Creating Corporate Value Report 2017
Financial Section
Year ended March 31, 2017

Refreshing the Air

Management’s Discussion and Analysis

Group Outline

grew 3.5% in the Air Care category, dropped 1.4% in the Cloth Care

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

category, increased 15.8% in the Thermal Care category, rose 3.1%

CORPORATION, six consolidated subsidiaries, three equity methodin the Hand Care category, decreased 5.4% in the Humidity Careaffiliated companies and other affiliated companies.

category, and declined 0.4% in the Home Care category, from theprevious year.

Sales Overview
In the fiscal year ended March 31, 2017 (hereinafter called “theCost of Sales, SG&A Expenses, and Operating Income

current year”), the Japanese economy witnessed a gentle recovery,

Cost of sales was ¥27,473 million, up 0.7% year on year, as quantity

as the employment and income environments were healthy, the yensold increased, the ratio of products with a high gross profit rose, andweakened and share prices rose after the U.S. presidential election,

S.T. kept reducing product returns and manufacturing cost. Selling,

improving business confidence. However, consumer spending was

general and administrative expenses were ¥15,630 million, up 4.0%

sluggish, because the upward pressure on prices curbed household

year on year as marketing cost augmented, although S.T. madepurchasing power, young people’s propensity to spend is declining,efforts to reduce expenses. Consequently, operating income was

and weathers were unfavorable. In addition, the outlook for the global¥2,854 million, up 21.9% year on year.

economy remains uncertain, because of the Brexit and the concerns
over U.S. political measures, although the slowdown of the global

Other Income (Expenses), Profit Before Income Taxes andeconomy subsided.

Profit Attributable to Owners of Parent

In these circumstances, the S.T. Group concentrated on “market

As for other income and expenses, profit before income taxes was

expansion,” “share increase,” and “profit-oriented management” for¥2,751 million, up 61.6% year on year, and profit attributable torealizing sustainable growth and took measures for establishing aowners of parent was ¥1,817 million, up 99.2% year on year, as sharebusiness division system with the basic policy of “brand valueof profit of entities accounted for using equity method grew and sales

management,” while continuing narrowing down and concentrating

cash discount dropped.
Accordingly, earnings per share increased from ¥42.01 in theon targets, development of unprecedented products, and swift

previous year to ¥83.57. The ratio of profit attributable to owners ofbusiness administration.

parent to sales increased from 2.0% in the previous year to 4.0%, andThe sales for the current year were ¥45,958 million, up 2.9% year on

ROE rose from 4.1% to 7.6%.

year, because the revenue in each business category increased as
the S.T. Group managed the revenues thoroughly by promoting
visualization of each business. Regarding individual segments, sales

Operating income /Operating income margin
Operating income (millions of yen)

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

Operating income margin (%)

6.2
4.5
3.8

4.0
2.6

5.2
3.8

1.8

2.0

565

1,234

1,817

2,854

2,342

1,813

2,131

1,800

45,95844,661

48,263

46,993

46,944

1.2

912(millions of yen)

Profit attributable to owners of parent /Return on sales

892

Net sales

13

14

15

16

17

13

14

15

16

17

13

14

15

16

17

Note: ‌As a result of new accounting standards being applied effective from the fiscal year ended March 31, 2017, the figures for fiscal years 2016 and 2017 reflect those changes. The figures for fiscal years 2013 to 2015 are as originallypresented without retroactive application.

1

Financial Position

is mainly due to the growth of profit before income taxes. On the otherTotal assets as of March 31, 2017 stood at ¥38,458 million, up

hand, net cash used in investment activities was ¥622 million (in the¥3,534 million from the end of the previous year. Among them,same period of the previous fiscal year, net cash used in investment

current assets grew ¥2,759 million to ¥22,467 million, mainly because

activities was ¥624 million). This is mainly due to the augmentation of

cash and cash equivalents increased. On the other hand, non-current

expenditures through the acquisition of property, plant andassets rose ¥755 million to ¥15,992 million, mainly due to the increase

equipment. In addition, net cash used in financing activities was ¥640

in investment securities.

million, as expenditure decreased ¥236 million year on year. This ismainly because of the retirement of treasury shares.

Total liabilities were ¥12,646 million, up ¥1,217 million from the end

As a result, the balance of cash and cash equivalents at the end ofof the previous year, mainly because of the augmentation of
consumption taxes payable and long-term deferred tax liabilities. On

the current year was ¥11,396 million, up ¥3,844 million from the end

the other hand, net assets were ¥25,812 million, up ¥2,316 millionof the previous year.

from the end of the previous year, mainly because of the growth ofretained earnings and valuation difference on available-for-sale

Dividends and Return to Shareholders

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 ¥1,049.58 at
the end of the previous year to ¥1,148.41. In addition, equity ratio

distribute a term-end dividend of ¥12.0 (¥24.0 for the full year,

increased from 65.2% at the end of the previous year to 65.3%,

including the interim dividend, with a consolidated payout ratio being

indicating sound financial standing.

28.7%). The company will continue to place importance on returns toshareholders.

Capital Expenditures and Depreciation and Amortization
Capital expenditures dropped from ¥1,758 million in the previous year

Business and Operational Risks

to ¥608 million in the current year. Depreciation and amortization

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

decreased from ¥1,128 million in the previous year to ¥997 million inposition or stock prices include the following: (1) an escalation in raw

the current year.

materials prices; (2) the impact on manufacturing operations fromnatural disasters and changes in international political or otherCash Flows

conditions; (3) sales fluctuations due to unseasonal weather; (4) andNet cash provided by operating activities for the current year was

the failure of initiatives to raise new businesses. Forward-looking¥5,150 million, up ¥2,669 million from the previous year. This increasestatements in this annual report are based on certain assumptions
made by the Group as of the end of this fiscal year.

