Evolving on Strengths
WAC OA L HOL DI NG S

A N N UA L R E P ORT 2010

Expressing Beauty
Since its establishment in 1949, the Wacoal Group has remained the foremost
company in the Japanese market for women’s innerwear by enabling women
the world over to express their beauty. Today, based on a holding company
system that encompasses 47 consolidated subsidiaries and nine affiliates, theWacoal Group is building an even more robust operational platform in Japan
while growing sales aggressively in North America, Europe, and Asia.
Also, thanks to basic research on the shape and movement of the humanbody as well as research on the physiology of sensation, we have developed
innerwear and other garments that realize outstanding comfort and figure
enhancement. This research draws on extensive analytical data that we haveaccumulated by measuring the physiques of over 40,000 Japanese women.
As well as our signature beauty and comfort, through new functionality
we will add value to realize products that even more customers love whileproviding products that invigorate markets.

CONTENTS
1 Financial Highlights
2 FACING CHALLENGES		Aiming to Accelerate Expansion in Growing Business Areas
at Home and Abroad
8 EVOLVING ON STRENGTHS

26 Eleven-Year Financial Summary
28 Management’s Discussion and Analysis
34 Consolidated Balance Sheets
36 Consolidated Statements of Income
37 Consolidated Statements of Comprehensive Income (Loss)

		 Message from the Management

		 Consolidated Statements of Equity

16 AIMING FOR SUSTAINABLE GROWTH

38 Consolidated Statements of Cash Flows

17 Social Contribution

39 Notes to Consolidated Financial Statements

19 Cultural Activities

63 Management’s Report on Internal Control over Financial Reporting

20 Personnel Development

64 Report of Independent Registered Public Accounting Firm

21 Environmental Management

66 Corporate Data

22 Corporate Governance

67 Investor Information

25 Board of Directors and Corporate Auditors



WACOAL HOLDINGSANNUAL REPORT 2010

FINANCIAL HIGHLIGHTS
Wacoal Holdings Corp. and Subsidiaries
Thousands of
U.S. dollars*% change

2010$1,748,362

2010 vs 2009
– 5.2%

Millions of yen (except per share amounts)

Years Ended March 31, 2010, 2009 and 2008

Net sales
Operating income

2010¥163,2972009¥172,276

3,810

10,129¥165,761
13,540

3,123
2,524

7,627
5,230

14,353
4,966

1.5

3.0

2.6

¥   17.86¥   36.75¥   35.14

Income before income taxes, equity in net income (loss) ofaffiliated companies and minority interests
Net income attributable to shareholders of the Company
ROE (%)

2008

40,792– 62.433,43727,024– 59.1– 51.7$ 0.19– 51.4Per share of common stock (in yen/dollars):
Net income attributable to shareholders of the Company
Cash dividends

20.00

25.00

25.00

0.21

– 20.01,215.52

1,181.00

1,291.41

13.01

2.9

Shareholders’ equity¥171,630¥165,873¥185,113$1,837,580

3.5

Total assets

223,387

213,486

241,619

2,391,724

4.6

Shareholders’ equity* The U.S. dollar amounts represent translations of Japanese yen solely for convenience at the rate of ¥93.4=$1.

Net Sales

Operating income

Net Income Attributable to
Shareholders of the Company

Shareholders’ Equity¥ Billion¥ Billion¥ Billion¥ Billion

164

166

166

172

12.9

163

9.0

13.5

186

193

185
166

172

10.1
63

3.8

5.0
35

2.8

5.2
37

07

08

09

10

06

07

08

09

10

06

77.7

77.2

76.8

76.6

2.5

20

18

1.3
06

77.0

07

08

Earnings per Share (¥)

09

10

06

07

Equity Ratio (%)

08

09

10



Facing Challenges
Aiming to Accelerate Expansion in Growing Business Areas
at Home and Abroad
The table below shows the contraction of the women’s innerwear
market in Japan, the Wacoal Group’s core operations. Furthermore,
the department store sector, the mainstay sales channel of our women’s
innerwear wholesale operations, is also contracting. Both trends
reflect the aging of Japan’s society and make the prospect of significant
future growth unlikely. With these unfavorable business conditions
set to continue, the Wacoal Group aims to secure growth and earnings
by stepping up the pace of expansion in growing business areas in Japanand overseas based on the new Medium-Term Management Plan.

Women’s Innerwear Market in Japan (Retail base)¥ Billion

791.0

792.5

791.0

767.0

758.0

740.0

725.0

682.0

627.0

01

02

03

04

05

06

07

08

09 (estimate)

Source: Yano Research Institute Ltd.

WACOAL HOLDINGSANNUAL REPORT 2010

Growing Business Areas in Japan:
Building New Sales Channels

amphi

In 2002, the SPA operations of Wacoal Corp. cut the tape on amphi as a directly
managed store based on a select shop concept. Mainly targeting women in their
20s, these stores carry indoor wear, fashion accessories, and sundries as well as
innerwear. Our network in Japan has 52 stores, as of the end of the fiscal year.
Tasked with building new sales channels, SPA operations are growing steadily.
They performed solidly in the fiscal year, contributing net sales of ¥7.1 billion,up ¥90 million year on year. Overall SPA operations accounted for 64 stores, asof the end of the fiscal year, and we will add eight stores in the current fiscal year.
Going forward, SPA operations will consolidate various shop brands in orderto position amphi as the main shop brand, thereby increasing the efficiency ofinvestment in brands and further raising name recognition among customers.



Growing Business Areas in Japan:
Increasing Points of Contact with Customers

peach john & lecien

Through a quarterly mail-order catalog and 27 stores in Japan, as of the end of the
fiscal year, Peach John markets innerwear principally for young women and young
career women. With a talent for creating and marketing youthful fashionablelineups, Peach John is very popular among younger women. Because the customer
group of Wacoal Corp. centers on career women through senior women, PeachJohn will enable the Wacoal Group to grow sales by increasing points of contact
with younger customers as well as carve out a larger share of the women’s innerwear market in Japan.
In another initiative to increase points of contact with customers and use avariety of sales methods and channels, Lecien became a member of the Wacoal
Group in August 2009. This new wholly owned subsidiary specializes in products
for high-volume markets.

WACOAL HOLDINGSANNUAL REPORT 2010

Growing Business Areas in Japan:
Strengthening Product Development

cw-xSports conditioning wear products with advanced functionality, CW-X
has earned strong approval from leading athletes worldwide since its
launch in 1991. In Japan, shipments of CW-X have increased in linewith growing health consciousness among consumers, and this productcategory promises further growth. Responsible for developing the CW-X
range, our Wellness Business has until now targeted athletes throughproducts with advanced functionality. In February 2010, however, theWellness Business debuted CW-X STYLE FREE as a strategic productwith “light” functionality for everyday use. Looking beyond sportswear
and using market growth as a tailwind, we are strengthening productdevelopment to realize a lineup of products that customers can wear atwork, when traveling, or in other everyday situations. Moreover, in Tokyo
we opened our first two directly managed CW-X stores, as of the end of
the fiscal year, and we are heightening brand name recognition under theslogan “Supporting Healthy Lifestyles.”

Growing Business Areas Overseas

china
oper ations
In China’s thriving market, the Wacoal Group is ramping up thedevelopment of operations based on three brands: the mainstay
Wacoal brand, amphi for young women, and the high-value-added
brand Salute. In addition to accelerating wholesale operations
focused on the department store channel, we are upping the pace of
directly managed store openings. At the same time, we are actively
pushing forward with promotional campaigns to raise Wacoal
brand name recognition and grow sales. As part of this drive, webegan featuring a famous Chinese actress, Li Xiao Ran, in advertising campaigns from August 2009.
Also, we are undertaking research to ensure Chinese women aresatisfied with our innerwear. As in Japan, in China we establisheda research center, the Chinese Human Science Research Center,in 2002. This center measures Chinese women’s physiques andchecks wearing feel and product functionality by using trial-fitting
monitors. The ability to develop products best suited to respective
regions in this way is one of the Wacoal Group’s unique strengths.
With this in mind, we intend to continue collecting data on Chinese
women in a wide range of regions, from the coast to the interior,in order to develop products ideally suited to Chinese women.

WACOAL HOLDINGSANNUAL REPORT 2010

Growing Business Areas Overseas

u.s.
oper ations

In U.S. operations, the mainstay of overseas operations, the Wacoal
Group brought to market two original brands to offset a decrease insales following the cancellation of the contract for licensed products
for DKI and DKNY designer brands. For high-end department stores,
we introduced Wacoal Luxe, and we unveiled b.tempt’ d by Wacoal asa sexy, fashionable brand. Among business partners and consumers,b.tempt’ d by Wacoal is attracting considerable attention and acclaim,
with more stores carrying the new brand than initially planned.

Evolving on Strengths
Message from the Management“We will regain our ability to respond to changing
market conditions and strengthen growing businessareas even further.”

Yoshikata Tsukamoto
Representative Director

WACOAL HOLDINGSANNUAL REPORT 2010

Report on Business Results for the Fiscal Year

Overview of the Previous Medium-Term Management Plan

In the fiscal year under review, ended March 31, 2010, the Wacoal GroupThe fiscal year marked the final year of our previous three-year Medium-recorded year-on-year declines of 5.2% in net sales, to ¥163.3 billion;

Term Management Plan, which set out net sales of ¥180 billion and oper-

62.4% in operating income, to ¥3.8 billion; and 51.7% in net income

ating income of ¥15.3 billion as numerical targets for the fiscal year.

attributable to shareholders of the Company, to ¥2.5 billion.

Unfortunately, however, we fell short of these targets. Similarly, reaching

In the fiscal year, conditions remained tough, despite signs of

the numerical targets of our CAP21 growth strategy for the current fiscal

recovery from the downturn that began with the 2008 worldwide

year is likely to be very challenging. Setting our sights on net sales offinancial crisis. In Japan’s retail sector, there was a strengthening of a¥200 billion and operating income of ¥18 billion, we began this growthtendency among consumers to favor lower priced products and spend

strategy four years ago.

carefully. As a result, the Wacoal Group’s mainstay sales channels—

We did not reach our targets for three main reasons. First, the recent

department stores and general merchandising stores—saw very challeng-

volatility of business conditions led to a significant slump in mainstay

ing business conditions continue unabated.

women’s innerwear wholesale operations in Japan. Second, our opera-

Faced with these business conditions, the Wacoal Group’s mainstay

tional structure was unable to respond fully to such changing business

operating company Wacoal Corp. led initiatives that concentrated on

conditions. Third, our overseas operations, which should have driven

increasing product appeal even further and marketing products to meet

growth, did not expand quickly enough.

consumer needs more accurately. However, due to an overall downturn

Behind the first reason was the shrinking of the women’s innerwear

in sales of women’s innerwear, business conditions were severe. On theand men’s innerwear segments in Japan’s innerwear market. Whileother hand, although not compensating for slumping sales of women’s in-high-end product sales are sluggish, high-volume markets are shifting

nerwear, men’s innerwear and SPA (specialty store retailer of private label

toward low-priced products. In particular, the women’s innerwear market

apparel) operations posted sales on the same level as those of the previous

is much smaller than it was a decade ago and is likely to become smallerfiscal year. Moreover, growing consumer health awareness provided astill. This shrinking of markets was a major factor in the Group’s lacklus-

following wind for the Wellness Business, which achieved a year-on-year

ter performance.

increase in sales.
Overseas, operations improved profitability due to cost reductions

The backdrop of the second reason was the diversification of the sales
channel used by consumers today in recent years, as well as our existing

and the absence of the previous fiscal year’s losses related to the DKI andsales channels undergoing dramatic structural change. The business

DKNY designer brands. Other positive developments included b.tempt’ dresults of business partners in our main sales channels—department

by Wacoal, which outperformed initial sales targets after marketing at thestores, specialty stores, and general merchandising stores—are trending

beginning of 2009. As for China, we steadily grew market share among

downward, with department stores seeing particularly marked decreases.

existing stores, mainly department store channels, by promoting three

Because Wacoal Corp. focuses on mid-to-high-end products, the depart-

brands: our mainstay Wacoal brand, amphi targeting young women, andment store channel accounts for a large share of its sales. Consequently,

the high-value-added brand Salute.

not only the downturn among department stores but also our inability torespond quickly to this change adversely affected business results.
Until now, we have developed new pillars of our business, such as theWellness Business, men’s innerwear operations, SPA operations, andInternet sales to counteract the downward trend in the women’s innerwear market. However, these new businesses were unable to fully offset

10

the economic slump. Nonetheless, our new businesses have reached a size
where they can steadily contribute to business results. And, the outlook
for these businesses is very promising. Looking at the Group as a whole,business development possibilities are multiplying. For example, we are
steadily moving forward to increase points of contact with customers
through such initiatives as making Peach John Co., Ltd., and Lecien
Corporation wholly owned subsidiaries. Over the past three years, ourefforts to expand operations in growing business areas have produced solid
benefits. Further, we have almost finished building a structure for higher
earnings by integrating the manufacturing operations of the Wacoal brandand the Wing brand. This initiative is enabling us to consolidate varieties
and colors for each Wacoal-brand product, which lowers inventory loss
and thereby reduces the cost of sales as a percentage of net sales. Goingforward, however, I think we need to reform the women’s innerwear
wholesale operations in order to respond to changes in sales channels.
Behind the third reason was the strong growth of markets in emerging countries such as China, Brazil, Russia, and India. These countries
have high-market potential. Another factor was the attempts to expand
market shares in the U.S. and Europe. In this environment, expanding
overseas operations was critical to our growth. The reason we did not meettargets was because we did not develop these operations rapidly enough.
However, we did take a range of different measures to develop overseas
operations. In mainstay U.S. operations, sales declined due to low consumer spending and the cancellation of a contract for licensed products
for DKI and DKNY designer brands. However, we took steps towardbuilding highly profitable operations by changing over to our original
brand products, which have higher profit margins. A good example is ourb.tempt’ d by Wacoal brand, which debuted in January 2009 to a favorable
reception. Also, in China we continued to grow market share by heightening the name recognition of three key brands through sales initiatives andstepped-up advertising.
Bearing in mind the many tasks and successes that efforts under theprevious Medium-Term Management Plan have given us, we will steadily
push forward with measures under the new Medium-Term Management
Plan, which began from April 2010. Furthermore, in light of the progressof these measures and trends in business conditions, we will continue toseek new growth by pursuing our CAP21 growth strategy.

WACOAL HOLDINGSANNUAL REPORT 2010

corpor ate activation project 21
A Summary of CAP21
CAP21 is an abbreviation of Corporate Activation Project 21. Under this growth strategy, we are reorganizing and strengthening existing operations while developing operations in business areas that promise growth. In these development efforts,
rather than limiting ourselves to independent efforts, we actively seek M&As as well as capital and operational tie-ups.

new medium-term management plan
A Summary of the New Medium-Term Management Plan
PeriodApril 2010–March 2013

Target corporate profile
Global Wacoal Group

Group strategies over three years• Heighten the overall capabilities of the Wacoal Group through collaboration among
Group companies to realize each company’s strengths• Secure and increase earnings
Restructure operations focusing on innerwear wholesale operations
Accelerate expansion in growing business areas at home and abroad• Strengthen system for Groupwide management

Target corporate profile for 2013
• New revenue and earnings pillars established alongside existing innerwear wholesale operations• Overseas operations such as those in the U.S. and China support growth• Restructured innerwear wholesale operations see profitability improve• System for Groupwide management further developed and strengthened• Meeting corporate social responsibilities and compliance requirements

Numerical targets		
For fiscal 2013, net sales of ¥190 billion and operating income of at least ¥8 billion

11

12

The main focuses of our new Medium-Term Management Plan,

In the Wellness Business, which is developing the sports condition-

launched from April 2010, are improving our ability to respond to

ing wear product CW-X and seeing sales grow favorably as a result, we

dramatic changes in market conditions while stepping up initiatives inwill redouble business development efforts. Aiming to boost sales by

growing business areas. In accordance with the above Group strategies,

one-third in three years, from ¥9 billion for the fiscal year to ¥12 billion,

our efforts to regain responsiveness to market change will mainly involve

we will bring new products to market, enrich our existing productrealizing our overall capabilities as a corporate group and restructuring

lineups, diversify sales channels through new store openings, raise namewomen’s innerwear wholesale operations. During the previous Medium-recognition through advertising, and increase overseas sales.

Term Management Plan, we were unable to completely reflect sudden

Another growing business area is men’s innerwear. Since making achanges in market conditions due to the structure of our operations.

full-fledged entry into this market by introducing Cross Walker, ourAs a result, revenues and earnings continued to decline, causing theoperations have been performing well. We intend to develop theseGroup to lose momentum. Given that the women’s innerwear market is

operations vigorously in order to establish an unshakable position in theunlikely to grow in Japan, we must shift to an operational structure

men’s innerwear market. Plans call for a 25% rise in sales, from ¥4 billion

geared toward securing earnings. Vice president Hideo Kawanaka will

for the fiscal year to ¥5 billion, by increasing the number of stores

explain these structural reform efforts in more detail later in this section.

carrying our products, taking advantage of Internet sales, and launching

Meanwhile, to add further impetus to efforts in growing businessareas, we will accelerate the expansion of a range of initiatives that are

new brands targeting senior customers.
At the same time, in existing women’s innerwear wholesale opera-

already contributing earnings and thereby achieve further growth.

tions we aim to secure our solid position as the company with the largest

Specifically, overseas operations will play a central role in supporting

share of the market. To that end, based on its unique R&D, the Wacoal

growth. In particular, we will focus on restoring growth in operations

Group will develop high-quality products with advanced functionality soin the U.S., which is showing signs of economic recovery, and claimingthat it can offer products that truly have value for customers. Moreover,a larger market share through our fast-growing operations in China.

we will extend our market share by introducing products to low-price

Our director responsible for international operations, Tadashi Yama-

high-volume markets, a large area that we have not yet actively exploited.

moto, will cover these initiatives in more detail later in this section.

These efforts to win further market share will draw on the combined

However, I would like to first explain our strategies for growing

expertise of Peach John, which sells low-priced products for young

business areas in Japan beyond our existing innerwear wholesale opera-

women, and Lecien, which specializes in low-cost production for high-tions. In SPA operations, which are tasked with building new sales

volume markets.

channels by developing directly managed stores, we intend to increase

As we take these steps to increase profitability and strengthen ourstore openings while maintaining profitability. Over three years,

growth potential, I think we need to make sure of reaching the numerical

we aim to increase total sales from direct retail operations 33%, fromtargets we have set out for the three-year period. I hope that we can meet¥150 billion for the fiscal year to ¥20 billion.

our new targets ahead of schedule and get back on a growth track.

WACOAL HOLDINGS13

ANNUAL REPORT 2010

Capital Measures and Returns to Shareholders

Outlook for the Current Fiscal Year

The Wacoal Group’s basic financial policy is to pursue flexible capital

Emerging nations are driving recovery in economies worldwide. In Japan,

measures based on a strong financial foundation and on ample cash flows.

however, the business climate remains harsh, and consumer spending will

Accordingly, as part of efforts to strengthen profitability in growing

likely need more time to recover. Mindful of these trends and in accor-

business areas, we will actively invest in overseas operations. This invest-

dance with its new Medium-Term Management Plan, the Wacoal Groupment will target returning U.S. operations to growth and raising brandwill regain its ability to respond to changing conditions, restructurename recognition through advertising and sales campaigns in China.

operations to ensure earnings, and strengthen measures in growing

In Japan, we will continue to invest in operations for which namebusiness areas. As a result, for the current fiscal year we expect to post

recognition remains low, such as men’s innerwear operations and theincreases of 5.3% in net sales, to ¥172.0 billion; 31.2% in operating

Wellness Business. Meanwhile, we must improve operations and reduceincome, to ¥5.0 billion, and 26.8% in net income attributable to share-

costs and expenses in order to increase efficiency and restore the wholesale

holders of the Company, to ¥3.2 billion. This forecast assumes a foreign

channel’s ability to respond to business condition changes.

exchange rate of US$1=¥92, but foreign exchange rate fluctuations could

Regarding M&As, so far we have implemented major mergers

significantly affect consolidated business results because U.S. operations

with Peach John and Lecien. Going forward, however, I want to include

account for a large share of Wacoal’s consolidated revenues and earnings.

companies with which we can realize manufacturing synergies as a

Our newly launched Medium-Term Management Plan sets out amanufacturer in the innerwear industry in the scope of our M&A

Global Wacoal Group as a target corporate profile. However, this does

activities. Overseas, rather than developing operations independently,

not mean that our sole focus will be on building the presence of ourwe intend to scrutinize potential local partners to find companies thatoverseas operations. We also intend to retain our leading position inare certain to facilitate operational expansion. Looking forward, based

Japan, our home market, by continuing to manufacture unique high-on a stable financial foundation, the Wacoal Group will make thequality products with advanced functionality. Establishing an even moreinvestments needed to increase earnings.

dominant position in Japan will heighten our brand equity and productIn relation to returns to shareholders, we view meeting the expecta-

recognition worldwide. This is the type of Global Wacoal Group wetions of our shareholders by steadily increasing earnings to heighten enter-should seek. Also, the Wacoal Group’s Human Science Research Center,

prise value as an important management task, in accordance with ourwhich has conducted basic research on women’s physiques for more thanbasic policy of paying stable dividends in light of consolidated business

40 years, is unique. None of our competitors have such an organization,

results. Regrettably, we had to reflect less favorable business results bywhich enables us to discover what customers see as offering real value

lowering cash dividends to ¥20 per share for the fiscal year, a reduction

and develop appealing products suited to the times. In accordance withof ¥5 from the previous fiscal year. Further, since 2001 we have purchased

our basic approach to manufacturing, which is also our basic manage-treasury stock as part of increasing returns to shareholders. In the fiscal

ment strategy, we will continue creating products loved by customers andyear, we improved capital efficiency by purchasing 1,130,000 shares ofdeveloping products that meet the needs of the times in order to raise

treasury stock, bringing treasury stock purchased to a total of 21.3

enterprise value. In closing, I would like to ask our shareholders and othermillion shares. As for retained earnings, while considering investment

investors for their continued understanding and support.

in new businesses and M&As, we will purchase treasury stock flexibly to
improve capital efficiency and realize returns to our shareholders.

