ANNUAL REPORT
Year Ended March 31, 2002

ProfileS

ince its establishment in 1949, Kurita Water Industries Ltd. has provided integrated solutions to meet its clients’water treatment needs. Kurita’s cutting-edge technologies have gained the Company recognition as a global
leader in water treatment chemicals and facilities. In addition, through its facilities maintenance, operation,and consulting businesses, Kurita provides a range of services that anticipate its customers’ needs in the areas ofquality control, safety, and reduction of operating costs.
Along with the evolution of our society, the environmental protection needs of our clients have continued to growat an accelerating rate. We at Kurita see it as our job to use the wide range of technologies and know-how wehave developed and mastered through our experience in the field of water treatment to satisfy these needs in an
expanding range of environmental fields, such as in our soil and air purification operations. Our corporate vision of
becoming an Advanced Management Company for Water and the Environment reflects our drive to establish anorganization that provides high-value-added management services and demonstrates overwhelming superiority in
its chosen business fields. Through the integrated management of water and other environmental resources, ouraims are to achieve a high level of customer satisfaction and to benefit society.

To make more people aware of our corporate vision of becoming an
Advanced Management Company for Water and the Environment,
we have adopted a service logo. This new logo reflects our strong commitment to and confidence in contributing to society through continued
progress in our water and environmental technologies.

Contents
Financial Highlights......1
To Our Shareholders......2
KURITA at a Glance......6
Operational Review and Outlook......8
Water Treatment Chemicals......8
Water Treatment Facilities......9
Developing New Business Fields......12
Soil and Groundwater Remediation......12
Water Treatment Systems for Clean Energy Fuel Cells......14
Selected Financial Data......15
Management’s Discussion and Analysis......16
Consolidated Financial Statements and Notes......20
Report of Independent Certified Public Accountants......31
Non-Consolidated Summary......32
Subsidiaries......33
Board of Directors and Corporate Auditors/Corporate Data......34
Investor Information......35

3

Kurita Water Industries Ltd.

Note on Projections for Future Results
Projections for future results contained in this annual reportaccord with Kurita’s plans, prospects and strategies as decided by the management on the basis of information available
at the time.
Since projections for future results lack the substance of fact
and may be based on data from other sources the accuracy
and reliability of which we are unable to guarantee, you arerequested not to rely on such projections alone.
Moreover, many factors affecting business results are subject
to uncertainty and are therefore a source of risk. These factors
include, but are not limited to, the following: macroeconomicchanges, such as changes in capital markets and large-scale
shifts in demand, especially insofar as these influence the markets and industries directly related to our main businesses.

Financial Highlights

Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31

Thousands of
U.S. Dollars

Millions of Yen

2001

2002

2002

¥142,678$1,072,767

For the years ended March 31:
Net sales................................................................................................. ¥153,435
Operating income ...................................................................................

15,817

10,79081,128

Income before income taxes....................................................................

14,727

9,121

68,579Net income ............................................................................................

8,366

5,670

42,632

Total assets ............................................................................................. ¥183,175¥172,145$1,294,323

Total shareholders’ equity ....................................................................... 119,209

122,590921,729

At year-end:

Per share of common stock (Yen and U.S. dollars):
Net income.............................................................................................

¥63.2

¥42.8

$0.32

Cash dividends applicable to the year (parent company)...........................

16.0

16.0

0.12

Note: The U.S. dollar amounts are given solely for convenience at the rate of ¥133 to US$1.00, the approximate exchange rate prevailing on March 29, 2002.

Net Sales

Millions of Yen

2002

142,678

2001

153,435

2000

130,998

1999

146,754

1998

148,322Net Income

Millions of Yen

2002

5,670

2001

8,366

2000

4,648

1999

7,567

1998

6,553

Total Assets

Millions of Yen

2002

172,145

2001
2000

183,175
165,297

1999

165,775

1998

161,922

Annual Report 2002

1

To Our Shareholders

uring the fiscal year ended March 31, 2002, Kurita Water

Could you describe business condi-

Industries Ltd. felt the brunt of the worldwide economic down-tions during the past fiscal year andturn. Within this markedly deteriorating business operating

your consolidated performance?

Denvironment, the Kurita Group is treating Customer Satisfaction as thelinchpin of its business activities as it seeks to strengthen its earnings

The substantial deterioration in ourbusiness environment made the pastfiscal year an extremely difficult one.

base. In the following interview, President Santo discusses fiscal
performance and the Company’s strategies for the future.

Domestically, we contended with adecline in capital investment in theinformation technology (IT) industry
and other private-sector industries, aworsening in employment conditions,and faltering personal consumption.
Globally, we faced a worldwide economic downturn. This downward trend
in business conditions strengthened
through the fiscal year.
Conditions were also difficult in ourown market. Companies continued torestrain their capital investment inequipment and investment activities
were at low ebb across industrial sectors. Sales of water treatment chemicals
suffered because of falling operating
rates at customers’ facilities resulting
from rationalization measures andbecause of intensifying competition.
On a consolidated basis, orders
decreased 9.3% to ¥140,492 million
while net sales declined 7.0% to¥142,678 million. This reduction in

Takahide Santo, President

earnings translated into unavoidable
declines in profitability. Operating
income fell 31.8% to ¥10,790 million
and net income sunk 32.2% to ¥5,670
million. To maintain a stable dividend

2

Kurita Water Industries Ltd.

An Inter view with the President
payout record, we declared a year-end

To combat worsening business condi-

Would you update us on the

cash dividend of ¥8 per share, with

tions in our Water Treatment Facilities

progress of your medium-term

total cash dividends for the fiscal year

Division, we aggressively targeted cus-management plan?

amounting to ¥16 per share, the same

tomers in the electronics industries ofThe basic theme of our Evolution 2002

amounts as for the previous fiscal year.

the People’s Republic of China, Taiwan,(EV-2) Plan is to create a new Kurita

and Southeast Asian countries—where

through a process of evolution based on

How about business conditions andthe potential for new investment exist-

integrating the strengths of the Kurita

performance in each division? Do

ed. Despite these efforts to maintain

Group. Its main goal is to strengthen

you have basic business strategies

sales levels, the impact of weak domes-

our profitability structure. During whatfor each of these segments?

tic demand drove orders down to

was the second year of this 3-year plan,

In the Water Treatment Chemicals¥93,538 million, a 13.7% decrease.

guided by the basic principle of cus-

Division, demand for our products fell

Sales dropped 10.5% to ¥96,401 million

tomer satisfaction, we worked to further

because of the lower plant operating

and operating income slumped 50.7%

strengthen our business by reinforcing

rates of our major customers in theto ¥4,537 million.

our sales and product development

basic industries of petroleum, steel, andDuring the fiscal year, we continued

pulp and papers. The resulting contrac-

to follow the slogan of our sales activities

oration in business conditions hastion in the market put strong pressurein the previous year—“Changing how

resulted in us not reaching our originalon prices, creating a difficult businessto sell and what to sell.” For chemicals,

performance goals for the fiscal year

environment. Although shipments of

we shifted to selling value rather thanunder the plan, reform of our structure

water treatment chemicals decreased,

products. For facilities, we shifted tois steadily progressing. In the last year

we worked hard to expand revenues

selling ready-made equipment ratherof the EV-2 Plan, we are continuing tofrom sales of contract-type services,

than order-made. And in our mainte-emphasize strengthening our Groupfocusing our sales efforts on the key

nance and other services category, weand business execution capabilities andareas of each market. As a result, orders

expanded our sales focus to include thereducing overall costs. Through theseedged up 0.8% to ¥46,953 million andentire utility rather than the area

measures, we are endeavoring to create

sales rose 1.2% to ¥46,277 million.

around specific equipment. Througha new Kurita, the basic theme of the Plan.

Operating income, however, decreased

these measures, we concentrated our

5.7% to ¥6,244 million. To further

efforts on raising the high-value-added

reduce production and distribution

content in our products and services tocosts for our core chemicals business,

strengthen our profitability.

capabilities. Although the further deteri-

we absorbed Kurita Chemicals Ltd., ourchemicals manufacturing subsidiary,through a merger on April 1, 2002
(after the end of the fiscal year).

Annual Report 20023

To Our Shareholders

In what areas of your business do

March 2001. During the fiscal year

What strategies are you emphasizing

you expect to achieve growth?

under review, we began supplying themto remain competitive?

With the business climate as it is andwith prototype water treatment systems

Basically, we are expanding in fields

markets contracting, we are concentrat-essential to the functioning of fuel cells.

where we are already strong. To thising on developing business in fields

H Power is drawing closer to the pro-end, we are boosting our business exe-with growth potential. Our greatest

duction stage for its commercial fuelcution capabilities through our medium-expectations for new business fields arecells, and Kurita is scheduled to supply

term management plan. For example,

centered on the soil and groundwaterthem with water treatment systems. We

the modular and ready-made products

remediation and fuel cell businesses. To

expect this market to grow significantly

emerging from the standardization ofdevelop the new market in soil remedi-

over the next few years.

the production of equipment make itation related to real estate business, we

Besides these activities, we will bepossible to lower costs and reduce

jointly established Land Solution Inc.

promoting environmental renovationdelivery times. These attributes havewith companies operating in such varied

projects with the goal of developing thisalready exhibited steady results withfields as real estate and financial services.

field into a core business. As part of thatultrapure water production systems forLand Solution made a good start as aprocess, we have made a full-fledged

semiconductor manufacturing. Now,

pioneer in the environmental recovery

entry into the business of scrapping

we are expanding these techniques tobusiness for soil contamination related

incinerators polluted by dioxin, which

pure water production systems for phar-to real estate business—offering com-requires specialized technologies suchmaceutical purposes. By marshalling ourprehensive schemes that make it possible

as those associated with the safe

advanced know-how in water treatment,

for landowners to acquire a contamina-

removal of dioxin.

we are also developing our maintenancetion risk hedge when they wish to sell

Anticipating continued growth inbusiness. Our main areas of focus areland. To broaden our array of soil andsales of our ultrapure water production

contracts of one year or more, operating

groundwater remediation technologies,

systems to electronics manufacturers inmanagement contracts, and Build-Own-

we at Kurita have acquired the exclu-

China and Southeast Asian countries,

Operate (BOO) contracts.

sive rights in Japan to a permeable

we have strengthened strategic points

Customer satisfaction is the underly-

reactive barrier method from Canadaof our support organization. We estab-ing theme of our business activities. We

that achieves low-cost processing. The

lished a maintenance service company

approach environmental issues directly,

technology was purchased jointly withfor ultrapure water production systems

leveraging our water treatment and

Dowa Mining Co., Ltd.

in Shanghai, China, and a company inother world-class technologies, propos-

To enter the water treatment busi-

Singapore specializing in owning anding effective measures and solutions,ness for household fuel cells, we formed

operating production systems to supply

and developing business models fora strategic alliance with H Powerultrapure water to its customers.

new technologies for the removal of

Corporation, of the United States, in

pollutants. In this way, we seek to nurture businesses with very high growthpotential and social demand.

4

Kurita Water Industries Ltd.

An Inter view with the President
Do you have a vision of the type of

The resolution remains valid until thecompany Kurita should aim to be?

end of the next general shareholders’

The role we need to play in solving

meeting. Moreover, we have decided toenvironmental issues grows larger all

reduce the investment unit for our

the time. To grow and develop as ashares to 100 shares from 1,000 shares,

socially significant corporation in an age

effective July 1, 2002. We are hopingof sudden changes, we have set ourthat our shareholder base will swell

sights on becoming an Advanced Water

with individual and other classes ofand Environmental Management

shareholders attracted by such measures,Company. As such, we will not only be

and intend to make full use of the

supplying our customers with chemicals

management monitoring function thatand equipment, but will also be applying

shareholders provide.

our management know-how to provide
a full service. Through this process, we

Are there any bright points in thewill work with our customers in propos-

outlook for Kurita in the current

ing the best systems to ameliorate or

fiscal year?

solve the problems they face.

