Board of Directors

specific items to be performed, schedules, andcomprised 12 directors, including 1 external direc-

other items for executing audits. Based on thistor. The Board of Directors’ meetings set manage-

framework, each corporate auditor then conducts

ment policy, make management decisions, andaudits.
Corporate auditors attend Board of Directors’

oversee directors’ execution of their duties. The
Board of Directors’ meetings are chaired by themeetings, Executive Committee meetings, andpresident and in principle held monthly on a regu-

other important company meetings and monitor

larly scheduled basis and whenever necessary on

the directors’ execution of duties and the Board ofan ad hoc basis.

Directors’ fulfillment of its oversight responsibilities.

Kurita has an Executive Committee comprising

Corporate auditors’ other responsibilities include

Corporate Governance Structure
General Meetingof Shareholders

Board of Directors

Board of Corporate
Auditors
Corporate Auditors

Executive Committee

President

14 Kurita Water Industries Ltd.

Annual Report 2012

Internal Auditing
Department

Operating Divisionsconducting asset status surveys of the entire Group,

Mr. Noriyuki Hayata, Kurita’s part-time external

including subsidiaries, and auditing the status anddirector, is an employee of ITOCHU Corporation,functionality of internal control systems imple-

which is a shareholder of Kurita. However, ITOCHU

mented by the directors. They also confirm thehas no special interests in Kurita because it is not aaccounting auditors’ independence and fulfillment

major shareholder and its monetary transactionsof duties, and meet with the accounting auditorswith Kurita fall within normal businessregularly and as otherwise necessary to discuss thetransactions.

accounting audit and exchange opinions.
The Internal Auditing Department, which

Mr. Chiaki Kuzuu, Kurita’s full-time external
corporate auditor, is a former employee of ITOCHU

reports directly to the president, is tasked with

Corporation, which is a shareholder of Kurita.

strengthening internal audits. As of June 28, 2012,

However, as described above, ITOCHU has no

the head of the department and eight subordinate

special interests in Kurita.

staff members conduct internal audits of the Com-

Mr. Tamio Uda, a part-time external corporatepany and other Group companies to ascertain any

auditor, is an attorney and has no special interests

issues or problems arising in the execution ofin Kurita.

duties. The department then recommends mea-

The external director voices opinions from ansures for improvement to the president. From theindependent position at Board of Directors’ meet-fiscal year beginning April 1, 2008, the department

ings. This ensures a multilateral perspective andhas been responsible for monitoring the status ofgreater objectivity in directors’ decisions on busi-

internal controls and recommending and support-

ness execution. The external corporate auditors

ing improvements in response to the introduction

make use of their specialized wisdom to conductof the internal controls reporting system for finan-

audits from an independent position. This

cial reporting mandated by the Japanese Financial

increases the objectivity of management

Instruments and Exchange Act. The department

supervision.

also monitors the Group’s implementation andimprovement of risk management.
The corporate auditors discuss the Internal
Auditing Department’s audit plan for each fiscal
year and exchange opinions regarding the results

Mr. Hayata attended Board of Directors’ meetings and voiced appropriate opinions as requiredon the proposals and deliberations at themeetings.
In addition to conducting regular audits, Mr.

of audits, the assessment of internal control overKuzuu attended Board of Directors’ meetings,

financial reporting, and the assessment of risk

Executive Committee meetings, Board of Corpo-

management.

rate Auditors’ meetings and other important

Kurita has appointed Grant Thornton Taiyo

meetings to offer a specialist financial and

ASG as its accounting auditor, in accordance withaccounting perspective on matters, as well as

the law, to implement and enhance the Com-appropriately exchanging opinions with thepany’s accounting audits.

accounting auditors and the Internal Auditing
Department.
Mr. Uda attended Board of Directors’ meetings

External Director and External
Corporate Auditors

and Board of Corporate Auditors’ meetings to offer

Kurita has one external director and two external

opinions appropriately as needed, mainly from a

corporate auditors. Regarding the independence ofspecialist legal expert’s perspective.

the external director and corporate auditors, Kurita

Kurita has registered the external director andjudges that there is no possibility of a conflict of

the two external corporate auditors as indepen-interest with shareholders given their financial

dent officers in accordance with the Tokyo Stockrecord and background.

Exchange’s listing regulations.
Kurita Water Industries Ltd. Annual Report 2012 15

Internal Control System and
Risk Management Systemtransparency, integrity, safety, and coexistence.
These values are set forth in the Code of Ethical

In May 2006, the Kurita Group formulated theConduct, established in 2000. Kurita then pre-Fundamental Policy Regarding the Establishment

scribed its Basic Principles and Compliance Guide-of Internal Control Systems in accordance with thelines to Practice Ethical Conduct to ensure rigorous

requirements of Japan’s Companies Act, and hascompliance with laws, regulations and social ethics

subsequently augmented Kurita’s risk managementin Kurita’s daily business activities.

and internal controls in line with this basic policy.

Kurita has established a Compliance Committee

The Fundamental Policy Regarding the Establish-

chaired by the executive senior managing director

ment of Internal Control Systems has been revised(representative director) and a Group Complianceby a Board of Directors’ resolution. To ensure that

Committee, also chaired by the same executive

the Kurita Group’s financial reporting is conductedsenior managing director, comprising representa-

properly, Kurita established its Internal Control

tive directors from Group companies in Japan. The

Reporting System in accordance with the Japanese

Kurita Group determines policies and priority mea-

Financial Instruments and Exchange Act, and con-sures related to compliance activities in these com-firms the effectiveness of and implements continu-

mittees, which it then discloses to all executives

ous improvements to this system.

and employees through subcommittees in place ateach headquarters, business division, and Group• Risk Management
The Director and General Manager of the Corporatecompany division.
Further, Kurita has instituted whistleblower

Planning Division is designated as the officer toprotection regulations and set up an internal con-promote oversight of risk management for thesultation desk, while at the same time providing

Kurita Group by regularly conducting risk analysis

consultation and whistleblowing desks through an

and evaluation, and by taking steps to prevent risk

external organization.

events from occurring where possible. As describedabove, monitoring of the execution status and• Headquarters Health and Safety Committee

improvement status of risk management is con-

The Headquarters Health and Safety Committee

ducted by the Internal Auditing Department.

reports directly to the president. The committee

Among serious risks, the head of the Compli-

oversees several subcommittees: the Facilities Pro-

ance Committee is responsible for those related toduction Division Health and Safety Committee, thecompliance and the head of the Headquarters

Ultrapure Water Supply Group Health and Safety

Health and Safety Committee is responsible forCommittee, the Construction Division Health andthose related to health and safety. The following

Safety Committee, the Maintenance Group Healthsystems are in place to enhance management ofand Safety Committee, the Chemicals Divisioncompliance and health and safety.

Health and Safety Committee, and the Headquarters, Branch and Office Health and Safety Commit-• Compliance Committees

tees. Together these committees work to maintain

The Kurita Group regards compliance activities as

and improve health and safety at workplaces and inentailing more than simple law abidance. Rather,business activities from a perspective that includes

compliance activities are conceived as ethicalthat of Group companies and cooperating partners.

practices aimed at realizing five values: fairness,

16 Kurita Water Industries Ltd.

Annual Report 2012

Remuneration Paid to Directors
and Corporate Auditors

Information Disclosure and IR Activities• Amount of Remuneration for Directors andand transparent relationships with stakeholders

Corporate Auditors, Policy for Calculation, andthrough all its business activities. In accordance

Method of Determination

with this management policy, the Company there-

Kurita’s system for compensating directors andfore endeavors to adequately disclose information

corporate auditors is intended to create incentives

to investors in a proper and timely manner, in com-to continuously work to increase the Company’s

pliance with the Companies Act, the Financial

enterprise value and business results. To this end,

Instruments and Exchange Act, and the rules of thethe remuneration packages comprise two compo-

Tokyo Stock Exchange.

As one of its management policies, Kurita builds fairnents: a basic annual salary and a performance-

The General Manager of the Corporate Planning

linked component that reflects the Company’s

Division has overall responsibility in managing thebusiness results. Specifically, for directors the basic

corporate information of the Kurita Group. Namely,

annual salary is set separately for each office, while

the General Manager collects information from all

for corporate auditors the basic annual salary

Kurita business divisions and Group companies andreflects the full-time or part-time status of the offi-manages the important corporate information. The

cer. The performance-linked amount is variable andGeneral Manager of the Corporate Planning Divi-

dependent on achievement of performance targets

sion promptly passes on to the president any risk

for the fiscal year. To incentivize improved businessinformation, such as the occurrence of an emer-

performance over the medium to long term, agency situation, and also decides on the necessity

certain proportion of the basic annual salary is paidof the proper disclosure of the collected corporate

to the Directors’ and Corporate Auditors’ Sharehold-information.

ing Scheme and allocated for purchasing the Com-

With respect to investor relations (IR) activities,pany’s shares. Based on this policy, theKurita holds an earnings presentation twice a year,

remuneration for each director is decided by theat which time the president explains the results andBoard of Directors and the remuneration for eachholds a Q&A session. In addition, the president also

corporate auditor is decided by the Board of Corpo-

conducts overseas meetings twice annually. As

rate Auditors within the total limit set by the Gen-

regards Kurita’s IR organization, the General Man-

eral Meeting of Shareholders.

ager of the Corporate Planning Division is the executive in charge of IR. Also, Kurita has set up units inRemuneration to Directors and Corporate Auditors for the Fiscal Year Ended
March 31, 2012
Classification
Directors

Total
remuneration
paid

Total remuneration paid by type (Millions of yen)

Basic
(Millions of yen) remuneration

Stock
options

Bonus

Number of
Retirement recipients(Persons)
package

515

460

–

–

54

15

(Excluding external
corporate auditors)

32

32

–

–

–

1

External corporate
auditors

45

45

–

–

–

2

(Excluding external
directors)

Corporate auditors

charge of IR inside the Corporate Planning Division,and the General Manager of the Corporate Planning Division together with full-time personnel
actively seize any opportunities to meet with investors and analysts. Kurita has also set up a dedicatedIR website on which the Company discloses earnings presentation materials and a variety of otherfinancial materials, from the viewpoint of increasing
fairness and transparency.

Kurita Water Industries Ltd. Annual Report 2012 17

Environmental Improvement Activities
The Kurita Group’s basic policy for its environmental improvement activities is to operate in keeping with
its corporate philosophy and endeavor to resolve water and environmental issues so it can contributebroadly to society. A distinctive aspect of that basic policy is that core business activities cover products,
technologies and services in the water and environmental fields to reduce the environmental impacts ofcustomers and the Group alike. The Group thus undertakes environmental improvement from the perspectives of pursuing internal change, responding to social needs, and meeting customer needs.

The Three Aspects of Kurita’s Environmental Improvement Activities
Kurita’s own
environmental
improvement activities

Customers’ environmental
improvement activities
Societal needs

Customer needs

Internal change

Realizing a sustainable society
through the development of
new products and technologies
that contribute to environmental
improvement

Products, technologies andservices that will enable
customers to improve theenvironment

Reducing environmental impact
through operational
improvement and innovation

Results of Environmental Activities in the Year Ended March 31, 2012
Internal Change Initiatives

Responding to Social Needs

To drive internal change, we started by categorizing all

To accommodate social needs, the Group develops

Group business facilities into production sites andproducts and technologies that fundamentallyadministrative offices. We set goals in keeping withresolve environmental issues for customers andthe nature of each operation. Objectives are to reduce

society. The Group monitors the numbers of newenvironmental impact, notably by lowering carbon

products and technologies developed and thedioxide emissions and waste from Group operations.

resulting environmental benefits to customers. Key

To cut carbon dioxide emissions, we met theresults for the year under review were as follows:

government’s power-saving target and reached theoverall carbon dioxide emission goal for the Groupby optimizing the operationsof ultrapure water supply
facilities while lowering theenergy consumption of plants
and offices.

New Environmental Improvement Products and
Newly Developed Technologies
Environmental
Improvements

The Group attained its
waste disposal goals largely by Lower CO2 emissions
streamlining wastewater treatment at ultrapure water
Waste reduction

Sewage treatmentl Cyanogen decomposition technology for wastewater

specific and detailed data in
the Kurita Group Environmental Report.

18 Kurita Water Industries Ltd.

Annual Report 2012l Scale inhibitor for steam condensate with high ironconcentrationl Reverse osmosis (RO) membrane antifoulant for desalinationunits
l Purification systems for use of fermented methane gas fromwastewater and solid wastel Carrier-type anaerobic water treatment (for chemical plants)
for low-concentration wastewaterl Low-sludge aerobic organism treatment process using
microorganismsl Electrolyzed sulfuric acid generator for photoresist removal
in semiconductor manufacturing

supply facilities.
We will disclose more

New Products and Technologies

Soil and groundwater l Bio-augmentation technology for Volatile Organic Comremediation
pounds (VOCs)

Meeting Customer Needs–Examples of Environmental Improvements throughOur Businesses
We meet customer needs by proposing and imple-

Reducing Waste

menting measures that match customer requests

As part of its own

for reducing the environmental impacts of theirenvironmental

plants and other business sites. Key achievements

preservation

for the year under review are as follows.

efforts, a customerthat operates a

Eliminating Effluent Discharges by Reclaiming

petroleum refinery

and Recycling Wastewaterand petrochemiA customer thatcals manufacturing business uses water to collectplates electronic

sulfur oxide particles from gas emitted in refining

products wanted

processes, using a flocculant to filter the particles

to build a plant

and remove them as solids. When removing thethat would not

solids, the customer uses diatomite as an auxiliary

discharge effluent

agent. The customer wanted to reduce the amountoutside the site,of waste it generates since the diatomite layer on

the goal being to protect neighboring water

the filter surface eventually becomes waste along

resources. Kurita proposed using a membranewith the solids. Kurita recommended using a water

treatment system to separate pollutants fromtreatment chemical to enlarge the particles of thewastewater to reclaim and reuse water, with evapo-

solids, making it easier to trap them in the diato-

ration equipment concentrating the pollutants formite layer. This improvement enabled the customer

disposal. The customer accepted this proposal,

to remove the solids with half of the diatomite

which helped eliminate discharges outside the site.

previously used, leading to a substantial reduction

This accomplishment was also widely praised forin waste.

contributing to local environmental preservation
when the customer expanded its operations overseas.

