Creating Corporate Value Report 2016
Financial Section
Year ended March 31, 2016

Refreshing the Air

Management’s Discussion and Analysis

Group Outline

segments, sales in the Air Care category increased 3.9%, sales in the

The S.T. CORPORATION Group is composed of S.T.

Cloth Care category decreased 2.4%, sales in the Thermal Care

CORPORATION, six consolidated subsidiaries, three equity method

category decreased 18.8%, sales in the Hand Care category

affiliated companies and other affiliated companies.

increased 5.2%, sales in the Humidity Care category increased
11.1%, and sales in the Home Care category increased 2.8%.

Sales Overview
In the fiscal year ended March 31, 2016 (hereinafter called “theCost of Sales, SG&A Expenses, and Operating Income

current year”), the Japanese economy recovered gently, because

Cost of sales declined 3.3% year on year to ¥27,294 million, as S.T.

corporate earnings and the employment situation improved due to themade efforts to reduce manufacturing cost although procurement

yen depreciation and the decline in oil price. However, the economic

cost, etc. augmented through the yen depreciation. Selling, general

outlook remains uncertain, amid the downturn of consumer spending

and administrative expenses increased 2.7% year on year to ¥18,715

due to the slowdown of the Chinese economy, the anxiety overmillion, as marketing cost increased, but other expenses were curbed.

international situations, unstable weathers, etc. as well as the yen

As a result, operating income rose 29.2% year on year to ¥2,342 million.

appreciation and the fall in share prices from the beginning of 2016.
Other Income (Expenses), Pretax and Profit Attributable toIn these circumstances, the S.T. Group set the goal of “brand value
management” with the basic policy of narrowing down andOwners of Parent

concentrating on targets, developing unprecedented products, andAs for other income and expenses, profit before income taxes grew

conduct swift business administration; and has been shifting to

10.9% year on year to ¥1,703 million, and profit attributable to owners

profit-oriented management based on the creation of clients, theof parent increased 2.2% year on year to ¥912 million.

establishment of a highly profitable system, and the introduction of theAccordingly, earnings per share increased from ¥40.83 in thebusiness division system. In addition, the S.T. Group has continued theprevious year to ¥42.01. The ratio of profit attributable to owners ofcompany-wide activities for managerial reform STR (S.T. Reformation).

parent to sales grew from 1.8% in the previous year to 1.9%, while
ROE dropped from 4.2% to 4.1%, both indicating little change.

As a result, the sales of the new brand “SHALDAN” in the Air Care
category contributed to the sales for the current year, and theperformance of the premium series of the existing mega-brandFinancial Position“Shoshu-Riki” and other category was healthy. Consequently, sales

Total assets as of March 31, 2016 stood at ¥34,924 million, up ¥1,139

increased 0.2% year on year to ¥48,351 million. Regarding individual

million from the end of the previous year. Current assets declined ¥514

Operating income (millions of yen)

4.5

2,342

1.9

1.8

1.2
0.2

76

565

892

1,813

1,800

1,751

2.6

4.8
3.8

2,131

3.8

48,351

48,263

46,993

46,94446,354

3.8

Profit attributable to owners of parent (millions of yen)
Return on sales (%)

Operating income margin (%)

1,234(millions of yen)

Profit attributable to owners of parent /Return on sales

912

Operating income /Operating income margin

Net sales

12

1

13

14

15

16

12

13

14

15

16

12

13

14

15

16

million to ¥19,708 million, mainly because of the decrease in notes andexpenditures through the acquisition of property, plant and equipment.

accounts receivable. On the other hand, non-current assets grew

Net cash used in financing activities was ¥876 million, as expense¥1,653 million to ¥15,216 million, mainly because of the increase inaugmented ¥262 million year on year. This is mainly due to theinvestment securities.

acquisition of treasury shares.
As a result, the balance of cash and cash equivalents at the end of

Total liabilities were ¥11,428 million, up ¥244 million from the end of
the previous year, mainly because of the augmentation of notes andthe current year was ¥7,552 million, up ¥967 million from the end of

accounts payable and deferred tax liabilities, etc. On the other hand,the previous year.

net assets were ¥23,496 million, up ¥896 million from the end of theprevious year, mainly because of the growth of retained earnings andDividends and Return to Shareholders

valuation difference on available-for-sale securities.

Taking into consideration such factors as profit attributable to ownersof parent and the need to realize shareholder returns, we decided toConsequently, net assets per share increased from ¥1,001.84 at
the end of the previous year to ¥1,049.58. In addition, equity ratio

distribute a term-end dividend of ¥11.0 (¥22.0 for the full year,

grew from 64.8% at the end of the previous year to 65.2%, indicating

including the interim dividend), on a par with the previous fiscal year,

the sound financial standing.

making for a consolidated payout ratio of 52.4%. The company willcontinue to place importance on returns to shareholders.

Capital Expenditures and Depreciation and Amortization
Capital expenditures increased from ¥1,486 million in the previous

Business and Operational Risks

year to ¥1,758 million. Depreciation and amortization rose from ¥844

Factors that could possible impact the Group’s operating results,

million in the previous year to ¥1,128 million.

financial position or stock prices include the following: (1) an
escalation in raw materials prices; (2) the impact on manufacturing

Cash Flows

operations from natural disasters and changes in international political

Net cash provided by operating activities for the current year wasor other conditions; (3) sales fluctuations due to unseasonal weather;¥2,481 million, up ¥344 million from the previous year. This increase is(4) and the failure of initiatives to raise new businesses. Forward-

mainly due to the rise in depreciation and amortization, etc. On thelooking statements in this annual report are based on certain

other hand, net cash used in investment activities was ¥624 million (Inassumptions made by the Group as of the end of this fiscal year.

the same period of the previous fiscal year, net cash used in investment
activities was ¥1,768 million). This is mainly due to the augmentation of

Capital expenditures /Depreciation and amortization

Dividends per share /Payout ratio

ROA / ROE

2,061

Capital expenditures (millions of yen)
Depreciation and amortization (millions of yen)

Dividends per share (yen)Payout ratio (%)

13

14

2.7

2.9

2.7

22.0

84.6
53.9

1.9

16

22.0

22.0

4.1

22.0

1,128

844

15

4.2

22.0

1,758

1,486

4.0

894

942
830

632.2

38.8

0.4

12

ROE (%)

6.1

931

1,007

ROA (%)

52.4

0.3

12

13

14

15

16

12

13

14

15

16

2

Consolidated Balance Sheets
S.T.CORPORATION and consolidated subsidiaries
March 31, 2016 and 2015

thousands of
U.S. dollars (Note 2)

millions of yen

Assets

2016

2015

2016

¥ 7,566¥7,629$67,139

—

109

—

Trade notes and accounts receivable (Note 6)

5,380

5,867

47,741

Merchandise and finished goods

4,897

4,866

43,459Work in process

235

269

2,088

Raw materials and supplies

795

638

7,053

Deferred tax assets (Note 11)

384

371

3,406

Other current assets

455

478

4,039

(4)

(5)

(39)

19,70820,221

174,886

Land (Note 9)

3,195

3,189

28,356

Buildings and structures

7,465

6,659

66,241

Machinery, equipment and vehicles

6,603

6,509

58,594Tools, furniture and fixtures

3,931

3,871

34,883

Construction in progress

124

375

1,098

Leased assets (Note 17)

967

794

8,577

(13,626)(13,286)(120,915)

Property, plant and equipment, net

8,659

8,110

76,835Intangible assets, net of accumulated amortization

228

219

2,025

228

219

2,025

435

469

3,863

4,850

3,757

43,034Long-term loans

26

31

228

Deferred tax assets other than unrealized revaluation loss on land (Note 11)

11

4

97

1,008

974

8,945

6,330

5,235

56,167¥34,924¥33,785$309,915

Current assets:
Cash and time deposits (Notes 6, 10 and 16)
Marketable securities (Notes 6 and 8)

Less - allowance for doubtful accounts
Total current assets

Property, plant and equipment, at cost:Less - accumulated depreciation

Total intangible assets

Investments and other assets:
Investments in non-consolidated subsidiaries and affiliates
Investment securities (Notes 6 and 8)