Although there are signs that the economy of Japan has bottomed out, there are

our business execution capabilities,

What is your policy regarding

many sources of concern, such as thecreating new environmental-related

increasing shareholders’ value?

slow recovery in private sector capitalbusinesses, and reducing total costs.

We boast a solid financial position—

investment, diminishing market size due

For Kurita, the fiscal year ahead is aeffectively, we have no debt. By imple-

to business reorganizations, and otheryear in which we plan to make firm thementing investment and capital

negative factors. We expect that our

foundation for our next major advance.

measures that take maximum advantage

business conditions will remain severe.

of this strength, we aim to increase our

As for the last year of the EV-2 Plan,

capital efficiency. To enable us to pur-we have to bear in mind that conditions

sue systematic capital measures inare likely to get worse. Our fundamen-

response to changes in our businesstal policy will be for each employee toenvironment due to subsequent events,

induce reform within the Kurita Groupa resolution was passed at the parent

through change and self-adaptation,company’s general shareholders’ meet-working to create new value anding held on June 27, 2002, approving a

increase our cost competitiveness. To

buyback of common stock not exceed-

improve consolidated profitability, we

ing 13,000 thousand shares and an

will be thorough in implementing ouracquisition cost of ¥20,000 million.

major ongoing strategies: strengthening

July 2002

Takahide Santo, President

Annual Report 2002

5

Kurita at a GlanceKurita’s businesses are based on◆WATER TREATMENT CHEMICALS

providing comprehensive
services encompassing the fullrange of its customers’ water andenvironmental needs. Serving primarily
corporations and public entities, the◆ Boiler water treatment chemicals◆ Cooling water treatment chemicals◆ Flocculant and sludge dewatering agents◆ Process treatment chemicals◆ Chemical injection and dosing systems◆ Maintenance services

Company supplies various chemicals,◆ Contract-type services

equipment, and facilities, as well as
facility consulting, maintenance, and◆WATER TREATMENT FACILITIES

outsourcing services for water treatment,

WATER TREATMENT FACILITIES FOR
THE ELECTRONICS INDUSTRY

air purification, and soil remediation.

◆ Ultrapure water production systems◆ Wastewater treatment facilities◆ Maintenance services◆ Precision cleaning

WATER TREATMENT FACILITIES FOR
GENERAL INDUSTRY◆ Pure water production systems◆ Wastewater treatment facilities◆ Soil and groundwater remediation◆ Chemical cleaning◆ Maintenance services

PUBLIC SECTORENVIRONMENTAL CONTROL FACILITIES◆ Sewage treatment facilities◆ Sludge (human waste, etc.) recycle facilities◆ Incinerators scrapping business◆ Management of facilities operation◆ Maintenance services

6

Kurita Water Industries Ltd.

Composition of Net Sales

32.4%
Kurita boasts the top share of the domestic water treatment chemicals market in Japan. In using water treatment chemicals, our goal is to use thesafest and most appropriate treatment method for water that has or is going to be used in
production processes. Our boiler and cooling water treatment chemicals prevent rusting andhelp improve and maintain heat efficiency, thereby prolonging the useful life of facilities.
Our wastewater treatment chemicals purify wastewater and reduce the quantity of sludge.
Companies in such industries as petroleum, iron and steel, and pulp and papers use ourprocess treatment chemicals to improve production yield rates as well as to maintain andimprove production efficiency. Currently, we are focusing our efforts on expanding our salesof incinerator-related chemicals and revenues from contract-type services, which integrate
supplies of equipment and treatment chemicals with maintenance and operation services.

Composition of Net Sales

67.6%
Kurita’s ultrapure water production technology is recognized as cutting-edge
technology globally. Utilizing such membrane technology as ultrafiltration
and reverse osmosis, the Company’s systems almost completely remove impurities fromwater for use in semiconductor and liquid crystal display manufacture. If they wish, customers
may assemble the ready-made KuriAqua ultrapure water production system using our standardized equipment units. Among new technology, Kurita offers the KHOW (Kurita Hydrogen
Ozone Water) system, functional water production equipment that produces functional water
for wet cleaning processes in the manufacturing of electronic materials and devices. In addition to ultrapure water production systems, the Company supplies comprehensive services forthe entire water treatment utility, including wastewater treatment systems and maintenance.
Kurita is the No.1 producer of ultrapure water production systems in Japan.
Utilizing its membrane and pure water production technologies, Kurita supplies sterile, purified water production systems for pharmaceutical manufacture. Modularization of the purewater production system has been commercialized for the pharmaceutical industry. For theelectric power generation industry, the Company provides water production and wastewater
treatment systems for thermal and nuclear power plants. Kurita’s sludge reduction system
greatly reduces the excess organic sludge produced in factories in a variety of industries.
In the soil and underground water remediation field, Kurita employs cutting-edge technology in providing a full range of services, from survey to remediation.

Wastewater treatment technology makes an important contribution to safe recycling ofwater. As such, it has an important role to play in the public sector, which must respond to
the need to eliminate industrial waste, reduce environmental impact, and realize a societythat recycles its resources. At the Company’s sludge recycle facilities, safety is maintained by
combining deodorizing and noise reduction measures with advanced processing and reusetechnologies.
Kurita also accepts commissions from regional municipal bodies to manage the operationsof human waste and sewage treatment facilities and leisure facilities.
Taking advantage of its dioxin removal technologies, the Company has entered the incinerators scrapping business, which requires advanced safety management.

Annual Report 2002

7

Operational Review and Outlook

income to sales ratio was approximately

levels, we developed the market forthe same as in the previous fiscal year.

contract-type services, such as services

During the fiscal year under review,

aimed at reducing customers’ wastewater

the division continued its shift to high-treatment costs and services that offer avalue-added products and services under

supply of steam to companies based on

the Company’s policy of selling value

Build-Own-Operate (BOO) schemes.

rather than products. As part of its cost

We also focused our sales efforts on theConsolidated sales of the Water

reduction measures, Kurita absorbed

key points of each market.

Treatment Chemicals Division amount-

Kurita Chemicals, its main producer ofOrders increased for contract-type

ed to ¥46,277 million, edging up 1.2%

chemicals for the domestic market, inservices and other services in our main-from the previous fiscal year. Orders

a merger concluded on April 1, 2002.

tenance and other services category.

also increased, rising 0.8%, to ¥46,953

The Company took this measure to

Sales expanded favorably for chemical

million. Operating income, however,increase cost competitiveness by inte-agents to solidify heavy metals contained

decreased 5.7%, to ¥6,244 million.

grating the production and distribution

in fly ash during waste incineration.

Although the operating income to salesorganization for chemicals.

Sales of processing chemicals for theratio of division declined one percent-Demand for water treatment chemi-

pulp and papers industries also moved

age point, to 13.5%, this divisioncals weakened during the fiscal year

up slightly. Under the influence of ratio-remained the chief source of the Kurita

under the significant impact of reduced

nalization at customers’ factories andGroup’s stable profitability. If extraordi-

operating rates in the petroleum, ironintensified competition, however, sales

nary expenses provided for retirement

and steel, pulp and papers, and otherof the division’s core line of products—

benefits are excluded, the operating

so-called heavy industries. In response,

chemicals for treating boilers, cooling

we targeted larger market shares andincreased profitability. We redoubled
our efforts to make proposal-based sales,
offering solutions that contribute tosolving individual customers’ problems
using a combination of chemicals,
Kurita Kasei Co., Ltd.

chemical injection and dosing systems,

Effective April 1, 2002, Kurita Kasei transferred its

Merger with Kurita Chemicals Co., Ltd.
As part of the restructuring of the Group’s manu-

manufacturing facilities to Kurita. Through suchconsulting, and maintenance services.

facturing and distribution bases to minimize theirmeasures, the Kurita Group is proceeding with

Emphasizing the maintenance of ordercosts, Kurita Chemicals was merged with Kurita

more efficient integration to reduce costs.

Sales (Millions of Yen)

Operating Income (Millions of Yen)

2002

46,277

2002

2001

45,7092001

2000

45,486

2000

1999

44,621

1999

1998

43,563

1998

8

Kurita Water Industries Ltd.

on April 1, 2002.

6,244
6,623
6,292
5,971
4,455

water, and wastewater—declined as didfor new capital investment existed.

sales of the other chemicals category.

Among orders, demand for the productWe pressed ahead with marketing ofgroup’s core product, ultrapure water

our boiler steam supply contract during

production systems for the electronics

the fiscal year under review. In this ser-industry, dropped substantially overall.

vice, we handle the entire process ofOverseas orders for these systems, how-producing steam, from financing theever, were strong. Yet this growth wasconstruction of the facilities to main-

Consolidated sales of the Water

offset by the sharp drop in domestic

taining them. Customers make no capi-

Treatment Facilities Division declined

demand related to business liquidations,tal investment, merely purchase the

10.5%, to ¥96,401 million. Orders

plant closures, plant amalgamations, andsteam from Kurita. Because of the many

were down 13.7%, to ¥93,538 million.

other reorganization in the industry. The

advantages of this outsourcing of steam

Operating income amounted to ¥4,537

maintenance services category also was

production, including lower capitalmillion, a drop of 50.7%.

significantly affected by the lower operating rates in the electronics industry,

investment, smaller maintenance costs,
and reduced assets, we anticipate
growth in demand for this business.

◆ Water Treatment Facilities for theElectronics Industry

and revenues from precision cleaning
services decreased.

The division’s business climate is

Consolidated sales of this product group

During the fiscal year, we expanded

likely to remain difficult for the timedecreased because of the slump in theand improved our support services forbeing. Demand from the petroleum andIT industry in Japan.

ultrapure water production systems insteel markets is continuing its down-

During the fiscal year under review,the high-growth regions of China andward trend, and conditions also appear

we worked aggressively to expand busi-

Southeast Asia through the establish-

to be extremely harsh in other indus-

ness in China, Taiwan, and Southeast

ment of Kuritec (Shanghai) Co., Ltd.

tries. Nevertheless, by proceeding with

Asian countries—areas where potential

and Kuritec Singapore Pte. Ltd. Kuritec

a host of countermeasures and working(Shanghai) is providing maintenanceto thoroughly cut production costs, we

services for ultrapure water treatment

plan to expand orders and strengthen

systems to the fast-growing Chinese

our profitability. Specific sales measuresmarket and selling standard equipment.

include proposing resource and energy

On the other hand, Kuritec Singapore

conservation solutions to customers,

operates facilities to supply ultrapure

expanding sales of annual water treat-water to electronics manufacturers.

ment management, and increasing salesof product supply contracts. Amongother measures, we will develop newmarkets and rationalize our chemical
production.

KuriAqua
The ready-made ultrapure water production system
KuriAqua can be assembled with standardized
modular units to meet the specific requirementsof customers.