Supplying Water to Disaster Victims
From June 19 to July 19, 2011, the Kurita Groupseawater desalination unit. Evacuees used thishelped supply water to a hotel being used as anwater in the toilets and for washing clothes.

evacuation shelter in Minamisanriku, Miyagi Prefecture, one of the areas hit hard by the Great East

We later received a letter of appreciation fromthe hotel for our support efforts.

Japan Earthquake. Kurita installed a seawater desalination unit there to provide water for daily use.
The roughly 700 evacuees staying at thishotel faced water shortages because water andsewerage systems had yet to be restored. The
Kurita Group responded to a request for assistance from the hotel by supplying about 30
cubic meters of treated water daily with the
Kurita Water Industries Ltd. Annual Report 2012 19

Board of directors and corporate auditors (As of June 28, 2012)
Directors

Toshiyuki Nakai*Kazufumi Moriuchi*

2011	President
Representative Director (to present)
2009	President, Kurita Engineering Co., Ltd.
2005	Director
1979	Joined Kurita Water Industries Ltd.

2010

General Manager of Facilities Division(to present)
2009 Representative Director (to present)
2007 Executive Senior Managing Director(to present)
1971	Joined Kurita Water Industries Ltd.

Tetsuo Saeki

Kaoru Kajii

Shigeaki Takeda

2011	General Manager of Facilities Production
Division (to present)
2007 Managing Director (to present)
1974	Joined Kurita Water Industries Ltd.

2011	General Manager of Research andDevelopment Division (to present)
2009 Managing Director (to present)
1974	Joined Kurita Water Industries Ltd.

2011	Managing Director
General Manager of Chemicals Division(to present)
2007	Director
1973	Joined Kurita Water Industries Ltd.

Tetsuo Kai

Heiju Maeda

Motoyuki Yoda

Kiyoshi Itou

2011	General Manager of Ultrapure Water
Supply Group, Facilities Division(to present)
2007 Director (to present)
1972	Joined Kurita Water Industries Ltd.

2012	General Manager of Sales Group II,
Chemicals Division2009 Director (to present)
1975 Joined Kurita Water Industries Ltd.

2012	General Manager of Domestic Sales
Group I, Facilities Division2009 Director (to present)
1978 Joined Kurita Water Industries Ltd.

2009	Director
General Manager of Administrative
Division (to present)
1979 Joined Kurita Water Industries Ltd.

Takahito Namura

Youichi Kurokawa

Noriyuki Hayata

2012	General Manager of Sales Group I,
Chemicals Division2011	Director (to present)
1977	Joined Kurita Water Industries Ltd.

2011	Director
General Manager of Corporate
Planning Division (to present)
1984	Joined Kurita Water Industries Ltd.

2012	General Manager, Planning &Administration Department,
Machinery Company, ITOCHU
Corporation2009 External Director (to present)
1981	Joined ITOCHU Corporation

Chiaki Kuzuu

Shiro Hayashi

Tamio Uda

2004	External Corporate Auditor(to present)
2002	Chief Financial Officer, Machinery
Company, ITOCHU Corporation
1971 Joined ITOCHU Corporation2012	Corporate Auditor (full time)2009	General Manager of Personnel andLabor Relations Department ,Administrative Division1977 Joined Kurita Water Industries Ltd.

2009	External Corporate Auditor(to present)
1977	Established Harada Uda Law Office(currently Uda Law Office)1974	Admitted to the Japan Bar
Association

Corporate Auditors

20 Kurita Water Industries Ltd.

Annual Report 2012

* Representative Director

Six-Year Financial Summary
Kurita Water Industries Ltd. and Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars(Note 1)Millions of yen
2012

2011

2010

2009

2008

2007

2012

¥193,792¥181,234¥178,520¥199,706¥204,875¥197,146$2,363,320

Water Treatment Chemicals

56,44356,73553,74358,33158,646

56,667688,334

Water Treatment Facilities

137,348

124,499

124,777

141,374

146,228

140,479

1,674,985

Cost of sales

127,905

118,573

117,221

135,874

138,549

137,819

1,559,826

Selling, general and administrative expenses

36,50335,52834,94135,89635,85735,050445,168

Operating income

29,382

27,131

26,35827,93530,46824,276358,324

Income before income taxes and minority interests

29,676

27,84428,178

26,10331,27924,591

361,914

Net income

16,54817,13817,28816,29918,297

14,207

201,806

Capital expenditures

8,105

5,965

8,083

56,32224,097

19,563

98,842

Research and development (R&D) expenses

4,232

4,225

3,990

4,363

4,551

4,421

51,612

Depreciation and amortization

16,035

16,066

15,523

11,716

9,425

6,512

195,558

Total current assets

144,985

117,852

109,297

98,689121,562

137,004

1,768,110

Total current liabilities

42,35834,771

38,59247,93549,08065,496

516,562

Equity (Note 2)

208,891

198,042

192,588

177,291

169,402

156,772

2,547,463

Total assets

271,141

253,298

251,620

245,406

231,498

235,137

3,306,605

Number of shares issued (thousands)

132,800

132,800

132,800

132,800

132,800

132,800

Number of employees (persons)

4,555

4,490

4,445

4,404

4,249

3,992

For the year:
Net sales

At year-end:

U.S. dollars(Note 1)Yen

Per share of common stock (Note 4):
Net income
EquityCash dividends applicable to the year

130.65134.02134.38126.69142.21110.42

1.59

1,649.24

1,563.57

1,496.98

1,378.04

1,316.65

1,218.42

20.11

40.00

38.00

36.00

34.00

32.00

28.00

0.49

%

Ratios:Total assets turnover (times)

0.74

0.72

0.72

0.84

0.88

0.88

Equity ratio

77.0

78.2

76.5

72.2

73.2

66.7

Return on sales

8.5

9.5

9.7

8.2

8.9

7.2

Return on equity (ROE) (Note 3)

8.1

8.8

9.3

9.4

11.2

9.4

Return on assets (ROA) (Note 3)

6.3

6.8

7.0

6.8

7.8

6.3

Notes: 1. The U.S. dollar amounts are given solely for convenience at the rate of ¥82 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2012.
2. Equity represents net assets less minority interests.
3. ROE = Net income ÷ Equity (Average) ×100
ROA = Net income ÷ Total assets (Average) ×100
4. Net income and cash dividends per share are calculated using the average number of shares for the year under review. Calculation of equity per share is based on the numberof shares at year-end (excluding treasury stock).

Kurita Water Industries Ltd. Annual Report 2012 21

MANAGEMENT’S DISCUSSION AND ANALYSIS

Business Overview
Markets in which the Kurita Group operates remained challenging during the
fiscal year ended March 31, 2012. In Japan, although there were some brightsigns in conjunction with the recovery in corporate production due to restoration efforts following the Great East Japan Earthquake, the appreciation of theyen together with unstable electricity supply has caused companies to consolidate production sites or relocate them overseas, and key electronics industry
customers are struggling with a rapid downturn in performance.
Overseas, markets have expanded, as there has been an increase in capital
investment in the electronics industry in East Asia in conjunction with the
spread of smartphones and tablet PCs.
The fiscal year ended March 31, 2012 was the final year of MP-11 (Make
Progress 2011), our three-year medium-term management plan. The basic
objectives of the plan were to seize opportunities provided by market and customer changes, and advance steadily toward expansion of our earnings base.
Under the plan, the Group worked to achieve sustained growth by further
expanding its service businesses and global operations and developing new
products and businesses.
In tandem with its sales activities, the entire Group also worked to implement rigorous risk management.
For the fiscal year ended March 31, 2012, the Kurita Group saw year-on-yearincreases in orders received, net sales, and operating income, which led in turnto higher income before income taxes and minority interests. Net income
declined slightly, however, as taxation system reforms resulted in increased
corporate income taxes.
Operating Resultsa) Orders
In both the Water Treatment Chemicals and Water Treatment Facilities segments,
the Group focused on helping customers to recover from the earthquake.
In the Water Treatment Chemicals segment, Kurita worked to develop products, technologies and services to help customers successfully meet the challenges of reducing their environmental impacts and enhancing productivity.

Orders by Segment
Years ended March 31(Millions of yen)

208,689

In the Water Treatment Facilities segment, Kurita worked to secure orders by

195,065

175,162 181,951

197,256

focusing on consultative sales targeting key customers and on strengthening
its sales activities in Asia.
In particular, the Group strengthened its production and sales systems in
China, one of its focus markets.

149,659 136,595 121,791 125,237 140,507
59,0292008

58,4702009

53,3702010

n Water Treatment Facilities
n Water Treatment Chemicals

22 Kurita Water Industries Ltd. Annual Report 2012

56,714
2011

56,7482012In both the Water Treatment Chemicals and Water Treatment Facilities segments, the Group also worked to increase future orders by developing andexpanding sales of new products.
Total consolidated orders for the Kurita Group in the fiscal year ended
March 31, 2012 were up 8.4% versus the previous fiscal year to ¥197,256 mil-Sales by Segment
Years ended March 31(Millions of yen)

204,875 199,706

178,520 181,234

193,792

lion. Orders increased in both the Water Treatment Chemicals and Water
Treatment Facilities segments.
b) Net Sales
Consolidated net sales for the fiscal year ended March 31, 2012 rose 6.9% to¥193,792 million. The main factors were a 0.5% decline in sales for the Water Treatment Chemicals segment, and a 10.3% increase in sales for the Water Treatment
Facilities segment. Further details of sales in each segment are given in f ) on the146,228 141,374 124,777 124,499 137,348
58,646
2008

58,331
2009

53,743
2010

56,735
2011

56,4432012

n Water Treatment Facilities
n Water Treatment Chemicals

following page.
c) Cost of Sales

Gross Profit

Cost of sales was up 7.9% to ¥127,905 million from ¥118,573 million in the fiscal

Years ended March 31(Millions of yen)year ended March 31, 2011.
As a percentage of sales, cost of sales increased to 66.0% in the year ended

65,886

66,32563,831

61,29962,660

2008

2009

2010

2011

2012

March 31, 2012, 0.6 of a percentage point up from 65.4% in the previous fiscal year.
This deterioration in the cost-of-sales ratio was due in part to the fall in the
cost-of-sales ratio in the Water Treatment Chemicals segment, caused mainly byan increase in the cost of raw materials and a decline in sales of core productsthat are relatively profitable.
d) Selling, General and Administrative (SG&A) Expenses
SG&A expenses were ¥36,503 million, up 2.7%, or ¥975 million, from ¥35,528
million in the fiscal year ended March 31, 2011.
The increase in SG&A expenses was mainly attributable to a ¥384 million
year-on-year increase in personnel-related expenses, comprising salaries andallowances, provision for employees’ bonuses, and retirement benefit expenses,
due to an increase in the number of employees. At the same time, other

SG&A Expenses
Years ended March 31(Millions of yen)expenses also increased by ¥419 million year on year.
As a percentage of net sales, SG&A expenses declined by 0.8 of a percent-35,85735,89634,941

35,52836,503

2008

2009

2010

2011

2012

age point year on year to 18.8%.
e) Operating Income
Operating income increased to ¥29,382 million in the year ended March 31,
2012, up 8.3% from ¥27,131 million in the fiscal year ended March 31, 2011. The
operating margin improved to 15.2% from 15.0% in the previous fiscal year.

Kurita Water Industries Ltd. Annual Report 2012 23

f ) Segment Information
Water Treatment Chemicals
Orders and Sales

Operating Income by Segment
Years ended March 31(Millions of yen)

In Japan, orders for and sales of products including boiler water treatment
30,468chemicals, cooling water treatment chemicals, and process treatment chemi-

27,935cals for the oil refining and petrochemical and pulp and paper industries

26,35827,131

29,382declined versus the previous fiscal year, due to production stoppages caused by
the earthquake. Meanwhile, there was an increase in chemical dosing systems
and other equipment due to the restoration efforts following the earthquake.
As a result of these factors, segment sales in Japan declined by 2.1% compared with the previous fiscal year.
Overseas, orders and sales of cooling water treatment chemicals and othercore products increased as a result of growing manufacturing activity, especially

20,93919,51718,181

9,525
2008

8,417
2009

8,177
2010

17,032

20,127

10,099
2011

9,268
2012

n Water Treatment Facilities
n Water Treatment Chemicals

in China, Brazil and other emerging economies.
As a result, overseas sales increased 6.0% compared with the previous year,
mainly in Asia and Europe.