Other assets
Total investments and other assets
Total assets

3thousands of
U.S. dollars (Note 2)

millions of yen

Liabilities and net assets

2016

2015

2016

¥2,202¥1,974$19,542

2,982

2,922

26,464

47

62

415

Current liabilities:
Trade payables (Note 6)
Electronically recorded obligations-operating
Short-term loans payable
Lease obligations
Other payables (Note 6)
Accrued expenses

169

138

1,498

2,160

2,384

19,166

606

614

5,375

Electronically recorded obligations-non-operating

58

89

519

Income taxes payable

360

315

3,197

Consumption taxes payable

16

267

139

Allowance for sales returns

124

158

1,104

Other current liabilities

57

85

504

8,781

9,008

77,921

Total current liabilities
Long-term liabilities:
Lease obligations

571

559

5,067

Provision for directors’ retirement and severance benefits

127

122

1,130

Provision for executive officers’ incentive plan (Note 4)

17

—

150
11,503

1,296

1,190

Deferred tax liabilities (Note 11)

Net defined benefit liability (Notes 1 and 12)

373

34

3,307

Deferred tax liabilities - unrealized revaluation gain on land (Note 9)

262

271

2,327

Other liabilities-not current liabilities
Total long-term liabilities

1

1

11

2,648

2,176

23,494

7,066

7,066

62,699

7,068

7,068

62,719Net assets (Note 13):
Shareholders’ equity:
Common stock:
Authorized - 96,817,000 shares in 2016 and 2015
Issued and outstanding - 23,000,000 shares in 2016 and 2015
Capital surplus
Retained earnings

9,739

9,394

86,419Treasury stock, at cost

(1,734)(1,654)(15,389)

Total shareholders’ equity

22,13821,874

196,448

Accumulated other comprehensive income (loss):
Unrealized holding gain on other securities, net of taxes

1,482

743

13,154

Unrealized revaluation loss on land, net of taxes (Note 9)

(537)

(546)

(4,767)

Translation adjustments

(287)

(202)

(2,549)Remeasurements of defined benefit plans

(20)

21

(181)

Total accumulated other comprehensive income (loss)

638

17

5,657

Subscription rights

75

81

667

Non-controlling interests

646

629

5,728

Total net assets

23,496

22,600208,500¥34,924¥33,785$309,915

Total liabilities and net assets
See notes to consolidated financial statements.

4Consolidated Statements of Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

thousands of
U.S. dollars (Note 2)

millions of yen

Net sales
Cost of sales (Notes 15 and 20)
Gross profit before reversal of allowance for sales returns
Reversal of allowance for sales returns
Gross profit
Selling, general and administrative expenses (Note 15)
Operating income
Non-operating income (expenses):
Interest and dividends received
Interest expense
Purchase discounts
Sales discounts
Loss on equity of affiliates
Insurance income
Other, net
Total non-operating income (expenses)
Ordinary income
Special gains (losses), net:
Loss on disposition of property, plant and equipment, net
Gain on reversal of subscription rights to shares
Loss on valuation of investment securities
Gain (loss) on sales of investment securities, net
Gain on extinguishment of tie-in shares, net
Total special gains (losses), net
Profit before income taxes
Income taxes (Note 11):
Current
Prior periods
Deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

2016

2015

2016

¥48,351
27,32821,02334
21,057
18,7152,342¥48,263
28,19420,070(42)
20,02818,2161,813$429,062
242,510
186,553302
186,855
166,073
20,782

92
(1)
164
(885)
(15)
21
7
(617)
1,725

79
(2)
171
(863)
(90)
154
335
(215)
1,598

818
(10)
1,452
(7,856)
(130)
188
59
(5,479)15,303

(43)
17
—
—
5
(22)
1,703

(111)
29
(10)
(0)
30
(62)
1,536

(382)
146
—
—
42
(194)
15,109

570
107
2
679
1,023
111
¥912

532
—
25
557
979
87
¥892

5,054
954
20
6,028
9,081
988
$8,094

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2016 and 2015
thousands of
U.S. dollars (Note 2)

millions of yen

2016

2016

Profit¥1,023¥979$9,081

Other comprehensive income (loss) (Note 5)
Unrealized holding gain (loss) on other securities, net of taxes
Unrealized revaluation loss on land, net of taxes
Translation adjustments
Remeasurements of defined benefit plans, net of tax
Other comprehensive income (loss) of equity method companies
Total other comprehensive income (loss)
Comprehensive income

739
8
(102)
(42)
(12)
591
¥1,615

598
25
166
170
19
980
¥1,959

6,555
75
(905)
(369)
(110)
5,247
$14,329

1,533
82

1,820
139

13,601
728

Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

5

2015

Consolidated Statements of Changes in Net Assets
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

millions of yen
Number of sharesof common stock(Thousands)

Balance at April 1, 2015
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2016

23,00023,000Commonstock

CapitalsurplusRetainedearnings¥ 7,066¥ 7,068¥ 9,394(481)
912¥ 7,066¥ 7,068

Treasury stock,at cost¥ (1,654)

Total
shareholders’equity

(86)

(167)
86

¥21,874
(481)
912
(167)
0

¥ 9,739¥ (1,734)¥22,138

Subscription
rightsNon-controllinginterests

Total net
assetsmillions of yen
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2015
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2016

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plans
loss

¥743

¥ (546)¥ (202)

¥21

¥17

¥ 81

¥ 629

739
¥1,4828¥ (537)(85)¥ (287)(42)¥(20)

621
¥638

(6)
¥ 75

17
¥ 646

¥ 22,600
(481)
912
(167)
0
632
¥ 23,496

Treasury stock,at costTotal
shareholders’equitymillions of yen
Number of sharesof common stock(Thousands)

Balance at April 1, 2014
Cumulative effects of changes in accounting policies
Restated balance at April 1, 2014
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Change of scope of consolidation
Reversal of unrealized revaluation loss on land, net of taxes
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2015

Commonstock

CapitalsurplusRetainedearnings

23,000¥ 7,066¥ 7,068

23,000¥ 7,066¥ 7,068¥8,837¥94¥8,931(481)
892¥ (1,652)¥ (1,652)(2)
5
47
23,000¥ 7,066¥ 7,068

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plans
loss

¥21,319¥94¥21,412
(481)
892
(2)
5
47

¥9,394¥ (1,654)¥21,874

Subscription
rightsNon-controllinginterests

Total net
assetsmillions of yen
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2014
Cumulative effects of changes in accounting policies
Restated balance at April 1, 2014
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Change of scope of consolidation
Reversal of unrealized revaluation loss on land, net of taxes
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2015

¥ 145

¥ (524)¥ (335)¥(149)¥(864)

¥ 95

¥ 536

¥ 145

¥ (524)¥ (335)¥(149)¥(864)

¥ 95

¥ 536

598
¥ 743

(21)
¥ (546)134¥ (202)

170
¥21

881
¥17

(14)
¥ 81

93
¥ 629

¥21,087¥94¥21,180
(481)
892
(2)
5
47
959
¥22,600
Total
shareholders’equitythousands of U.S. dollars (Note 2)
Number of sharesof common stock(Thousands)

Balance at April 1, 2015
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2016

23,00023,000Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at cost$ 62,699$ 62,719$ 83,363(4,273)8,094$ (14,675)$ 62,699$ 62,719(765)(1,479)765$ 194,105(4,273)8,094(1,479)0$ 86,419$ (15,389)$ 196,448

thousands of U.S. dollars (Note 2)
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2015
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2016

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plans
loss

Subscription
rightsNon-controllinginterests

Total net
assets$6,596$ (4,842)$ (1,791)

$188

$151

$ 716

$ 5,5816,558$13,15475$ (4,767)(757)$ (2,549)(369)$(181)

5,507$5,657

(49)
$ 667

147
$ 5,728$200,553(4,273)8,094(1,479)05,604$208,500

See notes to consolidated financial statements.