Annual Report 2002

9

Operational Review and Outlook◆ Water Treatment Facilities for

Kurita is pursuing two strategies in

We have also begun a leasing service

the market for ultrapure water produc-for pure and ultrapure water production

tion systems for the electronics industry.

systems in Japan. For this business, we

Consolidated sales of this product group

The first strategy is well represented bydeveloped the pure water production

also declined during the fiscal year

our ready-made ultrapure water produc-

system DEMISHA, which is housed inunder review. Although sales of watertion system KuriAqua. A modular

a container and can be leased by cus-

treatment facilities for the electric

system that can be assembled with stan-

tomers for any required period. Thispower generation industry and water

dardized modular units in accordanceservice is particularly useful for plant

production systems for pharmaceuticalwith desired water quality and volume,

start-ups or sudden but temporary pureproduction increased, sales of water

KuriAqua is low-cost and has shortwater or ultrapure water requirements.

treatment facilities for the food productdelivery times. The other strategy is

We have positioned DEMISHA as one ofindustry decreased. Revenues from

represented by the change in the focus

our strategic products because of antici-

maintenance services expanded.

of our business scope from the area

pated growth in demand. Another prod-

We have modularized our pure wateraround equipment to the utility. We areuct for which we expect shipments to

production systems for pharmaceuticals

shifting our business emphasis to win-increase is the KHOW SYSTEM. This

purposes. By redesigning previous

ning comprehensive outsourcing con-unit dissolves hydrogen or ozone gas inequipment, we have achieved shorter

tracts to operate and maintain ultrapure

ultrapure water for cleaning wafers anddelivery times, better quality control,

water production systems as well as

is adaptable to the cost-efficient central

cost reductions, and a smaller footprint.

provide consulting services.

production method as well as the

We intend to convert our full line of

one-by-one production method.

products for the pharmaceutical industry

For the time being, we do not foresee

General Industry

to modular systems.

a significant recovery in capital investment or operating rates by the domestic
electronics industry. Accordingly, we
will continue to concentrate on overseas
markets and on increasing productivity
through cost reductions and increased
modularization of equipment.
Ozone water production equipment
Kurita has developed centralized-manufacture
ozone water production equipment utilized for
wet cleaning processes in electronic materials anddevice manufacturing.

10

Kurita Water Industries Ltd.

Water purification systems for the pharmaceuticals field
In the pharmaceuticals field as well, Kurita hasachieved low cost, compact size, short delivery
times, and high quality for its product line by introducing modular systems.

In the soil remediation field, we have

◆ Public Sector Environmental

begun developing a new field in the real

Control Facilities

estate industry and introduced new

In the environmental facilities field, we

technology. For details of the company

approached existing customers withestablished to develop this field, pleaseenergy conservation and other schemes

see pages 12 and 13. During the fiscal

and sought to create demand

year, we acquired, jointly with Dowafor our products. It was a

Mining Co., Ltd., exclusive rights indifficult market because

Scrapping of incinerators

Japan to the permeable reactive barriers

demand for sludge recy-

tion of safety measures by work-

method of EnvironMetal Technologies

cle facilities from the pub-

Ensuring thorough implementaers, Kurita’s technologies are usedin the decontamination and scrappingInc., of Canada. This purification tech-lic sector shrank due to thenology prevents groundwater contami-emphasis on garbage in the government’s

nated with volatile organic compounds

supplemental budget. However, overall(VOC) from flowing out of the cont-orders increased thanks to expanded

incinerators operated by municipal

aminated area. We also introducedorders for renewal of human wastebodies. We will be providing a compre-

new technologies in the form of thetreatment facilities and for large-scalehensive service covering the evaluation

anaerobic bioremediation, in situ degra-

improvements of existing facilities.

of dioxin and soil contamination, thedation with iron powder, and in situ

Orders for sewage water treatment

management of industrial waste after

immobilization methods. We havefacilities dropped substantially because

scrapping, and the recycling of materials.

already received orders for these newof capital investment restraint by theWith capital investment constraints

technologies.

public sector and because of intensified

ongoing in the public sector market, we

competition. Orders for maintenanceintend to strengthen our management ofgeneral industry for water treatment

and other services also declined, affect-

existing customers by providing functional

facilities remains bleak, but demand for

ed by the cuts in the budgets of regional

analysis and other services and to focus

facilities for the electric power genera-

government bodies.

on developing demand for our products.

The overall outlook for demand fromtion and pharmaceuticals industries

During the fiscal year under review,should expand. In addition, increased

we established an environmental renova-

demand is also expected in the mainte-tion project group to make a full-fledged

nance services and soil remediation

entry into the business of scrappingof dioxin-polluted incinerators.

fields.

Sales (Millions of Yen)
2002

Operating Income (Millions of Yen)
96,401
107,725

2001
2000

85,511

2002

4,537
9,195

2001
2000

1999

102,133

1999

1998

104,759

1998

4,873
9,194
8,406

Annual Report 2002

11

DEVELOPING NEW BUSINESS FIELDSAs the leading specialist in water treatment and environmental equipment in Japan, Kurita is moving boldly into
new fields with strong growth potential. In doing so, we are utilizing our accumulated technical expertise andmanagement capabilities and creating new business models. In the following section, we describe our efforts toestablish commercial businesses in two of the most promising new fields we are developing.

SOIL ANDGROUNDWATERREMEDIATION

There is a unique and complex back-In addition to the top-level technology

ground to Japan’s soil and groundwaterand know-how in Japan developed

pollution problems. The population den-through our wealth of experience, wesity is high as is the utilization of land.

have expanded the scope of our business

Ownership changes frequently. There isto cover the full range of contamination

also a high degree of usage of ground-profiles by acquiring the method of inwater. Manufacturing plants, hospitals,

situ degradation through the use of ironresearch centers, and incinerator facili-

powder and the capability of off-siteties may have contaminated land withtreatment through a business alliancechemicals, heavy metals, and dioxin—with Dowa Mining. As a result, Kurita

and there may well be extensive areas

has captured the top share of thisof contaminated land that are as yetmarket in Japan.

unidentified. Japan’s soil and groundwa-

Already the leader in this field, we

ter contamination evaluation and reme-

are developing a new market related todiation market is currently estimated to

the real estate business to complementbe ¥70 billion annually, and is forecast

the existing market for supporting theto quadruple in 10 years.

remediation programs of major corpora-Entering the market in 1993, Kurita

tions. The backdrop for this new market

was one of the first to offer soil andis the trend among many corporations togroundwater contamination evaluation

try and find uses for or sell their idle land

surveys and remediation services. As a

as part of their restructuring efforts topioneer in the field, we have steadilycope with the poor economic conditions.

achieved growth by selling these ser-

In addition, public awareness of soil andvices to major corporations in the elec-

groundwater contamination is rising,tronics and pharmaceuticals industries

and these issues create major obstacles

that were advanced in their environ-for commercial real estate transactions.

mental management activities. We

To facilitate such real estate transac-

boast the largest customer base in thetions, we assess the latent soil contami-

field, totaling more than 1,000 projects.

nation. After revealing the extent ofcontamination, we proceed to clean up

12

Kurita Water Industries Ltd.

Land Solution is the first commercial
soil contamination risk hedge specialist
in Japan, meeting customers’ evaluation,
remediation, and sales needs by providing necessary services to facilitate realestate transactions. These services utilize Kurita’s top-class capabilities in theassessment of soil contamination andSoil analysis vehicle
Thanks to a wide range of technologies, Kurita canprovide soil and groundwater remediation services

clean-up costs and time frames as wellas its strong business execution capabili-

for all types of contamination.

ties. Land Solution also provides cost-cap
the site, permitting the sale or redevel-

and liability insurance products devel-

opment of the land. Kurita is the first

oped by its shareholder companies. The

company to advocate this business con-company is taking maximum advantage

cept in Japan. In July 2001, we formedof the expertise and information net-

a company to make companies aware ofworks of its founding, cooperative, andthis risk and to provide a solution in thealliance partners to expand its business.

form of a comprehensive service. LandIn the six months following its launch,

Solution Inc. is a partnership of banks

Land Solution won 100 orders fromand trust companies, soil contaminationcompanies in Japan, including four

assessment and remediation companies,

remediation projects. The company

and real estate development consulting

has strong expectations for anothercompanies. Kurita, however, retains

leap in business volume in the current

control of the company through a 51%

fiscal year.

Profile of

LAND SOLUTION INC.
Established: July 27, 2001
Paid in capital: ¥450 million
Main businesses:◆ Maintenance and operation of land evaluation
systems (four stages available depending onneeds)◆ Agency and subcontracting services for land

Land Solution’s Risk Management
Land Solution Inc.’s
Risk Management

Land withsoil contamination risk

AssessRenew or alter
land use

Determine asset value
Optimize real estate value

Abandon plans

Use

Sell

redevelopment plans for land with soil contamination risk, disposal by sale plans, and otherplans)

Cooperative Partner:
Japan Real Estate Institute(Evaluation systems management)

Measure risk

Risk uncovered◆ Support of real estate transactions (proposal of

Shareholders:
1) Kurita Water Industries Ltd.
2) Development Bank of Japan
3) Dowa Mining Co., Ltd.
4) UFJ Bank Limited
5) The Asahi Bank Ltd.
6) The Nomura Holding Co., Ltd.
7) The Yasuda Fire & Marine Insurance Co., Ltd.
8) The Chuo Mitsui Trust and Banking Co., Ltd.
9) XYMAX Corporation
10)Engineering & Risk Services Corporation
11)E&E Solutions Inc.

stake.

Latent Risk
Unrecognizedevaluation surveys (screening and selection of
appropriate subcontractors)

Hold

Alliance Partners:
Mitsui Fudosan Co., Ltd.
(Use of evaluation systems, land use planning,land sales)
Recruit Cosmos Co., Ltd.
(Same as above)
And eight other companies

Annual Report 2002

13

WATER
TREATMENTSYSTEMS FOR
CLEAN ENERGYFUEL CELLS

Kurita will supply water treatment(Kurita Continuous Deionizer), which uses

system for fuels cells, which are touted

electricity to continuously regenerate theas the trump card in the battle to reduce

ion exchange resin while removing ionicenvironmental impact as well as being

impurities and producing pure water.

the source of a new industry.

The chief advantage of Kurita’s system

Entering another new environment-is that it is practically maintenance-free.

related business field, Kurita has made a

We are continuing to perfect the systemfull-fledged start in the water treatment

as the market for residential cogenera-

systems for the fuel cells market. In

tion fuel cells, which is expected toMarch 2001, we formed a strategic

expand rapidly, becomes established.

technology partnership with H PowerH Power is constructing a factory to

Corporation, of the United States, a

mass-produce the fuel cells, and has

leading manufacturer of proton exchange

received orders for approximately

membrane (PEM) residential cogenera-

12,000 units, totaling US$81 million,

tion fuel cells, and also took an equity

in the United States. The U.S. market isstake in the company. Fuel cells are

forecast to grow to approximately

gathering a great deal of attention as a

10,000 units per year by 2006.

green energy source. We expect to be theKurita is also participating in a

exclusive supplier of a water treatment

National Project covering fuel cells in

system for H Power’s fuel cells that will

Japan. Leveraging our experience with H

be highly competitive in terms of cost

Power, we hope to become the de facto

and function. The system employs KCDI

standard for water treatment systems forfuel cells among the battery manufactur-

PEM Fuel Cell and Kurita’s Water Purification Uniters and energy companies in Japan thatare developing and promoting fuel cells.

ExhaustJapan’s fuel cell market is estimated toCH4Natural Gas
Liquified Petroleum Gas C3H8

H2 + CO2

expand to more than two million units
ANODE

annually by 2010. We will continue toPure H2O
Fuel Processor

Air

CATHODE

Tap Water

COOLINGsearch for further strategic alliances with

Exhaustleading companies that would enable
Kurita’s
Water Purification Unit

Kurita to develop new applications andPure Water Tank

Bath, etc.

Cell Stackbusinesses for its pure water supply
Hot Water Tank

systems in the energy-related field.

