Annual Report 2015
Year ended March 31, 2015

TERAOKA SEISAKUSHO CO., LTD.

Teraoka Seisakusho Co., Ltd.

15

PROFILE
Since its establishment in 1921, Teraoka Seisakusho Co., Ltd. has developed into aleading manufacturer of highly functional packing, electrical insulation, electronicequipment, other industrial and general home-use adhesive tapes.
Our Company has formulated a new medium-term management plan spanning
April 2015 to March 2018 to further promote improvement of our corporate value.

New Medium-term Management Plan

Teraoka 100 Phase 1
1 Corporate Philosophy

Challenge the global market with advanced adhesive technologies.

2 Management Plan Vision

As a strong company stably generating a consistent consolidated operating profit, we continuously strive to improve
corporate value through returning to the roots of corporate management, and promotion and execution of companywide progress and reform. We will build a solid management foundation to secure a great leap during the next
medium-term management plan (Teraoka 100 Phase 2), which will end in 2020 – the 100th anniversary of the Company’s establishment.

3 Teraoka 100 Phase 1 Priority Initiatives and Goals

The business environment the Company is operating in during this business plan period, was determined to be unpredictable and fluid, was not greatly influenced by external factors such as business environment, and with realizing
stable operating results as the most important goal for this period, strengthening/enhancing management foundation
and building a business model that makes full use of knowledge will be the base for achieving this goal. Further, by
utilizing the strengthened/enhanced management foundation, we will build up the strength required for this large
leap during the next medium-term management plan (Phase 2).

4 Priority Performance Indicators

The image of consolidated sales operating income ratio
Consolidated sales operating income ratio
10%
8%
6%
4%
2%
0%

FY 2015

2016

2017

2018

Teraoka 100 phase 1Start

5 Corporate Slogan
We want to bring shiny, new technology into people’s lives.

10

CONTENTS
Consolidated Financial Highlights............................ 1
To Our Stockholders.................................................. 2
Review of Operations ............................................... 4
Consolidated Five-year Summary............................. 6
Consolidated Financial Statements ......................... 7
Company Data ........................................................... 27
Teraoka Seisakusho Co., Ltd.
Investor Information ................................................. 29

2019

2020

Teraoka 100 phase 2

2021

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FINANCIAL HIGHLIGHTS

For the years ended March 31,
Thosands of
U.S. dollars

Millions of yen

2015

2014

2015

¥22,477¥20,529$186,884

Operating Income (Loss)

1,024

(105)

8,517

Income (Loss) before Income Taxes

1,902

(794)

15,819Net Income (Loss)

1,025

(924)

8,521

Total Assets

35,331

32,596

293,765

Net Assets

28,26826,277

235,038

Operating Income (Loss) to Net Sales

4.6

(0.5)

Equity Ratio

80.0

80.6

Return on Average Assets (ROA)

3.0

(2.8)

Return on Average Stockholders’ Equity (ROE)

3.8

(3.5)

Net Sales

Ratio (%)

Per Share

Yen

U.S. dollars

Net Income (Loss)¥38.92¥(35.09)$0.32

Cash Dividends

10.00

10.00

0.08

The U.S. dollar amounts in this annual report are translated from yen, for convenience only,at the rate of ¥120.27 = US$1, the rate prevailing on March 31, 2015.

Net Sales

Net Income (Loss)(¥ billions)

Total Assets(¥ millions)(¥ billions)
40

1,200

30

1,000
30
800

20

20

600

10

400
10
200

0

11

12

13

14

15

0

12
11

14
13

15

0

11

12

13

14

15

Teraoka Seisakusho Co., Ltd.

1TO OUR STOCKHOLDERS

Result for FY 2015

Future Focus

Fiscal year 2015, the year ended March 31, 2015 marks

Regarding the future economic situation of Japan, in

our 105th business term.

addition to continued financial and economic measures
implemented by the government, while business confi-

During the current consolidated accounting year, ourdence is anticipated to remain steady, for example with

Corporate Group has made increased efforts to enhance

expectations for improvement of corporate capital invest-

profits such as expanding and diversifying sales channels

ment, we also recognize that the unpredictability of theby strengthening proposal-based business and develop-

situation continues - for example, the opacity of personaling new clients, ensuring opportunity gain through fixing

consumption due to the increase in growing defensive

an efficient inventory sales system, reducing production

consciousness among consumers and the concern overcosts along with improving yield through constant review

the economic slowdown of the European economy andof the production process, making efforts for the former

emerging economies.

items with structuring more advanced quality control andguarantee systems etc.

Under such circumstances, our Corporate Group has
improved the operations of the Indonesian manufactur-

Further, the Indonesian manufacturing subsidiary,

ing subsidiary, including production efficiency and quality,

which is entering its third year of operation has greatly in-

and apart from continuously striving to improve productcreased its production capacity, and we are finally seeing

quality, by continuing to strengthen our business base byconsistent profit each month.

cultivating our existing customer base and developing new

The consolidated net sales for this term were ¥22,477

demand both domestically and abroad, we have been

million (US$186,884 thousand), a 9.5% increase over theable to improve our consolidated base profit level throughprevious term. The consolidated operating loss for thepromoting rationalization and optimization of the manu-

previous term was ¥105 million, but this term shows anfacturing process, and enhancing the management base.

operating profit of ¥1,024 million (US$8,517 thousand).

Further, we have placed importance on the development

Due to the foreign exchange profit calculated at the endof personnel specialized in sales, manufacturing, develop-of the term, with the weak yen, consolidated income

ment and management as a priority and we are develop-

before income taxes was ¥1,902 million (US$15,819

ing our human resources with an eye on the future.

thousand). As a result, consolidated net income for theprevious term was a consolidated loss of ¥924 million,

Problem Prevention

but this term a consolidated net income of ¥1,025 million

The Corporate Group considers the following issues to be(US$8,521 thousand) has been posted.

the most important challenges.

The end of term dividend was distributed at ¥5.00(US$0.04) per share and the mid-term dividend preceding
it was also ¥5.00 (US$0.04) per share for a total of ¥10.00

1 Enhancing Personnel Training
The Corporate Group recognizes that the source of busi-(US$0.08) per share in annual dividends.

ness competitiveness that is not influenced by the dramatically changing economic environment is found in people,

2

Teraoka Seisakusho Co., Ltd.

ating efficiency, we intend to further increase the profit
contribution as part of the consolidated base.
3 Enhancing Quality Management and Assurance
Systems
Along with training someone to watch over productquality and establishing a system that can respond to theindustry with the highest product quality control levels,
we will improve the quality of our Company’s products
through the establishment of appropriate quality risk
management.
4 Unique Product Development and Intellectual
Property
We will develop new technology and new products withKeishiro Teraoka,
President

originality and strong characteristics, backed by equipment and evaluation technology, and along with prompt
introduction onto the market, we will implement an aggressive intellectual property strategy.

and enhancement of human resource management tomake the most of the abilities of each employee is necessary in all sales, manufacturing, R&D and management
departments. Along with flexibly responding to changes,
we will create a business model and new systems for
conducting business and in order to promote reform, we

We would like to take this opportunity to express our
sincere gratitude to our shareholders for their continued
patronage and support.
June 23, 2015

are preparing a system which allows the company andemployee to grow together.
2 Enhancing Operations of IndonesianManufacturing Subsidiaries
Our Indonesian manufacturing subsidiary is now in a situation where operating efficiency has greatly improved andKeishiro Teraoka,

it is now feasible for it to be profitable, but through pro-President

motion of a management focus that unifies the subsidiarywith the parent company for the expansion of production
item lines, quality improvement and improvement of oper-

Teraoka Seisakusho Co., Ltd.

3REVIEW OF OPERATIONSIn order to continue developing products with high-performance and high-added value that meet the market needs, ourCorporate Group’s R&D plans to revitalize R&D activity through sophistication of the market-orientated development system and improvement of joint development with end users.
New achievements in the current accounting year include the market introduction of single and double sided tapefor parts in smartphones, tablets and PCs etc., high temperature heat-resistant tape for parts manufacturing, various
electromagnetic shielding material, thick, heat-conductive tape, double sided paper tape which considers recyclability orsick house syndrome (or volatile chemicals) measures, strong adhesive tape for affixing automobile parts, and tape for the
manufacture of automobile parts, and we anticipate product development over a wide range of industrial fields.
Total R&D costs in this consolidated accounting period were ¥832 million (US$6,925 thousand) and the consolidated
sales ratio was 3.7%. This is a decrease of 0.5 points below the previous term.
Consolidated sales for the corporate group was ¥22,477 million (US$186,884 thousand), which are broken down by
product segment below.