6

Consolidated Statements of Cash Flows
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

thousands of
U.S. dollars (Note 2)

millions of yen

2016
Cash flows from operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash
provided by operating activities:
Depreciation and amortization
Gain on reversal of subscription rights to shares
Gain on extinguishment of tie-in shares
Loss on sales of property, plant and equipment
Loss (gain) on sales and valuation of investment securities
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for directors’ retirement and severance benefits
Increase (decrease) in provision for executive officers’ incentive plan
Increase (decrease) in allowance for sales returns
Interest and dividends received
Insurance income
Interest expense
Foreign exchange loss (gain)
Equity in loss of affiliates
Changes in operating assets and liabilities:
Receivables
Inventories
Payables and accrued expenses
Other, net
SubtotalInterest and dividends received
Interest paid
Proceeds from insurance income
Payments for loss on disaster
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments into deposits (more than three months)
Proceeds from withdrawal of time deposits (more than three months)
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of securities
Other investments, net
Net cash provided by investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Purchases of treasury stock
Payments of dividends
Payments of dividends to non-controlling interests
Other finance, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents from newly consolidated subsidiary
Increase in cash and cash equivalents resulting from merger withunconsolidated subsidiaries
Cash and cash equivalents at end of year (Note 16)
See notes to consolidated financial statements.

7

2015

2016

¥1,703¥1,536$15,109

1,128
(17)
(5)
43
—
(1)
18
5
17
(34)
(92)
(21)
1
82
15

844
(29)
(30)
111
10
(11)
(232)
(34)
—
42
(79)
(154)
2
(235)
90

10,013
(146)
(42)
382
—
(5)
163
47
150
(302)
(818)
(188)
10
726
130

436
(201)
324
(369)
3,032
106
(1)
21
—
(677)
2,481

(656)
322
(481)
1,048
2,061
89
(2)
154
(28)
(138)
2,137

3,866
(1,787)
2,873(3,272)
26,908
941
(10)
188
—
(6,012)22,016(0)
1,022(1,687)
3
(9)
—
106
(60)
(624)

(1,005)
—
(840)
123
(8)
3
—
(42)
(1,768)(1)
9,071(14,967)
25
(81)
—
945
(532)
(5,541)

(10)
(167)
(481)
(65)
(152)
(876)

18
(2)
(481)
(48)
(101)
(614)

(89)
(1,479)(4,273)(581)(1,352)(7,774)

(19)
962
6,585
—

32
(212)
6,728
31

(164)
8,537
58,432—

5¥7,55238¥6,58547$67,017

Notes to Consolidated Financial Statements
S.T.CORPORATION and Consolidated Subsidiaries
March 31, 2016

1 Summary of Significant Accounting Policies(a) Basis of presentation
S.T. CORPORATION (the “Company”) and its domestic subsidiaries
maintain their books of account in conformity with accounting principles
generally accepted in Japan, and its overseas subsidiaries maintain theirbooks of account in conformity with those of their countries of domicile.
Effective April 1, 2008, the Company adopted the “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (PITF No. 18, issued by the
Accounting Standards Board of Japan (ASBJ) on May 17, 2006).
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted inJapan, which are different in certain respects as to the application anddisclosure requirements of IFRS, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made to the consolidated financial
statements issued domestically for readers outside Japan. The notes tothe consolidated financial statements include information which is not
required under accounting principles generally accepted in Japan but ispresented herein as additional information. Furthermore, certain amounts
in the prior year’s financial statements have been reclassified to conform tothe current year’s presentation.
As permitted by Financial Instruments and Exchange Law, amounts arerounded to the nearest million yen. Consequently, the totals shown in theaccompanying consolidated financial statements (both in yen and U.S.
dollars) do not necessarily agree with the sum of the individual amounts.
(b) Scope of consolidation(1) Number of consolidated subsidiaries:
6 companies(2) Names of consolidated subsidiaries:
S.T. TRADING CO., LTD., S.T. BUSINESS SUPPORT CO., LTD., S.T.
(THAILAND) CO., LTD., FAMILY GLOVE CO., LTD. (TAIWAN), S.T.
KOREA CORPORATION (SOUTH KOREA), and SHALDAN (THAILAND)
CO., LTD.
(3) Names of major non-consolidated subsidiaries:
JAPAN AROMA LABORATORY CO., LTD. and S.T. GLOVE CO., LTD.
The number of non-consolidated subsidiaries decreased by one
from the previous fiscal year because the former subsidiary, JAPANCORPORATION CO., LTD., was combined into the Company throughan absorption-type merger effective August 1, 2015.
(Reasons for exclusion from scope of consolidation)
Non-consolidated subsidiaries have been excluded from the scope of
consolidation because the total amounts of their total assets, net
sales, profit or loss (amount equivalent to equity interests), retained
earnings (amount equivalent to equity interests) and other figures arelimited, and the effect on the consolidated financial statements as awhole is not significant.
(c) Scope of application of equity-method accounting(1) Number of affiliated companies accounted for by the equity method:
3 companies(2) Names of major companies:
SHALDAN (PHILIPPINES), INC., AEKYUNG S.T. CO., LTD., and NS
FAFA JAPAN CO., LTD.
(3)	‌Name of non-consolidated subsidiaries for which equity method is notappliedThe non-consolidated subsidiaries to which the equity method does
not apply (JAPAN AROMA LABORATORY CO., LTD, and S.T. GLOVECO., LTD.) are accounted for using the cost method rather than theequity method because the total amounts of their profit or loss (amountequivalent to equity interests), retained earnings (amount equivalent toequity interests) and other figures are limited, and the effect on the
consolidated financial statements as a whole is not significant.
(d) Accounting period
The accounting period of the Company begins on April 1 and ends on
March 31 of the following year. The four overseas subsidiaries have fiscal
years ending on December 31. The necessary adjustments for significant
transactions, if any, during the intervening period are made on
consolidation.
(e)	‌Translation of foreign currency transactions and financial
statements
Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the rates of exchange in effect at the balance sheet
date and the accounts of the overseas consolidated subsidiaries aretranslated into yen at the rates of exchange in effect at the balance sheet
date. Foreign exchange gains and losses are credited or charged toincome and translation adjustments are included in net assets.
(f) Marketable securities and investment securities
Other securities with determinable market value are carried at market value
with any changes in unrealized holding gain or loss, net of the related
deferred income tax assets or liabilities, included in net assets. Other
securities without determinable market value are stated at cost determinedby the moving-average method and the cost of other securities sold iscomputed based on the moving-average method. During the years ended
March 31, 2016 and 2015, the Company and its consolidated subsidiaries
did not have any trading securities.
(g) Inventories
Inventories are stated at the lower of cost or net selling value, cost being
determined by the average method.
(h)	‌Property, plant and equipment, except for leased assets, anddepreciation
Property, plant and equipment are stated at cost. Depreciation of property,
plant and equipment of the Company and its domestic subsidiaries,
except for buildings (excluding structures attached to the buildings)
acquired on or after April 1, 1998, is computed by the declining-balancemethod in conformity with the Corporation Tax Law of Japan. Depreciationof property and equipment of overseas subsidiaries and buildings(excluding structures attached to the buildings) acquired on or after April 1,
1998 of the Company and domestic subsidiaries is computed by thestraight-line method.
The estimated useful lives of the major depreciable assets are as follows:
Buildings and structures
3 to 50 years
Machinery, equipment and vehicles
2 to 17 years
Tools, furniture and fixtures
2 to 20 years(i) Intangible assets
Intangible assets, except for leased assets, are amortized by the straightline method. Cost of software purchased for internal use is amortized by
the straight-line method over a period of mainly 5 years, the useful life
applicable to commercially available software.
( j) Leases
Non-cancelable lease transactions that transfer substantially all the risks
and rewards associated with the ownership of the leased assets areaccounted for as finance leases. All other lease transactions are accounted
for as operating leases and related payments are charged to income as
incurred.
Depreciation is computed by the straight-line method over therespective lease terms assuming a nil residual value.