14

Kurita Water Industries Ltd.

Selected Financial Data

Kurita Water Industries Ltd. and Consolidated Subsidiaries
Year ended March 31

Millions of Yen

1997

1998

1999

2000

2001

2002

Net sales ............................................................. ¥171,592¥148,322¥146,754¥130,998¥153,435¥142,678

Cost of sales ........................................................

117,170

104,226

101,366

88,174

105,587

99,039Selling, general and administrative expenses ........

28,42629,07030,17931,61932,03032,848Operating income ...............................................

25,99515,025

15,209

11,203

15,817

10,790

Income before income taxes ................................

27,096

14,85015,5808,615

14,727

9,121

Net income .........................................................

12,655

6,553

7,567

4,648

8,366

5,670

Capital expenditures ...........................................

7,378

3,864

6,642

1,968

2,714

3,268

R&D expenses .....................................................

4,340

4,996

5,178

5,164

4,743

5,071

Depreciation .......................................................

2,749

2,807

3,055

3,167

2,946

3,132

Current assets .....................................................

121,600

114,426

112,576

111,017

115,263

103,490

Current liabilities ................................................

59,78851,28749,34041,63351,62536,585

Total shareholders’ equity....................................

98,482

102,585

108,051

113,383

119,209

122,590

Total assets .........................................................

166,170

161,922

165,775

165,297

183,175

172,145

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

95.3

49.4

57.1

35.1

63.2

42.9

Shareholders’ equity per share .............................

741.6

772.5

816.5

856.8

900.8

926.5

Dividends per share (parent company) .................

16.0

16.0

16.0

17.0

16.0

16.0

Return on assets (%) ............................................

7.8

4.0

4.6

2.8

4.8

3.2

Return on sales (%)..............................................

7.4

4.4

5.2

3.5

5.5

4.0

Total assets turnover (Times)...............................

1.1

0.9

0.9

0.8

0.9

0.8

Shareholders’ equity ratio (%) ..............................

59.3

63.4

65.2

68.6

65.1

71.2

Return on equity (%) ...........................................

13.6

6.5

7.2

4.2

7.2

4.7

For the year:

At year-end:

Amounts per share of common stock (Yen):

Others:Annual Report 2002

15

Management’s Discussion and Analysis

OVERVIEWNET SALES AND ORDERS RECEIVED

Overall, the Kurita Group experienced a difficult business climate

Consolidated net sales for the fiscal year ended March 31, 2002,

in the fiscal year ended March 31, 2002. Sales of water treatment

amounted to ¥142,678 million, falling ¥10,757 million, or 7.0%

facilities suffered under the continued restraint or postponement of

because of the deterioration in the water treatment facilities business.

capital investment and demand was low from all industries, partic-

A description of performance by segment follows.

ularly electronics industries. Sales of water treatment chemicals werealso weak because of progressive rationalization at the factories of◆ Water treatment chemicals

customers and heightened competition.

Sales of water treatment chemicals edged up ¥568 million, or

Despite these conditions, we pressed forward with various mea-

1.2%, to ¥46,277 million. Amid an overall downward trend in thesures to strengthen our sales and profitability and to maintain ordermarket, we developed contract-type services, such as services

and earnings levels. With customer satisfaction as the basic policy

aimed at reducing customer’s wastewater treatment costs andof our business activities, we made further progress toward theservices that offer a supply of steam to companies based on Build-goals of the EV-2 Plan, our 3-year medium-term management plan.

Own-Operate (BOO) schemes. We also focused our sales efforts on

Targeting efficient use of capital, we continued to give top priority

the key points of each market. Revenues increased from contract-

to our fields of emphasis in allocating our corporate resources.

type services and other maintenance services and sales expanded

Looking at consolidated performance, orders declined 9.3%, tofor chemicals to solidify heavy metals contained in fly ash during¥140,492 million while net sales decreased 7.0%, to ¥142,678

waste incineration. Sales of processing chemicals to pulp and paper

million, because of the downturn in the water treatment facilities

industries also rose slightly. On the other hand, sales of the divi-business. Operating income dropped 31.8%, to ¥10,790 million,sion’s core product line of chemicals for treating boilers, coolingbecause of the decline in net sales and an increase in selling, generalwater, and wastewater fell under the impact of the ongoing ratio-

and administrative expenses (SG&A), mainly comprising additional

nalization at customers’ factories and intensifying competition.

charges related to employees’ retirement benefits and R&D expenses.

Total orders for water treatment chemicals during the fiscal year

Consolidated net income for the period under review fell 32.2%, toamounted to ¥46,953 million, rising ¥381 million, or 0.8%.

¥5,670 million, primarily as a result of valuation losses recorded
for investment in securities based on the application of depletion◆ Water treatment facilities

accounting. Despite the contraction in earnings, free cash flow

Sales of water treatment facilities dropped ¥11,324 million, or

expanded by ¥2,789 million, to ¥3,379 million, mainly thanks to

10.5%, to ¥96,401 million, becoming the primary factor in the

an improvement in operating cash flows. In keeping with theoverall decline in net sales. During the fiscal year, the companies ofdividend policy of the parent company, annual cash dividends

the Kurita Group cooperated to strengthen sales efforts in response

applicable to the period were set at ¥16.00 per share.

to the downward trend in the market. In addition, the Kurita

Among subsequent events, a resolution was passed at theGroup took aggressive steps to increase its presence in the markets

parent company’s general shareholders’ meeting held on June 27,

of China, Taiwan, and Southeast Asia, where new capital investment

2002, approving a buyback of common stocks not to exceed

is anticipated in the electronics industry. Overseas sales of the core

13,000 thousand shares and an acquisition cost of ¥20,000 million.

product for the electronics industry, ultrapure water production

The resolution remains valid until the end of the next generalsystems, grew. However, domestic sales of ultrapure water produc-shareholders’ meeting.

tion systems dropped substantially because poor business conditions
forced customers to abandon the business, stop operations, andIn a Board of Directors’ Meeting held on March 26, 2002, the parent company decided to change its stock trading unit from 1,000

amalgamate factories.
In the market for water treatment facilities for general industry,

shares to 100 shares to promote more active stock trading, particu-

sales of water treatment facilities to the materials and electric

larly among individual investors. The change went into effect on

power generation industries and of water production systems toJuly 1, 2002.

the pharmaceutical industry increased. Conversely, sales of water
treatment facilities to the food product industry declined. Soil

16

Kurita Water Industries Ltd.

remediation revenues declined, although sales grew thanks to theprincipally due to a relative rise resulting from declines in productdevelopment of a new market related to real estate transactions

prices and to the increased burden of fixed expenses produced byand to the introduction of new technology. Revenues from mainte-

lower net sales. Consequently, gross profit decreased, ¥4,208 million,

nance and other services dropped substantially because of theor 8.8%, to ¥43,639 million.

decline in operating rates among the core customer group of elec-

SG&A expenses advanced slightly, rising ¥818 million, or 2.6%,

tronics companies. Revenues from chemical cleaning also

to ¥32,848 million. Although the Group did reduce SG&A expens-decreased slightly.

es (excluding R&D expenses) by ¥494 million, a ¥984 million

In the environmental facilities field, Kurita faced a difficult mar-increase in additional expenses related to employees’ retirement

ket for sludge recycle facilities because of a contraction in the mar-benefits and an increase of ¥328 million in R&D expenses, princi-

ket size resulting from the increased emphasis on garbage in thepally for the water treatment chemicals business, resulted in an

government’s supplemental budget and due to increased competi-

overall rise. Subsequently, SG&A expenses increased ¥328 million,tion. Nevertheless, overall orders increased thanks to expanded

or 6.9%, to ¥5,071 million, and SG&A expenses as a percentage oforders for renewal of human waste treatment facilities and fornet sales rose 2.1 percentage points, to 23.0%, from 20.9%. R&D

large-scale improvements of existing facilities; sales, however,expenses in SG&A expenses as a percentage of net sales rose 0.5

declined. Though orders of sewage treatment facilities decreased

percentage points, to 3.6%, from 3.1% a year earlier.

significantly because of capital investment restraint by the public

Consequently, operating income decreased ¥5,027 million, orsector and intensified competition, sales increased. Revenues from

31.8%, to ¥10,790 million. Operating income as a percentage of

maintenance and other services also declined under the impact of

net sales fell 2.7 percentage points, to 7.6%, from 10.3%. By seg-budget cuts by regional government bodies. Total orders for water

ment, although water treatment chemicals sales increased 1.2%,

treatment facilities during the fiscal year amounted to ¥93,538

operating income fell ¥379 million, or 5.7%, to ¥6,244 million, pri-million, dropping ¥14,868 million, or 13.7%.

marily because of price declines related to heightened competition.
The operating income ratio declined 1.0 percentage point, to13.5%, from 14.5%. In the core water treatment facilities business,

COSTS, EXPENSES, AND OPERATING INCOME

Cost of sales amounted to ¥99,039 billion, declining ¥6,548 mil-the previously mentioned slump in sales and lower prices resulted

lion, or 6.2%, from the previous fiscal year, falling slightly less thanin a ¥4,658 million, or 50.7%, drop in operating income to ¥4,537

the 7.0% contraction in net sales. The cost of sales ratio increased

million, accounting for 92.7% of the overall decline in operating

0.6 percentage points, to 69.4%, from 68.8% in the preceding fis-income. The operating income ratio fell 3.8 percentage points, tocal year. The increase in the cost of sales ratio despite the Group’s

4.7%, from 8.5%.

efforts to reduce overall costs, including installment expenses, was

Net Sales by Segment

R&D Expenses andRatio of R&D Expenses to Net Sales

Operating Income andRatio of Operating Income to Net Sales(Billions of Yen)

(Billions of Yen)(%)

(Billions of Yen)

(%)

180

6

6

28

16

21

12

14

8

7

4

135

90

3

3

45

0

0

1997 1998 1999 2000 2001 2002

01997 1998 1999 2000 2001 2002

00

1997 1998 1999 2000 2001 2002

Water Treatment Chemicals
Water Treatment Facilities

Annual Report 2002

17

Management’s Discussion and Analysis

trade, because of increased recovery of receivables from the previ-

OTHER INCOME (EXPENSES) AND NET INCOME

Other expenses, net, expanded ¥580 million, to ¥1,670 million.

ous fiscal year. In addition, inventories dropped ¥2,483 million

This increase can be attributed to a variety of negative factors,

because of the completion of construction and reduced orders, andwhile positive factors, such as financial income, net, changed little.

marketable securities fell ¥2,128 million because of sales. On the

Among negative factors, loss on write-down of investment securi-other hand, cash on hand and in banks increased ¥4,974 million

ties related to the application of depletion accounting increased

because of increased net cash provided by operating activities and¥1,482 million, to ¥1,986 million. In addition, equity in earnings

reflecting the contraction in assets.

of unconsolidated subsidiaries and affiliates dropped ¥349 million,

Investments and long-term receivables amounted to ¥29,947

to ¥198 million. Among positive factors, there was a ¥932 million

million, as the decline in this category was held to ¥725 million.

gain on sale of an affiliated company’s stock and other, net,

Looking at individual items, as mentioned previously, investment

improved ¥323 million.

in securities decreased ¥4,402 million because of valuation losses,

As a result of the preceding factors, income before income taxes

sales, and redemptions. Long-term loans to unconsolidated

amounted to ¥9,121 million, down ¥5,606 million, or 38.1% fromsubsidiaries rose ¥2,365 million based on long-term loans to athe previous fiscal year. Net income was ¥5,670 million, declining

new subsidiary. Deferred tax assets—non-current expanded¥2,696 million, or 32.2%, year on year.