Capital expenditures /Depreciation and amortization

Dividends per share /Payout ratio

ROA / ROE

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

ROA (%)ROE (%)

Dividends per share (yen)Payout ratio (%)

84.6
53.9

2,061

7.6

52.4

38.8

28.7

14

15

997

2.7

24.0

22.0

22.0

4.1

22.0

5.0
22.0

1,128

16

4.2

2.9

2.7

1.9

608

844

830

13

4.0

894

942

1,486

1,758

6.1

17

13

14

15

16

17

13

14

15

16

17

2

Consolidated Balance Sheets
S.T.CORPORATION and consolidated subsidiaries
March 31, 2017 and 2016

thousands of
U.S. dollars (Note 2)

millions of yen

Assets

2017

2016

2017

Cash and time deposits (Notes 7, 11 and 17)¥11,439¥7,566$101,959

Trade notes and accounts receivable (Note 7)

5,220

5,380

46,532Merchandise and finished goods

3,940

4,897

35,116Work in process

266

235

2,372

Raw materials and supplies

867

795

7,726

Deferred tax assets (Note 12)

414

384

3,688

Other current assets

325

455

2,896

(4)

(4)

(35)

22,467

19,708200,255

Land (Note 10)

3,096

3,195

27,596

Buildings and structures

7,441

7,465

66,322

Machinery, equipment and vehicles

6,548

6,603

58,364Tools, furniture and fixtures

3,908

3,931

34,834

Construction in progress

—

124

—

Leased assets (Note 18)

937

967

8,356

(13,929)(13,626)(124,154)

Property, plant and equipment, net

8,001

8,659

71,318Intangible assets, net of accumulated amortization

334

228

2,976

334

228

2,976

423

435

3,771

6,092

4,850

54,298Long-term loans

15

26

130

Net defined benefit asset (Notes 1 and 13)

103

—

917

Deferred tax assets other than unrealized revaluation loss on land (Note 12)

11

11

96

1,013

1,008

9,033

7,657

6,330

68,246¥38,458¥34,924$342,795

Current assets:

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 7 and 9)

Other assets
Total investments and other assets
Total assets

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

millions of yen

Liabilities and net assets

2017

2016

2017

¥2,159¥2,202$19,240

2,937

2,982

26,180—47—

Current liabilities:
Trade payables (Note 7)
Electronically recorded obligations-operating (Note 7)
Short-term loans payable
Lease obligations
Other payables (Note 7)
Accrued expenses

163

169

1,451

2,405

2,160

21,439

754

606

6,721

Electronically recorded obligations-non-operating

20

58

178

Income taxes payable

680

360

6,058

Consumption taxes payable

379

16

3,378

Allowance for sales returns

108

124

964

Other current liabilities

62

57

549

9,666

8,781

86,159Total current liabilities
Long-term liabilities:
Lease obligations

435

571

3,874

Provision for directors’ retirement and severance benefits

127

127

1,135

Provision for executive officers’ incentive plan (Note 5)

40

17

358
10,705

1,201

1,296

Deferred tax liabilities (Note 12)

Net defined benefit liability (Notes 1 and 13)

718

373

6,404

Deferred tax liabilities - unrealized revaluation gain on land (Note 10)

262

262

2,337

Other non-current liabilities
Total long-term liabilities

196

1

1,746

2,980

2,648

26,559Net assets (Note 14):
Shareholders’ equity:
Common stock:
Authorized - 96,817,000 shares in 2017 and 2016
7,066

7,066

62,978

Capital surplus

Issued and outstanding - 23,000,000 shares in 2017 and 2016

7,068

7,068

62,999Retained earnings

11,016

9,739

98,189Treasury stock, at cost

(1,487)(1,734)(13,255)

Total shareholders’ equity

23,662

22,138210,911

Unrealized holding gain on other securities, net of taxes

2,379

1,482

21,201

Unrealized revaluation loss on land, net of taxes (Note 10)

(537)

(537)

(4,788)Translation adjustments

(354)

(287)

(3,159)Remeasurements of defined benefit plans

(25)

(20)

(225)

1,462

638

13,029

Accumulated other comprehensive income (loss):

Total accumulated other comprehensive income (loss)
Subscription rights

46

75

412

Non-controlling interests

642

646

5,725

Total net assets

25,812

23,496230,077¥38,458¥34,924$342,795

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, 2017 and 2016

thousands of
U.S. dollars (Note 2)

millions of yen

Net sales
Cost of sales (Notes 16 and 21)
Gross profit before reversal of allowance for sales returns
Reversal of allowance for sales returns
Gross profit
Selling, general and administrative expenses (Note 16)
Operating income
Non-operating income (expenses):
Interest and dividends received
Interest expense
Purchase discounts
Sales discounts
Share of profit of entities accounted for using equity method
Share of loss of entities accounted for using equity method
Other, net
Total non-operating income (expenses)
Ordinary income
Special gains (losses), net:
Loss on disposition of property, plant and equipment, net
Impairment loss
Gain on reversal of subscription rights to shares
Gain (loss) on sales of investment securities, net
Gain on extinguishment of tie-in shares, net
Loss on abolishment of retirement benefit plan
Other
Total special gains (losses), net
Profit before income taxes
Income taxes (Note 12):Current
Prior periods
Deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

