NGK SPARK PLUG CO., LTD.
Integrated Report 2017

Our new corporate message was conceived to celebrate our 80th anniversary in November 2016.
In marking this anniversary, we looked back over the 80-year history of our company, including its corporate philosophy
and products, and have formulated our corporate message as a portrait of NGK SPARK PLUG CO., LTD. to collectively
express the DNA that flows deep within us and our expectations of how we should be in the future.
Based on the idea expressed in our corporate message, all members of the company are determined to undertake
concerted efforts to make NGK SPARK PLUG indispensable to the world through cutting-edge, innovative manufacturing.

—IGNITE YOUR drive, dreams and SPIRIT—

Sensors

Semiconductor Packages
and Substrates

Spark Plugs

Machine Tools

Glow Plugs

Medical Products

Fine Ceramics

Contents
13
79Corporate Message
Source for Value Creation
Value Creation
Model
CEO’s Message

Our Strategy
13 Looking Back on the Medium-termManagement Plan

14 Review of Operations by Segment

18 Measures to Develop New Business
19 Risks and Opportunities

Our Value
21 Financial Results Highlights for
the Past 11 Years

25 Executive Officers

01

27 Our CSR

33 Roundtable

Meeting with
OutsideDirectors

Our ESG Approach
29 Corporate Governance
31 Compliance
32 Risk Management

Corporate
Philosophy
Corporate
Code of Conduct

CSR Policy

35 Diversity & Work-Life Balance
38 Occupational Safety and Health
39 Social Contribution
41 Protecting the Global Environment

About Us
45 Global and Domestic Networks
47 Analysis of Consolidated Financial
Results for the Fiscal Year Ended
March 31, 201749 Financial Information
70 Independent Auditor’s Report
71 Corporate Profile
72 Stock Information

02

Source for Value Creation

Startup Period

Founded in 1876, the Morimura Group is a corporate group whose name is synonymous with Japan’s ceramic industry.
Over the 140 years since its founding, the Group has been sincerely committed to delivering high-quality products on time and at areasonable price.
Inheriting the corporate DNA of the Morimura Group, the NGK SPARK PLUG Group will deliver Real Value beyond customers’ expectations.

AroundShiseiShinjitsu
Sincerely,
do our very best

DokuritsuJiei
Believe in one’s own
ability, and takeactions by oneself

Dokuritsu- Jiei is a word uttered by
Ichizaemon Morimura. It means to keep
your grace and dignit y by acting
autonomously. In keeping with thisideal, we will strive to act independently
and with pride, respond nimbly to
day-to-day changes in the internal andexternal environments, and continue totake on new challenges.

The Morimura Group’s history starts with Morimura Gumi, a businessestablished in 1876 by two brothers: Ichizaemon Morimura and Toyo
Morimura. This entity (presently Morimura Brothers Inc.) was a pioneerof Japan’s trading industry. The founders of Morimura Gumi went on toestablish Nippon Toki Gomei Kaisha (later called Nippon Toki Co., Ltd.
and presently Noritake Co., Ltd.) in January 1904 and, in May 1917, theSanitary Ceramics Division of Nippon Toki was separated to become
Toyo Toki Co., Ltd. (presently TOTO Ltd.). Subsequently, in May 1919,
the Insulator Division of Nippon Toki was spun off to become the

Shikai-Keitei means to cooperate withthe people of the world (Shikai) like
brothers and sisters. This is the valuethat Morimura Gumi treasured since its
founding. The N GK S PA RK PLUG
Group conducts global business byembracing individual differences innationality, culture, gender and others,
and by helping each other advancetoward the common goals.

Unite efforts with thepeople of the world,
and utilize eachother’s differences

1949

Have cherished desire,and carry it throughtill the end

03（Left）
Toyo Morimura（Right）
Ichizaemon Morimura

In 1958, started the manufacture ofceramic cutting tools. This has
since been contributing to cost
reduction and higher efficiency inproduct processing by developing
ceramic tools that are far superior in terms of cutting speed,
product life and finished surfaces compared with cemented
carbide tools.

Started the sale ofNTK-branded products“Suppose that we produce only one defective productper 1,000 products. To the customer who purchasesthat one product, our defect rate is 100%.”
Commitment to quality

present NGK Insulators, Ltd. Other companies that grew out of
Morimura Gumi include Okura Art China (presently Okura Art China
Inc.) established in May 1919, Ina Seito Co., Ltd. established in
February 1924 (presently LIXIL Corporation, which was integrated with
Tostem in 2001), Nitto Sekko Co., Ltd. established in September 1936
(and merged into Noritake Co., Ltd. in June 1985), and NGK SPARKPLUG CO., LTD. (former Spark Plug Division of NGK Insulators, Ltd.).
These companies provide the foundation of today’s Morimura Group.

Words of Magoemon Ezoe, first president of the company

On the day immediately before the spark plugs were to be released, defects were found in a few
of the products. Magoemon Ezoe, the founder of the company, took the following view: “Supposethat we produce only one defective product per 1,000 products. To the customer who purchasesthat one product, our defect rate is 100%.” Accordingly, he had all the plugs, which had alreadybeen shipped to different regions across Japan, recalled. He then resumed R&D activities for the
manufacture of products with uniform quality. The commitment to quality and uniformity has been
maintained since before the company was founded up to the present day, supporting the qualityof our manufacturing.

1876

1936

Founding of
Morimura
Gumi

Major events

Commercialized cutting tools

Began conducting R&D to realize
long-standing plan to releaseproducts other than spark plugs in
1947, and unveiled a range of “NTKTECHNICAL CERAMICS”-branded
products in and after the spring of 1949 for full-scaleparticipation in the ceramic industry.

Soshi- Kantetsu means to make an
ac c o m plis h m e nt w i t h a s e n s e ofmission and without giving up
halfway. It originates from the oath of
Nippon Toki Gomei Kaisha. The Soshi
of NGK SPARK PLUG is described in
its Corporate Philosophy: “With fulluse of the most suitable technology
and our accumulated experience, we
continue striving to offer new values
to the people of the world.” We will
decidedly fulfill this commitment.

SoshiKantetsu

1958

Magoemon Ezoe, who was convinced of theadvent of a motorized society in Japan, decided
to manufacture spark plugs domestically, eventhough the number of automobiles produced in
the country was only 49 units at that time. He
succeeded in developing Japan’s first spark plugin 1930 and began selling the product. In 1936,
he established NGK SPARK PLUG as Japan’s
first plug manufacturer.

NGK SPARK PLUG has newly set the values to be shared across the company by reviewing and outlining the ideas that have been valued since thefounding of Morimura Gumi, from which the Morimura Group originated. By never straying from the values passed down through the generations andreaffirming the role that we are committed to fulfill, we will continue to make steady progress.

ShikaiKeitei

1930

Developed Japan’s first spark plug

The Nittoku Way—The Nittoku Group’s Shared Values—

Morimura Gumi began international
trade to get back the assets that had
left Japan. With a sincere attitude inline with its basic policy of honesty,
eagerness and kindness, it succeededin building a large business outside thecountry. Shisei-Shinjitsu is a core valuethat supports this policy, and our Groupwill continue to conduct business in asincere and faithful manner.

Contributed greatly to Japan’s post-war recovery and motorization by manufacturing
the country’s first spark plugs with high-performance and uniform quality.

1890

1900

1910

1920

1930

Around1930

Founding of
NGK SPARK
PLUG

1940

1949

1950

1886

1904

1914

1923

1939

1948

1951

Invention ofgasoline-fueled
cars

Yamaha’s SteamCar manufactured
as Japan’s first
domestic car

Outbreak ofWorld War I

Great Kanto
Earthquake

Outbreak ofWorld War II

Invention of
the transistor

Treaty of Peacewith Japan signed
in San Francisco

1958

Ichizaemon Morimurain his later years04

Establishment
PeriodSubsequently, the company began applying its core ceramic technologies also tosensors, semiconductors, and IC packages in addition to spark plugs, thereby making its
position in the industry unshakable and entering overseas markets ahead of competitors.

Development
PeriodWe are developing a range of application technologies based on the technologies andknow-how accumulated in the automotive components business to expand our businessdomain to include next-generation vehicles and environmental and medical fields.

2007

1990
The company began developing andevaluating materials for bioceramics in themid 1970s in recognition of the tremendous
potential for ceramic materials to contribute to
the future of medicine in an aging society.
Starting with the development of the bone
prosthesis “CERATITE® ” in the 1990s, wehave been expanding our medical productlineup, including the development and sale of“CERATITE®,” which can be flexibly shaped,
and the absorbable and replaceable artificial
bone “CERAREBORN®.”

Developed various sensors

Developed ceramic IC packages
The development of new technology to metalize
ceramic surfaces made it possible to hermeticallyseal metal components in a ceramic package. In
1967, it began producing IC packages and hassince developed a range of new technologies
through the development and production ofceramic packages.

1959

D e v e l o p e d t h e w o r l d ’ s fi r s t
MEMS-based thermal conductivityhydrogen sensor. Our technology todetect trace a m o unts of leakedhydrogen is indispensable for asociety powered by hydrogen energy.

Developed bone prosthesis

1971

1965

Developed a hydrogenleak detection sensor

As countermeasures for pollution resulting fro m the full - scale
motorization of society, developed an exhaust temperature sensor in1971, a zirconia oxygen sensor in 1982, and a wide range oxygen
sensor in 1988. We are proactively expanding the sensor business in
response to exhaust gas regulations that are being made even stricter
for environmental protection reasons.

1996
Developed an iridium plug
T his wo rld ’s fi r st plu g m ad e byadopting an iridium alloy chip for thecentral electrode and a platinum alloyc h i p fo r t h e ex te r n a l e l e ct ro d eprovides high durability and ignitability.

2016
Established
the Fuel
Cell Div.
As one of the next-generation solutions for energy andenvironmental issues, we have been proactively
developing solid oxide fuel cell (SOFC) and established
the Fuel Cell Div. in 2016. We are focusing on the productthat incorporates our core ceramic molding, printing andsintering technologies, and are fostering R&D for bothplanar and tubular SOFC.

Consolidated net sales
372.9 billion yen

1999

1964

Developed an oxygen
concentrator
Developed an oxygen concentrator
for use by patients with a respiratory
illn e s s to all ow th e m to re ceive
medical care at home for higher QOL.

Establishment of the first overseas base in Brazil

Supporting racing teams

Upon request of the Brazilian government, the company establishedits first overseas base, Ceramica e Velas de Ignicao NGK do Brasil
Ltda. At that time there were only few Japanese manufacturers ofautomobiles and automotive components operating bases overseas,
making us a forerunner in this regard.

We have been supporting motorsports ever since a machine
equipped with our spark plugs took the championship at the Isle of
Man TT Race. Since then, many more races have been won bymachines fitted with our high-quality, reliable plugs, resulting in the
products being recognized across the world.

Net sales

1959

Major
events1960

Unconsolidated

1970 1971

1964 1965

1960

1967

Finalization of thenational income doublingplan (high economic
growth policy)

Consolidated

1970
Bill to revise
the Clean Air
Act (Muskiebill) passed in
the UnitedStates

Promulgation of the basic law for
the prevention of pollution
Number of automobiles owned inJapan exceeded 10 million units
05

1980
1973
First oil crisis

1979
Second oil crisis

1990

1985
Plaza Accord

1989
Collapse of
the Berlin Wall

1996

1999

2000

2007

2005
2008
The Kyoto
Protocol cameinto effect

2010

2016

2011
2016
Great East Japan The Paris
Earthquake
Agreement
came into
effectThe Financial Crisis(Collapse of Lehman Brothers)

06

NGK SPARK PLUG’s

Value Creation Model

Our Ideal Image in the Year 2020

We will exercise our strengths to meet social challenges, provide additional value to a range of stakeholders, and increase our own

Monozukuri Company, Highly Profitable Company,
Progressive Company, and Human “Asset” Company

corporate value, which will collectively serve as the driving force of our sustainable growth.

Social challenges

Local communities andinternational society

NGK SPARK PLUG’s strengths

NGK SPARK PLUG’sBusiness Process

1

GlobalSDGs

COP21

The SDGs, formulated under the UN’s leadership, areglobal goals to be pursued not only by national
governments but also by companies. Also, the Paris
Agreement concluded at COP 21 is aimed at limiting the
average rise in global temperatures to below 2 degrees
Celsius. In regard to both of these, companies are
increasingly expected to fulfill roles that benefit society.

Starting with the establishment of a base in Brazil in
1959, we expanded our business overseas ahead ofother Japanese companies and steadily increased oursales channels. Furthermore, by supporting global
racing teams, we increased our presence in overseas
markets and established a robust sales network globally.
We presently have 33 domestic and 39 overseas
sites supplying high-quality products all over the world.

Suppliers

g
nin
n
a
Pl

R&
D
Customers

2

Shift from internal combustion engine
vehicles to electric vehicles and fuelcell vehicles● Car sharing● Cheap products made in emerging countries● Insufficient workforce in Japan●

Business opportunities
Motorization in emerging countries
Stricter environmental regulations● Downsizing of components driven bydownsized engines
●
●

3

Sales

NGK SPARK PLUG’s products
Spark plugs ● Sensors● Glow plugs● Cutting tools● IC packages● Fuel cells● Medical products
●

Lo

g is

ti c sannoc ti a g eudPr o m a n
q u a li t y

Value provided by
NGK SPARK PLUG

Real Value

m d
en
t

Business risks

We have been developing and manufacturing ceramic
products and materials for as long as we have been
manufacturing spark plugs. By combining ceramics withother materials, we developed various products, such as
sensors and IC packages, to diversify our businessportfolio. Also, we have been committed to stringent
qualit y m a nag e m e nt to m a nu facture u nifo r m ly
high-quality products since the company began.
By utilizing our ceramic technology, technology tomake combined use of ceramic and other materials,
and quality management as our strengths, we aretaking on the challenge of creating new value forpe ople and so ciet y, including developing newmaterials and process technologies.

＝

Environment
surrounding
NGK SPARK PLUG

Procurement

Technology

Shareholders and investors

Finance
We have long built a firm management foundation
and are highly evaluated by international rating bodies inrecognition of our sound management. Our capital
adequacy ratio is as high as 62.5%, demonstrating thestability of our financial status.
Rating and Investment
Information, Inc.

A+

(As of July 1, 2017)

Environment

Japan Credit Rating
Agency, Ltd.

A+

Starting point (basis for corporate activities)

Corporate Philosophy
Employees
0708

CEO’s Message

1. Strengthening current businesses

Soaring to New Heights to
Deliver Real Value,
Which Is Always Needed● Automotive components businessWe have continued to achieve growth by supplying
plugs and sensors to multiple automakers and also
by promoting sales of our products as repair parts.
Demand for repair parts will continue to expand,mainly in emerging markets; moreover, customers
are increasingly looking to our products for help incomplying with environmental regulations. We therefore
find ourselves in a favorable business environment.
Under these circumstances we will further enhance
the business to ensure profit, and will invest the earned
profit into new businesses and new equipment.
● Technical ceramics business

Shinichi Odo
Representative Director andChairman of the Board
Chief Executive Officer
President Officer

In the semiconductor package business, we are
fostering structural reforms and growth strategies. We
are revitalizing this business by: (1) establishing NTK
CERAMIC CO., LTD. as an independent company
serving the business; (2) concentrating on selected
products; (3) restructuring the production bases; and(4) employing top officers from outside the company.
This revitalization project is being implemented almost
exactly as planned.

2. Establishing new business pillars● Environment- and energy-related fields

Looking Back on the Long-Term Management Plan, “NITTOKU SHINKARON”
Ending the first year of the seventh medium-term management plan
In 2010, the NGK SPARK PLUG Group formulated
a long-term management plan called “NIT TOKUSHINKARON” and broke down the targeted period into
separate stages: the Delving, Renovating and Evolving
stages, with an eye to providing all stakeholders with
Real Value in 2020. For this seventh medium-term
management plan (from the year ended March 31, 2017
to the year ending March 31, 2021), we are working on a
five-year plan for delivering real value. This period, which
includes the three years of the last step, “Evolving,” is themost important in completing our NITTOKU SHINKARON
long-term management plan. Now, as we end the initial
year of the medium-term plan, I believe that we havemanaged to make mindset reforms to implement specificmeasures to deliver Real Value, although the annual
results might not be 100% satisfactory.

09

As for our business strategy, we are focusing on
three mainstays: “Strengthening current businesses,”“Establishing new business pillars” and “Establishingstrong business infrastructure,” and are making Groupwide efforts to attain these targets. For the creation of
new business pillars, we will proactively make effective
use of M&As. However, M&A projects entail various
risks, particularly outside Japan, including difficulties inestablishing a shared corporate culture with the merged
company and understanding its financial situation. In
this age, however, I believe that avoiding taking risks
could actually pose the highest risk. The management
team will therefore take risks and take on corresponding
responsibilities while gaining experience in dealing withrisks. Next, I will outline the business strategy.

We are proactively developing a solid oxide fuel cell
(SOFC). This fuel cell provides particularly high power
generation efficiency among fuel cells using hydrogento generate power, and could be made smaller andcheaper. We are also developing a tubular SOFC stackfor use in business and industrial systems as well as aplanar SOFC stack for use in household cogeneration
systems. In April 2017, we began the operation ofa demonstration unit for industrial systems at the
Komaki Plant, aiming to increase our presence as amanufacturer of fuel cell stacks.

and medical equipment against the background of superaging society.

3. Establishing strong business infrastructure
We are establishing an organizational structure thathelps our diverse team members demonstrate theirabilities globally, thereby enhancing our organization andpersonnel as the major elements of the infrastructure that
supports our businesses.
Through my overseas assignments, I have foundthat Japan is behind other countries in terms ofwomen’s empowerment, and am thus fostering theactive participation of women at our company. To
promote diversity management, we established theWorking Styles Reforming Office in 2016 for higher
work efficiency and the leveling of the playing field.
Furthermore, we implemented a project to develop
the next generation of global leaders. We are thus
speeding up the transformation of our company into
an organization where a diverse group of workers candemonstrate their abilities. We have yet to attain thisgoal, but the Japanese Ministry of Economy, Trade andIndustry (METI) selected our company to be one of the
New Diversity Management Selection 100 companies
in recognition of our human resource-related efforts
and approaches in February 2017. Moreover, we newly
established the Corporate Strategy Group to enhance
the corporate functions and turned our major overseas
bases into regional headquarters (RHQs) to makespeedy responses on a global scale.
We will continue to make organizational reforms toprovide individual employees with workplaces that allow
them to demonstrate their full potential, thereby fostering
not only the growth of the company but also the welfareof employees.

Real
Value
Sales: 520 billion yen
OP: 100 billion yen● Medical field

In 2016, in order to make contributions in the medical field
by using our unique ceramic technologies, we acquired
30% of the shares of Japan Medical Dynamic Marketing,
INC., which is expanding its orthopedic implant business,
including by entering overseas markets. In 2017, wefounded a medical division and formed partnerships
with the National Institute of Advanced Industrial Scienceand Technology (AIST) and Hokkaido University for joint
development projects. Through these measures we willmeet the increasing needs for biocompatible materials

Establishing new
business pillars
Strengthening
current
businesses
Establishing strong business infrastructure
2017/32021/3Outline of the seventh medium-term management plan

10

Changes in the External Environment

The Nittoku Way—The Nittoku Group’s Shared Values

Risks and opportunities for NGK SPARK PLUG

Passing the corporate DNA of NGK SPARK PLUG down through the generations

At NGK SPARK PLUG, sales of automotive components
account for 85% of total sales. Sales outside Japan
also account for 80% of the total. For the company, it
is critical to appropriately identify and promptly deal
with the risks and opportunities posed by trends andchanges in the market. It is difficult for all employees ofa large organization to have the same idea, but if at least
20 to 30% of employees share a sense of crisis and leadthe organization to reform, that organization can movein a desirable direction. I attribute importance to beingcommitted to achieving results through perseverance
and never giving up halfway. At NGK SPARK PLUG,
risks and opportunities will be treated as detailed below
to enable us to overcome risks and seize all possible
opportunities for the further growth of the company.

1. Dealing with risks
In anticipation of the expanded use of next-generation
vehicles that have no internal combustion engines,
we are developing and commercializing hydrogenleak detection sensors that help ensure the safety offuel cell vehicles. As for EVs, I cannot at the moment
specify the product items to be developed, but wemay be able to offer ceramic packages for such selfdriving components and LED headlights, whose use isexpanding. The spread of car sharing could result ina decrease in the number of automobiles themselves;
accordingly, we are proactively creating businesses in
new fields, such as environmental, energy and medical

fields. We are also hedging the risks posed by changes
in the foreign exchange market, which have tremendous
impact on our profits, by measures such as expanding
the overseas production ratio on a long-term basis andprocuring components in foreign currencies.

2. Opportunities for further growth
Exhaust gas regulations have been made stricter year
by year not only in developed countries but also in
emerging markets. In response, NGK SPARK PLUG
is promoting the sales of high value-added products.
These products include the oxygen sensors that help
exhaust gas purification systems function effectively;
wide range ox ygen sensors that enable precise
control of the air-fuel ration to near the stoichiometricpoint; and NOx sensors that are compliant with strict
NOx regulations. At the same time we are developing
sensors to detect particulate matter (PM) containedin exhaust gas. Automobile engines need to be madesmaller and lighter for higher fuel efficiency, for which
advanced materials should be developed for pluginsulators. Our company has long conducted research
into ceramic materials and has an integrated system forthe production of materials through to the assembly of
products. Also, as the world’s top manufacturer of spark
plugs, we have a responsibility to supply repair parts thatwill meet the needs of customers in the after-sale market
as a business opportunity.

Our company was officially founded in 1936 but traces
its origins to Morimura Gumi, which was establishedby Ichizaemon Morimura and his brother in 1876.
Celebrating the 80th anniversary of the founding in 2016,
we launched a project to look back over our history,
from the starting point to the present, to decide what
we should keep and what we should change going
forward. The Nittoku Way summarizes NGK SPARK
PLUG’s shared values in the Morimura Group’s crossgenerational philosophy of producing quality productswith participation by all employees. We plan to translate
the Nittoku Way into multiple languages to help theroughly 15,000 employees working within our global
network to deepen their understanding and awarenessof our values.
The four values the Nittoku Group shares are:
● Shisei-Shinjitsu: Sincerely, do our very best
When each one of us embodies the Value ShiseiShinjitsu, credit and trust are created among us, andsuch slow but steady efforts result in the largest assets
for our company.
● Dokuritsu-Jiei: Believe in one’s own ability, and takeactions by oneself
We do not wait for changes. We take actions byourselves and expand possibilities. Self-motivation
makes people grow, supports an organization’s
evolution, and becomes the driving force to unfold thefuture.
● Shikai-Keitei: Unite efforts with the people of theworld, and utilize each other’s differences
By uniting efforts with the coworkers of the world, andby utilizing our different characters and strengths, we

can create new values and offer them to the world.
● Soshi-Kantetsu: Have cherished desire, and carry it

through till the end
W hat are the resolutions that we can nevercompromise? Is your sense of mission clear in what wewill accomplish? The Soshi and challenge in each oneof us support the growth and evolution of the company.
Let me introduce an anecdote that is relevant to ourshared values as described in the Nittoku Way. A customer
who had been conducting an investigation to select apartner for new technology development eventually chose
us from among a number of companies boasting theindustry’s leading technologies. I asked the customer
why they chose us, and the answer was because all our
employees were working with sincerity. This story shows
the commitment we make in the Nittoku Way.
We have been achieving grow th by pursuing
technologies aimed at meeting the needs of the world’s
automakers regarding the engines of their products. We
have striven to listen to and meet the requests of customers,
respond to any problems in a steady manner, and continue
a process of trial and error to achieve all that we can. I
believe this is the strength that we have gained by adheringto the shared values described in the Nittoku Way.

To Our Stakeholders
Delivering Real Value to all stakeholders
Thank you for your kind support of NGK SPARK PLUG.
The company upholds the target of posting sales of
520 billion yen and operating income of 100 billion yen
by the fiscal year ending March 31, 2021, and I deemit my responsibility to attain this target by making thebest use of our technologies and strengths. I also think
it is important to clarify what value the company willoffer and have that value evaluated and recognized bystakeholders for the delivery of Real Value to them.
NGK SPARK PLUG signed the UN Global Compact in11

November 2016. As a good corporate citizen, we will comply
with the ten principles of the Compact and contribute to thecreation of a sustainable society through the achievement of
the Sustainable Development Goals (SDGs).
Toward its 90th and 100th anniversary, the NGKSPARK PLUG Group should become more united,make more contributions, achieve further growth as an
indispensable entity for society, and deliver Real Valueto all our stakeholders, for which I would ask for yourcontinued understanding and support.

12

Our Strategy
Looking Back on the Medium-termManagement PlanNGK SPARK PLUG

Seventh medium-term management plan(for FY2016 to FY2020)

Existing
businesses

Evolving

DelvingRenovating

FY2010 to 2012

FY2013 to 2015

FY2016 to 2018

Delve into existing
businesses and seek
new business

Launch new products or
new business

Develop existing andnew business at anaccelerated rate

Real
Value

Review of Operations
by Segment

Pursuing Real Value to Increase the Significance of NGK SPARK PLUG
In 2010, the NGK SPARK PLUG Group formulated a longterm management plan called NITTOKU SHINKARON(The Evolution of NGK SPARK PLUG).
In the plan, we have upheld a goal for the year ending
March 31, 2021, which is to become a Monozukuri Company,a Highly Profitable Company, a Progressive Company, and a

Human “Asset” Company.
In order to attain this goal and provide all stakeholders
with Real Value as a company, we are steadily moving
for ward by progressing through the three separate
three-year steps: Delving, Renovating and Evolving.