8

Notes to Consolidated Financial Statements(k) Allowance for doubtful receivables
The allowance for doubtful receivables is provided based on pastexperience for normal receivables and on an estimate of the collectabilityof receivables from companies in financial difficulty.
(l) Allowance for sales returns
The allowance for sales returns is provided for losses on sales returns
subsequent to the balance sheet date at an amount equivalent to that
calculated based on the actual percentage of returns in prior years.
(m) Employees’ retirement and severance benefits(1) Method of attributing expected benefit payments to the period
In calculating the retirement benefit obligation, the method of
attributing expected benefit payments to periods is based on thebenefit formula.
(2) Amortization method of actuarial gains/losses
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method over a
period of a certain number of years (5 years) which is shorter than the
average remaining years of service of the employees.
(3) Adoption of a simplified method in some consolidated subsidiaries
Some consolidated subsidiaries adopt the simplified method whichassumes retirement benefit obligation to be equal to the benefits

payable if all eligible employees voluntarily terminated their employment
at the end of fiscal year for the calculation of net defined benefit liability
and retirement benefit expenses.
(n) Provision for directors’ retirement and severance benefits
The Company has accrued provision for directors’ retirement andseverance benefits at the amount which would be required to be paid if all
directors resigned from their positions and left the Company as of thebalance sheet date in accordance with its internal regulations.
(o) Provision for executive officers’ incentive plan
The Company has established an executive officers’ incentive plan trust
and a provision is made at the amount required for stock awards based on
the Company’s internal regulations for awarding stock.
(p) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts
exclusive of consumption taxes.
(q) Cash and cash equivalents
Cash and cash equivalents in the accompanying consolidated statementsof cash flows consist of cash on hand, demand deposits and liquid
short-term investments with a maturity of three months or less from theirrespective dates of acquisition.

2 Basis of Translation
The consolidated financial statements presented herein are expressed inyen and, solely for the convenience of the reader, have been translated
into U.S. dollars at ¥112.69 = U.S.$1.00, the approximate exchange rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2016. Thistranslation should not be construed as a representation that all amounts
shown could have been, or could in the future be, converted into U.S.
dollars at that or any other rate.

3 Change in Accounting Policies
The Company has adopted “Revised Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, September 13, 2013) (hereinafter,
the “Business Combinations Accounting Standard”), “Revised AccountingStandard for Consolidated Financial Statements” (ASBJ Statements No.
22, September 13, 2013) (hereinafter, the “Consolidation AccountingStandard”), “Revised Accounting Standard for Business Divestitures”(ASBJ Statement No. 7, September 13, 2013) (hereinafter, the “Business
Divestitures Accounting Standard”) and other standards effective from thefiscal year ended March 31, 2016. Accordingly, the accounting methods
have been changed with the difference arising from changes in equity insubsidiaries in which the Company retains control recorded as capitalsurplus, and acquisition-related costs recorded as expenses for the fiscal
year in which they are incurred. In addition, regarding businesscombinations occurring on or after April 1, 2015, the accounting method
has been changed to retroactively reflect adjustments to the amountallocated to acquisition costs arising from the finalization of the provisional

9

accounting treatment on the consolidated financial statements of theperiod in which the business combination occurs. Furthermore, thepresentation of net income and others has been changed and thepresentation of minority interests has been changed to non-controllinginterests. In order to reflect the changes in presentation, the consolidated
financial statements for the fiscal year ended March 31, 2015 have been
reclassified.
The Business Combinations Accounting Standard and other standards
have been adopted in accordance with the transitional treatment set forthin Article 58-2 (4) of the Business Combinations Accounting Standard,
Article 44-5 (4) of the Consolidation Accounting Standard and Article 57-4
(4) of the Business Divestitures Accounting Standard. The Company
adopted these accounting standards effective April 1, 2015.
There was no impact on the consolidated financial statements as aresult of the application of these accounting standards.

4 Additional Information(Transactions of Delivering the Company’s Own Stock to Employees etc.
through Trusts)(a) Board Benefit Trust (BBT)The Company reviewed the system for executive officers’ compensation,and introduced a “Board Benefit Trust” with the goal of increasingawareness of the importance of contributing to further enhancing theCompany’s corporate value and performance over the medium-to-longterm from the fiscal year ended March 31, 2016.
The Company has adopted “Practical Solution on Transactions ofDelivering the Company’s Own Stock to Employees etc. through Trusts”(PITF No. 30, issued by the ASBJ on March 26, 2015).
(1) Summary
The Company awards the Company’s stock to the executive officers
who satisfy certain requirements based on predetermined regulations
for awarding stocks. Executive officers are granted a certain number ofpoints depending on the financial results, and upon their retirement,
the officers will receive stock depending on the number of points they
have accumulated.
The Company has established the Trust by contributing funds to be
used for the acquisition of the Company’s stock on behalf of executive
officers. The Trust will acquire the Company’s stock to be awarded tothe executive officers in the future, and the shares are managed astrust assets.
(2) The Company’s stock in the Trust
The Company’s own stock in the Trust is recorded in treasury shares
under net assets based on the book value of the shares in the Trust(excluding ancillary expenses). The book value and the number ofthese treasury shares in the Trust as of March 31, 2016 were ¥105
million (U.S.$929 thousand) and 100,000 shares, respectively.

(b) Employee Stock Ownership Plan (ESOP) Trust
The Company introduced an Employee Stock Ownership Plan (ESOP)
Trust as an employee incentive plan with the aim of raising awareness ofshare price and improving financial results.
The Company has adopted “Practical Solution on Transactions ofDelivering the Company’s Own Stock to Employees etc. through Trusts”(PITF No. 30, issued by the ASBJ on March 26, 2015).
(1) Summary
The Company awards the Company’s stock to the employees who
satisfy certain requirements based on predetermined regulations forawarding stocks.
If the Company’s profit is higher than a pre-determined standard,
the Company awards a certain number points to employees. Upon
their retirement, employees will receive the Company’s stock
depending on the number of points they have accumulated.
The Company has established the Trust by contributing funds to be
used for the acquisition of the Company’s stock on behalf ofparticipating employees. The Trust will acquire the Company’s stock
to be awarded to employees in the future, and the shares aremanaged as trust assets.
(2) The Company’s stock in the Trust
The Company’s own stock in the Trust is recorded in treasury shares
under net assets based on the book value of the shares in the Trust(excluding ancillary expenses). The book value and the number ofthese treasury shares in the Trust as of March 31, 2016 were ¥126
million (U.S.$1,115 thousand) and 120,000 shares, respectively.

10

Notes to Consolidated Financial Statements

5 Consolidated Statements of Comprehensive Income
The amount of recycling and amount of income tax effect associated with other comprehensive income for the years ended March 31, 2016 and 2015 wereas follows:
thousands of
U.S. dollars

millions of yen

2015

2016
Unrealized holding gain (loss) on other securities, net of taxes
Amount recognized in the year
Reclassification adjustments included in the statement of income
Before income tax effect adjustment
Amount of income tax effectUnrealized holding gain (loss) on other securities, net of taxes

2016¥1,081
(6)
1,074
(335)
739

¥864
0
864
(266)
598

$9,589(57)
9,532(2,977)
6,555

8

25

75

Translation adjustments
Amount recognized in the year

(102)

166

(905)

Remeasurements of defined benefit plans, net of tax
Amount recognized in the year
Reclassification adjustments included in the statement of income
Before income tax effect adjustment
Amount of income tax effectRemeasurements of defined benefit plans, net of tax

(89)
28
(61)
19
(42)

206
55
261
(90)
170

(788)
249
(538)
170
(369)

(12)
—
(12)
¥591

26
(7)
19
¥980

(110)
—
(110)
$5,247

Unrealized revaluation loss on land, net of taxes
Amount of income tax effect

Other comprehensive income (loss) on equity method companies
Amount recognized in the year
Reclassification adjustments included in the statement of income
Other comprehensive income (loss) on equity method companies
Total other comprehensive income (loss)

6 Financial Instruments(1) Current status of financial instruments(a) Policy in relation to financial instruments
The Company and its consolidated subsidiaries (collectively, the “Group”)
raise necessary funds following capital investment plans for undertaking
the manufacturing-and-selling businesses. Surplus funds of the Groupare only invested in highly secure financial assets.
(b) Details of financial instruments and related risk
Trade receivables—trade notes and accounts receivable—are
exposed to credit risk in relation to customers. In addition, receivables
denominated in foreign currencies are exposed to foreign currency
exchange risk.
Investment securities, most of which are stocks of other companies
with which the Group has business relationships, are exposed tomarket price fluctuation risk.
Substantially all trade payables—notes and accounts payable-trade,electronically recorded obligations-operating and other payables—havepayment due dates within one year. In addition, payables denominatedin foreign currencies are exposed to foreign currency exchange risk.
(c) Risk management system for financial instruments(Credit risk management—the risk that customers or counterparties
may default)
The Company has established a management policy whereby theCompany evaluates the financial conditions of its customers and monitors

11

due dates and outstanding balances regularly to identify and mitigate
risks of bad debts from customers who are having financial difficulties.
The consolidated subsidiaries perform equivalent management
procedures as the Company.
(Market risk management—the risk arising from fluctuations in
exchange rates and interest rates)
The Company uses forward exchange contract transactions with theaim of avoiding risk related to fluctuation in future foreign exchange.
For investment securities, the Company periodically confirms themarket value of such financial instruments and reports to the director
in charge. The Company reviews the status of these investments on acontinuing basis.
(Liquidity risk management—the risk that the Group may not able tomeet its payment obligations on the schedule dates)
The Company manages liquidity risk by means of preparing monthly
financial plans.
(d)	‌Supplementary explanation of items relating to the fair value of financial
instruments
The fair value of financial instruments is based on their quoted market
prices if available. If there are no market prices available, fair value isreasonably estimated. Because estimation of fair values incorporates
variable factors, adopting different assumptions can change the value.