Packing Tapes
Sales of Packing Tapes(¥ billions)
5

4.4
4

4.1

4.1

4.1
3.7

3

2

1

The Packing and Packaging Tape segment has been impacted by the risein consumption tax in April of last year, slowing orders in the second
quarter and while there was a comeback in the third quarter, it was notenough to make up the lost business.
Consolidated sales for this product segment decreased by 7.6%
under the previous term to ¥3,749 million (US$31,169 thousand). This
segment accounts for 16.7% of total consolidated sales and decreased by
3.1 points below the previous term.

0

‘11

‘12

‘13

‘14

‘15

Sales of Electrical Insulation andElectronic Equipment Tapes(¥ billions) 12.1
12

11.9
10.1

11

9.3

9.3

‘13

‘14

10
8
6
4
2
0

‘11

‘12

‘15

Sales of Other Industrial Tapes

Electrical Insulation and Electronic Equipment Tapes(¥ billions)
8

6.6

7.1
6.1

6.5

6.8

6

4

2

0

‘11

4

‘12

Teraoka Seisakusho Co., Ltd.

‘13

‘14

‘15

With regard to the Electrical Insulation and Electronic Equipment Tapes
segment, beyond significant results from efforts to develop new customers, due to improved exports thanks to the weak yen, we have newly
adapted to mobile-related devices mainly for overseas users and there
has been positive growth trends in automobile-related tape exports.
As a result, consolidated sales for this product segment greatly
increased by 27.6% over the previous term to ¥11,928 million (US$99,175
thousand). This segment accounts for 53.1% of consolidated sales, andhas increased by 7.6 points over the previous term.

BREAKDOWN OF SALES BY CATEGORY

53.1% Electrical Insulation and16.7% Packing Tapes

Electronic Equipment Tapes

Olive cloth tapes● Kraft paper tapes●●●

Polypropylene film adhesive tapes●●●

Double-coated adhesive tapes

Corrosion-proof tapes● Masking cloth tapes●●

Acetate cloth adhesive tapes
Combination adhesive tapes●

Kapton film adhesive tapes
Nomex adhesive tapes●

Glass cloth adhesive tapes●

EMI/RFI shielding tapes●

Silicone rubber adhesive tapes●

30.2% Other Industrial Tapes

Polyester film adhesive tapes

R

R

Surface protection tapes

CHANGES IN OVERSEAS SALES
Overseas Sales(¥ billions)
GEOGRAPHICALSALES MARKETS
10

Asia

29.0%
8

8.17
7.46

Japan
6.01

6

6.07

69.3%

6.29

Other Industrial Tapes

4

2

North America
0

’11

’12

1.0%

’13
Europe

’14

’15

0.5%

Other areas

0.2%

GEOGRAPHICAL SALES MARKETS
Asia

34.2%

Japan

63.7%

While the Other Industrial Tape segment was impacted by last-minutedemand before the consumption tax increase and the subsequent
fall in demand, and there was a decline in demand due to the poor
climate during the beginning half of the period, due to an influx of inquiries for architectural curing tape in the latter half of the period andnew application developments of polyethylene cloth tape as a main
product, etc., consolidated sales of this product segment were ¥6,800
million (US$56,540 thousand), which is a decrease of 4.5% from theprevious period. However, this decrease was because of the strategic
move of some designated items to the Electrical Insulation and Electronic Equipment Tapes, and there was actually an increase of 1.9%
from the previous period. This segment accounts for 30.2% of total
consolidated sales, which is a decrease of 4.5 points compared to theprevious term.

Overseas Sales
North America

1.2%

Europe0.7%

Other areas

0.2%

Overseas sales in the year under review have significantly exceeded
the previous term in the Electrical Insulation and Electronic Equipment
Tape segment by 41.0%, but in other product segments, Packing Tape
has increased only slightly by 0.9%, and the Other Industrial Tapesegment has significantly decreased by 53.1%. Gross export value was¥8,167 million (US$67,906 thousand), a 29.8% increase over the previous term. Gross export value makes up 36.3% of total consolidated
sales, and has increased 5.6 points compared to the previous term.

Teraoka Seisakusho Co., Ltd.

5

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FIVE-YEAR SUMMARY

Thousands of
U.S. dollars

Millions of yen

2011

2012

2013

2014

2015

2015

¥23,137¥20,333¥19,935¥20,529¥22,477$186,884

598

(168)

(92)

(105)

1,024

8,517

1,007

(119)

674

(794)

1,902

15,819

649

(138)

263

(924)

1,025

8,521

Total Assets

32,33030,43433,64732,59635,331

293,765

Net Assets

24,03523,83826,67026,27728,268235,038

Operating Income to Net Sales

2.6

(0.8)

(0.5)

(0.5)

4.6

Equity Ratio

74.3

78.3

79.3

80.6

80.0

Return on Average Assets (ROA)

2.0

(0.4)

0.8

(2.8)

3.0

2.7

(0.6)

1.0

(3.5)

3.8

Years ended March 31

Net Sales
Operating Income (Loss)
Income (Loss) before Income Taxes
Net Income (Loss)

Ratio (%)

Return on Average
Stockholders' Equity (ROE)Per Share

Yen

Net Income (Loss)¥32.91¥(7.02)¥9.99¥(35.09)¥38.92$0.32

Cash Dividends

10.00

10.00

10.00

10.00

10.00

0.08

The U.S. dollars are translated at the rate of ¥120.27 per US$1, prevailing on March 31, 2015.

6

U.S. dollars

Teraoka Seisakusho Co., Ltd.

Consolidated Financial Statements
Fiscal Year 2015
Year ended March 31, 2015

Teraoka Seisakusho Co., Ltd.

7

FINANCIAL REVIEWNet Assets(¥ billions)
30

20

10

0

11 12 13 14 15

Net Income (Loss)
per Share (Yen)
40

30

20

10

0

12
11

14
13

15

Cash Dividends
per Share (Yen)
15

10

5

0

8

11 12 13 14 15

Teraoka Seisakusho Co., Ltd.

Business Performance
Japan’s economy in the fiscal year under review, other than seeing an improvement corporate
performance focusing on export-related business, due to the effects of the depreciating yenthat has resulted from the government’s active financial and economic measures, there has been
Equity Ratioa wide(%) penetration in the economy overall of the effects of resource depreciation, especiallycrudeoil, moving the economy into gradual recovery. However, while some sectors showed an
80
increase in wages, centering on large companies, the slackened individual consumption following the increase in consumption tax, the European economy’s inability to escape instability, theloss of benefits in the U.S. economy which is steadily recovering, and the slowdown of growth60
in emerging economies such as China and India, means that there is still uncertainty for the
future.
Under these circumstances, our Corporate Group is committed to efforts for the expansion
40
and diversification of sales channels, improvement of the production process, cost reduction
and further improved quality control. Also, the operating efficiency of the Indonesian manufac20turing subsidiary, which has celebrated its third year, has increased substantially, and monthly
profitability is now feasible.
As a result, consolidated net sales for this term were ¥22,477 million (US$186,884 thousand),a 9.5% increase from the previous term. The consolidated operating loss for the previous
011was
12¥10513 million,
14 15but this term a consolidated operating profit of ¥1,024 million (US$8,517
term
thousand) was posted. In addition, the consolidated loss before income taxes of the previous
Returnon Average
periodwas ¥794
million, but this fiscal period the consolidated income before income taxes wasAssets (ROA) (%)¥1,902 million (US$15,819 thousand). Consolidated net income came to ¥1,025 million3(US$ 8,521 thousand). The previous period had a consolidated net loss of ¥924 million.
Segment Information
The Packing Tape segment has been impacted by the rise in consumption tax in April of last
2year, slowing orders in the second quarter and despite a comeback in the third quarter, it was
not enough to make up the lost business. Consolidated sales for this product segment was¥3,749 million (US$31,169 thousand), which is a decrease from the previous period of 7.6%.
This segment accounts for 16.7% of total consolidated sales and decreased by 3.1 points below
1the previous term.
With regard to the Electrical Insulation and Electronic Equipment Tapes segment, beyond
significant results from efforts to develop new customers, due to improved exports thanks to
the weak12yen, we14have newly adapted to mobile-related devices mainly for overseas users and0
there
15 growth trends in automobile-related tape exports. The consolidated
13 positive
11has beensales for this product segment was ¥11,928 million (US$99,175 thousand), which was an increase of 27.6% over the previous period. This segment accounts for 53.1% of total consoliReturn on Average
dated sales and has increased (%)
by 7.6 points over the previous term.
Stockholders' Equity (ROE)
While the Other Industrial Tape sector was impacted by last-minute demand before the4
consumption tax increase and the subsequent fall in demand, and there was a decline in demand due to the poor climate during the beginning half of the period, due to an influx ofinquiries for architectural curing tape in the latter half of the period and new application devel3
opments of polyethylene cloth tape as a main product, etc., consolidated sales of this productsegment were ¥6,800 million (US$56,540 thousand), which is a decrease of 4.5% from theprevious period. This segment accounts for 30.2% of consolidated sales and decreased by 4.5
2
points over the previous term. This is due to the strategic move of some special items to theElectrical Insulation and Electronic Equipment Tapes, and there was actually an increase of 1.9%
from the last period.
1
On one hand, overseas sales have significantly exceeded the previous term in the ElectricalInsulation and Electronic Equipment Tape segment by 41.0%, but in other product segments,
0