Operating Margin by Segment
Years ended March 31(%)

Operating Income
Segment operating income declined year on year due to lower sales and anincrease in raw material prices, as well as higher SG&A expenses in line with anincrease in employees for business expansion overseas.
Total Group orders for the Water Treatment Chemicals segment were ¥56,748

16.2
14.9
14.3

million (up 0.1% versus the previous fiscal year), while sales were ¥56,443 million

15.2
14.4
14.0
13.8

17.8

16.4

15.0

15.2
14.7

14.8
14.6

13.7

2010

2011

(down 0.5%). Operating income was ¥9,268 million (down 8.2%).
Water Treatment Facilities
Orders and Sales
In the electronics industry, orders and sales in the ultrapure water supply businessdeclined slightly due to the impact of a drop in capacity utilization at customer
plants. Meanwhile, there was a large increase in orders from overseas semiconductor manufacturers for ultrapure water production systems and electrolyzed
sulfuric acid generators for the manufacturing process of semiconductors.
Maintenance service orders and sales increased, primarily for facility
modifications.
In general industries, orders and sales increased significantly as demand forwater treatment facilities from the domestic electric power industry surged
during recovery efforts following the earthquake. Demand for maintenanceservices, mainly in relation to facility modification in industries such as electric
power and food, also increased.

24 Kurita Water Industries Ltd. Annual Report 2012

2008

2009

n Water Treatment Chemicals
n Totaln Water Treatment Facilities

2012Operating Income
Segment operating income increased year on year due to a significant rise inOverseas Sales by Region
Fiscal year ended March 31, 2012

sales for the general industry sector, despite changes in the composition ofsales and higher SG&A expenses for the electronics industry sector.

10.4%
4.7%

Total Group orders for the Water Treatment Facilities segment were ¥140,507

77.0%

7.9%

million (up 12.2% versus the previous fiscal year), sales were ¥137,348 million

Overseas Sales¥29,269(up 10.3%), and operating income was ¥20,127 million (up 18.2%).

milliong) Overseas Sales
Overseas sales rose 11.0% to ¥29,269 million in the year ended March 31, 2012.

n Asia¥22,541 million

The overseas sales ratio with respect to consolidated net sales increased ton North America

¥2,310 million

15.1% from 14.5% in the previous fiscal year.

n Europe

¥1,373 millionn Other regions¥3,044 million

Sales by Region• Asia: Up 17.4% to ¥22,541 million; 77.0% of total overseas sales• North America: Down 18.1% to ¥2,310 million; 7.9% of total overseas sales• Europe: Up 7.6% to ¥1,373 million; 4.7% of total overseas sales• Other regions: Down 1.0% to ¥3,044 million; 10.4% of total overseas sales

Net Income per ShareYears ended March 31(Yen)142.21h) Other Income and Expenses

134.38134.02130.65

2010

2011

2012

9.4

9.3

8.8

8.1

2009

2010

2011

2012

126.69The net result of other income and expenses was net other income of ¥294
million, down ¥418 million from ¥712 million in the previous fiscal year.
This decline was mainly attributable to a loss on valuation of investment
securities of ¥608 million, which was partially offset by a gain on sales of properties of ¥139 million.
The net result of interest and dividend income and interest expense

2008

increased slightly to ¥407 million versus ¥390 million in the previous fiscal year.

2009i) Income before Income Taxes and Minority Interests
Income before income taxes and minority interests increased 6.6% to ¥29,676
million from ¥27,844 million in the previous fiscal year.
The pretax profit margin decreased to 15.3% from 15.4% in the previous
fiscal year.

Return on Equity
Years ended March 31(%)j) Net Income
After deducting income taxes and income from minority interests, Kurita
recorded net income of ¥16,548 million for the fiscal year ended March 31,

11.2

2012, a 3.4% decrease from ¥17,138 million in the previous fiscal year.
Net income per share decreased to ¥130.65 from ¥134.02 in the previous
fiscal year, and the net margin fell to 8.5% from 9.5% in the previous fiscal year.
Return on equity decreased to 8.1% from 8.8% in the previous fiscal year.

2008

Note: Return on equity = Net income ÷ Equity (Average) ×100

Kurita Water Industries Ltd. Annual Report 2012 25k) Returns to Shareholders
Kurita’s basic policy is to pay stable dividends on an ongoing basis. Kurita strives
to increase its dividends, taking into consideration earnings performance andDividends per ShareYears ended March 31(Yen)investment in its businesses.
In light of future business prospects and to reward shareholders for their

32.00

34.00

40.00

38.00

36.00

support, Kurita paid an annual dividend of ¥40 per share (of which ¥20 per
share was an interim dividend), an increase of ¥2 per share versus the previous
fiscal year’s ¥38 per share (of which ¥19 per share was an interim dividend).
Capital Expenditures
The Kurita Group is committed to making necessary investments in technologi-

2008

2009

2010

2012

2011

cal innovation, production capacity expansion, and competitiveness enhancement in response to intensification of sales competition. In the year ended
March 31, 2012, capital expenditures totaled ¥8,105 million, an increase of¥2,140 million year on year. (Leased assets and leased obligations were included
for transactions for finance leases which do not transfer ownership.)
The Water Treatment Chemicals segment invested a total of ¥1,311 million,
mainly for construction of a new plant at a Group company overseas. This repre-

Capital Expenditures andDepreciation and Amortization
Years ended March 31(Millions of yen)sented an increase of ¥334 million from the previous fiscal year.

56,322

The Water Treatment Facilities segment invested a total of ¥6,409 million,
primarily to install and expand facilities for the ultrapure water supply business.
This was a substantial ¥1,917 million increase from the previous fiscal year.
Depreciation and amortization decreased slightly by 0.2% year on year to¥16,035 million.
Research and Development
Kurita conducts R&D mainly through its Research and Development Division.
The Kurita Group employs approximately 150 R&D personnel, equivalent to3.3% of its total workforce (4,555 personnel on a consolidated basis). In the year
ended March 31, 2012, total R&D expenses increased 0.2% year on year to¥4,232 million, equivalent to 2.2% of net sales.
The Water Treatment Chemicals segment’s R&D activities predominantly
involved developing chemicals that help customers improve energy efficiency,
reduce their environmental impact, and boost productivity. Other developments include technologies for systems that monitor water treatment
effectiveness. Through these efforts, the segment achieved the following:• Kurita developed a chemical treatment technology that prevents fouling ofreverse osmosis (RO) membranes. Use of this chemical ensures stable
operation of seawater desalination systems that use RO membranes, which
are becoming widely-used overseas.

26 Kurita Water Industries Ltd. Annual Report 2012

24,097
9,425

2008

11,716
8,083
2009

16,066

15,5232010

n Capital Expendituresn Depreciation and Amortization

5,965
2011

16,0358,105
2012

• In regions that suffer severe water shortages, such as China, industrial
complexes use reclaimed sewage water or industrial wastewater as cooling water. Kurita developed a cooling water treatment chemical that canbe used with water of reclaimed water quality.

R&D Expenses
Years ended March 31(Millions of yen)

4,551

4,363

• Kurita developed a chemical to control corrosion in boiler economizers,

3,990

4,225

4,232

2011

2012

and a boiler water treatment chemical that effectively increases the reclamation rate of condensate in boilers. These chemicals respond to customers’ energy saving needs by enhancing the heating efficiency of boilers.
The segment’s R&D expenses for the fiscal year ended March 31, 2012
totaled ¥1,335 million, a 3.9% increase versus the previous fiscal year.
2008

2009

2010

In the Water Treatment Facilities segment, Kurita endeavored to further
improve ultrapure water quality to contribute to productivity in the electronics
industry, and to develop wastewater treatment and soil remediation technologies in anticipation of future environmental regulations. Kurita also endeavored
to develop technologies conducive to a recycling-oriented society such aswastewater reclamation for reuse and sludge volume reduction. Through these
efforts, the segment achieved the following:• Kurita developed an ultrapure water production system and trace analysis
technologies that can be applied in the manufacturing process of theworld’s most advanced semiconductors.
• Kurita developed an anaerobic biological wastewater treatment systemthat can be used over a wider range of water quality, and an aerobic biological wastewater treatment system using the ecological chain mechanism that can reduce the volume of sludge generated from thebiotreatment. These systems use less energy and emit less waste compared with conventional biotreatment systems.
• Chlorinated ethylene is a groundwater pollutant that cannot be easily
degraded by microbes that usually live in the earth. Kurita developed atechnology for culturing a large quantity of chlorinated ethylenedegrading bacteria and a soil remediation technology for injecting thebacteria into the groundwater.
The segment’s R&D expenses for the fiscal year ended March 31, 2012
totaled ¥2,897 million, a 1.5% decrease versus the previous fiscal year.

Kurita Water Industries Ltd. Annual Report 2012 27

Financial Positiona) Assets
As of March 31, 2012, Kurita had total assets of ¥271,141 million, an increase of

Total Assets and Return on Assets
As of March 31(Millions of yen) (%)¥17,843 million from ¥253,298 million as of March 31, 2011.
231,498

Current Assets

245,406 251,620 253,298

7.8

6.8

7.0

271,141

6.8

6.3

Current assets as of March 31, 2012 totaled ¥144,985 million, an increase of¥27,133 million from ¥117,852 million as of March 31, 2011.
The increase was mainly due to increases of ¥13,115 million in notes andaccounts receivable, trade and ¥20,500 million in marketable securities. This waspartially offset by a ¥6,171 million decrease in cash and time deposits.
The increase in notes and accounts receivable, trade reflected increased
sales in the Water Treatment Facilities segment during the second half of the

2008

2009

2010

2011

2012

n Total Assets
n Return on Assets
Note: Return on assets = Net income ÷ Total assets (Average) ×100

fiscal year ended March 31, 2012. The increase in marketable securities anddecrease in cash and time deposits were due to increased investment in negotiable certificates of deposits, which are treated as marketable securities.
Property, Plant and Equipment, Intangible Assets, and Investments andProperty, Plant and Equipment, Net
As of March 31(Millions of yen)

126,063

Long-term Receivables
As of March 31, 2012, property, plant and equipment, net totaled ¥98,368 million, a decrease of ¥8,240 million from ¥106,608 million as of March 31, 2011.

116,500

106,608

98,36881,984This occurred mainly because depreciation on facilities for the ultrapure watersupply business, for which capital expenditures were made up until the previous fiscal year, exceeded capital expenditures in the year under review.
Investments and long-term receivables were ¥26,103 million as of March 31,
2012, a decrease of ¥794 million from ¥26,897 million a year earlier. The
decrease was mainly attributable to a decrease in investment securities.
b) Liabilities
As of March 31, 2012, liabilities totaled ¥61,139 million, an increase of ¥7,193
million from ¥53,946 million as of March 31, 2011.
Current Liabilities
Current liabilities as of March 31, 2012 were ¥42,358 million, an increase of¥7,587 million from ¥34,771 million as of March 31, 2011. The increase was due
to increases of ¥4,862 million in notes and accounts payable, trade, ¥1,452 million in accounts payable, other, and ¥1,419 million in income taxes payable. The
increases in notes and accounts payable, trade and accounts payable, otherwere due to increases in the amount of goods purchased and expenses in linewith the increase in sales in the Water Treatment Facilities segment. The

28 Kurita Water Industries Ltd. Annual Report 2012

2008

2009

2010

2011

2012

increase in income taxes payable was due to a rise in income before income
taxes and minority interests.

EquityAs of March 31(Millions of yen)

Long-term Liabilities
Long-term liabilities as of March 31, 2012 were ¥18,781 million, a small decreaseof ¥394 million from ¥19,175 million as of March 31, 2011.

169,402177,291

192,588 198,042

208,891c) Net Assets
As of March 31, 2012, net assets totaled ¥210,002 million, a ¥10,651 million
increase from ¥199,351 million as of March 31, 2011. The change mainly reflectsa ¥16,548 million increase in retained earnings due to net income for the year.

2008

2009

2010

2011

2012

This increase was partially offset by a ¥4,939 million decrease in retained
earnings for cash dividends paid, and a ¥736 million decrease in total othercomprehensive income due to a reversal of unrealized gains on available-forsale securities, reflecting a drop in the market prices of investment securities
held by the Group. As of March 31, 2012, Kurita had an equity ratio of 77.0%,

Cash Flows from Operating Activities

down 1.2 percentage points from 78.2% a year earlier.

Years ended March 31(Millions of yen)

Equity per share at March 31, 2012 was ¥1,649.24, an increase of ¥85.67 from

43,644¥1,563.57 a year earlier.
33,658*Equity is defined as net assets less minority interests.

Cash Flows

29,79628,282

2011

2012

20,380Cash Flows from Operating Activities
Operating activities provided net cash of ¥28,282 million in the fiscal year ended
March 31, 2012, a decrease of ¥1,514 million versus the previous fiscal year. This
primarily reflects income before income taxes and minority interests of ¥29,676

2008

2009

2010

million, ¥16,035 million in depreciation and amortization, and a ¥5,448 million
increase in trade payables. These were partially offset by ¥13,652 million from anincrease in trade receivables and income taxes paid of ¥11,346 million.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥13,507 million, a decrease of ¥16,662
million versus the previous fiscal year. This primarily reflects an inflow from adecrease in time deposits, net of ¥6,608 million, and a net outflow of ¥12,009
million after subtracting payments for purchase of marketable securities andinvestment securities from proceeds from sale and redemption of marketablesecurities and investment securities, and an outflow of ¥7,460 million for payments for purchase of property, plant and equipment, mainly for equipment for
the ultrapure water supply business.