¥1,690 million.

The effective tax rate after application of tax effect accounting

Property, plant and equipment, net, edged up ¥308 million, tofell 5.8 percentage points, to 37.3%, from 43.1%. Net income per¥36,353 million. During the fiscal year, capital expenditures total-

share was ¥42.85, dropping ¥20.37 from ¥63.22 in the previous

ing ¥3,268 million were made primarily in the water treatment

fiscal year. Cash dividends declared by the parent company were

facilities business. However, because capital expenditures were¥16.00 per share.

kept within the scope of depreciation and amortization, property,
plant and equipment, net, remained approximately the same.

FINANCIAL POSITION◆ Assets◆ Liabilities and Stockholders’ Equity

Total assets at fiscal year-end contracted ¥11,030 million, or 6.0%,

Total liabilities contracted ¥14,447 million, or 22.8%, to ¥48,997

to ¥172,145 million. The decline can mainly be attributed to amillion. Of this amount, current liabilities were mainly responsible

decrease in current assets because of the drop in sales.

for the overall decrease, declining ¥15,040 million, to ¥36,585

By type of asset, total current assets fell ¥11,773 million, tomillion. This drop can mainly be attributed to the ¥9,705 million¥103,490 million. The main factor contributing to this decline wasdecline in payment of notes and accounts payable, trade, becausea ¥11,924 million decrease in notes and accounts receivable,of payments to reduce the high level from the previous fiscal year

Net Income andRatio of Net Income to Net Sales

Current Ratio

Capital Expenditures(Billions of Yen)

(%)

(%)

12

8

280

8

9

6

210

6

6

4

140

4

3

2

70

2

0

0

0

1997 1998 1999 2000 2001 2002

18

Kurita Water Industries Ltd.

(Billions of Yen)0

1997 1998 1999 2000 2001 2002

1997 1998 1999 2000 2001 2002

and because of lower inventories. Income taxes payable sunk

Net cash provided by operating activities increased ¥3,373 mil-

¥5,321 million because of a decline in earnings after the payment

lion from the previous fiscal year, to ¥8,713 million. Cash inflow,of interim income taxes based on a higher expected level. Long-term

consisting mainly of income before income taxes adjusted for

liabilities edged up ¥593 million, to ¥12,411 million. This increase

depreciation and amortization and other noncash items and income

principally resulted from an increase in accrued employees’ retire-

taxes paid, decreased. On the other hand, cash outflow, mainly

ment benefits because of the addition to reserves. Kurita’s total

from operating receivables, liabilities, and other changes in assets andshort- and long-term interest-bearing debt was an extremely low

liabilities, produced a cash inflow from an increase in the recovery¥217 million. Return on total assets dropped 1.5 percentage points,of receivables and a decrease in inventories that exceeded theto 3.2%, from 4.8%, due to a deterioration in return on sales (ROS)

increase in cash outflows from the decrease in payables.

and asset turnover for the reasons previously noted. ROS fell to

Net cash used in investing activities amounted to ¥5,334 mil-

4.0%, from 5.5%; and asset turnover declined to 0.803 times, fromlion, up ¥584 million from the previous fiscal year. Although pay-

0.881 times.

ments for the purchase of and proceeds from the sale of marketable

Total shareholders’ equity increased ¥3,381 million, or 2.8%, tosecurities and investment securities resulted in a ¥3,666 million¥122,590 million. Although net income declined, the sharehold-increase in cash inflows, to ¥1,430 million, long-term loans to aers’ equity ratio rose 6.1 percentage points, to 71.2%, from 65.1%,

new subsidiary, other payments, an increase in time deposits, andimproving further in tandem with the contraction in total assets

others, net contributed to a ¥4,250 million increase in cash

and liabilities. The ¥3,360 million increase in retained earnings

outflows, to ¥6,764 million.

was mainly responsible for the improvement in the equity ratio.

Net cash used in financing activities amounted to ¥2,169 million, declining by ¥202 million from the previous fiscal year. This
result can be attributed to a ¥198 million decline in short-term

CASH FLOWSCash and cash equivalents (hereafter referred to as cash) at the end

debt, net. Cash dividends paid amounted to ¥2,117 million, theof the fiscal period amounted to ¥32,980 million, increasingsame as in the previous fiscal year.

¥1,411 million from the previous fiscal year-end. This increase canmainly be attributed to an improvement in the balance of tradereceivables and payables despite the decline in sales. The amountof cash represented approximately 2.8 months of average monthly
sales of ¥11,890 million, representing adequate liquidity for normal
business operations.

Return on Assets

Depreciation

Return on Equity

(%)

(%)

4

8

16

3

6

12

2

4

8

1

2

4

(Billions of Yen)001997 1998 1999 2000 2001 2002

01997 1998 1999 2000 2001 2002

1997 1998 1999 2000 2001 2002

Annual Report 2002

19

Consolidated Balance Sheets

Kurita Water Industries Ltd. and Consolidated Subsidiaries
At March 31, 2001 and 2002

Millions of Yen

Assets2001

Current assets:
Cash on hand and in banks (Note 13) .................................................... ¥ 28,434
Notes and accounts receivable, trade (Note 10) ......................................
67,397
Allowance for doubtful accounts ............................................................
(199)
Marketable securities (Note 5-(1)) ..........................................................
6,768
Inventories (Note 14).............................................................................
10,185
Deferred tax assets—current (Note 16) ..................................................
1,729
Other current assets...............................................................................
946
Total current assets ............................................................................ 115,263

Thousands of
U.S. Dollars(Note 1)

2002

2002

¥ 33,408
55,473
(185)
4,640
7,702
1,503
945
103,490$ 251,188
417,090(1,391)
34,887
57,91011,301
7,105
778,120

Investments and long-term receivables:
Investments in securities (Note 5-(1)) ....................................................
Investments in unconsolidated subsidiaries and affiliates .........................
Deferred tax assets—non-current (Note 16) ...........................................
Long-term loans to unconsolidated subsidiaries.......................................
Other investments .................................................................................
Allowance for doubtful accounts ............................................................
Total investments and long-term receivables.......................................

22,721
3,137
2,167
70
2,663
(89)
30,672

18,319
2,547
3,857
2,435
2,867
(80)
29,947

137,737
19,15029,00018,30821,556(602)
225,165

Property, plant and equipment, at cost (Note 5-(2)):
Land......................................................................................................
Buildings and structures.........................................................................
Machinery and equipment .....................................................................
Construction in progress ........................................................................
Other facilities .......................................................................................
Total......................................................................................................
Accumulated depreciation......................................................................
Property, plant and equipment, net ....................................................

14,80826,983
11,393341
9,831
63,356(27,310)36,04515,044
28,16811,806
198
10,986
66,203(29,850)
36,353

113,113
211,789
88,767
1,489
82,602497,767(224,436)
273,331

Other assets.............................................................................................
1,194
Total assets............................................................................... ¥183,175

2,354¥172,145

17,699$1,294,323

The accompanying notes are an integral part of these statements.

20

Kurita Water Industries Ltd.

Thousands of
U.S. Dollars(Note 1)Millions of Yen

Liabilities and shareholders’ equity

2001

Current liabilities:
Short-term borrowings (Note 15) ........................................................... ¥66
Current portion of long-term borrowings (Note 15) ................................
31
Notes and accounts payable, trade (Note 10) ..........................................
32,616
Income taxes payable.............................................................................
5,763
Advances received .................................................................................
2,941
Accrued employees’ bonuses (Note 5-(3))...............................................
2,913
Allowance for product warranty .............................................................
956
Other current liabilities ..........................................................................
6,337
Total current liabilities .......................................................................
51,625Long-term liabilities:
Long-term borrowings (Note 15) ............................................................
Accrued employees’ retirement benefits (Notes 5-(3), 17) .......................
Accrued retirement benefits for directors and corporate auditors .............
Other long-term liabilities.......................................................................
Total long-term liabilities....................................................................
Total liabilities ..........................................................................

2002
¥

132
7
22,911
442
1,621
2,927
923
7,617
36,585

2002
$

992
53
172,263
3,323
12,18822,0086,940
57,271275,075

97
10,031961
727
11,81863,44478
10,873667
792
12,411
48,997586
81,752
5,015
5,955
93,316368,398

Minority interests in consolidated subsidiaries ....................................
522
Contingent liabilities (Note 20)
Shareholders’ equity:
Common stock, 2002—no par value, 2001—¥50 par value
Authorized: 235,840,000 shares
Issued: 2002—132,800,256 shares....................................................
13,4502001—132,800,256 shares
Capital surplus.......................................................................................
11,398
Unrealized gain on revaluation of land (Note 11)....................................
—
Retained earnings ..................................................................................
95,444
Unrealized holding gains on securities ....................................................
493
Foreign currency translation adjustment .................................................
(775)................................................................................................ 120,010
Treasury stock, at cost:
2002—477,000 shares, 2001—460,000 shares.....................................
(801)
Total shareholders’ equity .................................................................. 119,209
Total liabilities, minority interests and shareholders’ equity........ ¥183,175

558

4,195

13,450101,128

11,39819
98,804
162(418)
123,41785,699143
742,887
1,218(3,143)927,947(827)
122,590¥172,145(6,218)
721,729$1,294,323

Annual Report 2002

21

Consolidated Statements of Income

Thousands of
U.S. Dollars(Note 1)

Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2001 and 2002

Millions of Yen

2001

2002

2002

Net sales .................................................................................................. ¥153,435
Cost of sales............................................................................................. 105,587
Gross profit........................................................................................
47,847
Selling, general and administrative expenses .......................................
32,030Operating income ..............................................................................
15,817
Other income (expenses):
Interest and dividend income .................................................................
501
Interest expenses ...................................................................................
(38)
Gain on sale of an affiliated company’s stock ..........................................
—
Gain on (sales of) investment securities ..................................................
449
Equity in earnings of unconsolidated subsidiaries and affiliates ................
547
Loss on disposal of property, plant and equipment ..................................
(223)
Loss on sales of investment securities .....................................................
(407)
Loss on write-down of investment securities...........................................
(504)
Amortization of unrecognized effect of change inaccounting for employees’ retirement benefits ......................................
(1,162)Other, net..............................................................................................
(253)................................................................................................
(1,090)¥142,678
99,03943,63932,848
10,790$1,072,767
744,654
328,113
246,977
81,128

453
(35)
932
—
198
(141)
—
(1,986)

3,406
(263)
7,008
—
1,489
(1,060)—(14,932)(1,162)70(1,670)(8,737)526(12,556)

Income before income taxes ..................................................................
14,727
Income taxes (Note 16):
Current taxes.........................................................................................
8,058
Deferred taxes .......................................................................................
(1,716)................................................................................................
6,342
Minority interests in earnings of consolidated subsidiaries ................
19
Net income .............................................................................................. ¥ 8,366

9,121

68,5794,630(1,229)3,401
49¥ 5,670

34,812(9,241)
25,571
368
42,632$

U.S. dollars(Note 1)Yen

2001
Per share of common stock:
Net income............................................................................................ ¥Cash dividends ......................................................................................
The accompanying notes are an integral part of these statements.

22

Kurita Water Industries Ltd.

63.22
16.00

2002
¥

42.85
16.00

2002
$

0.32
0.12

Consolidated Statements of Shareholders’ Equity

Thousands of
U.S. Dollars(Note 1)

Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2001 and 2002

In thousands
Number ofshares issued

Millions of Yen

2001

2002

2002

Common stock:
Beginning of the year......................................................... 132,800
End of the year.................................................................. 132,800¥13,450
13,450¥13,450
13,450$101,128
101,128

Capital surplus:
Beginning of the year.....................................................................................
End of the year..............................................................................................