August 2010

Yoshikata Tsukamoto
Representative Director

14

Evolving on Strengths
Message from the Management“The Wacoal Group will raise the productivity ofeach employee and ensure stable profitability.”
Hideo Kawanaka
Director and Vice President(Business Restructuring and Peach John)

Restructuring Innerwear Wholesale Operations

Peach John’s Current Standing and Business Strategies

I am very much aware that our core operations, women’s innerwear

Popular among young women and young career women, Peach John

wholesale operations in Japan, are facing extremely challenging condi-

recorded a 12% year-on-year decline in net sales, to ¥13.2 billion, for thetions. As our president Yoshikata Tsukamoto explained, restructuring

fiscal year. In Japan, Peach John has its own sales channels centered onthese core operations is a priority task that we have to tackle quickly.

mail-order catalog sales and store sales. Recently, the methods customers

My mission is to accelerate the business restructuring that we have

use to order have rapidly shifted from telephone and fax to the Internet.

carried out so far while implementing further restructuring decisively in

Although we developed an IT infrastructure to increase customer

order to improve our ability to respond to dramatic changes in market

convenience, Internet orders were lackluster, and consequently net salesconditions as set out in our new Medium-Term Management Plan.

decreased. I believe the main reason for this was a decline in productInitially, we will concentrate on putting a brake on a rapid decreaseplanning capabilities. With this in mind, we intend to reinforce productin profitability. Because the market is shrinking, women’s innerwear

planning capabilities and take full advantage of our new IT infrastruc-

wholesale operations in Japan have little prospect of growing. Therefore,

ture to provide young women and young career women with the very

we have to change the structure of operations and earnings to suit thelatest product information.

size of revenues. We need to realize a leaner structure that secures

Further, we intend to increase the profitability of each store in orderearnings even in the midst of a sales downturn. While continuing withto secure earnings. Based on exacting assessments of the profitability ofexisting initiatives to revise fixed costs and reduce expenses, we intend

the 27 stores that Peach John operates primarily in the Tokyo metropoli-

to move forward with such new reforms as increasing the productivity of

tan area as of August 31, 2010, we will implement a scrap-and-build

each employee, reforming the profit structure in the department store

program in order to create a network of stores that attracts even morechannel, and deploying personnel with a view to improving productivity.

customers. Overseas, plans call for establishing an operational platform

Among these initiatives, I think that increasing the productivity of

in China and rapidly expanding operations. We have began to actively

individual employees is a key strategy. If employees have the motivation

develop a store network while managing operations efficiently throughto handle multiple roles, it will not only reduce costs but also give risecollaboration with the operations of Wacoal Corp. in China. Our two

to synergies that will encourage new ideas.

stores in Hong Kong are seeing brisk sales, and store openings are slated

In order to lead these efforts, we established a restructuring advance-

for China in August 2010. By advancing these strategies, we aim toment project in April 2010. In its first three months, this project identi-

achieve net sales of ¥15.6 billion and operating income of ¥0.8 billion

fied tasks, established strategies, and set out improvement targets, whichin three years time.

we are trying to reach in one year. This is the first time we have set a time
limit on such a project, but we are absolutely determined to meet thesetargets so that we can respond to volatile times and survive as a company.

WACOAL HOLDINGS

15

ANNUAL REPORT 2010

Evolving on Strengths
Message from the Management

Operations in China and the U.S. Crucial to Growth
For the immediate future, China and the U.S. will be our priorities
overseas. The rapid turnaround of the Chinese market after the businessclimate worsened testifies to its burgeoning potential. Furthermore,because the Wacoal Group’s competence lies in high-quality productswith advanced functionality, the growing affluence of the population
along China’s coastal areas is a major opportunity.
In China, initiatives focus on three brands with a view to catering toa broad range of customers. As well as the mainstay Wacoal brand, we aredeveloping amphi, for young women, and the high-value-added brandSalute. During the fiscal year, we increased their name recognition in
China by mounting advertising campaigns on a larger scale. Consequently, our share of sales increased steadily at existing stores centered on the“We will accelerate the development of overseas

department store channel, comprising 333 stores at the end of the fiscal

operations to make them a growth driver.”number of stores carrying our products, in coastal areas and inland areas

year. We will continue raising name recognition while increasing theof northeastern China. Also, over three years we plan to open 23 directly

Tadashi Yamamoto
Director and Senior Corporate Officer(General Manager of International Operations)managed stores, including factory outlets, giving us 25 stores. Further,to increase points of contact with customers, we began sales through amajor Internet shopping site, Taobao, from February 2010. Through such
efforts, we aim to realize growth in step with the expansion of China’s
market and, in three years, grow sales 150%, to ¥10.0 billion.
In the U.S., accounting for the largest portion of overseas earnings,
our priority is to raise growth and earnings. During the fiscal year, we

Aiming to Expand Overseas Operations Rapidly

raised the name recognition of a new original brand introduced in response

Strengthening and expanding overseas operations has been an importantto the cancellation of the contract for licensed products for DKI and

facet of our growth strategy since the previous Medium-Term Manage-

DKNY designer brands. As a sexy and fashionable brand, b.tempt’ d byment Plan. Because Japan’s market is shrinking, overseas operations are

Wacoal has earned strong endorsement from business partners and con-key to growth. However, under the previous Medium-Term Management

sumers. In the fiscal year, about half the number of stores carried this newPlan, efforts to strengthen and expand overseas operations lacked speed.

brand compared with the number that carried DKI and DKNY designer

While the worldwide recession affected us, I think we did not progressbrands. However, by raising this number close to the level achieved forsufficiently in brand loyalty penetration and other efforts to build a

DKI and DKNY, we plan to increase sales and brand loyalty in the current

foundation from which to accelerate growth. Although the Wacoal Group

fiscal year. Further, we will use U.S. operations to launch the new brandmarkets products in 39 countries, market share worldwide remains low

in Canada, Mexico, and Brazil. Although still far from the sales levels of

because often the Group sells products on a small scale through sales

DKI and DKNY products, we look forward to improved profitability

agencies. In response, we will expand overseas operations at a greater pacebecause b.tempt’ d by Wacoal is an in-house brand. Also, we plan to market

by strengthening operational platforms in the U.S. and China while

Shapewear, a women’s undergarment with corrective functionality—

laying foundations in new markets with considerable potential such as

an area in which we have long-standing expertise. Further, U.S. operations

Germany, Brazil, and Russia through further brand loyalty penetration.

will increase points of contact with customers by launching an Internet

As a result, we aim to increase overseas sales, including those of affiliates,

sales web site in August 2010. Our goals are to return U.S. operations to¥17.0 billion, to ¥69.0 billion, by fiscal 2013.

growth and increase sales 25%, to ¥13.0 billion, by fiscal 2013.

16

Aiming for
Sustainable Growth
The Wacoal Group’s Management Philosophy andCorporate Social Responsibility
Seeking to “contribute to society by helping women to express their beauty,”
the Wacoal Group has sought to improve women’s lifestyles through its innerwear business since its foundation. While constantly monitoring changes inwomen’s values and sense of beauty, we have pursued manufacturing that realizes
the essence of timeless beauty. In these efforts, our basic management strategy
has been to focus on customer feedback in order to continue creating products
loved by customers and develop new products that meet the needs of the times.
Further, mutual trust is a key facet of our vision and our management philosophy. This ideal began with the absolute trust managers place in employees,
which became expressed as mutual trust between the Company and its workforce. Today, our business management values mutual trust in a broad range ofrelationships with society, including relationships with customers, business partners, local communities, and shareholders.
No matter what the era, as it advances business initiatives the Wacoal Groupwill never forget to consider and benefit society. Building mutual trust withsociety is the goal of the Wacoal Group’s corporate social responsibility activities.
Our Mission
We will contribute to society by helping women to express their beauty.
Our VisionWe, the employees and management of Wacoal, will maintain a refined corporate culture based on
mutual trust and will continually strive to make the Company a global leader in the industry.
Our Values
1. Create products loved by customers.
2. Develop new products that meet the needs of the times.
3. Conduct business in a fair manner with a forward focus.
4. Build a better Wacoal through better human resources.
5. Fear not failure and boast not of success.

WACOAL HOLDINGS17

ANNUAL REPORT 2010socialcontribution
In a variety of ways, the social contribution activitiesof the Wacoal Group are helping women to express

The Aio mobile breast cancer screening unit

Wacoal Breast Care Activities
Aiming to facilitate the early diagnosis and treatment of breast cancer andother breast diseases, we conduct the activities summarized below.

their beauty in accordance with its Mission.

Furthermore, the Wacoal Group plans to advance these activities through-The criteria for the Wacoal Group’s social contribu-

out the Group and overseas.

tion activities are that they must enable many women• Pink Ribbon Activities

to lead more healthy and active lifestyles, they must

Pink Ribbon activities involve awareness campaigns that promote thebe something that the Wacoal Group is uniquely
qualified to do, and they must be socially significant.
By conscientiously continuing such activities,
we deepen our relationships with women and society

early diagnosis and treatment of breast cancer worldwide. As an innerwear
manufacturer, the Wacoal Group makes unique contributions to Pink
Ribbon activities. In these efforts our goals are to help as many womenas possible that suffer due to breast cancer and protect women’s healththrough the early diagnosis of breast cancer.
For example, we increase awareness through the Pink Ribbon Fitting

at large and increase recognition for the value of theCampaign. In this campaign, held for one month every October, werole we play.

fund” for every brassiere customers try on at stores. Moreover, since 2005

donate ¥10 to the Japan Cancer Society’s “breast cancer eradication smile
we have operated a system whereby shareholders are able to make contributions to this fund equivalent to a part of the Wacoal essence check gift
certificates provided as a shareholder benefit. Wacoal matches the amountof these contributions with its own contributions
to the fund.
Also, our support extends overseas. Wacoal Group companies in
12 countries and regions, including the U.S., China, and Southeast Asia,
support Pink Ribbon activities in light of regional needs, and these efforts
are producing benefits.
www.wacoalholdings.jp/community_e/environment.html• Breast Cancer Screening Support Project
We began the Breast Cancer Screening Support Project in October 2009.
Through this project we hope to help as many women as possible undergo
breast cancer screening. To that end, and as a company empathetic towomen, the Wacoal Group purchased a new mobile breast cancer screening unit. As an expression of our compassion for women, we named themobile unit Aio, which means “with love” in Japanese. The Aio mobile
breast cancer screening unit is traveling all over Japan to give more womeneasy access to breast cancer screening.

18

Remamma products

Spark Angels• Remamma

Sports Activities

The Wacoal Group has developed an original range of Remamma products

The Wacoal Group actively promotes women’s sports. We formed thefor women who have undergone operations for breast cancer. We began

Spark Angels women’s track team with a view to enabling each athlete

manufacturing these products in 1974 with the aim of restoring smiles

to realize her abilities and thereby show the beauty of women taking partand attractive bodylines to women who have suffered from breast cancer.

in sport and competing energetically and positively.

Through consultation with physicians and rehabilitation specialists as

Since we established Spark Angels more than 20 years ago, the teamwell as many years of in-house research, the Wacoal Group has developed

has built an impressive record, with several individual athletes participating

the Remamma product range, which includes natural-feeling pads throughin the Olympics and numerous other track and field events at home andto stylish innerwear and bathing suits. To date, more than 180,000 women

abroad. As well as qualifying for the recent Beijing Olympics, team member

have used these products. Customers can consult with us and purchase

Kayoko Fukushi represented Japan at four consecutive events through to

Remamma products at five Remamma Room stores around Japan.

the World Championships in Athletics in 2009.

Further, we provide these products through the Remamma website andThrough such activities, the Wacoal Group wants to give greaterat Consultation and Fitting Sessions held annually in various regions.

exposure to the joy of sports and the beauty of women who take part in

Although we run Remamma as a business, we view it as a “social”

them. At the Wacoal Group, we want to remain a company that helps

business that does not put profit first and which we are uniquely qualified

women do their best.

to operate as a women’s innerwear manufacturer.

www.wacoalholdings.jp/community_e/culture.html

www.wacoalholdings.jp/community_e/environment.html

Nyubou Bunka Kenkyukai
Tsubomi School

The Wacoal Group is a long-time supporter of the Nyubou Bunka

The Wacoal Group conducts Tsubomi School innerwear classes nationwide

Kenkyukai, established in 1991. This organization gathers specialists fromfor girls, from the fourth year of elementary school through the second

a wide range of fields, including medicine, biology, and other sciences asyear of junior high school, and their guardians. Tsubomi School programs

well as sociology and the humanities, who address physical and psychologi-

seek to alleviate the uncertainty and insecurity that is common among

cal issues associated with women in relation to the breast. Since its estab-adolescent girls due to dramatic physical change by promoting understand-lishment, the organization has continued to deepen understanding of

ing of physical development and innerwear. Also, Tsubomi School pro-the significance of women in society through discussions and exchanges

grams use the results of research by the Wacoal Group’s Human Scienceof information on research findings and academic insights.

Research Center on the maturing process of children.

www.wacoal.jp/company/nyubou-bunka/index.html

Our personnel visit regional children’s associations, girl scouts groups,
and schools to provide instruction on the differences between adults andchildren and the correct way to select and use innerwear based on stagesof maturity. Because guardians and children study together, the programs
provide a chance for them to discuss physical changes and innerwear at
home. Held with the cooperation of the National Federation of Kodomokai, Tsubomi School programs have instructed more than 20,000 participants since October 2001.
www.wacoalholdings.jp/community_e/environment.html

WACOAL HOLDINGS19

ANNUAL REPORT 2010

cultur alactivities
Contributing to the spread and development ofJapan’s Western fashion culture for women through“Luxury in Fashion Reconsidered”©The Kyoto Costume Institute, photo by Naoya Hatakeyama

Japanese Painting Exhibition
In the 1980s, Wacoal Corp., now under the umbrella of Wacoal Holdings
Corp., and Kyocera Corporation established an exhibition to promote

its innerwear operations, the Wacoal Group is engaged

international exchanges not only in business but also in the Arts. The resultin a variety of cultural activities that have a particular

was the Modern Japanese Painting Exhibition, which toured five countriesemphasis on the themes of fashion and art. We are1985 through November 1986. As a retrospective of this exhibition,

involved in these activities because we want to go
beyond the area of innerwear products and contributeto culture and lifestyles as they relate to women.

and seven cities worldwide, including London and Paris, from February
the recently held Japanese Painting Exhibition showed one work from 45of the 48 artists featured. Further, Wacoal Holdings Corp. and Kyocera
Corporation held the exhibition at the Museum of Kyoto in 2009 tocommemorate their respective 60th and 50th anniversaries and express
their gratitude to society. The 21st century has been characterized by the
rapid emergence of new forms of culture, vigorous business powers, and the

The Kyoto Costume Instituteswift globalization of information. Amidst this environment, the aesthetic

We established the Kyoto Costume Institute in order to specialize in thevalue of Japanese culture is being revaluated within Japan. In this exhibit,

collection, research, preservation, and display of historical Western gar-masterpieces by 45 artists representative of Japanese painting, stepping out

ments and explore the future of costume culture. Established with theof the bounds of their individual circles, have gathered together in one place.

all-round support from the Wacoal Group in 1978, the institute hasThis has allowed a great number of people to reconfirm the beauty of thesecontinued its activities for more than three decades.

works. Through these efforts, we are contributing to the further advance-

Centered on garments with historical value, the institute’s collection

ment of Japanese culture in Kyoto, and throughout the rest of Japan.

of more than 30,000 items includes documents of cultural interest, posters,
and fashion plates. Using unique painstaking preservation methods, we

The SPIRAL Building

preserve delicate, easily damaged fibers, such as those of medieval garments.

The Wacoal Group established the SPIRAL building in 1985 in Aoyama,

Further, museums and art galleries in Paris, New York, Los Angeles, andTokyo, as a multipurpose cultural facility that combines art and everyday

other cities around the world have invited the institute to exhibit the results

life. Part of the facility, the Spiral Hall hosts a diverse spectrum of events,

of its research. As a result, these exhibitions enable international cultural

including theater, music concerts, and other kinds of performance as well as

exchanges in regions worldwide.

symposiums and art exhibitions. Also, the facility provides space for young

Recent activities include holding the “Luxury in Fashion Reconsid-

artists to exhibit and perform and organizes a variety of cultural projects.

ered” exhibition at the National Museum of Modern Art, Kyoto and the

The SPIRAL building attracts attention from many different quarters as

Museum of Contemporary Art Tokyo in 2009. Themed on the changing

a place where visitors can experience a complete fusion of art and everyday

relationship between luxury and fashion in different societies from thelife and as a source and focal point for cultural trends. In keeping with its

17th century through to the present day, the exhibition attracted a large

mission, the facility includes a contemporary art gallery, a home furnishingnumber of visitors.

retail store, a CD/DVD store, a cafe, a restaurant, and a hairdresser’s salon.

www.kci.or.jp/

Through the cultural projects at the SPIRAL building, the Wacoal Groupintends to continue providing society at large with ideas for incorporating
art into everyday life.
www.spiral.co.jp/e_language/index.html

20

personnel
development
The personnel of the Wacoal Group are one of its
most important assets. Mindful of this, the Group works

Balance between Professional and Family Commitments
Because we have many female employees, we are improving and extending
a range of programs that support employees simultaneously fulfillingto deepen trust with employees, create workplace envi-

important roles at work and at home. These include maternity andronments that enable all employees to work with vigor

childcare leave programs and a leave system for employees caring for or

and with a sense of fulfillment, and develop systems
for developing and optimally utilizing personnel.
In addition to respecting human rights and individuality
as a matter of course, we are taking steps to diversify
our workforce and help employees balance professionaland family commitments.

nursing family members.
Meanwhile, our employees have independently established a support
group for working women with children, the WACWAC Mothers’Group, and we support the initiatives of this group. The group helps
communication about a broad range of topics. As well as enablingexchanges of a variety of information about childbirth and child-rearing,
it puts forward ideas relating to such issues as combining work and otheraspects of life or creating employee-friendly workplaces.

Personnel Development
In order to foster the kind of self-starting personnel that will contribute

Diversity Management

to the future continued development of the Wacoal Group, the Group

Striving to create fair workplaces that respect personnel diversity, Wacoal

conducts training programs based on the employee’s work history andGroup companies around the world employ a wide range of people regard-current position, such as the Leader Development Training and Career

less of their race, gender, age group, or whether or not they have disabilities.

Training programs. We also have a self-education support system that

In Japan, women account for approximately 86% of the workforce ofassists employees’ independent efforts to develop abilities in line with

Wacoal Corp., but they occupy less than 15% of management positions.

their career plans. In addition, we have a variety of awards designed to

To rectify this imbalance, we offer a range of personnel development

further heighten employee motivation.

programs to help ambitious female employees advance their careers.
Further, we currently employ 100 individuals with disabilities, which also
meets the 1.8% minimum employment rate required of private sector
companies. However, our efforts in this regard do not simply involve
securing a fixed number of employees, we are creating barrier-free offices
in order to make it easier for our disabled employees to work.
Overseas, as well as hiring employees locally in the regions where
we operate, we try to build long-term partnerships with employees bypromoting local employees to executive positions and developing personnel
measures that reflect respect for local customs, culture, and religion.