2017

2016

2017

¥45,958
27,49018,46816
18,485
15,6302,854¥44,661
27,32817,332
34
17,36615,0252,342$409,644
245,027
164,617144
164,761
139,320
25,441

106
(0)
144
(521)
25
—
295
48
2,903

92
(1)
164
(885)
—
(15)
28
(617)
1,725

946
(2)
1,284
(4,643)
220
—
2,625
430
25,872

(10)
(130)
5
4
—
(19)
(0)
(151)
2,751

(43)
—
17
—
5
—
—
(22)
1,703

(89)
(1,161)
42
32
—
(169)
(2)
(1,348)24,524

873
—
(67)
806
1,946
129
¥1,817

570
107
2
679
1,023
111
¥912

7,783
—
(601)
7,182
17,342
1,146$16,196

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2017 and 2016
thousands of
U.S. dollars (Note 2)

millions of yen

2017

2017

Profit¥1,946¥1,023$17,342

Other comprehensive income (Note 6)
Unrealized holding gain on other securities, net of taxes
Unrealized revaluation loss on land, net of taxes
Translation adjustments
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income (loss) of entities accounted for using equity method
Total other comprehensive income
Comprehensive income

897
—
(76)
(5)
(18)
798
¥2,744

739
8
(102)
(42)
(12)
591
¥1,615

7,993
—
(678)
(43)
(157)
7,115
$24,457

2,641
103

1,533
82

23,543914

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

5

2016

Consolidated Statements of Changes in Net Assets
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2017 and 2016

millions of yen
Number of sharesof common stock(Thousands)

Balance at April 1, 2016
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Increase by merger
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2017

23,000Commonstock

CapitalsurplusRetainedearnings¥ 7,066¥ 7,068¥9,739
(504)
1,817

Treasury stock,at cost¥ (1,734)

(1)
248

(36)
0
23,000¥ 7,066¥ 7,068

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plans
loss

Total
shareholders’equity¥ 22,138
(504)
1,817
(1)
212
0

¥11,016¥ (1,487)¥ 23,662

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 10)

Balance at April 1, 2016
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Increase by merger
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2017

¥ 1,482¥ (537)¥ (287)¥ (20)

¥638

¥ 75

¥ 646

896
¥ 2,379¥ (537)(67)¥ (354)(5)¥ (25)

824¥1,462

(29)
¥ 46

(3)
¥ 642

¥ 23,496
(504)
1,817
(1)
212
0
792
¥ 25,812

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

23,000

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

Commonstock

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

23,000¥ 7,066¥ 7,068

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plans
loss

¥ (1,654)

(86)

(167)
86

¥ 21,874
(481)
912
(167)
—

¥ 9,739¥ (1,734)¥ 22,138

millions of yen
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 10)

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

Subscription
rightsNon-controllinginterests¥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)
—
632
¥ 23,496

Total net
assetsTotalshareholders’equitythousands of U.S. dollars (Note 2)
Number of sharesof common stock(Thousands)

Balance at April 1, 2016
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Increase by merger
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2017

23,000Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at cost$ 62,978$ 62,999$ 86,804(4,494)
16,196$ (15,458)(317)
0
23,000$ 62,978$ 62,999

(5)
2,208

$ 197,323(4,494)
16,196(5)
1,891
0$ 98,189$ (13,255)$ 210,911

Subscription
rightsNon-controllinginterests

Total net
assets$ 209,429(4,494)
16,196
(5)
1,891
0
7,060
$ 230,077

thousands of U.S. dollars (Note 2)
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 10)

Balance at April 1, 2016
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Increase by merger
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2017

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plans
loss

$ 13,213$ (4,788)$ (2,560)$ (182)$5,683$ 670$ 5,754

7,988$ 21,201$ (4,788)(599)$ (3,159)(43)$ (225)7,346$13,029

(258)
$ 412

(28)
$ 5,725

See notes to consolidated financial statements.

6

Consolidated Statements of Cash Flows
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2017 and 2016

thousands of
U.S. dollars (Note 2)

millions of yen

2017
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
Impairment loss
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
Loss on abolishment of retirement benefit plan
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in net defined benefit asset and 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
Interest expenses
Foreign exchange losses (gains)Share of (profit) loss of entities accounted for using equity method
Changes in operating assets and liabilities:
Receivables
Inventories
Payables and accrued expenses
Accrued consumption taxes
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities2017¥2,751¥1,703$24,524

997
130
(5)
—
10
(4)
19
(0)
(239)
—
23
(16)
(106)
0
(170)
(25)

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

8,883
1,161
(42)
—
89
(32)
169
(3)
(2,128)
—
208
(144)
(946)
2
(1,519)
(220)

144
838
(32)
363
957
5,637
109
(0)
(595)
5,150

436
(201)
324
(251)
(117)
3,054
106
(1)
(677)
2,481

1,285
7,473
(287)
3,239
8,530
50,241974(2)(5,306)45,907

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 used in investing activities

(33)
—
(449)
8
(9)
13
—
(152)
(622)

(0)
1,022
(1,687)
3
(9)
—
106
(60)
(624)

(291)
—
(4,000)
73
(84)
115
—
(1,354)(5,542)

Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Purchases of treasury stock
Proceeds from disposal of treasury stock
Payments of dividends
Payments of dividends to non-controlling interests
Other finance, net
Net cash used in financing activities

(45)
(1)
185
(504)
(106)
(169)
(640)

(10)
(167)
—
(481)
(65)
(152)
(876)

(404)
(5)
1,650
(4,494)(943)(1,507)(5,704)

(50)
3,839
7,552

(19)
962
6,585

(441)
34,22067,316

5¥11,3965¥7,55245$101,580

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 resulting from merger withunconsolidated subsidiaries
Cash and cash equivalents at end of year (Note 17)
See notes to consolidated financial statements.