11,398
11,398

11,398
11,39885,69985,699Retained earnings:
Beginning of the year..................................................................................... 89,340
Net income for the year .................................................................................
8,366
Cash dividends paid....................................................................................... (2,117)
Bonuses to directors and corporate auditors ...................................................
(145)
Other items ...................................................................................................
—End of the year.............................................................................................. ¥95,444

95,444
5,670(2,117)(164)(27)¥98,804

717,624
42,632(15,917)(1,233)(203)$742,887

The accompanying notes are an integral part of these statements.

Annual Report 2002

23

Consolidated Statements of Cash Flows

Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2001 and 2002

Millions of Yen

2001
I. Cash flows from operating activities:
Income before income taxes .......................................................................... ¥14,727
Depreciation and amortization.......................................................................
3,196
Increase (decrease) in allowance for employees’ retirement benefits ...............
3,596
Increase (decrease) in other allowances and accruals, net...............................
653
Interest and dividends income .......................................................................
(502)
Interest expenses ..........................................................................................
38
Decrease (increase) in trade receivables ......................................................... (16,742)
Decrease (increase) in inventories..................................................................
(3)
Increase (decrease) in trade payables..............................................................
5,619
Payments of bonuses to directors and corporate auditors ................................
(146)
Other, net.....................................................................................................
(634).....................................................................................................................
9,805
Interest and dividends received .....................................................................
453
Interest paid..................................................................................................
(38)
Income taxes paid ......................................................................................... (5,085)
Other, net.....................................................................................................
206
Net cash provided by operating activities ...................................................
5,340

Thousands of
U.S. Dollars(Note 1)

2002

2002

¥ 9,121
3,409
828
(365)
(454)
35
10,8802,537(8,854)(165)
698
17,669506(35)(9,490)64
8,713$ 68,579
26,6326,226(2,744)(3,414)263
81,805
19,075(66,571)(1,241)
5,248
132,850
3,805(263)(71,353)481
65,511

II. Cash flows from investing activities:
Decrease (increase) in time deposits, net........................................................
Payments for purchase of property, plant and equipment................................
Proceeds from sales of property, plant and equipment ....................................
Payments for purchase of marketable securities and investment securities ......
Proceeds from sales of marketable securities and investment securities ...........
Long-term loans to unconsolidated subsidiaries ..............................................
Other payments ............................................................................................
Other revenues .............................................................................................
Net cash used in investing activities...........................................................

208(2,596)116(7,276)
5,040
(51)
(878)
686
(4,750)(507)(2,747)93(6,218)7,648(2,461)(1,826)684(5,334)(3,812)(20,654)699(46,752)
57,504(18,504)(13,729)
5,143(40,105)

III. Cash flows from financing activities:
Decrease in short-term debt, net....................................................................
Proceeds from long-term debt........................................................................
Repayments of long-term debt .......................................................................
Cash dividends paid ......................................................................................
Other............................................................................................................
Net cash used in financing activities ..........................................................

(140)
319
(407)
(2,117)(26)(2,371)58
1(45)(2,117)(66)(2,169)

436
8
(338)
(15,917)(496)(16,308)

IV. Effect of exchange rate changes on cash and cash equivalents ............
58
V. Net increase (decrease) in cash and cash equivalents............................ (1,723)
VI. Cash and cash equivalents at beginning of year .................................... 33,240
VII. Cash and cash equivalents of newly consolidated subsidiaries...........
52
VIII. Cash and cash equivalents at end of year ............................................ ¥31,569

145
1,354
31,56956¥32,980

1,090
10,180237,361421$247,970

The accompanying notes are an integral part of these statements.

24

Kurita Water Industries Ltd.

Notes to Consolidated Financial Statements

Kurita Water Industries Ltd. and Consolidated Subsidiaries

1. Basis of presenting Consolidated Financial Statements

3. Application of equity method

Kurita Water Industries Ltd. (the “Company”) and its subsidiaries(1) Number of companies to which the equity method is applied: 5in Japan maintain their books of account and prepare their financial(2) Affiliates to which no equity method has been applied had nostatements in accordance with accounting principles and practices

material effect on consolidated net income and consolidated

generally accepted in Japan, while its foreign subsidiaries maintainretained earnings in the aggregate. Hence, they have not been

their books of account and prepare their financial statements inincluded in the application scope of the equity method.

conformity with those of the countries of their domicile.
The accompanying consolidated financial statements were also

4. Business terms of consolidated subsidiaries

prepared in accordance with accounting principles and practices

The fiscal year of Kurita (Singapore) Pte. Ltd. and eleven othergenerally accepted in Japan, and filed with the Japanese Ministry ofoverseas consolidated subsidiaries ended December 31, 2001. The

Finance (MOF) and the Tokyo Stock Exchange as required by theaccompanying consolidated financial statements include the

Securities and Exchange Low of Japan.

accounts of these subsidiaries as of December 31, 2001 and for the

Certain reclassifications of accounts and modifications haveyear then ended.

been made in the accompanying financial statements to facilitate
understanding by readers outside Japan. These reclassifications andmodifications have no effect on net income or shareholders’ equity.
All figures in the financial statements and notes are stated inmillions of yen by discarding fractional amounts of less than ¥1
million. As a result, the totals shown in the financial statements
and notes in yen do not necessarily agree with the sum of theindividual amounts.
The translation of yen amounts into U.S. dollar amounts is
included solely for convenience and has been made for 2002, as amatter of arithmetical computation only, at the rate of ¥133 to US$1,
the prevailing rate on the Tokyo foreign exchange market on
March 30, 2002. The translation should not be construed as a representation that yen have been, could have been, or could in the
future be converted into U.S. dollars at the above or any other rate.

5. Significant accounting policies(1) Valuation basis and method
Marketable securities
Held-to-maturity debt securities: Amortized cost (straight-line
amortization)
Other securities
Items that have market price: Evaluated at market price at thebalance sheet date, with resulting unrealized holding gains andlosses reported as a separate component of shareholders’ equity(cost of sold securities are computed by the moving averagemethod)Items that have no market price: Cost basis by the moving
average method
Inventories
Principally cost basis by the moving average method (except

2. Scope of consolidation
The consolidated financial statements include the accounts

for work in process whose costs are determined by the specificidentification method)of the company and its significant subsidiaries. All significant(2) Depreciation method of property, plant and equipment

intercompany transactions and balances have been eliminatedDeclining-balance method for the Company and domestic con-in consolidation.

solidated subsidiaries (except for buildings, not including auxiliary(1) Number of consolidated subsidiaries: 27

facilities, acquired on and after April 1, 1999, for which theName of principal consolidated subsidiaries: Kurita Chemicals Ltd.,straight-line method is applied) and straight-line method for

Kurita Kasei Co., Ltd., Kurita Engineering Co., Ltd., and Kuritaz

overseas consolidated subsidiaries

Co., Ltd.

(3) Allowances and accruals(2) Name of principal non-consolidated subsidiary: Kurita Sogo

Accrued employees’ bonus:

Service Co., Ltd.

The Company and its domestic consolidated subsidiaries

All the non-consolidated subsidiaries are those subsidiaries whose

provide for an amount equivalent to the anticipated bonus

combined assets, net sales, net income, and retained earnings inpayments to employees.

the aggregate are not significant in terms of the consolidated
financial statements.

Annual Report 200225

Notes to Consolidated Financial Statements

Accrued employees’ retirement benefits:

11. Unrealized gain on revaluation of land

Accrued employees’ retirement benefits are recorded based on

The Company carried out a revaluation of land for business use in

the estimated projected benefit obligation and fair value of theaccordance with the Land Revaluation Law (enacted on March 31,

pension assets at the balance sheet date. Unrecognized net oblig-1998). The revaluation difference is stated as “unrealized gain on

ation at transition in the amount of ¥3,480 million is recognizedrevaluation of land” in the shareholders’ equity account, after

over three years. Actuarial gains and losses are amortized overdeduction of tax equivalent from the net amount of revaluation

one to two years.

gain and loss. The tax equivalent is stated as deferred tax liabilities(4) Leases

in long-term liabilities.

Finance leases other than those that are deemed to transfer the

Revaluation method:ownership of the leased assets to lessees are accounted for by the

The revaluation of land was computed in accordance with Article

same method as that of operating leases.

Two, Item One of the Land Revaluation Law Enforcement Order(5) Consumption tax(Cabinet Order No. 119, issued on March 31, 1998). The compu-

Consumption taxes are accounted for separately from transaction

tation is included in appropriate adjustment for land price of

prices.

public notice.
Revaluation date: March 31, 2002

6. Revaluation of assets and liabilities of theconsolidated subsidiaries in consolidation process
Full fair value method
7. Amortization of consolidated differences
Differences between acquisition cost and the underlying net equity
at the time of acquisition are amortized over three years, orCarrying value before revaluation: ¥13,540 million
Carrying value after revaluation: ¥13,574 million
12. Research and development expenses
Research and development expenses included in selling, generaland administrative expenses:
Millions of yen

charged or credited to income at the date of acquisition, if minor.
8. Appropriation of retained earnings
The accompanying consolidated statements of shareholders’ equity
reflect the appropriations of retained earnings of the Company and its
consolidated subsidiaries in the year in which the annual shareholders
meet and approve the appropriations.

2001

2002

¥4,743¥5,071

13. Reconciliation between cash and cash equivalents
Reconciliation between the cash and cash equivalents in the
consolidated statement of cash flows and the consolidated balance
sheet items is as follows:
Millions of yen

9. Scope of cash and cash equivalents

2001

Cash and cash equivalents in the consolidated statement of cash
flows are composed of cash on hand, bank deposits withdrawable
on demand and short-term investments with an original maturityof three months or less and subject to a minor risk of fluctuations
in value.

2002

Cash and bank deposits .......................... ¥28,434
Time deposits having original
maturity of more than three months .....
(368)
Cash equivalents included inmarketable securities............................
3,503¥33,408

Cash and cash equivalents...................... ¥31,569¥32,980(428)—

10. Notes payable and receivable
Trade notes receivable of ¥1,027 million and ¥1,788 million and14. Inventories

trade notes payable of ¥302 million and ¥4,905 million, whose

Inventories at March 31, 2001 and 2002 consisted of the following:

maturity dates fell on March 31, 2001 and 2002, respectively, aMillions of Yen

non-working day for financial institutions in Japan, have beentreated as if they had been settled on that date.

26

Kurita Water Industries Ltd.

Thousands of
U.S. Dollars

2001

2002

2002

Finished products................ ¥ 1,265¥1,276$ 9,594

Raw materials .....................

1,575

1,606

12,075Work in process..................

7,345

4,820

36,241..................................... ¥10,185¥7,702$57,910

15. Short-term borrowings and long-term debt

16. Income taxes

Short-term borrowings are unsecured and represented by short-

After application of tax effect accounting for financial statement

term notes. The weighted average interest rates for the years

purposes for the year ended March 31, 2002, the breakdown of theended March 31, 2001 and 2002 were approximately 7.36% andprincipal items causing a difference between the Japanese statutory

5.15%, respectively.

tax rate and the company’s effective tax rate was as follows:

Long-term debt at March 2001 and 2002 is summarized as follows:
Millions of Yen

Thousands of
U.S. Dollars

Statutory tax rate ............................................................ 42.0%(adjustments)

2001

2002

2002

Loan from banks at interest
rates from 5.31% to 5.78%........ ¥128

Entertainment expenses andother expenses not deductible .......................................

2.1

¥85

$639

Dividends received not taxable........................................