12
11

14
13

15

Packing Tape has increased only slightly by 0.9%, and the Other Industrial Tape segment has
significantly decreased by 53.1%. Gross export value was ¥8,168 million (US$67,912 thousand),a 29.8% increase over the previous term. Gross export value makes up 36.3% of total consolidated sales, and has increased 5.6 points compared to the previous term.

Equity Ratio
(%)
80

60

40

20

15

0

s)

11 12 13 14 15

Return on Average
Assets (ROA) (%)
3

2

1

15

15

0

12

14
15

13

11

Return on Average
Stockholders' Equity (ROE) (%)
4

3

Cash Flows
Capital from operating activities increased by ¥842 million (US$7,004 thousand). This was anincrease on the previous year’s consolidated accounting of ¥349 million. This increase in thisterm was mainly due to an increase in current net profit before taxes and other adjustments.
Cash flow used for investment activities was ¥773 million (US$6,427 thousand). Even in theactivities of the previous consolidated accounting term, ¥363 million was used for investment.
The main factor for this in the current term was expenditures for acquisition of fixed assets.
There was a ¥638 million (US$5,310 thousand) decrease in capital from financial activities.
There was a decrease of ¥763 million in used capital from the previous consolidated accounting
year. The main factor for a decrease this term was the repayment of long-term borrowings.
From these activities, consolidated cash and cash equivalents for end of year consolidated
accounting were ¥6,036 million (US$50,185 thousand), a decrease of ¥325 million (US$2,702
thousand) compared to the previous year end consolidated accounting.
Dividends
TERAOKA considers the payment of dividends to its shareholders as one of our most importantbusiness issues, and we operate under a basic policy of continued stable dividend payments.
The end of term dividend was ¥5.00 (US$0.04) and combined with the previously distributed interim dividend of ¥5.00 (US$0.04) per share, the total annual dividends were ¥10.00(US$0.08) per share.

2

1

0

Financial Position
Total assets for the end of year consolidated accounting increased by 8.4% or ¥2,735 million(US$22,738 thousand) over the previous end of year consolidated accounting to ¥35,331 million(US$293,765 thousand).
Total current assets for the end of year increased by 6.1% or ¥1,044 million (US$8,679
thousand) over the previous end of year consolidated accounting to ¥18,101 million (US$150,501
thousand). This was mainly due to an increase in inventory.
Total fixed assets for the end of year consolidated accounting increased 10.9% or ¥1,691
million (US$14,058 thousand) over the previous end of year consolidated accounting to a totalof ¥17,230 million (US$143,264 thousand). This was mainly due to the market value increase ininvestment securities.
Total liabilities for the end of year consolidated accounting increased 11.8% or ¥744 million(US$6,185 thousand) from the previous end of year consolidated accounting to ¥7,063 million(US$58,727 thousand). Out of this, total current liabilities increased by 4.1% or ¥231 million(US$1,920 thousand) from the previous end of term to ¥5,905 million (US$49,097 thousand).
This was mainly due to an increase in accrued tax payable. Total long-term liabilities for theend of the term increased 79.5% or ¥513 million (US$4,265 thousand) for the previous end ofyear consolidated accounting to ¥1,158 million (US$9,630 thousand). This was mainly due to anincrease in deferred tax liability following a market value increase in investment securities.
Total net assets for the end of year consolidated accounting increased 7.6% or ¥1,991 million (US$16,553 thousand) above the previous end of year consolidated accounting to ¥28,268
million (US$235,038 thousand). This was mainly due to an increase in retained earnings.
The result of these figures is a capital-to-asset ratio of 80.0%, a decrease of 0.6 points
from the previous term.

12
11

14
13

15

Teraoka Seisakusho Co., Ltd.

9

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSMarch 31, 2015 and 2014

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥  6,410¥  6,440$  53,296

6,010
(8)
4,529
330
830
18,101

5,968
(8)
4,027
292
338
17,05749,967(65)
37,6562,742
6,905
150,501

Less: Accumulated depreciation ����������������������������������������������������������������
Property,plant and equipment, net ������������������������������������������������������������

4,076
11,75324,788131
40,748(28,509)
12,2394,021
11,26824,25754
39,600(27,691)
11,90933,894
97,721
206,106
1,092
338,813(237,049)
101,764

Intangible Assets ������������������������������������������������������������������������������������������

438

192

3,646

Investments and Other Assets:
Investments in securities (Notes 2-b and 5) �����������������������������������������������
Deferred income taxes (Note 2-g) �������������������������������������������������������������
Net defined benefit asset ��������������������������������������������������������������������������
Other �������������������������������������������������������������������������������������������������������
Less: Allowance for doubtful accounts (Note 2-h) �������������������������������������
Total investments and other assets ������������������������������������������������������������

3,856
41
376
280
(0)
4,553

3,161
9
21
249
(2)
3,438

32,063
338
3,124
2,329
(0)
37,854

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

¥ 35,331¥ 32,596$ 293,765

ASSETS
Current Assets:
Cash and time deposits ����������������������������������������������������������������������������
Notes and accounts receivable:
Trade ����������������������������������������������������������������������������������������������������
Less: Allowance for doubtful accounts (Note 2-h) �������������������������������������
Inventories (Note 2-c) �������������������������������������������������������������������������������
Deferred income taxes (Note 2-g) �������������������������������������������������������������
Other current assets ���������������������������������������������������������������������������������
Total current assets ����������������������������������������������������������������������������

Property,Plant and Equipment (Note 2-d):Land ���������������������������������������������������������������������������������������������������������
Buildings ��������������������������������������������������������������������������������������������������
Machinery and equipment ������������������������������������������������������������������������
Construction in progress ���������������������������������������������������������������������������

The accompanying notes to consolidated financial statements are an integral part of these statements.

10

Teraoka Seisakusho Co., Ltd.