(2) Estimated fair value of financial instruments
The carrying value of financial instruments recognized on the consolidated balance sheets as of March 31, 2016 and 2015, the estimated fair value of such items
and the differences between them are shown below. Financial instruments for which fair value is extremely difficult to estimate are not included in the following table.
millions of yen
Year ended March 31, 2016

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets¥7,566
5,380
4,794¥17,740¥7,566
5,380
4,794¥17,740————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities¥2,202
2,982
2,160¥7,344¥2,202
2,982
2,160¥7,344————

Year ended March 31, 2015

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Marketable securities and Investment securities
Assets¥7,629
5,867
3,811¥17,307¥7,629
5,867
3,811¥17,307————a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities¥1,974
2,922
2,384¥7,280¥1,974
2,922
2,384¥7,280————

Year ended March 31, 2016

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets$67,139
47,74142,545$157,426$67,139
47,74142,545$157,426————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities$19,542
26,464
19,166$65,172$19,542
26,464
19,166$65,172————

Difference

millions of yen
Difference

thousands of U.S. dollars
Difference

Notes: 1. Method of estimating the fair value of financial instruments and other matters relating to investment securities
Assetsa. Cash and time deposits and b. Trade notes and accounts receivable
Because these items are settled over the short term, the fair value and carrying value are nearly equivalent. Therefore, the relevant carrying value is used.
c. Investment securities
Stocks are valued at the exchange trading price. Bonds are valued at the exchange trading price or at the price provided by the financial institutions offering these securities. For information on securities classified by purpose ofholding, please refer to the “Marketable Securities and Investment Securities” section of the notes to the financial statements.
Liabilities
a. Trade payables, b. Electronically recorded obligations-operating and c. Other payables
Because these items are settled over the short term, the fair value and carrying value are nearly equivalent. Therefore, the relevant carrying value is used.
2. Financial instruments for which fair value is extremely difficult to determine
Carrying value
thousands of
U.S. dollars

millions of yen

Unlisted equity securities

2016
¥ 55

2015
¥ 55

2016
$ 489

Because the fair value of these financial instruments is extremely difficult to determine, given that no quoted market price is available, they are not included in the above table.

12Notes to Consolidated Financial Statements

3. Redemption schedule for receivables and other securities with maturity dates at March 31, 2016 and 2015 are summarized as follows:Year ended March 31, 2016

Time deposits
Trade notes and accounts receivable
Investment securities
Other
Total

Year ended March 31, 2015

Time deposits
Trade notes and accounts receivable
Marketable securities and investment securities
Bonds
Other
Total

One year or lessmillions of yen
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

More than 10 years¥7,565
5,380

¥—
—

—
—

—
—

—
¥12,945

100
¥100

—
—

—
—

One year or lessmillions of yen
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

More than 10 years¥7,627
5,867

¥—
—

—
—

—
—

100
—
¥13,594

—
100
¥100

—
—
—

—
—
—

thousands of U.S. dollars
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

Year ended March 31, 2016

One year or lessTime deposits
Trade notes and accounts receivable
Investment securities
Other
Total

$67,132
47,741

$—
—

—
—

—
—

—
$114,874

887
$887

—
—

—
—

More than 10 years

7 Derivatives
The Company and its consolidated subsidiaries had no derivative instruments outstanding at March 31, 2016 and 2015.

8 Marketable Securities and Investment Securities(1) Other securities
The acquisition cost and related carrying value of other securities with a determinable market value at March 31, 2016 and 2015 are summarized as follows:
thousands of
U.S. dollars

millions of yen

Acquisition cost
Carrying value
Total unrealized gain
Total unrealized loss2016
¥2,662
4,794
2,170
37

2015
¥2,753
3,811
1,077
19

2016
$23,621
42,545
19,253329

At March 31, 2016 and 2015, unlisted stocks (whose carrying value was ¥55 million (U.S.$489 thousand) and ¥55 million, respectively) are not included in
the above table because their fair value is extremely difficult to determine, given that no quoted market price is available.

13(2) Sales of other securities(Year ended March 31, 2016)
Not applicable(Year ended March 31, 2015)
millions of yen
Proceeds from sales

Gain on sales

Loss on sales

¥3

—

¥0

(1) Stocks(2) Bonds
1. Government bonds

—

—

—

2. Corporate bonds

—

—

—

3. Others———(3) Other securities

—

—

—

¥3

—

¥0

Total

(3) Impairment of investment securities
The Company recognized impairment loss on investment securities of ¥10 million for the year ended March 31, 2015.

9 Land Revaluation
In accordance with the Land Revaluation Law (Proclamation No. 34 dated
March 31, 1998), land used for business activities was revalued at March
31, 2002. The revaluation difference, net of taxes, is stated as “unrealized
revaluation loss on land, net of taxes” in net assets. Deferred tax liabilities
arising from this revaluation difference are presented separately fromdeferred tax liabilities for other temporary differences in the accompanying
consolidated balance sheets. The market value of the land as of March 31,
2016 and 2015 decreased by ¥562 million (U.S.$4,987 thousand) and¥584 million, respectively, after the revaluation.

10 Pledged Assets
Pledged assets for the years ended March 31, 2016 and 2015 are summarized as follows:
thousands of
U.S. dollars

millions of yen

2016Time deposits

¥4

2015
¥5

2016
$ 39

Time deposits were pledged as collateral mainly for leased office space at March 31, 2016 and 2015.

14

Notes to Consolidated Financial Statements

11 Income Taxes
At March 31, 2016 and 2015, the tax effect of the temporary differences which gave rise to a significant portion of the deferred tax assets (excluding deferredtaxes on unrealized revaluation loss on land) was as follows:
thousands of
U.S. dollars

millions of yen

2015

2016
Deferred tax assets:
Accrued employees’ bonuses

2016

¥126

¥ 136$1,119

Allowance for sales returns

39

52

342

Accrued business taxes

34

28

306

Loss on valuation of inventories

44

24

394

Net defined benefit liability

393

379

3,484

Provision for directors’ retirement and severance benefits

39

39

350

Provision for executive officers’ incentive plan

5

—

46

Write-downs of securities

59

61

523

Impairment loss
Other

7

7

64

148

141

1,315
7,946

Gross deferred tax assets

895

868

Valuation allowance

(112)

(109)

(996)

Total deferred tax assets

783

759

6,949

(111)

Deferred tax liabilities:
Deferred gain on sales of property

(13)

(13)

Undistributed earnings of controlled foreign companies

(97)

(88)

(859)

Unrealized holding gain on other securities, net of taxes

(652)

(316)

(5,783)

Total deferred tax liabilities

(761)

(418)

(6,753)Net deferred tax assets¥22¥ 341$196

At March 31, 2016 and 2015, net deferred tax assets were included in the following items in the consolidated balance sheets.
thousands of
U.S. dollars

millions of yen

2016

2016

¥384
11

¥ 3714$3,406
97

Non-current liabilities - deferred tax liabilities

(373)

(34)

(3,307)(Changes in presentation)“Loss on valuation of inventories,” which was included in “Other” underdeferred tax assets in the previous fiscal year, has been separately
presented from the fiscal year ended March 31, 2016 due to increasedmateriality.
In order to reflect this change in presentation of the consolidated

15

2015

Current assets - deferred tax assets
Non-current assets - deferred tax assets

financial statements, a reclassification of the previous fiscal year has been
made accordingly.
As a result, “Other” under deferred tax assets of ¥165 million as ofMarch 31, 2015 has been reclassified as “Loss on valuation of inventories”
of ¥24 million and “Other” of ¥141 million.