7

2016

Notes to Consolidated Financial Statements
S.T.CORPORATION and Consolidated Subsidiaries
March 31, 2017

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) Name of major non-consolidated subsidiary:
JAPAN AROMA LABORATORY CO., LTD.
The number of non-consolidated subsidiaries decreased by one
from the previous fiscal year because the former subsidiary, S.T.
GLOVE CO., LTD. was combined into S.T. TRADING CO., LTD.
through an absorption-type merger effective September 28, 2016.
(Reasons for exclusion from scope of consolidation)
The non-consolidated subsidiary has been excluded from the scope of
consolidation because the total amounts of its assets, net sales, profit
or loss (amount equivalent to equity interests), retained earnings(amount equivalent to equity interests) and other amounts are limited,
and the effect on the consolidated financial statements as a whole isnot 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 subsidiary for which equity method is notappliedThe non-consolidated subsidiary to which the equity method does not
apply (JAPAN AROMA LABORATORY CO., LTD) is accounted forusing the cost method rather than the equity method because the total
amounts of its profit or loss (amount equivalent to equity interests),

retained earnings (amount equivalent to equity interests) and otheramounts 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, 2017 and 2016, 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, and facilities attached to the buildings
and structures acquired on or after April 1, 2016, is computed by the
declining-balance method in conformity with the Corporation Tax Law ofJapan. Depreciation of property and equipment of overseas subsidiaries
and buildings (excluding structures attached to the buildings) acquired on
or after April 1, 1998 and facilities attached to the buildings and structuresacquired on or after April 1, 2016 of the Company and domestic
subsidiaries is computed by the straight-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 ¥112.19 = U.S.$1.00, the approximate exchange rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2017. 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(Adoption of Practical Solution on a Change in Depreciation Method due to
Tax Reform 2016)
Effective from the fiscal year ended March 31, 2017, the Company has
adopted the “Practical Solution on a Change in Depreciation Method due
to Tax Reform 2016” (ASBJ PITF No.32 issued on June 17, 2016) inaccordance with the reform of the Corporation Tax Act of Japan.
Accordingly, the Company has changed the depreciation method applied
to facilities attached to buildings and non-building structures acquired on
or after April 1, 2016 from the declining-balance method to the straight-line
method.
As a result of this change, operating income, ordinary income, and profit
before income taxes increased by approximately ¥1 million (U.S.$10
thousand) for the fiscal year ended March 31, 2017.
(Changes in Accounting Policy for Sales Recognition)
In the past, the sales promotion expenses paid to certain customers forthe purpose of expanding sales were recorded in selling, general andadministrative expenses. However, the accounting treatment for sales
promotion expenses has been changed to one in which the corresponding
amounts are deducted directly from net sales effective from the fiscal year
ended March 31, 2017.

9

In line with a more competitive business environment in recent years aswell as centralized and large-scaled distribution, management of sales
promotion expenses has become increasingly important.
In consideration of such changes in the management environment, theCompany examined details of transactions with customers in order todeliberate on achieving more appropriate sales management and business
management under the business division system that started as part ofmanagement reform activities. As a result, a certain portion of sales
promotion expenses tend to be taken into consideration when determining
sales terms and transaction conditions, and they constitute a substantial
part of the sale price. The Company concluded that the method ofrecording net sales after deducting sales promotion expenses more
appropriately reflects actual business operations.
This change in accounting policy has been adopted retrospectively andthe consolidated financial statements for the previous fiscal year were
adjusted to reflect such retrospective adoption.
As a result of this change, compared with the amounts recognized prior
to the retrospective adoption, net sales, gross profit and selling, generaland administrative expenses for the previous fiscal year decreased by¥3,690 million, respectively. However, there was no impact on operating
income, ordinary income, and profit before income taxes.

4 Changes in Presentation(Consolidated Statements of Income)“Insurance income,” which had been presented separately under “Nonoperating income” for the previous fiscal year was included in “Other
non-operating income” for the fiscal year ended March 31, 2017, because
the amount was insignificant. In order to reflect this change in presentation,
the consolidated financial statements for the previous fiscal year have been
reclassified.
As a result of this change, “Insurance income” of ¥21 million under “Nonoperating income” which had been included in “Other non-operating
income” in the consolidated statement of income for the previous fiscal
year has been reclassified.
(Consolidated Statements of Cash Flows)“Accrued consumption taxes,” which had been included in “Other, net” of“Net cash provided by operating activities” for the previous fiscal year were
presented separately for the fiscal year ended March 31, 2017 due to anincrease in materiality. In order to reflect this change in presentation, theconsolidated financial statements for the previous fiscal year have been
reclassified.

As a result of this change, “Other, net” of ¥ (369) million under “Net cash
provided by operating activities” has been reclassified as “Accrued
consumption taxes” of ¥ (251) million and “Other, net” of ¥ (117) million
under “Net cash provided by operating activities” in the consolidated
statement of cash flows for the previous fiscal year.
“Insurance income” and “Proceeds from insurance income,” which had
been presented separately under “Net cash provided by operating
activities” for the previous fiscal year were included in “Other, net” for the
fiscal year ended March 31, 2017 because the amount was insignificant. In
order to reflect this change in presentation, the consolidated financial
statements for the previous fiscal year have been reclassified.
As a result of this change, “Insurance income” of ¥ (21) million and“Proceeds from insurance income” of ¥21 million under “Net cash provided
by operating activities” have been included in “Other, net” under “Net cash
provided by operating activities” in the consolidated statement of cash
flows for the previous fiscal year.