Kurita Water Industries Ltd. Annual Report 2012 29

Cash Flows from Financing Activities
Financing activities used net cash of ¥5,607 million, a decrease of ¥3,425 million
versus the previous fiscal year. The main use of cash was ¥4,977 million in cash
dividends paid.
Cash and Cash Equivalents’ at End of Year (on a consolidated basis)
At March 31, 2012, Kurita had cash and cash equivalents totaling ¥19,825 million, an increase of ¥8,991 million versus March 31, 2011.
Business Risks
The following are summaries of major foreseeable risks present in the businessenvironments in which the Kurita Group operates. Forward-looking statements
herein are based on judgments made by management as of March 31, 2012.
1. Economic and Market Conditions
The Group’s Water Treatment Chemicals and Water Treatment Facilities businesses are affected by economic conditions in Japan and countries and regions
outside Japan where the Group operates. Demand in the Water Treatment
Chemicals business fluctuates in response to factory capacity utilization rates inindustries such as steel, petroleum refining and petrochemicals, and pulp andpaper—the main areas of demand for the business. Such demand fluctuations
may affect the Group’s financial results. Demand in the Water Treatment
Facilities business fluctuates in response to trends in capital expenditure inelectronics—the main area of demand for the business—and other industries.
Such demand fluctuations may affect the Group’s financial results.
More intense competition with rivals in the Group’s business domains could
lead to declines in prices of products and services, which could lower theGroup’s profitability.
2. Materials and Parts Procurement
The Group procures raw materials and parts from outside the Group for the
manufacture of products and fabrication of facilities. The prices of raw materials
and parts fluctuate based on changes in market conditions, and this may affect
the Group’s financial results.

30 Kurita Water Industries Ltd. Annual Report 2012

3. Overseas Business Development
The Group is striving to expand its business outside Japan. In contrast to theJapanese market, doing business in overseas markets involves a number ofinherent risks, including the risk of changes to local laws and regulations, the riskof political and economic instability, and the risk of foreign exchange rate fluctuations. If such risks materialized, the Group’s financial results could be affected.
4. New Product Development
The Group continuously endeavors to develop new technology and new products.
The success of new technology and product development efforts cannot be
guaranteed. The Group may not be able to offer new technologies and products that meet the needs of its customers or launch new products in a timely
fashion. The Group may also fail to keep pace with technological innovationand changing customer needs. If the Group were to fail to develop outstanding
new products, this could hamper its future growth and profitability or otherwise affect its financial results.
5. Intellectual Property
The Group recognizes the importance of intellectual property and continuallyseeks to register its own intellectual property while avoiding infringing theintellectual property rights held by third parties, both in Japan and overseas.
Given the wide scope of the Group’s business, however, there is potential for
the Group’s intellectual property rights to be infringed and potential for theGroup to infringe the rights held by third parties. Such occurrences may affect
the Group’s financial results.
6. Dependence on Information Systems
The Group’s use of information systems is increasing, as is the importance of
information systems to the Group’s business. If a computer virus or some otherfactor were to obstruct the functions of the Group’s information systems, theGroup’s business activities, financial results, and financial condition could be
negatively affected.
7. Large-Scale Natural Disasters
If an earthquake, typhoon, or other kind of natural disaster were to directly or
indirectly upset the Group’s business execution, the Group’s business activities,
financial results, and financial condition could be negatively affected.

Kurita Water Industries Ltd. Annual Report 2012 31

CONSOLIDATED BALANCE SHEETS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
As of March 31, 2012 and 2011

Thousands of
U.S. dollars(Note 1)Millions of yen

AssetsCurrent assets:

2012

2011

2012

Cash and time deposits (Notes 3 and 5) ���������������������������������������������������������������������������������������

¥ 28,902¥ 35,073$      352,474

Notes and accounts receivable, trade (Notes 4 and 5) �����������������������������������������������������������

66,35653,241

809,231

Allowance for doubtful accounts ���������������������������������������������������������������������������������������������������

(58)

(40)

(712)

Marketable securities (Notes 5 and 6) �������������������������������������������������������������������������������������������

40,50020,000493,902

Inventories (Note 7) �����������������������������������������������������������������������������������������������������������������������������

5,522

5,480

67,346

Deferred tax assets (Note 9) ���������������������������������������������������������������������������������������������������������������

2,294

2,312

27,979Other current assets �����������������������������������������������������������������������������������������������������������������������������

1,466

1,785

17,888

Total current assets ���������������������������������������������������������������������������������������������������������������������������

144,985

117,852

1,768,110

Investment securities (Notes 5 and 6) �������������������������������������������������������������������������������������������

14,992

15,987

182,830

Investments in unconsolidated subsidiaries and affiliates �����������������������������������������������������

1,169

1,070

14,260

Deferred tax assets (Note 9) ���������������������������������������������������������������������������������������������������������������

8,035

8,306

97,994

Other investments ���������������������������������������������������������������������������������������������������������������������������������

2,246

1,717

27,393

Investments and long-term receivables:

Allowance for doubtful accounts ���������������������������������������������������������������������������������������������������

(339)

(184)

(4,138)

Total investments and long-term receivables �����������������������������������������������������������������������

26,10326,897318,340

13,962

14,072

170,274

Property, plant and equipment, at cost (Notes 14 and 15):
Land (Note 12) ���������������������������������������������������������������������������������������������������������������������������������������
Buildings and structures ���������������������������������������������������������������������������������������������������������������������

65,36864,296797,175

Machinery and equipment ���������������������������������������������������������������������������������������������������������������

92,18086,962

1,124,152

Construction in progress ��������������������������������������������������������������������������������������������������������������������

2,362

3,001

28,809Other facilities �����������������������������������������������������������������������������������������������������������������������������������������

11,237

11,158137,044

Leased assets �������������������������������������������������������������������������������������������������������������������������������������������

7,808

7,668

95,225

Total �������������������������������������������������������������������������������������������������������������������������������������������������������

192,919

187,159

2,352,681

Accumulated depreciation ���������������������������������������������������������������������������������������������������������������������

(94,551)(80,550)(1,153,063)

Property, plant and equipment, net �����������������������������������������������������������������������������������������������

98,368106,608

1,199,618

1,683

1,939

20,535¥271,141¥253,298$   3,306,605

Intangible assets
Total assets �����������������������������������������������������������������������������������������������������������������������������������������
The accompanying notes are an integral part of these statements.
32 Kurita Water Industries Ltd. Annual Report 2012

Thousands of
U.S. dollars(Note 1)Millions of yen

Liabilities and Net Assets

2012

2011

2012

Short-term borrowings and current portion of long-term borrowings (Note 8) ���������

¥  1,463¥  1,607$   17,847

Notes and accounts payable, trade (Notes 4 and 5) ����������������������������������������������������������������

21,322

16,460260,029

Accounts payable, other ���������������������������������������������������������������������������������������������������������������������

6,237

4,785

76,066

Income taxes payable �������������������������������������������������������������������������������������������������������������������������

7,045

5,626

85,920

Advances received �������������������������������������������������������������������������������������������������������������������������������

945

1,057

11,530Accrued employees’ bonuses �����������������������������������������������������������������������������������������������������������

2,427

2,336

29,599Provision for product warranties �����������������������������������������������������������������������������������������������������

1,007

927

12,289Current liabilities:

Other current liabilities �����������������������������������������������������������������������������������������������������������������������

1,908

1,969

23,280Total current liabilities ���������������������������������������������������������������������������������������������������������������������

42,35834,771

516,562

Lease obligations (Note 8) �����������������������������������������������������������������������������������������������������������������

6,191

6,535

75,509Accrued employees’ retirement benefits (Note 10) �����������������������������������������������������������������

10,335

9,936

126,037

Accrued retirement benefits for directors and corporate auditors �������������������������������������

168

440

2,055

Deferred tax liabilities on revaluation of land (Note 12) ���������������������������������������������������������

1,303

1,509

15,895Long-term liabilities:

Other long-term liabilities (Note 8) �������������������������������������������������������������������������������������������������

782

754

9,539

Total long-term liabilities ���������������������������������������������������������������������������������������������������������������

18,781

19,175229,038

Total liabilities �������������������������������������������������������������������������������������������������������������������������������������

61,13953,946745,600

13,45013,450

164,033

Net assets:
Shareholders’ equity (Note 11):
Common stock, 2012 and 2011
Authorized: 531,000,000 shares
Issued: 2012—132,800,256 shares
2011—132,800,256 shares ���������������������������������������������������������������������������������������������
Capital surplus �����������������������������������������������������������������������������������������������������������������������������������������

11,426

11,426

139,351

Retained earnings ���������������������������������������������������������������������������������������������������������������������������������

196,541

184,954

2,396,851

2011—6,139,744 shares �����������������������������������������������������������������������������������������������������������������

(9,642)(9,640)(117,593)

Total shareholders’ equity �������������������������������������������������������������������������������������������������������������

211,776

200,191

2,582,642

252

623

3,078

Treasury stock, at cost
2012—6,140,839 shares

Accumulated other comprehensive income:Unrealized gains on available-for-sale securities �����������������������������������������������������������������������
Unrealized losses on revaluation of land (Note 12) �����������������������������������������������������������������

(564)

(764)

(6,887)

Foreign currency translation adjustments �����������������������������������������������������������������������������������

(2,572)(2,006)(31,370)

Total accumulated other comprehensive income ���������������������������������������������������������������

(2,884)(2,148)(35,179)

Minority interests �������������������������������������������������������������������������������������������������������������������������������������

1,110

1,308

13,542

Total net assets ����������������������������������������������������������������������������������������������������������������������������������

210,002

199,351

2,561,005

Liabilities and net assets �����������������������������������������������������������������������������������������������������������������

¥271,141¥253,298$3,306,605

Kurita Water Industries Ltd. Annual Report 2012 33

CONSOLIDATED STATEMENTS OF INCOME ANDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2012 and 2011

CONSOLIDATED STATEMENTS OF INCOME

Thousands of
U.S. dollars(Note 1)Millions of yen
2012

2011

2012

Net sales (Note 17) �������������������������������������������������������������������������������������������������������������������������������������
Cost of sales �������������������������������������������������������������������������������������������������������������������������������������������������
Gross profit �����������������������������������������������������������������������������������������������������������������������������������������������

¥193,792
127,905
65,886¥181,234
118,573
62,660$2,363,320
1,559,826
803,493

Selling, general and administrative expenses (Note 13) ���������������������������������������������������������
Operating income (Note 17) �������������������������������������������������������������������������������������������������������������

36,50329,38235,52827,131

445,168
358,324

Other income (expenses):
Interest and dividend income �����������������������������������������������������������������������������������������������������������
Interest expense �������������������������������������������������������������������������������������������������������������������������������������
Equity in earnings of unconsolidated subsidiaries and affiliates �����������������������������������������
Loss on disposal of properties ���������������������������������������������������������������������������������������������������������
Gain on sales of properties (Note 14) ���������������������������������������������������������������������������������������������
Impairment losses (Note 15) �������������������������������������������������������������������������������������������������������������
Loss on valuation of investment securities (Note 6) �����������������������������������������������������������������
Loss on disaster and support expense of disaster restoration ���������������������������������������������
Other, net �������������������������������������������������������������������������������������������������������������������������������������������������
Other income (expense), net �����������������������������������������������������������������������������������������������������������
Income before income taxes and minority interests ���������������������������������������������������������������

495
(88)
328
(27)
139
(173)
(608)
(49)
278
294
29,676

424
(34)
308
(28)
—
—
—
(240)
282
712
27,844

6,045(1,085)
4,011
(334)
1,698
(2,112)(7,425)
(602)
3,395
3,589
361,914

Income taxes (Note 9):
Current �������������������������������������������������������������������������������������������������������������������������������������������������������
Deferred �����������������������������������������������������������������������������������������������������������������������������������������������������
Total income taxes ���������������������������������������������������������������������������������������������������������������������������������
Income before minority interests �����������������������������������������������������������������������������������������������������

12,750292
13,042
16,634

11,653(1,069)10,583
17,260155,493
3,563
159,056
202,857

Minority interests in income ���������������������������������������������������������������������������������������������������������������
Net income ���������������������������������������������������������������������������������������������������������������������������������������������������

86¥ 16,548

121¥ 17,138

1,051$  201,806

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Thousands of
U.S. dollars(Note 1)Millions of yen

Income before minority interests �����������������������������������������������������������������������������������������������������
Other comprehensive income (Note 16):
Unrealized gains (losses) on available-for-sale securities �������������������������������������������������������
Unrealized losses on revaluation of land �������������������������������������������������������������������������������������
Foreign currency translation adjustments �����������������������������������������������������������������������������������
Share of other comprehensive income of associates accounted
for using equity method �������������������������������������������������������������������������������������������������������������������
Total other comprehensive income �����������������������������������������������������������������������������������������������
Comprehensive income �������������������������������������������������������������������������������������������������������������������������
Comprehensive income attributable toComprehensive income attributable to owners of parent ���������������������������������������������������
Comprehensive income attributable to minority interests ���������������������������������������������������

2012

2011

2012

¥16,634¥17,260$202,857

(370)
184
(564)

(1,364)—(639)(4,522)
2,249(6,879)(35)(785)¥15,848(46)(2,050)¥15,209(429)(9,582)$193,275¥15,79652¥15,13970$192,638
637
U.S. dollars(Note 1)Yen

Per share of common stock (Note 19):
Net income ����������������������������������������������������������������������������������������������������������������������������������������������Cash dividends applicable to the year �������������������������������������������������������������������������������������������
The accompanying notes are an integral part of these statements.
34 Kurita Water Industries Ltd. Annual Report 2012

2012

2011

2012

¥130.65
40.00¥134.02
38.00

$1.59
0.49

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2012 and 2011

Millions of yen
Shareholders’ equity (Note 11)

Balance as of March 31, 2010 �����������������

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Total
Treasury shareholders’stockequity¥13,450¥11,426¥172,717¥(4,855) ¥192,738(4,888)(4,888)

Unrealized
Unrealized
Total
gains
losses on
Foreign accumulated
on available- revaluation ofcurrency
otherfor-saleland translation comprehensive
securities(Note 12) adjustments
income¥   1,989¥(764)¥(1,374)

Minority
interests

Total net
assets¥  (149) ¥1,350¥193,939

Changes during the year
Cash dividends paid �����������������������������

(4,888)Other �����������������������������������������������������������

(12)