WACOAL HOLDINGS21

ANNUAL REPORT 2010environmental
management
In order to protect the global environment, the Wacoal
Group takes measures to reduce environmental burden

Bra recycle bag

Strengthened Development of Eco Products
The Wacoal Group engages in environment-friendly product development.
For example, developing innerwear that helps maintain body temperature

at all stages of its operations, from design and materials

contributes to society’s energy-saving efforts, while encouraging the use ofdevelopment through production, transportation, sales,

recycled fabric or synthetic fabric made from plants helps resource recycling.

and collection. In accordance with our environmental

share of sales every year. In the fiscal year, they accounted for approximately

policy, we prepare a medium-term environmental

60% of sales.

action plan every three years and conduct environmen-

As a result of these measures, eco products are generating a larger

Brassiere Recycling Campaign

tal management initiatives to reach the plan’s targets.

We began the Brassiere Recycling Campaign after a survey revealed that

Also, the Wacoal Group is working to raise the overallmany women are reluctant to discard as garbage brassieres that they nolevel of its environmental efforts by using an environmental management system.

longer wear. In this initiative, customers put brassieres they no longer needin specially designed collection bags and bring them to stores. The collectedbrassieres are processed into RPF, which a paper manufacturer uses.
During our 2009 Brassiere Recycling Campaign, lasting roughly twomonths from February 12 to April 22, 800 stores collected approximately

Reduction of Environmental Burden

13,000 brassieres. These were converted into 5,180 kg of recycled plastic

At the Wacoal Group factories producing such innerwear products asfuel. Collecting the unneeded innerwear of customers is an importantbrassieres, girdles, and bodices, the largest environmental burden stems

responsibility of the Wacoal Group as a manufacturer. At the same time,from cutting wastage from polyester, nylon, and other textile materials.

such initiatives are an important part of our environmental preservation

At the design stage, we use CAD to reduce cutting wastage. Nevertheless,activities. This particular initiative is spreading beyond Japan to countries

about 40% of materials end up as cutting wastage, which accounts forworldwide, with Group company Taiwan Wacoal Co., Ltd., advancing aaround 40% of the total waste factories generate. To resolve this problem,

similar project.

Kyushu Wacoal Manufacturing Corp., which operates our main factory,
uses thermal recycling to create recycled plastic fuel (RPF), which a
paper manufacturing company uses. Thanks to such initiatives, the waste
recycle rate of the Wacoal Group’s 14 operating bases in Japan rose to
89% in 2009.
Other initiatives to reduce the environmental burden of operations
include measures to reduce CO2 emissions associated with transportation.
In these efforts, we are moving forward with plans to increase the use of
trains instead of trucks for shipping products from factories, and we areconsolidating distribution centers to build a more efficient distribution
network. Through a range of such initiatives, Wacoal Corp. reduced its
CO2 emissions 6% year on year in Japan for 2009.

22

corpor ate
governance
The overriding goal of the Wacoal Group’s

Management Philosophy and Corporate Governance
The Wacoal Group’s management philosophy is based on mutual trust. This iscorporate governance is to continuously growenterprise value by ensuring that management

a value that the Wacoal Group aims to carefully preserve in its relationships
with shareholders, other investors, and all other stakeholders with a vested inter-is highly transparent, equitable, and objective

est in the Group. To that end, the Group will steadily build and strengthenwith respect to all stakeholders, including share-

ensure that every individual in the Group, from the management team throughholders, other investors, and customers.

governance systems pursuant to laws and statutory regulations while working toto employees, is aware of the social significance of the Wacoal Group andadheres to good ethical conduct. We believe that properly functioning corporate governance based on mutual trust is indispensable in order to achievesustained growth and further increase enterprise value.
Regarding our progress in developing corporate governance systems, in 2002
the Company introduced a corporate officer system to clarify responsibility for
operational implementation, speed up decision making, and strengthen themonitoring functions of the Board of Directors. In 2003, Wacoal established theDisclosure Committee in order to ensure the accuracy of the financial and otherinformation made available to the public. Further, in 2005 we elected outside
directors to ensure management decisions are balanced and not made solely bydirectors. Meanwhile, in October 2005 we transferred to a holding company
system in order to realize a more effective management system that enables
strategic decision making and optimal resource deployment for Group companies overall while clarifying responsibility and authority and allowing flexible
operations at operating subsidiaries.

Corporate Governance Structure
As of June 29, 2010

GENERAL SHAREHOLDERS’ MEETINGGroup Management Meeting
4 Directors
2 Corporate Auditors
Quarterly Business Results Review Committee
7 Directors 5 Corporate Auditors
Representative of Each Company
and Department
Disclosure Committee
Risk Management Committee
Information Security Promotion Division

Board of Directors
4 Directors
3 Outside Directors
5 Corporate Auditors

Board of Corporate Auditors
2 Corporate Auditors
3 Outside Corporate Auditors
Board of Corporate Auditors’ Secretariat

Representative Director

Executive Compensation Advisory Committee
Office of Corporate Auditors
Operating Subsidiary
Operating Subsidiary

Compliance Committee
Corporate Ethics Committee
Corporate Ethics Hotline

Operating Subsidiary
Operating Subsidiary

Independent
Accountants

WACOAL HOLDINGS23

ANNUAL REPORT 2010

Corporate Governance System
The Group employs an auditor system of governance, with operational

Attendance of Outside Corporate Auditors at Meetings ofthe Board of Directors and the Board of Corporate Auditors

implementation and oversight undertaken by the Board of Directors andApril 2009–March 2010

the Board of Corporate Auditors. Comprising 7 directors, 3 of whom are

Board of Directors
		Board of Corporate
Auditors

Yutaka Hasegawa

Attended 11
from a total of 14

Attended 11
from a total of 15

Tomoharu Kubo

Attended 14
from a total of 14

Attended 15
from a total of 15

Yoko Takemura

Attended 13
from a total of 14

Attended 15
from a total of 15

outside directors, and 5 corporate auditors, 3 of whom are outside corporate
auditors, the Board of Directors decides such issues as important management policies and strategies and items stipulated by statutory laws andregulations or the Group’s articles of incorporation. Furthermore, theGroup files notifications with the Tokyo Stock Exchange for all of theabovementioned outside directors and outside corporate auditors as“independent directors or auditors.”Five corporate auditors, 3 of whom are outside corporate auditors,

Limited Liability Agreements Concluded with Outside Directors

sit on the Board of Corporate Auditors, which supervises and audits

and Outside Corporate Auditors

business management. Also, the Group has established the Office ofIn order to enable the Group to include competent outside directors andCorporate Auditors, which audits and monitors the appropriateness andoutside corporate auditors, the Group’s articles of incorporation permit

efficiency of the operational processes of Group companies.

the Group to conclude agreements with outside directors and outside

Also, the Group has established the Group Management Meeting,corporate auditors limiting their liability for damages in relation to thewhich comprises directors and corporate auditors. The meeting considers

Group. Accordingly, the Group concludes limited liability agreements

Group management strategy and other important management issues

with outside directors and outside corporate auditors.

and conducts prior deliberation of matters for consideration by the Boardof Directors. Including outside directors, the Executive Compensation

Requirements for Resolutions Electing Directors

Advisory Committee develops proposals for the appointment, promotion,

The Group’s articles of incorporation stipulate that a resolution for theand compensation of executives and contributes to the realization of highly

election of a director requires the attendance of shareholders that cantransparent and equitable business management.

exercise voting rights and that own at least one-third of voting rights aswell as authorization based on a majority of voting rights. Furthermore,

Disclosure Policy

cumulative votes are not permitted.

The Group has established the Disclosure Committee in order to ensure
the accuracy of financial and other information issued by the Group.

Determination of Dividends from Retained Earnings

This committee checks the propriety of the Group’s internal controls andIn order to return profits to shareholders flexibly, the Group’s articles of

disclosure based on Section 302 of the U.S. Sarbanes-Oxley Act withincorporation stipulate that resolutions of the Board of Directors determine

respect to 20-F annual reports filed with the U.S. Securities and Exchange

cash dividends from retaining earnings, unless otherwise stipulated by laws

Commission and other financial reports submitted by the representativeand statutory regulations.

director and directors responsible for financial matters. In addition, thecommittee checks the accuracy of disclosed information. The representative

Compensation of Executives

director and the directors responsible for financial matters prepare written

For the fiscal year, total compensation for directors was ¥275 million, total

oaths based on the reports that the committee has verified.

compensation for corporate auditors was ¥33 million, and total compensation for outside directors and outside corporate auditors was ¥49 million.

Attendance of Outside Directors at Meetings of the Board of Directors

In addition, the total compensation for directors includes acquisition rights

April 2009–March 2010

for the subscription of new shares of ¥40 million recognized in expenses.

Kazuo Inamori

Attended 9 from a total of 14

Further, one director, who retired upon conclusion of the ordinary general

Mamoru Ozaki

Attended 13 from a total of 14

shareholders’ meeting convened on June 26, 2009, is included. Yoshitaka

Atsushi Horiba

Attended 13 from a total of 14

Tsukamoto, the one executive that receives compensation of over ¥100
million on a consolidated basis, serves concurrently as a director of Wacoal
Holdings Corp. and Wacoal Corp. and receives total compensation of¥173 million.

24Compliance System• Directors establish medium-term management plans, which directors and• In order to ensure that directors and employees adhere to laws andemployees share and that apply laterally to the entire Group. Further, instatutory regulations and implement operations based on sound societal

accordance with these plans, directors issue instructions to each divisionnorms, the Group has established its own conduct and ethics code.

regarding the establishment of medium-term and short-term policies and• Directors lead efforts to instill and ensure adherence to good corporate

business results targets.

ethics throughout the Wacoal Group.

• The business results of each Group company are analyzed on a monthly• Headed by the representative director and with the Legal and Compliancebasis and reported to the Board of Directors. Also, directors check the

Department as its secretariat, the Corporate Ethics Committee develops

business results and the progress of measures at meetings of the Quarterlycompliance systems and examines compliance issues that significantly

Business Results Review Committee held four times a year. If targets haveaffect the Wacoal Group.

not been met, directors examine improvement measures and revise targets• The Group has established a system whereby employees discovering

if needed.

potential compliance problems relating to violations of the Group’s
conduct and ethics code can report these immediately to the Legal andGroup Management Systems of the Wacoal Group

Compliance Department. This system includes a corporate ethics hotline• The Group has established regulations and a basic policy for the manage-

for whistleblowers. Upon receiving such reports, the Legal and Compli-

ment of Group companies. The Group also stipulates items that theance Department investigates the details of cases, consults with the division

Board of Directors must decide and items that must be reported toin charge, and decides on the measures to prevent recurrence. The Legal

Wacoal Holdings Corp.

and Compliance Department submits serious problems to the Corporate• Transactions between Group companies must be equitable and pursuant

Ethics Committee, which reports the results of investigations to the Board

to laws and regulations, accounting principles, and tax systems.

of Directors and the Board of Corporate Auditors.

• The Office of Corporate Auditors conducts internal audits of Group• The Group’s conduct and ethics code, Corporate Ethics—Wacoal’s Action

companies, which include audits of the status of the construction andAgenda, stipulates resolute refusal of demands from antisocial forces.

operation compliance systems and risk management systems. Further, theFurther, conduct standards for crisis management set out in the Group’s

Office of Corporate Auditors reports the results of these audits to thecrisis management manual stipulate that the Group will not have any

Board of Directors and the divisions with jurisdiction over respective

relationship whatsoever with antisocial forces. Also, in order to addressGroup companies. At the same time, the Office of Corporate Auditors

gratuitous demands from antisocial forces, the Group coordinates withensures Group companies conduct operations appropriately by providing

outside specialist organizations and collects and manages information

them with directions and advice on the construction of systems.

about antisocial forces and has established an internal system in this regard.

Defensive Measures against Takeovers through the Acquisition of
Risk Management Systema Substantial Shareholding of the Company• With the director responsible for risk management as its chairperson, theAfter the Group’s June 2006 ordinary general shareholders’ meeting passed

Risk Management Committee manages overall risks related to the Wacoal

a resolution authorizing the adoption of a basic policy on measures against

Group and develops and strengthens risk management systems.

the acquisition of a substantial shareholding of the Group, the Board of• Based on the approval of the Board of Directors, the Risk Management

Directors decided upon specific countermeasures reflecting that basic

Committee establishes risk management regulations that form the basis ofpolicy. Further, the June 2009 ordinary general shareholders’ meeting

the risk management system. Guided by these regulations, the Risk

renewed this policy. In principle, the Group does not oppose the acquisi-

Management Committee clarifies responsibility for respective risk catego-tion of large shareholdings that contribute to the enhancement of the enter-ries and builds systems for comprehensive risk management of the entire

prise value and shareholders’ common interests. The Group’s defensive

Wacoal Group.

measures against takeovers, or peacetime takeover defensive measures,• The Risk Management Committee periodically reports to the Board ofinclude providing advance warning that there are procedures prospective

Directors on the operational status of the risk management system ofpurchasers of the Group’s shares must follow and that a gratis allocation of

Wacoal Holdings Corp. and the entire Wacoal Group.

acquisition rights for the subscription of new shares with discriminatory
treatment for the exercise of such rights may be implemented. In addition,

Performance of Duties by Directors

the Group has established the Independent Committee to ensure that

• In order to heighten the appropriateness of directors’ decision making,initiations of defensive measures against takeovers are based on substantive,

the Group’s directors include independent outside directors.

objective decisions and not based on arbitrary decisions by the Board of
Directors. For further details, please refer to the Group’s web site.
www.wacoalholdings.jp/ir_e/news.html

WACOAL HOLDINGS25

ANNUAL REPORT 2010

BOARD OF DIRECTORS AND CORPORATE AUDITORS
Wacoal Holdings Corp. and Subsidiaries

As of June 29, 2010

Representative Director

Director and Vice President

Yoshikata Tsukamoto

Hideo Kawanaka

Representative Director,

Director, Vice President and Corporate Officer,

President and Corporate Officer,

Wacoal Corp., In charge of Business Restructuring,

Wacoal Corp.

Sales Control Department and Peach John Support

Directors

Corporate Auditors

Tadashi Yamamoto

Morio Ikeda

Kimiaki Shiraishi

Director and Senior Corporate(Outside Director)(Standing Corporate Auditor)

Officer, Wacoal Corp.,

Adviser, Shiseido Company, Limited

General Manager of International

Chairman of the Board of Trustees andOperations

Chancellor of Toyo Eiwa Jogakuin,

Ikuo Otani
Director and Corporate Officer,
Supervisor of Accounting, Wacoal Corp.

Mamoru Ozaki(Outside Director)
Advisor, Yazaki Sogyo Corporation,
Outside Director, Fujikyuko Co., Ltd.,
Outside Director, Kikkoman
Corporation

Yoshio Kawashima(Standing Corporate Auditor)

Chairman of Public Interest Corporation

Akira Katayanagi

Commission, Outside Director of(Outside Corporate Auditor)

Asahi Kasei Corporation, Outside

Representative Director and Chairman,

Director of Isetan Mitsukoshi Holdings,

Mitsubishi UFJ NICOS Co., Ltd.

Outside Director of Tokyo Metropolitan

Outside Statutory Auditor, Hyakujushi Bank, Ltd.

Television Broadcasting Corp.

Tomoharu Kuda

Atsushi Horiba(Outside Corporate Auditor)(Outside Director)

Certified Public Accountant

Representative Director andChairman and President,

Yoko Takemura

HORIBA, Ltd.

(Outside Corporate Auditor)
Partner at Miyake Imai Ikeda law firm, Lawyer

Message from an Outside Director

Message from an Outside Director

Mamoru Ozaki, Outside Director

Yoko Takemura, Outside Corporate Auditor

Based on 44 years of experience working as a public

I have worked with Wacoal for 15 years as a legal

servant and in government institutions, I fulfill myadvisor, plus 5 years as a corporate auditor. As part ofmanagerial oversight responsibilities from a slightly

my oversight responsibilities, I focus particular attention

removed perspective. I consider corporate compliance,on any legal issues that may arise during the executionsocial responsibility, consumer protection, macro-of business activities. I believe that it is the responsibility

economics, and trends in principal overseas countries.

of the corporate auditors to make objective judgments

I believe that Wacoal’s corporate governance systems canwhile taking into consideration the direction of theeffectively respond to changing times. I am particularly

Company, and offering advice and opinions accordingly.

impressed with the overall approach to corporate management, the adaptability ofSince its founding, Wacoal has operated based on the vision of establishinginternal systems to a management environment in which laws and other systems

a refined corporate culture based on mutual trust. Even before society began to focus

change rapidly, and the establishment and updatingon CSR activities, Wacoal had been placing importance on social contribution,of internal policies. However, it is important to deepen understanding of corporate

compliance, and corporate governance. Going forward, additions to the current

governance systems and continue growing the Company.

corporate governance system may become necessary to respond to advances in

As the population declines, consumer spending in Japan is rapidly approaching

information systems technology and changes in social trends. However, as longits upper limit. Without growth in consumer spending, companies will have to fightas Wacoal does not forget its vision, its corporate governance system will naturally

for market share. While this is important for a competitive society, it narrows businessmaintain its effectiveness.

perspectives. The Wacoal Group must view the market from a global perspective,

I believe the fact that Wacoal continues to implement management based

and make the Wacoal brand recognized worldwide. Wacoal will tirelessly pursue

on its vision of establishing a refined corporate culture based on mutual trust is

the two goals of leading fashion trends and creating eternal beauty. Bearing thesesomething worthy of the trust of its shareholders and other investors. In orderfactors in mind, I ask shareholders and other investors for continued support of theto maintain this approach to management, Wacoal must continue to walk downCompany from a long-term rather than a short-term perspective.

the path of proper business.