5 Additional Information(Implementation Guidance on Recoverability of Deferred Tax Assets)
Effective from the fiscal year ended March 31, 2017, the Company has
adopted the “Revised Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Implementation Guidance No.26 issued on
March 28, 2016).
(Change in Retirement Benefit Plans)
Effective from April 1, 2017, the Company transferred the defined benefit
portion of its pension plans for current employees to a defined contribution
pension plan. To account for this transfer, effective from the year ended
March 31, 2017, the Company adopted “Guidance on Accounting forTransfers between Retirement Benefit Plans” (ASBJ Implementation
Guidance No.1 issued on December 16, 2016) and “Practical Solution on
Accounting for Transfers between Retirement Benefit Plans” (ASBJ PITF
No.2 issued on February 7, 2007).
Due to this transfer, loss on abolishment of retirement benefit plan in theamount of ¥19 million (U.S.$169 thousand) was recorded in special loss inthe consolidated statement of income for the fiscal year ended March 31,
2017.
(Transactions of Delivering the Company’s Own Stock to Employees etc.
through Trusts)(a) Board Benefit Trust (BBT)The Company introduced a “Board Benefit Trust” with the goal ofincreasing awareness of the importance of contributing to further
enhancing the Company’s corporate value and performance over the
medium-to-long-term.
(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, 2017 were ¥105
million (U.S.$933 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 of
the Company’s share price and strengthening financial performance.
(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, 2017 were ¥126
million (U.S.$1,120 thousand) and 120,000 shares, respectively.

10

Notes to Consolidated Financial Statements

6 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, 2017 and 2016 wereas follows:
thousands of
U.S. dollars

millions of yen

2017

2016

2017

¥1,286
(4)
1,282
(385)
897

¥1,081
(6)
1,074
(335)
739

$11,460(32)
11,428(3,435)
7,993

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

—

8

—

Translation adjustments
Amount recognized in the year

(76)

(102)

(678)

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

(25)
18
(7)
2
(5)

(89)
28
(61)
19
(42)

(227)
164
(63)
19
(43)

(15)
(2)
(18)
¥798

(12)
—
(12)
¥591

(136)
(20)
(157)
$7,115

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

Share of other comprehensive income (loss) of entities accounted for using equity method
Amount recognized in the year
Reclassification adjustments included in the statement of income
Share of other comprehensive income (loss) of entities accounted for using equity method
Total other comprehensive income

7 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, 2017 and 2016, 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, 2017

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets¥11,439
5,220
6,077
¥22,736¥11,439
5,220
6,077
¥22,736————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities¥2,159
2,937
2,405¥7,501¥2,159
2,937
2,405¥7,501————

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, 2017

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets$101,959
46,532
54,163$202,655$101,959
46,532
54,163$202,655————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities$19,240
26,18021,439$66,859$19,240
26,18021,439$66,859————

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 “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

2017
¥ 15

2016
¥ 55

2017
$ 135

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, 2017 and 2016 are summarized as follows:Year ended March 31, 2017

Time deposits
Trade notes and accounts receivable
Investment securities
Other
Total

Year ended March 31, 2016

Time deposits
Trade notes and accounts receivable
Investment securities
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¥11,438
5,220

¥—
—

—
—

—
—

—
¥16,659

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¥7,565
5,380

¥—
—

—
—

—
—

—
¥12,945

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, 2017

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

$101,953
46,532

$—
—

—
—

—
—

—
$148,486

891
$891

—
—

—
—

More than 10 years

8 Derivatives
The Company and its consolidated subsidiaries had no derivative instruments outstanding at March 31, 2017 and 2016.

9 Investment Securities(1) Other securities
The acquisition cost and related carrying value of other securities with a determinable market value at March 31, 2017 and 2016 are summarized as follows:
thousands of
U.S. dollars

millions of yen

Acquisition cost
Carrying value
Total unrealized gain
Total unrealized loss2017
¥2,662
6,077
3,446
31

2016
¥2,662
4,794
2,170
37

2017
$23,727
54,16330,715279

At March 31, 2017 and 2016, unlisted stocks (whose carrying value was ¥15 million (U.S.$135 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, 2017)
millions of yen(1) Stocks(2) Bonds

Proceeds from sales

Gain on sales

Loss on sales

¥ 13

¥4

—

1. Government bonds

—

—

—

2. Corporate bonds

—

—

—

3. Others———(3) Other securities

—

—

—

¥ 13

¥4

—

Total
(Year ended March 31, 2016)
Not applicable(Year ended March 31, 2017)

thousands of U.S. dollars(1) Stocks(2) Bonds

Proceeds from sales

Gain on sales

Loss on sales

$ 116

$ 32

—

1. Government bonds

—

—

—

2. Corporate bonds

—

—

—

3. Others———(3) Other securities

—

—

—

$ 116

$ 32

—

Total

(3) Impairment of investment securities
There were no significant impairment losses on investment securities to be recorded for the years ended March 31, 2017.

10 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 31,2017 and 2016 decreased by ¥509 million (U.S.$4,539 thousand) and¥562 million, respectively, after the revaluation.

11 Pledged Assets
Pledged assets for the years ended March 31, 2017 and 2016 are summarized as follows:
thousands of
U.S. dollars

millions of yen

2017Time deposits

¥4

2016
¥4

2017
$ 38

Time deposits were pledged as collateral mainly for leased office space at March 31, 2017 and 2016.