(12)

(12)

Net income for the year ���������������������

17,13817,13817,138(4,784)(4,784)(4,784)(1,366)(632)(1,998)(42)(2,040)(4,784)

7,452(1,366)(632)(1,998)

(42)

5,411

¥184,954¥(9,640) ¥200,191¥      623

¥(2,148) ¥1,308¥199,351(4,939)(4,939)Acquisition of treasury stock �������������
Net changes of net assets otherthan shareholders’ equity �����������������
Total changes during the year ���������������
Balance as of March 31, 2011 �����������������

12,236¥13,450¥11,426¥(764)¥(2,006)

Changes during the year
Cash dividends paid �����������������������������

(4,939)Other �����������������������������������������������������������

(5)

(5)

(5)

Net income for the year ���������������������

16,54816,54816,548

(2)

(2)

(15)

(15)

(2)

Acquisition of treasury stock �������������
Reversal of unrealized gains (losses)
on revaluation of land �����������������������

(15)

Net changes of net assets otherthan shareholders’ equity �����������������

199

(565)

(736)

(198)

(934)

11,585

(370)

199

(565)

(736)

(198)

10,650¥(9,642) ¥211,776¥     252¥(2,884) ¥1,110¥210,002

11,587

Total changes during the year ���������������
Balance as of March 31, 2012 �����������������

(370)¥13,450 ¥11,426¥196,541(2)¥(564) ¥(2,572)

Thousands of U.S. dollars (Note 1)
Shareholders’ equity (Note 11)

Accumulated other comprehensive income
Unrealized
Unrealized
Total
gains
losses on
Foreign accumulated
on available- revaluation ofcurrency
otherfor-saleland translation comprehensive
securities(Note 12) adjustments
incomeRetainedearnings

Total
Treasury shareholders’stockequity$164,033 $139,351 $2,255,537$(117,563) $2,441,358

Cash dividends paid �����������������������������

(60,240)(60,240)(60,240)

Other �����������������������������������������������������������

(62)

(62)

(62)

Net income for the year ���������������������

201,806

201,806

201,806

(29)

(29)

(189)

(189)

Commonstock

Balance as of March 31, 2011

Capitalsurplus$    7,597$(9,326) $(24,472)

Minority
interests

Total net
assets$(26,201) $15,959 $2,431,117

Changes during the year

(29)

Acquisition of treasury stock �������������
Reversal of unrealized gains (losses)
on revaluation of land �����������������������

(189)

Net changes of net assets otherthan shareholders’ equity �����������������

(4,519)(29)(6,898)(6,898)141,284(4,519)2,438

Balance as of March 31, 2012 ����������������� $164,033 $139,351 $2,396,851 $(117,593) $2,582,642$   3,078$(6,887) $(31,370)

Total changes during the year ���������������

141,3132,438(8,978) (2,417)(11,396)(8,978) (2,417)

129,887$(35,179) $13,542 $2,561,005

The accompanying notes are an integral part of these statements.
Kurita Water Industries Ltd. Annual Report 2012 35

CONSOLIDATED STATEMENTS OF CASH FLOWS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2012 and 2011

Thousands of
U.S. dollars(Note 1)Millions of yen
2012

2011

2012

¥ 29,676
16,035
415
85
(328)
(495)
88
(108)
173
608

¥ 27,844
16,066
455
225
(308)
(424)
34
18
—
7

$ 361,914
195,558
5,068
1,047(4,011)(6,045)
1,085(1,328)
2,112
7,425

Interest and dividends received �������������������������������������������������������������������������������������������������������
Interest paid ���������������������������������������������������������������������������������������������������������������������������������������������
Income taxes paid ���������������������������������������������������������������������������������������������������������������������������������
Others, net �����������������������������������������������������������������������������������������������������������������������������������������������
Net cash provided by operating activities �����������������������������������������������������������������������������

(13,652)
(135)
5,448
285
954
(146)
38,907693(89)(11,346)
117
28,282

1,213
(461)
(573)
(350)
(1,430)174
42,490703(33)(13,371)
8
29,796(166,499)(1,646)66,448
3,485
11,644(1,783)
474,476
8,457(1,091)(138,370)
1,438
344,910

II. Cash flows from investing activities
Decrease (increase) in time deposits, net �������������������������������������������������������������������������������������
Payments for purchase of property, plant and equipment ���������������������������������������������������
Proceeds from sale of property, plant and equipment �����������������������������������������������������������
Payments for purchase of marketable securities and investment securities �����������������
Proceeds from sale and redemption of marketable securities and investment securities ������
Others, net �����������������������������������������������������������������������������������������������������������������������������������������������
Net cash used in investing activities �����������������������������������������������������������������������������������������

6,608(7,460)262(69,010)57,001(907)(13,507)(23,987)(6,014)30(68,810)69,050(438)(30,169)

80,589(90,977)
3,197(841,594)
695,134(11,070)(164,720)

III. Cash flows from financing activities
Increase (decrease) in short-term borrowings, net �������������������������������������������������������������������
Proceeds from long-term loans payable ��������������������������������������������������������������������������������������Cash dividends paid �����������������������������������������������������������������������������������������������������������������������������Cash dividends paid to minority shareholders of consolidated subsidiaries �����������������
Payments for lease obligations ���������������������������������������������������������������������������������������������������������
Payments for purchase of treasury stock, net �����������������������������������������������������������������������������
Net cash used in financing activities �����������������������������������������������������������������������������������������

(166)
46
(4,936)
(41)
(507)
(2)
(5,607)1,183—(4,886)(64)(480)(4,784)(9,032)(2,029)572(60,202)(500)(6,189)(29)(68,378)

(176)
8,991
10,834(397)(9,802)
20,590(2,155)
109,655
132,124—¥ 19,825

46¥ 10,834—$ 241,779

I. Cash flows from operating activities
Income before income taxes and minority interests ���������������������������������������������������������������
Depreciation and amortization (Note 17) �����������������������������������������������������������������������������������
Increase (decrease) in accrued employees’ retirement benefits �����������������������������������������
Increase (decrease) in other allowances ���������������������������������������������������������������������������������������
Equity in earnings of unconsolidated subsidiaries and affiliates �����������������������������������������
Interest and dividend income �����������������������������������������������������������������������������������������������������������
Interest expense �������������������������������������������������������������������������������������������������������������������������������������
Loss (gain) on sales and disposal of properties �������������������������������������������������������������������������
Impairment loss �������������������������������������������������������������������������������������������������������������������������������������
Loss on valuation of investment securities ���������������������������������������������������������������������������������
Changes in assets and liabilities:
Decrease (increase) in trade receivables ���������������������������������������������������������������������������������
Increase in inventories �������������������������������������������������������������������������������������������������������������������
Increase (decrease) in trade payables ���������������������������������������������������������������������������������������
Decrease (increase) in other assets �������������������������������������������������������������������������������������������
Increase (decrease) in other liabilities ���������������������������������������������������������������������������������������
Others, net �����������������������������������������������������������������������������������������������������������������������������������������������

IV.	Effect of exchange rate changes on cash and cash equivalents �������������������������������
V.	Net increase (decrease) in cash and cash equivalents ���������������������������������������������������
VI.	Cash and cash equivalents at beginning of year �������������������������������������������������������������
VII.	Cash and cash equivalents of newly consolidated subsidiaries,
net of excluded subsidiaries from consolidation �����������������������������������������������������������
VIII.	Cash and cash equivalents at end of year (Note 3) �����������������������������������������������������������
The accompanying notes are an integral part of these statements.

36 Kurita Water Industries Ltd. Annual Report 2012

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kurita Water Industries Ltd. and Consolidated Subsidiaries

1. Basis of presentation of consolidated financial statements
Kurita Water Industries Ltd. (the “Company”) and its domestic subsidiaries maintain their books of accountand prepare their financial statements in accordance with accounting principles and practices generally
accepted in Japan, while its foreign subsidiaries maintain their books of account and prepare their financial statements in conformity with those of the countries of their domicile. Certain accounting principles
and practices generally accepted in Japan are different from International Financial Reporting Standards
and standards in other countries in certain respects as to application and disclosure requirements.
Accordingly, the accompanying consolidated financial statements are intended for use by those who are
informed about Japanese accounting principles and practices.
The Company’s consolidated financial statements, prepared in accordance with accounting principles
and practices generally accepted in Japan, were filed with the Japanese Ministry of Finance and theTokyo Stock Exchange as required by the Financial Instruments and Exchange Law of Japan.
Certain reclassifications of accounts and modifications have been made in the accompanying consolidated financial statements to facilitate understanding by readers outside Japan. In addition, certain reclassifications have been made in the 2011 financial statements to conform to the classification used in 2012.
All figures in the consolidated financial statements and notes are stated in millions of Japanese yen
by discarding fractional amounts of less than ¥1 million. As a result, the totals shown in the consolidated
financial statements and notes in yen do not necessarily agree with the sum of the individual amounts.
The translation of yen amounts as of or for the year ended March 31, 2012 into U.S. dollars is included
solely for the convenience of readers and has been made, as a matter of arithmetical computation only,at the rate of ¥82 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2012.
The translation should not be construed as a representation that yen amounts have been, could havebeen or could in the future be converted into U.S. dollars at the above or any other rate.

2. Significant accounting policies
(1) Consolidation
Scope of consolidation
The consolidated financial statements included the accounts of the Company and its significant subsidiaries (together, the “Group”). For the years ended March 31, 2012 and 2011, 37 subsidiaries were consolidated, respectively.
Under the control concept, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated.
All significant inter-company transactions and balances have been eliminated in consolidation.
Names of principal consolidated subsidiaries:
Kuritaz Co., Ltd.
Kurita Engineering Co., Ltd.
Kuritec Service Co. Ltd.
Kurita Chemical Manufacturing Ltd.
Fiscal years of consolidated subsidiaries
The fiscal years of Kurita (Singapore) Pte. Ltd. and 12 (12 in 2011) other consolidated subsidiaries end on
December 31. For these consolidated subsidiaries, the financial statements as of December 31 were used forconsolidation purposes. However, material transactions that have occurred during the three-month period
from January 1 to March 31 of the following year have been adjusted as necessary for consolidation.

Kurita Water Industries Ltd. Annual Report 2012 37

Amortization of goodwill
Goodwill is amortized using the straight-line method over practically estimated effective years whereapplicable, or otherwise, three years, except for minor amounts that are charged to income in the periodof acquisition.
(2) Equity method
Scope of equity method application
Under the influence concept, significant investments in unconsolidated subsidiaries and affiliates overwhich the Company has the ability to exercise significant influence with regard to the operating andfinancial policies of the investees are accounted for by the equity method. For the years ended March 31,
2012 and 2011, 3 companies were accounted for by the equity method.
Name of principal company applying the equity method:
Kurita Sogo Service Co., Ltd.
Investments in the remaining unconsolidated subsidiaries and affiliates were stated at cost. If theequity method of accounting had been applied to the investments in these companies, the effect on theaccompanying consolidated financial statements would not be material.
Fiscal years of companies accounted for by the equity method
Adjustments were made to the financial statements of the companies accounted for by the equity
method whose fiscal year-ends were not identical to the Company.
(3) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand,readily available bank deposits, and short-term investments with an original maturity of three months orless and subject to a minor risk of fluctuations in value.
(4) Available-for-sale securities
Available-for-sale securities that have available fair values are stated at fair value at the balance sheet
date, with resulting unrealized holding gains and losses reported as a separate component of net assets.
Available-for-sale securities with no available fair values are stated at cost computed by the movingaverage method. The cost of sold securities is computed by the moving-average method.
(5) Inventories
Inventories held for sale in the ordinary course of business are stated at the lower of cost determined by
the moving-average method, except for work in process determined by the specific-identification
method, or net selling value.
(6) Derivative transactions
Derivative transactions utilized by the Group are composed of only forward currency contracts enteredinto when necessary to hedge the market risk, as the Company maintains the policy not to engage in
speculative transactions. The Company believes that the risk of counterparty default is negligible because
its forward currency contracts are entered into only with banks with high credit ratings. In addition, transactions in forward currency contracts are executed and managed by the finance and accounting department on a contract-by-contract basis after they have been approved by prescribed internal procedures.

38 Kurita Water Industries Ltd. Annual Report 2012

(7) Depreciation of property, plant and equipment
Property, plant and equipment is depreciated by the declining-balance method for the Company and its
domestic consolidated subsidiaries, except for buildings (other than building equipment) acquired on
and after April 1, 1998, and ultrapure water supply equipment located at clients’ sites, for which thestraight-line method is applied. The straight-line method is applied by foreign consolidated subsidiaries.
The estimated useful lives of these assets are as follows:
Buildings and structures: 2–65 years
Machinery and equipment: 4–10 years(8) Impairment of long-lived assets
The Company reviews its long-lived assets for impairment in accordance with the accounting standards
for impairment of fixed assets whenever events or changes in circumstances indicate the carrying
amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if
the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows
expected to result from the continued use and eventual disposition of the asset or asset group. The
impairment loss would be measured as the amount by which the carrying amount of the asset exceeds
its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling price at disposition.
(9) Accrued employees’ bonuses
The Company and its domestic consolidated subsidiaries accrue the amount of employees’ bonuses
based on the anticipated bonus payments to employees.
(10) Accrued employees’ retirement benefits
Accrued employees’ retirement benefits are recorded based on the estimated amount of projected benefit obligation at the balance sheet date by the Company, certain of its domestic consolidated subsidiaries and certain foreign consolidated subsidiaries, and based on the estimated amounts of projected
benefit obligation and pension plan assets, at the balance sheet date by other domestic consolidated
subsidiaries. Actuarial differences are subject to amortization over a period of 1–2 years from the year
when they are incurred.
(11) Leases
Finance leases which do not transfer ownership are capitalized to recognize leased assets and lease obligations in the consolidated balance sheets. Leased assets are depreciated using the straight-line method
over the respective lease periods without residual value.
(12) Consumption taxes
Consumption taxes are accounted for separately from transaction prices and are not reflected in the
consolidated statements of income.
(13) Construction contracts
The percentage-of-completion method has been applied to the contracts if the outcome of the construction activity is deemed certain for the percentage of performance of the contractor’s obligation at
the end of the balance sheet date, otherwise the completed-contract method is applied. The percentage
of completion is determined using the cost incurred to the estimated total cost.