26

ELEVEN-YEAR FINANCIAL SUMMARY
Wacoal Holdings Corp. and Subsidiaries

2010

2009

2008

Net sales¥163,297¥172,276¥165,761

Cost of sales

79,95384,686

83,127

Years ended March 31 (millions of yen, except per share amounts)

For the year

% of net sales
Selling, general and administrative expenses

49.0%

49.2%

50.1%

78,392

77,39969,245

Loss (gain) on sale or disposal of property, plant and equipment

25

33

(184)

Impairment charges on long-lived assets

23

29

33

78,511

77,461

69,094Government subsidy
Special retirement related expenses
Total selling, general and administrative expenses% of net sales

48.1%

45.0%

41.7%

Operating income

3,810

10,12913,540

Other income and expenses, net(733)(2,701)

588

Net interest income (expense)

46

199

225

Income before income taxes, equity in net income (loss)of affiliated companies and minority interests
Income taxes

3,123
1,574

7,627
3,213

14,353
5,853

Net income attributable to shareholders of the Company

2,524

5,230

4,966

Return on assets

1.2%

2.3%

2.1%

Return on equity

1.5%

3.0%

2.6%

Net cash provided by operating activities

9,449

8,168

14,225

Net cash (used in) provided by investing activities(2,698)(4,714)

3,590

Net cash (used in) provided by financing activities(5,438)(7,448)(9,400)Depreciation and amortization

4,807

4,546

3,908

Capital expenditures

3,998

2,362

1,211

Net income attributable to shareholders of the Company¥ 17.86¥36.75¥35.14

Cash dividends

20.00

25.00

25.00

Shareholders’ equity

1,216

1,181

1,291

Total current assets¥ 89,933¥ 90,619¥ 98,845

Total current liabilities

35,683

31,94336,010Cash and cash equivalents

24,31722,93928,043

Net property, plant and equipment

51,82049,03951,548

Total assets

223,387

213,486

241,619

8,129

5,302

5,701

171,630

165,873

185,113

Per share of common stock (in yen)

At year-end

Short-term bank loans and long-term debt, including current portion
Total shareholders’ equity

WACOAL HOLDINGSANNUAL REPORT 2010

2007

2006

2005

2004

2003

2002

2001

2000

¥166,410¥164,122¥160,968¥163,155¥163,709¥162,829¥162,023¥165,937

84,65884,322

84,041

84,63885,306

86,56787,49389,290

50.9%

51.4%

52.2%

51.9%

52.1%

53.2%

54.0%

53.8%

68,831

69,72072,12872,47270,44068,336

64,831

66,004

25

612

133

455

143

740

75

(474)

2,574

556

614
(7,100)7,521
68,85678,467

65,16175,501

71,13969,07664,90665,530

41.4%

47.8%

40.5%

46.3%

43.5%

42.4%

40.1%

39.5%

12,896

1,333

11,766

3,016

7,264

7,186

9,624

11,117

861

1,976

206

1,404

(2,800)310

10,443

338

163

157

107

112

140

117

62

(54)

13,920
6,502

3,466
1,459

12,079
5,800

4,532
2,520

4,604
2,487

7,613
3,785

20,1299,058

11,401
4,961

9,029

2,821

6,790

2,902

2,898

4,983

10,889

7,254

3.7%

1.2%

3.0%

1.3%

1.3%

2.2%

4.6%

3.1%

4.8%

1.6%

3.9%

1.8%

1.8%

2.9%

6.3%

4.2%

9,339

719

2,045

5,201

7,858

8,653

11,4808,451(1,185)(2,069)(5,528)

1,328(9,839)(9,412)(13,686)(9,624)(8,404)(3,428)296(6,138)(6,006)(5,472)(6,478)(2,611)

3,735

3,433

3,312

3,081

2,971

3,533

3,265

3,157

2,536

6,456

5,418

2,338

2,104

2,484

1,182

7,757

¥63.18¥19.60¥47.17¥19.85¥19.48¥33.22¥71.17¥47.07

22.00

20.00

20.00

15.00

13.50

13.50

16.50

13.50

1,375

1,296

1,221

1,186

1,097

1,128

1,142

1,127

¥ 92,915¥110,773¥120,300¥123,045¥124,486¥127,390¥129,508¥127,734

34,86835,52534,97033,89933,57637,09541,44938,49019,816

19,89324,19527,44327,24635,381

41,19649,88952,78253,501

51,82649,932

54,17157,29158,64459,990250,266

242,296

226,196

224,803

218,105

223,985

232,262

237,721

5,984

6,458

6,911

4,450

6,301

8,079

8,865

9,658

193,278

186,475

175,746

170,758

160,839

168,205

172,558

173,61227

28

MANAGEMENT’S DISCUSSION AND ANALYSIS
Wacoal Holdings Corp. and Subsidiaries
Years ended March 31, 2010, 2009 and 2008

Financial information contained in this section is based on the
consolidated financial statements included in this annual report,
which have been prepared in accordance with generally accepted
accounting principles in the United States (U.S. GAAP). The
Wacoal Group consists of 1 holding company (the Company),
47 consolidated subsidiaries and 9 equity-method affiliates.
The Wacoal Group is engaged in the manufacturing, wholesaling,and – for certain products – retailing of women’s foundation
garments and lingerie, nightwear, children’s underwear, outerwear
and sportswear, hosiery and other textile products. Other operations
include restaurant businesses, cultural and service-related operations,and the construction of interiors for commercial premises.

Share of Net Sales

Overview

were apparel sales made on a wholesale basis to department stores, general

We are the leading designer, manufacturer and marketer of women’s

merchandisers and other general retailers, and approximately 12% were

intimate apparel in Japan, with the largest share of the Japanese market forapparel sales made through our own specialty retail stores, catalog sales andfoundation garments and lingerie. We also sell our foundation garments andthe Internet. Sales from our other businesses (which include store and homelingerie products in several overseas markets. Sales of foundation garments

design services, restaurant businesses, cultural products and other services)(primarily brassieres and girdles) and lingerie (primarily slips, bra-slips andcomprised the remaining 2% of Wacoal Corp.’s sales for fiscal 2010.

2010

Hoisiery
1.0%

Textile products
4.6%
Other
6.0%

Outwear andsportswear
10.6%

Foundation garments
and lingerie
71.1%

Childrens’s
underwear
1.0%
Nightwear
5.8%

Over the past five fiscal years, fluctuations in our sales have typicallywomen’s briefs) accounted for approximately 71.0% of our consolidated net
sales for fiscal 2010. Our outerwear and sportswear product category hasreflected changes in unit volume, as average unit prices have generally

been the most successful of our product categories over the last three fiscal

remained stable during this period.

years, as net sales grew consistently from ¥8,920 million for fiscal 2008, or

Cost of Sales

5.4% of out total net sales, to ¥17,241 million for fiscal 2010, or 10.6% of

Our cost of sales arises principally from material and manufacturing costs

our total net sales. We also design, manufacture and sell nightwear, chil-related to the production of our apparel products.

dren’s underwear, hosiery and other apparel and textile products, and engage

Selling, General and Administrative Expenses

in several business lines that are ancillary to our core apparel business.

Our selling, general and administrative expenses principally consist of

Revenues

employee compensation and benefit expenses and promotional expenses,

We principally generate revenues from sales of innerwear (consisting ofsuch as advertising costs. Other selling, general and administrative

foundation garments and lingerie, nightwear and children’s underwear),

expenses include shipment costs, payment fees (including outsourcing

outerwear and sportswear, hosiery, textile products and other products.

payments) and rental payments for our specialty retail stores. Our selling,

The following table sets forth information with respect to our net

general and administrative expenses do not include any impairment
charges on long-lived assets or any gains or losses on the sale or disposal ofsales by category of products for fiscal 2010, 2009 and 2008:

property, plant and equipment. However, these expenses are included in

For fiscal 2010, approximately 86% of the sales of Wacoal Corp. (thenet sales of which account for approximately 64% of our consolidated sales)

operating costs and expenses and thus impact our operating income.

Net Sales (and Percentage) by Product Category			
2009

2010

Innerwear
Foundation Garments and LingerieNightwear
Children’s Underwear
Total Innerwear
Outerwear and Sportswear
Hosiery
Textile Products
Other
Total

¥116,068
9,438
1,608
127,114
17,241
1,701
7,462
9,779
¥163,297

Millions of Yen

71.0%
5.8
1.0
77.8
10.6
1.0
4.6
6.0
100.0%¥123,368
11,0191,950
136,337
15,498
1,657
6,270
12,514¥172,276

2008

71.6%
6.4
1.1
79.1
9.0
1.0
3.6
7.3
100.0%¥123,460
10,611
1,953
136,024
8,920
1,803
3,963
15,051¥165,761

74.4%
6.4
1.2
82.0
5.4
1.1
2.4
9.1

100.0%

WACOAL HOLDINGS29

ANNUAL REPORT 2010

Income Tax Expenses

We have taken steps to address these key industry trends, in seeking to

Our income tax expenses depend on our taxable income, applicable statu-build on the core strengths of our market position and brand awareness withtory tax rates and the proportion of current and deferred income taxes.

Japanese consumers. We continue to seek to sell higher-end products to

Our effective tax rate depends on a range of factors, including applicablereach consumers seeking high quality innerwear garments and to mitigate

statutory tax rates, permanently non-deductible expenses, unrecognized

the adverse impact on sales and margins from lower priced garments. We

tax benefits, any valuation allowance with respect to tax loss carryfor-

have taken steps to reduce our cost structure, such as producing morewards and tax exemptions. The effective tax rate was 50.4% for fiscal

products in lower-cost countries such as China and Vietnam, consolidating

2010, 42.1% for fiscal 2009 and 40.8% for fiscal 2008.

and modernizing our product distribution centers and expanding our early
retirement program. We are also seeking to expand sales in overseas

Key Industry Trends

markets—in particular China, the United States and Europe, as well as in

We believe that the following have been key trends in our industry during

the ASEAN region, where we launched our sorci age brand—and increase

the last three fiscal years:

sales through our own specialty retail stores, our catalog operations and the• Consumer spending in Japan has stagnated since the second half of 2007

Internet. Pursuant to our CAP 21 strategic plan, we intend to extend ourfollowing increased fuel prices and volatility in the stock and currency

innerwear product offerings into the mid-price range and include more fash-exchange markets due to the U.S. sub-prime mortgage crisis, and has not

ionable offerings in our product mix to help us reach a broader customer

gained strength. Although there are signs of economic recovery following

base. We believe that Peach John and Lecien will help us to advance these

the recent implementation of economic stimulus measures in many coun-goals. We will continue to implement these steps and evaluate other strate-

tries, the pace of the recovery in most of the world’s developed countries

gies to address challenges and opportunities in the industry going forward.

continues to be slow. The women’s apparel industry in particular continues to be in a sluggish state, characterized by an increasing number of cost

Results of Operations—conscious consumers who are exercising more cautious spending habits.

Fiscal 2010 Compared to Fiscal 2009• The number of department stores, one of our key distribution channels,

Net Sales

and retail sales through department stores declined due to the deteriora-

Consolidated net sales decreased 5.2% from ¥172,276 million for fiscaltion in consumption caused by the worsening economy. General

2009 to ¥163,297 million for fiscal 2010.

merchandising stores faced not only decreases in the numbers of new

Wacoal Brand

branch openings due to stagnant consumption levels, but also reduc-

Innerwear. The overall sales of brassieres, our main product, for fiscal 2010

tions in store sizes and increases in store closings, as well as reductions

were below the sales for fiscal 2009. This was the case despite the strong

in retail sales. At the same time however, sales at direct sales outlets andperformance of our Ribbon Bra, a product that we launched in January

on the Internet have steadily risen.

2010 as part of our campaign brassiere LALAN series and that gained strong• Due to the adverse changes in the consumer behavior and retailsupport from our consumers for its functionality and design, because thisindustry coupled with factors such as a decline in the female popula-strong performance was more than offset by the poor performance of othertion, the market for women’s innerwear garments in Japan shrank, andbrassiere products. We launched new products in our new Style Science func-

the prices of innerwear declined in terms of both overall prices andtional underwear series in each of the four seasons in fiscal 2010, with anaverage price per item. The numbers of innerwear items purchased andemphasis on the Cross-Walker, but the sales of these new products for fiscal

owned per person also decreased.

2010 were below the sales of this series for fiscal 2009. Although the• Outerwear and other manufacturers entered the innerwear market.

summer products from our Sugoi seasonal undergarments performed well,

These manufacturers offer their products by focusing on new elements,

overall sales from this series were below the sales for fiscal 2009 due to thesuch as fashionability, lifestyle and price, rather than function andpoor performance of our usual autumn and winter products, which werequality. Because the economic downturn has led consumers to become

affected by increased competition from our competitors’ products. Outside

more price conscious, these new manufacturers and others achieved aJapan, b.tempte’d by Wacoal and our new lower-priced brassiere and func-

greater market share.

tional bottom products marked in the United States performed strongly,• These manufacturers and other competitors strengthened their cost reduc-and sales of our coal Wacoal brand products in China grew.

tion efforts by, for example, sourcing fabric and producing garments in

Outerwear. In contrast to the performance of our innerwear

China and other lower-cost countries. Sales in Japan of lower priced

products, our new outerwear product, Sugo-T, achieved sales exceeding

women’s innerwear garments manufactured in these counties increased,

our expectations, and fiscal 2010 sales of Gra-P, our value-added brandleading to an intensification of price competition in our industry. The

targeting senior consumers, exceeded the sales for fiscal 2009. Thus, therecent development and tendency of general merchandisers producing

overall sales for fiscal 2010 of our Wacoal brand products fell below thetheir own low priced “private brand” merchandise accelerated these trends.

sales for fiscal 2009 due primarily to generally weak sales of our inner-• A lthough catalog marketing has made little progress, new sales strate-

wear products, which more than offset gains in sales of our outerwear andgies such as e-commerce and television marketing have led to moreother products sold under the Wacoal brand.

diversified sales channels and exposure to new customer groups.

30

Wing Brand

fiscal 2009 primarily due to a decrease in the number of customers visiting

In our Wing brand business, although sales of some of our campaign bras-

shopping centers where our shops are located. Sales for fiscal 2010 at Une

sieres continued as planned, our other brassiere and Style Science products

Nana Cool, however, did not change materially as compared to sales fromperformed poorly. As in our Wacoal brand business, sales of our Wing

fiscal 2009, because sales from our new store openings offset decreased sales

brand undergarments were lower than fiscal 2009 sales due to increased

at our existing stores.

competition from private-label brands sold by specialty clothing stores andPeach John. Although we made efforts to improve net sales throughgeneral merchandisers. The overall sales of our men’s innerwear products,

Peach John’s retail stores by continuing to develop products sold only at

which achieved significant growth during the fiscal 2010 as a result of anthose retail stores, net sales for fiscal 2010 at the retail stores declined asincrease in new store openings, exceeded fiscal 2009 sales. This was primar-

compared to net sales for fiscal 2009, primarily due to a decrease in the

ily due to the performance of our Cross-Walker products, which were soldoverall number of shoppers at the shopping malls and other buildings inmainly by general merchandisers under the BROS brand and more thanwhich Peach John is a tenant. The decrease in the number of Peach John

offset the decreased sales of DAMS at department stores as compared toretail stores from 28, as of March 31, 2009, to 27, as of March 31, 2010,

fiscal 2009 sales. Thus, the overall sales of our Wing brand business fell

also contributed to the decrease in net sales.

below fiscal 2009 sales due primarily to the poor performance of our core

As a result of the foregoing, overall sales of our specialty retail store

women’s products, which more than offset any increased sales of our men’sbusiness for fiscal 2010 increased as compared to sales for fiscal 2009. We

innerwear products.

are currently focused on improvement of profitability of our specialty retail

Other Brands

business, and as part of these efforts, we have been reorganizing our shop

Luxury Products. Sales of our luxury products fell below sales for fiscal

brands to consolidate them into AMPHI as the “master shop brand” from2009, primarily because sales of our department store product PARFAGE,

fiscal 2010.

along with other luxury products, fell below the sales for fiscal 2009.

Catalogue and Online Sales Business

Wellness Products. In our wellness business, sports-related products

In our Wacoal brand catalog sales business, although the number of

performed strongly primarily because of an increase in health conscious

purchasers of our core catalog sales remained broadly the same between

consumers. These products include our new sports tights in our condition-

fiscal 2010 and fiscal 2009, the average amount spent per customer was

ing wear product, CW-X sports, and our functional wear for golf andlower, and as a result, sales for fiscal 2010 fell below fiscal 2009 sales. Peachrunning, Jyuryu. With the aim of furthering the brand recognition of ourJohn mail-order sales from our seasonal catalogs for fiscal 2010 were all

CW-X line, we opened our first retail store in January 2010 and one addi-

below the sales for fiscal 2009 due to a fall in Peach John catalog orders. In

tional store in February 2010. Due to the successful openings of thesecontrast to our catalog business, the number of purchasers at our Wacoal

stores, sales of our CW-X line for fiscal 2010 increased as compared to sales

Web Store and sales increased for fiscal 2010, even though the averagefor fiscal 2009. Similarly, our leggings and footwear products performed

amount spent per customer remained largely unchanged as compared towell. Sales of our body styling wear, Style Cover, and our highly fashionable

the average amount for fiscal 2009. The growth in our online business wasand functional business footwear, Success Walk, increased as compared tomainly a result of our expanded product categories and an active Internet

sales for fiscal 2009. As a result of the foregoing, overall sales of ouradvertising campaign. As a result, the overall sales from our catalog andwellness products exceeded the sales for fiscal 2009.

online sales business increased for fiscal 2010.

Lecien Products. Net sales of Lecien’s innerwear and clothing products

Other Businesses

for fiscal 2010 were below its sales for fiscal 2009 due to the severe condi-

Fiscal 2010 net sales attributable to our mannequin and fixture rental

tions of general merchandisers.

business, as well as interior design and remodeling business, which we

Licensed Products. As a result of the termination of our manufacturingconduct through our subsidiary Nanasai, decreased due to reduced orders

and distribution license for Donna Karan (DKI, DKNY) products during

primarily resulting from poor sales at department stores, suspension

fiscal 2009, we did not carry any licensed products in the United States forand termination of store remodeling and downsizing that accompanies the

fiscal 2010.

economic deterioration.

Specialty Retail Business

Cost of SalesAMPHI. In our specialty retail store business, we focused our expansion on

Our cost of sales decreased 5.6% from ¥84,686 million for fiscal 2009 to

our retail store AMPHI. Despite an increase in the number of customers¥79,953 million for fiscal 2010, primarily due to a decrease in net sales,and sales volume that we achieved primarily through price reductions, thewhich more than offset the impact of our acquisition of Lecien in August

average amount spent per customer for fiscal 2010 was lower for fiscal

2009. Cost of sales as a percentage of net sales decreased 0.1%, from 49.1%

2009, resulting in decreased sales for fiscal 2010.

for fiscal 2009 to 49.0% for fiscal 2010. The slight improvement in cost of

Wacoal Factory. Sales for fiscal 2010 from our Wacoal Factory Store,
which is located in outlet malls, exceeded the sales for fiscal 2009.

sales as a percentage of net sales is primarily due to the absence of losses,
including a liquidation expense of ¥630 million, associated with the liquida-

Une Nana Cool. Our subsidiary specialty retail business, Une Nanation of Tokai Wacoal Sewing Corp., which we recognized as cost in fiscal

Cool Corp., experienced a decrease in sales at existing stores compared to2009. The cost of sales would have increased slightly for fiscal 2010 without

31

WACOAL HOLDINGSANNUAL REPORT 2010

the effect of these losses, despite our efforts to improve inventory manage-

Holdings Corp. as compared to the decrease in income before income

ment by achieving fewer returned goods and fewer losses from inventory

taxes, equity in net income (loss) of affiliated companies, and net loss

write-downs, as well as improved efficiencies in overseas production.

(income) attributable to noncontrolling interests is primarily due to thedecrease in income taxes. Although our current income taxes increased for

Selling, General and Administrative Expenses

fiscal 2010, it was more than offset by the decrease in our deferred income

Our selling, general and administrative expenses increased 1.3% fromtaxes. However, the effective tax rate increased from 42.1% in fiscal 2009

¥77,399 million for fiscal 2009 to ¥78,392 million for fiscal 2010. This

to 50.4% in fiscal 2010, primarily due to an increase in permanently non-increase was primarily due to an increase in our net periodic benefit costs,

deductible expenses as a percentage of taxable income, unrecognized tax

which in turn was primarily attributable to the increased amortization of

benefits and undistributed earnings of foreign subsidiaries, which moreactuarial losses, as well as the impact of our acquisition of Lecien in Augustthan offset a decrease in the valuation allowance for tax loss carryforwards.

2009, which more than offset any cost-reduction efforts. The amortization

The decrease in the valuation allowance for tax loss carryforwards was dueof actuarial losses increased for fiscal 2010, because of the significant valua-

to a reversal in the valuation allowance as a result of changes in our legaltion loss in plan assets as of the end of fiscal 2009 that were required to be

structure. Accordingly, we utilized ¥721 million of tax loss carryforwards,

amortized starting in fiscal 2010. The selling, general and administrativeand recognized the tax benefits of ¥293 million for the year ended Marchexpenses as a percentage of net sales increased by 3.1% from 44.9% for fiscal

31, 2010.

2009 to 48.0% for fiscal 2010. The greater increase in the selling, generaland administrative expenses as a percentage of net sales, as compared to the

Liquidity and Capital Resources.

increase in the absolute number, is primarily due to the decrease in net sales.

Our main source of liquidity is net cash flows from operations which allows

Impairment of Goodwill and Other Intangible Assets

us to secure working capital, make capital investments and pay dividends

When Peach John became our wholly-owned subsidiary in fiscal 2008, we

without relying on substantial borrowings or other financing from outside

recognized Peach John’s catalog customer relationships as an intangibleof the group. However, as of March 31, 2010 we had credit facilities atfixed asset with the intent to depreciate it using the straight-line method

financial institutions totaling ¥29,331 million, with an outstanding balanceover a period of seven years. At the end of fiscal 2010, however, we evalu-

of ¥8,129 million, including borrowings by Lecien of ¥3,487 million andated the recoverability of this asset and recognized an impairment loss ofborrowing by Nanasai of ¥2,200 million.

approximately ¥1,023 million as a result. In addition, we also recognized

In general, all of our credit facilities have automatically renewed terms,

an impairment loss of ¥71 million with respect to Lecien, after we evalu-

and we are not aware of any issues with respect to any of our lenders that

ated the recoverability of the goodwill we recognized when we acquired a

could cause these facilities to become unavailable. Even if any of our

100% interest in Lecien in August 2009.

subsidiaries loses access to funds from such credit facilities, we believe that

Operating Margin

it is possible for companies in our group to provide funds. Our borrowing

Our operating margin (i.e., operating income as a percentage of net sales)

requirements are not affected by seasonality.

decreased to 2.3% for fiscal 2010, as compared to 5.9% for fiscal 2009,

We are not aware of any restrictions on the transfers of funds from abecause the rate of decrease in our operating costs and expenses was not

subsidiary to a parent company in the form of a cash dividend, loan or cash

sufficient to offset the rate of decrease in net sales, and we recognized signif-

advance. We believe that our working capital is adequate for our present

icantly larger impairment charges for fiscal 2010. The slower rate ofrequirements and for our business operations both in the long anddecrease in our operating costs and expenses were primarily attributable

short-term.

to stagnant sales through department stores and general merchandisers,
which have historically yielded a greater operating margin through higher
prices for us than other distribution channels, combined with decreased

SG&A Expenses

Net Cash Provided byOperating Activities

operating margin of our Peach John Business, as we incurred increased¥ Billion¥ Billion

personnel and other costs from store openings and other expansion efforts

77.4

to market the business.
Total Other Loss, Net
Total other loss, net, decreased ¥1,815 million from ¥2,502 million for

69.7

68.8

78.4

14.2

69.2
9.3

fiscal 2009 to ¥687 million for fiscal 2010. This decrease was primarily due
to a decrease in impairment charges on marketable securities andinvestments.