14

Notes to Consolidated Financial Statements

12 Income Taxes
At March 31, 2017 and 2016, 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

2016

2017
Deferred tax assets:
Accrued employees’ bonuses

2017

¥158

¥ 126$1,411

Allowance for sales returns

34

39

299

Accrued business taxes

56

34

499

Loss on valuation of inventories

37

44

329

Net defined benefit liability

355

393

3,166

Accrued payable due to transfer to defined contribution pension plan

79

—

707

Provision for directors’ retirement and severance benefits

39

39

352

Provision for executive officers’ incentive plan

12

5

111

Write-downs of securities

54

59

484

Impairment loss

46

7

413

Other

142

148

1,266

Gross deferred tax assets

1,014

895

9,037

Valuation allowance

(154)

(112)

(1,371)

Total deferred tax assets

860

783

7,666

Deferred gain on sales of property

(12)

(13)

(108)

Net defined benefit asset

(32)

—

(282)

Deferred tax liabilities:

Undistributed earnings of controlled foreign companies

(73)

(97)

(651)

Unrealized holding gain on other securities, net of taxes(1,037)(652)(9,244)(1,154)(761)(10,285)—22—¥(294)¥ —$(2,619)

Total deferred tax liabilities
Net deferred tax assets
Net deferred tax liabilities

At March 31, 2017 and 2016, net deferred tax assets or net deferred tax liabilities were included in the following items in the consolidated balance sheets.
thousands of
U.S. dollars

millions of yen

2017

2016

2017

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

¥414
11

¥ 38411$3,688
96

Non-current liabilities - deferred tax liabilities

(718)

(373)

(6,404)

A reconciliation of the statutory tax rates to the Company’s effective tax rates for the years ended March 31, 2017 and 2016 is summarized as follows:
2017
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 rate15

31.00%
0.72(0.30)(2.61)(0.86)(0.28)——
1.62
29.29%

2016
33.00%
1.35(0.33)(1.93)
0.50
0.28
1.31
6.35
(0.64)
39.89%

13 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.

In addition, effective from April 1, 2017, the Company transferred thedefined benefit portion of its pension plans for current employees to adefined contribution pension plan. To account for this transfer, effectivefrom the year ended March 31, 2017, the Company adopted “Guidanceon Accounting for Transfers between Retirement Benefit Plans” (ASBJ
Implementation Guidance No.1 issued on December 16, 2016) and“Practical Solution on Accounting for Transfers between Retirement
Benefit Plans” (ASBJ PITF No.2 issued on February 7, 2007).
Due to this transfer, loss on abolishment of retirement benefit plan in theamount of ¥19 million (U.S.$169 thousand) was recorded in special loss inthe consolidated statement of income for the fiscal year ended March 31,
2017.

(1) 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
Service cost
Interest cost
Actuarial gain or loss
Payment of retirement benefits
Decrease due to transfer of retirement benefit obligation to defined contribution pension plan
Other
Balance at the end of the year

2017

2016

2017

¥3,903
237
31
(9)
(220)
(2,623)(1)¥1,318¥3,810
257
30
5
(199)
—
(1)
¥3,903$34,785
2,117
273
(80)
(1,959)(23,377)(8)$11,751

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
Decrease due to transfer of retirement benefit obligation to defined contribution pension plan
Balance at the end of the year

2017

2016

2017

¥2,606
52
(34)
154
(156)
(2,402)¥220¥2,620
52
(83)
159
(142)
—
¥2,606$23,231
465
(306)
1,376
(1,394)(21,408)$1,963

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
Net defined benefit asset and liability on consolidated balance sheet

2017

2016

2017

¥117
(220)
(103)
1,201
1,098
1,201
(103)
¥1,098¥2,736(2,606)
130
1,166
1,296
1,296
—
¥1,296$1,046(1,963)(917)
10,705
9,788
10,705(917)$9,78816

Notes to Consolidated Financial Statements

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

millions of yen

2016

2017
Service cost
Interest cost on benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Extraordinary additional retirement payments
Net retirement benefit expenses
Profit or loss due to transfer of retirement benefit obligation to defined contribution pension plan (*)

¥237
31
(52)
34
8
258
¥(19)

2017

¥257
30
(52)
28
18
281
¥—

$2,117
273
(465)
307
70
2,303
$(169)(*) It is recorded as special loss.

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

millions of yen

2016

2017
Actuarial gain (loss)
Adjustment due to transfer of retirement benefit obligation to defined contribution pension plan
Total

¥9
(16)
¥(7)

2017

¥(61)—¥(61)$81(143)$(63)

Remeasurements of defined benefit plans, before tax, in the consolidated balance sheets
thousands of
U.S. dollars

millions of yen

2017
Unrecognized actuarial gain (loss)

¥37

2016

2017

¥30

$326

2017

2016

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

—%
—
—
—
100.0
—
100.0%

21.8%
1.1
15.7
3.8
46.3
11.3
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:
2017
Discount rate
Expected rate of return on plan assets

0.8%
2.0%

2016
0.8%
2.0%

(2) Other retirement benefits
The assets to be transferred to the defined contribution pension plan total ¥256 million (U.S.$2,281 thousand), and the transfer to other pension assets will bemade over four years. On March 31, 2017, the assets that have not yet been transferred to the plan amounted to ¥256 million (U.S.$2,281 thousand) included
in “Other payables” and “Other non-current liabilities.”17

14 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, 2017, the legal reserve of theCompany included in retained earnings amounted to ¥550 million(U.S.$4,901 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.