(9.0)
1.0

(31)

(7)

(53)

Per capita equalization and inhabitants’ taxes ..................

............................................. ¥ 97

¥78

$586

Amortization of consolidated differences..........................

0.4

Other .............................................................................

0.8

Effective tax rate after application of tax effect accounting......

37.3

Less current portion ....................

Significant components of the deferred tax assets and liabilities were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2001

2002

2002

Excess provision for accrued employees’ retirement benefits ................................................ ¥2,219¥2,924$21,985

798

6,000

Deferred tax assets:
Excess provision for accrued bonuses to employees..............................................................

633

Accrued enterprise taxes not deductible...............................................................................

499

—

—

Accrued retirement benefits for directors and corporate auditors ..........................................

390

274

2,060

Loss from write-down of other securities..............................................................................

296

362

2,722

Excess provision of allowance for product warranty .............................................................

200

258

1,940

Loss from write-down of marketable securities.....................................................................

193

855

6,429

Loss from planned designing expenses .................................................................................

—

219

1,647

Unrealized gain on sales of property, plant and equipment ...................................................

185

185

1,391

Excess provision for allowance for doubtful accounts ...........................................................

—

179

1,346

Other..................................................................................................................................

1,025

932

7,008

Total deferred tax assets ..................................................................................................

5,644

6,993

52,579Reserve for reduction entry of cost of fixed assets.................................................................

(940)

(928)

(6,977)

Gain on valuation of other securities....................................................................................

(654)

(486)

(3,654)

(152)

(216)

(1,624)

Deferred tax liabilities:

Projected income taxes pertaining to retained earningsof overseas consolidated subsidiaries..................................................................................

Total deferred tax liabilities ............................................................................................. (1,747)(1,631)(12,263)

Deferred tax assets, net ................................................................................................... ¥3,896¥5,361$40,308

Annual Report 2002

27

Notes to Consolidated Financial Statements

17. Retirement benefits and pension plans
1. The company and fourteen domestic consolidated subsidiaries provide lump-sum retirement benefits and qualified pension plans as defined
benefit pension plans; moreover, the company and five domestic consolidated subsidiaries have fully introduced qualified pension plans.
2. Benefit obligation:
Thousands of
U.S. Dollars

Millions of Yen

2001
Retirement benefit obligation ....................................................................................... ¥(21,015)

2002

2002

¥(22,160)$(166,617)

Fair value of pension plan assets...................................................................................

8,609

10,08175,797

Unfunded retirement benefit obligation........................................................................

(12,406)(12,079)(90,820)

Unrecognized net obligation at transition arising from new accounting standards..........

2,318

1,153

8,669

Unrecognized actuarial gain.........................................................................................

56

53

398

Unrecognized prior service cost ...................................................................................

—

—

—

Net retirement benefit obligation .................................................................................

(10,031)(10,873)(81,752)

Advance payment for pension cost ...............................................................................

—

—

—

Accrued employees’ retirement benefits....................................................................... ¥(10,031)¥(10,873)$181,752

3. Benefit cost:Thousands of
U.S. Dollars

Millions of Yen

2001

2002

2002

Service cost......................................................................................................................... ¥1,049¥1,175$ 8,835

577

4,338

Interest cost ........................................................................................................................

564

Expected return on plan assets ............................................................................................

(191)

(65)

(489)

Amortization of obligation at transition arising from new accounting standards.....................

1,162

1,162

8,737

Actuarial loss ......................................................................................................................

457

1,331

10,008

Prior service cost.................................................................................................................

—

137

1,030

Extra additional retirement payments ..................................................................................

35

31

233

Net periodic benefit cost.................................................................................................. ¥3,077¥4,349$32,699

4. Assumptions to determine above obligation and cost:
2001

2002

Periodic allocation of projected benefit obligation.................. Equal amount over each period

28

Equal amount over each period

Discount rate .......................................................................

3.0%

2.5~3.0%

Expected return rate on plan assets.......................................

2.5~4.0%

0.0~1.0%

Amortization period of net obligation at transition.................

three years

three years

Recognition period of actuarial loss.......................................

one~two years

one~two years

Kurita Water Industries Ltd.

18. Leases
1. The following pro forma amounts concern the finance leases which would have been reflected in the financial statements if finance leaseaccounting had been applied to the finance lease transactions currently accounted for as operating lease:1) Lease assets (lessee)
Thousands of
U.S. Dollars

Millions of Yen

2001

2002

2002

Acquisition costs ................................................................................................................. ¥2,752¥2,615$19,661

Accumulated depreciation ...................................................................................................

1,749

1,525

11,466

Net book value ............................................................................................................... ¥1,003¥1,089$ 8,1872) Lease obligations (net book value)
Thousands of
U.S. Dollars

Millions of Yen

2001

2002

2002

Due within one year or less ................................................................................................. ¥ 406¥ 402$3,023

Due within more than one year...........................................................................................

597

686

5,158

Total............................................................................................................................... ¥1,003¥1,089$8,1883) Lease payments relating to finance lease transactions accounted for as operating lease
Thousands of
U.S. Dollars

Millions of Yen

2001

2002

2002

Lease payments................................................................................................................... ¥694

¥592

$4,451(Depreciation expenses) ......................................................................................................

(592)(4,451)(694)

Depreciation of the leased assets is computed by the straight-line method over the lease terms (as residual value “zero”).
2. Accrued lease payments relating to operating lease transactions
Thousands of
U.S. Dollars

Millions of Yen

2001

2002

2002

Due within one year or less ................................................................................................. ¥ 49

¥ 61

$ 459

66

75

564

........................................................................................................................................... ¥116

¥136

$1,023

Due within more than one year...........................................................................................

Annual Report 2002

29

Notes to Consolidated Financial Statements

19. Segment information
The business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2001 and 2002 is outlined
as follows:
Millions of yen
Chemicals
division

Year ended March 31, 2002

I. Sales and operating income
Sales1) Sales to outside customers........................................................... ¥46,277
2) Intersegment sales.......................................................................
351
Total....................................................................................... 46,628
Operating costs and expenses .......................................................... 40,384
Operating income............................................................................ ¥ 6,244
II. Assets, depreciation and capital expenditures
Assets ............................................................................................. ¥38,793
Depreciation and amortization.........................................................
1,169
Capital expenditures .......................................................................
1,882

Facilities
division

Total

Eliminationor corporate¥96,401
337
96,73992,201¥ 4,537¥142,678
689
143,368
132,585¥ 10,782

¥

—
(689)
(689)
(697)
8

¥142,678—
142,678
131,887¥ 10,790¥79,158
2,318
2,877

¥117,951
3,487
4,760

¥54,193——¥172,145
3,487
4,760

Eliminationor corporate

Consolidated¥

Consolidated

Millions of yen
Chemicals
division

Year ended March 31, 2001

I. Sales and operating income
Sales1) Sales to outside customers........................................................... ¥45,709
2) Intersegment sales.......................................................................
312
Total....................................................................................... 46,022
Operating costs and expenses .......................................................... 39,399
Operating income............................................................................ ¥6,623
II. Assets, depreciation and capital expenditures
Assets ............................................................................................. ¥34,080
Depreciation and amortization.........................................................
1,108
Capital expenditures .......................................................................
1,339
20. Contingent liabilities¥107,725
131
107,856
98,661¥9,195¥153,435
444
153,879
138,060¥15,819

¥

—
(444)
(444)
(442)
¥(2)

¥153,435—
153,435
137,617¥15,817¥94,317
2,160
1,740

¥128,397
3,268
3,079

¥54,777——¥183,175
3,268
3,079

Millions of Yen

Thousands of
U.S. Dollars

2001

2002

2002

............................................. ¥197

¥126

$947

21. Subsequent events

holders’ meeting held on June 27, 2002, approving a buyback of theCompany’s common stock not to exceed 13,000 thousand shares
and an acquisition cost of ¥20,000 million. The resolution remains
valid until the end of the next general shareholders’ meeting.
(3) Change in the stock trading unit

(1) Appropriation of unappropriated retained earnings
The following appropriations of unappropriated retained earnings
for the year ended March 31, 2002, were approved at the general
meeting of shareholders of the Company held on June 27, 2002:
Millions of Yen

Cash dividends.......................................................
Bonuses to directors and corporate auditors ............

common stock
A resolution was passed at the parent company’s general share-

at March 31, 2001 and 2002 were as follows:

Kurita Water Industries Ltd.

Total

(2) Setting of the upper limit for buyback of the Company’s

Guarantees for employees’ indebtedness from bank housing loans

30

Facilities
division¥1,05871

In a Board of Directors’ Meeting held on March 26, 2002, the parent
company decided to change its stock trading unit from 1,000 to
100 shares to promote more active stock trading, particularly witha view to increasing the number of individual shareholders. Thechange will go into effect on July 1, 2002.

Report of Independent Certified Public Accountants

To the Board of Directors ofKurita Water Industries Ltd.

We have examined the consolidated balance sheets of Kurita Water Industries Ltd. and subsidiaries as of March 31, 2002
and 2001, the related consolidated statements of income, shareholders’ equity and cash flows for the years then ended,
expressed in Japanese yen.
Our examinations were made in accordance with generally accepted auditing standards in Japan and, accordingly, included
such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the aforementioned consolidated financial statements present fairly the financial position of Kurita Water
Industries Ltd. and subsidiaries as of March 31, 2002 and 2001, and the consolidated results of its operations and cash flows forthe years then ended, in conformity with accounting principles generally accepted in Japan applied on a consistent basis.
Our examination also comprehended the translation of Japanese yen amounts and, in our opinion, such translation has been
made in conformity with the basis stated in Note 1. Such U.S. dollar amounts are presented solely for the convenience of readers
outside Japan.

June 27, 2002

Annual Report 200231

Non-Consolidated Summary

Non-Consolidated Balance Sheets, at March 31, 2001 and 2002
Thousands of
U.S. Dollars

Millions of Yen

2001
AssetsCurrent assets........................................................................................ ¥107,312
Property, plant and equipment ...............................................................
29,485Intangible assets.....................................................................................
838
Investments and other assets..................................................................
31,750................................................................................................ ¥169,385
Liabilities
Current liabilities ...................................................................................
50,082Long-term liabilities ...............................................................................
10,059................................................................................................
60,141
Shareholders’ equity
Common stock ......................................................................................
13,451
Capital surplus and legal reserve.............................................................
14,144Retained earnings ..................................................................................
81,950
Unrealized holding gains on other securities ...........................................
500
Treasury stock, at cost............................................................................
(801)................................................................................................ 109,244
Total liabilities and shareholders’ equity ...................................................... ¥169,385

2002

2002

¥ 93,892
29,1982,025
32,030¥157,145$ 705,955
219,534
15,226
240,827$1,181,541

35,693
10,412
46,105

268,368
78,286346,654

13,451
14,27883,969169(827)
111,039¥157,145

101,135
107,353
631,346
1,271(6,218)834,880$1,181,541

Non-Consolidated Statements of Income, for the Years Ended March 31, 2001 and 2002
Thousands of
U.S. Dollars

Millions of Yen

2001
Net sales .................................................................................................. ¥129,698
Cost of sales.............................................................................................
92,986Gross profit............................................................................................
36,712

2002

2002¥117,518
84,73132,787$883,594
637,075
246,519

Selling, general and administrative expenses ...............................................
Operating income ...............................................................................

24,69912,01325,532
7,255

191,970
54,549Non-operating income ................................................................................
Non-operating expenses..............................................................................
Income before income taxes .............................................................