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent Liabilities:
Notes and accounts payable:
Trade ����������������������������������������������������������������������������������������������������
Short-term borrowings �����������������������������������������������������������������������������
Current portion of long-term borrowings �������������������������������������������������
Accrued income taxes �������������������������������������������������������������������������������
Accrued expenses �������������������������������������������������������������������������������������
Other current liabilities �����������������������������������������������������������������������������
Total current liabilities ���������������������������������������������������������������������

¥ 3,906
5
—
575
560
859
5,905

¥ 4,015
4
375
115
530
635
5,674

$ 32,476
40
—
4,783
4,658
7,140
49,097Long-term Liabilities:
Net defined benefit liability �����������������������������������������������������������������������
Deferred liabilities taxes (Note 2-g) �����������������������������������������������������������
Asset retirement obligations (Note 2-m) ����������������������������������������������������
Other �������������������������������������������������������������������������������������������������������
Total long-term liabilities �����������������������������������������������������������������

24
707
309
118
1,158

25
327
177
116
645

199
5,877
2,572
982
9,630

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

7,063

6,319

58,727NET ASSETSStockholders’ Equity:
Common stock: ����������������������������������������������������������������������������������������
Authorized: 80,000,000 shares
Issued:   ‌26,687,955 shares as of March 31, 2015 and26,687,955 shares as of March 31, 2014, respectively
Additional paid-in capital ��������������������������������������������������������������������������
Retained earnings �������������������������������������������������������������������������������������
Less: Treasury stock, at cost ����������������������������������������������������������������������
Total Stockholders’ equity ���������������������������������������������������������������

5,057

5,057

42,048

4,644
15,973(137)
25,537

4,644
15,251(137)
24,81538,613
132,804(1,140)212,325

Accumulated other comprehensive income
Unrealized gains on securities (Notes 2-b and 5) ���������������������������������������
Foreign currency translation adjustments (Note 2-j) �����������������������������������
Remeasurements of defined benefit plans ������������������������������������������������
Total accumulated other comprehensive income �����������������������������
Total net assets �������������������������������������������������������������������������������

1,682
688
361
2,731
28,268

1,122
168
172
1,462
26,277

13,9895,721
3,003
22,713
235,038

Total liabilities and net assets ����������������������������������������������������������

¥35,331¥32,596$293,765

Teraoka Seisakusho Co., Ltd.

11

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the years ended March 31, 2015 and 2014

Thousands of
U.S. dollars

Millions of yen

2015¥22,477
16,882
5,595
4,571
1,024

2014
¥20,529
16,218
4,311
4,416
(105)

2015
$186,884
140,365
46,51938,002
8,517

78
(4)
(8)
986
—
47
(130)
(101)
10
878

72
(14)
(2)
611
(1,383)
—
—
—
27
(689)

647
(32)
(65)
8,198
—
389
(1,079)
(837)
81
7,302

Income (Loss) before income taxes ��������������������������������������������������������

1,902

(794)

15,819

Income taxes:
Current ����������������������������������������������������������������������������������������������������
Deferred ���������������������������������������������������������������������������������������������������
Total income taxes ���������������������������������������������������������������������������������
Net income (loss) before minority interests ��������������������������������������������

774
103
877
1,025

296
(166)
130
(924)

6,436
862
7,298
8,521

Net income (loss) �����������������������������������������������������������������������������������

¥ 1,025¥   (924)$  8,521

Net Sales ������������������������������������������������������������������������������������������������������
Cost of Sales ������������������������������������������������������������������������������������������������
Gross profit �������������������������������������������������������������������������������������������
Selling, General and Administrative Expenses �����������������������������������������������
Operating income (loss) �������������������������������������������������������������������������
Other Income and Expenses:
Interest and dividend income ��������������������������������������������������������������������
Interest expenses ��������������������������������������������������������������������������������������
Loss on disposal of property, plant and equipment ������������������������������������
Foreign exchange gains, net ���������������������������������������������������������������������
Impairment loss ����������������������������������������������������������������������������������������
Gain on sales of investment securities �������������������������������������������������������
Cost for asset retirement obligations (Note 2-m) ���������������������������������������
Early extra retirement payments ����������������������������������������������������������������
Other, net �������������������������������������������������������������������������������������������������Per Share
Per share of common stock
Net income (loss) ��������������������������������������������������������������������������������������Cash dividends �����������������������������������������������������������������������������������������

The accompanying notes to consolidated financial statements are an integral part of these statements.

12

Teraoka Seisakusho Co., Ltd.

Yen

¥38.92
10.00

U.S. dollars¥(35.09)
10.00

$0.32
0.08

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2015 and 2014

Thousands of
U.S. dollars

Millions of yen

2015¥1,025

2014¥(924)

2015$8,521

560
520
189
1,269

481
142
—
623

4,658
4,324
1,571
10,553Comprehensive Income ��������������������������������������������������������������������������������

2,294

(301)

19,074

Total comprehensive income attributable to:
Owners of the parent �������������������������������������������������������������������������������
Minority interests ��������������������������������������������������������������������������������������

2,294
—

(301)
—

19,074—

Net income (loss) before minority interests ��������������������������������������������
Other Comprehensive Income
Unrealized gains on securities �������������������������������������������������������������������
Foreign currency translation adjustments ��������������������������������������������������
Remeasurements of defined benefit plans, net of tax ��������������������������������
Total other comprehensive income ������������������������������������������������������������

The accompanying notes to consolidated financial statements are an integral part of these statements.

Teraoka Seisakusho Co., Ltd.

13

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended March 31, 2015 and 2014

Millions of yen
Accumulated Other Comprehensive Income

Stockholders’ Equity

Balance at April 1, 2013
Cumulative effects of changes
in accounting policies ����������
Balance at the beginning ofcurrent year reflected changes
in accounting policies �����������
Issuance of new shares �����������Cash dividends paid ���������������
Net income (loss) ��������������������
Purchase of treasury stock ������
Net changes of items otherthan Stockholders’ equity �����
Total changes of items during
the period ����������������������������
Balance at March 31, 2014 ��Balance at April 1, 2014 �������
Cumulative effects of changes
in accounting policies
Balance at the beginning ofcurrent year reflected changes
in accounting policies �����������
Issuance of new shares �����������Cash dividends paid ���������������
Net income (loss) ��������������������
Purchase of treasury stock ������
Net changes of items otherthan Stockholders’ equity �����
Total changes of items during
the period ����������������������������
Balance at March 31, 2015 ��CommonStock

Additional
Paid in
CapitalTreasury
Stock,
at CostRetained
Earnings¥5,057¥4,644¥16,438

—

—

—

—

5,057
—
—
—
—

4,644
—
—
—
—

16,438
—
(263)
(924)
—

—

—

—

—
¥5,057¥5,057—¥4,644¥4,644(1,187)¥15,251¥15,251

—

—

(40)

—

5,057
—
—
—
—

4,644
—
—
—
—

15,211
—
(263)
1,025
—

—

—

—

—
¥5,057—¥4,644762¥15,973

Foreign
Remeasure- Total AccumuCurrency
ments oflated Other
Translation
DefinedComprehenAdjustments Benefit Plans sive Income

Total
Stockholders’EquityUnrealized
Gains onSecurities¥(136) ¥26,003¥  641¥ 26¥—¥  667¥26,670

—

—

—

—

—

—

(136)
—
—
—
(1)

26,003
—
(263)
(924)
(1)

641
—
—
—
—

26
—
—
—
—

—
—
—
—
—

667
—
—
—
—

26,670
—
(263)
(924)
(1)

—

—

481

142

172

795

795

(1)
(1,188)¥(137) ¥24,815¥(137) ¥24,815

481¥1,122¥1,122

142
¥168
¥168

172
¥172
¥172

795
¥1,462¥1,462(393)¥26,277¥26,277

(40)

—

—

—

—

(40)

(137)
—
—
—
(0)

24,775
—
(263)
1,025
(0)

1,122
—
—
—
—

168
—
—
—
—

172
—
—
—
—

1,462
—
—
—
—

26,237
—
(263)
1,025
(0)

—

—

560

520

189

1,269

1,269

(0)
762
¥(137) ¥25,537

560¥1,682

520
¥688

189
¥361

1,269
¥2,731

2,031¥28,268

Total Net
AssetsThousands of U.S. dollars
Stockholders’ Equity
CommonStock

Balance at April 1, 2014 ������� $42,048
Cumulative effects of changes
in accounting policies ����������
—Balance at the beginning ofcurrent year reflected changes
in accounting policies ����������� 42,048
Issuance of new shares �����������—Cash dividends paid ���������������
—Net income (loss) ��������������������
—Purchase of treasury stock ������
—Net changes of items otherthan Stockholders’ equity �����
—Total changes of items during
the period ����������������������������
—Balance at March 31, 2015 �� $42,048

Additional
Paid in
CapitalRetained
Earnings$38,613 $126,802
—

(330)

38,613————

126,472—(2,189)
8,521
—

—

—

—
6,332
$38,613 $132,804

Accumulated Other Comprehensive Income

Treasury
Stock,
at CostUnrealized
Gains onSecurities$(1,137) $206,326$ 9,331$1,397$1,432$12,160$218,486

(330)

—

—

—

—

(330)

(1,137) 205,996———(2,189)
—
8,521
(3)
(3)

9,331
—
—
—
—

1,397
—
—
—
—

1,432
—
—
—
—

12,160————218,156—(2,189)
8,521
(3)

—

4,658

4,324

1,571

10,553

10,553(3)
6,329$(1,140) $212,325

4,658$13,989

4,324$5,721

1,571$3,003

10,553$22,713

16,882$235,038——

The accompanying notes to consolidated financial statements are an integral part of these statements.