9.4
8.2

47.8

41.4

41.7

07

08

45.0

48.0

Net Income Attributable to Wacoal Holdings Corp.
Net income attributable to Wacoal Holdings Corp. for fiscal 2010 was¥2,524 million, a decrease of ¥2,706 million compared to ¥5,230 million
for fiscal 2009. The smaller decrease in net income attributable to Wacoal

0.7

06

09

10

Ratio of SG&A expenses to total net sales (%)

06

07

08

09

10

32

Cash Flowsthe expansion of our specialty retail store network. Payments to acquire

Fiscal 2010 Compared to Fiscal 2009

intangible assets were ¥1,755 million for fiscal 2010, ¥1,846 million for

Cash Provided by Operating Activities. Net cash provided by operating

fiscal 2009 and ¥1,678 million for fiscal 2008. These payments primarily

activities increased slightly by ¥1,281 million from ¥8,168 million forcomprised of payments for information technology-related investments.

fiscal 2009 to ¥9,449 million for fiscal 2010. This was primarily due to

For fiscal 2011 we expect to spend approximately ¥530 million for

substantial progress achieved in cost-reduction efforts and to a decrease in

office maintenance and repair and ¥120 million for investments in infor-

inventory, despite a decrease in net sales. Cash inflows from operating

mation technology and our retail sales space in China. Although we

activities consisted mainly of cash received from customers and cash

currently do not have any concrete plans, we expect to continue to makeoutflows are mainly payments for production costs, selling, general andexpenditures for the expansion of our specialty retail store network

administrative expenses, and income taxes. For fiscal 2010, cash inflows(including costs for the development of new stores and the closure of

from cash received from customers decreased due to a decrease in net

underperforming stores) and for maintenance, to meet applicable legal

sales. This decrease was more than offset by a decrease in cash outflows

requirements and to facilitate the manufacture of new products with newachieved through cost reductions and efforts to keep inventory levels

designs and specifications. Furthermore, we intend to evaluate and pursue

lower. In addition, despite a small increase in selling, general and admin-

opportunities for acquisitions, investments and other strategic transac-

istrative expenses, cash outflows for payments relating to such expenses

tions that we believe will help us achieve our business objectives, includ-decreased as a result of successful cost-cutting efforts that resulted ining extending our product offerings in Japan and in overseas markets andreduced personnel and publicity expenses. The increase in selling, generalstrengthening our capabilities in the Internet, catalog and other market-

and administrative expenses, despite the decrease in cash outflows, wasing channels. We expect to fund these capital expenditures and otherprimarily attributable to increases in non-cash items, such as depreciation

expenditures through our cash from operations, existing cash reserves

and amortization and liability for termination and retirement benefits.

and other available sources of liquidity.

Cash outflow for payments of income taxes decreased, due to the decreasein taxable income.

In fiscal 2009, we sold plants and other property in connection withthe liquidation of our subsidiary Tokai Wacoal Sewing Corp with a book

Net Cash Used in Investing Activities. Net cash used in investing activ-

value of ¥59 million, and in fiscal 2008, we sold overseas corporate

ities decreased by ¥2,016 million from ¥4,714 million for fiscal 2009 to

housing units and other property with a book value of ¥211 million.

¥2,698 million for fiscal 2010. This was primarily due to an increase in

Cash Dividends

proceeds from the sale and redemption of marketable securities of ¥5,007

On May 11, 2010, our board of directors approved a fiscal year-end

million which was partially offset by increase in payments to acquire

dividend of ¥100 per five shares of common stock to our shareholders onmarketable securities of ¥2,407 million and an increase in capital expen-

record as of March 31, 2010, and dividends in a total amount of ¥2,828

ditures of ¥1,636 million.

million were paid on June 7, 2010. Our current policy is to pay cash divi-

Net Cash Used in Financing Activities. Net cash used in financing

dends once a year, and we seek to pay stable cash dividends based on our

activities decreased by ¥2,010 million from ¥7,448 million for fiscal 2009

consideration of numerous factors, including our ability to improve ourto ¥5,438 million for fiscal 2010. This was primarily due to a decrease ofenterprise value through investments using retained earnings, ability to¥2,389 million in treasury stock purchases.

improve our net income per share and results of operations.

Capital Expenditures

Share Repurchases

Capital expenditures were ¥3,998 million for fiscal 2010, ¥2,362 million

We repurchased 309,472 shares of common stock during fiscal 2010 fromfor fiscal 2009 and ¥1,211 million for fiscal 2008. These expenditures wereshareholders who held shares constituting less than one unit andprimarily for the repair of office facilities of our domestic subsidiaries andrequested that such shares be repurchased, as well as from dissenting
shareholders in our share exchange with Lecien who requested that theirCapital Expenditures

shares be repurchased. See “Item 10.B. Memorandum and Articles of¥ Billion

Association—Capital Stock—Distribution of Surplus—Unit Share
System”. On February 22, 2010, our board of directors approved by reso-

6.5

lution repurchases of up to 750 thousand shares of common stock up to a
total purchase amount of ¥794 million. Pursuant to this board of direc4.2

tors resolution, we had repurchased 740 thousand shares of common
stock for a total purchase price of ¥784 million as of February 23, 2010.

2.5

In addition, also on February 22 we purchased 93 thousand shares of

2.4

common stock for a total purchase price of ¥98 million from our subsid-

1.2

06

07

08

iaries Wacoal Corp. and Torica Co., Ltd.
09

10

WACOAL HOLDINGS33

ANNUAL REPORT 2010

Research and Development, Patents and Licenses, etc.

we are focused on developing new products that are not only comfortable

For more than 40 years, since the establishment of our Human Science

for the wearer but have a positive physiological effect. In 2000, we

Research Center, we have aimed to achieve harmony between the humanconducted an analysis on the physiological changes associated with aging

body and clothing. In particular, we have conducted research into

throughout a 25 year period from the teenage years to the 40s. We named

women’s body in order to accurately understand the Japanese woman’s

the principles of these changes SPIRAL Aging.

physique. In order to accurately understand the Japanese woman’s

Our research and development activities for fiscal 2010 have been

physique, we have developed such things as a silhouette analysis systemvery fruitful as we have been able to succeed in producing new products

and a three-dimensional measuring system. However, we are also working

by improving and building on our existing products. For example, weon an even more advanced measurement of sensory comfort. Our

conducted research into the relationship between aging and changes in

research and development activities focus on addressing the proportional,

the physical form of the body, and determined and announced the law ofphysiological and mental aspects of garment design.

this relationship. In addition, since fiscal 2007, we have continued our

One of our most important research results was the Golden Canon,

research and development in men’s innerwear, and have continued towhich we announced in 1995, and which provides a set of indicators thatmake progress in implementing the measurement of the male body andcharacterize the beautiful Japanese woman’s body. We also began

improved the organization of our monitoring and data collection system.

applying new sales methods at that time. From 1995 to 1998 we partici-

The cost of research and development for fiscal 2010 was approxi-

pated in a project led by the Ministry of International Trade and Industry

mately ¥778 million, compared to ¥768 million for fiscal 2009 and ¥766

(presently the Ministry of Economy, Trade and Industry) enriching themillion for fiscal 2008. We expect to maintain a similar level of researchbasic study of sensory comfort and conducting research based on reac-and development expenditures for fiscal 2011.

tions to three factors: pressure, heat and touch. Based on this research,

RISK FACTORS
Our business, performance and financial condition are subject to risks

10. Our business may be adversely affected by seasonality

and uncertainties, including those described in the risk factors below.

11.	We may face increasing risks relating to conducting business

These risks and uncertainties could result in a material adverse effect on
our results of operations and financial condition, and a material decline
in the trading price of our common stock and American Depositaryinternationally12.	We may not be successful with acquisitions and other strategic transactions with third parties

Shares (“ADSs”).

13.	We may not be able to recover the cost of investments we make in

1.	The recent global economic downturn, which has weakened the14.	We may face infringement of our intellectual property rights or

Japanese economy, could negatively affect our business, results ofclaims that we infringe the intellectual property rights of others

pursuing growth opportunities and developing new markets

operations and financial condition
2.	Continued difficulties faced or changes in business policies made by
department stores, general merchandisers and other general retailers
in Japan would hurt our business3.	Our sales may decline if we are unable to effectively anticipate andrespond to consumer tastes and preferences and deliver high-quality
products
4.	The apparel market is highly competitive, and our share of sales or
profitability may decline if we are unable to maintain ourcompetitiveness
5.	Our specialty retail store network expansion may not lead to
improved sales and profits
6.	We may experience difficulties in successfully increasing our catalog
and Internet sales
7.	We are subject to inventory risks that could negatively impact ouroperating results
8.	Improvement in our profitability will largely depend on our ability to
reduce costs
9. 	It may be difficult for us to attract and retain highly qualified personnel

15.	If we fail to protect our customers’ privacy and data and maintainthe confidentiality of our trade secrets we may face proceedings
against us and lose customer confidence
16.	If we fail to maintain adequate internal controls over financial
reporting we may not be able to produce reliable financial reports ina timely manner or prevent financial fraud
17.	Our holdings of equity securities expose us to market risks
18.	Natural disasters and epidemics could affect our manufacturing abilities or sales results
19.	We may become classified as a passive foreign investment company,
which could result in adverse U.S. tax consequences to U.S. holdersof our stock or ADSs
20.	Yen-dollar fluctuations could cause the market price of the ADSs to
decline and reduce dividend amounts payable to ADS holders as
expressed in U.S. dollars
21.	As a holder of ADSs, you will have fewer rights than a shareholder
has, and you must act through the depositary to exercise those rights
22.	Japan’s unit share system imposes restrictions on holdings of ourcommon stock that do not constitute whole units

34

Consolidated Balance Sheets
Wacoal Holdings Corp. and Subsidiaries

Millions of Yen

Thousands of
U.S. Dollars (Note 2)

2010

2009

2010

¥16,704
7,613
24,317
6,529¥13,378
9,561
22,93910,483$178,843
81,510260,353
69,904469
21,116(1,972)
32,1034,595
2,776
89,933541
19,422(2,279)31,153
5,395
2,965
90,6195,021
226,081(21,113)343,715
49,197
29,722962,880

Property, Plant and Equipment:
Land (Notes 9 and 20)
Buildings and building improvements (Notes 9, 11 and 20)
Machinery and equipment
Construction in progress			 Total
Accumulated depreciation
			 Net property, plant and equipment

22,012
61,585
14,773103
98,473(46,653)
51,82020,502
58,216
13,66068
92,446(43,407)
49,039235,675
659,368
158,169
1,103
1,054,315(499,497)
554,818

Other Assets:
Investments in affiliated companies (Note 6)
Investments (Notes 3, 9, 19 and 20)
Goodwill (Notes 7 and 8)
Other intangible assets (Notes 7 and 8)
Prepaid pension expense (Note 12)
Deferred income taxes (Note 16)
Other
			 Total other assets

14,76935,828
11,203
12,351
263
935
6,285
81,634

13,28329,182
11,203
13,242
1,088
5,830
73,828158,126
383,597
119,947
132,238
2,816
10,011
67,291
874,026¥223,387¥213,486$2,391,724

Years Ended March 31, 2010 and 2009ASSETS
Current Assets:
Cash and cash equivalents:
		 Cash		 Time deposits and certificates of deposit			 Total
Marketable securities (Notes 3, 19 and 20)
Notes and accounts receivable:
		 Trade notes		 Trade accounts (Note 17)
		 Allowance for returns and doubtful receivables (Note 4)Inventories (Note 5)
Deferred income taxes (Note 16)
Other current assets (Notes 17, 19 and 20)
			 Total current assets

Total
See notes to consolidated financial statements.

WACOAL HOLDINGS35

ANNUAL REPORT 2010

Years Ended March 31, 2010 and 2009

LIABILITIES AND EQUITYCurrent Liabilities:
Short-term bank loans (Note 9)
Notes and accounts payable:
		 Trade notes		 Trade accounts (Note 17)
		 Other payables
Accrued payroll and bonuses
Income taxes payable (Note 16)
Current portion of long-term debt (Note 9)
Other current liabilities (Notes 12 and 20)
			 Total current liabilities
Long-term Liabilities:
Long-term debt (Note 9)
Liability for termination and retirement benefits (Note 12)
Deferred income taxes (Note 16)
Other long-term liabilities (Notes 11, 12 and 16)
			 Total long-term liabilities

Millions of Yen

Thousands of
U.S. Dollars (Note 2)

2010

2009

2010

¥7,941¥5,221$85,021

2,174
9,161
5,975
5,927
2,105
108
2,292
35,683

2,498
9,172
5,817
6,336
747
39
2,113
31,94323,27698,084
63,97363,45822,537
1,156
24,540382,045

80
2,269
9,380
2,422
14,151

42
4,090
8,346
1,098
13,576857
24,293
100,428
25,932
151,510

Commitments and Contingencies (Notes 9 and 10)
EQUITY
Wacoal Holdings Corp. Shareholders’ Equity (Notes 13 and 22):
Common stock, no par value—		authorized, 500,000,000 shares in 2010 and 2009; issued 143,378,085 shares in2010 and 2009
Additional paid-in capital (Note 14)
Retained earnings
Accumulated other comprehensive loss (Note 15):
		 Foreign currency translation adjustments
		 Unrealized gain on securities
		 Pension liability adjustments (Note 12)
			 Total accumulated other comprehensive loss
Less treasury stock at cost—2,179,739 shares and 2,927,238 shares in 2010 and 2009			 Total Wacoal Holdings Corp. shareholders’ equity

13,26029,366
137,155

13,26029,316138,235

141,970
314,411
1,468,469(7,505)
3,669(1,783)(5,619)(2,532)
171,630(8,288)325(3,383)(11,346)(3,592)
165,873(80,354)
39,283(19,090)(60,161)(27,109)
1,837,580

Noncontrolling Interests
			 Total equity

1,923
173,553

2,094
167,967

20,5891,858,169

Total¥223,387¥213,486$2,391,724

36

Consolidated statements of income
Wacoal Holdings Corp. and Subsidiaries

Years Ended March 31, 2010, 2009 and 2008

Net Sales (Note 17)
Operating Costs and Expenses (income):
Cost of sales (Notes 12 and 17)
Selling, general and administrative (Notes 1, 7, 12, 14 and 17)
Impairment charges on property, plant and equipment (Note 20)
Impairment charges on goodwill (Notes 8 and 20)
Impairment charges on other intangible assets (Notes 8 and 20)
Loss (gain) on sale or disposal of property, plant and equipment
		 Total operating costs and expenses
Operating Income
Other Income (expenses):
Interest income
Interest expense
Dividend income
	Gain on sale or exchange of marketable securities andinvestments—net (Note 3)	Impairment charges on marketable securities and investments (Note 3)
Other—net (Notes 1 and 20)
		 Total other (loss) income—net
Income Before Income Taxes, Equity in Net Income (loss) of AffiliatedCompanies, and Net Loss (income) Attributable to Noncontrolling
Interests (Note 16)
Income Taxes (Note 16):
Current
Deferred		 Total income taxes
Inomce Before Equity in Net Income (loss) of Affiliated Companes,
and Net Income Attributable to Noncontrolling Interests
Equity in Net Income (loss) of Affiliated Companies (Notes 6 and 7)
Net Income
Net Loss (income) Attributable to Noncontrolling Interests
Net Income Attributable to Wacoal Holdings Corp.

Years Ended March 31, 2010, 2009 and 2008

Net Income Attributable to Wacoal Holdings Corp. Per Share (Note 18):
Basic
DilutedNet Income Attributable to Wacoal Holdings Corp.
Per American Depositary Receipt (5 shares of common stock) (Note 18):
Basic
DilutedSee notes to consolidated financial statements.

Millions of Yen

Thousands of
U.S. Dollars (Note 2)

2010¥163,2972009¥172,276

2008¥165,761

2010$1,748,362

79,95378,392
23
71
1,023
25
159,487
3,810

84,686
77,39929

83,127
69,24533

33
162,147
10,129(184)
152,221
13,540856,028
839,315246
760
10,953268
1,707,570
40,792

144
(98)
619

274
(75)
677

303
(78)
641

1,542
(1,049)6,627

7(1,460)
101
(687)

19
(3,550)153(2,502)

715
(937)
169
813

75
(15,632)
1,082(7,355)

3,123

7,627

14,35333,437

3,161(1,587)
1,574

2,717
496
3,213

5,577
276
5,853

33,844(16,992)
16,852

1,549
907
2,456
68
¥2,524

4,414
893
5,307
(77)
¥5,2308,500(3,392)
5,108(142)¥4,966

16,585
9,711
26,296728$27,024

Yen

U.S. Dollars (Note 2)

2010

2009

2008

2010

¥17.86¥17.85¥36.75¥36.74¥35.14¥35.14

$0.19
$0.19

¥89.28¥89.24¥183.74¥183.72¥175.72¥175.72

$0.96
$0.96

37

WACOAL HOLDINGSANNUAL REPORT 2010

Consolidated Statements of Comprehensive Income (Loss)
Wacoal Holdings Corp. and Subsidiaries

Years Ended March 31, 2010, 2009 and 2008

Net Income
Other Comprehensive Income (loss), Net of Tax (Note 15):
Foreign currency translation adjustments
Unrealized gains (losses) on securities
Pension liability adjustments
Other Comprehensive Income (loss)
Comprehensive Income (loss)
Comprehensive Income (loss) Attributable to Noncontrolling Interests
Comprehensive Income (loss) Attributable to Wacoal Holdings Corp.

Millions of Yen

Thousands of
U.S. Dollars (Note 2)2010¥ 2,456

2009¥5,3072008¥5,1082010$26,296

795
3,351
1,600
5,746
8,202
49
¥8,251(8,710)(4,978)(3,897)(17,585)(12,278)
105¥(12,173)(498)(9,149)(3,616)(13,263)(8,155)(96)¥(8,251)

8,512
35,87817,131
61,52187,817524$88,341

See notes to consolidated financial statements.

Consolidated Statements of Equity
Wacoal Holdings Corp. and Subsidiaries
Millions of Yen

Years Ended March 31, 2010, 2009 and 2008

BALANCE, APRIL 1, 2007
Net income
Other comprehensive loss
Cash dividends paid to Wacoal Holdings Corp. shareholders,¥110 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Cancellation of treasury stock
Issuance of new shares to acquire a subsidiary (Note 7)
Distribution of treasury stock to acquire a subsidiary (Note 7)
Purchase of common shares of the Company’s subsidiary
BALANCE, MARCH 31, 2008
Net income
Other comprehensive loss
Cash dividends paid to Wacoal Holdings Corp. shareholders,¥125 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Share-based compensation granted (Note 14)
Purchase of common shares of the Company’s subsidiary
BALANCE, MARCH 31, 2009
Net income
Other comprehensive income
Cash dividends paid to Wacoal Holdings Corp. shareholders,¥125 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Sale of treasury stock
Share-based compensation granted and exercised (Note 14)
Purchase and sales of common shares of the Company’s subsidiaries
Distribution of treasury stock to acquire a subsidiary (Note 7)
Balance, March 31, 2010

Shares of
Outstanding
Common Stock(Thousands)

Common Stock

Additional
Paid-in Capital

Retained
Earnings

140,577¥13,260¥25,242¥140,666
4,966

Accumulated
Other
Comprehensive
Income (Loss)

Treasury Stock¥19,274¥(5,164)(13,217)(3,093)(3,936)3,261
3,440
143,342

4,474
(454)
13,26029,262(6,015)
5,950
5,174
6,057

(55)

(17,403)(3,584)(2,891)

140,451

29,316138,235
2,524

Total Equity¥193,278
4,966(13,217)¥2,461
142(46)¥195,739
5,108(13,263)(90)(3,093)(90)(6,015)(6,015)4,474
4,720
185,113
5,230(17,403)(3,584)54
13,260Noncontrolling
Interests(3,093)(5,950)136,589
5,230

Total Wacoal
Holdings Corp.
Shareholders’Equity(11,346)(3,537)(3,537)54(3,592)

165,873
2,524
5,727

5,727
(3,511)

(116)
2,351
77
(182)
(83)

(69)
2,094
(68)
19

(3,511)(76)(1,372)11
450(1,540)13
5(1,540)
13
55

2,582
¥(2,532)

2,489¥171,630

(46)
2,104
141,198¥13,260¥29,366(93)¥137,155¥(5,619)¥1,923

4,474
4,720
(116)
187,464
5,307(17,585)(3,584)(83)(3,537)54(69)
167,9672,456
5,746(3,511)(76)(1,540)
13
55
(46)
2,489
¥173,553

Thousands of U.S. Dollars (Note 2)

Years Ended March 31, 2010, 2009 and 2008

BALANCE, MARCH 31, 2009
Net income
Other comprehensive income
Cash dividends paid to Wacoal Holdings Corp. shareholders,$125 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Sale of treasury stock
Share-based compensation granted and exercised (Note 14)
Purchase and sales of common shares of the Company’s subsidiaries
Distribution of treasury stock to acquire a subsidiary (Note 7)
Balance, March 31, 2010
See notes to consolidated financial statements.