2,259
2,644
11,628

3,181
4,005
6,431

23,91730,11348,353

Corporate, inhabitants’ and enterprise taxes................................................
Net income.......................................................................................... ¥

4,858
6,770

2,090
¥ 4,341

15,714$ 32,639

32

Kurita Water Industries Ltd.

Subsidiaries

Major Consolidated Subsidiaries and Affiliates
Company Name

Paid-in
Capital (Millions)

OVERSEAS SUBSIDIARIESNorth America • South America
Kurita do Brasil Ltda.
R$1.6
Av. Eng. Eusebio Stevaux 1469, CEP 04696, Santo Amaro,
São Paulo, Brazil
Telephone: 55 (11) 5686-8388 Facsimile: 55 (11) 5686-6365
Kurita America Inc.
US$3.0
Suite 877, Prestonwood Tower, 5151 Belt Line Road,
Dallas, TX 75240, U.S.A.
Telephone: 1 (972) 889-8921 Facsimile: 1 (972) 889-8924
Kurita de Mexico S.A. de C.V.
M.N. PESO8.1
Calle #1 No. 191, Parque Industrial Jurica, Querétaro,
C.P. 76100, Mexico
Telephone: 52 (4422) 185911 Facsimile: 52 (4422) 181177
EuropeKurita Europe GmbH
DM4.5
Industriepark Mackenstein, Industriering 43,
D-41751 Viersen, Germany
Telephone: 49 (2162) 95800 Facsimile: 49 (2162) 40159
Kuritec Europe GmbHDM1.8
Rebenring 11, D-84032 Altdorf, Germany
Telephone: 49 (871) 684277 Facsimile: 49 (871) 35827
Asia
Kurita (Singapore) Pte. Ltd.
S$4.0
30 Joo Koon Rd., Singapore 628984
Telephone: 65 (6861) 2622 Facsimile: 65 (6861) 4768
Kurita Water (Malaysia) Sdn. Bhd.
M$0.3
21 Jalan Brp 1/3, Bukit Rahman Putra, 47000 Sungei Buloh,
Selangor, Darul Ehsan, Malaysia
Telephone: 60 (3) 6157-3166 Facsimile: 60 (3) 6157-2892
Peremba-Kurita Sdn. Bhd.
M$1.3
15A Jalan Brp 1/3, Bukit Rahman Putra, 47000 Sungei Buloh,
Selangor, Darul Ehsan, Malaysia
Telephone: 60 (3) 6157-0551 Facsimile: 60 (3) 6157-0562
Kurita Water Industries (Dalian) Co., Ltd.
¥550
33-27, Dalian Industrial Park, Dalian Economic & TechnicalDevelopment Zone, Liaoning, People’s Republic of China
Telephone: 86 (411) 761-3520 Facsimile: 86 (411) 761-3435
Kurita (Taiwan) Co., Ltd.
NT$20
10th Fl.-6, No. 150, Fu Hsing North Rd., Taipei, Taiwan
Telephone: 886 (2) 2717-4464 Facsimile: 886 (2) 2719-0292
P.T. Kurita Indonesia
US$2.0Jl. Jababeka XIIA Kav. V-6, Kawasan Industri Jababeka,
Cikarang-Bekasi 17530, Jawa Barat, Indonesia
Telephone: 62 (21) 893-6245 Facsimile: 62 (21) 893-5158
Kurita-GK Chemical Co., Ltd.
BAHT56460 Moo 17, Bangphli Industrial Estate, Bangsaothong,Bangsaothong Subdistrict, Samutprakarn 10540, Thailand
Telephone: 66 (2) 315-2300 Facsimile: 66 (2) 315-2301
HANSU Ltd.
W2,500741-5 Wonsi-dong, Ausan, Kyonggi Province,
Republic of Korea
Telephone: 82 (31) 492-7800 Facsimile: 82 (31) 491-7643
HANSU Technical Service Ltd.
W568
C-802 Techno-park, Yatap-dong Bundang-ku, Sungnam-city,
Kyunggi-do, Republic of Korea
Telephone: 82 (2) 421-3301 Facsimile: 82 (2) 421-3304
Kuritec (Shanghai) Co., Ltd.
¥30
Room 2203, No. 1289 Pudong South Road,
Pudong New District, Shanghai, People’s Republic of China
Telephone: 86 (21) 5887-4337 Facsimile: 86 (21) 5887-4339
Kuritec Singapore Pte. Ltd.
S$1.4910 Tampines Industrial Avenue 3, Singapore 528798 c/o AFPD Pte., Ltd.
Telephone: 65 (6787) 6186 Facsimile: 65 (6424) 9100
DOMESTIC CONSOLIDATED SUBSIDIARIES
Kurita Kasei Co., Ltd.
¥450
Kurita Engineering Co., Ltd.
¥160
Kuritaz Co., Ltd.
¥220
Kurita Creation Co., Ltd.
¥160
Kurita Kako Corp.
¥ 80
Land Solution Inc.
¥450

EquityOwnership (%)

Business

100.0

Manufacture and Sales of Water Treatment Chemicals

100.0

Facility Operation

45.0

Manufacture and Sales of Water Treatment Chemicals

80.0

Manufacture and Sales of Water Treatment Chemicals

100.0

Facility Operation

100.0

Manufacture and Sales of Water Treatment Chemicals and Water
Treatment Facilities

100.0

Sales of Water Treatment Chemicals and Water Treatment
Facilities

30.0

Sales of Water Treatment Chemicals

80.0

Manufacture and Sales of Water Treatment Chemicals

95.0

Manufacture and Sales of Water Treatment Chemicals

90.0

Manufacture and Sales of Water Treatment Chemicals

60.0

Manufacture and Sales of Water Treatment Chemicals

33.2

Manufacture and Sales of Water Treatment Chemicals

59.4

Sales of Water Treatment Facilities

100.0

Maintenance Services and Sales of Small-sized Water Treatment
Facilities

100.0

Sales of Ultrapure Water for Specified Customers

100.0
100.0
100.0
100.0
100.0
51.0

Manufacture of Water Treatment Chemicals
Chemical Cleaning and Precision Cleaning
Facility Operation
Manufacture and Sales of Purifiers
Manufacture and Sales of Water Treatment Facilities
Real Estate Transaction and Soil Remediation Consulting(As of June 30, 2002)

Annual Report 2002

33

Board of Directors and Corporate Auditors/Corporate Data

Board of Directors
and Corporate Auditors

Corporate Data
(As of March 31, 2002)(As of June 30, 2002)

President

COMPANY NAME

Takahide Santo

Kurita Water Industries Ltd.

DOMESTIC OFFICES
Head Office:Executive Senior Managing Director

ADDRESS

4-7, Nishi-Shinjuku 3-chome,

Hiroshi Fujino

4-7, Nishi-Shinjuku 3-chome,

Shinjuku-ku, Tokyo 160-8383

Shinjuku-ku, Tokyo 160-8383,

Telephone: 81 (3) 3347-3111

Managing Directors

Japan
Osaka Office:Tohru Kawamura
Tohru Ishizaka

DATE OF ESTABLISHMENT

2-22, Kitahama 2-chome, Chuo-ku,

Toyoaki Inoue

July 13, 1949

Osaka 541-0041
Telephone: 81 (6) 6228-4800

Sumio Miyake
Takuo Ishida

PAID-IN CAPITAL¥13,450,751,434

Corporate Research & Development
Center:

Eiki Uno

NUMBER OF EMPLOYEES

7-1, Wakamiya Morinosato, Atsugi,

Hiroshi Nakamura

3,404 (Consolidated)

Kanagawa 243-0124

Directors

Katsuhiko Inoue

Telephone: 81 (46) 270-2111

Hiroshi Saito
Kazuyoshi Yoshitomi

Business & Technology
Development Center:

Tohru Kawachi

1-1, Gochoyama, Kawada, Nogi,

Yoshio Akamatsu

Shimotsuga-gun, Tochigi 329-0105

Toshiyuki Hisamatsu

Telephone: 81 (280) 54-1511
Corporate Auditors
Mitsunobu Hattori

Branches:

Masahiko Kurita

Sapporo, Sendai, Nagoya, Hiroshima,

Hisashi Nemoto

Takamatsu, Fukuoka

Takeo Yanagihara
OVERSEAS OFFICES
Singapore Branch:
30 Joo Koon Rd., Singapore 628984
Telephone: 65 (6861) 2622
Taiwan Representative Office:4th Fl., 350, Section 2, Kuang-Fu Rd.,
Hsinchu, Taiwan
Telephone: 886 (3) 573-6251

34

Kurita Water Industries Ltd.

Investor Information(As of March 31, 2002)

STOCK EXCHANGE LISTINGSTokyo, Osaka
COMMON STOCK
Authorized:

235,840,000 shares

Issued:132,800,256 shares(Stock Trading Unit changed from 1,000
shares to 100 shares, effective July 1, 2002)
NUMBER OF SHAREHOLDERS
8,363
INDEPENDENT AUDITOR
Taiyo Audit Corporation

Shareholdings

Percentage of
total shares issued

Itochu Corporation

10,268,000

7.7%

Nippon Life Insurance Company

7,518,883

5.7%

The Chase Manhattan Bank N.A. London

7,370,264

5.5%

UFJ Bank Limited

5,872,131

4.4%

The Asahi Bank, Ltd.

5,668,623

4.3%

The Tokyo Marine and Fire Insurance Co., Ltd.

4,685,526

3.5%

The Chuo Mitsui Trust and Banking Co., Ltd.

4,677,000

3.5%

Sumitomo Mitsui Banking Corporation

4,672,701

3.5%

The Mitsubishi Trust and Banking Corporation (Trust account) 3,557,000

2.7%Japan Trustee Services Bank, Ltd. (Trust account)

2.5%

MAIN SHAREHOLDERS

3,373,000

8F, Akasaka Oji Bldg., 1-22, Akasaka 8-chome,
Minato-ku, Tokyo, Japan 107-0052
TRANSFER AGENTThe Chuo Mitsui Trust and Banking
Co., Ltd.

DISTRIBUTION OF SHAREHOLDERS AND SHARES
Financial Institutions
103 (1.2%)

Foreign Investors
262 (3.1%)
Domestic Corporations
327 (3.9%)

Securities Companies
627,713 Shares (0.5%)

Individuals and Others
14,340,709 Shares (10.8%)

Securities Companies
35 (0.4%)

33-1, Shiba 3-chome, Minato-ku,

Domestic Corporations
17,283,876 Shares (13.0%)

Tokyo, Japan 105-8574

Financial Institutions
56,507,351 Shares (42.6%)
Individuals and Others
7,636 (91.3%)

Foreign Investors
44,040,607 Shares (33.2%)

Number of Shares Issued and Outstanding
132,800,256 shares (100%)

Number of Shareholders
8,363 (100%)

STOCK PRICE RANGE
(¥)
2,000

1,919
1,790

1,750

1,845 1,811

1,650 1,605 1,659

1,500
1,460

1,660

1,475

1,520

1,474
1,392
1,300

1,710

1,565

1,360 1,350

1,410

1,730 1,748
1,631 1,615 1,587
1,481 1,450

1,434

1,487

1,430

1,000

500

0
Apr. ’01 May ’01 June ’01 July ’01 Aug. ’01 Sept. ’01 Oct. ’01 Nov. ’01 Dec. ’01 Jan. ’02 Feb. ’02 Mar. ’02 Apr. ’02 May ’02 June ’02

Annual Report 2002

35

ADDRESS:

4-7, Nishi-Shinjuku 3-chome,
Shinjuku-ku, Tokyo 160-8383, JapanTELEPHONE: (03) 3347-3111
HOME PAGE: http://www.kurita.co.jp

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