Kurita Water Industries Ltd. Annual Report 2012 39

(14) Foreign currency translation
Monetary receivables and payables denominated in foreign currency are translated using the spot
exchange rate prevailing at the balance sheet date, and the differences are charged to income as foreignexchange gains or losses.
Foreign subsidiaries’ assets and liabilities are translated using the spot exchange rate at their balance
sheet date, and their income and expenses are translated using the average exchange rate during theyear. The translation differences are recorded in “Foreign currency translation adjustments” and “Minority
interests” in net assets.
(15) Appropriation of retained earnings
The accompanying consolidated statements of changes in net assets reflect the appropriations ofretained earnings of the Company in the fiscal year in which the appropriations are approved at thegeneral shareholders’ meeting.
(16) Earnings per share
Earnings per share are computed using the weighted-average number of common shares outstanding.
(17) Additional information
Accounting Standard for Accounting Changes and Correction of Errors
Effective the fiscal year ended March 31, 2012, the Group adopted “Accounting Standard for Accounting
Changes and Correction of Errors” (ASBJ Statement No. 24, December 4, 2009) and “Guidance on Accounting Standard for Accounting Changes and Correction of Errors” (ASBJ Guidance No. 24, December 4, 2009).
(18) Changes in presentation“Loss on disaster” and “Support expense of disaster restoration”“Loss on disaster” and “Support expense of disaster restoration” among the “Other income (expenses)” section of the consolidated statements of income had been separately presented for the year ended March
31, 2011, but they are included in “Loss on disaster and support expense of disaster restoration” among the“Other income (expenses)” section of the consolidated statements of income because their amount decreased.
The amount of “Loss on disaster” for the years ended March 31, 2012 and 2011 are ¥27 million (US$ 340
thousand) and ¥124 million, respectively, and the amount of “Support expense of disaster restoration” forthe years ended March 31, 2012 and 2011 are ¥21 million (US$ 262 thousand) and ¥115 million, respectively.

3. Reconciliation between cash and cash equivalents
The reconciliation between the fiscal year-end cash and cash equivalents (See Note 2 (3)) in the consolidated
statements of cash flows and cash and time deposits in the consolidated balance sheet items is as follows:

For the years ended March 31

Cash and time deposits�����������������������������������������������������������������������������
Time deposits with original maturity of more than
three months ���������������������������������������������������������������������������������������������
Certificates of deposits included in marketable securities,
excluding deposits maturing over three months�������������������������Cash and cash equivalents�����������������������������������������������������������������������

40 Kurita Water Industries Ltd. Annual Report 2012

Millions of yen
2012

Thousands of
U.S. dollars(Note 1)

2011

2012

¥ 28,902¥ 35,073$ 352,474(17,576)(24,238)(214,353)

8,500¥ 19,825—¥ 10,834

103,658$ 241,779

4. Trade notes with maturity on the balance sheet date
The following amount of trade notes had March 31, 2012 as their maturity date, which fell on a holiday offinancial institutions. These trade notes were accounted for as if they had been cleared on their maturity date.
Millions of yen

Notes receivable�������������������������������������������������������������������������������������������������������������������������
Notes payable�����������������������������������������������������������������������������������������������������������������������������

¥679
¥197

Thousands of
U.S. dollars(Note 1)

$8,292$2,405

5. Financial instruments and related disclosures
(1) Policy for financial instruments
The Group invests its funds in low risk financial assets (deposits, etc.) in principle. The Group finances its
working fund and capital investment fund internally and does not need external funds, but may raisenecessary funds from external resources in case of special demand for significant capital investment, if
any. In such cases, financing from external resources would be possible without any problem thanks toour sound financial position. With respect to derivatives, only forward foreign currency contracts are used
if necessary to avoid foreign exchange risk, and not for speculative purposes.
(2) Nature of financial instruments and their related risks
Trade receivables such as notes and accounts are exposed to customer credit risk. Certain trade receivables denominated in foreign currencies arising from overseas operations are exposed to the market riskof fluctuation in foreign currency exchange rates.
Marketable securities and investment securities are exposed to the risk of market price fluctuations
and business risk of the investees.
Payment terms of trade payables such as notes and accounts are mostly less than one year. Leaseobligations under finance lease transactions are mainly related to ultrapure water supply business and its
payment term is 17 years (18 in 2011) later at maximum.
(3) Risk management system for financial instruments
Credit risk management (customers’ default risk):
The Company manages its credit risk involved in trade receivables based on the Credit Control Policy andManual. The Control Division of each business unit and the Legal Department collect credit information
on a regular basis and control the payment terms and outstanding balances by customer, and the Company is making efforts to prevent them from damages and to improve the soundness of the transactions
by monitoring the default risk of customers due to the deterioration of their financial position at an earlystage. The consolidated subsidiaries are also making efforts to reduce credit risk by controlling payment
terms and outstanding balances of customers. Counterparties of forward foreign currency contracts to be
used to avoid foreign exchange risk when necessary are limited to high-credit-rating financial institutions
and accordingly, we believe there is very little credit risk.
Market risk management (foreign exchange risk and interest rate risk):
The Company and certain consolidated subsidiaries utilize forward foreign currency contracts to hedge
the market risk of fluctuations in foreign exchange rates involved in trade receivables and payables by
currency and by month. Forward foreign currency contracts are executed and controlled by the Finance
Department after the individual contract is approved in accordance with the predetermined rule.

Kurita Water Industries Ltd. Annual Report 2012 41

Liquidity risk management (risk that the Company may not be able to settle on the payment due date):
The Finance Departments of the Company and its consolidated subsidiaries prepare and update the fundmanagement plan every month based on reports from each business unit and hold a sufficient amountof liquidity in hand and manage the liquidity risk.
Carrying amounts, fair values and unrealized gain (loss) of financial instruments at March 31, 2012 and2011 were as follows (financial instruments whose fair values cannot be reliably determined are notincluded in the following table):
Millions of yen
At March 31, 2012

Cash and time deposits������������������������������������������������������������������������������������
Notes and accounts receivable, trade��������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities ����������������������������������������������������������������������
Total assets������������������������������������������������������������������������������������������������������������
Notes and accounts payable, trade�������������������������������������������������������������
Total liabilities ������������������������������������������������������������������������������������������������������

Carrying
amountFair value

Difference¥ 28,902
66,356¥ 28,902
66,356¥——55,402¥150,661¥ 21,322¥ 21,322

55,402¥150,661¥ 21,322¥ 21,322

—
¥—
¥—
¥—

Thousands of U.S. dollars (Note 1)
At March 31, 2012

Cash and time deposits������������������������������������������������������������������������������������
Notes and accounts receivable, trade��������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities ����������������������������������������������������������������������
Total assets������������������������������������������������������������������������������������������������������������
Notes and accounts payable, trade�������������������������������������������������������������
Total liabilities ������������������������������������������������������������������������������������������������������

Carrying
amountFair value

Difference$  352,474
809,231$  352,474
809,231$——675,635$1,837,341$  260,029$  260,029

675,635$1,837,341$  260,029$  260,029

—
$—
$—
$—

Millions of yen
At March 31, 2011

Cash and time deposits������������������������������������������������������������������������������������
Notes and accounts receivable, trade��������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities ����������������������������������������������������������������������
Total assets������������������������������������������������������������������������������������������������������������
Notes and accounts payable, trade�������������������������������������������������������������
Total liabilities ������������������������������������������������������������������������������������������������������

Carrying
amountFair value

Difference¥ 35,073
53,241¥ 35,073
53,241¥——35,897¥124,211¥ 16,460¥ 16,460

35,897¥124,211¥ 16,460¥ 16,460

—
¥—
¥—
¥—

Notes:
a. Computation method of fair values
Cash and time deposits and notes and accounts receivable, trade:
Fair values approximate carrying amounts because of their short maturities.
Marketable securities and investment securities:
Fair values approximate carrying amounts because of their short maturities since marketable securities consist of certificatesof deposits. Fair values of investment securities are determined based on the quoted market price of the stock exchange.
Notes and accounts payable, trade:
Fair values approximate carrying amounts because of short maturities.

42 Kurita Water Industries Ltd. Annual Report 2012

b. Financial instruments whose fair values cannot be reliably determined are as follows:
Thousands of
U.S. dollars

Unlisted equity securities�����������������������������������������������������������������������������������������

(Note 1)Millions of yen
2012

2011

2012

¥90

¥90

$1,098

These securities are not included in above “Marketable securities and investment securities” since their fair values cannot
be reliably determined.
c. Maturities of monetary receivables and securities after the balance sheet date:

At March 31, 2012

Deposits��������������������������������������������������������������������������������������������
Notes and accounts receivable, trade����������������������������������
Marketable securities and investment securities
Available-for-sale securities with maturities   (Certificates of deposits)����������������������������������������������������
Total����������������������������������������������������������������������������������������������������

At March 31, 2012

Deposits��������������������������������������������������������������������������������������������
Notes and accounts receivable, trade����������������������������������
Marketable securities and investment securities
Available-for-sale securities with maturities   (Certificates of deposits)����������������������������������������������������
Total����������������������������������������������������������������������������������������������������

Due in one
year or lessMillions of yen
Due after one
Due after five
year throughyears throughfive years
ten years

Due after
ten years¥ 28,862
66,356

¥—
—

¥—
—

¥—
—

40,500¥135,719

—
¥—

—
¥—

—
¥—

Thousands of U.S. dollars (Note 1)
Due after one
Due after five
year throughyears throughfive years
ten years

Due after
ten years

Due in one
year or less$   351,979
809,231

$—
—

$—
—

$—
—

493,902$1,655,112

—
$—

—
$—

—
$—

6. Marketable securities and investment in securities
(1) Available-for-sale securities with fair value at March 31, 2012 and 2011 are summarized as follows:
Millions of yen
At March 31, 2012

Carrying amount exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������������������

Carrying
amountAcquisition
cost

Difference¥ 7,845——
7,845¥ 5,873——5,873¥  1,972
—
—
1,972

7,056
—
—
7,056
¥14,902

8,626
—
—
8,626
¥14,499(1,570)——(1,570)¥    402

Kurita Water Industries Ltd. Annual Report 2012 43

Millions of yen
At March 31, 2011

Carrying
amountAcquisition
cost

Difference

Carrying amount exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������������������

¥ 7,197——
7,197¥ 5,076——
5,076¥ 2,121
—
—
2,121

8,699
—
—
8,699
¥15,897

10,024——
10,024¥15,100(1,325)——(1,325)¥   796

At March 31, 2012

Carrying
amountAcquisition
cost

Difference$ 95,680——
95,680$ 71,623——
71,623$ 24,057——
24,05786,052——
86,052$181,732

105,203——105,203$176,826(19,151)——(19,151)$   4,906

Thousands of U.S. dollars (Note 1)

Carrying amount exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������������������

(2) Available-for-sale securities sold during the years ended March 31, 2012 and 2011 are summarized as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Sales amount�������������������������������������������������������������������������������������������������
Total gains on sales�������������������������������������������������������������������������������������
Total losses on sales �����������������������������������������������������������������������������������

2012

2011

2012

¥0
—
1

¥50
26
—

$10
—
14

(3) Loss on valuation of available-for-sale securities
The Company recognizes loss valuation for the full amount of securities when the fair value declines
below 50% of the acquisition cost, and for amounts deemed necessary after consideration of recoverability when the fair value declines by 30 to 50% of the acquisition cost. For the year ended March 31,
2012, loss on valuation recognized on equity securities classified as available-for-sale securities amounted
to ¥608 million (US$7,425 thousand).

44 Kurita Water Industries Ltd. Annual Report 2012

7. InventoriesInventories at March 31, 2012 and 2011 consist of the following:Thousands of
U.S. dollars(Note 1)Millions of yen

Finished products ���������������������������������������������������������������������������������������
Raw materials �����������������������������������������������������������������������������������������������
Work in process���������������������������������������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������

2012

2011

2012

¥1,598
1,209
2,715¥5,522¥1,303
1,533
2,643¥5,480$19,488
14,744
33,113$67,346

8. Short-term borrowings and long-term debt
(1) Short-term borrowings and current portion of long-term debt
The short-term borrowings and current portion of long-term debt at March 31, 2012 and 2011 consist of
the following:Thousands of
U.S. dollars(Note 1)Millions of yen

Short-term borrowings�����������������������������������������������������������������������������
Current portion of lease obligations�����������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������

2012

2011

2012

¥  957506¥1,463¥1,128478¥1,607$11,675
6,172$17,847

The weighted-average annual interest rate of short-term borrowings for the years ended March 31, 2012
and 2011 were 4.69% and 3.92%, respectively.
(2) Long-term debt
Long-term debt at March 31, 2012 and 2011 is summarized as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen
2012

2011

2012

Long-term borrowings������������������������������������������������������������������������������
Less current portion of long-term borrowings���������������������������������
Long-term borrowings with maturing dates coming in 2014
and thereafter���������������������������������������������������������������������������������������������

¥   42—¥   ——$   519—¥   42¥   —$   519

Lease obligations�����������������������������������������������������������������������������������������
Less current portion of lease obligations�������������������������������������������
Lease obligations with maturing dates coming in 2014 andthereafter�����������������������������������������������������������������������������������������������������

¥6,697(506)¥7,014(478)$81,681(6,172)¥6,191¥6,535$75,509

The weighted-average annual interest rate of long-term borrowings for the year ended March 31, 2012
was 4.24%.