Common Stock

Additional
Paid-in Capital

Retained
Earnings$141,970$313,876$1,480,032
27,024

Accumulated
Other
Comprehensive
Income (Loss)$(121,478)
61,317

Treasury Stock

Total Wacoal
Holdings Corp.
Shareholders’EquityNoncontrolling
Interests$22,420 $1,798,362(728)
26,296
204
61,521(37,591)(37,591)(814)(16,489)
139
589
(493)
(493)
26,649$20,589 $1,858,169(37,591)(814)(16,489)
139
54

535

$141,970$314,411(996)$1,468,469$(60,161)

Total Equity$(38,458) $1,775,942
27,02461,317(16,489)
139
589

27,64526,649$(27,109) $1,837,580

38

Consolidated statements of cash flows
Wacoal Holdings Corp. and Subsidiaries

Years Ended March 31, 2010, 2009 and 2008

Operating Activities:
Net income	Adjustments to reconcile net income to net cash provided byoperating activities:
		 Depreciation and amortization
		 Share-based compensation (Note 14)
		 Provision for returns and doubtful receivables—net
		 Deferred income taxes
		 Loss (gain) on sale or disposal of property, plant and equipment
		 Impairment charges on property, plant and equipment (Note 20)
		 Impairment charges on goodwill (Notes 8 and 20)
		 Impairment charges on other intangible assets (Notes 8 and 20)
		 Gain on sale or exchange of marketable securities and investments (Note 3)
		 Impairment charges on marketable securities and investments (Note 3)
		 Equity in net (income) loss of affiliated companies, less dividends
		 Changes in assets and liabilities:
			 Decrease in notes and accounts receivable
			 Decrease (increase) in inventories
			 Decrease in other current assets			 (Decrease) increase in notes and accounts payable
			 Increase (decrease) in liability for termination and retirement benefits			Increase (decrease) in accrued expenses, income taxes payable andother current liabilities
		 Other			 Net cash provided by operating activities
Investing Activities:
Proceeds from sales and redemption of marketable securities
Payments to acquire marketable securities
Proceeds from sales of property, plant and equipment
Capital expenditures
Payments to acquire intangible assets (Note 8)
Proceeds from sales of investments
Payments to acquire investments
Cash balances of subsidiary acquired through share exchanges (Note 7)
Other
			 Net cash (used in) provided by investing activities
Finacing Activities:
Decrease in short-term bank loans—net
Proceeds from issuance of long-term debt
Repayments of long-term debt
Repurchase of treasury stock
Sale of treasury stock
Dividends paid on common stock			 Net cash used in financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2010

2009

2008

2010

¥2,456¥5,307¥5,108$26,296

4,807
55
(360)
(1,587)
25
23
71
1,023
(7)
1,460
(492)

4,546
54
(725)
496
33
29

3,908

(19)
3,550
(296)

(715)
937
4,198

51,467589(3,855)(16,992)
268
246
760
10,953(75)
15,632(5,268)

1,794
806
331
(2,525)439

2,109(2,494)105
841(1,209)

1,822
1,218
49
(2,614)(2,613)

19,2088,630
3,544(27,035)
4,700

996
134
9,449

(3,550)
(609)
8,168

2,681
(69)
14,225

10,664
1,435
101,167

12,131(7,846)468(3,998)(1,755)5(2,019)362(46)(2,698)

7,124(5,439)159(2,362)(1,846)30(1,871)

10,506(9,892)
1,057(1,211)(1,678)
1,414
(618)
4,115
(103)
3,590

129,882(84,005)
5,011(42,805)(18,790)54(21,617)
3,876
(493)
(28,887)

(442)

(279)

(4,733)(350)(1,148)13(3,511)(5,438)65
1,378
22,939¥24,317(48)(3,537)

(259)
18
(51)
(6,015)(3,584)(7,448)(1,110)(5,104)28,043¥22,939(3,093)(9,400)(188)
8,227
19,816¥28,043(3,747)(12,291)
139(37,591)(58,223)696
14,753245,600$260,353¥   982,078¥   757,268¥   782,542$ 1,049
22,248¥   112,489¥    9

¥ 143
9,194

$   118
26,649(509)(4,714)

190
276
(184)
33

Additional Cash Flow Information:
Cash paid for:		 Interest
		 Income taxes
Noncash Investing Activities:
		Fair value of certain marketable securities received in exchange forother marketable securities with a carrying values of ¥5 million($54 thousand) and ¥7 million in 2010 and 2009, respectively
		 Acquisition of subsidiary through share exchange (Note 7)
See notes to consolidated financial statements.

WACOAL HOLDINGS39

ANNUAL REPORT 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wacoal Holdings Corp. and Subsidiaries

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Financial Statements —Wacoal Holdings Corp. (the “Company”)
and subsidiaries are predominantly engaged in one industry, the manufactureand sale of apparel, including foundation garments, lingerie, nightwear andouterwear in Japan, the United States of America, Europe and certain Asian
countries.
The accompanying consolidated financial statements, stated in Japanese yen,
have been prepared on the basis of accounting principles generally accepted in
the United States of America.
Consolidation—The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries (collectively, the “Companies”). All intercompany transactions and balances are eliminated.
Foreign subsidiaries of the Company have a fiscal year ending December 31.
The accounts of those subsidiaries are included in the Company’s consolidated
financial statements based on the subsidiaries’ fiscal year.
As further described in Note 7 to the consolidated financial statements, onJanuary 10, 2008, the Company acquired the remaining 51% interest in adomestic subsidiary of Peach John Co., Ltd. (“PJ”) with a fiscal year ended
February 29, 2008. Prior to January 10, 2008, the Company accounted for its
original investment of 49% in this subsidiary using the equity method. As of
March 31, 2008 and thereafter, the subsidiary is included in the Company’s
consolidated balance sheet based on the subsidiary’s fiscal year end. However,
because the subsidiary’s results of operations and changes in financial position
between January 10, 2008 and March 31, 2008 were not significant, theCompany continued to account for its investment using the equity method
and the income from the subsidiary’s operations for the fiscal year ended
February 29, 2008 was included in equity in net income (loss) of affiliatedcompanies in the consolidated statements of income. The subsidiary is included in the Company’s consolidated statements of income for the year ended
March 31, 2010 and 2009 based on the subsidiary’s fiscal year end for the year
ended February 28, 2010 and 2009. On August 17, 2009, the Company
acquired the outstanding common shares of Lecien Corp. (“Lecien”) with afiscal year ended March 31, 2010. Lecien’s results of operations were includedin the Company’s consolidated statements of income for the year ended March
31, 2010 from August 1, 2009.
Investments in affiliated companies where the Company’s ownership is 20%
to 50% are accounted for using the equity method.
Significant influence is generally deemed to exist if the Companies have anownership interest in the voting stock of the investee of between 20% to 50%,although other factors are considered in determining whether the equity
method of accounting is appropriate.
Use of Estimates—The preparation of financial statements in conformity withaccounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amountsof revenues and expenses during the reporting period. Actual results could
differ from those estimates.

Cash and Cash Equivalents—Cash and cash equivalents include all time
deposits and certificates of deposit (all of which are interest-bearing) withoriginal maturities of three months or less, which can be withdrawn at facevalue at any time without diminution of principal.
Foreign Currency Translation—Assets and liabilities of foreign subsidiaries
have been translated to Japanese yen at period-end exchange rates and income
and expenses have been translated using average exchange rates for the period.
Translation adjustments resulting from the process of translating financial
statements, net of tax, are included in other comprehensive income (loss), a
separate component of equity. Exchange gains and losses resulting from foreign
currency transactions and the conversion of monetary assets and liabilities
denominated in foreign currencies are included in other income (expenses) inthe consolidated statements of income.
Foreign currency translation gains for the years ended March 31, 2010,2009 and 2008 were ¥43 million ($460 thousand), ¥35 million and ¥35
million, respectively, and have been included in other income (expenses).
Marketable Securities and Investments—The Companies classify their debt
and marketable equity securities as available-for-sale and carry them at fairvalue with a corresponding recognition of unrealized holding gains or losses(net of tax) in other comprehensive income (loss), a separate component ofequity, until realized. Equity securities that do not have readily determinable
fair values are recorded at cost. Gains and losses on sales of investments arecomputed based on cost determined using the average cost method.
If a decline in the fair value of marketable securities and investments isdetermined to be other-than-temporary, an impairment charge is recorded in
the consolidated statements of income. The Companies periodically determine
whether a decline in the fair value of marketable securities and investments isdeemed to be other-than temporary based on criteria that include the durationof the market decline, the extent to which cost exceeds market value, thefinancial position and business outlook of the issuer and the intent and abilityof the Companies to retain the impaired marketable securities and investments
for a sufficient period of time for anticipated recovery in market value.
Allowance for Sales Returns—Allowance for sales returns is estimated basedon historical products returns experience, sales movements, and the overallretail industry situation.
Allowance for Doubtful Receivables—Allowance for doubtful notes andreceivables is estimated based on historical collection experience and additional
information including current economic conditions and creditworthiness ofeach applicable customer.
Inventories— Inventories are stated at the lower of cost or market, cost being
determined on the first-in, first-out method for raw materials and the average
cost method for work in process and finished products. Cost includes net
prices paid for materials purchased, production labor cost, factory overhead
and charges for customs duties.
Property, Plant and Equipment—Property, plant and equipment is stated atcost less accumulated depreciation and impairment losses. Depreciation ofproperty, plant and equipment is computed by the declining-balance method,
except for buildings acquired on or after April 1, 1998, which are depreciated40

using the straight-line method, based upon the estimated useful lives of theassets. The estimated useful lives are as follows:
Buildings and building improvements: 5 - 50 years (Mainly 38 years)
Machinery and equipment:
2 - 20 years (Mainly 5 years)
Depreciation expense for the years ended March 31, 2010, 2009 and 2008are ¥3,016 million ($32,291 thousand), ¥3,050 million and ¥2,999 million,
respectively.
Goodwill and Other Intangible Assets—Goodwill represents the excess of thepurchase price over the related underlying tangible and intangible net asset
values of business acquired.
Goodwill and other intangible assets with indefinite useful lives are tested
for impairment annually, or more frequently if conditions indicate an earlier
review is necessary. Goodwill is allocated and reviewed for impairment byreporting units, which consist primarily of the operating segments and certain
other reporting units. The goodwill is allocated to the reporting unit in which
the business that created the goodwill resides. To test for goodwill impairment,
the carrying value of each reporting unit is compared with its fair value. If thecarrying value of the goodwill is considered impaired, a loss is recognized basedon the amount by which the carrying value exceeds the fair value of the asset.
To test for other intangible assets with indefinite useful lives, the carrying
value of an intangible asset is compared with its fair value. If the carrying valueof the other intangible assets with indefinite useful lives is considered impaired, a loss is recognized based on the amount by which the carrying value
exceeds the fair value of the asset.
Other intangible assets with estimable useful lives consist primarily ofcustomer relationship and software and are amortized over their estimated useful
lives using the straight-line method. The estimated useful lives are as follows:
Customer relationship: 7 years
Software:5 years
Impairment of Long-lived Assets—The carrying values of long-lived assets,held and used by the Companies, are evaluated for impairment whenever there
is an event or change in circumstances that indicates that such assets have been
impaired or that the carrying amounts of such assets might not be recoverable.
The carrying amount of a long-lived asset is not recoverable if it exceeds thesum of the undiscounted cash flows expected to result from the use andeventual disposition of the asset. That assessment shall be based on the
carrying amount of the asset at the date it is tested for recoverability, whether
in use or under development. The impairment loss is measured as the amountby which the carrying amount of a long lived asset exceeds its fair value.
Derivatives—Derivative instruments, including certain derivative instruments
embedded in other contracts, are accounted for in accordance with theguidance for derivatives and hedging. Because such derivative instruments are
not designated as a hedge, changes in the fair value are recorded in earnings.
Asset Retirement Obligations—The Companies have obligations arising fromcontractual commitments to remove leasehold improvements from leased
facilities and return the property to a specified condition when the leaseterminates. The Companies recognize asset retirement obligations at the
inception of a lease. The asset retirement obligation is measured with an
expected present value technique based on historical experience and recordedin other long-term liabilities in the consolidated balance sheets and is subsequently adjusted for changes in estimated disposal costs. The difference
between the gross expected future cash flow and its present value is accreted
over the life of the related lease, which is determined using best estimate
because the Companies’ lease contracts generally have automatic renewal articles.
The associated estimated asset retirement costs are capitalized as part of thecarrying amount of the long-lived asset and depreciated over its useful life.

Termination and Retirement Plans—Termination and retirement benefits areaccounted for in accordance with the guidance for retirement benefits.
Provisions for termination and retirement benefits include those for directors
and corporate auditors of the Companies.
The Companies do not recognize a gain or loss on settlement of the pension
obligation when the cost of all settlements in a year is less than or equal to thesum of the service cost and interest cost components of net periodic pension
cost for the plan for the year.
Leases—Certain noncancelable leases are classified as capital leases and theleased assets are included as part of property, plant and equipment. Suchleasing arrangements involve the computer aided design system and thecomputer hardware. Other leases are classified as operating leases and are notcapitalized. The payments on such leases are recorded as expense. The rental
expense under operating leases is recognized on a straight-line basis.
Treasury Stock—The Companies account for treasury stock under the cost
method and include treasury stock as a component of equity.
Acquisitions—The Company accounts for acquisitions using the acquisition
method in accordance with the guidance for business combinations. The
Company allocates the purchase price to the assets acquired and liabilities
assumed based on the estimated fair values at the date of acquisition, including
intangible assets that can be identified and named. The purchase price inexcess of the fair value of the net assets and liability is recorded as goodwill.
Share-Based Compensation—Share-based compensation is accounted for inaccordance with the guidance for stock compensation. The Company measures
share-based compensation cost at the grant date, based on the fair value of theaward and recognizes the cost over the requisite service period, which is thevesting period. The fair value of the award is estimated using the Black-Scholes
option-pricing model.
Revenue Recognition—The Companies recognize revenue on sales to retailers,
mail order catalog sales and internet sales when (1) persuasive evidence of anarrangement exists, (2) delivery has occurred resulting in transfer of title andrisk of loss, (3) the sales price is fixed or determinable, and (4) collectability isreasonably assured. As for consignment sales, the Companies recognize
revenue when the products are sold to the ultimate customer. The Companies
recognize revenue on direct retailing sales at the Companies’ directly managed
retail stores at the point of sale to the customer.
Advertising Expenses—Advertising costs are expensed as incurred. Advertising expenses for the years ended March 31, 2010, 2009 and 2008 were ¥11,643
million ($124,657 thousand), ¥13,624 million and ¥11,768 million, respectively, and have been included in selling, general and administrative expenses.
Shipping and Handling Costs—Shipping and handling costs for the years
ended March 31, 2010, 2009 and 2008 were ¥5,324 million ($57,002 thousand),¥4,895 million and ¥4,062 million, respectively, and have been included inselling, general and administrative expenses.
Research and Development Costs—Research and development costs are
expensed as incurred. Research and development costs for the years ended
March 31, 2010, 2009 and 2008 were ¥778 million ($8,330 thousand), ¥768
million and ¥766 million, respectively, and have been included in selling,
general and administrative expenses.
Income Taxes—The provision for income taxes is determined under the asset
and liability method in accordance with the guidance for income taxes. Under
this method, deferred tax assets and liabilities are determined for temporary
differences between the financial statement and tax bases of assets and liabilities and tax loss carry forwards at presently enacted tax rates. A valuation
allowance is recorded when it is more likely than not that some portion or allof the deferred tax assets will not be realized in the future.

WACOAL HOLDINGS41

ANNUAL REPORT 2010

The Companies assess their income tax positions and record tax benefits for
all years subject to examination based upon their evaluation of the facts,
circumstances and information available as of the end of fiscal year. For thosetax positions only where there is greater than 50 percent likelihood that the tax
position will be sustained, the Companies record the largest amount of tax
benefit that may potentially be realized upon ultimate settlement with a taxing
authority that has full knowledge of all relevant information.
Reclassifications—Certain reclassifications have been made to the prior years’
financial statements to conform with the current year’s presentation.
To conform to the 2010 presentation, the Companies have reclassified
share-based compensation to “share-based compensation,” which had previously
been presented as “Other” in other expenses in the consolidated statements ofcash flows for the year ended March 31, 2009.
Recent Accounting Pronouncements:
The Codification—In June, 2009, the Financial Accounting Standards Board(“FASB”) issued the FASB Accounting Standards Codification (“ASC”). ASC
became the single source of authoritative nongovernmental U.S. GAAP,
superseding existing FASB, American Institute of Certified Public Accountants(“AICPA”), Emerging Issues Task Force (“EITF”) and related literature.
Additionally, rules and interpretive releases of the U.S. Securities and Exchange
Commission (“SEC”) under authority of the federal securities laws are also
sources of authoritative U.S. GAAP for SEC registrants. The Codification
eliminates the previous U.S. GAAP hierarchy and establishes one level ofauthoritative GAAP. All other literature is considered non-authoritative. This
Codification was effective for interim and annual periods ending after September 15, 2009. The Companies adopted the Codification from the quarter
ending September 30, 2009. There was no impact to the consolidated financial
results of operations and financial position.
Fair Value Measurements—In September 2006, the FASB issued the new
guidance for fair value measurements. This guidance defines fair value,establishes a framework for measuring fair value and expands disclosure of fairvalue measurements. The guidance applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does
not require any new fair value measurements. For all financial assets andliabilities that are recognized or disclosed at fair value, this guidance iseffective for fiscal years beginning after November 15, 2007. For certain
nonfinancial assets and liabilities that are recognized or disclosed at fair value,
this guidance was effective for fiscal years beginning after November 15, 2008.
The Companies adopted the guidance for all financial assets and liabilities thatare recognized or disclosed at fair value from the first quarter beginning April
1, 2008, and for certain nonfinancial assets and liabilities that are recognizedor disclosed at fair value from the first quarter beginning April 1, 2009. This
adoption did not have a material impact on the Companies’ consolidated
results of operations and financial position. See Notes 19 and 20 for disclosuresrequired by this guidance.
In April 2009, the FASB issued the new guidance for determining fair value
when the volume and level of activity for the asset or liability have significantly
decreased and identifying transactions that are not orderly, which provides
additional guidance on measuring the fair value of financial instruments whenmarkets become inactive and quoted prices may reflect distressed transactions.
This guidance was effective for interim or fiscal years ending after June 15,
2009. The Companies adopted the guidance from the first quarter beginning
April 1, 2009. This adoption did not have a material impact on the Companies’
consolidated financial position, result of operations or cash flows.
In January 2010, the FASB issued additional disclosure requirements for fairvalue measurements. According to the guidance, the fair value hierarchy