We aim to deliver Real Value to all stakeholders in 2020.
Core elements of the seventh medium-term management plan

Automotive Components
Business

Outline of the businessWe are supporting the world’s motorization throughthe supply of products, mainly components for internal
combustion engines. These include spark plugs to serve
as a “lighter” for the electrical ignition of fuel-air mixture;various automobile sensors that greatly contribute to thepurification of exhaust gas from gasoline-or diesel-powered
vehicles; and glow plugs to assist the autoignition of diesel
engines. We are also developing and selling hydrogen leakdetection sensors to ensure safety in a world powered byhydrogen energy.

Results for the year ended March 31, 2017 andforecast for the year ending March 31, 2018
Strengthening
current businesses
Expand our market share in emerging markets,mainly in China and India● Enhance products designed to respond toenvironmental regulations● Expand the lineup of automotive components
through Wells● Revitalize the ceramic packaging business● Expand the lineup of components forsemiconductor manufacturing equipment through
NTK CERATEC●

Establishing new
business pillars
Launch new products for next-generation vehicles,
which have no internal combustion engines● Commercialize products in the environmental,
energy and medical fields●

Establishing strong
business infrastructure
Foster speedy management for total optimization
on a global scale● Utilize human resources globally based on fairtreatment● Restructure the organization to clarify
responsibilities and authorities and add
cross-organizational supervisory functions●—Slogan for the seventh medium-term management plan—

Accelerating Current & New Businesses13

Due to the favorable sales of new cars in rising emerging
markets including China, we recorded steady sales
for automotive components. Also, our sales of repair
parts were satisfactory, being driven by sales in China
and ASEAN. In North America, despite a decrease in
the growth rate of automobile sales, our sales of repair
parts remained robust. However, the stronger yen in theforeign exchange market caused a decrease in our sales
and operating income. As a result, in the automotive
components business, we posted net sales of 318,149
million yen (down 1.5% year on year) and operating incomeof 57,988 million yen (down 18.5% year on year).
For the year ending March 31, 2018, we expect that sales
will increase by 2.8% year on year to 327.1 billion yen while

operating income will decrease by 0.9% to 57.4 billion yen.
Although the growth rate will decrease for the global
production of automobiles, we expect that sales quantitiesof our plugs and sensors will increase to produce more
profits, while operating income will slightly decrease due tochanges in the foreign exchange market.

Medium-term measures
It is predicted that sales quantities will continue to increase
for next-generation vehicles such as electric vehicles andfuel cell vehicles (see p. 20).
Demand for plugs and sensors is on the rise, coming
mostly from emerging markets, with higher fuel efficiency
and measures to comply with local environmental
regulations being increasingly required. Accordingly, therole to be played by NGK SPARK PLUG, which has theability to develop high value-added products including
their materials, will continue to expand. In response, we will
steadily make and maximize profits.
As for the plug business, we will establish a system
to sell 1 billion plugs in the year ending March 31,
2021, thereby further enhancing our competitiveness.
Environmental regulations are becoming stricter not only
in developed countries but also in emerging economies(see p. 20), and we will enhance the sensor business, inparticular for emerging markets, while also focusing on
the establishment of our technological superiority for the
expansion of our business.

14Semiconductor-div.
Business

Review of Operations
by Segment
Outline of the businessconsolidation of our production sites will impose extra cost on
us, allowing us to achieve only a minor reduction of deficit.

Our semiconductor packages and substrates madeby using our unique ceramic multilayer technology are
adopted for a range of products, including communication
devices, smart devices, medical equipment and cameras.

Medium-term measures
Since the year ended March 31, 2017, we have been
implementing various measures, including the initiatives listed
below, to revitalize the ceramic package business based onfour basic policies: (1) establish a subsidiary for the business;(2) invite officers from outside the company; (3) concentrate on
selected products; and (4) restructure our production bases. We
will continue to improve our profitability to move into the black.

Results for the year ended March 31, 2017 andforecast for the year ending March 31, 2018
Strategies for the automobile repair parts market
in North America

Canada, and by Wells specializing in the development andmanufacture of products for the global repair parts market.

In July 2015 we acquired all shares of Wells from UCI Holdings,
one of the leading automotive component companies in the
United States, with an eye to expanding the sales of our own
and Wells’ products in the repair parts market.
However, the transaction size abruptly diminished after ouracquisition of Wells due to changes in the external environment
after the M&A, resulting in our posting an impairment loss ofabout 20.2 billion yen in the consolidated financial settlement
for the year ended March 31, 2017.
In response, we will make necessary improvements
and rebuild our strategies for the repair parts market.
Transfer of the sales function
We will increase product quality and the speed of related
operations by transferring the sales functions played by Wells
to NGK SPARK PLUGS (U.S.A.) and NGK SPARK PLUGS

Sales mix of the automotive components business
Plug business(100 million yen)
5,000

Sensor business

21.7

22.0

18.2

4,000
3,000 13.3
2,000
1,000
0

15

2,488
1,029

1,459

2013/3

2,718
1,128

1,591

2014/3

2,928
1,204

1,724

2015/3

3,229
1,332

1,897

2016/3

3,181

Sales ratio of theautomotive components
business

Operating income from the automotive
components business

Operating income ratio

23.3

Use of Wells’ plant in Mexico
NGK SPARK PLUG will make use of the Wells plant inReynosa, Mexico to expand the product lineup while also
taking advantage of the cost benefits provided by the plant.
We are now making examinations to identify what products
are to be manufactured at the plant in consideration ofmarket needs.
To press forward with these measures, we invited new
managers from outside the company and renewed thesales and production systems. We will make keen efforts
to sell more of Wells’ products by making use of our global
sales network.

(%)
25(100 million yen)
100

20

80

15

60

Automotive
components
business
683

85.3%

711

589

580

1,251
1,931

2017/3

10

40

5

20

0

0

In this business we faced a substantial decrease in thesales quantity of crystal device and SAW filter packages,
and the stronger yen also brought to stagnant sales.
However, we reduced deficits on a consolidated basis
from the previous year by restructuring the production
bases with the establishment of a subsidiary tasked withprofit-making in July 2016, building a matrix for profit
management, improving productivity, and concentrating on
selected products for cost reduction.
As a result, on a consolidated basis, sales came
to 19,449 million yen (down 18.4% year on year) andoperating loss amounted to 4,842 million yen (as comparedto 7,116 million yen in the previous fiscal year).
For the year ending March 31, 2018, we will record net
sales of 16.7 billion yen, down 13.7% year on year andoperating loss of 4.1 billion yen.
Sales will decrease due to the withdrawal from the crystal
filter package business, which will be completed by the endof March 2018, and also because we will concentrate more
on selected products. For operating income, we will continue
our streamlining efforts, including reducing personnel.
However, the stronger yen and relocation necessitated by the
Semiconductor-related sales/Operating income ratio
Sales(100 million yen)

Operating income ratio
(%)
40

400
300

282

297

253

238

200

30

194

100

10

0

0
(10)

332

(34.3)

2013/320

2014/3

2015/3

2016/32017/3

2013/3(29.3)

2014/3(31.2)

2015/3(29.9)

2016/3(24.9)(20)

Reform the corporate culture● Change the mindset of employees and speed up business
management● Clarify responsibilities by matrix management (business
unit system)
Improve the profit-making system● Consolidate the production bases to reduce the fixed
cost (reduce the number of plants from four to three andstreamline the process flow)● Concentrate resources on high value-added products(appropriate allocation of personnel)
Concentrate on selected products● Withdraw from the manufacture of commodity products● Keep the prices of products with technological superiority
at appropriate levels

Operating income from thesemiconductor-related business(100 million yen)0

2017/3

Semiconductorrelated business

5.2%

(20)
(40)

(48)

(60)

(71)

(80)

(30)
(40)

Sales ratio of thesemiconductor-related
business

(87)
(100)

(97)

2013/3

2014/3(79)

2015/3

2016/32017/316

Measures toDevelop
New Business

1. Fuel cell business
Operation of a demonstration unit at the
Komaki Plant
We are developing solid oxide fuel cells (SOFC ) bymaking use of our core ceramic molding, printing andsintering technologies. Specifically we are developing
two types: planar and tubular SOFC*2.
In April 2017, we installed a tubular SOFC andmicro gas turbine (MGT)-combined pressurized hybrid
power generation system (made by MHPS) and began
operating this demonstration unit*3. The system is also
equipped with our own developed SOFC stack.
*1

Review of Operations
by Segment

Ceramics-div. Business

Outline of the businessby the increased depreciation cost due to the expanded
investment in equipment. As a result, consolidated sales
for the business came to 31,855 million yen (down 2.9%
year on year) and operating income to 400 million yen(down 83.4% year on year).
The industrial ceramics business were also impacted
by the foreign exchange market and recorded a decreasein sales year on year, although the adoption of ourelectrostatic chucks greatly increased due to the expanded
demand for semiconductor manufacturing equipment andsubstantially contributed to increasing our sales.
Sales will increase to 37.2 billion yen, up 16.9% year on
year, and operating income to 40 million yen for the year
ending March 31, 2018.
For the industrial ceramics business, the semiconductor
manufacturing equipment market will continue to be favorable,
which will in turn boost our sales. However, operating income
will decrease year on year due to the equipment investment
planned for the year ending March 2018 and to the influenceof the depreciation cost.

In the cutting tool business, we manufacture cutting tools to
be used to process components for automobiles, industrial
equipment and aircraft. We are developing new materials in
addition to ceramic materials to supply a range of products
to support industries around the world. Our ceramic products
for industrial use include components for semiconductor
manufacturing equipment, bearing balls and other productsthat make use of the unique features of ceramics. We are also
engaged in and developing new business fields, including thefuel cell business and the medical business, in which we deal
with bone prosthesis.

Results for the year ended March 31, 2017 andforecast for the year ending March 31, 2018
In the ceramics-div. business, our shipments remained
favorable for cutting tools and ceramic products to be
used in industrial equipment. Profit from the businessdropped, however, as the yen was stronger relative to theprevious fiscal year and an extra burden was imposed

Pressurized hybrid power generation system installed at the Komaki Plant

By operating the demonstration unit, we will makefurther progress for the practical and wider use of
SOFC, thereby contributing to solving energy andenvironmental problems.
*1 SOFC: Generate electricity by using oxygen (O 2) in the air as well ascarbon monoxide (CO) and hydrogen (H 2) derived from city gas.
*2 We have formed business partnership with Mitsubishi Hitachi Power
Systems, Ltd. (MHPS).
*3 The demonstration test is conducted with financial support from the New
Energy and Industrial Technology Development Organization (NEDO).

2. Enhancement of the medical businessResearch into artificial cartilage with
Hokkaido University
Hokkaido University is fostering the practical use of
double network (DN) gels as artificial cartilage with aview to helping patients with cartilage diseases, which
are becoming prevalent as society ages, to improvetheir quality of life (QOL) by providing their doctors withnew treatment materials and methods.
NGK SPARK PLUG has strengths in developing
products with high reliability and durability by using
fine ceramics as materials. In light of the current aging
of society, Hokkaido University and NGK SPARKPLUG will collaborate to assert their respective
strengths to help patients with incurable cartilage
diseases improve their QOL. The joint research will
be conducted at a department established within the
University’s facilities to foster the application of toughhydrogels as cartilage.

DN gel with high toughness

Joint research laboratory for healthcare materials
established by NGK SPARK PLUG and AIST

Establishment of a research laboratory with AIST

Sales/Operating income ratio of the ceramics-div. business

Operating income from the ceramics-div. business

Sales(100 million yen)(100 million yen)

Operating income ratio
(%)
10

500
400

6.0

300

245

221

7.4

6.8
328
250

1.3

0.8

2013/3

2014/3

2015/3

6

30

4

20

2

10

0

0

8.5%

24

100

17

40

319

200

0

Ceramics-div.
business

50

82016/32017/3

Sales ratio of theceramics-div. business

15

17

NGK SPARK PLUG
Has manufactured andsold artificial bones andother products
Regards the medical
field as one of its new
key business domains

AIST
Has high potentials
regarding thedevelopment ofmaterials, including
medical materials

Joint ResearchLaboratory
Develops innovative
healthcare products

42

2013/3NGK SPARK PLUG and the National Institute of Advanced
Industrial Science and Technology (AIST) established amaterials and chemistry research laboratory to conduct
joint research into healthcare materials.
This laborator y was established under thecollaborative research system fostered by AIST to conduct
R&D more speedily and intensively and with closer links
to corporations. It is based in the AIST Chubu Centeras the Institute’s first joint research laboratory locatedin the Chubu region. The laboratory has also become
AIST’s first joint research laboratory called by a namethat includes the name of a manufacturer/seller of fineceramics and applied products.

2014/3

2015/3

2016/32017/318

Risks and Opportunities
NGK SPARK PLUG’s major short-, mediumand long-term risks and opportunities

About 85%

Short-term

Decreased use of internal combustion engines

Plugs and sensors are the core products of our company in theautomotive components business and they are used in internal
combustion engines. There are growing concerns that the
number of automobiles powered by internal combustion
engines might decrease in the future as more electric vehicles,
fuel cell vehicles and other next-generation cars are developed
and popularized. In emerging markets, however, demand forgasoline-powered vehicles (Opportunity 2) tends to expand
while environmental regulations are being enhanced(Opportunity 1). Accordingly, demand for plugs and sensors will

About 80%

Medium-termLong-term
1. Decreased use of internal
combustion engines

Risk 2Global operations

The NGK SPARK PLUG Group’s overseas sales ratio amounts toabout 80% of the total, but we avoid risks by producing our coreceramic components largely in Japan to prevent the outflow oftechnologies as well as by also conducting the sintering
process, which imposes large equipment investment burdens, ina stable manner in Japan. For materials, however, we procure
many of them from overseas and also produce, assemble andsell products across the globe. We are therefore subject tochanges in the political situations and economic trends of

3. Spread of car sharing

Opportunity 1
4. Sudden rise in the prices of materials and metals

1. Stricter environmental regulations
2. Expanded demand in emerging markets

Business
opportunities

3. Advantages provided by the ability to develop materials
to suit the downsizing trend
4. Development competition intensified by technological innovations●●

Environmental issues
Energy shortage●

Aging of Japanese society
and decreasing birthrate● Labor shortage
●

S

●

G

19

●

Management transparency
Enhancement of the risk
management system

Environmental regulations● Europe: Euro 6d-TEMP● China (nationwide):

China 6 (equivalent to Euro 6)● China(nationwide):
China 5

2017

2018

2019

● India: BS6(equivalent to Euro 6)● Europe: Euro 6d

2020

2021

Resource shortage

Increase in population andeconomic growth in emerging
market countries● Progress of urbanization●●

Environmental regulations

In Europe, environmental regulations, particularly those on
exhaust gas, have been strengthened, including the launch of
the Euro 6d-TEMP regulation in 2017. Plugs, sensors and otherproducts can directly help increase fuel efficiency and ensurecompliance with exhaust gas regulations. In particular, sensors
will be more strictly regulated and demand for value-added
sensors with higher performance will expand. Moreover, tocomply with stricter environmental regulations, we aredeveloping new products, such as sensors to detect particulatematter (PM) contained in exhaust gas, expecting that demandfor our sensors and other products will further increase.

Opportunity 2

ESG risks&
opportunities

countries in which we operate, and the foreign exchange market
has impacts on both our production and sales results.
In order to mitigate the impact caused to our global
business by changes in exchange rates and others, the Groupis increasing its overseas production and assembly rates andenhancing manufacturing systems, mainly in the Asian region.
We are thus hedging risks through business optimization acrossthe globe.

2. Global operations

Business risks

E

continue to increase in those countries. Under thesecircumstances, value-added products are becoming
mainstream and NGK SPARK PLUG, which has the ability todevelop materials, can boost its business and make it more
profitable. We are also developing products for electric vehicles
and fuel cell vehicles hydrogen leak detection sensors for next
generation cars. By continuing to invest in new businesses forthe future, we are proactively creating new management pillars
and improving the profit-making structure in which automotive
components presently account for 80% of our total sales.

Overseas
sales ratio

Automotiverelated sales

Present businesssituation

Risk 1

Enhancement of compliance●

Promotion of diversity

Expansion of demand in emerging markets

In emerging markets such as China and India, demand forgasoline-powered vehicles will further expand, and we arepromoting sales in these markets.
In China, users of high-end vehicles are already aware ofour brand, and we are now promoting sales in the “volumezone,” including users of mid-range vehicles. To this end, we are
expanding sales channels to include inland areas in addition tocoastal areas, and selling low-priced plugs to expand the local
Chinese market. In India, meanwhile, we are giving more
support to retailers and distributors to earn more recognition andtrust for the NGK brand.
Moreover, we are working to identify the models of local
automakers for which we could promote sales in the repair parts
market and conduct OEM business with such makers.

20

Our Value

Financial Results Highlights for the Past 11 Years(Millions of yen)

2007/3

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

Net sales

344,891

345,584

292,121

243,914269,232

284,746

302,798

329,758

347,636

383,272

372,919

Operating income (loss)

52,40135,039(5,222)

10,683

28,77024,47823,754

51,661

62,196

66,28453,595

Ordinary income (loss)

53,85534,938(7,528)10,75827,37923,74027,67454,96067,90764,48355,559Profit (loss) attributable to owners of the parent

34,072

22,144(71,669)

13,50923,68025,52420,90932,70436,75330,81525,602

Capital expenditures

29,271

63,231

24,173

10,9778,767

14,00424,012

41,03436,37245,33936,328Depreciation

18,861

25,474

31,767

18,825

16,646

15,438

12,798

11,567

13,337

16,834

19,601R&D expenses

16,253

17,444

17,575

13,907

15,763

16,036

17,10019,40021,337

23,123

23,416

Cash flows from operating activities

36,48137,72836,60334,25535,39821,07926,19454,69736,59356,46549,764

Cash flows from investing activities(22,924)(43,820)(27,153)(17,270)(20,412)(15,850)(15,442)(61,148)(12,865)(82,331)(53,410)

Free cash flows(1,125)(25,520)

3,820

27,83430,684

8,507

8,456

3,541

13,995(25,866)

6,335

Dividend payout

5,953

5,917

2,941

2,396

4,791

4,789

4,788

6,093

7,834

9,140

8,942

Net assets

288,976

288,299

184,384

207,006

218,159

235,613

268,309302,793343,380

341,044354,710

Total assets

413,769

412,150

275,995

331,476

337,318

340,295

366,489

458,148

485,497

526,103563,801

Interest bearing debt

16,91937,28937,04239,81436,69737,39927,41857,33946,15380,212

99,275(Yen)

Earnings (losses) per share154.24100.93(328.90)62.01

108.71117.2596.06

150.26168.88141.60119.44

1,302.52

1,312.72

838.11

942.41994.36

1,075.24

1,223.41

1,381.38

1,566.80

1,557.16

1,660.06

Cash dividends per share

27.00

27.00

13.50

11.00

22.00

22.00

22.00

28.00

36.00

42.00

42.00

Operating income ratio (%)

15.2

10.1

(1.8)

4.4

10.7

8.6

7.8

15.7

17.9

17.3

14.4

Return on net sales (%)

9.9

6.4

(24.5)

5.5

8.8

9.0

6.9

9.9

10.6

8.0

6.9

Gross profit on sales (%)

27.9

24.1

13.8

21.0

27.4

25.1

24.2

32.6

35.8

35.6

33.0

ROE (Return on equity) (%)

12.5

7.7

(30.6)

7.0

11.2

11.3

8.4

11.5

11.4

9.1

7.4

ROA (Return on assets) (%)

8.5

5.4

(20.8)

4.4

7.1

7.5

5.9

7.9

7.8

6.1

4.7

ROIC (Return on invested capital) (%)

11.4

7.3

(3.1)

6.1

10.3

10.9

6.4

10.5

10.8

11.6

9.1

Equity ratio (%)

69.4

69.4

66.2

61.9

64.2

68.8

72.7

65.6

70.2

64.4

62.5

Total asset turnover (times)

0.9

0.8

0.8

0.8

0.8

0.8

0.9

0.8

0.7

0.8

0.7

Dividend payout ratio (%)

17.5

26.8

–

17.7

20.2

18.8

22.9

18.6

21.3

29.7

35.2

Net assets per share21

22

Financial Highlights

Non-financial Highlights

Performance

Data related to employees
Profit attributable to owners of the parent/ROE (Return on equity)

Net sales/Operating income/Operating income ratio
Net sales

Operating income

Operating income ratio(Millions of yen)
400,000

383,272
329,758

300,000

372,919

347,636

302,798

17.9

(%)
20

ROE (Return on equity)

Profit attributable to owners of the parent

11.5

11.4

14.4

15.7

15

7.8

1,200

15,00066,284

907

900

872

842

396

600

20,909

300

474

448

2013/3

2014/3

13,197

12,760

9,000

6,000

5

14,926421

4.0

53,595

14,52412,000

371

572

433

30,815

Consolidated

12,563936

8.0

25,60220,00062,19612.0

7.4

36,753

10

51,661(Number of persons)

9.1

8.4
40,000100,000

Non-consolidated

Outside Japan(Number of patents)

1,020
17.3

32,704200,000

In Japan(%)(Millions of yen)
60,000

Number of employees at work

Number of new patents filed

446

565

451

5,881

5,809

5,823

5,829

2015/3

2016/3

5,719

3,000

23,7540

2013/3

2014/3

2015/3

2016/32017/3Equity ratio002014/3

2013/3

2015/3

2016/3

Cash dividends per share

Dividend payout ratio

Ratio of female employees

(Yen)

(%)

(%)

100.0

100

50

20.00

16.22
72.7
65.6

70.2

80

64.4

60.0

29.7

60

22.9
40.0

40

35.2

62.5

40

18.6

21.3

16.72

20

0

2013/3

2014/3

2015/3

2016/32017/3

0

17.41
15.78

2013/3

2014/3

Number of employees on childcare leave(Number of persons)

20

80

15

60

16.14

10

10

40

5

20

0

0

8

20

2017/3

Number of employees on childcare leave (non-consolidated)

55

58

53

48
10.00

42

42

36

47

6
10

2014/3

Number of female employees in managerial posts

30

22

2013/30

2017/3

15.00

28
20.0

2016/3(Number of persons)

(%)

80.0

2015/3

Ratio of female employees/Number of female employees in managerial posts (non-consolidated)

Cash dividends per share/Dividend payout ratio

Equity ratio002017/3

2015/3

2016/30

2017/3

5.00

4

3

0

2013/3

2014/3

2015/3

2016/32017/3

2013/3

2015/3

2014/3

2016/32017/3

Data related to environment
Capital expenditures/Depreciation

Earnings per share

Capital expenditures

Earnings per share(Yen)(Millions of yen)200.0050,000150.0024,012

19,601

23

11,567

13,337

2015/3

2016/32017/3

73.8

30

0

28.33
3.19

31.17
28.89
3.41

27.61
3.28

28.56
3.62
1.29

5.04
1.29

20

50.0

15

25.14

25.48

24.33

23.65

24.85

10

25.0

10,0002014/3

73.4

16,834
12,7982013/3

75.0

80.8
71.2

25

20,000036,32836,37277.5

30,000

96.06

50.00

Amount of CO 2 emissions(10,000 tons-CO 2)
35

100.0

41,034141.60Outside Japan
Groups in Japan (without integrated certification)
Groups in Japan (with integrated certification)

Rate of taking paid leave(%)

40,000119.44100.00Depreciation

45,339168.88150.26

Fluctuations in CO2 emissions

Rate of taking paid leave (non-consolidated)5

2013/3

2014/3

2015/3

2016/32017/30

2013/3

2014/3

2015/3

2016/32017/30

2013/3

2014/3

2015/3

2016/32017/324

Executive Officers(As of June 29, 2017)

Directors

Audit & Supervisory Board Members
Shinji Shibagaki

Fumio Mizuno

Yasuhiko Hotta

April 1977
Joined our company
October 2003 General Manager, Accounting & Finance Dept.
April 2007 President, NGK SPARK PLUGS (U.S.A.)
HOLDING, INC.
June 2007 Member of the Board, NGK SPARK PLUG CO., LTD.
June 2010
Managing Director, Member of the Board
June 2011
Senior Managing Director, Member of the Board
April 2012 Senior Managing Officer, Member of the Board
April 2013 Vice President, Member of the Board
June 2013
Executive Vice President, Member of the Board
April 2016 Representative Director and Vice Chairman of theBoard (up to today)

April 1981
Joined our company
February 2006 General Manager, Semiconductor Components
Div. Production Dept. Sec. I Communication
Media Components Group
June 2009
General Manager, Production Dept. Ceramic
Package Div. Communication Media
Components Group
April 2011
President, NTK CERAMIC CO., LTD.
Senior General Manager, NGK SPARK PLUG CO., LTD.
July 2011
April 2013
Vice Senior General Manager, Technical
Ceramics Group Semiconductor Div.
June 2015
Audit & Supervisory Board Member, Standing(up to today)