Kurita Water Industries Ltd. Annual Report 2012 45

Annual maturities of long-term debt at March 31, 2012 are as follows:
Millions of yen

Years Ending March 31¥  507
497
476
419
4,840
¥6,7402013�������������������������������������������������������������������������������������������������������������������������������������������������
2014�������������������������������������������������������������������������������������������������������������������������������������������������
2015�������������������������������������������������������������������������������������������������������������������������������������������������
2016�������������������������������������������������������������������������������������������������������������������������������������������������
2017 and thereafter�������������������������������������������������������������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������������������������������������������

Thousands of
U.S. dollars(Note 1)

$ 6,183
6,067
5,810
5,115
59,036$82,201(3) Other long-term liabilities
Other than the short-term borrowings and lease obligations described above, ¥727 million (US$8,868
thousand) and ¥735 million of interest-bearing long-term deposits received were included in other longterm liabilities as of March 31, 2012 and 2011, respectively. The weighted-average annual interest rates forsuch deposits received for the years ended March 31, 2012 and 2011 were 0.36%.

9. Income taxes
Significant components of the deferred tax assets and liabilities as of March 31, 2012 and 2011 are as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Deferred tax assets:
Excess depreciation of property, plant and equipment ���������
Excess provision for accrued employees’
retirement benefits�����������������������������������������������������������������������������
Excess provision for accrued bonuses to employees���������������
Accrued enterprise taxes not deductible�������������������������������������
Loss on revaluation of investment securities�������������������������������
Excess provision of allowance for product warranty ���������������
Impairment loss��������������������������������������������������������������������������������������
Unrealized gain on sale of property, plant and equipment���Other�����������������������������������������������������������������������������������������������������������
Subtotal�������������������������������������������������������������������������������������������������
Valuation allowance�������������������������������������������������������������������������
Total deferred tax assets�����������������������������������������������������������������
Deferred tax liabilities:
Capital gains on properties deferred for tax purposes�������������
Estimated income taxes pertaining to retained earnings ofoverseas consolidated subsidiaries�����������������������������������������������
Unrealized losses on available-for-sale securities�����������������������
Other�����������������������������������������������������������������������������������������������������������
Total deferred tax liabilities�����������������������������������������������������������
Deferred tax assets, net�������������������������������������������������������������������

46 Kurita Water Industries Ltd. Annual Report 2012

2012

2011

2012

¥ 4,956¥ 4,992$ 60,444

3,675
897
509
461
379
316
188
961
12,347(786)
11,561

3,984
922
445
279
362
169
214
1,242
12,614(685)
11,92944,82910,947
6,209
5,628
4,630
3,859
2,302
11,729150,581(9,589)140,991

(640)

(732)

(7,813)

(439)
(149)
(1)
(1,231)¥10,329

(404)
(173)
—
(1,310)¥10,618(5,359)(1,820)(22)(15,017)$125,974

A reconciliation between the normal effective statutory tax rate and the effective income tax rate as apercentage of income before income taxes and minority interests for the years ended March 31, 2012
and 2011 was as follows:
Normal effective statutory tax rate��������������������������������������������������������������������������������������������
Expenses not deductible for income tax purposes ������������������������������������������������������������
Reversal of deferred tax liabilities on retained earnings of foreign
consolidated subsidiaries������������������������������������������������������������������������������������������������������������
Dividend income not taxable for income tax purposes����������������������������������������������������
R&D expense tax credit������������������������������������������������������������������������������������������������������������������
Difference in statutory tax rates of foreign subsidiaries ����������������������������������������������������
Adjustment to deferred tax assets and liabilities from changes
in the statutory tax rate����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������������������������������������������
Actual effective tax rate������������������������������������������������������������������������������������������������������������������

2012

2011

40.6%
0.4

40.6%
0.4

(0.1)
(0.2)
(0.8)
(0.9)

(0.1)
(0.2)
(0.8)
(0.9)

4.4
0.5
43.9%

—
(1.0)
38.0%

Following the promulgation on December 2, 2011 of the “Act for Partial Revision of the Income Tax Act
etc. for the Purpose of Creating Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing Financial Resources Necessary
to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No. 117 of
2011), corporation tax rates will be changed for the fiscal years beginning on or after April 1, 2012. In
addition, the Special Reconstruction Corporation Tax, a surtax for reconstruction funding after the Great
East Japan Earthquake, will be imposed for the fiscal years beginning in the period from April 1, 2012 toMarch 31, 2015. In line with these changes the effective statutory tax rate used to measure deferred tax
assets and liabilities was changed from 40.6% to 38.0% for temporary differences expected to be utilized
in the fiscal years beginning on or after April 1, 2012. The rate was also changed to 35.6% for temporary
differences expected to be utilized in the fiscal years beginning on or after April 1, 2015.
As a result of this change, deferred tax assets (net of deferred tax liabilities) as of March 31, 2012
decreased by ¥1,293 million (US$15,778 thousand), and income taxes increased by ¥1,315 million(US$16,043 thousand).

10. Retirement benefits and pension plans
The Company and 8 domestic consolidated subsidiaries provide lump-sum retirement benefit plans anddefined contribution pension plans. Sixteen other domestic consolidated subsidiaries provide lump-sum
retirement benefit plans. Three overseas consolidated subsidiaries provide lump-sum retirement benefit
plans; 2 provide lump-sum retirement benefit plans and defined contribution pension plans; and 1
provides a defined contribution pension plan.
(1) Benefit obligations
Thousands of
U.S. dollars(Note 1)Millions of yen

Retirement benefit obligation����������������������������������������������������������������
Fair value of plan assets�����������������������������������������������������������������������������
Unfunded retirement benefit obligations�����������������������������������������
Unrecognized actuarial gain�������������������������������������������������������������������
Unrecognized prior service cost �����������������������������������������������������������
Net accrued employees’ retirement benefits �����������������������������������
Prepaid pension cost���������������������������������������������������������������������������������
Accrued employees’ retirement benefits�������������������������������������������

2012

2011

2012

¥(20,305)
9,879(10,426)
91—(10,335)—¥(10,335)¥(19,870)
9,895(9,975)38—(9,936)—¥ (9,936)$(247,632)
120,480(127,151)
1,114—(126,037)—$(126,037)

Kurita Water Industries Ltd. Annual Report 2012 47

(2) Net periodic benefit costs
Thousands of
U.S. dollars(Note 1)Millions of yen

Service cost ���������������������������������������������������������������������������������������������������
Interest cost���������������������������������������������������������������������������������������������������
Expected return on plan assets �������������������������������������������������������������
Amortization of actuarial differences���������������������������������������������������
Additional retirement payments�����������������������������������������������������������
Loss at transition to defined contribution pension plan �������������
Other�����������������������������������������������������������������������������������������������������������������
Net periodic benefit cost���������������������������������������������������������������������

2012

2011

2012

¥  854
152
—
124
27
—
685
¥1,844¥  764
149
—
280
2
—
667
¥1,864$10,420
1,861
—
1,515
336
—
8,354
$22,489

In the above table, benefit cost incurred for the domestic consolidated subsidiaries, which use the simplified method for computing benefit obligations, is included in “Service cost,” and “Other” represents contribution to the defined contribution pension plan.
(3) Assumptions to determine above obligation and cost:
Periodic allocation of projected benefit obligation������
Discount rate��������������������������������������������������������������������������������
Expected rate of return on plan assets ������������������������������
Amortization period of actuarial differences��������������������

2012
Equal amountover each period
1.7–1.8%
0.5–0.7%
1–2 years

2011
Equal amountover each period
1.7–1.8%
0.5–0.7%
1–2 years

11. Shareholders’ equity
Japanese companies are subject to the Companies Act. A summary of the sections of the Companies Act
that affect financial statements and accounting matters is as follows:(1) Distribution of dividends to shareholders
Under the Companies Act, if companies meet certain criteria, dividends can be paid at any time during
the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors’ meeting if
the articles of incorporation of the company so stipulate.
The Companies Act provides certain limitations on the amounts available for dividends and/or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders,and it is calculated mainly based on capital surplus other than paid-in capital, retained earnings, and treasury stock, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
(2) Increases/decreases; transfer of common stock, reserve, and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends. However, suchappropriation may not be made if the aggregate amount of legal reserve and additional paid-in capital
exceeds 25% of the common stock. Under the Companies Act, this legal reserve and additional paid-in
capital may be reversed without limitation.

48 Kurita Water Industries Ltd. Annual Report 2012

The Companies Act also provides that common stock, legal reserve, additional paid-in capital, othercapital surplus, and retained earnings can be transferred among the accounts under certain conditions
upon resolution of the shareholders.
(3) Treasury stock
The Companies Act provides that companies may purchase, hold or dispose of such treasury stock byresolution of the Board of Directors’ meetings. The amount of treasury stock purchased cannot exceed
the amount available for distribution to the shareholders which is determined by a specific formula.

12. Unrealized gains on revaluation of land
The Company implemented a revaluation of land for business use in accordance with the Land Revaluation Law (enacted on March 31, 1998). The revaluation difference, net of taxes is stated as “Unrealized
gains (losses) on revaluation of land” in the valuation and translation account in net assets. The tax equivalent is stated as deferred tax assets or liabilities in long-term liabilities.
When any revaluated land is sold, the related unrealized gain or loss on revaluation of land is transferred to retained earnings.
Revaluation method: The revaluation of land was computed in accordance with Article Two, Item Oneof the Land Revaluation Law Enforcement Order.
Revaluation date: March 31, 2002

13. Selling, general and administrative expenses
Selling, general and administrative expenses for the years ended March 31, 2012 and 2011 consisted of
the following:Thousands of
U.S. dollars(Note 1)Millions of yen

Salaries and allowances�����������������������������������������������������������������������������
Provision for employees’ bonuses���������������������������������������������������������
Retirement benefit expenses �����������������������������������������������������������������
Travel expenses���������������������������������������������������������������������������������������������
Research and development expenses�������������������������������������������������
Other�����������������������������������������������������������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������

2012

2011

2012

¥14,394
1,378
987
2,633
4,232
12,877¥36,503¥13,986
1,356
1,033
2,468
4,225
12,458¥35,528$175,548
16,80812,045
32,11051,612
157,043$445,168

14. Other income (expenses)
The details of gain on sales of properties for the year ended March 31, 2012 are as follows:Year ended March 31, 2012

Millions of yen

Land �����������������������������������������������������������������������������������������������������������������������������������������������
Others���������������������������������������������������������������������������������������������������������������������������������������������

¥123
15

Thousands of
U.S. dollars(Note 1)

$1,511
187

Kurita Water Industries Ltd. Annual Report 2012 49

15. Impairment losses
For the purpose of impairment testing, assets of the Group are generally grouped based on business,
however, idle assets and investment properties are grouped by individual property.
For the year ended March 31, 2012, the Group recognized impairment losses of ¥173 million (US$2,112 thousand) on real estate for which there is no intended use in the future and whose market values
significantly declined.
The details of impairment losses recognized are as follows:Year ended March 31, 2012

Idle assets:
Kitakami, Iwate Land�����������������������������������������������������������������������������������������������������������
Takatsuki, Osaka Land���������������������������������������������������������������������������������������������������������
Awara, Fukui Land ���������������������������������������������������������������������������������������������������������������

Millions of yen

¥103
60
8

Thousands of
U.S. dollars(Note 1)

$1,267740
105

The carrying value of these assets is written down to their fair value less costs to sell, which is based onJapanese Real Estate Appraisal Standards.

16. Comprehensive income
The components of other comprehensive income for the year ended March 31, 2012 are as follows:
Millions of yen

Unrealized gains on available-for-sale securities
Gains arising during the year�������������������������������������������������������������������������������������������
Reclassification adjustments to profit or loss�������������������������������������������������������������
Amount before income tax effect���������������������������������������������������������������������������������
Income tax effect�����������������������������������������������������������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������������������������������������
Unrealized losses on revaluation of land
Income tax effect�����������������������������������������������������������������������������������������������������������������
Foreign currency translation adjustments
Gains arising during the year�������������������������������������������������������������������������������������������
Share of other comprehensive income of associates
accounted for using equity method
Gains arising during the year�������������������������������������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������������������������������������

50 Kurita Water Industries Ltd. Annual Report 2012

Thousands of
U.S. dollars(Note 1)¥(1,004)
610
(394)
23
(370)

$(12,254)
7,440(4,813)291(4,522)

184

2,249

(564)

(6,879)(35)¥  (785)(429)$ (9,582)

17. Segment information
(1) Overview of reportable segments
The Company’s reportable segments are components of the Group about which separate financial information is available. These segments are subject to periodic examinations to enable the Company’s boardof directors to decide how to allocate resources and assess performance.
The Company’s business divisions are based on product and service categories. Each of the divisions
conducts business based on comprehensive strategies formulated for the products and services thatthey handle in Japan and overseas. The Company’s consolidated subsidiaries conduct business under thesupervision of the relevant business divisions.
The Group’s operations are therefore classified into two reportable segments, the Water Treatment
Chemicals segment and the Water Treatment Facilities segment, based on the products and services
handled by each of the divisions.
The Water Treatment Chemicals segment manufactures and sells water treatment chemicals andequipment and provides maintenance services. The Water Treatment Facilities segment manufacturesand sells water treatment equipment and facilities, provides ultrapure water, chemical cleaning, toolcleaning, soil and groundwater remediation services, and provides maintenance services that encompass
operation, maintenance, and management of water treatment facilities.
(2) Methods for calculating sales, income and loss, assets and liabilities, and other amounts
by reportable segment
Accounting methods applied in the reportable segments are consistent with the methods applied in
preparation of the accompanied consolidated financial statements. Segment income represents operating
income. Inter-segment sales and transfers between the Group reflect values based on market price. Intersegment sales and transfers between the Company’s divisions are based primarily on book values.