disclosures are to be further disaggregated by class of assets and liabilities.
A class is often a subset of assets or liabilities within a line item in the consolidated balance sheets. The guidance also requires additional disclosure aboutsignificant transfers between Levels 1 and 2 of the fair value hierarchy. This
guidance is effective for interim and annual reporting periods beginning after
December 15, 2009 except for the requirement regarding the Level 3 activity
which is effective for fiscal years beginning after December 15, 2010, and forinterim periods within those fiscal years. These amendments do not have an
impact on the consolidated financial position, result of operations or cash flows
as this guidance relates only to additional disclosures.
In September 2009, the FASB issued amended guidance concerning fairvalue measurements of investments in certain entities that calculate net asset
value per share (or its equivalent). If fair value is not readily determinable, theamended guidance permits, as a practical expedient, a reporting entity tomeasure the fair value of an investment using the net asset value per share (or its
equivalent) provided by the investee without further adjustment. In accordancewith the guidance, the Companies adopted these amendments for the year
ended March 31, 2010. This adoption did not have a material impact on the
Companies’ consolidated financial position, result of operations or cash flows.
Recognition and Presentation of Other-Than-Temporary Impairments—
In April 2009, the FASB issued the new guidance for recognition and presentation of other-than-temporary impairments." This guidance amends the otherthan-temporary impairment guidance for debt securities to make the guidance
more operational and to improve the presentation and disclosure of other-thantemporary impairments on debt and equity securities in the financial statements. This guidance did not amend existing recognition and measurement
guidance related to other-than-temporary impairments of equity securities.
The guidance was effective for interim or fiscal years ending after June 15,
2009. The Companies adopted this guidance from the first quarter beginning
April 1, 2009. This adoption did not have a material impact on the Companies’
consolidated financial position, result of operations or cash flows.
Business Combinations—In December 2007, the FASB issued new accounting guidance for business combinations. This guidance establishes principles
and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. This statement alsoestablished disclosure requirements to enable the evaluation of the nature andfinancial effects of the business combination. In April 2009, the FASB issued
an amendment to the revised business combination guidance. This amends andclarifies the revised guidance to address application issues raised by preparers,
auditors, and members of the legal profession on initial recognition andmeasurement, subsequent measurement and accounting, and disclosure of assets
and liabilities arising from contingencies in a business combination. The revised
guidance and amendment are effective for business combinations for which theacquisition date is on or after the beginning of the fiscal year beginning on orafter December 15, 2008. The Companies adopted this guidance from the firstquarter beginning April 1, 2009. See Note 7 for further information.
Noncontrolling Interest in Consolidated Financial Statements—
In December 2007, the FASB issued new accounting guidance for noncontrolling interests in consolidated financial statements. This guidance establishedaccounting and reporting standards for ownership interests in subsidiaries heldby parties other than the parent, the amount of consolidated net income
attributable to the parent and to the noncontrolling interest, changes in aparent’s ownership interest, and the valuation of retained noncontrolling equity
investments when a subsidiary is deconsolidated. The guidance also establisheddisclosure requirements that clearly identified and distinguished between the42interests of the parent and the interests of the noncontrolling owners.
The guidance was effective for fiscal years beginning on or after December 15,
2008 on a prospective basis, except for certain presentation and disclosure
requirements, which must be applied retrospectively for all period presented,
and was adopted by the Companies from the first quarter beginning April 1,
2009. Upon the adoption of this guidance, noncontrolling interests, which werepreviously referred to as minority interests and classified between total liabilities
and shareholders’ equity on the consolidated balance sheets, are now included asa separate component of total equity. In addition, consolidated net income on
the consolidated statements of income now includes the net income (loss)
attributable to noncontrolling interests. These financial statement presentation
requirements have been adopted retrospectively and prior year amounts in the
consolidated financial statements have been reclassified or adjusted to conformto this guidance. This adoption did not have a material impact on the Companies’ consolidated financial position, result of operations or cash flows.
Employer’s Disclosures about Postretirement Benefit Plan Assets—
In December 2008, the FASB issued new guidance for employers’ disclosuresabout postretirement benefit plan assets. This guidance requires providing

detailed disclosures about plan assets including how investment allocation
decisions are made, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, and significant
concentrations of risk within plan assets. In January 2010, the FASB issued anamendment to this guidance. This amends the terminology from major
categories of assets to classes of assets and provides a cross reference to theguidance for fair value measurements described above on how to determine
appropriate classes to present fair value presentation. This guidance was
effective for reporting periods ending after December 15, 2009. This guidance
required only additional disclosures. See Note 12 for disclosures required bythis guidance.
Subsequent Events—In May 2009, the FASB issued the new guidance forsubsequent events. This guidance establishes general standards of accounting
for and disclosure of events that occur after balance sheet date but before
financial statements are issued or are available to be issued. The guidance was
effective for interim or fiscal years ending after June 15, 2009. The Companies
adopted this guidance from the first quarter beginning April 1, 2009. See Note
22 for further information.

2. TRANSLATION INTO U.S. DOLLAR STATEMENTS

The financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The translations of Japanese
yen amounts into U.S. dollar amounts are included solely for convenience of readers outside of Japan and have been made at the rate of ¥93.4 to $1, the noonbuying rate for yen in New York City at March 31, 2010. Such translations should not be construed as representations that the Japanese yen amounts could be
converted into U.S. dollars at the above or any other rate.

3. MARKETABLE SECURITIES AND INVESTMENTS

The fair value of debt and marketable equity securities is based on quoted market prices at March 31, 2010 and 2009. The fair values of the debt and marketable
equity securities were as follows:
Millions of Yen

2010

Current:
National debt securities
Corporate debt securities
Bank debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

Cost

Gross Unrealized Gain

Gross Unrealized Loss

¥ 1,160
1,885
100
3,229
¥ 6,374¥   10
12
0
175
¥ 198

1
¥ 43

¥ 1,170
1,855
100
3,404
¥ 6,529¥23,841¥9,415¥604¥32,652

Cost

Gross Unrealized Gain

Gross Unrealized Loss

Fair Value¥ 1,672
4,924
100
3,787
¥10,483¥26,293¥ 42

Fair Value

Millions of Yen

2009

Current:
National debt securities
Corporate debt securities
Bank debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

13
56¥ 1,659
5,011
100
3,987
¥10,757

¥

261
¥ 330

¥ 143
0
461
¥ 604

¥22,505¥5,961¥2,173

43

WACOAL HOLDINGSANNUAL REPORT 2010

Thousands of U.S. Dollars

2010

Current:
National debt securities
Corporate debt securities
Bank debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

Cost

Gross Unrealized Gain

$ 12,420
20,182
1,070
34,572$ 68,244$    107
129
0
1,884
$   2,120$255,257$100,803

Gross Unrealized Loss

Fair Value

10
$ 460

$ 12,527
19,861
1,070
36,446$ 69,904$6,467$349,593$ 450

There were no securities which had been in a continuous unrealized loss position for more than 12 months at March 31, 2010 and 2009. Gross unrealized
holding losses and fair values of debt and marketable equity securities, all of which have been in a continuous unrealized loss position for less than 12 months at
March 31, 2010 and 2009, were as follows:
Millions of Yen

2010

Current:
Corporate debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

Thousands of U.S. Dollars

Fair Value

Gross Unrealized Loss

Fair Value

Gross Unrealized Loss

¥ 643
44
¥ 687

¥ 42
1
¥ 43

$ 6,884471$ 7,355

$ 450
10
$ 460

¥3,867¥604$41,403$6,467

Fair Value

Gross Unrealized Loss

¥3,638100
2,247¥5,985

¥ 143
0
461
¥ 604

¥5,862¥2,173

Millions of Yen

2009

Current:
Corporate debt securities
Bank debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

The unrealized losses on investments were caused primarily by a general decline in stock prices in Japan as of the end of the fiscal year. The Companies periodically determine whether a decline in the fair value of marketable securities and investments is deemed to be other-than temporary based on criteria that includes
the duration of market decline, the extent to which cost exceeds market value, the financial position and business outlook of the issuer and the intent and abilityof the Companies to retain the impaired marketable securities and investments for sufficient period of time for anticipated recovery in market value as describedin Note 1. No investments were identified that meet the Companies’ criterion for recognition of an impairment loss on investments in unrealized loss position
presented above. Therefore, the Companies do not believe the unrealized losses represent an other-than-temporary impairment as of March 31, 2010 and 2009.
Future maturities of debt securities and mutual fund classified as available-for-sale at March 31, 2010 were as follows:
Millions of Yen

Due within one year
Due after one year through five years
Due after five years through ten years
After ten years
Total

Thousands of U.S. Dollars

Cost

Fair Value

Cost

Fair Value¥2,684
1,673
958
1,059
¥6,374¥2,739
1,698
976
1,116
¥6,529$28,737
17,912
10,257
11,338$68,244$29,325
18,18010,45011,949$69,904

Proceeds from sales of available-for-sale securities were ¥795 million ($8,512
thousand), ¥304 million and ¥2,136 million for the years ended March 31,
2010, 2009 and 2008, respectively. The gross realized gains on the sales ofavailable-for-sale securities for the years ended March 31, 2010, 2009 and 2008
were ¥4 million ($43 thousand), ¥0 million and ¥557 million, respectively.
The gross realized losses on the sales of available-for-sale securities for the year
ended March 31, 2010 were ¥3 million ($32 thousand). No realized losses wererecorded in 2009 and 2008.
During the years ended March 31, 2010, 2009 and 2008, the Companies
exchanged certain equity securities for other marketable securities. The
Companies recorded the newly received securities at fair value and recognizeda gain of ¥6 million ($64 thousand), ¥2 million and ¥95 million in the years
ended March 31, 2010, 2009 and 2008, respectively.
The Companies recognized impairment charges on marketable securities
and investments in which declines in fair value are other-than-temporary are¥1,445 million ($15,471 thousand), ¥3,547 million and ¥923 million in theyears ended March 31, 2010, 2009 and 2008, respectively.
Investments in non-marketable equity securities for which there is no readily
determinable fair value were accounted for using the cost method and aggregated ¥3,085 million ($33,030 thousand) and ¥2,865 million at March 31,
2010 and 2009, respectively. Investments in non-marketable equity securities
are reviewed annually or upon the occurrence of an event for other-than
temporary impairment. The Companies recognized impairment charges oninvestments in non-marketable equity securities of ¥15 million ($161
thousand), ¥3 million and ¥14 million in the years ended March 31, 2010,2009 and 2008, respectively.
The Company’s subsidiary in the United States of America adopted a nonqualified deferred compensation plan and trust agreement. Investments consist of
several mutual funds, which are recorded at the fair market value of ¥91 million($974 thousand) and ¥24 million as of March 31, 2010 and 2009, respectively.

44

4. VALUATION AND QUALIFYING ACCOUNTS

Information related to the Companies’ allowance for doubtful receivables was as follows:
Millions of Yen

Balance at beginning of year
Increase due to change in scope of consolidation (Note 7)
Charged to costs and expenses
Balances written-off/reversed
Balance at end of year

2010
¥ 82
28
38
(32)
¥116

Thousands of
U.S. Dollars

2009
¥77

2008
¥ 82

13
(8)
¥82

10
(15)
¥ 77

2010
$ 878
300
407
(343)
$1,242Millions of Yen

Thousands of
U.S. Dollars

Information related to the Companies’ allowance for returns was as follows:

Balance at beginning of year
Increase due to change in scope of consolidation (Note 7)
Charged to costs and expenses
Balances written-off/reversed
Balance at end of year2010
¥ 2,19715
1,856(2,212)¥ 1,8562009¥ 3,0682008¥ 2,897

2,197(3,068)¥ 2,197

3,068(2,897)¥ 3,0682010$ 23,522
160
19,872(23,683)$ 19,871

Millions of Yen

Thousands of
U.S. Dollars

2009¥26,7023,269
1,182¥31,1532010$297,130
34,936
11,649$343,715

5. INVENTORIESInventories at March 31, 2010 and 2009 were as follows:

Finished products
Work in process
Raw materials
Total

2010
¥27,752
3,263
1,088¥32,103

6. INVESTMENTS IN AFFILIATED COMPANIESInvestments are accounted for using the equity method of accounting if the investment provides the Companies the ability to exercise significant influence, but
not control, over an investee. Significant influence is generally deemed to exist if the Companies have an ownership interest in the voting stock of the investee ofbetween 20% to 50%, although other factors are considered in determining whether the equity method of accounting is appropriate. The Companies record
investments in equity method investees meeting these characteristics as “Investments in affiliated companies." Under the equity method, the Companies record
their proportionate share of an affiliated companies’ income or loss based on the most recently available financial statements.
The Companies’ investments in affiliated companies and percentage of ownership at March 31, 2010 and 2009 include, among others, the following companies:
Percentage of Ownership (%)

2010
34
25
42
50
20

Name of Investee

Thai Wacoal Public Company Limited
Shinyoung Wacoal Inc.
Indonesia Wacoal Co., Ltd.
Taiwan Wacoal Co., Ltd.
House of Rose Co., Ltd.

2009
34
25
42
50
20

Investments in affiliated companies which have quoted market price at March 31, 2010 and 2009 compared with related carrying amounts were as follows:

Carrying amount
Aggregate value of quoted market price2010¥8,814
7,768

Millions of Yen

Thousands of
U.S. Dollars

2009¥7,823
6,524

2010$94,368
83,169

WACOAL HOLDINGS45

ANNUAL REPORT 2010

The following tables represent the affiliated companies’ summarized information from the balance sheets as of March 31, 2010 and 2009, and statements ofoperations for the years ended March 31, 2010, 2009, and 2008.

2010¥30,303
29,221¥59,524¥ 7,165
6,143
46,216¥59,524

Current assets
Noncurrent assets
Total
Current liabilities
Long-term liabilities
EquityTotal

Net sales
Gross profit
Income before income taxes
Net income

2010¥49,130
25,948
3,730
2,777

2009
¥57,488
30,3883,630
2,832

Millions of Yen

Thousands of
U.S. Dollars

2009¥30,974
24,926¥55,900¥ 8,247
5,771
41,882¥55,900

2010$324,443
312,859$637,302$ 76,713
65,771
494,818$637,302

Millions of Yen

Thousands of
U.S. Dollars

2008¥81,466
44,063
7,480
5,087

2010
$526,017
277,816
39,93629,732

Dividends received from the affiliated companies were ¥415 million ($4,443 thousand), ¥597 million and ¥806 million during the years ended March 31, 2010,2009 and 2008, respectively.
Retained earnings include net undistributed earnings of affiliated companies in the amount of ¥14,369 million ($153,844 thousand) and¥14,272 million at March 31, 2010 and 2009, respectively.

7. ACQUISITIONSPJ—On June 2, 2006, the Company acquired 49% of the issued commonshares of PJ, primarily a mail-order innerwear retailer. Since then, the Company accounted for this investment using the equity method. During the year
ended March 31, 2008, because of the decline in fair value of PJ’s shares, theCompany recognized an impairment loss of ¥4,694 million, which was
included in equity in net loss of affiliated companies. On January 10, 2008,
the Company acquired the remaining 51% of the outstanding common sharesof PJ through share exchange. This aimed to expand its innerwear operations’market area by including customer age groups and product styles that it had
not been able to develop fully.
This transaction was accounted for as an acquisition. PJ is included in the
Company’s consolidated balance sheet as of March 31, 2008 based on PJ’s
fiscal year end, which is February 29, 2008. However, because PJ’s results ofoperations and change in financial position between January 10, 2008 andMarch 31, 2008 were not significant, the Company continued to account for
its investment using the equity method and the income from PJ’s operations
for the fiscal year ended February 29, 2008 was included in equity in net
income (loss) of affiliated companies in the consolidated statements of income.
The purchase cost of the additional shares was ¥9,266 million, which
consisted of the fair value of the shares distributed to the shareholders of PJ
and the direct costs of the business combination. As consideration for theacquisition, the Company distributed 3,261,400 new shares and 3,440,000
shares of treasury stock to the shareholders of PJ. Those shares were valued at¥1,372 per share which was the five-day average stock price before the acquisition announcement on November 9, 2007.
The purchase price of additional PJ shares was allocated based upon theestimated fair value of the identifiable assets acquired and liabilities assumed.

The Company’s new basis of investment in PJ was ¥21,814 million, including
the initial investment of ¥10,670 million for the 49% shares and the corresponding amount of deferred tax liability of ¥1,878 million for the outsidebasis temporary differences, which the Company recognized on investment in
PJ upon the acquisition.
As a result of the allocation of new basis of investment in PJ, the Company
recognized goodwill of ¥11,203 million and intangible assets of ¥8,677
million, in aggregate, which were classified as goodwill and other intangible
assets in the consolidated balance sheets. Intangible assets consisted of trademark of ¥5,316 million and customer relationship of ¥3,361 million.
The trademark is not subject to amortization and the customer relationship issubject to amortization over estimated useful life of 7 years. Goodwill is notdeductible for tax purpose.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.
Millions of Yen

Cash
Other current assets
Property, plant, and equipment
Goodwill
Other intangible assets
Other assets
Total assets acquired
Current liabilities
Long-term debt
Total liabilities assumed
Net assets acquired2008¥ 4,115
2,693
698
11,203
8,677
692
28,078
2,432
3,832
6,264
¥21,814

46

Unaudited Pro Forma Results
Unaudited pro forma financial information is presented below as if theacquisition of PJ occurred at the beginning of the 2008.
Millions of Yen

Pro forma sales
Pro forma operating income
Pro forma net income

2008¥180,407
14,627
5,492

Pro forma earnings per share

2008
¥39

Yen

Lecien—On August 17, 2009, the Company acquired all the outstanding
common shares of Lecien which primarily manufactures and sells innerwear,
lace, handicrafts and tapestries, through share exchange. This aimed to expand
its business field. This enables the Company to maintain the growth of its
innerwear business in the domestic market by making its presence known in
the new market and developing new and different products, sales methods andchannels, as well as pricing strategies.
This transaction was accounted for as an acquisition. Lecien’s results ofoperations were included in the Company’s consolidated statements of income
for the year ended March 31, 2010 from August 1, 2009. Lecien’s results ofoperations and change in financial position between August 1, 2009 andAugust 17, 2009 were not significant.
The purchase cost of the acquisition was ¥2,489 million ($26,649 thousand),
which was the fair value of the shares distributed to the shareholders of Lecien.
As consideration for the acquisition, the Company distributed 2,104,063
shares of treasury stock to the shareholders of Lecien. Those shares were valuedat ¥1,183 ($13) per share which was the stock price on the acquisition date ofAugust 17, 2009.
The purchase price of Lecien’s shares was allocated based upon the estimatedfair value of the identifiable assets acquired and liabilities assumed. As a resultof the allocation of basis of investment in Lecien, the Company recognized
goodwill of ¥71 million ($760 thousand).
Lecien’s net sales and net loss included in the Company’s consolidated
statement of income for the year ended March 31, 2010 were ¥8,751 million($93,694 thousand), and ¥245 million ($2,623 thousand), respectively.

The costs of the business combinations was ¥121 million ($1,296 thousand),
which was included in selling, general and administrative.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.
Millions of Yen

Thousands of
U.S. Dollars

2010¥   362
3,381
1,841
2,164
1,101
71
144
798
9,862
5,725
1,602
7,327
46
¥2,4892010$   3,876
36,19919,711
23,16911,788
760
1,542
8,544
105,589
61,296
17,15278,448492$26,649

Cash
Trade notes and receivable
Other current assets
Property, plant, and equipment
Investments
Goodwill
Other intangible assets
Other assets
Total assets acquired
Current liabilities
Long-term liabilities
Total liabilities assumed
Noncontrolling interests
Net assets acquired

Unaudited Pro Forma Results
Unaudited pro forma financial information was presented below as if theacquisition of Lecien occurred at the beginning of the 2009 and fiscal year.

Pro forma sales
Pro forma operating income
Pro forma net income attributable
to Wacoal Holdings Corp.