15 Amounts per Share
Net assets per share as of March 31, 2017 and 2016 were ¥1,148.41(U.S.$10.24) and ¥1,049.58, respectively. Basic earnings per share for theyears ended March 31, 2017 and 2016 was ¥83.57 (U.S.$0.74) and¥42.01, respectively.
Diluted earnings per share for the years ended March 31, 2017 and2016 was ¥83.17 (U.S.$0.74) and ¥41.97, respectively.

The basis for the calculation of basic earnings per share and diluted earnings per share for the years ended March 31, 2017 and 2016 was as follows:
thousands of
U.S. dollars

millions of yen

2016

2017
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)

2017¥ 1,817
—
1,817

¥ 912
—
912

$ 16,196—
16,196

22

22

—

—

—

—

0
(0)

0
(0)

—
—

—

—

—

The basis for calculation of total net assets per share as of March 31, 2017 and 2016 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)

2017

2016

2017

¥ 25,812
689
46
642
25,124¥ 23,496
721
75
646
22,775$ 230,077
6,137
412
5,725
223,940

22

22

—

18

Notes to Consolidated Financial Statements

16 Major Expenses
Major expenses included in selling, general and administrative expenses for the years ended March 31, 2017 and 2016 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 plan2017
¥ 3,096
2,618
2,145
1,350
210
—
23

2016
¥ 2,797
2,742
2,095
1,358
235
5
17

2017
$ 27,593
23,33919,11912,031
1,874—
208

Research and development expenses included in general and administrative expenses and cost of sales for the years ended March 31, 2017 and 2016
amounted to ¥611 million (U.S.$5,444 thousand) and ¥536 million, respectively.

17 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, 2017 and 2016 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

2017¥11,439(52)
9¥11,3962016¥7,566(20)
7¥7,552

2017$101,959(462)
83$101,580(*) 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.”

18 Leases(Finance Leases)
Leased assets included in property, plant and equipment are buildings and structures, machinery, equipment and vehicles, tools, furniture and fixtures in thedaily 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, 2017 and 2016.

19

19 Segment Information(1) Summary of Reporting Segments
Segment information for the years ended March 31, 2017 and 2016 isomitted as the Group operates as a 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, 2017 and 2016 is omitted 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.

(4) Related Information(Change in Accounting Policies)
Changes in the Group’s accounting policy for sales recognition have been adopted retrospectively.
(a) Information by products and services
millions of yen
Year ended March 31, 2017

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties¥19,640¥8,938¥5,728¥5,290¥6,361¥45,958

Year ended March 31, 2016

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties¥18,976¥9,061¥4,947¥5,130¥6,547¥44,661

Year ended March 31, 2017

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties$175,064$79,672$51,054$47,154$56,700$409,644

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, 2017 and 2016.

(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, 2017 and 2016.

(c) Information by major customers
Sales

PALTAC CORPORATION
ARATA CORPORATION

thousands of
U.S. dollars

millions of yen

Customers

2017

2016

2017

¥16,292¥9,628¥14,562¥8,895$145,216$85,822

Related segment

Daily necessities
Daily necessities

20 Related Party Transactions(Years ended March 31, 2017 and 2016)
Not applicable

21 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 ¥301 million (U.S.$2,686 thousand) and¥483 million for the years ended March 31, 2017 and 2016, respectively.

20

Notes to Consolidated Financial Statements

22 Note to Consolidated Statements of Changes in Net Assets
Shares in issue and outstanding and treasury stock at March 31, 2017 and 2016 were as follows:(Year ended March 31, 2017)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock

23,000 thousand
1,123 thousand

Note: Details of the change in the number of shares of treasury stock are as follows:
Increase due to purchase of shares less than standard unit:
Decrease due to the exercise of stock options:0 thousand
178 thousand

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

(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 change in the number of shares of treasury stock are as follows:
Increase 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

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, 2017 were as follows:
Subscription rights for stock options¥46 million (U.S.$412 thousand)

Subscription rights at March 31, 2016 were as follows:
Subscription rights for stock options

Dividends paid from retained earnings for the year ended March 31,2017 were as follows:

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

Total amount ofdividends(millions of yen)

Dividends
per share(yen)

Board of directors’
meeting held on
May 16, 2016

¥ 241

¥ 11

Board of directors’
meeting held on
October 27, 2016

263

12

Resolution

Resolution

Board of directors’
meeting held on
May 22, 2017

21

¥ 265

Source ofdividends

Retainedearnings

Board of directors’
meeting held on
May 18, 2015

¥ 240

¥ 11

Board of directors’
meeting held on
October 29, 2015

241

11

Resolution

March 31,2016

May 31,2016

September 30, December 2,
2016
2016

Dividends
per share
(yen)

¥ 12

Dividends
per share(yen)

Effective date

Dividends for which the record date was in the year ended March 31,2017 and the effective date is in the year ending March 31, 2018 were as
follows:
Total amount ofdividends(millions of yen)

Total amount ofdividends(millions of yen)

Record date

¥75 million

Record date

Effective date

March 31,2015

June 1,2015

September 30, December 4,
2015
2015

Dividends for which the record date was in the year ended March 31,
2016 and the effective date was in the year ended March 31, 2017 wereas follows:

Record date

Effective date

Resolution

March 31,2017

May 31,
2017

Board of directors’
meeting held on
May 16, 2016

Total amount ofdividends(millions of yen)

¥ 241

Source ofdividends

Retainedearnings

Dividends
per share
(yen)