14

Teraoka Seisakusho Co., Ltd.

Foreign
Remeasure- Total AccumuCurrency
ments oflated Other
Translation
DefinedComprehenAdjustments Benefit Plans sive Income

Total
Stockholders’EquityTotal Net
AssetsTeraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2015 and 2014

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥1,902¥ (794)$15,819

861
101
—
130
(47)
(2)
(207)
(78)
4
(726)

1,170
—
1,383
—
—
(2)
(133)
(72)
14
(537)

7,166
837
—
1,079
(389)
(16)
(1,722)(647)
32(6,037)

(22)
(415)
(156)
—
(151)
1,194
78
(4)
(426)
842

(161)
(576)
354
(53)
208
801
72
(14)
(510)
349

(184)
(3,452)(1,295)—(1,256)
9,935
647
(32)
(3,546)
7,004

Investing Activities:
Payment for purchases of property, plant and equipment �������������������������
Payment for purchases of intangible assets �����������������������������������������������
Payment for purchases of investment in securities �������������������������������������
Proceeds from sales of investment securities ���������������������������������������������
Decrease (increase) in time deposits ����������������������������������������������������������
Net cash used in investing activities ��������������������������������������������������

(184)
(278)
(3)
66
(374)
(773)

(195)
(154)
(2)
68
(80)
(363)

(1,527)(2,313)(21)
545(3,111)(6,427)

Financing Activities:
Dividends paid ������������������������������������������������������������������������������������������
Increase (decrease) in long-term borrowings ���������������������������������������������
Payment for acquisition of treasury stock ��������������������������������������������������
Net cash used in financing activities �������������������������������������������������

(263)
(375)
(0)
(638)

(263)
(500)
(0)
(763)

(2,189)(3,118)(3)(5,310)Effect of Exchange Rate Changes on Cash and Cash Equivalents ����������Net Increase (Decrease) in Cash and Cash Equivalents ���������������������������Cash and Cash Equivalents at Beginning of Period ��������������������������������Cash and Cash Equivalents at End of Period �������������������������������������������

244
(325)
6,361
¥6,036

134
(643)
7,004
¥6,361

2,031(2,702)
52,887$50,185

Operating Activities:
Income (Loss) before income taxes �������������������������������������������������������������������
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization ��������������������������������������������������������������
Early extra retirement payments ������������������������������������������������������������
Impairment loss �������������������������������������������������������������������������������������
Cost for asset retirement obligations �����������������������������������������������������
Gain on sales of investment securities ���������������������������������������������������
Increase (decrease) in allowance for doubtful accounts ��������������������������
Increase (decrease) in net defined benefit liability ����������������������������������
Interest and dividends income ���������������������������������������������������������������
Interest expenses �����������������������������������������������������������������������������������
Foreign exchange losses (gains) �������������������������������������������������������������
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable ��������������������������
(Increase) decrease in inventories �������������������������������������������������������
Increase (decrease) in notes and accounts payable �����������������������������
Increase (decrease) in accrued consumption taxes ������������������������������
Other, net ��������������������������������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������������������������
Interest and dividends income received �������������������������������������������
Interest expenses paid ��������������������������������������������������������������������
Income taxes (paid) refund �������������������������������������������������������������
Net cash provided by operating activities ����������������������������������������

The accompanying notes to consolidated financial statements are an integral part of these statements.

Teraoka Seisakusho Co., Ltd.

15

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2015 and 2014

1. Basis of Presenting Financial Statements
The accompanying consolidated financial statements of
TERAOKA SEISAKUSHO CO., LTD. (the “Company”) and its
subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different incertain respects as to application and disclosure requirements from International Financial Reporting Standards, andare compiled from the consolidated financial statements
prepared by the Company, as required by the Financial
Instruments and Exchange Law of Japan. However, certain
account balances, as disclosed in the basic consolidated
financial statements in Japan, have been reclassified to theextent deemed necessary to enable presentation in a form
which is more familiar to readers outside Japan.
The accounts of overseas consolidated subsidiaries are
based on their accounting records maintained in conformity with generally accepted accounting principles andpractices prevailing in the respective countries of domicile.
For the convenience of readers, the accompanying
consolidated financial statements are presented in U.S.
dollars by translating yen amounts at the rate of ¥120.27=
US$1, the prevailing exchange rate on March 31, 2015.

2. Summary of Significant Accounting Policies
a. Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and five subsidiaries,
TERAOKA SEISAKUSHO (Hong Kong) CO., LTD.,TERAOKA SEISAKUSHO (Shanghai) CO., LTD.,TERAOKA SEISAKUSHO (Shenzhen) CO., LTD.,
SHIN-EI SHOJI CO., LTD. and PT. TERAOKA SEISAKUSHOINDONESIA.
Significant inter-company balances, unrealizedinter-company profits and losses among the companies are entirely eliminated. The assets and liabilities of
the consolidated subsidiaries are incorporated into thefinancial statements at fair value and the difference
between net assets at fair value and investment
amounts are amortized by the straight-line method
over a period of five years.
The fiscal years of overseas subsidiaries end December 31. Overseas subsidiaries’ financial statements are
based on temporary settlement dates of March 31,
2015 and 2014 and are used for the consolidation of
the Company.
b. Investments in securities
Debt securities that are intended to be held to maturity (“held-to maturity debt securities”) are measured
at amortized cost in the balance sheet. Securities otherthan held-to maturity debt securities (“other securities”) are measured at fair value.
Other Securities that have fair values are stated atfair value, with unrealized gains and losses included in
the net assets, net of applicable income taxes. Realized
gains and losses on sales of securities are based on themoving average cost of the securities. Other securities
that do not have fair values are stated at cost16

Teraoka Seisakusho Co., Ltd.

determined by the moving average method. For otherthan temporary declines in fair value, other securities
are reduced to net realizable value by a charge toincome.
c. Inventories
The Company mainly applies the cost method basedon the periodic average method which determines
the amount of the inventories shown on the balance
sheet by writing them down based on the decrease in
their profitability.
d. Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost.
Depreciation is computed principally by the decliningbalance method at a rate based on their estimateduseful lives, which range as follow:
Buildings������������������������������������������������ 3~50 years
Machinery and equipment��������������������� 4~16 years
Depreciation of buildings, machinery and equipment of overseas subsidiaries and buildings acquired by
the Company and its domestic subsidiary on or after
April 1, 1998 is computed by the straight-line method
due to changes in Japanese income tax regulations.
e. Impairment of assets
Assets are reviewed for impairment whenever eventsor changes in circumstance indicate the carrying
amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying
amount of an asset or asset group exceeds the sum of
the undiscounted future cash flows expected to result
from the continued use and eventual disposition of
the asset or asset group. The impairment loss would
be measured as the amount by which the carrying
amount of an asset or asset group exceeds