A reconciliation of the statutory tax rates to the Company’s effective tax rates for the years ended March 31, 2016 and 2015 is summarized as follows:
2016
Japanese statutory tax rate
Permanent differences, such as entertainment expenses, etc.
Permanent differences, such as dividend income
Tax credit
Undistributed earnings of controlled foreign companies
Equity in loss of affiliates
Downward adjustment of deferred tax assets at end of year due to tax rate change
Income taxes for prior periods
Other
Effective tax rate
(Adjustment of deferred tax assets and liabilities pursuant to the change inthe corporate tax rates)
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of
2016) and the “Act for Partial Amendment of the Local Tax Act, etc.” (ActNo. 13 of 2016) were enacted by the Japanese Diet on March 29, 2016.
As a result, the effective statutory tax rate used to measure the Company’sdeferred tax assets and liabilities was changed from 32% to 31% for the
temporary differences expected to be realized or settled in the year
beginning April 1, 2016.

33.00%
1.35(0.33)(1.93)
0.50
0.28
1.31
6.35
(0.64)
39.89%

2015
35.00%
1.69(0.71)(3.10)
1.32
2.04
3.46
—
(3.45)
36.25%As a result of this change, deferred tax assets (net of deferred tax
liabilities) and net defined benefit liability decreased by ¥2 million (U.S.$14
thousand) and ¥0 million (U.S.$3 thousand), respectively. In addition,
income taxes-deferred and unrealized holding gain on other securities
increased by ¥22 million (U.S.$197 thousand) and ¥21 million (U.S.$187
thousand), respectively. Also, unrealized revaluation gain on land (deferred
tax liabilities) decreased by ¥8 million (U.S.$75 thousand) and unrealized
revaluation loss on land, net of taxes increased by same amount for theyear ended March 31, 2016.

12 Employees’ Retirement and Severance Benefits
The Company and its consolidated subsidiaries have either funded or
unfunded defined benefit plans for payments of employees’ retirement.
The Group pays a pension or lump sum based on length of service andsalary in the defined benefit corporate pension plan.
In unfunded retirement benefit plans, the Company pays a lump sum
based on length of service and salary as a retirement benefit.

Some consolidated subsidiaries adopt the simplified method whichassumes retirement benefit obligation to be equal to the benefits payable if
all eligible employees voluntarily terminated their employment at fiscal year
end for the calculation of net defined benefit liability and retirement benefit
expenses.

Defined benefit plans
Adjustments of beginning and ending balance of retirement benefit obligations
thousands of
U.S. dollars

millions of yen

Balance at the beginning of the year
Cumulative effect of change in accounting principle
Restated balance at the beginning of the year
Service cost
Interest cost
Actuarial loss
Payment of retirement benefits
Other
Balance at the end of the year

2016

2015

2016

¥3,810
—
3,810
257
30
5
(199)
(1)
¥3,903¥3,931
(144)
3,787
229
30
1
(240)
2
¥3,810$33,808—
33,8082,283
268
47(1,767)(8)$34,631

Adjustments of beginning and ending balance of plan assets
thousands of
U.S. dollars

millions of yen

Balance at the beginning of the year
Expected return on plan assets
Actuarial loss
Employer’s contributions
Payment of retirement benefits
Balance at the end of the year

2016

2015

2016

¥2,620
52
(83)
159
(142)
¥2,606¥2,367
47
207
161
(162)
¥2,620$23,247
465
(740)
1,413
(1,257)$23,12816

Notes to Consolidated Financial Statements

Adjustments of ending balance of retirement benefit obligations and plan assets, and net defined benefit asset and liability on consolidated balance sheet
thousands of
U.S. dollars

millions of yen

Funded retirement benefit obligations
Plan assets
Unfunded retirement benefit obligations
Net defined benefit asset and liability on consolidated balance sheet
Net defined benefit liability
Net defined benefit asset and liability on consolidated balance sheet

2016

2015

2016

¥2,736(2,606)
130
1,166
1,296
1,296
¥1,296¥2,701(2,620)
81
1,109
1,190
1,190
¥1,190$24,281(23,128)
1,153
10,35011,503
11,503$11,503

The following table summarizes the components of net retirement benefit expenses:
thousands of
U.S. dollars

millions of yen

2015

2016
Service cost
Interest cost on benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Extraordinary additional retirement payments
Net retirement benefit expenses

¥257
30
(52)
28
18
¥281

2016

¥229
30
(47)
55
28
¥295

$2,283
268
(465)
249
158
$2,493

Remeasurements of defined benefit plans, before tax, in the consolidated statements of comprehensive income
thousands of
U.S. dollars

millions of yen

2015

2016
Actuarial gain (loss)¥(61)

2016

¥261

$(538)Remeasurements of defined benefit plans, before tax, in the consolidated balance sheets
thousands of
U.S. dollars

millions of yen

2016
Unrecognized actuarial gain (loss)

¥30

2015

2016

¥(31)

$262

2016

2015

Plan assets(1) Plan assets
The fair value of plan assets, by major category, as a percentage of total plan assets is as follows:

Domestic bonds
Domestic equities
Foreign bonds
Foreign equities
General accounts
Other
Total

21.8%
1.1
15.7
3.8
46.3
11.3
100.0%

12.8%
20.6
5.5
14.4
44.3
2.4
100.0%(2) Calculation method of expected long-term rate of return on plan assets
The expected return on assets has been estimated based on the anticipated allocation to each asset class and the expected long-term returns on assets
held in each category.
The assumptions used in the actuarial calculation
The main assumptions used in the actuarial calculation (presented as a weighted average) are as follows:
2016
Discount rate
Expected rate of return on plan assets

17

0.8%
2.0%

2015
0.8%
2.0%

13 Net Assets
The Corporation Law of Japan (the “Law”), which superseded most of theprovisions of the Commercial Code of Japan, went into effect on May 1,
2006. The Law provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve)
and retained earnings (other than the legal reserve) be transferred to thecapital reserve and the legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of the capital stock
account. Such distributions can be made at any time by resolution of theshareholders or by the Board of Directors if certain conditions are met.

Capital surplus and the legal reserve are not available for the distributionof dividends but may be used to reduce or eliminate a deficit or may betransferred to stated capital. At March 31, 2016, the legal reserve of theCompany included in retained earnings amounted to ¥550 million(U.S.$4,879 thousand).
The maximum amount which the Company can distribute as dividends
is calculated based on the non-consolidated financial statements of theCompany and in accordance with the Corporation Law of Japan.

14 Amounts per Share
Net assets per share as of March 31, 2016 and 2015 were ¥1,049.58(U.S.$9.31) and ¥1,001.84, respectively. Basic earnings per share for theyears ended March 31, 2016 and 2015 was ¥42.01 (U.S.$0.37) and¥40.83, respectively.
Diluted earnings per share for the years ended March 31, 2016 and2015 was ¥41.97 (U.S.$0.37) and ¥40.82, respectively.

The basis for the calculation of basic earnings per share and diluted earnings per share for the years ended March 31, 2016 and 2015 was as follows:
thousands of
U.S. dollars

millions of yen

2015

2016
Basic earnings per share:
Profit attributable to owners of parent
Amount not attributable to shareholders of common stock
Amount attributable to shareholders of common stock
Weighted-average number of shares outstanding(millions of shares)
Diluted earnings per share:
Adjustments to profit attributable to owners of parent
Increase in number of shares outstanding(millions of shares)(Subscription rights to shares)
Shares having an anti-dilutive effect(millions of shares)

2016

¥ 912
—
912

¥ 892
—
892

$ 8,094
—
8,094

22

22

—

—

—

—

0
(0)

0
(0)

—
—

—

1

—

The basis for calculation of total net assets per share as of March 31, 2016 and 2015 was as follows:
thousands of
U.S. dollars

millions of yen

Total net assets per share:
Total net assets
Deductions:
Subscription rights
Non-controlling interests
Amounts attributable to shareholders of common stock
Number of shares outstanding at year end(millions of shares)

2016

2015

2016

¥ 23,496
721
75
646
22,775¥ 22,600
710
81
629
21,891$ 208,500
6,395
667
5,728
202,105

22

22

—

18

Notes to Consolidated Financial Statements

15 Major Expenses
Major expenses included in selling, general and administrative expenses for the years ended March 31, 2016 and 2015 were as follows:
thousands of
U.S. dollars

millions of yen

Sales promotion expenses
Advertising costs
Salaries
Shipment and storage expenses
Provision for employees’ retirement and severance benefits
Provision for directors’ retirement and severance benefits
Provision for executive officers’ incentive plan2016
¥ 6,487
2,742
2,095
1,358
235
5
17

2015
¥ 5,861
2,857
2,067
1,357
267
20
—

2016
$ 57,565
24,32918,58812,050
2,089
47
150

Research and development expenses included in general and administrative expenses and cost of sales for the years ended March 31, 2016 and 2015
amounted to ¥536 million (U.S.$4,758 thousand) and ¥513 million, respectively.