¥ 11

Record date

Effective date

March 31,2016

May 31,2016

23 Stock Option Plans
At March 31, 2017, 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, 2009
June 18, 2010

20,000155,000

4 employees
4 officers and 17 employees

Aug 4, 2011 – Aug 3, 2016
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.
Stock option expenses related to the 2017 stock option plan amounting to ¥3 million (U.S.$25 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
period2010
4 employees
Common stock
20,0002011
4 officers and
17 employees
Common stock
155,000

August 3, 2009
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, 2017 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

2010
—
—
—
—
—
20,000——20,000
—

2011
—
—
—
—
—
140,000—
96,000—44,000

2012
—
—
—
—
—
35,000—8,000—
27,0002010¥1,037
—
¥197

2011
¥1,049
1,599
¥178

2012
¥976
1,745
¥194

2013
—
—
—
—
—
70,000—17,0005,000
48,000

2014
—
—
—
—
—
125,000—
15,000—110,000

2015
175,000——
175,000——
175,000
42,000—133,000

2013
¥946
1,494
¥153

2014
¥1,066
1,690
¥117

2015
¥1,059
1,713¥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)

2017

2016

2015

2014

2013

2017
$409,644

For the Year:¥45,958¥44,661¥48,263¥46,993¥46,944

Cost of sales

Net sales

27,47327,29428,23526,98027,738244,883

Selling, general and administrative expenses

15,63015,025

18,216

17,881

17,406

139,320

Operating income

2,854

2,342

1,813

2,131

1,800

25,441

Profit before income taxes

2,751

1,703

1,536

1,637

1,105

24,524

Profit attributable to owners of parent

1,817

912

892

1,234

565

16,196

Capital expenditures

608

1,758

1,486

942

2,061

5,422

Depreciation and amortization

997

1,128

844

894

830

8,883

R&D expenses

611

536

513

564

572

5,444

Cash flows from operating activities

5,150

2,481

2,137

2,110

980

45,907

Cash flows from investing activities

(622)

(624)

(1,768)514(1,924)(5,542)

Free cash flow

4,529

1,857

369

2,624

(944)

40,365

Cash flows from financing activities

(640)

(876)

(614)

(465)

(557)

(5,704)

At Year-End:¥22,467¥19,708¥20,221¥18,956¥15,533$200,255

Property, plant and equipment, net

8,001

8,659

8,110

7,555

7,524

71,318

Total current assets
Total assets

38,45834,92433,78532,37030,076

342,795

Total current liabilities

9,666

8,781

9,008

8,966

8,058

86,159Total long-term liabilities

2,980

2,648

2,176

2,318

1,805

26,559Total net assets

25,812

23,496

22,60021,087

20,213230,077

Cash and cash equivalents

11,396

7,552

6,585

6,728

4,469

101,580

Number of shares issued (thousand shares)

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

1,123

1,301

1,149

1,147

1,284

890

860

859

760

663

Number of employees
Per Share (yen and U.S. dollars):¥83.57¥42.01¥40.83¥56.74¥26.01

Dividends

24.00

22.00

22.00

22.00

22.00

0.21

Net assets

1,148.41

1,049.58

1,001.84

936.06905.84

10.24

1,809

1,114

1,021

999

988

16.12

Operating income margin

6.2

5.2

3.8

4.5

3.8

Profit before income taxes/net sales

6.0

3.8

3.2

3.5

2.4

Return on sales

4.0

2.0

1.8

2.6

1.2

ROA

5.0

2.7

2.7

4.0

1.9

ROE

7.6

4.1

4.2

6.1

2.9

Equity ratio

65.3

65.2

64.8

63.2

65.4

Profit attributable to owners of parent

Common stock price$0.74

Ratios (%):

25

Notes: 1. U.S. dollar amounts are translated from yen for convenience only, at the rate of ¥112.19 = U.S.$1.00, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2017.
2. ‌As a result of new accounting standards being applied effective from the fiscal year ended March 31, 2017, the figures for fiscal years 2016 and 2017 reflect those changes. The figures for fiscal years 2013 to 2015 are as
originally presented without retroactive application.
3. The common stock prices listed are as of the end of the fiscal year ended in March.
4. ROA = Profit attributable to owners of parent divided by average total assets for the fiscal year.
5. 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.

Investor Information
As of March 31, 2017

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

14,078

Registered transfer agent

Mizuho Trust & Banking Co., Ltd.

Accounting auditors

Ernst & Young ShinNihon LLC

Annual shareholders’ meeting

Middle of June each year

Employees

890 (consolidated)

SHALDAN (THAILAND) CO., LTD.

415 (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

25.3

Nippon Life Insurance Company

1,336

6.1

TCSB (Mizuho Bank)

884

4.0

Takashi Suzuki

675

3.1

FUMAKILLA LIMITED

541

2.4

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

524

2.4

Japan Trustee Services Bank, Ltd. (Trust Account)

510

2.3

Kanichi Suzuki

500

2.3

Takako Suzuki

446

2.0

Suzuki Kanichi Shouten

433

2.0

Individuals, etc. .......................... 36.2%
Other Japanese corporations ..... 34.5%
Financial institutions .................. 22.6%
Non-Japanese institutions .......... 6.1%
Securities fi rms ............................0.8%

Note: ‌The Company holds treasury stock of 903 thousand shares as of March 31, 2017; however, it is excluded
from the list of major shareholders shown above.

Stock Chart
Stock price (yen)Nikkei 225 (yen)3,000

25,0002,400

20,0001,800

15,000

1,200

10,000600

Trading volume (shares) 5,000
2,000,000

014/6 78

9 10 11 12 15/1 2

3

4

5

6

7

8

9 10 11 12 16/1 2

3

4

5

6

7

8

9 10 11 12 17/1 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 2017