Kurita Water Industries Ltd. Annual Report 2012 51

(3) Sales, income and loss, assets and liabilities, and other amounts by reportable segment
Millions of yen
Reportable segments

Year ended March 31, 2012

Sales
1) Sales to outside customers�����������
2) Intersegment sales���������������������������
Total�������������������������������������������������������
Segment income�����������������������������������
Segment assets���������������������������������������
Segment liabilities���������������������������������
Other items
Depreciation and amortization�����
Impairment losses���������������������������
Increase in property,
plant and equipment andintangible assets������������������������������
Amortization of goodwill��������������
Goodwill�����������������������������������������������

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Adjustments

Consolidated¥56,443372¥56,816¥ 9,268
36,58017,999¥137,348
246¥137,595¥ 20,127
161,750
43,252¥193,792
619¥194,411¥ 29,396
198,330
61,252¥     —
(619)¥    (619)¥    (13)72,811(113)¥193,792—¥193,792¥ 29,382
271,141
61,1391,485—

14,550—16,035——173

16,035
173

1,463
31
13

6,641
—
—

8,105
31
13

—
—
—

8,105
31
13

Thousands of U.S. dollars (Note 1)
Reportable segment

Year ended March 31, 2012

Sales
1) Sales to outside customers�����������
2) Intersegment sales���������������������������
Total�������������������������������������������������������
Segment income�����������������������������������
Segment assets���������������������������������������
Segment liabilities���������������������������������
Other items
Depreciation and amortization�����
Impairment losses���������������������������
Increase in property,
plant and equipment andintangible assets�����������������������������
Amortization of goodwill��������������
Goodwill�����������������������������������������������

52 Kurita Water Industries Ltd. Annual Report 2012

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Adjustments

Consolidated$688,334
4,544$692,878$113,032
446,102219,512$1,674,985
3,008$1,677,994$  245,458
1,972,561
527,469$2,363,320
7,552$2,370,872$  358,490
2,418,664
746,981$     —
(7,552)$   (7,552)$    (166)887,941(1,380)$2,363,320—$2,363,320$  358,324
3,306,605
745,600

18,118—

177,439—

195,558——
2,112

195,558
2,112

17,843381
166

80,998——98,842
381
166

—
—
—

98,842381
166

Millions of yen
Reportable segments

Year ended March 31, 2011

Sales
1) Sales to outside customers�����������
2) Intersegment sales���������������������������
Total�������������������������������������������������������
Segment income�����������������������������������
Segment assets���������������������������������������
Segment liabilities���������������������������������
Other items
Depreciation and amortization�����
Increase in property,
plant and equipment andintangible assets�����������������������������
Amortization of goodwill��������������
Goodwill�����������������������������������������������

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Adjustments

Consolidated¥56,735
349¥57,084¥10,099
36,444
16,919¥124,499
180¥124,680¥ 17,032
158,414
37,155¥181,234
530¥181,764¥ 27,131
194,859
54,075¥    —(530)¥     (530)¥     058,439(128)¥181,234—¥181,234¥ 27,131
253,298
53,946

1,539

14,527

16,066—

16,066

1,183
59
44

4,781
—
—

5,965
59
44

—
—
—

5,965
59
44

Note:
“Adjustments” represents the following:
1. Sales: Elimination of intersegment transactions.
2. Segment income: Amount resulting from eliminations of intersegment transactions.
3. Segment assets: Mainly corporate assets of ¥72,932 million (US$889,425 thousand) and ¥58,572 million as of March 31, 2012
and 2011, respectively, unallocated to reportable segment assets (cash deposits, securities in trust, and long-term investments).
4. Segment liabilities: Amount resulting from eliminations of intersegment claims and liabilities.
5. Impairment loss on idle assets was recognized for the year ended March 31, 2012. This had no effect on the reportable segments.

Related Information(Information by geographic region)(1) Net SalesYear ended March 31, 2012

Sales ���������������������������������������������������������

Millions of yen
Japan

Asia

North
America

Europe

Other

Total

¥164,523¥22,541¥2,310¥1,373¥3,044¥193,792

Thousands of U.S. dollars (Note 1)
Year ended March 31, 2012

Sales ���������������������������������������������������������

Japan

Asia

North
America

Europe

Other

Total

$2,006,380$274,896$28,170$16,747$37,125$2,363,320

Millions of yen
Year ended March 31, 2011

Sales ���������������������������������������������������������

Japan

Asia

North
America

Europe

Other

Total

¥154,867¥19,195¥2,820¥1,276¥3,075¥181,234

Note:
Sales are allocated to regions based on the location of the customer to which the products or services are delivered or provided.

Kurita Water Industries Ltd. Annual Report 2012 53

(2) Property, Plant and Equipment
The Company has omitted disclosure here because property, plant and equipment holdings in Japanaccount for more than 90% of the amount of property, plant and equipment reported on the consolidated balance sheet.
(Information by major customer)
Year ended March 31, 2012

Sales to:Sharp Corporation�����������������������������������������

Year ended March 31, 2011
Sales to:Sharp Corporation�����������������������������������������

Millions of yen¥28,792

Thousands of
U.S. dollars (Note 1)

Reportable segment$351,133 Water Treatment Facilities

Millions of yen

Thousands of
U.S. dollars (Note 1)

Reportable segment¥28,149$339,145

Water Treatment Facilities

18. Subsequent events
Appropriation of retained earnings
The following appropriation of retained earnings for the year ended March 31, 2012 was approved at theordinary general meeting of shareholders of the Company held on June 28, 2012.
Millions of yen¥2,533

Cash dividends (year-end dividends)���������������������������������������������������������������������������������

Thousands of
U.S. dollars(Note 1)$30,892

19. Per share information
U.S. dollars(Note 1)Yen

Net assets per share �����������������������������������������������������������������������������������
Net income per share (EPS)���������������������������������������������������������������������

2012

2011

2012

¥1,649.24
130.65¥1,563.57
134.02$20.11
1.59

The basis of calculation for EPS is as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Net income�����������������������������������������������������������������������������������������������������
Net income attributable to common stock���������������������������������������
Average number of shares outstanding���������������������������������������������

(The Company has no dilutive shares.)

54 Kurita Water Industries Ltd. Annual Report 2012

2012

2011

2012

¥16,548
16,548
126,659,779¥17,138
17,138
127,874,054$201,806
201,806

Report of Independent Certified Public Accountants

Kurita Water Industries Ltd. Annual Report 2012 55

Corporate Data
As of March 31, 2012

Company Name
Address

Kurita Water Industries Ltd.
4-7, Nishi-Shinjuku 3-chome,
Shinjuku-ku, Tokyo 160-8383, Japan(From October 2012 relocating asfollows:) 10-1, Nakano 4-chome,
Nakano-ku, Tokyo 164-0001, Japan
Paid-in Capital¥13,450,751,434
Date of Establishment July 13, 1949
Stock ExchangeFirst Section of the Tokyo Stock Exchange
Listings
First Section of the Osaka Securities
Exchange
Number of Employees 4,555 (on a consolidated basis);
1,521 (parent company)
Domestic Offices

Kurita Global Technology Center:
1-1, Kawada, Nogi-machi,
Shimotsuga-gun, Tochigi
329-0105, Japan
Tel.: 81 (280) 54-1511
Osaka Office:2-22, Kitahama 2-chome, Chuo-ku,
Osaka-shi, Osaka 541-0041, Japan
Tel.: 81 (6) 6228-4800
Other Offices:
Tohoku, Nagoya,
Hiroshima and Kyushu
Overseas Offices

Head Office:4-7, Nishi-Shinjuku 3-chome,
Shinjuku-ku, Tokyo 160-8383, Japan
Tel.: 81 (3) 3347-3111(From October 2012 relocating asfollows:) 10-1, Nakano 4-chome,
Nakano-ku, Tokyo 164-0001, Japan
Tel.: 81 (3) 6743-5000

Taiwan Branch:
5F-3, No. 295, Section 2,
Kuang-Fu Road,(Empire Commercial Bldg.)
Shinchu, Taiwan, R.O.C.
Tel.: 886 (3) 575-1157
Malaysia Branch:
1-5-28, E-gate Lebuh Tunku Kudin 2,
11700 Gelugor, Pulau Pinang, Malaysia
Tel.: (604) 656-0026

Major Consolidated Subsidiaries and Affiliated Companies
Company Name

Paid-in Capital(Millions)

EquityOwnership (%) Main Business

OVERSEASn North America & South America
Kurita America, Inc.

US$3.0100.0

Kurita do Brasil LTDA.

R$6.986

100.0

Manufacture & sale of water treatment chemicals andwater treatment facilities
Manufacture & sale of water treatment chemicals

n Europe
Kurita Europe GmbH

EUR2.301

95.0

Manufacture & sale of water treatment chemicals

n AsiaKurita Water Industries (Dalian) Co., Ltd.
Kuritec (Shanghai) Co., Ltd.
Kurita Water Industries (Suzhou) Ltd.
Kurita (Taiwan) Co., Ltd.
Hansu Ltd.
Hansu Technical Service Ltd.
Kurita-GK Chemical Co., Ltd.
Kurita (Singapore) Pte. Ltd.

¥550
¥30
¥530
NT$20
W2,500W400
BAHT92
S$4.0

90.1
100.0
100.0
100.0
33.2
59.4
85.0
100.0

Kuritec Singapore Pte. Ltd.
Kurita Water (Malaysia) Sdn. Bhd.
P.T. Kurita Indonesia

S$1.49
RM$0.6
US$2.0

100.0
83.3
92.5

Manufacture & sale of water treatment chemicals
Sale & maintenance of water treatment facilities
Manufacture & sale of water treatment facilities
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment facilities
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals and water
treatment facilities
Operation & maintenance of water treatment facilities
Sale of water treatment chemicals and water treatment facilities
Manufacture & sale of water treatment chemicals

DOMESTIC
Kurita Creation Co., Ltd.
Kuritec Service Co. Ltd.
Kuritaz Co., Ltd.
Kurita Engineering Co., Ltd.
Land Solution Inc.
Kurita Chemical Manufacturing Ltd.

¥160
¥50
¥220
¥160
¥450
¥50

100.0
100.0
100.0
100.0
66.0
100.0

Manufacture & sale of water purifiers
Tool cleaning
Operation & maintenance of water treatment facilities
Chemical cleaning
Soil remediation
Manufacture of water treatment chemicals

56 Kurita Water Industries Ltd. Annual Report 2012Investor Information
As of March 31, 2012

Stock Exchange Listings

First Section of the Tokyo Stock ExchangeFirst Section of the Osaka Securities Exchange
Authorized: 531,000,000 shares
Issued: 132,800,256 shares(Stock trading unit: 100 shares)
38,108Grant Thornton Taiyo ASG LLC
Akasaka Ouji Bldg. 5F, 8-1-22, Akasaka, Minato-ku, Tokyo 107-0052, Japan
Sumitomo Mitsui Trust Bank, Ltd.
1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan

Common Stock

Number of Shareholders
Independent Auditor
Transfer Agent

Main Shareholders

Distribution of Shares
Shareholdings
Percentage of total(Number of shares) shares issued (%)

ITOCHU Corporation
Japan Trustee Services Bank, Ltd. (Trust Account)
Nippon Life Insurance Company
Kurita Water Industries Ltd.
Mizuho Trust & Banking Co., Ltd.
Retirement Benefit Trust
ITOCHU Corporation AccountRetrustee Trust & Custody Services Banking
Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Tokio Marine & Nichido Fire Insurance Co., Ltd.
Pictet and Cie (Europe) S.A.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
RBC Dexia Investor Services Trust,
London-Lending Account7,448,000
7,431,500
6,644,283
6,140,839

2,820,000

5.60
5.59
5.00
4.62

Treasury Stock
Individuals
Financial
Institutions
Foreign
Owned

Securities
Firms

2.12

2,768,800
2,586,926
2,444,700
2,056,131

2.08
1.94
1.84
1.54

2,024,730

1.52

Shareholdings(Number of shares)

n
n
n
n
n
n

41,315,920

Other Domestic
Firms
Percentage of total
shares issued (%)
31.1%

1,982,871

1.5%

18,296,723

13.8%

46,895,992

35.3%

18,167,911

13.7%

6,140,839
Total132,800,256

100.0%

4.6%

Stock Price Range and Trading Volume (Tokyo Stock Exchange)
Stock price (Yen)

Trading volume (Hundreds of shares)

4,000

800,000

3,000

600,000

2,000

400,000

1,000

200,000

0

Jan. ’10

June ’10

Jan. ’11

June ’11

Jan. ’12

June ’12

n Stock Price n Trading Volume
Kurita Water Industries Ltd. Annual Report 2012 57

URL: http://www.kurita.co.jp/english/

Kurita Water Industries Ltd. ANNUAL REPORT 2012

4-7, Nishi-Shinjuku 3-chome, Shinjuku-ku, Tokyo 160-8383, Japan
Tel: 81 (3) 3347-3111(From October 2012 relocating as follows:)
10-1, Nakano 4-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 81 (3) 6743-5000