April 1980
Joined our company
February 2008 General Manager, Accounting & Finance Dept.
November 2008 General Manager, Semiconductor Components
Div., Communication Media Components Gr.
June 2009
General Manager, Planning Dept.,
Communication Media Components Gr.
February 2011 General Manager, Information Systems Dept.
July 2011
Senior General Manager
April 2016
Senior General Manager, Working Styles
Reforming Office, Corporate Strategy Gr.
June 2017
Audit & Supervisory Board Member, Standing(up to today)

Teppei Okawa

Shogo Kawajiri

Kenichi Masuda

Fumiko Nagatomi

April 1981
Joined our company
February 2011 General Manager, Procurement Group
Procurement Dept.
June 2011
Member of the Board
April 2012
Corporate Officer, Member of the Board
June 2012
Corporate Officer
June 2013
Corporate Officer, Member of the Board
April 2014
Managing Officer, Member of the Board
April 2015
Senior Managing Officer, Member of the Board
April 2016
Representative Director
Vice President Officer (up to today)

April 1979 Joined our company
June 2008 Vice Senior General Manager, Communication
Media Components Group
Semiconductor Components Div.
June 2008 Member of the Board
June 2011 Managing Director, Member of the Board
April 2012 Managing Officer, Member of the Board
April 2013 Senior Managing Officer, Member of the Board
April 2014 Vice President Officer, Member of the Board(up to today)

May 1970
June 1997

April 1981
March 1989
April 1989
May 2006

Takeshi Nakagawa

Takeshi Kawai

April 1979
Joined our company
February 2007 General Manager, Purchasing Dept.
June 2008
Member of the Board
June 2011
Managing Director, Member of the Board
April 2012Managing Officer, Member of the Board
April 2013
Senior Managing Officer, Member of the Board(up to today)

April 1987
Joined our company
February 2011 General Manager, Sensor Engineering Dept. II,
Automotive Components Group Sensor Div.
April 2012
Corporate Officer
April 2015
Managing Officer
June 2015
Managing Officer, Member of the Board
April 2016
Senior Managing Officer, Member of the Board(up to today)

Shinichi Odo

Representative Director and Chairman of the Board
Chief Executive Officer
President Officer
April 1977 Joined our company
July 2005 President, NGK SPARK PLUGS (U.S.A), INC.
June 2007 Member of the Board, NGK SPARK PLUG CO., LTD.
June 2010 Managing Director, Member of the Board
June 2011 President
April 2012 President & CEO
April 2016 Representative Director and Chairman of the Board
Chief Executive Officer
President Officer (up to today)

Representative Director
Vice President Officer

Member of the Board
Senior Managing Officer

Audit & Supervisory Board Member, Standing

Representative Director and Vice Chairman of the Board

Member of the Board
Vice President Officer

Audit & Supervisory Board Member, Standing

Outside Auditor

Outside Auditor

Joined THE MITSUBISHI BANK, LTD.
Member of the Board, THE BANK OF TOKYOMITSUBISHI, LTD.
May 2001
Managing Director, THE BANK OF TOKYOMITSUBISHI, LTD.
Executive Vice President, KOKUSAI SECURITIES CO., LTD.
June 2001
June 2005
Chairman, KOKUSAI ASSET MANAGEMENT CO., LTD.
June 2006
President, KOKUSAI ASSET MANAGEMENT CO., LTD.
October 2007 Chairman, KOKUSAI ASSET MANAGEMENT CO., LTD.
June 2008
External Auditor, TODA CORPORATION
June 2012
Audit & Supervisory Board Member, NGKSPARK PLUG CO., LTD. (up to today)

June 2016
June 2017

Registered as an attorney, Joined Hachisuka Law Firm
Resigned from Hachisuka Law Firm
Opened Nagatomi Law Firm (up to today)
Audit & Supervisory Board Member, UCS CO., LTD.
(up to today)
Outside Corporate Auditor, CHUBU ElectricPower Co. Inc. (up to today)
Audit & Supervisory Board Member, NGK SPARKPLUG CO., LTD. (up to today)

Member of the Board
Senior Managing Officer

Corporate Officers
Mikihiko Kato
Member of Board
Corporate Officer

April 1985
Joined our company
February 2012 General Manager, Corporate Planning Dept.
August 2012 President of CERAMICA E VELAS DE IGNICAONGK DO BRASIL LTDA.
October 2015 General Manager, Corporate Planning Dept.
April 2016
Corporate Officer
June 2017
Member of the Board, Corporate Officer(up to today)

Member of the Board (Outside Director)
August 1996 President & CEO, JOHNSON & JOHNSON K.K.
VISION CARE COMPANY
August 2011 Vice Chairman of the Board, PASONA INC.
June 2013 Member of the Board, NGK SPARK PLUG CO., LTD.
(up to today)
August 2016 Vice Chairman, PASONA INC. (up to today)

Kanemaru Yasui

Megumi Tamagawa

March 1981 Registered as a Certified Public Accountant
April 1999 Representative Partner, Central Audit Corporation
August 2007 Representative Partner, KPMG AZSA LLC
June 2008 Representative Partner, Executive Director, Headof Nagoya Office, KPMG AZSA LLC
July 2013
Head of the Office Yasui Certified Public
Accountant (up to today)
June 2014 Member of the Board, NGK SPARK PLUG CO.,LTD. (up to today)

August 1990 Registered as a Certified Public Accountant
March 2006 Representative Director, Maruyahonsya CO., LTD.
March 2016 Member of the Board, Maruyahonsya CO., LTD.
(up to today)
June 2016 Member of the Board, NGK SPARK PLUG CO.,LTD. (up to today)

Member of the Board (Outside Director)

25

Morihiko Otaki

Member of the Board (Outside Director)

Masahiko Okuyama

Takahiro Suzuki

Yoshitaka Narita

Kozo Amano

Managing Officer
Medical Div.
Manager of TOKYO BRANCHManaging Officer
President of NTK CERATEC CO., LTD.
Industrial Ceramics Div.

Managing Officer
President of NGK SPARK PLUGS (U.S.A.)
HOLDING, INC.
President of NGK SPARK PLUGS (U.S.A.),
INC.

Managing Officer
Automotive Components Sales &Marketing Div.
Cutting Tools Div.

Noboru Ishida

Kozo Yamasaki

Nobuyuki Tokioka

Yoshihiro Matsubara

Corporate Officer
Product Technology Div.
Fuel Cell Div.

Corporate Officer
President of NTK CERAMIC CO., LTD.

Corporate Officer
AEC Div.

Corporate Officer
Facility Engineering Div.
Corporate Quality Management Div.

Takio Kojima

Yutaka Tanaka

Masato Taniguchi

Toru Matsui

Corporate Officer
Senior General Manager
Engineering R&D Gr.

Corporate Officer
Sensor Div.
Glow Plug Div.

Corporate Officer
Marketing Div.
Business Development Div.

Corporate Officer
President of NGK SPARK PLUG
(SHANGHAI) CO., LTD.
President of NGK SPARK PLUG
(SHANHAI) TRADING CO., LTD.
Automotive Components Sales &Marketing Div.

Masaki Sumiya

Kenji Isobe

Hiroyuki Maeda

Hiroyuki Tanabe

Corporate Officer
President of NGK SPARK PLUG EUROPE
GmbH

Corporate Officer
Vice Senior General Manager
Corporate Administration Gr.

Corporate Officer
SCM Div.
Senior General Manager
Procurement Div.
Spark Plug Div.

Corporate Officer
President of CERAMICA E VELAS DE
IGNICAO NGK DO BRASIL LTDA.

26

NGK SPARK PLUG’s Definition of CSR
Our Connections with Society
NGK SPARK PLUG adopts an easy-to-understand definition of CSR, which is“meeting stakeholder expectations and needs through our business to make stakeholders happy.”

Our CSRNGK SPARK PLUG engages in business activities with theaspiration of “serving society through business.” Society
here indicates the people and organizations with which wehave relations and they are called “stakeholders.”“Stakeholders” refers to the suppliers that deliver raw
materials and equipment to us, the customers that buy
the products we sell, and the employees involved in our

Dialogue with Stakeholders

We view CSR not just as a responsibility but as anopportunity to be accountable through review of the NGKSPARK PLUG Group’s economic, environmental and social
activities from a global perspective, to enhance corporate
value, and to contribute to the sustainable developmentof society in accordance with our Corporate Philosophy.

Corporate Philosophy

Our CSR activities are wide-ranging and diverse, and toprovide our Group’s action guidelines for fulfilling CSR, weestablished the CSR Policy in April 2011, which comprises
10 policies, such as the Compliance Policy and others.
In line with the CSR Policy, we review and promote CSR
based on a multifaceted approach.

To deepen mutual understanding, we are fostering dialogue
with our stakeholders through various opportunities. We

Risk Management Policy
Compliance Policy● Information Security Policy● Corporate Quality Policy● Information Disclosure Policy● Procurement Policy● Human Resource Policy●

Corporate
Philosophy

Corporate
Philosophy

Corporate
Code of Conduct

3

2
Management
PolicyActionGuideline

1●●

CSR Policy

Commitment●●

CSR promotion system
CSR Committee
Chairman: President & CEO
Risk Management Dept.
(Secretariat)

BCM-WG

27

Safety and
HealthCommittee

Environment
Committee

CSR Procurement
WG

Confidentiality
Management
Committee

Risk Management
WG

ExportControlCommittee

Compliance
Committee

Occupational Safety and
Health Basic Policy
Social Contribution Policy
Environmental Policy

will continue these dialogues to make more stakeholders
happy and thereby increase our corporate value.

117th Ordinary General Meeting of Shareholders
held on June 29, 2017
Number of participating shareholders: 205
Voting rate: 82.6%● Dialogue with institutional investors and securities
analysts:
Results for the year ended March 2017
Number of companies that had face-to-facemeetings with us: 348● Dialogue with personal investors:
Results for the year ended March 2017
Number of events held: 12
Total number of participants: 1,148●

Dialogue withshareholders andinvestors

Our CSR Philosophy and Policy

Enhancement of corporate value

Quality
Committee

business activities. The shareholders and investors thatprovide us with capital and the local communities andinternational society where we have production and sales
sites are also our important stakeholders. Consideration
for the environment is also a responsibility that a company
should fulfill.

General Meeting of
Shareholders

Dialogue withcustomers

We publicize our technologies by participating in various exhibitions and events every year.

Dialogue with
suppliers

We annually hold a briefing on our policies for our major suppliers to help them understand our present situationand targets.

Dialogue with local
communities

We have business sites across the globe. At each location, we respect the local culture and customs and valuesmooth communication with local people.

Dialogue with
employees

To provide employees with safe and sound workplaces where they can work hard and make a meaningful
contribution, the management team proactively visits individual workplaces and talks with workers on-site.

CSR Promotion System

Participation in the United Nations Global Compact

As well as determining each year’s key tasks
for implementation of the CSR Policy, the
CSR Committee oversees and evaluates
the CSR-related activities implemented by
the respective task force committees anddivisions, and makes proposals regarding
them, in order to achieve total optimizationof CSR activities, thereby strengthening thebusiness foundation.
Working groups are established asnecessary to discuss specific themes anddevelop countermeasures.
Through close collaboration among the
CSR Committee, the task force committees,
and working groups, a company-wide CSR
promotion system is put in place.

The NGK SPARK PLUG Group participated in the United Nations Global Compact in November 2016.
The Global Compact is an initiative proposed in 1999 by then Secretary-General of theUnited Nations Kofi Annan to address various issues facing the world, such as global warming,
environmental problems and disparities in society. It was established formally at the UN
headquarters in July 2000 as a set of voluntary action principles to be followed by companies.
The NGK SPARK PLUG Group will support the Global Compact’s 10 principles set in four
fields (human rights, labor, environment and anti-corruption) and conduct activities to contributeto building a sustainable society.

Selected for ESG Indexes
NGK SPARK PLUG was selected for inclusion in the FTSE
Blossom Japan Index developed by FTSE Russell*1 aswell as in the MSCI Japan ESG Select Leaders Index and
the MSCI Japan Empowering Women Index developed
by US firm MSCI*2. The Government Pension Investment

Fund (GPIF) has adopted these three indexes for ESG
investment.
*1 FTSE Russell: This wholly owned subsidiary of the London Stock Exchange Group isa leading global index provider. It creates and manages indexes, data and analysis
solutions for investors.
*2 MSCI: A leading provider of various tools that help institutional investors around theworld make investment decisions

28

ESG stands for “environment, society and governance,” and the idea that companies need to take ESG-oriented views to ensure
their long-term growth is becoming more widespread around the world. In response, NGK SPARK PLUG is taking necessary
measures, which we introduce in this report.

Independence of Outside Directors and Auditors
the Board of Directors meetings.
We appoint independent outside directors and auditors
in line with our own selection criteria as well as the criteria
set by the securities exchanges to ensure that candidates
for independent positions have no special relationships
with the management team or major shareholders and thatthey have no conflicts of interest with general shareholders.

Outside directors play supervisory roles in positions
independent from business operations, including expressing
their opinions by taking a broader view at important
meetings, including the Board of Directors meetings.
Outside auditors play auditing functions by drawing on theirexpertise to carry out audits from multifaceted viewpoints
and express their opinions at important meetings including
Appointment reasons for outside directors and auditors

ESG
Management

Our ESG Approach: GovernanceCorporate Governance

Title

Name

Outsidedirector

Morihiko
Otaki

Reason for appointment

Frequency of attendance

He has a wealth of experience in global companies and expertise as an executive, Attended 12 of the 13 Board of Directors meetings held
and is expected to supervise management in an appropriate manner.
during the term*.

He is expected to make recommendations to management by using his expertise
Outside Kanemaru
Attended all of the 13 Board of Directors meetings heldand experience gained over the course of his long career as a certified public
director
during the term*.
Yasuiaccountant.
At tended all 10 of the meetings held since her
She is expected to make a range of recommendations by drawing upon her
Outside Megumi
appointment to the position of outside director at thewealth of experience as an executive in a different industry as well as the expertise
director Tamagawa
ordinary general meeting of shareholders held in Junedeveloped as a certified public accountant.
2016.

Basic Philosophy
We believe that it is our foundational and important managerial task to establish and maintain a fair and efficient management
system, while securing soundness and transparency in management, in order to enhance corporate value by fulfilling ourcorporate social responsibilities. We will enhance our corporate governance to ensure the efficiency and soundness of ourcorporate activities in line with our corporate philosophy, thereby fulfilling our responsibilities to our stakeholders.

Corporate Governance System

29

We choose to have a Board of Corporate Auditors, who
audit our directors objectively from an independent
position. We have also separated the managerial decisionmaking and supervision function from the businessexecution function by introducing the corporate officer
system. In the fiscal year ended March 31, 2017, the Boardof Directors met 13 times. As for decision-making, theBoard of Directors makes decisions on the most importantmatters for management, while decisions on other matters
are made by the Corporate Management Committee andothers for greater speed in decision-making.
We also appoint three outside directors and two outside
auditors with an eye to introducing independent external
viewpoints to enhance the supervision function and ensuretransparency in management.

Internal Auditing System

Chronological table of measures taken for corporate governance

Our Internal Auditing Office performs audits of NGKSPARK PLUG and its Group companies as an independent
department, reports the results to management, and makes
proposals to the audited companies on improvements
regarding the identified problems. Departments thatreceive such proposals fo rmulate and imple m ent
improvement plans, and the Internal Auditing Officemonitors and checks the implementation status. To ensure
the reliability of financial reporting, the Office assesses
the effectiveness of internal control over financial reporting
based on the internal control reporting system set pursuant
to the Financial Instruments and Exchange Act of Japan.
The Internal Auditing Office works to improve theeffectiveness of internal audits by exchanging views on eachof the audit plans and results with corporate auditors and/or
independent external auditors regularly or as required.

2005

●

Established the Internal Auditing Office
Abolished the retirement allowance system

2010

●

Founded the CSR Committee

2011

●

Established the CSR Policy

2012

●

Decreased the upper limit of the number of directors from 25 to 13● Introduced the corporate officer system
●

2013

●

Appointed an outside director

2014

●

Increased the number of outside directors to two

2015
2016
2017

●

Formulated the criteria for the appointment of independent directors
Began assessing the effectiveness of the Board of Directors●

Increased the number of outside directors to three●

Kenichi
MasudaOutsideauditorFumiko She is expected to use the expertise and knowledge that she has accumulated Newly appointed to the position of outside auditor at thegeneral meeting of shareholders held in June 2017.
Nagatomi during her long career as an attorney for the company.
* Fiscal year ended March 31, 2017

Compensations for Directors

Future Measures

NGK SPARK PLUG established its voluntary Nomination
and Remuneration Committees in April 2017 to ensure
rationality and transparency in the nomination andremuneration of its directors. We also introduced aperformance-linked and highly transparent and objective
stock remuneration system for directors and corporate
officers in June 2017, aiming to improve our corporate
performance on a medium- to long-term basis and makeour executives more aware of their roles to increase
corporate value.

We will increase the functionality of the Nomination andRemuneration Committees and the performance-linked
stock remuneration system, which were introduced toenhance our corporate governance in 2017, thereby
increasing the transparency, fairness and speed ofour business management while strengthening ourcompetitiveness. We also began implementing measures
to evaluate the effectiveness of the Board of Directors
in 2015 and will further enhance its effectiveness for thecontinuous improvement of our corporate governance.

Corporate governance system

General meeting of shareholders

Changed the term of service of a director from two years to one year

●

2008

He has served as a director at financial institutions and is expected to use his
Attended all of the 13 Board of Directors meetings held
abundant expertise and knowledge regarding finance and corporate management
during the term*.
for the benefit of the company.

OutsideauditorAppointment/dismissal

Appointment/dismissal
Nomination
Committee

Givingopinions

Consultation
Remuneration
Committee

Giving opinions

Board of Directors (including outside directors)

Board of Corporate Auditors (including outside auditors)
Audit

Appointment/dismissal

Instruction

Mutual cooperation
Independent Auditors

Corporate
Management
Committee

President and CEO

Corporate
Officers’ Meeting

Mutual cooperation
Instruction

Administration Officer in Charge

Corporate Officers

Instruction

Business Operating Section/Group Companies

Instruction

Internal Auditing Office
Audit

Various Conferences and Committees (CSR Committee, etc.)

Established the Nomination and Remuneration Committees● Introduced the performance-based stock remuneration system●

Disclosure

30

ESG
Management

Corporate GovernanceCompliance

Risk Management

Basic Philosophy

Basic Philosophy

We work to increase awareness among employees regarding compliance to act in a socially sensible manner, helping them tobear in mind that our enterprise is a member of society.

We will build and operate a company-wide risk management system in order to strategically deal with risks against thebackground of a business environment that is becoming more complex and diversified. To this end, we will implement
measures continuously and in an integrated manner in cooperation with our domestic and overseas Group companies.

Compliance
PolicyWith recognition that our company is a member of society, we enhance corporate ethics and understand thespirit and meaning of laws, company regulations, international rules, and social norms in order to appropriately
meet social demand and become a company trusted by the international community.
We not only comply with laws and regulations, but also act in good faith with common sense and responsibility
as a member of society.
● We regularly educate and raise the awareness of all our employees to impart a high level of ethics and correctknowledge, with which they can act voluntarily to prevent a violation.
● Should a violation occur, we will promptly investigate the causes and take remedial actions. We will strive totake appropriate countermeasures to prevent recurrence and fulfill our accountability.

Risk
Management
Policy●ActionGuidelines

Compliance promotion system
Board of Directors
Disciplinary
Committee

Committee activities
Consultation and reporting

Internal
Auditing Office

CSR Committee

Audit

Recommendation

Compliance Committee
Helpline channel Notification(inside and outside
the company)

Chairperson ofCompliance
Committee
Reporting

Cooperation

Division in charge of laws andregulations (Acquisition of legal
information and its dissemination)

Reporting

Educational
tools
Education andtraining
AwarenesssurveyResults
disclosure

Anti-Harassment Committee
Plant liaison staff and(Human Resources Dept.
division in charge of laws
and labor union)
and regulations
Consultation
and reporting
Implementationof compliance

Consultation
and reporting

Consultation

NGK SPARK PLUG (Headquarters, branches,sales offices, liaison offices and plants)

Compliance
check
Audit

Group companies

Corporate Ethics Helpline
The Corporate Ethics Helpline is an internal reporting
system available to employees seeking consultation
regarding compliance. We have worked to increase userconvenience by establishing channels not only inside
the company but also via an external expert service
provider and enabling employees to seek consultationand make reports also outside of business hours and on
holidays. Regarding consultations and reports received,
facts are investigated with discretion so that the reporting
employee is neither identified nor feels uncomfortable, andif problems are confirmed, they are dealt with promptly.
There were 54 consultations and reports in the fiscal year
ended March 31, 2017, including those from employeesof Group companies. The numbers have been increasing
year on year as a result of the permeation of complianceawareness throughout the workforce.

31

We conduct our activities with top priority on the protection of human life.
We strive to prevent factors that could affect business continuity.
● We minimize impact on related parties.
● We strive for rapid restoration of business operations and stable supply of products and services.
● We take measures to prevent the recurrence of risks.
●

ActionGuidelines●

Information Security

Compliance Promotion
The Compliance Committee, headed by the Representative
Director and made up representatives of the departmentsin charge of legal and regulatory matters and of thedivisions, meets every three months to monitor and makecorrections on key issues and actions concerning them.
To raise employees’ awareness of compliance, we provide
ongoing education at our workplaces, including levelspecific seminars, using the Compliance Guidebook andthe Compliance Newsletter.
In particular, taking the antitrust law (the Antimonopoly
Act of Japan) violation that we were confronted with in fiscal
2014 seriously, we have been implementing a program toprevent the recurrence of similar problems, specificallyby appointing a director in charge of compliance andfounding a team specializing in antitrust law-related issues
and legal compliance.

We will identify the risks that could have serious impact on our business activities based on the comprehensive
understanding of the risks related to our Group, and take necessary measures to prevent the occurrence andrecurrence so that the risks are reduced to an acceptable level. Even if such a risk should occur, we will also
strive to restore and continue smooth business operations, thereby maintaining trust from our stakeholders.

When necessary

CSR Committee

Disciplinary Committee
Recommendation

Chairperson of Compliance Committee

Disciplinary action

Investigation Committee(Those concerned)

Helpline channel(inside and outside the company)
Investigation
Both anonymousand non-anonymous
consultations
are accepted

Results

Compliance violator
Employees

while also ensuring compliance with the relevant laws andregulations.
To prepare against disasters, we have sequentially moved
our Internet systems and data exchange systems to a highly
disaster-resistant data center located outside the company.
Moreover, we have installed double lines for communication
with the data center to ensure business continuity.

Intellectual Property
To protect its existing and newly developed products,
NGK SPARK PLUG takes steps to actively acquire
intellectual property rights and make effective use of them.
We investigate the intellectual property rights of third
parties in all production processes, from early stages ofdevelopment to mass production, thereby avoiding therisk of infringing the intellectual property rights of third
parties or violating contracts, laws or regulations. We also
verify the appropriateness of the intellectual propertyrelated provisions in various contracts. In addition, we are

educating employees on the importance of intellectual
property. In the future, we will strengthen the managementof intellectual property across the Group as the basis forour continued evolution as a “Monozukuri Company.”
As for our measures against counterfeit goods, anumber of our Group companies, mainly in China and the
Middle East, are proceeding with activities in partnershipwith law firms, and we have also been strengthening
measures in ASEAN countries and India, where economic
growth continues.

Preparation against Large Earthquakes

Flow after report is received via the Helpline

Compliance Committee

We have established the Group Information Security
Regulations and Confidentiality Management Regulations,and strive for the appropriate management of confidential
information belonging to the NGK SPARK PLUG Group, ourcustomers and our suppliers. When we use wireless LAN,
mobile terminals and other electronic information devices,
we give all possible consideration to information security

We restructure the plants of Group co mpanies inconsideration of damage that might be inflicted by large
earthquakes in the future.
We also set out the initial responses to be made andmeasures to be taken to ensure business continuity in theevent of a large earthquake in our guidelines on business
continuity plans (BCPs) against earthquakes. Guidelines on
initial responses include those on employees’ actions, suchas evacuation and safety reporting, and on emergency
headquarters, internal firefighting teams and reserves.
Every November, our plants, sales offices and Group
companies in Japan concurrently hold evacuation drills,
which include the examination of the guidelines. Guidelines
on BCPs include those on the time required for the recovery
of important operations, recovery plans, organization ofrecovery teams and the implementation of BCPs.

Initiatives to Prevent Corruption
For the fiscal year ending March 31, 2018, we are implementing
anti-corruption measures as a priority across the Group.
In our Compliance Guidebook, we set rules concerning
the prevention of corruption, including the prohibition of
involvement in political contributions or bribery, and areraising awareness of the rules among employees. We
conduct surveys on related local laws and provide local
employees with relevant education also in our Group
companies outside Japan.