its recoverable amount, which is the higher of the
discounted cash flows from the continued use andeventual disposition of the asset or asset group, or the
net selling price at disposition.
f. Leased assets
Under accounting standards generally accepted inJapan, leased assets related to finance leases that do nottransfer ownership of the leased property to the lessee
are depreciated on a straight-line basis, with lease periodused as their useful lives and no residual value.
g. Income taxes
Income taxes are provided based on amounts requiredby the tax return for the period.
The Company has adopted the asset-liability
method of tax effect accounting to recognize deferred
tax assets and liabilities for the expected future tax
consequences of temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purpose, and the amounts used for income
tax purposes.
h. Allowance for doubtful accounts
Allowance for doubtful accounts provides for possible
losses on the uncollectability of receivables at theamount of estimated uncollectability, based on pastexperience of doubtful receivables and individual evaluation of collectability of the receivables.
i. Accrued retirement benefits(1) The‌
method of attributing expected retirement
benefit to periods
The Company applies the benefit formula basis tomeasure the pension obligation. The expected
retirement benefit attributed to periods of service
under the plan’s benefit formula is deemed asarising in each period.
(2) Actuarial‌gains and losses
Actuarial gains and losses are amortized by the
declining balance method over a certain period (5years) within the average remaining years of serviceof the eligible employees commencing with thefollowing periods.
(Accounting Change)
Effective from the beginning of the fiscal year ended
March 31, 2015, the Company adopted the “Accounting Standard for Retirement Benefits” (AccountingStandards Board of Japan (ASBJ) Statement No. 26,
issued May 17, 2012, hereinafter referred as the“Accounting Standards for Retirement Benefits”) and

its accompanying implementation guidance, “Guidance on Accounting Standard for Retirement Benefits”(ASBJ Guidance No. 25, March 26, 2015.) with respect
to certain provisions described in Section 35 of thestandard and in Section 67 of the guidance.
In applying these accounting standards, there was achange from the straight-line basis to the benefit
formula basis as the method for attributing the
expected retirement benefit to periods of service forthe calculation of the retirement benefit obligationand service costs. Also, the Company has changed themethod for determining the discount rate from using
a discount rate based on the number of years approximate to the average remaining service period of
employees to using a single weighted average discount rate that reflects the estimated timing andamount of the retirement benefit payments.
Concerning the application of the AccountingStandards for Retirement Benefits, based on the provisional treatment set out in Section 37 of the accounting standards, the effects of such changes in the fiscal
year ended March 31, 2015 have been adjusted in the
beginning balance of retained earnings.
As a result, the beginning balance of net defined
benefit liabilities increased by ¥62 million (US$513
thousand), and retained earnings decreased by ¥40
million (US$330 thousand).
But the impact on operating income, income
before income taxes for fiscal year ended March 31,
2015 was immaterial.
j. Foreign currency translation
All receivables and payables denominated in foreign
currencies at the balance sheet date are translated into
yen at current exchange rates. The resulting exchange
gains or losses are charged to income.
Balance sheets of consolidated overseas subsidiaries
are translated into yen at the year-end rates except for
stockholders’ equity accounts, which are translated at
the historical rates. Income statements of consolidated
overseas subsidiaries are translated at average rates.
Translation differences are presented as “foreign currency translation adjustments” in the accompanying
consolidated financial statements.
k. Derivatives and hedge accounting
Derivative financial instruments are stated at fair value
unless they are used for hedging purposes.
If derivative financial instruments are used as hedges
and meet certain hedging criteria, the Company and its
Teraoka Seisakusho Co., Ltd.

17

consolidated subsidiaries defer recognition of gains orlosses resulting from changes in fair value of derivative
financial instruments until the related losses or gains on
the hedged items are recognized.
However, in cases where forward foreign exchange
contracts are used as hedges and meet certain hedging
criteria, forward foreign exchange contracts and hedged
items are accounted for in the following manner:
If a forward foreign exchange contract is executedto hedge a future transaction denominated in a foreign
currency, the future transaction will be recorded using
the contracted forward rate, and no gains or losses on
the forward foreign exchange contract are recognized.
l. Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows include all highly liquid investments, generally with original maturities of threemonths or less, that are readily convertible to known

amounts of cash and are so near maturity that theypresent insignificant risk of changes in value.
m. Asset retirement obligations(Change in accounting estimates for asset retirement
obligations)
Effective from the fiscal year ended March 31, 2015,
the Company has changed the estimate amount concerned about the asset retirement obligation that has
been recorded as a future asbestos disposition cost
containing materials removal expense. Because ofprotection for natural environment, asbestos disposition cost has been inclined to increased and enabledmore reasonably.
By this change, the Company has recorded additional estimated cost ¥130 million (US$1,079 thousand) for asset retirement obligation, and income
before income taxes has been decreased the sameamount.

3. Contingent Liabilities
Contingent liabilities in respect of trade notes and export
bills discounted with banks with recourse in the ordinary

course of business, amounted to ¥17 million (US$141
thousand) and ¥15 million at March 31, 2015 and 2014.

4. Financial Instruments
Overview(1) Policy for financial instruments
The Company raises the funds by bank borrowings, andmanages funds only through short-term time deposit
and others. The Company uses derivatives for the purposes of managing foreign currency exchange risk related to trading receivables and payables, and does notenter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables – notes receivable and accounts
receivable – are exposed to credit risk in relation tocustomers. In addition, the Company is exposed toforeign currency exchange risk arising from receivables
denominated in foreign currencies resulting from tradewith overseas customers.
Equity securities – the Company holds equity
securities, which are mainly issued by company who
have business relationships with the Company, andthese securities are exposed to the risk of fluctuation inmarket prices. Trade payables – notes payable andaccounts payable – mostly have payment due dates
18

Teraoka Seisakusho Co., Ltd.

within one year. A portion of trade payables, which isdenominated in foreign currencies, is exposed toforeign currency exchange risk. Long-term debt is takenout principally for the purpose of capital expenditure.
Long-term debt with interest rate fluctuation risks is
carried out on fixed rate loans. Debt is exposed toliquidity risk relating to the funding as described below.
(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers
may default)
In accordance with the internal policies for managing
credit risk of the Company, the Company monitors
credit worthiness of their main customers periodically,
and monitors due dates and outstanding balances bycustomer.
To minimize the credit risk when entering into
derivative transactions, counterparties are limited tofinancial institutions with high ratings.
(b) Monitoring of market risks (the risks arising fromfluctuations in foreign exchange rates, interest rates
and others)

For equity securities included in investments in securities, the fair values of these securities are periodicallyreviewed and reported to the Board of Directors.
In conducting and managing derivative transactions,the accounting department confirm the effectiveness ofhedging and obtain approval from the responsible
person, depending on the notional contract value,
based on the internal policies and formal regulations onmarket risk for financial instruments.
(c) Monitoring of liquidity risk for financing (the risk that
the Company may not be able to meet its obligations
Estimated Fair Value of Financial Instruments
The carrying value of the financial instruments on the
consolidated balance sheet as of March 31, 2014 andunrealized gain (loss) are shown in the following table.

on the scheduled due dates)
The Company manages the liquidity risk mainly
through the monthly cash-flow plans, prepared by
the Company.
(4) Supplementary explanation of the estimated fair valueof financial instruments
The notional amounts of derivatives listed below are
not necessarily indicative of the actual market risk
involved in derivative transactions.

The table does not include financial instruments for which
it is extremely difficult to determine the fair value. (Pleaserefer to (2) below).
Millions of yen

Carrying

Estimatefair value

Difference(1) Cash and deposits ������������������������������������������������������������������������������������������������������ ¥6,410¥6,410—(2) Notes and accounts receivable ������������������������������������������������������������������������������������

6,010

6,010

—

(3) Marketable securities and investments in securities ����������������������������������������������������

3,837

3,837

—

(4) Notes and accounts payable ���������������������������������������������������������������������������������������

(3,906)(3,906)—(5) Short-term debt ����������������������������������������������������������������������������������������������������������

(5)

(5)

—

Financial Instruments(1) Methods to determine the estimated fair value offinancial instruments and other matters related tosecurities and derivative transactions
Cash and deposits and notes and accounts receivable
Since these items are settled in a short period, theircarrying value approximates fair value.
Investment in securities
The fair value of equity securities is based on quoted
market prices.
Notes and accounts payable and short-term debt
Since these items are settled in a short period of time,
their carrying value approximates fair value.
(2) Financial instruments for which it is extremely difficult
to determine the fair value were as follows:
As of March 31, 2015
Unlisted equity securities

Millions of yen¥19

The above financial instruments are not included in thepreceding table, because no quoted market prices are available and it is extremely difficult to determine the fair value.
(3) Redemption schedule for receivables and marketablesecurities with maturities at March 31, 2015
Millions of yen

Due in One
Year or Less

Cash and deposits���������������������������������������
Notes and accounts receivable���������������������
Marketable securities andinvestments in securities����������������������������
Total���������������������������������������������������������

¥ 6,410
6,010—¥12,420(4) The redemption schedule for short-term debt and longterm debt at March 31, 2015 and 2014 was as follows:
Millions of yen

2015
Short-term debt����������������������
¥5
Current portion of long-term debt����
—Total������������������������������������
¥5

2014
¥  4
375
¥379

Average interest
rates (%)

2015
5.0
—

Teraoka Seisakusho Co., Ltd.