16 Cash and Time Deposits
A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows to cash and time deposits in the accompanying
consolidated balance sheets at March 31, 2016 and 2015 is as follows:
thousands of
U.S. dollars

millions of yen

Cash and time deposits
Time deposits with a maturity in excess of three months
Other current assets (*)
Cash and cash equivalents

2016¥7,566(20)
7¥7,5522015¥7,629(1,044)—¥6,5852016$67,139(180)
58$67,017(*) These represent the Company’s contributions of funds to a bank in order to establish the “Board Benefit Trust (BBT)” and “Employee Stock Ownership Plan (ESOP) Trust.”

17 Leases(Finance leases)
Leased assets included in property, plant and equipment are machinery, equipment and vehicles, tools, furniture and fixtures in the daily necessities segment.
Leased assets included in intangible assets are software.
(Operating leases)
The Company and its consolidated subsidiaries had no significant operating leases at March 31, 2016 and 2015.

19

18 Segment Information(1) Summary of Reporting Segments
The Group changed its reporting segments from two (Mothproofing andHygiene-Related Products and Household Environment-Related Products)
to a single segment (Daily necessities) from the fiscal year ended March
31, 2016.
As a result of having considered the process of making decisions about
resource allocation and the nature of the Company’s products and theirmarkets, the Company judged that a single segment is the most rational
and the best fit considering the actual circumstances.
Segment information for the years ended March 31, 2016 and 2015 isomitted as the Group operates as a single segment.

(2)	‌Calculation method of sales, profits or losses, and other items byreportable segment
Information on the calculation method is omitted as the Group operates asa single segment.
(3)	‌Information on the amounts of sales, income, and other items byreportable segments
Information on the amounts of sales and other items for the years ended
March 31, 2016 and 2015 is omitted as the Group operates as a single
segment.

(4) Related Information(a) Information by products and services
millions of yen
Year ended March 31, 2016

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties¥21,118¥10,155¥4,947¥5,333¥6,798¥48,351

Year ended March 31, 2015

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties¥20,319¥10,405¥6,093¥5,070¥6,377¥48,263

Year ended March 31, 2016

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties$187,402$90,114$43,896$47,321$60,329$429,062

millions of yen

thousands of U.S. dollars(b) Information by geographical segment(Sales)Geographical segment information is not presented as overseas sales
were less than 10% of consolidated net sales for the years ended
March 31, 2016 and 2015.

(Property, plant and equipment)
Geographical segment information is not presented as the amount ofproperty, plant and equipment in Japan exceeded 90% of the total ofproperty, plant and equipment at March 31, 2016 and 2015.

(c) Information by major customers
Sales

PALTAC CORPORATION
ARATA CORPORATION

thousands of
U.S. dollars

millions of yen

Customers

2016

2015

2016

¥16,273¥9,768¥16,064¥9,964$144,406$86,682

Related segment

Daily necessities
Daily necessities

19 Related Party Transactions(Years ended March 31, 2016 and 2015)
Not applicable

20 Inventory Valuation Loss Included in Cost of Sales
Inventory valuation loss write-downs below cost to net selling value are included in cost of sales and amounted to ¥483 million (U.S.$4,285 thousand) and¥593 million for the years ended March 31, 2016 and 2015, respectively.

20

Notes to Consolidated Financial Statements

21 Note to Consolidated Statements of Changes in Net Assets
Shares in issue and outstanding and treasury stock at March 31, 2016 and 2015 were as follows:(Year ended March 31, 2016)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock

23,000 thousand
1,300 thousand

Note: Details of the increase are as follows:
Increases due to purchase on the stock market:
Increase due to purchase of shares less than standard unit:
Increase due to acquisition of treasury stock by the Trust:
Decrease due to disposition of treasury stock by third-party allotment:

150 thousand
1 thousand
220 thousand
220 thousand(Year ended March 31, 2015)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock

23,000 thousand
1,149 thousand

Note: Detail of the increase/decrease is as follows:
Increase due to purchase of shares less than standard unit:

2 thousand

The common stock owned by the Trust (220 thousand shares) is included in the number of shares held intreasury stock.

Subscription rights at March 31, 2016 were as follows:
Subscription rights for stock options¥75 million (U.S.$667 thousand)

Subscription rights at March 31, 2015 were as follows:
Subscription rights for stock options

Dividends paid from retained earnings for the year ended March 31,
2016 were as follows:

Dividends paid from retained earnings for the year ended March 31,
2015 were as follows:

Total amount ofdividends(millions of yen)

Dividends
per share(yen)

Board of directors’
meeting held on
May 18, 2015

¥ 240

¥ 11

Board of directors’
meeting held on
October 29, 2015

241

11

Resolution

Resolution

Board of directors’
meeting held on
May 16, 2016

21

¥ 241

Source ofdividends

Retainedearnings

Board of directors’
meeting held on
May 19, 2014

¥ 240

¥ 11

Board of directors’
meeting held on
October 30, 2014

240

11

Resolution

March 31,2015

June 1,2015

September 30, December 4,
2015
2015

Dividends
per share
(yen)

¥ 11

Dividends
per share(yen)

Effective date

Dividends for which the record date was in the year ended March 31,
2016 and the effective date is in the year ending March 31, 2017 were as
follows:
Total amount ofdividends(millions of yen)

Total amount ofdividends(millions of yen)

Record date

¥81 million

Record date

Effective date

March 31,2014

June 2,2014

September 30, December 5,
2014
2014

Dividends for which the record date was in the year ended March 31,
2015 and the effective date was in the year ended March 31, 2016 wereas follows:

Record date

Effective date

Resolution

March 31,2016

May 31,
2016

Board of directors’
meeting held on
May 18, 2015

Total amount ofdividends(millions of yen)

¥ 240

Source ofdividends

Retainedearnings

Dividends
per share
(yen)

¥ 11

Record date

Effective date

March 31,2015

June 1,2015

22 Stock Option Plans
At March 31, 2016, the Company had stock option plans, which were approved at the annual general meetings of the shareholders and by the Board of
Directors. Details of these stock option plans are summarized as follows:
Date of approval

Number of shares granted

Eligible participants

Exercisable period

June 18, 2008
June 18, 2009

95,00020,0003 officers and 12 employees
4 employees

Aug 1, 2010 – July 31, 2015
Aug 4, 2011 – Aug 3, 2016

June 18, 2010

155,000

4 officers and 17 employees

Aug 3, 2012 – Aug 2, 2017

June 17, 2011

35,0007 employees

Aug 2, 2013 – Aug 1, 2018

June 15, 2012

130,000

3 officers and 8 employees

Aug 2, 2014 – Aug 1, 2019

June 14, 2013

130,000

2 officers and 10 employees

Aug 2, 2015 – Aug 1, 2020

June 17, 2014

175,000

6 officers and 11 employees

Aug 2, 2016 – Aug 1, 2021

The option price per share was determined on the date the options were granted based on an established formula for determining option prices. The
options are exercisable during the above periods provided that the recipients are still directors, officers or employees of the Company or its subsidiaries.
Cost related to the 2016 stock option plan amounting to ¥11 million (U.S.$97 thousand) were included in selling, general and administrative expenses.
Description of stock options

GranteesType of stock
Number ofstock options
granted (*)
Grant dateConditionfor exercise
Working period
Exercisable
period2009
3 officers and
12 employees
Common stock
95,0002010
4 employees
Common stock
20,0002011
4 officers and
17 employees
Common stock
155,000

August 1, 2008

August 3, 2009

Working from
August 1, 2008
to July 31,
2010
August 1, 2008
to July 31,
2010
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 3, 2009
to August 3,
2011
August 3, 2009
to August 3,
2011
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)2012
7 employees
Common stock
35,0002013
3 officers and
8 employees
Common stock
130,0002014
2 officers and
10 employees
Common stock
130,0002015
6 officers and
11 employees
Common stock
175,000

August 2, 2010

August 1, 2011

August 1, 2012

August 1, 2013

August 1, 2014

Working from
August 2, 2010
to August 2,
2012
August 2, 2010
to August 2,
2012
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 1, 2011
to August 1,
2013
August 1, 2011
to August 1,
2013
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 1, 2012
to August 1,
2014
August 1, 2012
to August 1,
2014
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 1, 2013
to August 1,
2015
August 1, 2013
to August 1,
2015
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 1, 2014
to August 1,
2016
August 1, 2014
to August 1,
2016
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)(*) Number of stock options in the column “Number of stock options granted” has been converted into the equivalent numbers of shares.