32roles to individual directors in full consideration of
corporate governance, and Mr. Otaki and Mr. Yasui
express their opinions very frankly at the meetings. I
can raise questions in a straightforward manner about
anything that is unclear to me at the meetings. I therefore
think that the environment fully allows management tostart a new business with a spirit of challenge.

Q3
Our ESG Approach

Roundtable Meeting with Outside Directors

Megumi Tamagawa

Morihiko Otaki

Kanemaru Yasui

Member of the Board
MARUYAHONSHA Co., Ltd.
Outside director of
NGK SPARK PLUG since 2016

Vice Chairman, PASONA Inc.
Outside director of
NGK SPARK PLUG since 2013

Head of the Office Yasui
Certified Public Accountant
Outside director of
NGK SPARK PLUG since 2014

Q1

What is your impression of NGK SPARKPLUG? What is your understanding of thecompany’s present situation?

Otaki: NGK SPARK PLUG is definitely a typical committed
manufacturer. The company has been manufacturing
spark plugs as its core product for 80 years to achieve
tremendous sales and profits, and has maintained its
market position at the same level to the present day.
This is indeed rare in the market and is both a source ofstrength for NGK SPARK PLUG and a challenge.
Yasui: I agree with you. The company has been supplying
an overwhelmingly competitive product item, that is,
spark plugs, for 80 years. However, nobody knows if it
can keep doing so for another 80 years. The company
therefore upholds “Strengthening current businesses”
and “Establishing new business pillars” in its mediumterm management plan, and I think the former implies
strength and the latter a challenge for the company.
Tamagawa: I was appointed outside director less than
one year ago and am actively absorbing knowledge of thecompany. As my first impression,
however, I was simply surprised toknow that the company had long
been highly profitable due to asingle product item, and wondered
how it could be. However, in our
rapidly changing motorized society,I think it should skillfully utilize theassets it has accumulated to build
its next business pillar.
Otaki: I want workers to boldly take on
new challenges.

33

Q2

For the challenge that you have justmentioned, what advice do you give at
Board meetings?

Otaki: I have been urging the company to boldly take on
the challenge of developing new products, businesses
and services. NGK SPARK PLUG implemented its M&A
project practically two years ago. Until then, the company
seemed to avoid taking on new challenges that could
present risks. But M&A and business partnerships help
you broaden your outlook as you adopt new products
and new corporate cultures, and even if the project is
not as successful as planned, you can still learn great
lessons. I want the company to make progress througha process of trial and error, and expect that it will include
something different in its brand, which is currently known
widely as the brand for spark plugs.
Yasui: The company has an open culture and canprovide a foundation for employees to take on challenges
without worrying about failure. However, no outstandingly
innovative initiatives have been implemented so far,perhaps because the company has long been doing
well in the automotive components business, and its past
failure to get the semiconductor-related business on a
growth track made it reluctant to take further steps. But
the environment surrounding the business has improved,
and I believe the company should actually establish new
business pillars in the next several years, as upheld in themedium-term management plan.
Tamagawa: I can feel a sense of openness also at theBoard meetings. Chairman Odo has assigned different

Regarding the corporate governancesystem, please share your opinions about
what makes for a desirable system and theroles that you are playing for the company.

Otaki: As I said, my impression of NGK SPARK PLUG
is that it is a committed manufacturer, and the company
is also working hard for corporate governance. But I am
worried about its homogeneity. In its 80-year history, thefirst M&A was done just recently, which implies that people
with similar backgrounds and mindsets have been working
together in the same location for decades. This is both asource of strength and a challenge for the company.
We outside directors are therefore necessary forthe company, but I think it is critical for the company tohave a diverse team serving as its operational staff aswell. Diversity in the company will help people deal withinefficiencies in things that have been taken for granted
and identify problems that would otherwise be left
ignored, and this will eventually help improve corporate
governance. The company has only just started moving
in this direction, but I feel it is making steady progress.
Ya su i: I agree that the co mpany is proactively
implementing measures for corporate governance.
For the formulation of the medium-term management
plan, the directors lodged together to ensure sufficient
time was spent discussing the details. For corporate
governance, it is essential to make a plan, and the Boardof Directors is tasked with managing the progress of theplan and must play a monitoring function. In fact, theBoard checks and discusses the execution of businessby corporate officers on a quarterly basis. Also, forthe supervisory function, the company established theNomination and Remuneration Committees to enhancethat function step by step.
Tamagawa: While the company is taking measures
proactively and flexibly insome aspects, it also seems
to take a careful trial-and-error
approach. What do you think
about the speed?
Yasui: A careful manner indeed.
For example, the company
announced that it “plans to”
establish its Nomination andRemuneration Committees in

its governance report released
in response to the application ofJapan’s Corporate GovernanceC o d e i n J u n e 2 015 . T h e n ,during this term, the Committees
were actually established, aftersufficient discussion had taken Tamagawa: I expect that a diverse range
place. However, I think the period of employees will work for the company.
was indeed necessary for thecompany to ensure the functionality of the Committees.
Otaki: Making achievements not in a superficial but ina careful and steady manner is part of NGK SPARK
PLUG’s culture, and is something that does not need to
be changed forcefully. I regard this as a unique featureof a manufacturer that is committed to delivering highquality products.

Q4

Since your appointment to the positionof outside director, have you noticed anychanges in the company? What goal do
you think it needs to attain in the future?

Yasui: Mr. Odo has been aggressively implementing
reforms, including investing in new fields and enhancing
PR activities, and as a result I strongly feel that theinternal atmosphere has been substantially changed.
However, as Mr. Otaki said, homogeneity still remains afeature of the company and I believe it is important for thecompany to proactively embrace diversity while clarifying
the values to be shared across the company, with an eye
to boldly pursuing new business through M&A.
Otaki: Yes, indeed. I can understand that having nodefects is an ideal target to be pursued, but at thesame time the company should establish a system toappropriately deal with product defects, which you may
yet face even if you make your best effort to prevent them.
The company needs someone with a different background
who can propose a starting point for compromise, forwhich diversity is necessary. As one of the changes
already made, The Nittoku Way was announced globally.
In line with this philosophy, I hope that the company willallow each employee to uphold broader values so thatthey can make decisions and take actions independently.
The management team should be responsible for ensuringthat workers are allowed to uphold broader values, whichis the core of corporate governance.
Tamagawa: I got involved in the company after itbegan to change, but hope that it will continue to becommitted to manufacturing as its strength, whileworking to build an environment where a diverse groupof people can take on new challenges. I want to help thecompany speed up its measures for diversity, including
empowering women and providing employees with amore flexible working style.

Yasui: The supervisory function is
being enhanced step by step.

34

Promotion of Diversity
We promote diversity as one of our top management
priorities, believing that helping individual employees use
their unique capabilities to make a meaningful contribution
will not only enhance employee welfare but will also help thecompany achieve further growth. As the first step for this, wehave worked to create workplaces where women can fulfill

ESG
Management

DIAMOND Project to Promote the Active
Participation of Women at Our Workplaces

Our ESG Approach: Social

Diversity & Work-Life Balance

Basic Philosophy
Employees are the most important management resource. We promote the sustainable growth of the NGK SPARK PLUG
Group by striving for human resources development that respects the diversity and individuality of our employees and byencouraging individual employees to reach their own full potential, to grow and to participate actively in a state of physical andmental health.

Human
Resource
Policytheir potential, and have recently been expanding the targetof empowerment to provide all workers, not just women,with an environment that allows them to demonstrate theirabilities on a global scale. To this end, we will devote evenmore efforts to diversity-oriented management.

We acknowledge that employees are the most important management resource. In light of this, we respect thediversity and individuality of our employees and promote the cultivation of physically and mentally healthy humanbeings, striving to promote the further development of our Group as a whole.
Respecting the rights of our employees, we eliminate discrimination and harassment in employment, and avoid
the use of forced labor or child labor.
● We secure and foster human resources who help pass down our quality products principle to the following
generations. To this end, we provide learning opportunities and other programs to support the careerdevelopment of our employees.
● We strive to smoothly introduce a personnel system that ensures that people with different qualities can fully
realize their own capabilities into our Group.

The DIAMOND Project was launched in 2013 with thefollowing principles: change the corporate culture,change the consciousness, and change the environment.
Regarding the empowerment of women as a driving force
for the reform of our corporate culture, we have beenraising the awareness of managers and female employees
themselves about the issue.
Specifically, we implemented a training program inwhich a female employee is paired with her manager.
Under the program, she takes on the challenge ofperforming a task that is one level higher than the taskpresently assigned to her for nine months, and her
manager offers advice to help her fulfill the task, thereby
supporting her growth. Furthermore, all our departments
have formulated action plans to empower their female
members and are conducting activities in a planned
manner in line with the policies they have established todevelop female employees.

Number of female managers

Managers

Section chiefs(Persons)
40

38

36
32
30

26

28

22

28

20

26
19

22

10

0

3

4

6

2013/3

2014/3

2015/38

2016/310

2017/3●

ActionGuidelines

Human Resource Development
Our education and training activities mainly consist ofon-the-job-training (OJT), through which employees aretrained to acquire technologies and knowledge in theirnormal working situation. We also offer off-the-job-training(OFF-JT), providing employees with new technologies,
knowledge and skills outside their respective workplaces.
We have a wide range of OFF- JT programs that
include training by organizational level and role to provide
needed knowledge and skills, product quality education,
environment and safet y education, manufacturing
education, education in global business, and careerdevelopment support.
In addition, we have been providing education throughthe Monozukuri Education and Training Center establishedto give employees opportunities to acquire necessary
knowledge and skills in a timely fashion to maintain andimprove their manufacturing skills.

35

Education and training system
Education & training programs
Education &training programs
commonly
necessary for all
employees

Education &training planning(ETP) needed foreach department

Training programs forbusiness leader
candidates

Managers
Product quality
education
programs
Environmental/
safety education
programs
Mid-level
employees

OJT
Workplace education closely
linked with daily operations
Young
employees
OFF-JT
Training provided outside
the workplaceNew
employees

Professional education
programs

Training programs for
managers

Training programs for
new managers

Training programs for
new section chiefs

Global humanresources education
programs

Training programs for
mid-level employees

Correspondence
education programs

Follow-up programs

Personnel Appointment on a Global Basis
Since 2013 we have regularly conducted the global
personnel conference with the participation of personnel
managers from major overseas Group companies tospeedily share and meet challenges related to global
human resource development.
Also in 2013, we began focusing on the employmentof foreign nationals. Every year we employ three or more
non-Japanese new graduates, including not only those
who studied in Japan but also those who have studied theJapanese language outside the country and want to workin Japan.
We also rotate young employees around our overseas
bases to foster human resource development by using ourglobal network.
In 2016 we started to implement a program to develop
the next generation of global business leaders, aiming toemploy and promote people regardless of nationality andprovide them with appropriate opportunities and workplaces
that will allow them to demonstrate their abilities.

Training held for female employees

Training programs for
new employees

Global personnel conference

36

ESG
Management

Diversity & Work-Life Balance

Occupational Safety and HealthWork-Life Balance
We are committed to providing a work environment wherea diverse range of people can demonstrate their abilities
and work flexibly.
● Working style reform
We established a working style reform committee incooperation with the labor union to proactively reduce
working hours by measures such as prohibiting work after
10:00 p.m. in principle and setting every Wednesday as “noovertime day” and urging employees to leave work on timeon that day. Furthermore, in 2016 we founded the Working
Styles Reforming Office to reduce burdens imposed on theindirect departments by utilizing IT for higher productivity.
● Support for childcare
The number of employees on childcare leave exceeded
50 in the fiscal year ended March 31, 2014, and male
employees have also been taking leave each year recently.
Moreover, almost all employees returned to work after
taking childcare leave.
For the system for shorter working hours for childcare,in the fiscal year ended March 31, 2015 we extended
eligibility to parents with a child up to the third year ofelementary school, and made it possible for employees to
use the system intermittently for up to three times during theperiod of eligibility in the fiscal year ended March 31, 2017.
We are thus continuously improving the system to provide
employees with a more comfortable working environment.
● Mental health
We provide employees with mental health training for selfmanagement. We also hold training to teach managers
how to deal with employees with mental problems as
part of our effort to build a company-wide mental healthsupport system. In cooperation with external rehabilitation
facilities, we give full support to employees experiencing
mental health issues until they get well and return to work.
Moreover, we verify the effect of the training with reference
to the employee workplace return rate and problem
recurrence rate.

TOPICS

Number of users(Unit: persons)
60
50

Childcare leave system(female employees)

55
46

Childcare leave system(male employees)

58
53

1

4

48

1

2

Occupational safety and health is the most familiar theme for employees in their daily duties. It is the most important theme
for enterprises as well. We are well aware that offering a secure and safe workplace is our important corporate responsibility.
To this end, we established our occupational safety and health management system (OSHMS) in 2006, aiming to realize “zeroaccidents” and secure safety at all workplaces. We will continue strengthening our safety and health management activities at
a company-wide level, aiming to establish a corporate culture of “safety first.”

56

Basic Policy on
We strive for occupational safety and health as the starting point of business activities on the basis of respect for
Occupational human life and dignity.
Safety and HealthNursing careleave system

2

40
30
20

54

49
46

45

10

3

2

0

2013/3

2014/3

1

2

2015/3

2016/3Observe the laws and regulations, and voluntary standards on occupational safety and health.
Prevent occupational accidents and decrease risks by continuously improving on the management system andperformance of occupational safety and health.
● Conduct efforts to increase physical and mental health, and prevent health disabilities of employees.
● Disseminate this policy to all employees, promote awareness by education and enlightenment, and expand theoccupational safety and health activities by involving all employees.
●

12017/3

ActionGuidelines●

Toward Elimination of Occupational Accidents

Workers and managers encourage employees to leave work on time

Receiving High Evaluation for Diversity Promotion and Health-Oriented Management

In 2017 we received an award from the Japanese
Minister of Economy, Trade and Industry as one of the
New Diversity Management Selection 100 companies.
We were also certified as one of the Excellent
Enterprises of Health and Productivity Management(“White 500”) and were designated to be one of the“Semi-Nadeshiko Brands,” The Ministry of Economy,
Trade and Industry and the Tokyo Stock Exchange jointly
grant this designation to companies that are outstandingin terms of the empowerment of women and announce
their names. We are thus rated highly for our diversity
promotion measures and health-oriented management.

37

Basic Philosophy

With the aim of eliminating occupational accidents andcreating a comfortable and safe work environment, we havebuilt an OHSAS 18001*1-based system for safety manuals
and standards and a JISHA OSHMS Standards*2-based
system for actual operations and activities. We are a JISHA
OSHMS Standards-certified business establishment.
In line with the Basic Policy on Occupational Safety
and Health, we set the policies, targets and plans for theoccupational safety and health activities of our plants. The resultsof the activities are checked by our internal auditors as well as by
the plant safety and health committee and the central safety andhealth committee. We are thereby working on the step-by-step
improvement of our occupational safety and health level.

Frequency rate of accidents
NGK SPARK PLUG (all accidents)
NGK SPARK PLUG
(accidents resulting in absence from work)
Electrical machinery and appliance manufacturing business(accidents resulting in absence from work) [reference](Frequency rate)
2.0

1.49

1.5

1.25
1.06

1.0

0.65
0.39

0.41

0.25

0.25

2013/3

2014/3

0.5

0.51

0.41
0.16

0

0.74
0.54

2015/30.08

0.08

2016/32017/3*1 OHSAS 18001: Organizations can show their commitment to occupational healthand safety to employees and society by meeting this standard. Although not an ISO
standard, it is widely adopted internationally.
*2 JISHA OSHMS Standards: Standards set by the Japan Industrial Safety & Health
Association (JISHA). The certification bodies accredited by JISHA give certification
to organizations meeting the standards, which include items specific to Japan, suchas KY, hiyari-hatto and 4S activities.

* The frequency rate of accidents of NGK SPARK PLUG includes that of temporary workers.

Occupational Safety and Health Education

Safety and health promotion organizations

We are conducting a range of activities to prevent theoccurrence and recurrence of incidents. We are working
to build a “safety first” culture from the aspects of people,
things and systems.
In the fiscal year ended March 31, 2017, the total numberof occupational accidents came to nine (13 in the fiscal year
ended March 31, 2016), and the total frequency rate was
0.74. Because four incidents involving temporary workers
occurred in the previous fiscal year, we cooperated with thetemporary employment agencies to create teaching materials
in Japanese, English and Portuguese to reinforce related
education. As a result, in the fiscal year ended March 31,
2017, we had no incidents involving temporary workers.

President
Chief Safety and
Health Administrator(Central safety and healthcommittee chairman)
Chief Central Safety and
Health Administrator

Internal
Safety and
HealthAuditorOSHMS
Secretariat

Central safety andhealth committee
Plant safety andhealth committee
Department/section
safety and healthsubcommittee
Workplace meetingon safety and healthExpert committees• Ad-hoc assessment

committee• Traffic safety measurescommittee etc.
Organized as necessary

Each plant** “Each plant” refers to the Headquarters Plant, Nagoya Plant,
Komaki Plant, Miyanojo Plant and Ise Plant.

38

[FC Gifu]
NGK SPARK PLUG now has three subsidiaries in Gifu
Prefecture and is the top sponsor of FC Gifu, a J2 League
football team based in the prefecture. We provide thissponsorship as a means of contributing to the revitalizationof our local communities and to express our gratitude
for the tremendous
way in which thesecommunities support ourdaily operations.

ESG
Management[Marathon festival]
We participated in the Marathon Festival Nagoya Aichi 2017 asa sponsor with its head office in Nagoya City. During the festival
period, we gave a demonstration of our oxygen concentrator in
our booth, and our employees also participated in the race as
runners. We thus proactively supported the organization of thisexciting local event.

Our ESG Approach: Social

Social Contribution
Social Contribution Activities of Our Sites Worldwide

Basic Philosophy
The NGK SPARK PLUG Group has established sites in every region of the world. We hold respect for local culture andcustoms, and engage in smooth communication with local communities. As members of those communities, we aim to work
together in building a comfortable society, while striving to participate in regional development, environmental preservation,and other activities that contribute to society.

SocialContribution
Policy● NGK Spark Plugs (UK) Ltd.
[Participation in a charity event]
Female employees
participated in a charity
eve nt (R ace fo r L ife)
to raise f unds fo r a norganization supporting
breast cancer patients.

● Ceramica e Velas de Ignicao NGK do Brasil[Supporting a running event]The company supported
the organization of a local
running and walking event
aimed at health promotion.
A b o u t 3 ,0 0 0 p e o ple,
including its employees,
participated in the event andinteracted with each other.

● NGK Spark Plugs (Vietnam) Co., Ltd.
[Beach cleanup activity]
Employees conducted abeach cleanup activity forenvironmental protection.
The activity attracted theattention of locals and helped
raise their environmental
awareness.

● Bujias NGK de Mexico S.A. de C.V.
[Donation of wheelchairs]
Metal rings collectedfrom employees weresold through a charity
o rganiz atio n and theproceeds were used to
donate wheelchairs to
those in need.

● Woojin Industry Co., Ltd.
[Donating umbrellas to elementary school students]
The company donatestransparent umbrellas
with high frontal visibility
to elementary schools
as a means of protectings t u d e nt s f ro m t raf f i c
accidents.

As a good corporate citizen, we at the NGK SPARK PLUG Group aim to contribute to society through theeffective use of management resources.

●

We focus on the following activities:

Activities closely related to our business fields and also to local communities
Activities that respect the cultures of individual countries and local communities, as well as activities that contribute tosociety such as traffic safety education programs
Activities that contribute to the next-generation society, focusing on environmental conservation, science, and education, as
well as cultures to be bequeathed to the next generation, etc.

ActionGuidelines●

We strive to create a corporate culture that encourages executives and employees to participate together insocial contribution activities as social citizens. We also respect and support their active involvement in society.

Social Contribution Activities in Japan[Naming rights and musical event for families]
We have been a naming rights partner for the municipal hallin Nagoya since 2012 and have been holding a free family
musical event in the hall, named “NTK Hall,” since 2013.
We invite about 3,000 people to the performance,
including families who suffered damage in the Great East
Japan Earthquake as well as children from elementary
schools, kindergartens and care facilities in Aichi Prefecture.

Theater Company HIKOSEN

39● NGK Spark Plugs (U.S.A.), Inc.
[Supporting a local firefighting team]
The company provides
space for the local
firefighting team to
perform practical drills
within the premises of its
plant.

40

Environmental Burdens from Business Activities

50,000 tons
Suppliers

Released into waters and notified by sites

310,000 tons-CO

Used in offices and plants and fortesting, travel and transportation

7,700 tons
Other fuels2

Research,
Design,Manufacturing,Sales

Output into air

EnergyLPG

Other GHG emissions

GHG emissions calculated on the basisof activities at sites, excluding CO2
emitted from energy use

532 tons-CO

2

Chemical substances (PRTR)

Used in offices and plants and fortesting, travel and transportation

As a globally developing core manufacturing corporation, we are aiming to simultaneously realize environmental
preservation and corporate growth, based on the participation of all our employees, in order to contribute to theconstruction of a sustainable society.

Released into air and notified by sites

2,007 kL

140 tons(crude oil equivalent)

We strive to utilize our unique technology to develop and offer environment-friendly products.
● Through all of our business activities, we make particular efforts to prevent global warming, make efficient useof resources, and control chemical substances, in order to conserve the environment.
● We strive to raise awareness of the environment among our employees to ensure that they all make positiveefforts to conserve the environment.
● We observe the laws, ordinances, and agreements concerning environmental conservation.
● We aim to substantiate our information disclosure and communication activities, and also carry out
environmental contribution activities aimed at coexistence with the regional community.
● In order to achieve these targets, we will strive to make ongoing improvements to our environmental
management system.

Overseas subsidiaries*3

Chemical substances (PRTR)

CO2 emissions due to electricity andcity gas consumption

Used in offices and plants

Basic Philosophy

Group companies in Japan*2

3

CO2 from energy use

City gas

3

Environmental
Policy1.49 million m

1 ton

18.13 million mEnvironmental issues are a common challenge for all mankind. Every member of the NGK SPARK PLUG Group will work towards
reducing environmental burdens from our business activities as much as possible and developing and providing products andtechnologies that contribute to improving the environment. We will also endeavor to communicate in greater depth with our
stakeholders including our local communities so that we may all work together to contribute to creating a sustainable society.

Released into sewerage systems andpublic waters; output from sites not
equipped with water meters wasdeemed to be equivalent to the total
volume of water consumed.

439.60 million kWh

Protecting the Global Environment

NGK SPARK PLUG

Overseas subsidiaries*3

Wastewater

Ceramic and metal materials
purchased

Used in offices and plants

Our ESG Approach: Environment

OUTPUT

Ceramic and metal materials

Electricity

ESG
Management

Scope covered*1

Output into waters

Raw materials

INPUT

Group companies in Japan*2

NGK SPARK PLUG

Scope covered*1●

Waste generated

Generated by solar power generatorsand small hydroelectric generators(and treated on commission)

Products

Total:
Waste

350,000 kWh
Tap water, well water

Tap water and groundwater used

Water

ActionGuidelines

Renewable energy

41

18,159 tons
1,599 tons

1.67 million m
PRTR

Handled and notified by sites

Logistics

Logistics

Chemical
substances(including waste sold)CO2 emitted by externaltransporters

CO2 emissions due to externallycommissioned transportation

2,623 tons-CO

2909 tons
Fuels used for transportation

Logistics

In our activities for environmental conservation, we set mediumterm environmental targets. From the fiscal year ended March
31, 2017, we have drawn up a vision for our company andlaunched activities under Global Eco Vision 2020.
We set four important environmental tasks, “Natural
res o urces,” “G lo bal war ming,” “ Toxic, ha z ard o us
chemicals” and “Key quality (development of environmentfriendly products),” under Global Eco Vision 2020. By
tackling these tasks through our business activities andon a foundation of legal compliance, communication,and raising consciousness of the environment we will
work to enhance our manufacturing power, increase ourbrand value, and contribute to not only the sustainable
development of our company, but of society, also.

Sustainable development

Waste recycled

Sent to landfill or incinerated

3

Formulating Global Eco Vision 2020and Launching Activities

19,758 tons

(outsourced)
Fuels used for transportation by trucks,
ships, and aircraft

985 kL(crude oil equivalent)

Product shipment

Customers

Customers*1 For each INPUT and OUTPUT amount, companies included in the scope of reporting are indicated with .
*2 Group companies in Japan: Nittoku Alpha Service Co., Ltd., Nittoku Unyu Co., Ltd., Ceramic Sensor Co., Ltd., NTK Ceramic Co, Ltd., CS Nakatsugawa Co., Ltd., Nansei Ceramic Co., Ltd.,
Kamioka Ceramic Co., Ltd., Spark Tec WKS Co., Ltd. (excluding the main factory in Okusa), Nichiwa Kiki Co., Ltd., Spark Tech Tono Co., Ltd., which are inside the scope of integrated ISO 14001
certification; and Nittoku Denshi Co., Ltd., NTK Ceratec Co., Ltd., as well as the main factory of Spark Tec WKS Co., Ltd. in Okusa, which are outside the scope of the integrated certification*3 “Overseas subsidiaries” refers to the following manufacturing and sales organizations: NGK Spark Plug (Shanghai) Co., Ltd., Changshu NGK Spark Plug Co., Ltd., Woojin Industry Co., Ltd.,NTK Technical Ceramics Korea Co., Ltd., NGK Spark Plugs (Thailand) Co., Ltd., Siam NGK Spark Plug Co., Ltd., NGK SPARK PLUGS (ASIA) CO., LTD., NGK Plugs Malaysia Berhad, PT
NGK Busi Indonesia, NGK Spark Plugs (India) Pvt. Ltd., NGK Spark Plugs (U.S.A.), Inc., Wells Vehicle Electronics, L.P., Ceramica e Velas de Ignicao NGK do Brasil Ltda., NGK Spark Plugs(France) S.A.S., NGK Spark Plugs SA (Pty) Ltd.; and to the following sales organizations: Taiwan NGK Spark Plugs Co., Ltd., NGK Spark Plugs (Vietnam) Co., Ltd., GNK Spark Plugs(Philippines), Inc., NGK Spark Plug (Australia) Pty. Ltd., NTK Technologies, Inc., NGK Spark Plugs Canada Limited, Bujias NGK de Mexico S.A. de C.V., Bujias NGK del Ecuador Cia. Ltda,NGK Spark Plug Europe GmbH, NGK Spark Plugs (UK) Ltd., LLC NGK Spark Plugs (Eurasia), and NGK Spark Plug Middle East FZE.