19

5. Securities
Historical costs, fair value and gross unrealized gains and losses for marketable securities as of March 31, 2015 and 2014 are
as follows:
Millions of yen

2015
Historical costs

Fair value

Net differences

Gross gains

Gross losses

Equity securities �����������������������������������������������

¥1,443¥3,837¥2,394¥2,394¥—

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

—

—

—

—

—

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

¥1,443¥3,837¥2,394¥2,394¥—

Other Securities:

Millions of yen

2014
Historical costs

Fair value

Net differences

Gross gains

Gross losses¥1,460¥3,142¥1,682¥1,682¥—Other Securities:
Equity securities �����������������������������������������������
Other ���������������������������������������������������������������

—

—

—

—

—

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

¥1,460¥3,142¥1,682¥1,682¥—Thousands of U.S. dollars

2015
Historical costs

Fair value

Net differences

Gross gains

Gross losses

Equity securities �����������������������������������������������

$12,001$31,906$19,905$19,905$—

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

—

—

—

—

—

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

$12,001$31,906$19,905$19,905$—

Other Securities:

Securities that do not have fair values are as follows:
Thousands of
U.S. dollars

Millions of yen

20

2015

2014

2015

Equity securities

¥19

¥19

$157

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

—

—

—

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

¥19

¥19

$157

Teraoka Seisakusho Co., Ltd.

6. Retirement and pension plans
The Company has a defined benefit pension plan. Our
domestic consolidated subsidiary and one of overseas
consolidated subsidiaries have retirement lump-sum plans.
In addition, when an employee retires, an employee may
be paid additional retirement benefits that are not part ofretirement benefit obligations. In lump-sum benefit plansoffered by domestic consolidated subsidiary etc. the retirement benefits and liabilities relating to the retirement
benefits are calculated using the simplified method.

The detailed notes relating to defined benefit pension plans for the fiscal year ended March 31, 2015 and 2014
were as follows:(1) Changes in defined benefit obligations
Thousands of
U.S. dollars

Millions of yen

2015

2015

2014

Beginning balance of benefit obligations ������������������������������������������������������������

¥4,140¥3,985$34,424

Cumulative effects of changes in accounting policies ��������������������������������������

62

—

513

Restated balance ������������������������������������������������������������������������������������������������

4,202

3,985

34,937

Service cost �����������������������������������������������������������������������������������������������������

272

219

2,263

Interest cost ����������������������������������������������������������������������������������������������������

58

80

486

Actuarial gains and losses �������������������������������������������������������������������������������

(123)

24

(1,026)

Benefits paid ���������������������������������������������������������������������������������������������������

(376)

(168)

(3,128)Ending balance of benefit obligations �����������������������������������������������������������������

¥4,033¥4,140$33,532(2) Changes in Pension AssetThousands of
U.S. dollars

Millions of yen

2015

2015

2014

Beginning balance of pension assets ������������������������������������������������������������������

¥4,160¥3,739$34,599

Expected return on pension assets ������������������������������������������������������������������

83

75

692

Actuarial gains and losses �������������������������������������������������������������������������������

242

206

2,009

Contributions by the employer ������������������������������������������������������������������������

299

309

2,484

Benefits paid ���������������������������������������������������������������������������������������������������

(376)

(168)

(3,128)Ending balance of pension assets �����������������������������������������������������������������������

¥4,409¥4,161$36,656(3) Reconciliation of retirement benefit liabilities using the simplified method.
Thousands of
U.S. dollars

Millions of yen

2015

2015

2014

Beginning balance of retirement benefit liabilities �����������������������������������������������

¥25

¥23

$213

Benefits expenses ��������������������������������������������������������������������������������������������

5

2

38

Benefits paid ���������������������������������������������������������������������������������������������������

(6)

—

(52)

Ending balance of retirement benefit liabilities ���������������������������������������������������

¥24

¥25

$199

Teraoka Seisakusho Co., Ltd.

21

(4)	‌Reconciliation of benefit obligations and pension assets with net defined benefit liability and asset on theConsolidated Balance Sheets
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Funded defined benefit obligations ��������������������������������������������������������������������

¥ 4,033¥ 4,140$ 33,532

Pension assets ����������������������������������������������������������������������������������������������������

(4,409)(4,161)(36,656)

Net �����������������������������������������������������������������������������������������������������������������

(376)

(21)

(3,124)

Unfunded defined benefit obligations ����������������������������������������������������������������

24

25

199

Net amount of liabilities and assets recognized in consolidated balance sheet ����

¥  (352)¥    4$ (2,925)

Liabilities (net defined benefit liability) ����������������������������������������������������������������

24

25

199

Assets (net defined benefit assets) ����������������������������������������������������������������������

(376)

(21)

(3,124)

Net amount of liabilities and assets recognized in consolidated balance sheet ����

¥  (352)¥    4$ (2,925)

Note: This includes plans using the simplified method.

(5) Retirement benefit expenses
Thousands of
U.S. dollars

Millions of yen

2015

2015

2014

Service costs �������������������������������������������������������������������������������������������������������

¥272

¥219

$2,263

Interest costs ������������������������������������������������������������������������������������������������������

58

80

486

Expected return on pension assets ����������������������������������������������������������������������

(83)

(75)

(692)

Recognition of actuarial gains and losses ������������������������������������������������������������

(99)

(50)

(821)

Benefits expenses calculated on the simplified method ��������������������������������������

5

2

38

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

¥153

¥176

$1,274(6) Remeasurements of defined benefit plans (Other comprehensive income)Thousands of
U.S. dollars

Millions of yen

2015
Actual differences �����������������������������������������������������������������������������������������������

2014

¥266

¥—

2015
$2,214(7) Remeasurements of defined benefit plans (Accumulated other comprehensive income)Thousands of
U.S. dollars

Millions of yen

2015
Unrecognized actuarial gains and losses �������������������������������������������������������������

22

Teraoka Seisakusho Co., Ltd.

¥534

2014
¥268

2015
$4,438(8) Pension Assets
 Breakdown of pension assets

2015

2014

Debt securities ��������������������������������������������������������������������������������������������������������������������������������

65%

62%

Equity securities ������������������������������������������������������������������������������������������������������������������������������

27%

30%

Cash and deposits ��������������������������������������������������������������������������������������������������������������������������

3%

3%

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

5%

5%

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

100%

100%

 Rate of expected return on pension assets
Expected return rate on plan assets is determined by considering the current and anticipated future portfolio of
pension assets and current and anticipated future

long-term performance of individual asset classes thatcomprise the funds’ asset mix.

(9) Basic assumptions for calculating benefit obligations
2015

2014

Discount rate ����������������������������������������������������������������������������������������������������������������������������������

1.3%

2.0%

Expected return rate on plan assets ������������������������������������������������������������������������������������������������

2.0%

2.0%

Expected rate of salary increase ������������������������������������������������������������������������������������������������������

2.9%

2.9%

7. Impairment loss
The Companies group their operating assets in accordancewith the classifications used for internal management.
For assets for business whose profitability has declined,
the carrying amounts were reduced to the recoverable
amounts, and the amounts of these reductions wererecorded as impairment loss. Impairment loss of ¥1,383
million for the year ended March 31, 2014 included ¥1,023
million for buildings and structures, ¥360 million formachinery and equipment.

March 31, 2014
Use
Assets for BusinessClassification

Location

Buildings and structures, machinery and equipment, land

Ibaraki prefecture

Amount(Millions of yen)

¥1,383

The recoverable amounts of assets for business are measured at the net selling price. But they are measured at memorandum
price because of having difficulty in selling or converting.

Teraoka Seisakusho Co., Ltd.