22Notes to Consolidated Financial Statements

Stock option activity during the year ended March 31, 2016 was as follows:
Number of shares

Non-vested Outstanding at beginning of year
Granted during the year
Forfeited during the year
Vested during the year
Outstanding at end of year
Vested Outstanding at beginning of year
Vested during the year
Exercised during the year
Forfeited during the year
Outstanding at end of year

2009
—
—
—
—
—
75,000——75,000
—

2010
—
—
—
—
—
20,000———20,000

2011
—
—
—
—
—
140,000———
140,000

2012
—
—
—
—
—
35,000———35,0002009¥1,264
—
¥220

2010
¥1,037
—
¥197

2011
¥1,049
—
¥178

2012
¥976
—
¥194

2013
—
—
—
—
—
70,000———70,0002014
125,000——
125,000——
125,000——
125,000

2015
175,000———
175,000
—
—
—
—
—

2013
¥946
—
¥153

2014
¥1,066
—
¥117

2015
¥1,059—¥97

Price of stock options
yen

Exercise price
Weighted-average market price
Fair value per option on grant date

The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option pricing model.
Method of estimating exercised stock options
The Company estimated the number of exercised stock options based on the actual number of forfeitures because it is difficult to estimate the number ofstock options which will be forfeited in the future.

23

Report of Independent Auditors24

Five-Year Financial Summary
S.T. CORPORATION and consolidated subsidiaries
Years ended March 31

thousands of
U.S. dollars(except per sharedata and ratios)

millions of yen(except per share data and ratios)

2016

2015

2014

2013

2012

2016
$429,062

For the Year:¥48,351¥48,263¥46,993¥46,944¥46,354

Cost of sales

Net sales

27,29428,23526,98027,73827,347242,208

Selling, general and administrative expenses

18,715

18,216

17,881

17,406

17,256

166,073

Operating income

2,342

1,813

2,131

1,800

1,751

20,782

Profit before income taxes

1,703

1,536

1,637

1,105

596

15,109

912

892

1,234

565

76

8,094

Capital expenditures

1,758

1,486

942

2,061

1,007

15,597

Depreciation and amortization

1,128

844

894

830

931

10,013

536

513

564

572

659

4,758
22,016

Profit attributable to owners of parent

R&D expenses
Cash flows from operating activities

2,481

2,137

2,110

980

1,560

Cash flows from investing activities(624)(1,768)514(1,924)(787)(5,541)

Free cash flow

1,857

369

2,624

(944)

773

16,476

Cash flows from financing activities

(876)

(614)

(465)

(557)

(549)

(7,774)

At Year-End:¥19,708¥20,221¥18,956¥15,533¥16,941$174,886

Property, plant and equipment, net

8,659

8,110

7,555

7,524

6,295

76,835

Total current assets
Total assets

34,92433,78532,37030,07630,287309,915

Total current liabilities

8,781

9,008

8,966

8,058

8,778

77,921

Total long-term liabilities

2,648

2,176

2,318

1,805

1,807

23,494

Total net assets

23,496

22,60021,087

20,213

19,701

208,500

Cash and cash equivalents

7,552

6,585

6,728

4,469

5,921

67,017

Number of shares issued (thousand shares)

23,00023,00023,00023,00023,000Treasury stock (thousand shares)

1,301

1,149

1,147

1,284

1,282

860

859

760

663

647

Number of employees
Per Share (yen and U.S. dollars):¥42.01¥40.83¥56.74¥26.01¥3.48$0.37

Dividends

22.00

22.00

22.00

22.00

22.00

0.20

Net assets

1,049.58

1,001.84

936.06905.84884.45

9.31

1,114

1,021

999

988

1,025

9.89

Operating income margin

4.8

3.8

4.5

3.8

3.8

Profit before income taxes/net sales

3.5

3.2

3.5

2.4

1.3

Return on sales

1.9

1.8

2.6

1.2

0.2

ROA

2.7

2.7

4.0

1.9

0.3

ROE

4.1

4.2

6.1

2.9

0.4

Equity ratio

65.2

64.8

63.2

65.4

63.4

Profit attributable to owners of parent

Common stock price
Ratios (%):

Notes: 1. U.S. dollar amounts are translated from yen for convenience only, at the rate of ¥112.69 = U.S.$1.00, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2016.
2. The common stock prices listed are as of the end of the fiscal year ended in March.
3. ROA = Profit attributable to owners of parent divided by average total assets for the fiscal year.
4. ROE = Profit attributable to owners of parent divided by average total equity (total net assets minus subscription rights less non-controlling interests in consolidated subsidiaries) for the fiscal year.

25

Investor Information
As of March 31, 2016

Group Companies

Corporate Data
Company name

S.T. CORPORATION

Headquarters

4-10, Shimo-ochiai 1-chome,

S.T. TRADING CO., LTD.

Shinjuku-ku, Tokyo 161-8540,

S.T. BUSINESS SUPPORT CO., LTD.

Japan
S.T. (THAILAND) CO., LTD.

Establishment

August 31, 1948

Common stock¥7,065,500,000

Fiscal year-end

March 31

Shares issued and outstanding

23,000,000

Listed stock exchangeTokyo Stock Exchange,

FAMILY GLOVE CO., LTD. (TAIWAN)
S.T. KOREA CORPORATION (SOUTH KOREA)First Section
JAPAN AROMA LABORATORY CO., LTD.

Shareholders

16,055

Registered transfer agent

Mizuho Trust & Banking Co., Ltd.

Accounting auditors

Ernst & Young ShinNihon LLC

Annual shareholders’ meeting

Middle of June each year

Employees

860 (consolidated)

SHALDAN (THAILAND) CO., LTD.

406 (non-consolidated)
Contact

Kouichi Yoshizawa,
Public Relations Department

E-mailir@st-c.co.jp

Telephone+81-3-3367-6115

Facsimile+81-3-3367-6320

Major Shareholders
Thousands of shares% of total

Shaldan Co., Ltd.

5,587

25.5

Nippon Life Insurance Company

1,336

6.1

TCSB (Mizuho Bank)

884

4.0

Takashi Suzuki

682

3.1

FUMAKILLA LIMITED

541

2.5

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

524

2.4

Kanichi Suzuki

500

2.3

Suzuki Kanichi Shouten

433

2.0

Takako Suzuki

424

1.9

Japan Trustee Services Bank, Ltd. (Trust Account)

393

1.8

Individuals, etc. .......................... 39.3%
Other Japanese corporations ..... 34.6%
Financial institutions .................. 21.2%
Non-Japanese institutions .......... 4.5%
Securities fi rms ............................0.4%

Note: ‌The Company holds treasury stock of 1,080 thousand shares as of March 31, 2016; however, it is
excluded from the list of major shareholders shown above.

Stock Chart
Stock price (yen)Nikkei 225 (yen)2,500

25,0002,000

20,0001,500

15,0001,000

10,000500

Trading volume (shares) 5,000
1,000,000

013/6 78

9 10 11 12 14/1 2

3

4

5

6

7

8

9 10 11 12 15/1 2

3

4

5

6

7

8

9 10 11 12 16/1 2

3

4

5

6

0

26

4-10, Shimo-ochiai 1-chome, Shinjuku-ku, Tokyo 161-8540, Japan
http://www.st-c.co.jp/english/company/ index.html
Printed in Japan, August 2016