42

Protecting the Global Environment

Environmental Management

Biodiversity

Environmental activity promotion organizations
Environmental
Administrator(President)

To conduct environmental conservation activities in a systematicand effective manner, we established an environmental
management system in line with the environmental policy sharedacross the Group. Under this system all Group employees
are working to achieve the Eco Vision. Regarding individual
activities, progress toward goals and problems are checked
through inter audits to facilitate continuous improvement at
the meetings of the Central Environmental Committee, which
is attended by the president and other directors, heads of thedivisions, environmental administrators of each region, and theheads of the working groups.

Central Environmental
Committee

Central Environmental
Committee Chairman

Internal
Environmental Auditor

Chief Central
Environmental
Administrator

Environmental
ISO Bureau

ESG
Management

Regional environmental
administrator

Head of the division

Head of theworking group

Environmental
Committee

Divisions

Working groups

Divisions include theGroups establishedat the Headquarters.

The working groups
conduct
cross-divisional
activities, such as
examining andconducting
professional surveys
and measures forenergy conservationand chemical
substances.

Each region
Note: “Each region”
refers to the
Headquarters Region,
Komaki Region,
Miyanojo Region, Ise
Region, and Group
companies in Japan.

Environmental action plan
Major item

Global warming

Minor item

Target for the fiscal year ending March 31, 2021

Result for the fiscal year ended March 31, 2017

Production

Reduce per-unit CO2 emissions by 5% relative to the fiscal year
ended March 31, 2016 (Average yearly reduction of 1%)

Target: Reduce per-unit CO2 emissions by 1% relative to the fiscal year ended March 31,
2016
Result: Reduced the emissions by 3.3% relative to the fiscal year ended March 31, 2016
Conducted cross-departmental energy conservation activities under theleadership of the energy conservation working group.

Logistics

Increase efficiency for logistics

Increased the efficiency of transportation between plants

Reduce defective products to reduce waste

Reduced waste through measures taken as part of core business activities,
including increasing product yield

Design products in consideration of waste reduction

Made environmental impact assessments in consideration of product life cycle atthe design stage

Use water more efficiently

Reduced water use by remodeling equipment and reviewing operational methodsRawmaterials

Design products in consideration of the saving of raw materials

Made environmental impact assessments in consideration of the product life cycle
at the design stage—

Build an environment-friendly product certification system andexpand the lineup of such products

Created an environment-friendly product certification system and partially
implemented it on a trial basis—

Ensure compliance with ELV, RoHS, REACH and otherregulations

Shared regulatory information across departments and made necessary responses
to the regulations under the leadership of the chemical substances management
working group—

Foster the replacement of substances of concern with
substitutes

Replaced phthalic acid, whose use will be prohibited by RoHS in 2019, with a substitute—Totally discontinue the use of HCFCs

Fostered a planned update of HCFC refilling equipment

Waste
Depletion of
resources

Water

Environmentfriendly products
Hazardous
chemical
substances

Reducing CO2 Emissions
We are working to reduce our CO2 emissions under Global
Eco Vision 2020 to contribute to the mitigation of climatechange, which poses threat to a sustainable society.
In Global Eco Vision 2020, we set the target for per-unit
CO 2 emissions to be achieved in the fiscal year ending
CO2 emissions

40
35

25

31.17
28.33
3.19

28.89
3.41

28.56

27.61
3.28

5.04
1.51

3.62
1.29

Asia
36%

20
15

25.14

25.48

24.33

23.65

24.63

10

Europe4%5043

2013/3

2014/3

2015/3

2016/3

North America
37%

Africa1%

Regional
composition ofemissionsoutside Japan

South
America22%* For purchased electricity, theCO2 emission coefficient set
for each country under the
GHG Protocol is used, while
for fuel, the same coefficientsas those used in Japan areused. Data for the fiscal year
ended March 31, 2017 include
data for Wells and 11 overseas
sales subsidiaries.

[Major initiatives]
1. Basic policy

We will comply with biodiversity-related laws, regulations and others.

2. Sites

When establishing, expanding or closing our sites, we will give due
consideration to its impact on ecosystems and will work to reduce energy
and resource use and emissions of substances of concerns as well as
noise and vibrations throughout the course of our business activities.

3. Products

We will develop and release products that contribute to energy andresource conservation and the reduction of emissions of substancesof concern, while also giving due consideration to their recyclability.

4. Procurement

We will foster green procurement in consideration of biodiversity and seek
the understanding and cooperation of suppliers regarding biodiversity.

5. AwarenessWe will raise our employees’ awareness of biodiversity and empower
them to conduct biodiversity conservation activities on an ongoing basis.

Handling of Hazardous Chemical
Substances within the GroupManagement system

Regulations on chemical substances are becoming stricter
worldwide. In response, we appropriately perform noncontainment management for our products and usage
management within plants. For hazardous chemical
substances, we categorize them into different hazard
ranks according to their toxicity and the strictness of therelated regulations, and handle them based on the criteria
set for each of the ranks. We will continue to expand theuse of substitutes for hazardous chemical substances andenhance their management to ensure compliance withthe relevant laws and regulations and to meet customers’
related requests without fail.

Customer request

Legal regulation
Information acquisition
Information control

Hazard rank (internal standards)
Non-containment managementfor our products

Control of use at plants

Hazard rank
Handling standard

Substances in the rank

Prohibited

Use is prohibited.

Substances whose use is prohibited or strictly regulated by laws and regulations

Restricted

Make a plan to use a substitute to reduce the use

Substances that are as hazardous as the prohibited substances but cannot be
immediately replaced due to their special properties

Monitored

Check for use in materials purchased for products

Substances whose use is not prohibited or restricted but the use of which inproducts (or not) needs to be checked

TOPICS

Overseas Group companies
Group companies in Japan(excluded from the integrated certification)
Group companies in Japan(included in the integrated certification)

CO2 emissions(10,000 tons-CO2)

30

March 31, 2021, and to attain this target we are implementing
measures to manage energy use in a more detailed mannerand reduce the power used by air conditioners with a focus
on ventilation in our buildings.

The NGK SPARK PLUG Group deems biodiversity
an environmental theme that is as important as
the recycling of resources and mitigation of global
warming. Accordingly, in April 2013, we establishedthe NGK SPARK PLUG Group Biodiversity Action
Guidelines to explain our approach to biodiversity.
Based on the guidelines, and with the recognition
that our activities such as the use of energy andresources have an impact on biodiversity, we will
work to reduce that impact in cooperation with
suppliers and external organizations.

Aichi Environmental Award 2017

As exhaust gas regulations are being made stricter around theworld, the fuel efficiency of automobiles needs to be increased
based on the understanding and control of variants, such as
vibrations and oxygen concentrations in exhaust gas. NGKSPARK PLUG develops and manufactures a range of sensors
that detect changes in the automobile’s status and accurately communicate themto the control system. In recognition of our contributions via these sensors to the
reduction of environmental impacts, including through higher fuel efficiency, reductionof CO2 emissions, and cleaner exhaust gas, we received the gold prize—the highest
prize in the Aichi Environmental Award 2017.

2017/344

About Us
Sapporo Sales Office

Domestic Network

Global and Domestic Networks
We are responding to worldwide needs by
the NGK SPARK PLUG GROUP’s global
network, mobilizing our resources.

Takasaki Liaison Office

Headquarters/Plant

Nagano Liaison Office

Sales OfficeGroup Company

Kamioka Ceramic Co., Ltd.
SparkTec TONO Co., Ltd.

NGK SPARK PLUG CO., LTD. has built a production system in collaboration
with local subsidiaries around the world and is providing top-quality productsthat meet the same high standard from anywhere around the world. It is also
getting its production and sales network up to full speed in BRICs and otheremerging markets.

Komaki Plant
Nittoku Unyu Co., Ltd.
Ceramic Sensor Co., Ltd.
SparkTec WKS Co., Ltd.
NTK Ceramic Co., Ltd.

NGK Spark Plugs (UK) Ltd.

Utsunomiya Liaison Office
Saitama Liaison Office

Tokyo Branch
Atsugi Liaison Office

Hiroshima
Sales Office
Fukuoka
Sales OfficeCS
Nakatsugawa Co., Ltd.
Hamamatsu Liaison OfficeOsaka Sales Office

Global Network

NTK Ceratec Co., Ltd.
Sendai Sales OfficeMiyanojo Plant

Ise Plant
Nansei Ceramic Co., Ltd.

Headquarters & Nagoya Plant
Nichiwa Kiki Co., Ltd.
Nittoku Denshi Co., Ltd.
Nittoku Alpha Service Co., Ltd.

NGK Spark Plug Europe GmbH
Europe Technical Center

NGK Spark Plugs (Thailand) Co., Ltd
Siam NGK Spark Plug Co., Ltd
SparkTec (Thailand) Co., Ltd
LLC NGK Spark Plugs (Eurasia)

Wells Vehicle Electronics, L.P.

Changshu NGK Spark Plug Co., Ltd.
NTK Technical Ceramics Korea Co., Ltd.

NGK Spark Plugs (France)
S.A.S. (Headquarters)

NGK Spark Plugs (U.S.A.), Inc. (Headquarters)
U.S.A. Technical Center

Woojin Industry Co., Ltd.
Woojin Technical Center

NGK Spark Plug Middle East FZENGK Spark Plugs Canada Limited
NGK Spark Plugs (France)
S.A.S. (France Factory)

NTK Technologies, Inc.

NGK Spark Plugs(India) Pvt. Ltd.
NGK Spark Plug
(Shanghai) Co., Ltd.
NGK Spark Plug
(Shanghai) Trading
Co., Ltd.

NGK Spark Plugs (U.S.A.) Holding, Inc.

HeadquartersNGK Spark Plugs (U.S.A.), Inc. (West Virginia Factory)
Taiwan NGK Spark Plug Co., Ltd.

Bujias NGK de Mexico S.A. de C.V.

NGK Spark Plugs Malaysia Berhad
Bujias NGK del Ecuador Cia. Ltda.
PT NGK Busi Indonesia

NGK Spark Plug (Philippines), Inc.

NGK Spark Plugs (Vietnam) Co., Ltd.

Ceramica e Velas de Ignicao NGK do Brasil Ltda.
Brasil Technical Center

Headquarters
Manufacturing & Sales Organization
Sales Organization
Technical Center

NGK Spark Plugs SA (Pty) Ltd.

45NGK Spark Plug (Australia) Pty. Ltd.

Holding Company

46

About Us
Analysis of Consolidated Financial Results for the Fiscal Year
Ended March 31, 2017

4. Financial Policy

1. Overview of Results
Looking at the global economy in the fiscal year ended March 31,
2017, there was no change in the composition supporting public
investment in China. However, in exports, there was a growthtrend, particularly in the U.S., with signs of bottoming out. Also in
the U.S., there was an improvement in the domestic and overseas
business environment, with market sentiment in the manufacturingindu st r y re c ove ring a nd a ra ll y in c a pi t a l inve st m e nts.
Furthermore, stocks continued to climb due to anticipation for
the Trump administration’s economic policies, forming a strong
base for consumer spending. While the manufacturing industryin Europe also saw an upswing, sluggish wages and rising prices
were major factors effecting consumer spending. Also, anxieties
over the political situation of the region caused uncertainty forthe future. Turning to the Japanese economy, the manufacturingindustry saw a recovery in exports, market sentiment improved
amidst high stock prices and good business results, and anincrease in public works drove non-manufacturing industries,
causing a consumption-related recovery.
In the Company’s main business field of the automotive

industry, automobile sales were favorable particularly in the China
and Europe markets, while there was a decrease in sales in the
U.S. compared to the previous fiscal year. On the other hand,sales were strong in Japan during the second half of the fiscal
year, with sales for the entire fiscal year exceeding those in theprevious fiscal year.
In the semiconductor industry, Chinese manufacturers maderapid progress, particularly in the smartphone market.
Looking at the NGK SPARK PLUG Group’s results for the
fiscal year under review, consolidated net sales decreased 2.7%
year on year to ¥372,919 million, operating income declined 19.1%
year on year to ¥53,595 million, and ordinary income dropped
13.8% year on year to ¥55,559 million. Profit attributable to ownersof the parent decreased 16.9% year on year to ¥25,602 million,
impacted by a ¥20,187 million impairment loss on the goodwill
and other assets of Wells, which we acquired in the previous
year. Major changes in the management environment triggered
the loss, which was recorded as an extraordinary loss in the
Automotive Components Group.

Business and ¥6,383 million in the Ceramics Business. Our
forecast for capital expenditures in the next fiscal year (April 1,
2017–March 31, 2018) is ¥48.4 billion.

development cost” pursuant to the “Accounting Standard for
Research and Development Cost” (Business Accounting Council)
amounted to ¥4,089 million.

Net cash provided by operating activities was ¥49,764 million,
having decreased ¥6.7 billion from the previous fiscal year. The
decline was largely attributable to a decrease in profit before
income taxes.

Net cash used in investing activities amounted to ¥53,410 million,
having increased ¥28,920 million from the previous fiscal year.
This increase was mainly attributable to expenditures for thepurchase of shares of subsidiaries resulting in a change in thescope of consolidation in the previous fiscal year.

Cash Flows from Financing Activities
Net cash used in financing activities amounted to ¥544 million,
compared to net cash provided by financing activities of ¥25,121
million in the previous fiscal year. The main factors were adecrease in financing by borrowing and the issuance of corporate
bonds as well as the acquisition of treasury stock.

6. Dividend Policy
NGK SPARK PLUG regards returning profits to shareholders as
one of its most important management policies and will continue
to meet the expectations of shareholders under the basic policyof continuing to pay stable dividends. We also think it is importantto provide shareholders with returns in line with earnings. Whileaiming for a consolidated dividend payout ratio of at least 30%,
we decide the amount of dividends by comprehensively taking
into consideration the basic policy of paying stable dividends
and of setting aside sufficient internal reserves for R&D, capital
expenditures for business expansion and for rationalization ofoperations as well as investments, which are essential to future

47

Cash Flows from Investing Activities

Cash Flows from Operating Activities

3. R&DR&D expenses in the fiscal year under review totaled ¥23,416
million, which included expenses related to improvements ofexisting products and applied research. The “research andneeds, the Group engages in direct financing from financial
markets through the issuance of corporate bonds, etc.
Total assets were ¥563,801 million, an increase of ¥37,698
million or 7.2% from the end of the previous fiscal year, while total
liabilities came to ¥209,091 million, up ¥24,032 million or 13.0%
from the end of the previous fiscal year.
Net assets totaled ¥354,710 million, an increase of ¥13,665
million or 4.0% from the end of the previous fiscal year. Retained
earnings increased ¥16,546 million, and accumulated othercomprehensive income rose ¥6,889 million, while we acquired
approximately ¥10 billion in treasury stock. As a result, net assets
per share amounted to ¥1,660.06, compared with ¥1,557.16 at theend of the previous fiscal year.

5. Cash Flows
Cash and cash equivalents at the end of the fiscal year underreview totaled ¥65,817 million, excluding the effect of exchange
rate changes on cash and cash equivalents amounting to ¥1,147
million, having decreased ¥5,338 million from the end of theprevious fiscal year.

2. Capital Expenditures
Capital expenditures for the fiscal year ended March 31, 2017,
amounted to ¥36,328 million. The breakdown in spending is¥27,577 million for the Automotive Components Group, and in theTechnical Ceramics Group, ¥2,364 million for the Semiconductors

N GK S PA R K PLUG Group’s financial policy is to secure
working capital to underpin smooth business operations and tosystematically prepare for medium- to long-term funding needs
enabling flexible capital expenditures in the future, in orderto support stable management and the ability to respond tochanging circumstances. For this purpose, as well as retention
and management of current funds in accordance with financial
planning, we are implementing ongoing measures to enhance theefficiency of receivables, payables and inventories. At the sametime, in order to reduce investment risks, the Group is focusing
on internal rules, such as management regulations, as well as theInvestment Committee and other organizations. To satisfy shortterm funding requirements, the Group uses indirect financing, inaddition to internal reserves. For medium- to long-term funding

growth. We intend to maintain payments of an interim dividend
and a year-end dividend. NGK SPARK PLUG recognizes theeffectiveness of share buybacks for enhancing capital efficiency
and intends to repurchase its shares, as necessary.
In order to ensure flexibility in returning profits to shareholders,the Company’s Articles of Incorporation specify dividends fromsurplus as a matter requiring a resolution of the board of directors.
The Company paid dividends per share of ¥42.0 for the fiscal year
ended March 31, 2017, consisting of an interim dividend of ¥21.0
and a year-end dividend of ¥21.0.

48

Consolidated Balance Sheets
NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
March 31, 2017 and 2016

Thousands of
U.S. dollars

Millions of yen
2016

2017

2017

Assets2017

2016¥ 30,045¥ 28,049$ 268,259

11,25911

100,527

87

174

777

7,697

2,038

68,7232017

Liabilities

Current assets
Cash and deposits (Notes 7 and 9)

Thousands of
U.S. dollars

Millions of yen

Current liabilities¥ 45,733¥ 37,984$ 408,330

Notes and accounts receivable - trade (Note 9)

91,59474,942817,804

Short-term loans payable (Notes 9 and 20)

Short-term investment securities (Notes 9 and 10)

57,21059,548510,804

Lease obligations (Note 20)

Inventories (Note 3)

86,857

82,122775,509

Income taxes payable

Deferred tax assets (Note 13)

11,02312,08098,420Other

36,48636,062

325,768

Other

14,614

12,040130,482

Total current liabilities

85,577

66,335764,080

(463)

(406)

(4,134)

306,570

278,3132,737,232

Bonds payable (Notes 9 and 20)

55,00055,000491,071

Long-term loans payable (Notes 9 and 20)

32,84824,859293,286

80

167

714

Allowance for doubtful accounts
Total current assets

Noncurrent assets
Property, plant and equipment

Accounts payable - trade (Note 9)

Noncurrent liabilities

Lease obligations (Note 20)

Buildings and structures, net

62,40058,443557,143

Net defined benefit liability (Note 12)29,26332,185261,277

Machinery, equipment and vehicles, net

86,35873,286

771,054

Deferred tax liabilities (Note 13)

5,324

5,325

47,536

Land

19,65919,764

175,527

Other

998

1,185

8,911

Construction in progress

9,726

13,39386,839Total noncurrent liabilities

123,514

118,723

1,102,804

Other, net

3,156

3,586

28,179209,091

185,058

1,866,884

181,302

168,473

1,618,768

Total property, plant and equipment (Note 3)

Total liabilities

Net assets
Intangible assets
Goodwill (Note 16)
Software
Other
Total intangible assets

Shareholders’ equity
460

9,372

4,107

Common stock

47,86947,869427,402

4,005

3,554

35,759

Capital surplus

54,82554,824

489,509234

10,4982,089

Retained earnings

262,010245,4632,339,375

4,701

23,426

41,973

Treasury stock(17,649)(7,647)(157,580)

Total shareholders’ equity

347,056

340,510

3,098,714

Investments and other assets
Investment securities (Notes 3, 9 and 10)

68,25253,064609,393

Deferred tax assets (Note 13)

1,496

987

13,357Net unrealized gains on available-for-sale securities

27,58022,733

246,250

Other

2,000

1,966

17,857

Foreign currency translation adjustments(16,527)(15,640)(147,563)

Allowance for doubtful accounts

(523)

(127)

(4,670)Remeasurements of defined benefit plans (Note 12)(5,804)(8,734)(51,821)

Total investments and other assets

71,22655,890635,946

Total accumulated other comprehensive income

5,249(1,640)46,866257,230

247,7902,296,696

Noncontrolling interests

2,404

2,174

21,464¥563,801¥526,103$5,033,938

Total net assets

354,710341,044

3,167,054¥563,801¥526,103$5,033,938

Total noncurrent assets
Total assets
See accompanying Notes to Consolidated Financial Statements.

49

Accumulated other comprehensive income

Total liabilities and net assets

50

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2017 and 2016

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2017 and 2016

Thousands of
U.S. dollars

Millions of yen
2017

2016

2017

2016

2017

Net sales (Note 16)¥372,919¥383,272$3,329,634

Profit¥25,997¥ 31,119$232,116

Cost of sales (Note 4)

250,017

246,774

2,232,295

Other comprehensive income:Gross profit

122,901

136,497

1,097,330

Unrealized gains (losses) on available-for-sale securities

4,837(7,527)43,188Foreign currency translation adjustments(1,007)(11,480)(8,991)

2,928(5,236)26,143

113

(531)

1,009

2017

Selling, general and administrative expenses
Selling expenses

25,25225,076

225,464

Remeasurements of defined benefit plans (Note 12)

General and administrative expenses

44,05345,137393,330

Total selling, general and administrative expenses (Notes 4 and 12)

69,30670,213618,804

Share of other comprehensive income of associates accounted for using
equity method

53,59566,284

478,527

Interest income

1,157

1,382

10,330

Dividend income

1,422

1,265

12,696Equity in earnings of associates

604

–

5,393

Other

1,815

1,934

16,205

Total nonoperating income

4,999

4,582

44,634

342

343

3,054

–

65

–

Foreign exchange loss

963

4,575

8,598

Contribution

311

33

2,777

Depreciation of idle property, plant and equipment

201

214

1,795

Other

1,217

1,151

10,866

Total nonoperating expenses

3,036

6,383

27,10755,55964,483496,063

Gain on sale of noncurrent assets (Note 4)

487

494

4,348

Total extraordinary income

487

494

4,348

773

1,306

6,902

20,1872,427

180,241

74

–

661

Operating income (Note 16)
Nonoperating income

Thousands of
U.S. dollars

Millions of yen

Total other comprehensive income (Note 5)
Comprehensive income

6,872(24,776)

61,357¥32,870¥ 6,343$293,482¥32,492¥ 6,392$290,107

377

(48)

3,366

Comprehensive income attributable to:
Owners of the parent
Noncontrolling interests
See accompanying Notes to Consolidated Financial Statements.

Nonoperating expenses
Interest expense
Equity in losses of associates

Ordinary income
Extraordinary income

Extraordinary loss
Loss on sale or disposal of noncurrent assets (Note 4)
Impairment loss (Note 4)
Loss on valuation of investment securities
Loss on sale of shares of associates

–

1,788

–

Loss on violation of antitrust law

77

856

688

Settlement package

99

14,837884

Total extraordinary loss

21,212

21,216

189,393

Profit before income taxes

34,833

43,761

311,009

Income taxes - current

11,434

10,543102,089

Income taxes - deferred(2,598)2,098(23,196)

Total income taxes (Note 13)

8,836

12,64278,893

Profit25,997

31,119232,116

394

304

3,518

¥ 25,602¥ 30,815$ 228,589

Profit attributable to:Noncontrolling interests
Owners of the parent
See accompanying Notes to Consolidated Financial Statements.