23

8. Income Taxes
Deferred income tax assets and liabilities as of March 31, 2015 and 2014 were composed of the following:Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Accrued bonus to employees ��������������������������������������������������������������������������

¥ 141

¥ 148

$ 1,175

Depreciation ���������������������������������������������������������������������������������������������������

16

24

134

Loss on valuation of investment securities �������������������������������������������������������

95

104

788

Deferred tax assets:

Net defined benefit liability �����������������������������������������������������������������������������

7

8

57

Tax loss carryforward ���������������������������������������������������������������������������������������

493

345

4,099

Impairment loss ����������������������������������������������������������������������������������������������

386

493

3,206

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

165

(38)

1,372

Valuation allowance ����������������������������������������������������������������������������������������

(932)

(783)

(7,751)

Total deferred tax assets ����������������������������������������������������������������������������������

¥ 371

¥ 301

$ 3,080

Deferred tax liabilities:
Reserve for advanced depreciation of noncurrent assets ���������������������������������

(20)

(28)

(165)

Unrealized gains on other securities ����������������������������������������������������������������

(712)

(560)

(5,916)

Net defined benefit asset ��������������������������������������������������������������������������������

(161)

(9)

(1,339)Other deferred tax liabilities ����������������������������������������������������������������������������

186

270

1,543

Total deferred tax liabilities ������������������������������������������������������������������������������

¥(707)¥(327)$ (5,877)

Net deferred tax assets (liabilities) ��������������������������������������������������������������������

¥(336)¥ (26)$ (2,797)

A reconciliation on the difference between the statutory tax rate and effective rate on taxable income for the fiscal years
ended March 31, 2015 and 2014 is as follows:
2015

2014

Statutory tax rate ����������������������������������������������������������������������������������������������������������������������������

35.6%

—

Rate difference from foreign subsidiaries ����������������������������������������������������������������������������������������

(0.9)

—

Per capita levy of inhabitant taxes ���������������������������������������������������������������������������������������������������

1.1—

Dividend and other non-taxable income �����������������������������������������������������������������������������������������

(0.7)

—

Increase in valuation allowance ������������������������������������������������������������������������������������������������������

10.8

—

Tax deduction for research expenses �����������������������������������������������������������������������������������������������

(6.2)

—

Entertainment and other non-deductible expenses �������������������������������������������������������������������������

1.2—

Adjustment on deferred tax assets due to change in income tax rate ���������������������������������������������

2.9—

Other, net ���������������������������������������������������������������������������������������������������������������������������������������

2.3—

Effective tax rate �����������������������������������������������������������������������������������������������������������������������������

46.1

—

No reconciliation is presented for the year ended March 31, 2014 because there was a loss before income tax.
Change in statutory effective tax rate
The “Act for Partial Amendment of the Income Tax
Act”and the “Act for Partial Amendment of the Local Tax
Act” were promulgated on March 31, 2015 and, as aresult, tax rates became or will become lower from fiscal
years beginning on or after April 1, 2015.
As a result, the effective statutory tax rate used to24

Teraoka Seisakusho Co., Ltd.

measure the Company’s deferred tax assets and liabilities
was changed from 35.6% to 33.1% for the temporary
differences expected to be realized or settled from thefiscal year beginning on April 1, 2015, and to 32.3% for
the temporary differences expected to be realized or settled from fiscal years beginning on or after April 1, 2016.

The effect of the announced reduction of the effective
statutory tax rate was to decrease deferred tax liabilities(after offsetting deferred tax assets by ¥42 million (US$349
thousand), and increase unrealized gains on available-for-sale securities, remeasurements of defined benefit plansand deferred income taxes by ¥79 million (US$657 thousand), ¥18 million (US$146 thousand) and ¥55 million(US$454 thousand), respectively, as of and for the fiscal
year ended March 31, 2015.

9. Subsequent EventAppropriation of retained earnings
Subsequent to March 31, 2015, the Company’s Board of
Directors, with the approval of stockholders on June 23,2015 declared a cash dividend of ¥132 million (US$1,095
thousand) equal to ¥5.00 (US$0.04) per share, applicableto earnings of the year ended March 31, 2015 and payable to stockholders on the stockholders’ register on
March 31, 2015.

Teraoka Seisakusho Co., Ltd.

25

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of Teraoka Seisakusho Co., Ltd.
We have audited the accompanying consolidated balance sheets of Teraoka Seisakusho Co., Ltd. and consolidated subsidiaries as of March 31, 2015 and the related consolidated statements of income, comprehensive
income, stockholders’ equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity with accounting principles generally accepted in Japan, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audits in conformity with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating theoverall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Teraoka Seisakusho Co., Ltd. and consolidated subsidiaries as of March
31, 2015 and the consolidated results of their operations and their cash flows for the years then ended inconformity with accounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amount into U.S. dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note1. Such U.S. dollar
amounts are presented solely for the convenience of readers outside Japan.
Tokyo, Japan
June 23, 2015

Inoue Audit Corporation

26

Teraoka Seisakusho Co., Ltd.

COMPANY DATA

Company Outline

(as of March 31, 2015)

Company NameTERAOKA SEISAKUSHO CO., LTD.

Head Office

4-22, Hiromachi 1-chome, Shinagawa-ku, Tokyo 140-8711, Japan
Tel:81-3-3491-1141
Fax:81-3-3491-5316

FoundedFebruary 11, 1921

Incorporated

May 5, 1943

Paid-in Capital¥5,057 million

Employees

497 (626 consolidated)

Board of Directors and Auditors

(as of June 23, 2015)

President

Keishiro Teraoka

Senior Managing Director

Kenichi Tsuji

Managing Directors

Masakazu Naito
Hiroyoshi Ohbori

Directors

Kiyohiro Takagi
Noriya Hashimoto
Noriyoshi Shiraishi

Audit & Supervisory Board Members

Yutaka Nomiyama

Masaru Nakamura
Masaki Miyake
Kazunori Shimamoto
Operating Officers

Jun Watanabe
Taiji Namekawa
Masao Mochizuki
Ken Ebitani

Teraoka Seisakusho Co., Ltd.

27

Consolidated Subsidiaries
Shin-ei Shoji Co., Ltd.

Tokyo, Japan

Teraoka Seisakusho (Hong Kong) Co., Ltd.

Hong Kong, China

Teraoka Seisakusho (Shanghai) Co., Ltd.

Shanghai, China

Teraoka Seisakusho (Shenzhen) Co., Ltd.

Shenzhen, China

PT. Teraoka Seisakusho Indonesia

Karawang, Indonesia

R&D Center, Factories and Offices
R&D Center

Shinagawa-ku, Tokyo

Factories

28

Teraoka Seisakusho Co., Ltd.

  Ibaraki Factory

Kitaibaraki, Ibaraki Prefecture  Sano Factory

Sano, Tochigi Prefecture  Kannami Factory

Kannami-cho, Shizuoka Prefecture

Branch Offices

Tokyo, Osaka, Nagoya and Seoul

Sales OfficeSendai

Representative Office

TaipeiINVESTOR INFORMATION

Investor Information

(as of March 31, 2015)

Head Office

Teraoka Seisakusho Co., Ltd.
4-22, Hiromachi 1-chome,Shinagawa-ku, Tokyo 140-8711, Japan
Telephone: 81-3-3491-1141
Facsimile: 81-3-3491-5316

Financial Year

April 1 to March 31

Common Stocks

Authorized Shares 80,000,000
Issued Shares 26,687,955

Stockholders

2,629

Stock Listing

Tokyo Stock Exchange, Second Section (Code: 4987)

Transfer Agency

Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo
100-8212, Japan

Major Stockholders
Stockholders

Number of shares Ratio of share(thousand shares) holding (%)

ITOCHU Corporation

6,672.0

25.34

Customers’ Stockholding Group

2,676.6

10.16

Japan Trustee Services Bank, Ltd. (Trust Account)

932.2

3.54

Keishiro Teraoka

887.9

3.37

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

818.8

3.11

Resona Bank, Ltd.

678.8

2.58

Employees’ Stockholding Group

529.0

2.01

Kuniko Teraoka

526.0

2.00

CGML PB CLIENT ACCOUNT

400.8

1.52

BBH BOSTON F NOMURA Jp Sm Cap F 620065

311.3

1.18

Teraoka Seisakusho Co., Ltd.

29

http://www.teraokatape.co.jp

Printed in Japan

12

Teraoka Seisakusho Co., Ltd.