51

52

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash FlowsNGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2017 and 2016

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2017 and 2016

Thousands of
U.S. dollars

Millions of yen
Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
Net unrealized
Foreignaccumulated
Total
gains oncurrency Remeasurements
othershareholders’ available-for- translation of defined benefit comprehensive Noncontrolling
equitysale securities adjustments
plansincomeinterests¥47,869¥54,824¥223,135¥ (7,640)(8,487)

Profit attributable to owners of
the parent¥318,189¥30,297¥ (4,017)¥(3,496)¥22,782¥2,407(8,487)30,815Purchase of treasury stock
Disposal of treasury stock0

Balance at March 31, 2016

¥343,380(8,487)$ 311,009

Depreciation and amortization

19,601

16,834

175,009

Impairment loss

20,1872,427

180,241

Increase (decrease) in net defined benefit liability

1,147

(449)

10,241

Interest and dividend income(2,579)(2,648)(23,027)

Interest expense

342

343

3,054

Equity in (earnings) losses of associates

(604)

65

(5,393)

(7)

(7)

(7)

Loss on disposal of noncurrent assets

286

811

2,554

0

0

0

Loss on valuation of investment securities

74

–

661

(7,563)(11,622)(5,237)(24,423)(233)(24,656)

–

1,788

–

Increase in notes and accounts receivable - trade(17,715)(1,167)(158,170)

Loss on sale of shares of associates–

022,327(7)

22,321(7,563)(11,622)(5,237)(24,423)(233)(2,335)

Increase in inventories(6,348)(1,949)(56,679)

47,86954,824245,463(7,647)

340,510

22,733(15,640)(8,734)(1,640)2,174

341,044

Increase in notes and accounts payable - trade

2,232

5,157

19,929Other, net

1,950

4,973

17,411

Subtotal

53,40869,948476,857

Interest and dividends received

2,336

2,932

20,857

Dividends of surplus(9,055)

Profit attributable to owners of
the parent(9,055)25,602

Purchase of treasury stock
Disposal of treasury stock

0(9,055)25,60225,602(10,001)(10,001)(10,001)000

Net changes in items other thanshareholders’ equity

Balance at March 31, 2017

¥ 43,761

30,815

Changes during the fiscal year

Total changes in items during
the period¥ 34,833

30,815

Net changes in items other thanshareholders’ equity
Total changes in items during
the period

2017

Profit before income taxes

Changes during the fiscal year
Dividends of surplus

2016

Cash flows from operating activities
Total net
assetsMillions of yen
Balance at April 1, 2015

2017

Accumulated other comprehensive income

4,846

(887)

2,930

6,889

230

7,120

–

0

16,546(10,001)

6,545

4,846

(887)

2,930

6,889

230

13,665¥47,869¥54,825¥262,010¥(17,649)¥347,056¥27,580¥(16,527)¥(5,804)¥ 5,249¥2,404¥354,710

(353)

(306)

(3,152)

Income taxes paid

(5,626)(16,109)(50,232)

Net cash provided by operating activities

49,76456,465444,321

Interest paid

Cash flows from investing activities
Net increase in time deposits(1,009)(352)(9,009)Net increase in short-term investment securities(8,973)(8,865)(80,116)

Purchase of property, plant and equipment(34,921)(42,892)(311,795)

935

1,776

8,348

Purchase of intangible assets(1,636)(1,168)(14,607)

Purchase of investment securities(8,739)(1,297)(78,027)

Proceeds from sale and redemption of investment securities

1,002

7,504

8,946

Proceeds from sale of property, plant and equipment
Thousands of U.S. dollars
Balance at March 31, 2016

$427,402 $489,500 $2,191,634 $ (68,277) $3,040,268$202,973 $(139,643)$(77,982)$(14,643)$ 19,411 $3,045,036

Changes during the fiscal year
Dividends of surplus(80,848)

Profit attributable to owners of
the parent(80,848)

228,589

Purchase of treasury stock(89,295)

Disposal of treasury stock00

228,589

228,589(89,295)(89,295)0

Net changes in items other thanshareholders’ equity
Total changes in items during
the period
Balance at March 31, 2017(80,848)

043,268–0147,732(89,295)

58,438$427,402 $489,509 $2,339,375 $(157,580) $3,098,714

See accompanying Notes to Consolidated Financial Statements.

43,268(7,920)26,161

61,509(7,920)26,161

61,509$246,250 $(147,563)$(51,821)$46,866

2,054
2,054

63,571122,009$21,464 $3,167,054

Purchase of shares of subsidiaries resulting in change in scope of consolidation (Note 2)
Other, net
Net cash used in investing activities–(37,415)

–

(69)

378

(616)

(53,410)(82,331)(476,875)

Cash flows from financing activities
Net increase (decrease) in short-term loans payable

10,866(649)

97,018Proceeds from long-term loans payable

8,000

19,84871,429

Repayment of long-term loans payable

(10)

(12)

(89)

Proceeds from issuance of bonds–

29,859–

Redemption of bonds–(15,000)–

Purchase of treasury stock(10,001)(7)(89,295)

Cash dividends paid

(9,056)(8,485)(80,857)

Other, net

(341)

(430)

(3,045)

Net cash (used in) provided by financing activities(544)

25,121(4,857)(1,147)(3,639)(10,241)

Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents(5,338)(4,384)(47,661)

Cash and cash equivalents at beginning of year

71,15575,540635,313

Cash and cash equivalents at end of year (Note 7)¥ 65,817¥ 71,155$ 587,652

See accompanying Notes to Consolidated Financial Statements.

53

54

Notes to Consolidated Financial Statements
NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries

1. Basis of Consolidated Financial Statements
The accompanying consolidated financial statements of NGKSPARK PLUG CO., LTD. (the “Company”) and its consolidated
subsidiaries (together with the Company, the “NGK Spark
Plug Group”) have been prepared in accordance with theprovisions set forth in the Financial Instrument and Exchange
Law of Japan and its related accounting regulations and in
conformity with accounting principles generally acceptedin Japan (“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements fromInternational Financial Reporting Standards (“IFRS”).
The accompanying consolidated financial statements
are a translation, with some expanded descriptions, from theconsolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate
Local Finance Bureau of the Ministry of Finance as required by
the Financial Instrument and Exchange Law of Japan.
The amounts indicated in millions of yen are rounded down
by truncating the figures below one million. Totals may not add
up exactly because of such truncation. The translation of theJapanese yen amounts into U.S. dollar amounts is included
solely for the convenience of readers outside Japan, using theapproximate exchange rate prevailing at March 31, 2017, whichwas ¥112 to U.S.$1.00. The translation should not be construed
as a representation that the Japanese yen amounts have been,
could have been or could in the future be converted into U.S.
dollars at this or any other rate of exchange.
Certain comparative figures have been reclassified toconform to the current year’s presentation.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The accompanying consolidated financial statements include
the accounts of the Company and its significant subsidiaries.
Investments in significant unconsolidated subsidiaries
and associates are accounted for by the equity method.
Investments in unconsolidated subsidiaries and associates
not accounted for by the equity method are stated at cost. Allintercompany transactions and accounts have been eliminated.
The difference between the cost of investments in subsidiaries
and the underlying equity in their net assets, adjusted
based on the fair value at the time of acquisition, is deferredprincipally as goodwill and amortized over the estimated usefullife, generally 5-10 years, on a straight-line basis.
The number of consolidated subsidiaries and associates
accounted for by the equity method for the years ended March
31, 2017 and 2016 was as follows:
Consolidated subsidiaries:
Domestic
Overseas
Associates accounted for by the equity method

2017

2016

11
30
3

10
30
2

During the year ended March 31, 2017, NTK Ceramic Co.,
Ltd. (new N-CERA) and Ceramic Sensor Nakatsugawa Co.,
Ltd. which were newly established were included in the scopeof consolidation. The Company merged former N-CERA as ofJanuary 1, 2017.
During the year ended March 31, 2016, Nihon CeratecCo., Ltd. and Wells Vehicle Electronics Holdings Corp. and its
subsidiaries were included in the scope of consolidation due
to the acquisition of shares of these companies. In addition,
NGK Spark Plug (Shanghai) Trading Co., Ltd. which was newly
established was included in the scope of consolidation.
Investments in the remaining unconsolidated subsidiaries

55

and associated companies are stated at cost. If the equity
method of accounting had been applied to the investments inthese companies, the effect on the accompanying consolidated
financial statements would not have been material.
The major subsidiaries that are not consolidated are Bujias
NGK Del Ecuador Cia Ltda., Nittoku Denshi Co., Ltd. andNittoku Smile Co., Ltd. for the year ended March 31, 2017 andBujias NGK Del Ecuador Cia Ltda. and Nittoku Denshi Co.,
Ltd. for the year ended March 31, 2016, respectively.
There were no unconsolidated subsidiaries accounted forby the equity method for all periods presented.
T he C o mpany has three (t wo in 2 016) associates
accounted for by the equity method, namely, Woo Jin Industry
Co., Ltd., Tokai Taima Kogu Co., Ltd. and Japan Medical
Dynamic Marketing, INC. for the year ended March 31, 2017,
Woo Jin Industry Co., Ltd. and Tokai Taima Kogu Co., Ltd. forthe year ended March 31, 2016.
During the year ended March 31, 2017, Japan Medical
Dynamic Marketing, Inc. became associates accounted for by
the equity method due to the acquisition of their stock.
During the year ended March 31, 2016, Eastern Co., Ltd.
was excluded from an associates accounted for by the equity
method due to the sale of its all shares.
The major unconsolidated subsidiaries that are notaccounted for by the equity method are Bujias NGK Del
Ecuador Cia Ltda., Nittoku Denshi Co., Ltd. and Nittoku Smile
Co., Ltd. for the year ended March 31, 2017 and Bujias NGKDel Ecuador Cia Ltda. and Nittoku Denshi Co., Ltd. for theyear ended March 31, 2016, respectively.
The associate that is not accounted for by the equity
method is Hayakawa Seiki Co., Ltd. for all periods presented.
These companies are excluded from the scope of theequity method because their net income (loss), retained
earnings, accumulated other comprehensive income andothers are immaterial, and the exclusion of these companies
from the scope of companies accounted for by the equity
method does not hinder a reasonable understanding of theGroup’s financial position and results of operations.
For the year ended March 31, 2017, the fiscal year-end
date of NGK Spark Plug (Shanghai) Co., Ltd., Changshu NGKSpark Plug Co., Ltd., NGK Spark Plug (Shanghai) Trading Co.,
Ltd., Bujias NGK de Mexico S.A. de C.V., LLC NGK Spark
Plugs (Eurasia), Woo Jin Industry Co., Ltd. and two othercompanies is December 31. However, when preparing theconsolidated financial statements, the Company uses thefinancial statements of the seven consolidated subsidiaries
and one associate that have been compiled by a temporary
closing of their accounts as of March 31.
(Unification of accounting policies applied to foreignsubsidiaries for consolidated financial statements)
The Company has adopted Practical Issues Task Force(“ PIT F ”) N o. 18, “ Practical S olution on Unification of
Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements,” issued by the AccountingStandards Board of Japan (“ASBJ”). PITF No. 18 requiresthat accounting policies and procedures applied by a parent
company and its subsidiaries to similar transactions andevents under similar circumstances should, in principle,
be unified for the preparation of the consolidated financial
statements. PITF No. 18, however, as a tentative measure,allows a parent company to prepare consolidated financial
statements using its foreign subsidiaries’ financial statements
prepared in accordance with either IFRS or U.S. generally
accepted accounting principles (“U.S. GAAP”). In this case,adjustments for the following four items are required in the
consolidation process so that their impact on profit attributable
to the owners of the parent is accounted for in accordancewith Japanese GAAP, unless the impact is not material.
(a) Goodwill not subject to amortization(b) Actuarial gains and losses of defined benefit retirement
plans recognized outside profit and loss(c) Capitalized expenditures for research and development
activities(d) Fair value measurement of investment properties andrevaluation of property, plant and equipment andintangible assets(Unification of accounting policies applied to associates
accounted for using the equity method)
The Company also has adopted ASBJ PITF No. 24, “Practical
Solution on Unification of Accounting Policies Applied to
Associates Accounted for Using the Equity Method.” PITF No.
24 requires that accounting policies and procedures appliedby an investment company and its associates to similartransactions and events under similar circumstances should,
in principle, be unified for applying the equity method. PITF
No. 24, however, as a tentative measure, allows an investmentcompany to apply the equity method using its foreign
associates’ financial statements prepared in accordancewith either IFRS or U.S. GAAP. In this case, adjustments
for the same four items as PITF No. 18 are required in the
consolidation process so that their impact on profit attributable
to the owners of the parent is accounted for in accordancewith Japanese GAAP, unless the impact is not material.
(b) Cash and cash equivalents
The NGK Spark Plug Group considers highly liquid debt
instruments purchased with an original maturity of three months
or less, which are readily convertible to known amounts ofcash, and therefore present an insignificant risk of changes invalue to changes in interest rates, to be cash equivalents.
(c) Investments and marketable securities
The NGK Spark Plug Group classifies certain investments
in debt and equity securities as “held-to-maturity,” “trading”
or “available -for- sale.” T he classification determines
the respective accounting method to be applied to theinvestments as stipulated by the accounting standards
for financial instruments. The NGK Spark Plug Group has
no securities categorized as trading or held-to-maturity
securities. Available-for-sale securities are stated at fair value
if such value is available, and net unrealized gain or loss onthese securities is reported as a component of accumulated
other comprehensive income, net of applicable income
taxes. Gains and losses on the disposal of available-forsale securities are computed by the moving average method.
Available-for-sale securities without available fair value arecarried at cost determined by the moving average method.
Adjustments in the carrying values of individual investment
securities are charged to income through write-downs when adecline in value is deemed other than temporary.
(d) Accounting for derivatives
Derivative instruments are valued at fair value if hedge
accounting is not appropriate or when there is no hedging
designation, and the gains and losses on the derivatives arerecognized in current earnings. According to the special
treatment permitted by the accounting standard for financial
instruments, if interest rate and currency swap contracts
are used as hedges and meet certain hedging criteria, theinterest rate and currency swap contracts are not remeasured
at market price, and the amount to be received under theinterest rate and currency swap contracts is added to or
deducted from the interest on the liabilities for which the swap

contracts are executed, and the liabilities denominated inforeign currencies for which the interest rate and currency
swap contracts are executed are translated at the contracted
rate. Measurement of hedge effectiveness is not considerednecessary for interest rate and currency swap contracts thatmeet the requirements for the special treatment.
(e) Inventories
Inventories held for sale in the ordinary course of businessare valued at the lower of cost, determined principally by
the moving average method, or net realizable value. If net
realizable value has fallen below cost as of the end of theperiod, the cost basis is reduced to net realizable value andregarded as decreased profitability of inventories.
(f) Allowance for doubtful accounts
Allowance for doubtful accounts has been provided for at theaggregate amount of estimated credit losses based on an
individual review of certain doubtful or troubled receivables
and a general reserve for other receivables based on thehistorical loss experience of a certain past period.
(g) Noncurrent assets and depreciation/amortization
Property, plant and equipment (except for lease assets),
including significant renewals and additions, are stated atcost. Depreciation is calculated by the straight-line method
based on the estimated useful life of the asset, principally
ranging from 8 to 50 years for buildings and from 4 to 10 years
for machinery, equipment and vehicles.
Intangible assets (except for lease assets), including
software for internal use, are mainly amortized using the straightline method over the estimated useful life of the asset. The
estimated useful life of software for internal use is mainly 5 years.
Expenditures on maintenance and repairs are charged toincome as incurred. Upon disposal, the cost and accumulated
depreciation are removed from the related accounts and any
gain or loss is recorded as gain or loss.
(h) Leases
The Company and its domestic consolidated subsidiaries
capitalize the assets used under finance leases as lessee,
except for certain immaterial or short-term finance leases which
are accounted for as operating leases in accordance with thecurrent accounting standard. Depreciation is calculated using
the straight-line method over the lease term and assuming noresidual value.
(i) Impairment of fixed assets
The Company and its domestic consolidated subsidiaries
have adopted the “Accounting Standard for Impairmentof Fixed Assets” and the related practical guidance. The
standard requires that fixed assets be reviewed for impairment
whenever events or changes in circumstances indicate thatthe carrying amount of an asset may not be recoverable.
An impairment loss is recognized in the income statement
by reducing the carrying amount of the impaired asset or agroup of assets to the recoverable amount, measured by thehigher of the asset’s net selling price or value in use. Fixed
assets include land, plants, buildings and other forms ofproperty, including intangible assets, and are to be groupedat the lowest level for which there are identifiable cash flows
from other groups of assets. For the purpose of recognition
and measurement of an impairment loss, fixed assets of the
NGK Spark Plug Group, other than idle or unused property,
are grouped into cash generating units based on managerial
accounting classifications.

56

(j) Employee retirement benefits
The difference between retirement benefit obligations andplan assets has been recognized as net defined benefit
liability. To calculate the retirement benefit obligations, thebenefit formula basis is used to allocate estimated retirement
benefits to periods of service. Past service cost that is yet tobe recognized is amortized on a straight-line basis over ten
years, a period not exceeding the average remaining service
period of the employees. Actuarial gains and losses that are
yet to be recognized are amortized on a straight-line basis
over ten years, a period not exceeding the average remaining
service period of employees, from the year following theyear in which they arise. Net defined benefit liability andretirement benefit costs of certain consolidated subsidiaries
are calculated using the simplified method as permitted by theaccounting standard for retirement benefits.
(k) Translation of foreign currency accounts
Receivables, payables and securities, other than stocks ofsubsidiaries and certain other securities, are translated into
Japanese yen at exchange rates prevailing at the fiscal yearend. Transactions in foreign currencies are recorded based on
the exchange rates prevailing on the transaction dates. Resulting
translation gains and losses are included in current earnings.
For financial statement items of the overseas consolidated
subsidiaries, all asset and liability accounts are translated
into Japanese yen by applying the exchange rate in effectat the respective fiscal year-end. All income and expense
accounts are translated at the average rate of exchange
prevailing during the year. Translation differences, after
allocating portions attributable to noncontrolling interests,
are reported in foreign currency translation adjustments as acomponent of accumulated other comprehensive income in
the accompanying consolidated balance sheets.
(l) Research and development expenses
Expenses related to research and development are charged
to income as incurred. Research and development expenses
arise from a wide range of the NGK Spark Plug Group’s
activities, including basic and applied research for material
development, planning and designing of new products
and processes and activities aimed at improving existingproducts and processes. For the years ended March 31,
2 017 and 2 016, research and development expenses
aggregated ¥23,416 million ($209,078 thousand) and ¥23,123
million, respectively. These amounts included research anddevelopment activities for basic and applied research and thedevelopment of new products and processes in the amountof ¥4,089 million ($36,509 thousand) and ¥5,401 million atMarch 31, 2017 and 2016, respectively, and were recorded as
general and administrative expenses. The remaining expenses
were recorded for the respective years in the accompanying
consolidated statements of income as manufacturing costs.
(m) Income taxes
Income taxes are accounted for by the asset-liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets andliabilities and their respective tax bases and operating loss
carryforwards. Deferred tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognizedin the period that includes the enactment date.

57(n) Enterprise taxes
The N GK Spark Plug Group records enterprise ta xes
calculated based on the “added value” and “capital”
amounts when levied as size-based corporate taxes for local
government enterprise taxes, which are included in selling,
general and administrative expenses.
(o) Appropriation of retained earnings
Cash dividends are recorded in the fiscal year when aproposed appropriation of retained earnings is approved by
the Board of Directors of the Company.
(p) Per share data
Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average
number of shares of common stock outstanding during theyear. Diluted earnings per share is not disclosed as the
NGK Spark Plug Group had no dilutive common shares.
Cash dividends per share shown for each fiscal year in theaccompanying consolidated statements of income represent
dividends declared by the Company as applicable to therespective year.
(q) Consumption taxes
All figures are net of consumption taxes.
(r) Changing in presentation(Consolidated Statements of Income)“Contribution,” which was included in “Other nonoperating
expenses” for the previous fiscal year, exceeded 10% of total
nonoperating expenses and is therefore presented separatelyfrom the current fiscal year. In order to reflect the change
in presentation, the consolidated statement of income forthe previous fiscal year has been reclassified to reflect aconsistent presentation format.
As a result of this change, ¥1,184 million of “Other
nonoperating expenses” for the previous fiscal year wasreclassified as ¥33 million for “Contribution” and ¥1,151 million
for “Other nonoperating expenses.”(s) Additional information
The Company and its domestic subsidiaries adopted “Revised
Implementation Guidance on Recoverability of Deferred Tax
Assets” (ASBJ Guidance No. 26, March 28, 2016 (hereinafter,“Guidance No. 26”)) from the current fiscal year.

3. Notes to Consolidated Balance Sheets(a) Inventories
At March 31, 2017 and 2016, inventories consisted of the following:

Finished goods
Work-in-process
Raw materials

Millions of yen
2017
2016
¥48,911 ¥47,176
25,581
23,08812,364
11,857

Thousands of
U.S. dollars
2017$436,705
228,402110,393(b) Accumulated depreciation of property, plants and equipment
At March 31, 2017 and 2016, accumulated depreciation ofproperty, plant and equipment amounted to ¥301,800 million($2,694,643 thousand) and ¥298,371 million, respectively.
(c) Investment securities
Among investment securities, shares of unconsolidated
subsidiaries and associates at March 31, 2017 and 2016,
amounted to ¥12,256 million ($109,429 thousand) and ¥5,338
million, respectively.

(d) Contingent liabilities(1) Guarantee on loans
At March 31, 2017 and 2016, contingent liabilities inrespect to guarantees of indebtedness, principally of
employees, amounted to ¥14 million ($125 thousand) and¥18 million, respectively.
(2) The NGK Spark Plug Group is subject to investigations
by overseas authorities regarding possible violations ofcompetition laws in relation to certain past transactionsin the automotive components segment. In connection,compensation for damage claims have been discussedwith some customers and civil lawsuits have been
filed. Additional losses may arise if new facts related topossible violations become known. However, the effect ofthese contingent liabilities on the consolidated financial
statements is not estimable at this stage.

4. Notes to Consolidated Statements of Income(a) Loss on valuation of inventories
For the years ended March 31, 2017 and 2016, a write-down of¥274 million ($2,446 thousand) and ¥800 million, respectively, wasrecognized as costs of goods sold.
(b) Selling, general and administrative expenses
Major components of selling, general and administrative
expenses for the years ended March 31, 2017 and 2016 wereas follows:

Depreciation
Provision of allowance for
doubtful accounts
Retirement benefit costs
Directors compensation andemployee salaries andallowances
Packing and transportation
expenses
Advertising expenses
Research and development
expenses*Millions of yen
2017
2016
¥ 3,044¥ 2,789

Thousands of
U.S. dollars
2017$ 27,179

183
1,356

53
920

1,634
12,10725,782

26,214230,196

6,188
5,602

6,103
5,874

55,25050,018

4,089

5,401

36,509* The aggregate amounts of research and development expenses included inselling, general and administrative expenses for the years ended March 31, 2017and 2016, were ¥4,089 million ($36,509 thousand) and ¥5,401 million, respectively.

(c) Gain on sale of noncurrent assets
Major components of gain on sale of noncurrent assets for theyears ended March 31, 2017 and 2016 were as follows:

Buildings and Structures
Machinery, equipment andvehiclesLand
Software
Other

Millions of yen
2017
2016
¥287
¥321

Thousands of
U.S. dollars
2017$2,563

53
101
4
13

527
1,214
0
18

59
136
0
2

(d) Loss on disposal of noncurrent assets
Major components of loss on disposal of noncurrent assets forthe years ended March 31, 2017 and 2016 were as follows:

Buildings and Structures
Machinery, equipment andvehiclesMillions of yen
2017
2016
¥337
¥294

Thousands of
U.S. dollars
2017$3,009

76

2,563

287

Land
Software
Other

0
1
145

92
12
830

0
9
1,295

(e) Impairment loss
For the years ended March 31, 2017 and 2016, the NGK Spark
Plug Group recognized an impairment loss on fixed assets inthe amount of ¥20,187 million ($180,241 thousand) and ¥2,427
million, respectively, as extraordinary loss.
For the year ended March 31, 2017, impairment loss
consisted of ¥7,513 million ($67,080 thousand) on goodwill,¥8,765 million ($78,259 thousand) on other intangible assetsand ¥3,908 million ($34,893 thousand) on machinery andequipment and other assets. The NGK Spark Plug Grouprevised the future business plan of a consolidated subsidiary,
Wells Vehicle Electronics Holdings Corp. (hereinafter “Wells”),
and its subsidiaries, as its business results were less thanwhat was estimated upon acquiring Wells. As a result ofcareful consideration of future recoverability based on therevised business plan, the NGK Spark Plug Group recognize
an impairment loss of goodwill, intangible assets and otherproperties related to Wells. The grouping of operating assets
is based on managerial accounting categories. Idle assets arerecorded separately in each fixed assets class. Recoverable
amounts were estimated using value in use and amounted to nil.
For the year ended March 31, 2016, impairment loss
consisted of ¥2,101 million on machinery and equipment, ¥192
million on construction in progress and ¥133 million on otherassets. The loss arose in connection with property used for
production of IC packages in the “Semiconductor” subsegmentof the “Technical Ceramics” segment that became impaired
because performance in the IC package business worsened
due to a change in supply and demand and increased costs
to stabilize quality. The grouping of operating assets is basedon managerial accounting categories. Idle assets are recorded
separately in each fixed assets class. Recoverable amounts
were estimated using value in use and amounted to nil.

5. Notes to Consolidated Statements of Comprehensive Income
Amounts reclassified as profit in the current period that wererecognized in other comprehensive income in the current or
previous periods and the tax effects for each component ofother comprehensive income were as follows:
Millions of yen
2017
2016
Unrealized gains (losses) on
available-for-sale securities
Increase (decrease) during
the year
Reclassification
adjustments
Subtotal, before tax
Tax effectSubtotal, net of tax
Foreign currency translation
adjustments
Decrease during the year
Remeasurements of defined
benefit plans
Increase (decrease) during
the year
Reclassification
adjustments
Subtotal, before tax
Tax effectThousands of
U.S. dollars
2017¥6,879¥(11,830)$61,420

64
6,943(2,105)
4,837–(11,830)
4,302(7,527)571
61,991(18,795)
43,188(1,007)(11,480)(8,991)

2,023(8,027)18,063

2,113
4,136(1,208)672(7,354)
2,118

18,86636,929(10,786)58

Subtotal, net of tax
Share of other comprehensive
income of associates
accounted for using equity
methodIncrease (decrease) during
the year
Reclassification
adjustments
Subtotal
Total other comprehensive
income(5,236)

2,928

26,143

113

(539)

1,009

–
113

7
(531)

–
1,009

¥6,872¥(24,776)$61,357

6. Notes to Consolidated Statements of Change in Net Assets
For the year ended March 31, 2017(a) Class and total number of issued and outstanding sharesand treasury stock
Number of Shares
As of March
31, 2016
Issued andoutstanding
sharesCommon stock
Total
Treasury stock
Common stock
Total

Increase Decrease

223,544,820
223,544,820––

5,923,363 5,397,451
5,923,363 5,397,451

As of March
31, 2017– 223,544,820– 223,544,820
58
58

11,320,756
11,320,756

Notes: 1) The increase of 851 shares in common stock of treasury stock was dueto the purchase of shares in quantities of less than one share unit.
2) The increase of 5,396,600 shares in common stock of treasury stock
was due to the repurchase of shares pursuant to the resolution at themeeting of the Board of Directors held on July 29, 2016.
3) The decrease of 58 shares in common stock of treasury stock was dueto the sale of shares in quantities of less than one share unit.

(b) Dividendsi) Cash dividends paid
Type of
Shares

Total
Dividend
dividends per share

Resolution
Board ofDirectors¥4,570on
millionMay 9,
Common ($40,804
2016
stock
thousand)
Board ofDirectors¥4,485onmillionOct 31,
Common $40,045
2016
stock
thousand)¥21($188)

Date ofrecordMarch 31,2016

¥21($188)

Payment
date

June 8,2016

September November
30, 2016 30, 2016ii) Dividends for which the date of record falls within thefiscal year under audit but the payment date occurs in thefollowing fiscal year
Type of Source of
Total
Dividend Date of Payment
Resolution Shares dividends dividends per share record
date
Board of¥4,456
Directors
million
March
on
¥21
31,
June 8,
May 9, Common Retained ($39,786
earnings thousand) ($188)
2017
2017
2017
stock

For the year ended March 31, 2016(a) Class and total number of issued and outstanding sharesand treasury stock

Total
Treasury stock
Common stock
Total

Issued andoutstanding
sharesCommon stock59

223,544,820

As of March
Increase Decrease
31, 2016–– 223,544,820–

5,921,224
5,921,224

2,291
2,291

– 223,544,820
152
152

5,923,363
5,923,363

Notes: 1) The increase of 2,291 shares in common stock of treasury stock was
due to the purchase of shares in quantities of less than one share unit.
2) The decrease of 152 shares in common stock of treasury stock was dueto the sale of shares in quantities of less than one share unit.

(b) Dividendsi) Cash dividends paid
Type of
Resolution Shares
Board ofDirectorson
May 8,
Common2015
stock
Board ofDirectorson
Oct 30,Common
2015
stock

Total
Dividend
dividends per share

Date ofrecordPayment
date¥3,917
million¥18

March 31,2015

June 5,2015¥4,570
million¥21

September November
30, 2015 30, 2015ii) Dividends for which the date of record falls within thefiscal year under audit but the payment date occurs in thefollowing fiscal year
Type of Source of
Total
Dividend Date of Payment
Resolution Shares dividends dividends per share record
date
Board of
March
Directors¥4,57031,
June 8,on May 9, Common Retained
earnings
million
¥21
2016
2016
2016
stock

7. Notes to Consolidated Statements of Cash Flows(a) Cash and cash equivalents
R e c o n ciliatio n of c as h a nd c as h equivale nts o n th e
consolidated statements of cash flows to the amounts
disclosed on the consolidated balance sheets at March 31,2017 and 2016, was as follows:
Millions of yen
2017
2016
Cash and deposits¥ 45,733 ¥ 37,984
Short-term investment securities
57,21059,548Subtotal
102,943
97,533Time deposits with deposit
term of over 3 months(9,115)(7,328)
Short-term investment
securities other than cash
equivalents(28,010) (19,048)
Cash and cash equivalents¥ 65,817 ¥ 71,155

Thousands of
U.S. dollars
2017$ 408,330
510,804
919,134(81,384)(250,089)$ 587,652(b) Assets and liabilities of newly consolidated subsidiaries
through acquisition of shares
For the year ended March 31, 2016
Assets acquired and liabilities assumed of Nihon Ceratec Co.,
Ltd., a newly consolidated subsidiary due to the acquisitionof shares as of the acquisition date, related acquisition costand net expenditure for the acquisition of shares for the year
ended March 31, 2016 were as follows:

Number of Shares
As of March
31, 2015

223,544,820

Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities

Millions of yen¥4,884
3,820
768(1,560)(612)

Acquisition cost of shares
Cash and cash equivalents of acquired company
Net cash used for acquisition of acquired company¥7,300(131)¥7,168Assets acquired and liabilities assumed of Wells Vehicle
Electronics Holdings Corp. and its three subsidiaries, newly
consolidated subsidiaries due to the acquisition of shares
as of the acquisition date, related acquisition cost and net
expenditure for the acquisition of shares for the year ended
March 31, 2016 were as follows:
Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities
Acquisition cost of shares
Assumption of bank borrowings
Cash and cash equivalents of acquired company
Net cash used for acquisition of acquired company

Millions of yen¥ 13,184
16,172
10,302(32,784)(5,100)¥ 1,773
28,841(368)¥30,246

The NGK Spark Plug Group holds investments in securities
such as negotiable certificates of deposits, debt securities
and equity securities whose fair values are monitored on aquarterly basis.
The NGK Spark Plug Group is a party to derivative
instruments such as foreign currency forward exchange
contracts, currency option contracts and interest rate andcurrency swap agreements in the normal course of businessprincipally for hedging purposes in order to reduce its
exposure to fluctuations in exchange rates and interest
rates. The NGK Spark Plug Group does not hold or issue
derivative financial instruments for trading purposes. Under
the NGK Spark Plug Group’s financial management policies,
contract balances of currency derivatives are limited to certain
anticipated export sales and import purchases.
(b) Fair value of financial instruments
The fair value and carrying value of financial instruments at
March 31, 2017 and 2016, other than unlisted equity securities
for which the fair value was extremely difficult to determine,
were as follows:

8. Lease Commitments(a) Finance lease transactions
Financing lease transactions without transfer of ownership ofleased assetsi) Components of lease assets are as follows:
1) Property, plant and equipment: Mainly equipment (tools,
furniture and fixtures) for development in the automotive
components segment.
2) Intangible assets: Mainly intra-communication systems(software).
ii) Depreciation of lease assets:
Depreciation is calculated using the straight-line method
over the lease term and assuming no residual value.
(b) Operating lease transactions
At March 31, 2017 and 2016, the NGK Spark Plug Group
had annual commitments under operating leases as lessee.
The aggregate future minimum payments for noncancelable
operating leases were as follows:

Due within one year
Due after one year

Millions of yen
2017
2016
¥ 644
¥ 693
1,840
2,235
¥2,485¥2,928

Thousands of
U.S. dollars
2017$ 5,750
16,429$22,188

9. Financial Instruments(a) Qualitative information on financial instruments
The NGK Spark Plug Group does not invest surplus funds
in securities other than short-term bank deposits and debt
securities with high liquidity from issuers with high credit ratingsin accordance with its accounting rules and policies. TheNGK Spark Plug Group uses indirect financing from financial
institutions such as correspondent banks and direct financing
from financial markets principally by the issuance of corporate
bonds to satisfy short-term and long-term funding requirements.
The NGK Spark Plug Group is exposed to credit risk
primarily with respect to trade receivables. In order to reducethe credit risk of these receivables, the NGK Spark PlugGroup sets payment terms according to the credit capabilityof its customers. In some cases, the NGK Spark Plug Group
receives security deposits in advance.

At March 31, 2017:
Financial assets:
Cash and deposits
Notes and accounts
receivable - trade
Short-term investment
securities:
Available-for-salesecurities
Investment securities:
Shares of
associates
Available-for-salesecurities
Total
Financial liabilities:
Accounts payable trade
Short-term loans
payableLong-term loans
payableBonds payable,
including current
portionTotal
Derivative instruments(*1)
At March 31, 2016:
Financial assets:
Cash and deposits
Notes and accounts
receivable - trade
Short-term investment
securities:
Available-for-salesecurities
Investment securities:
Available-for-salesecurities
Total
Financial liabilities:
Accounts payable trade
Short-term loans
payableCarrying
value

Fair
value
Millions of yen¥ 45,733¥ 45,733

91,594

91,594–57,21057,210

–

6,333

6,179

(154)

54,332¥255,205

54,332¥255,050–¥(154)¥ 30,045¥ 30,045¥

11,25911,259–32,84832,982

134

55,000¥ 129,153

55,287¥ 129,574

287
¥ 421

¥

¥

253

¥

–

¥ 37,984¥ 37,984¥–

74,942

74,942–59,54859,548–46,543¥ 219,019

46,543¥ 219,019¥––¥ 28,049¥ 28,049

¥

–

11

11

253

Difference

¥

–

–

–

60

Long-term loans
payableBonds payable,
including current
portionTotal
Derivative instruments(*1)

24,85925,055

195

55,000¥ 107,919

55,376¥ 108,491

376
¥ 571

¥

¥

¥

152

152

–

Thousands of U.S. dollars
At March 31, 2017:
Financial assets:
Cash and deposits
Notes and accounts
receivable - trade
Short-term investment
securities:
Available-for-salesecurities
Investment securities:
Shares of
associates
Available-for-salesecurities
Total
Financial liabilities:
Accounts payable trade
Short-term loans
payableLong-term loans
payableBonds payable,
including current
portionTotal
Derivative instruments(*1)$ 408,330$ 408,330

817,804

817,804

510,804$–

56,54555,170(1,375)

485,107$2,278,616

485,107$2,277,232–$(1,375)$ 268,259$ 268,259

100,527

100,527–

293,286

294,4821,196

491,071$ 1,153,152
$

2,259

493,634$ 1,156,911
$

2,259

$

–

2,563
$ 3,759$–

Notes:(1) The methods and assumptions used to estimate the fairvalue of financial instruments are summarized below:
The fair value of cash and deposits, notes andaccounts receivable - trade, accounts payable - trade andshort- term loans payable is approximately equal to thecarrying value due to their short-term maturities. The fairvalue of investment equity securities is based on quoted
market prices. The fair value of bonds and other securities
included in investment securities, bonds payable andderivative instruments is based on the price provided bycorrespondent financial institutions. The fair value of longterm loans payable is computed based on the total amountof principal and interest discounted at an interest rateapplicable to new loans under the same conditions.
(2) The following securities are not included in the table above
because the fair value was extremely difficult to determine.
Carrying value
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017

¥5,922
1,662¥5,3381,181

At March 31, 2017:
Cash and deposits
Notes and accounts
receivable - trade
Investments
Bonds
Negotiable deposits
Other

¥

2018
2019
2020
2021
2022
2023 and thereafter

2017
2018
2019
2020
2021
2022 and thereafter

267,857––

44,30471,429–91,594––13,00029,20013,600¥193,127

2,000––¥2,000–––¥–At March 31, 2017 and 2016, the cost and fair value ofavailable-for-sale securities were summarized as follows:
A loss on the write-down of available-for-sale securities
was not material for the year ended March 31, 2017, and noloss on the write-down of available-for-sale securities wasrecognized for the year ended March 31, 2016.

¥ 37,984¥–¥–

74,942––

7,100
40,50010,600¥171,127

1,129––¥ 1,129–––¥–$ 408,330

$

–

$–

817,804––

116,071
260,714
121,429$1,724,348

17,857––$17,857–––$–

Short-termloanspayableBonds
payable¥11,259
–
–
–
–
–

¥

–
25,000–30,000––Long-term
loans
payable
¥

–
9,962
9,924
4,962
8,000
–

Short-termloanspayable
¥

11
–
–
–
–
–

Bonds
payable¥With unrealized gains:
Equity securities
Bonds
Other
Subtotal
With unrealized losses:
Equity securities
Bonds
Negotiable deposits
Other
Subtotal
Total

–
11
9,962
9,924
4,962
–

Thousands of U.S. dollars
2017Year ending March 31,

Short-termloanspayable

2018
2019
2020

$100,527––

Bonds
payableLong-term
loans
payable$$–223,214–

Fair andcarrying
value

Cost

Unrealized
gains(losses)¥ 52,154
5,004
5,880
63,039¥12,484
4,999
5,312
22,796¥39,6704
567
40,242

153
10,05029,2009,099
48,503¥111,543

170
10,112
29,2009,100
48,583¥71,380

(17)
(62)
–
(0)
(79)
¥40,162

Millions of yen
2016With unrealized gains:
Equity securities
Bonds
Other
Subtotal
With unrealized losses:
Equity securities
Bonds
Negotiable deposits
Other
Subtotal
Total

Long-term
loans
payable¥–88,946
88,607At March 31, 2017 and 2016, derivative instruments, except
for derivative instruments accounted for by hedge accounting,were stated at fair value and recognized for valuation gains
and losses in current earnings as follows:
Notional
principal
or contract
amounts

Millions of yen
2017With unrealized gains:
Equity securities
Bonds
Other
Subtotal
With unrealized losses:
Equity securities
Bonds
Negotiable deposits
Other
Subtotal
Total

Fair value
Millions of yen

Valuation
gains(losses)

At March 31, 2017:
Foreign exchange contracts:
Forward contracts to sellCurrency call options
Currency put options¥18,065
2,364
1,300

¥205
(8)
56

¥205
(8)
56
¥253

At March 31, 2016:
Foreign exchange contracts:
Forward contracts to sellCurrency call options
Currency put options¥14,671
500
376

¥166
(14)
1

¥166
(14)
1
¥152

Thousands of U.S. dollars
At March 31, 2017:
Foreign exchange contracts:
Forward contracts to sellCurrency call options
Currency put options$161,295
21,107
11,607$1,830(71)
500$1,830(71)
500$2,259Fair andcarrying
value

Cost

Unrealized
gains(losses)¥ 44,727
16
5,336
50,081¥11,890
16
4,717
16,625¥32,8370619
33,456At March 31, 2017 and 2016, derivative instruments to which
hedge accounting was applied were as follows:

686
8,224
40,5006,599
56,010¥106,092

792
8,243
40,5006,600
56,136¥72,762

(106)
(19)
–
(0)
(125)
¥33,330

Fair
value

Thousands of U.S.dollars
2017

–
–
25,000–30,000–in equity securities above as no quoted market prices were available andit was deemed extremely difficult to determine the fair values due to theimpossibility of estimating future cash flows.

11. Derivative Instruments

10. Investment Securities

Millions of yen
2016Year ending March 31,

–
–
–

¥–

Millions of yen
2017Year ending March 31,

2021
2022
2023 and thereafter–(4) Contractual maturities of bank loans and bonds payable atMarch 31, 2017 and 2016, were as follows:$52,875
14,839(3) Expected maturities of financial assets at March 31, 2017and 2016, were as follows:61

At March 31, 2016:
Cash and deposits
Notes and accounts
receivable - trade
Investments
Bonds
Negotiable deposits
Other¥ 45,733

Thousands of U.S. dollars*1) The value of derivative instruments is shown as a net position.

Investments (equity securities)
in unconsolidated
subsidiaries and associates
Unlisted equity securities

At March 31, 2017:
Cash and deposits
Notes and accounts
receivable - trade
Investments
Bonds
Negotiable deposits
Other

–
–

510,804

Due in one Due later
Due in one year through than five
year or lessfive years
years
Millions of yen

Fair andcarrying
value

Cost

Unrealized
gains(losses)$465,661
44,67952,500562,848$111,464
44,63447,429203,536$ 354,196
36
5,063
359,304

1,366
89,732
260,714
81,241
433,063$995,920

1,518
90,286
260,714
81,250433,777$637,321

(151)
(554)
–
(0)
(705)
$358,589

Note: For equity investments in nonpublic companies with a carrying amountas of March 31, 2017 and 2016, amounting to ¥1,662 million ($14,839
thousand) and ¥1,181 million, respectively, fair values were not included

Notional
Contractprincipal
amounts
Hedged or contract due after
items
amounts
one year
Millions of yen
At March 31, 2017:
Interest rate andcurrency swaps:(floating rate receipt,
fixed rate payment)(U.S.$ receipt,
Japanese yen
payment)

Long-termbank loans¥32,848¥32,848¥–

At March 31, 2016:
Interest rate andcurrency swaps:(floating rate receipt,
fixed rate payment)(U.S.$ receipt,
Japanese yen
payment)

Long-termbank loans¥24,848¥24,848¥–

Thousands of U.S. dollars
At March 31, 2017:
Interest rate andcurrency swaps:(floating rate receipt,
fixed rate payment)(U.S.$ receipt,
Japanese yen
payment)

Long-termbank loans $293,286$293,286$–

62

The above interest rate and currency swaps which qualify forhedge accounting and meet specific matching criteria are notseparated from the hedged bank loans. The fair values of thederivative instruments are reflected in the calculation of the fairvalues of the related bank loans (see Note 9).

12. Employee Retirement Benefits
The Company has a lump-sum retirement benefit plan and adefined benefit pension plan that cover 80% of the retirement
benefits for employees of the Company who retire at thecompulsory retirement age after ten years or more of service.
Certain domestic consolidated subsidiaries have similar
retirement benefit plans. Certain overseas consolidated
subsidiaries have defined contribution plans. The Company
contributes certain plan assets to the employee retirement benefit
trust under the defined benefit pension plan. Net defined benefit
liability and retirement benefit costs of certain consolidated
subsidiaries are calculated using the simplified method aspermitted by the accounting standard for retirement benefits.
Information about employee retirement benefits for theyears ended March 31, 2017 and 2016 was as follows:(a) Defined benefit plans
Movement in retirement benefit obligations, except for plans
applying the simplified method:

Balance at April 1
Service cost
Interest cost
Actuarial loss
Benefits paid
Past service cost
Increase due to newly
consolidated subsidiaries
Other
Balance at March 31

Millions of yen
2017
2016
¥68,381¥57,360
3,751
3,276
349
644
(1,213)6,300(2,521)(3,045)
142(114)

Thousands of
U.S. dollars
2017$610,545
33,491
3,116(10,830)(22,509)
1,268

4,297
(338)
¥68,381–161$615,259–
18¥68,909

Movement in plan assets, except for plans applying thesimplified method:

Balance at April 1
Expected return on plan
assetsActuarial gain (loss)
Contributions paid by theemployer
Benefits paid
Increase due to newly
consolidated subsidiaries
Other
Balance at March 31

Millions of yen
2017
2016
¥36,440¥33,584

Thousands of
U.S. dollars
2017$325,357

1,054
932

1,004
(1,847)

9,411
8,321

3,232
(1,729)3,385(2,184)28,857(15,438)–(38)¥39,893

2,780
(282)
¥36,440–(339)$356,188

Movement in net defined benefit liability for plans applying thesimplified method:

Balance at April 1
Retirement benefit costs
Benefits paid
Contributions paid by theemployer
Balance at March 31

63

Millions of yen
2017
2016
¥245
¥236
43
44
(19)
(14)

Thousands of
U.S. dollars
2017$2,188
384
(170)

(21)
¥245

(196)
$2,205(22)¥247

Reconciliation from retirement benefit obligations and plan
assets to net defined benefit liability:

Funded retirement benefit
obligations
Plan assets
Unfunded retirement benefit
obligations
Total net defined benefit
liability
Net defined benefit liability
Total net defined benefit
liability

Millions of yen
2017
2016

Thousands of
U.S. dollars
2017¥ 47,786 ¥ 47,607(40,057) (36,591)
7,729
11,016$ 426,661(357,652)
69,00921,533

21,169192,259

29,26332,185261,277

29,26332,185261,277¥ 29,263¥ 32,185$ 261,277

Note: Includes those under plans applying the simplified method.

Retirement benefit costs:

Service cost
Interest cost
Expected return on plan
assetsNet actuarial loss amortization
Past service cost amortization
Retirement benefit costs
based on the simplified
methodTotal

Millions of yen
2017
2016
¥ 3,751¥ 3,276
349
644

Thousands of
U.S. dollars
2017$33,491
3,116(1,054)2,091
22(1,012)664
8(9,411)
18,670196

43¥ 5,20444¥ 3,626384$46,464

Remeasurements of defined benefit plans included in othercomprehensive income (before adjusting for tax effects):

Past service costs
Actuarial losses
Total

Millions of yen
2017
2016
¥ 119
¥ (123)(4,256)
7,478¥(4,136)¥7,354

Thousands of
U.S. dollars
2017$ 1,063(38,000)$(36,929)

Remeasurements of defined benefit plans included inaccumulated other comprehensive income (before adjustingfor tax effects):
Millions of yen
2017
2016
Past service cost yet to berecognized
Actuarial losses yet to berecognized
Total

¥

(14)

8,136
¥8,121¥(134)

Thousands of
U.S. dollars
2017
$

(125)

12,393¥12,258

72,643$72,509

2017
22%
27%
25%
16%
10%
100%

2016
19%
24%
29%
16%
12%
100%

Plan assets:(1) Plan assets comprise:
Bonds
Equity securities
General life insurance accounts
Alternative investments
Other
Total

Notes: 1) Alternative investments are mainly investments in hedge funds andinfrastructure funds.
2) As of March 31, 2017 and 2016, 8% and 7% of plan assets, respectively,
were assets held by the employee retirement benefit trust under thedefined benefit pension plan.

(2) Long-term expected rate of return:Current and target asset allocation and historical andexpected returns on various categories of plan assets havebeen considered in determining the long-term expected
rate of return.
Actuarial assumptions:
The principal actuarial assumptions at March 31, 2017 and2016 were as follows:
Discount rateLong-term expected rate of return

2017
2016
Mainly 0.4% Mainly 0.3%
Mainly 2.75% Mainly 2.75%

In assessing the realizability of deferred tax assets,management of the NGK Spark Plug Group considers
whether some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income
during the periods in which the temporary differences become
deductible. At March 31, 2017 and 2016, a valuation allowance
was provided to reduce deferred tax assets to the amount thatmanagement believed the deferred tax assets were realizable.
For the years ended March 31, 2017 and 2016, thereconciliation of the differences between the combined
Japanese statutory tax rate and the effective income tax rate
on pretax income reflected in the accompanying consolidated
statements of income was as follows:

Note: In calculating retirement benefit obligations, the NGK Spark Plug Group
uses mainly an index for salary increase by age based on a point system.

(b) Defined contribution plans
For the years ended March 31, 2017 and 2016, the amount of
required contribution to the defined contribution plans of theoverseas consolidated subsidiaries was ¥218 million ($1,946
thousand) and ¥212 million, respectively.

13. Income Taxes
The tax effects of temporary differences that gave rise toa significant portion of deferred tax assets and liabilities at
March 31, 2017 and 2016 were as follows:
Millions of yen
2017
2016
Deferred tax assets:
Net operating loss
carryforwards
Impairment loss on fixed
assetsNet defined benefit liability
Depreciation
Accrued expenses
Inventories
Intercompany profits
Other
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gains onavailable-for-salesecurities
Retained earnings ofoverseas consolidated
subsidiaries
Depreciation
Other
Total deferred tax liabilities
Net deferred tax assets

Thousands of
U.S. dollars
2017

1,119

¥ 2,778

5,297
8,938
3,125
4,368
2,988
4,762
1,663
(8,598)23,666

5,575
9,730
3,475
4,376
2,741
5,481
1,915
(7,130)28,94347,29579,80427,90239,00026,67942,518
14,848(76,768)
211,304(12,116)(9,992)(108,179)(2,943)(5,578)(1,106)(5,374)(303)(255)(16,469) (21,200)¥ 7,196 ¥ 7,743(26,277)(9,875)(2,705)(147,045)$ 64,250

¥

$

9,991

At March 31, 2017 and 2016, deferred tax assets and liabilities
were as follows:

Deferred tax assets:
Current
Noncurrent
Deferred tax liabilities:
Current
Noncurrent
Net deferred tax assets

Millions of yen
2017
2016

Thousands of
U.S. dollars
2017¥11,023
1,496¥12,080987$98,420
13,357–(5,324)¥ 7,196–(5,325)¥ 7,743–(47,536)$64,250

Combined Japanese statutory tax rate
Increase (decrease) due to:Permanently nondeductible expenses
Tax exempt income
Tax credits for research and development
expenses
Differences between Japanese and foreign
tax rates
Changes in valuation allowance
Retained earnings of overseas consolidated
subsidiaries
Effect of income tax rate changes
Loss on violation of antitrust law
Transfer of net loss carried forward resulting
from merger of a consolidated subsidiary
Impairment loss on goodwill
Other
Effective income tax rate

Percentage ofpre-tax income (%)
2017
2016
30.7
32.8
0.7
(0.4)

0.4
(0.5)

(6.2)

(4.4)

(2.9)
11.9

(1.1)
(1.7)

(7.9)
–
0.1

1.8
1.5
0.6

(6.5)
6.6
(0.7)
25.4

–
–
(0.5)
28.9

On March 31, 2016, amendments to the Japanese tax
regulations were enacted into law. Based on the amendments,
the statutory income tax rates utilized for the measurement ofdeferred tax assets and liabilities expected to be settled orrealized from April 1, 2016 to March 31, 2018 and on or after
April 1, 2018 were changed from 32.1% to 30.7% and 30.5%,
respectively, as of March 31, 2016.
Due to these changes in statutory income tax rates, netdeferred tax assets (after deducting the deferred tax liabilities)
decreased by ¥334 million as of March 31, 2016, deferredincome tax expense recognized for the fiscal year ended
March 31, 2016 increased by ¥675 million, net unrealized
gains on available-for-sale securities increased by ¥515 million
and remeasurements of defined benefit plans included inaccumulated other comprehensive income decreased by¥175 million compared with the amounts that would have beenreported without the changes.

14. Business Combinations
For the year ended March 31, 2017(a) Completion of accounting for the business combination
following provisional accounting
The accounting with regard to the business combination for
the acquisition of Wells Vehicle Electronics Holdings Corp. asof July 1, 2016 was completed in the current fiscal year. Due tothe completion of accounting for this business combination, thechange in initial purchase price allocation was reflected in thecomparative information included in the consolidated financial
statements of the current fiscal year as follows:64

Millions of yen¥10,192
176
(67)
109
¥10,302

Goodwill (pre-adjustment)
Other intangible assets
Deferred tax liabilities
Total Adjustment
Goodwill (after-adjustment)

Thousands of
U.S. dollars$91,000
1,571
(598)
973
$91,982

As a result, goodwill increased by ¥93 million ($830
thousand), other intangible assets decreased by ¥150 million($1,339 thousand), and total intangible assets, total noncurrent
assets and total liabilities each decreased by ¥57 million($509 thousand). Because sales, general and administrative
expenses decreased by ¥4 million ($36 thousand), operating
income, ordinary income and profit before income taxes for theprevious fiscal year also increased by that amount.
(b) Business combination under common control
The Company, NTK Ceramic Co., Ltd., (hereafter “former
N - CER A”) and NTK Ceramic Co., Ltd. (hereaf ter “newN-CERA”) and Ceramic Sensor Nakatsugawa Co., Ltd. whichwere newly established as of July 1, 2016, conducted anabsorption-type company split as of October 1, 2016 subject to
the Absorption-type Company Split Agreement concluded asof July 29, 2016.
(1) Overview of the combination
1. Name and nature of the split businessi) Split company
Company nameName and nature of the split business

NGK Spark Plug Co., Ltd.

Ceramic IC packages

NTK Ceramic Co., Ltd.
(former N-CERA)

Ceramic IC packages
Automotive sensorsii) Successor company
Company nameName and nature of the split business

NTK Ceramic Co., Ltd.
(new N-CERA)

Ceramic IC packages

Ceramic Sensor
Nakatsugawa Co., Ltd.

Automotive sensors

2. Date of the combination
October 1, 2016
3. Legal form of the combination
Absorption-type company split with the split companies
and successor companies as the Company and former
N - C E R A and new N - C E R A and C era mic S enso r
Nakatsugawa Co., Ltd., respectively.
4. Name of the acquired company after the combination
NTK Ceramic Co., Ltd. (new N-CERA)
Ceramic Sensor Nakatsugawa Co., Ltd.
5. Other matters relating to overview of transaction
Toward the revitalization of our ceramic IC package business,
we will establish a financially independent subsidiary with
manufacturing and sales functions consolidated instead of
the subsidiary with manufacturing functions only. With thisreform, we aim to clarify responsibilities and authority, better
visualize the financial management and achieve a positive
turnaround as early as possible.
The Company merged former N-CERA as of January
1, 2017.

(2) Overview of accounting treatment adopted
The combination is accounted for as a business combination
under common control based on the “Accounting Standard
for Business Combinations” (ASBJ Statement No. 21) andthe “Guidance on the Accounting Standard for Business
Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10).
For the year ended March 31, 2016
Business combinations resulting from acquisitions(a) Acquisition of Nihon Ceratec Co., Ltd.
(1) Overview of the combination
1. Name and business of the acquired company
Name: Nihon Ceratec Co., Ltd.
Business: Development, manufacturing and sales, alsocleaning and regeneration of structural ceramics
and various application products. Development,
manufacturing and sales of piezoelectric
ceramics and various application products.
2. Major reasons for the combination
The Company decided to acquire all the shares of
Nihon Ceratec to utilizing its high-precision processing
technology and cost competitiveness in the productionof small components for semiconductor manufacturing
equipment, the production of which the Company plans
to expand.
3. Date of the combination
April 1, 2015
4. Legal form of the combination
Acquisition of shares
5. Name of the acquired company after the combination
Nihon Ceratec Co., Ltd.
6. Ratio of voting rights acquired
100%
7. Main reason for determining the acquiring company
The Company acquired 100% of the voting rights byacquiring shares of Nihon Ceratec in cash.
(2) Period of operation of the acquired company included in
the consolidated financial statements
From April 1, 2015 to March 31, 2016

3. Amortization method and period
Straight-line amortization over 5 years(6) Assets acquired and liabilities assumed as of the date of
the business combination

1. Amount of goodwill¥10,193 million
The amount of goodwill is provisionally calculated,because the allocation of the acquisition cost had notbeen completed as of the end of the fiscal year.

Millions of yen¥4,884
3,821¥8,705

2. Reason for recognition
The acquisition cost exceeded the net amount of assets
acquired and liabilities assumed

Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities¥1,560613¥2,173(b) Acquisition of Wells Vehicle Electronics Holdings Corp.
(1) Overview of the combination
1. Name and business of the acquired company
Name: UCI Acquisition Holdings (No. 2) Corp. (hereinafter,
UCI Acquisition)
Business: M anu facturing and s ales of au to m otive
components, mainly operated by Wells Vehicle
Electronics, L.P. (formerly, Wells ManufacturingL.P.) (hereinafter, “Wells”), which is owned by
UCI Acquisition.
2. Major reasons for the combination
In order to strengthen the automotive components
business, which is the core business of the Company,
the Company aims to expand its business areas anddevelop new sales channels and customers by acquiring
the business of Wells, which has strength in the US
automotive repair market.
3. Date of the combination
July 1, 2015
4. Legal form of the combination
Acquisition of shares
5. Name of the acquired company after the combination
Wells Vehicle Electronics Holdings Corp.

¥7,300 million Cash

Acquisition cost

¥7,300 million(4) Expenses for the acquisition (advisory costs, etc.)¥93 million(5) Amount of goodwill, reason for recognition and amortization
method and period
1. Amount of goodwill¥768 million(2) Period of operation of the acquired company included in
the consolidated financial statements
From July 1, 2015 to March 31, 2016
(3) Acquisition cost of the acquired company
Consideration for acquisition$249,718 thousand Cash

Acquisition cost

$249,718 thousand

The consideration for the acquisition includes therepayment of a bank borrowing of the acquired company.

¥950 million(5) A m o u n t o f g o o d w i l l , re a s o n fo r re c o g n i t i o n , a n damortization method and period

65

Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities

Millions of yen¥13,185
16,349¥29,534¥32,785
5,168¥37,953(7) Amount allocated to intangible assets other than goodwill
and weighted average amortization period
Customer related assets

Millions of yen¥12,195(Amortization period: 10 years)(8) Purchase price allocation
The purchase price allocation had not been completed
as of March 31, 2016. Therefore, provisional accounting
treatment was applied based on reasonable information
available at that time.
(9) Estimated impact on the consolidated financial results if
the business combination had been completed as of the
beginning of the fiscal year (April 1, 2015)
The impact on the accompanying consolidated
financial statements is negligible. This amount has notbeen audited.

15. Net Assets
7. Main reason for determining the acquiring company
The Company acquired 100% of the voting rights byacquiring shares of UCI Acquisition in cash.

(4) Expenses for the acquisition (advisory costs, etc.)
2. Reason for recognition
The acquisition cost exceeded the net amount of assets
acquired and liabilities assumed.

(6) Assets acquired and liabilities assumed as of the date of
the business combination

6. Ratio of voting rights acquired
100%(3) Acquisition cost of the acquired company
Consideration for acquisition

3. Amortization method and period
Straight-line amortization over 10 years

Under Japanese laws and regulations, the entire amount paid
for new shares is required to be designated as common stock.
However, a company may, by a resolution of the Board of
Directors, designate an amount not exceeding one half of theprice of the new shares as additional paid-in capital, which isincluded in capital surplus.
Under Japanese Corporate Law (the “Law”), in cases inwhich a dividend distribution of surplus is made, the smaller ofan amount equal to 10% of the dividend or the excess, if any, of
25% of common stock over the total of additional paid-in capitaland legal earnings reserve must be set aside as additional paidin capital or legal earnings reserve. Legal earnings reserve is
included in retained earnings in the accompanying consolidatedbalance sheets.
Under the Law, legal earnings reserve and additional paidin capital can be used to eliminate or reduce a deficit by aresolution of the shareholders’ meeting. Additional paid-in capitaland legal earnings reserve may not be distributed as dividends.
All additional paid-in capital and all legal earnings reserve may
be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.

66

The maximum amount that the Company can distributeas dividends is calculated based on the separate financial
statements of the Company in accordance with Japanese laws
and regulations.

At March 31, 2017 and 2016, respectively, capital surplus
consisted principally of additional paid-in capital. In addition,
retained earnings included legal earnings reserve of theCompany in the amount of ¥5,837 million ($52,116 thousand) at
March 31, 2017 and 2016, respectively.

Other items:
Depreciation$ 153,196
Impairment loss on fixed assets
180,241
Increase in property, plant and
246,223equipment and intangible assets(a) General information about reportable segments
The reportable segments of the Company are the business units for which the Company is able to obtain financial information
separately in order for the Board of Directors of the Company to conduct periodic investigations to determine the distribution ofmanagement resources and evaluate business results. The Company has its business units identified by products. Each business
unit plans its own comprehensive domestic and overseas strategies for its own products and conducts its own business activities.
Accordingly, the NGK Spark Plug Group consists of two reportable segments: “Automotive components” and “Technical ceramics.”
The “Technical ceramics” segment consists of the “Semiconductor” and “Ceramics” subsegments.
● In the “Automotive components” segment, the Company manufactures and sells spark plugs, glow plugs, various automotive
sensors, ceramic engine parts and other automotive components.
● In the “Technical ceramics” segment, the Company manufactures and sells IC packages and other semiconductor components
in the “Semiconductor” subsegment and manufactures and sells cutting tools and ceramics products for industrial use in the“Ceramics” subsegment.
(b) Methods to determine net sales, income or loss, assets, and other items by reportable business segment
Accounting methods by reportable segment are principally the same as those written in Note 2 Summary of Significant Accounting Policies.
Profit by reportable business segment is stated on an operating income basis.
(c) Information about reportable segment profit and loss, segment assets and other material items
Information about reportable segments as of and for the years ended March 31, 2017 and 2016 was as follows:

Automotive
components

21,10756,991

Reportable segments
Technical ceramics
Total Technical
Semiconductor Ceramics
ceramics

Total

Other

Total

Adjustments

Consolidatedii) Geographic information
Information about geographic areas as of and for the years
ended March 31, 2017 and 2016 was as follows:

89 $ 175,009–
180,241$– $ 175,009–
180,241

324,33018–

324,357

324,357¥ 318,149–
318,149¥ 57,988¥ 478,647¥ 19,449 ¥31,855––
19,44931,855¥ (4,842) ¥ 400¥30,246 ¥53,603¥ 51,305–
51,305¥ (4,441)¥83,849¥369,454–
369,454¥ 53,546¥562,497¥3,464–
3,464¥ 49¥ 1,304¥ 372,919–
372,919¥ 53,595¥ 563,801

¥–
–
–
¥–
¥–

¥ 372,919–
372,919¥ 53,595¥563,801¥ 17,158
20,187¥¥10–¥ 19,601
20,187¥––¥ 19,601
20,1872

36,328–36,32827,577¥322,856–
322,856¥ 71,139¥453,261

308–¥ 2,123–¥ 2,431–¥ 19,590
20,187

2,364

6,383

8,747

36,325¥23,828 ¥32,802––
23,82832,802¥ (7,116) ¥ 2,419¥ 39,799 ¥ 31,835¥ 14,857–¥ 1,061
2,427

37,682

4,110¥¥56,631–
56,631¥ (4,697)¥ 71,634¥379,487–
379,487¥ 66,442¥524,896

905–¥ 1,966
2,427¥ 16,823
2,427

3,537

7,647

45,330¥3,785–3,785¥ (158)¥1,206¥¥383,272–
383,272¥ 66,284¥ 526,103

¥–
–
–
¥–
¥–

¥383,272–
383,272¥ 66,284¥ 526,103

10–¥ 16,834
2,427

¥–
–

¥ 16,834
2,427

845,339–45,339$173,652 $284,420––
173,652 284,420$ (43,232) $ 3,571$270,054 $478,598$458,080 $3,298,696 $30,929 $3,329,634––––
458,080 3,298,696 30,929
3,329,634$ (39,652) $ 478,089 $ 438 $ 478,527$748,652 $5,022,295 $ 11,643 $5,033,938$– $3,329,634––– 3,329,634$– $ 478,527$– $5,033,938

Thousands of
U.S. dollars
2017

Property, plant and equipment:Japan¥146,415 ¥133,597
Other area
34,88634,876¥181,302 ¥168,473$1,307,277
311,482$1,618,768

Millions of yen
2017
2016
Operating revenue - net sales:Japan¥ 61,947 ¥ 63,015
North America
104,357
111,965
Europe96,17095,861
Asia
70,10971,470
Other area
40,33440,958¥372,919 ¥383,272$ 553,098
931,759
858,661
625,973
360,125$3,329,634(e) Information about impairment of fixed asset bybusiness segment
Information about impairment of fixed assets is presented in (c)Information about reportable segment profit and loss, segment
assets and other material items.

(f) Information about goodwill as of and for the years ended March 31, 2017 and 2016 was as follows:

Automotive
components

Reportable segments
Technical ceramics
Total Technical
Semiconductor Ceramics
ceramics

Total

Other

Total

Adjustments

Consolidated

Millions of yen
March 31, 2017
Amortization
Balance
March 31, 2016
Amortization
Balance

¥ 910
–

¥–
–

¥153
460

¥153
460

¥1,064460¥––¥1,064460¥––¥1,064
460

¥ 757
8,758

¥–
–

¥153
614

¥153
614

¥ 910
9,372

¥–
–

¥ 910
9,372

¥–
–

¥ 910
9,372

$–
–

$9,5004,107$––$9,500
4,107

Thousands of U.S. dollars
March 31, 2017
Amortization
Balance$8,125–$––$1,366
4,107$1,366
4,107$9,5004,107

Note: For the year ended March 31, 2017, the NGK Spark Plug Group recognized impairment loss on goodwill in the amount of ¥7,513 million ($67,080 thousand) in the
Automotive components segment.

(g) Information about negative goodwill by business segment
No items to report.

(a) Basis for calculation of net assets per share

17. Information on Related Parties

Total net assets

No items to report.

Amount deducted from total
net assets

18. Per Share Information$2,840,616–
2,840,616$ 517,750$4,273,634

Millions of yen
2017
2016

iii) Information by major customer
The NGK Spark Plug Group had no single external customer
which accounted for more than 10% of net sales for theyears ended March 31, 2017 or 2016.

Basic and diluted net assets per share and earnings per sharefor the years ended March 31, 2017 and 2016, were as follows:

Basic net assets per share
Basic earnings per share

67

78,098

174,911 $180,241

Thousands of
U.S. dollars
2017

Thousands of U.S. dollars
For the year 2017:
Operating revenue - net sales:
External customers
Intersegment sales
Total net sales
Segment income (loss)
Segment assets$ 21,705 $–Note: Net sales are categorized by country or region based on the location of thecustomer.

(d) Related informationi) Information on products and services
Information on products and services is the same as that
already reported in (c) Information about reportable segment
profit and loss, segment assets and other material items.
Therefore, the information is omitted here.

Millions of yen

For the year 2016:
Operating revenue - net sales:
External customers
Intersegment sales
Total net sales
Segment income (loss)
Segment assets
Other items:
Depreciation
Impairment loss on fixed assets
Increase in property, plant andequipment and intangible assets

2,750 $ 18,955––

Notes: 1) From the year ended March 31, 2017, the assignment of components for semiconductor manufacturing equipment has been changed from the “Semiconductor” tothe “Ceramics” subsegment. Segment information for the fiscal year ended March 31, 2016, including the above notes, is based on the reportable segments for the
fiscal year ended March 31, 2017.
2) The “Other” segment includes business such as material sales, welfare program services and transportation not included in reportable segments.

16. Segment Information

For the year 2017:
Operating revenue - net sales:
External customers
Intersegment sales
Total net sales
Segment income (loss)
Segment assets
Other items:
Depreciation
Impairment loss on fixed assets
Increase in property, plant andequipment and intangible assets

$

Yen
2017
2016
¥1,660.06 ¥1,557.16
119.44141.60U.S. dollars
2017$14.82
1.07

of which, noncontrollinginterests
Net assets allocated tocommon stock
Number of shares of common
stock outstanding at fiscal
year end used in calculationof net assets per share(thousands)

Millions of yen
2017
2016
¥354,710 ¥341,044

Thousands of
U.S. dollars
2017$3,167,054

2,404

2,174

21,464(2,404)(2,174)(21,464)

352,305

338,870

3,145,580

212,224

217,621

1,894,857

68

Independent Auditor’s Report(b) Basis for calculation of earnings per share
Thousands of
U.S. dollars
2017

Millions of yen
2017
2016
Profit attributable to owners of
the parent¥ 25,602
Amount not attributable tocommon stock shareholders–
Profit attributable to common
stock owners of the parent
25,602
Weighted average number ofshares of common stock(thousands)
214,349¥ 30,815$ 228,589––

30,815228,589

217,622

1,913,830

Year ending
March 31,
2019
2020
2021
2022

Long-term loans payable
Millions Thousands ofof yenU.S. dollars
9,962
88,946
9,924
88,607
4,962
44,304¥8,000$71,429

Lease obligations
Millions Thousands ofof yenU.S. dollars
39
348
21
188
16
143
¥ 2
$ 18

21. Asset Retirement Obligation
Information is omitted due to immateriality.

Note: As the Company had no dilutive shares at March 31, 2017 or 2016, theCompany has not disclosed diluted net income per share for the years
ended March 31, 2017 and 2016.

19. Significant Subsequent Events
No items to report.

20. Borrowings(a) Bonds payable at March 31, 2017 and 2016, comprised
the following:

0.391% unsecured bonds due
September 2018
0.296% unsecured bonds
due October 2020
Total

Millions of yen
2017
2016

Thousands of
U.S. dollars
2017¥25,000¥25,000$223,214

30,000¥55,000

30,000¥55,000

267,857$491,071

Note: The aggregate annual maturities of bonds payable after March 31, 2017, areas follows:Year ending March 31,
2018
2019
2020
2021
2022

Millions of yen–
25,000–30,000¥–Thousands of
U.S. dollars–
223,214–
267,857$–(b) Loans payable and lease obligations at March 31, 2017and 2016, comprised the following:Thousands of
U.S. dollars
2017

Millions of yen
2017
2016
Short-term loans payable withinterest rate of 1.94%
Current portion of long-termloans payable
Current portion of leaseobligations
Long-term loans payable(except portion due within
one year) with interest rateof 0.16%
Lease obligations (except
portion due within one year)
Other
Total

11

$100,527

–

–

–

87

174

777

32,84824,859293,28680–¥44,275

167–¥25,212714–$395,313¥11,259¥

Notes: 1) Interest rates shown are weighted average interest rates for the balance
outstanding at March 31, 2017.
2) Average interest rates for lease obligations are omitted because leaseobligations include assumed interest amounts.
3) The aggregate annual maturities of long-term loans payable and leaseobligations (except portion due within one year) after March 31, 2017,
are as follows:69

70

About Us

About Us

Corporate Profile

Organization

Corporate Data

Number of Shares and Shareholders

NGK SPARK PLUG CO., LTD.
Headquarters
14-18 Takatsuji-cho, Mizuho-ku,
Nagoya 467-8525, Japan
Established
October 1936

Secretarial Office

Audit &
Supervisory
Board Member

Board ofDirectors

Corporate
Strategy Gr.

Marketing Div.

Corporate Planning Dept.

Strategic Marketing Dept.

Risk Management Dept.

SCM Div.

Public Relations Dept.

SCM Strategy Dept.

Working Styles
Reforming Office

Logistics Dept.

Corporate
Officers’Meeting

Internal
Auditing Office

Corporate
Administration Gr.
General Administration Dept.
Corporate Legal Dept.
Human Resources Dept.
Accounting and Finance Dept.

Engineering R&D Gr.

(Number of employees)

15,000Sensor Div.
Glow Plug Div.

Planning Control Office

Product Technology Div.
Testing Technology
Development Dept.
Production Design
Control Dept.
Production Technology
Development Dept.
Production Technology
1 Dept.
Production Technology
2 Dept.
Production Technology
3 Dept.
Production Technology
4 Dept.
Operations Management
Development Dept.

Shareholder registryadministrator
Accounting auditor
Number of shareholders

Major Shareholders
Name of shareholders

390,000,000
223,544,820
First section of the Tokyo
Stock Exchange andNagoya Exchange
Mitsubishi UFJ Trust andBanking Corporation
KMPG
13,110Cutting Tools Div.
Fuel Cell Div.

Breakdown of shareholders by type
Government and local public organizations
0.01% (14 thousand shares)

Individuals and Others
13.34%(29,812 thousand shares)

Financial Institutions
46.64%(104,210 thousand shares)

Business Development Div.
Medical Div.

Breakdown ofshareholders
by type

Strategic Engineering
Planning Dept.

14,524 14,926

13,197
12,563 12,760

Intellectual Property Dept.
MP Dept.
FD Dept.
LFP Office

10,000

Facility Engineering Div.
Planning Control Dept.

Shares held Ownership(thousands)
ratio

The Dai-ichi Life Insurance Company, Limited

16,752

7.49

The Master Trust Bank of Japan, Ltd. (Trust Account)

13,938

6.23

Meiji Yasuda Life Insurance Company

13,794

6.17

Japan Trustee Services Bank, Ltd. (Trust Account)

11,516

5.15

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

6,541

2.93

STATE STREET BANK AND TRUST COMPANY

6,358

2.84

National Mutual Insurance Federation ofAgricultural Cooperatives

6,138

2.75

The Master Trust Bank of Japan, Ltd. (for Toyota
Motor Corporation)

3,929

1.76

STATE STREET BANK AND TRUST COMPANY
505223

3,710

1.66

Japan Trustee Services Bank, Ltd. (Trust Account 9)

3,633

1.63

AEC Div.
Industrial Ceramics Div.

Information Systems Dept.

Number of employees at work
(Consolidated)

Spark Plug Div.

President
Corporate
Management
Committee

Number of Employees
Non-Consolidated: 5,719 (March 2017)
Consolidated: 14,926 (March 2017)

Business Management &Administration Dept.

Strategic Human
Resources Dept.

Meetings
Committees

Paid-in Capital¥47,869 million

Total number of authorized
share
Total number of issued
sharesListed market

Business PlanningManagement Div.

Audit &
Supervisory
Board

Stock Information

Foreign Corporation
32.45%(72,501 thousand shares)

MONOZUKURI Education &Energy Conservation Dept.
Environment & Safety
Management Dept.

Other Corporations
6.18%(13,804 thousand shares)

As of March 31, 2017, the Company holds 11,320 thousand shares of treasury stock
other than those listed above.
Securities Companies
1.38%(3,074 thousand shares)

Plant Engineering Dept.
Machinery Production &Maintenance Dept.

5,000

0

Machinery Design Dept.
Corporate Quality
Management Div.

2013/3

2014/3 2015/3 2016/3

2017/3

Stock price/trading volume
Stock price of NGK SPARK PLUG

The Nikkei 225

Trading volume(Yen)

The Nikkei 225
(Yen)

4,000

25,0003,200

20,0002,400

15,0001,600

10,000800

5,000

Quality Assurance Dept.
TQM Promotion Dept.

Procurement Div.
Strategic Planning Office
Supplier Relations &Development Office
Procurement Dept.

Automotive
Components Sales &Marketing Div.
Sales Planning &Marketing Dept.
OEM Sales &Marketing Dept.
Aftermarket Sales &Marketing Dept.
Aftermarket Technical
Service Dept.

00(Million shars)
5

4Tokyo Sales Dept.

3

2

1

0

71

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2011
2013
2014
2017
2015
2016
2012

(month)(Year)

72

NGK SPARK PLUG CO., LTD.
14-18 Takatsuji-cho, Mizuho-ku, Nagoya 467-8525
http://www.ngkntk.co.jp/
This is our Communication on Progressin implementing the principles of theUnited Nation’s Global Compact andsupporting broader UN goals.

Public Relations Dept., Corporate Strategy Gr.
Phone: 81-52-872-5896 Fax: 81-52-872-5951
CSR Promotion, Risk Management Dept.,
Corporate Strategy Gr.
Phone: 81-52-872-6248 Fax: 81-52-872-5999

COMMUNICATION ON
PROGRESSWe welcome feedback on its content.