Pro forma net income attributable to
Wacoal Holdings Corp. per share:
Basic
DilutedMillions of Yen

Thousands of
U.S. Dollars

2010¥167,621
3,272

2009
¥188,374
10,1152010$1,794,657
35,032

1,864

4,970

19,957

Yen

U.S. Dollars

2010

2009

2010

¥13.1913.18¥34.92
34.92

$0.14
0.14

8. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill —The changes in the carrying amount of goodwill for the year ended March 31, 2010 were as follows:
Millions of Yen

2010
Peach John Segment

Balance at beginning of year
Goodwill
Accumulated impairment losses
		 Total
Goodwill acquired during year
Impairment losses
		 Total
Balance at end of year
Goodwill
Accumulated impairment losses
		 Total

Other Segment¥11,203

Total¥11,203

11,203¥71(71)

11,20371(71)

11,203

11,203¥11,203¥11,203

47

WACOAL HOLDINGSANNUAL REPORT 2010

There was no change in the carrying amount of goodwill and accumulated impairment losses for the year ended March 31, 2009.
Thousands of U.S. Dollars

2010
Peach John Segment

Balance at beginning of year
Goodwill
Accumulated impairment losses
		 Total
Goodwill acquired during year
Impairment losses
		 Total
Balance at end of year
Goodwill
Accumulated impairment losses
		 Total

Other Segment$119,947

Total$119,947

119,947
$ 760
(760)

119,947760(760)

119,947

119,947$119,947$119,947

Goodwill of Other segment was recorded from acquired business of Lecien as further described in Note 7. Lecien segment was tested for impairment in the
fourth quarter, after the annual forecasting process. The Company identified a decline in fair value of Lecien primarily because of events that occurred after theacquisition date, and recognized an impairment loss of ¥71 million ($760 thousand), which was included in impairment charges on goodwill in the Other
segment. The fair value of that operating segment was estimated using the expected present value of future cash flows.
Other Intangible Assets —The components of acquired intangible assets excluding goodwill at March 31, 2010 and 2009 were as follows:
Millions of Yen

Thousands of U.S. Dollars

Gross Carrying
AmountAccumulated
Amortization andImpairment Loss

Gross Carrying
AmountAccumulated
Amortization andImpairment Loss

¥ 3,361
7,486
1,326¥12,173¥1,983
2,851
404¥5,238$ 35,985
80,15014,197$130,332$21,231
30,525
4,325$56,0812010
Year Ended March 31

Amortized intangible assets:
Customer relationship
Software
Other
		 Total
Unamortized intangible assets:
Trademark
Other
		 Total¥5,316100¥5,416$56,916
1,071$57,987
Millions of Yen

2009
Year Ended March 31

Amortized intangible assets:
Customer relationship
Software
Other
		 Total
Unamortized intangible assets:
Trademark
Other
		 Total

Gross Carrying
AmountAccumulated
Amortization andImpairment Loss

¥ 3,361
7,118
945¥11,424

¥ 480
2,730
386
¥3,596¥ 5,31698¥ 5,414

Other intangible assets acquired during the year ended March 31, 2010 totaled ¥1,755 million ($18,790 thousand) which primarily consist of software of¥1,746 million ($18,694 thousand) with estimated useful life of 5 years.

48

During the year ended March 31, 2010, the Company recorded an impairment charges on other intangible assets of ¥1,023 million ($10,953 thousand)for customer relationship in Peach John Segment, in connection with the decline
in the fair value, which was caused by a downturn in consumption because of
the general market condition. Customer relationship was valued by use of theexcess earnings method. Aggregate amortization expenses related to otherintangible assets and future estimated amortization expense were as follows:
Millions of Yen

Thousands of
U.S. Dollars

2010

2010

Aggregate amortization expense
		 2010¥1,791$19,176

Estimated amortization expense
		 2011
		 2012
		 2013
		 2014
		 2015
Total

1,468
1,413
1,231
999
747
¥5,85815,717
15,12813,18010,696
7,998$62,719

9. SHORT-TERM BANK LOANS AND LONG TERM DEBT

Short-term bank loans at March 31, 2010 and 2009 consisted of the following:
Millions of Yen

Unsecured bank loans
Collateralized bank loans
Total

2009
¥5,221

2010¥4,591
3,350¥7,941¥5,221Thousands of
U.S. Dollars

2010$49,154
35,867$85,021

The weighted-average annual interest rates on short-term bank loans as ofMarch 31, 2010 and 2009 were 1.3% and 1.5%, respectively.

Year Ended March 31

Long-term debt at March 31, 2010 and 2009 consisted of the following:

Year Ending March 31

Millions of Yen

2009
Year Ended March 31

Aggregate amortization expense
		 2009¥1,496

Estimated amortization expense
		 2010
		 2011
		 2012
		 2013
		 2014
Total

1,570
1,541
1,441
1,251
967
¥6,770Year Ending March 31

Millions of Yen

2008
Year Ended March 31

Aggregate amortization expense
		 2008¥ 909

Estimated amortization expense
		 2009
		 2010
		 2011
		 2012
		 2013
Total

1,379
1,260
1,200
1,084
841
¥5,764

Year Ending March 31

Collateralized bank loans, withinterest at 3.7% (based on current
market rates), maturing through2013
Capital lease obligation
Total
Less current portionLong-term debt, less current portion

Millions of Yen

Thousands of
U.S. Dollars

2010

2009

2010

¥ 137
51
188
(108)
¥ 80

¥ 81
81
(39)
¥ 42

$ 1,467546
2,013(1,156)$   857

The annual maturities of long-term debt at March 31, 2010 were as follows:Year Ended March 31

Millions of Yen

Thousands of
U.S. Dollars

¥108
67
13
¥188

$1,156718
139$2,013

2011
2012
2013
Total

Lecien, which is the subsidiary acquired as of August 17, 2009 as further
described in Note 7, pledges assets as security for loans. At March 31, 2010,
assets pledged as collateral for bank loans, including ¥280 million ($2,998
thousand) of investments presented as treasury stock on the consolidatedbalance sheets, were as follows. There were no assets pledged for loans
at March 31, 2009.
Millions of Yen

Thousands of
U.S. Dollars¥1,015412
977¥2,404$10,867
4,411
10,461$25,739Land
Buildings
Investments
Total

As is customary in Japan, both short-term and long-term loans are madeunder general agreements which provide that security and guarantees for
future and present indebtedness will be given upon request of the bank andthe bank has the right to offset cash deposits against obligations that havebecome due or, in the event of default, against all obligations due to the bank.

10. LEASESThe Companies lease most of their store premises, some of their distribution centers, and certain equipment. Most leases have automatic renewal provisions andallow the Companies to extend the lease term beyond the initial base period, subject to the terms agreed at lease inception. Future minimum rental commitments
on non-cancelable operating leases are presented below:
Year Ended March 31

Millions of Yen

2011
2012
2013
2014
2015
Thereafter
Total

¥ 688
662
564
162
174
782
¥3,032Thousands of
U.S. Dollars$ 7,366
7,088
6,039
1,734
1,863
8,373
$32,463

Rental expenses were ¥5,252 million ($56,231 thousand), ¥4,800 million and ¥3,979 million for the years ended March 31, 2010, 2009 and 2008, respectively.

49

WACOAL HOLDINGSANNUAL REPORT 2010

11. ASSET RETIREMENT OBLIGATIONSThe Companies recorded the fair value of asset retirement obligations in order to recognize legal obligations associated with the removal of leasehold
improvements from leased facilities and return the property to a specified condition when the lease terminates.
A reconciliation of the beginning and ending aggregate carrying amount of the asset retirement obligation was as follows:
Millions of Yen

Balance at beginning of year
Increase due to change in scope of consolidation (Note 7)
Accretion expense
Liabilities incurred
Liabilities settled
Changes due to translation of foreign currencies
Balance at end of year

2010
¥443
97
11
66
(22)
(1)
¥594

2009
¥382
10
105
(46)
(8)
¥443

Thousands of
U.S. Dollars

2010$4,743
1,039
118
706
(235)
(11)
$6,36012. TERMINATION AND RETIREMENT PLANS

Employee Retirement Plans—The Companies sponsor termination andretirement benefit plans that cover substantially all employees. Benefits are
based on the employee’s years of service, position and performance. If thetermination is involuntary or caused by death, the employee is usually entitledto greater payments than in the case of voluntary termination.
The Companies have a contributory defined retirement benefit plan, several
partially funded plans administered by independent trustees and several

unfunded termination plans administered by the Companies. Benefits under
the contributory defined retirement benefit plan are usually paid in a lumpsum at the earlier of termination or retirement, although periodic payments areavailable under certain conditions. Benefits under the other termination andretirement benefit plan are paid either as lump-sum payments or periodic
payments under certain conditions. The benefits are usually paid as a lumpsum payment, if the employee resigns before the mandatory retirement age.

Contributory Defined Retirement Benefit Plan—The following provides a reconciliation of benefit obligations, plan assets and funded status of the plans:

Change in benefit obligations:Benefit obligations at beginning of year
Service cost
Interest cost
Participants’ contributions
Actuarial loss
Benefits paid from plan assets
Settlement paid from plan assets
Settlement paid by the Companies
Increase due to change in scope of consolidation (Note 7)
Benefit obligations at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Participants’ contributions
Benefit payments
Settlement payments
Fair value of plan assets at end of year
Funded status at end of year

Millions of Yen

Thousands of
U.S. Dollars

2010

2009

2010

¥ 32,946
916
764
73
181
(607)
(767)
(129)
77
33,454¥32,819
812
751
73
61
(492)
(694)
(384)
32,946$352,741
9,807
8,180
782
1,938
(6,499)(8,212)(1,381)
824
358,180¥ 29,069
2,461
1,515
72
(607)
(767)
31,743¥ (1,711)¥34,067(5,963)
2,078
73
(492)
(694)
29,069¥ (3,877)$311,231
26,34916,221771(6,499)(8,212)339,861$ (18,319)

50

Amounts recognized in the consolidated balance sheets at March 31, 2010 and 2009 consist of:Millions of Yen

2010¥   263(82)(1,892)¥(1,711)

Prepaid pension expense
Accrued expenses
Liability for termination and retirement benefits

2009

Thousands of
U.S. Dollars¥   (91)(3,786)¥(3,877)2010$   2,816(878)(20,257)$(18,319)

Millions of Yen

Thousands of
U.S. Dollars

2009¥(10,585)
4,880¥ (5,705)

2010$(77,045)
44,850$(32,195)

Millions of Yen

Thousands of
U.S. Dollars

2009¥32,023

2010$350,396

Millions of Yen

Thousands of
U.S. Dollars

2008
¥ 858
761
(788)
(79)
(691)
¥ 61

2010
$ 9,8078,180(7,548)19,422(7,398)$22,463

Amounts recognized in accumulated other comprehensive loss at March 31, 2010 and 2009 were as follows:2010¥(7,196)
4,189¥(3,007)

Actuarial loss
Prior service benefit

The accumulated benefit obligation for all defined benefit plans at March 31, 2010 and 2009 were as follows:2010¥32,727

Accumulated benefit obligation
Net periodic benefit costs for the Companies’ plans consisted of the following for the year ended March 31:

Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial loss (gain)
Amortization of prior service benefit

2010
¥ 916
764
(705)
1,814
(691)
¥2,098

2009
¥ 812
751
(774)
919
(691)
¥1,017The unrecognized net actuarial loss and prior service benefit are being amortized over 12 years (the average remaining service life of active participants) using
the declining-balance method and the straight-line method, respectively.
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended March 31, 2010, 2009 and 2008 wereas follows:

Current year actuarial gain (loss)
Amortization of actuarial loss (gain)
Amortization of prior service benefit

2010¥1,575
1,814(691)¥2,6982009¥(6,800)
919(691)¥(6,572)

Millions of Yen

Thousands of
U.S. Dollars

2008¥(5,328)(79)(691)¥(6,098)2010$16,863
19,422(7,398)$28,887

51

WACOAL HOLDINGSANNUAL REPORT 2010

The estimated amounts that will be amortized from accumulated othercomprehensive loss into net periodic benefit cost over the next year are
summarized as follows:

Actuarial loss
Prior service benefits

Millions of Yen

Thousands of
U.S. Dollars

2010¥1,259(691)

2010¥13,480(7,398)weighted-average assumptions used as of March 31, in computing the benefit
obligations shown above were as follows:
Discount rate
Rate of increase in future compensation

largely on assumptions about economic growth and inflation, which aresupported by long-term historical data. The estimated long-term rate of
return is based on an asset allocation of equity securities of 33.0%, debt
securities of 48.0%, and other investments of 19.0%.
The Companies’ investment strategy is to maintain actual asset
weightings within a preset range of target allocations. The Companies’
investments are broadly diversified, typically consisting primarily of

The Companies use a March 31 measurement date for its plans. The

2009
2.5%
0.0%

2010
2.3%
0.0%

asset classes. The return expectations for each of the asset classes are based

The weighted-average assumptions used as of March 31, in computing thenet periodic benefit cost shown above were as follows:
Discount rate
Rate of increase in future compensation

2010
2.5%
0.0%

2009
2.5%
0.0%

2008
2.5%
0.5%

Expected long-term rate of return onplan assets

2.5%

2.5%

2.5%

The Company’s wholly owned subsidiary, Wacoal Corp.’s approach toestablishing the discount rate is based upon long term Japanese government bond rates and corporate bond indices. The discount rate assumption is based upon the effective yields as of March 31, 2010 on the Japanese
government bonds whose maturity dates would be the same as timing of
the expected future benefit payments, adjusted for an incremental yield ofapproximately 25 basis points that is achieved by selecting corporate
bonds whose credit characteristics satisfy the quality requirements but
whose yields are slightly higher than the yields on Japanese government
bonds. For other plans, similar indices and methods are used.
The expected long-term rate of return on plan assets is derived
proportionally from return assumptions determined for each of the major

equity and debt securities. The Companies believe these ranges represent
an appropriate risk profile for the planned benefit payments of the plans
based on the timing of the estimated benefit payment.
The asset allocation at March 31, 2010 and 2009 was as follows:
Equity securities
Debt securities
Life insurance company general accounts
Cash and cash equivalents

2010
41.0%
41.9%
13.9%
3.2%

2009
39.0%
40.8%
14.8%
5.4%

The target allocation percentages are reviewed and approved by the Pension
Committee. The actual allocations for 2010 and 2009 are different from thetarget allocation percentages primarily because the Company maintained
additional equity securities as the separate plan asset which was contributed tothe plan based on an agreement between the Company and employees and are
not governed by the Pension Committee. As such, the actual allocation
percentage of equity securities to the total plan assets is higher than the target
allocation, and similarly, the actual allocation for the debt securities and othertypes of assets are lower than the target allocation.
The following table presents the Companies’ plan assets using the fair value
hierarchy as of March 31, 2010. The fair value hierarchy has three levels basedon the reliability of the inputs used to determine fair value. Level 1 refers tofair values determined based on quoted prices in active markets for identicalassets. Level 2 refers to fair values estimated using significant other observable
inputs, and Level 3 includes fair values estimated using significant nonobservable inputs.

52

Millions of Yen

Level 1Equity securities:
Japanese companies
Foreign companies
Pooled funds (a)Debt securities:
Japanese government bonds
Japanese municipal bonds
Japanese corporate bonds
Foreign government bonds
Pooled funds (b)Life insurance company general accounts
Other types of investments:
Equity long/short hedge funds (c)Other assets
		 Total

Level 2

Level 3

¥6,112
829

Total¥ 6,112829
4,476¥ 4,476
1,705

10,742
4,406

1,705
17
177
660
10,742
4,406¥9,306

1,592
1,027¥22,437

1,592
1,027
¥31,743

Level 1

Level 2

17
177
660

Thousands of U.S. Dollars

Equity securities:
Japanese companies
Foreign companies
Pooled funds (a)Debt securities:
Japanese government bonds
Japanese municipal bonds
Japanese corporate bonds
Foreign government bonds
Pooled funds (b)Life insurance company general accounts
Other types of investments:
Equity long/short hedge funds (c)Other assets
		 Total

Level 3

$65,439
8,876$ 65,439
8,876
47,923$ 47,923
18,255

115,01147,173

18,255
182
1,895
7,066
115,01147,173

17,045
10,996$240,225

17,045
10,996$339,861

182
1,895
7,066

$99,636Total(a)	This class includes common stock of approximately 75% Japanese companies and 25% foreign companies.
(b)	This class includes approximately 48% of Japanese government bonds, 2% of Japanese municipal bonds, 37% of foreign government bonds, and 13% ofcorporate bonds.
(c)	This class includes hedge funds that invest both long and short in approximately 51% of Japanese common stocks and 49% of foreign common stocks.
Equity securities and debt securities presented in Level 1 are primarily
valued using a market approach on the quoted market prices of identical
instruments. Municipal bonds and corporate bonds presented in Level 2 areprimarily valued using quoted prices for identical instruments in markets thatare not active. Pooled funds in equity securities or debt securities and equity
long/short hedge funds which are categorized in Level 2 are valued by thesponsor of the fund primarily based on quoted prices in both active andinactive market for identical instruments which comprise funds. Life insurancecompany general accounts is the contracts with the insurance companies withguaranteed interest rate and return of capital, and those value are based on
addition of original value and return.

The general funding policy of the funded plans is to contribute amounts
computed in accordance with actuarial methods accepted by Japanese tax law.
The Companies expect to contribute ¥1,866 million ($19,979 thousand) totheir plans in the year ending March 31, 2011.
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
Year Ended March 31

2011
2012
2013
2014
2015
2016–2020

Millions of Yen

Thousands of
U.S. Dollars¥ 1,487
1,658
1,892
1,998
2,115
11,304$ 15,921
17,752
20,257
21,392
22,645
121,028

WACOAL HOLDINGS53

ANNUAL REPORT 2010

Multiemployer Plan—Some subsidiaries participate in multiemployer plans.
The aggregated amount of the contribution to the plans was ¥42 million($450 thousand) for the year ended March 31, 2010. As it is probable thatcertain subsidiaries will withdraw from the plan, the Companies assessed theprobability and recognized the estimated withdrawal liability of ¥651 million($6,970 thousand) as of March 31, 2010.
Defined Contribution Plan—A subsidiary has a defined contribution plan.
The amount of cost recognized for its contribution to the plan was ¥20 million($214 thousand) for the year ended March 31, 2010.
Employee Early Retirement Program—The Companies provide additional
benefits to employees that elect to participate in the Companies’ early
retirement program. Retirement benefits of ¥361 million ($3,865 thousand),¥157 million and ¥51 million were paid in addition to normal benefits andcharged to selling, general and administrative for the years ended March 31,
2010, 2009 and 2008, respectively.
Termination Plan for Directors and Corporate Auditors—The Company andcertain subsidiaries had termination plans for directors and corporate auditors.

Payment of termination benefits to directors and corporate auditors is made ina lump-sum upon termination and requires the approval of the shareholders
before payment. In June 2005, the Company rescinded its termination plan for
directors and corporate auditors upon the approval of its shareholders. The
amount of benefit for each individual was fixed as of June 29, 2005 and willremain frozen until the retirement of each respective director and corporate
auditor. The outstanding liabilities were ¥339 million ($3,630 thousand) at
March 31, 2010, 2009 and 2008, and were recorded in other long-term
liabilities. Subsidiaries still maintain plans for their directors and corporate
auditors. In accordance with the guidance for determination of vested benefit
obligation for a defined benefit pension plan, the subsidiaries recorded aliability for termination benefits for directors and corporate auditors at theamount that would be needed if all directors and corporate auditors were to
resign at each balance sheet date. The liabilities for termination benefits for
directors and corporate auditors at March 31, 2010 and 2009 were ¥377
million ($4,036 thousand) and ¥304 million, respectively, and were included
in liability for termination and retirement benefits.

13. EQUITY

Japanese companies are subject to the Companies Act of Japan (the “CompaniesAct”). The significant provisions in the Companies Act that affect financial andaccounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during
the fiscal year in addition to the year-end dividend upon resolution at theshareholders meeting. For companies that meet certain criteria such as; (1)having the Board of Directors, (2) having independent auditors, (3) having theBoard of Corporate Auditors, and (4) the term of service of the directors isprescribed as one year rather than two years of normal term by its articles ofincorporation, the Board of Directors may declare dividends (except for
dividends in kind) at any time during the fiscal year if the company hasprescribed so in its articles of incorporation. The Company meets all the above
criteria. The Board of Directors of companies with board committees (anappointment committee, compensation committee and audit committee) can
also do so because such companies with board committees already, by nature,
meet the above criteria under the Companies Act, even though such companies
have an audit committee instead of the Board of Corporate Auditors.
The Companies Act permits companies to distribute dividends-in-kind(non-cash assets) to shareholders subject to a certain limitation and additional
requirements.
Semiannual interim dividends may also be paid once a year upon resolution
by the Board of Directors if the articles of incorporation of the company sostipulate. The Companies Act provides certain limitations on the amounts
available for dividends or the purchase of treasury stock. The limitation is definedas the amount available for distribution to the shareholders, but the amount of
net assets after dividends must be maintained at no less than ¥3 million.
The amount of retained earnings available for dividends under the Companies Act was ¥96,486 million ($1,033,041 thousand) as of March 31, 2010,
based on the amount recorded in the Company’s general books of account.
(b) Increases/decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must
be appropriated as a legal reserve (a component of retained earnings) or as addi­
tional paid-in capital (a component of capital surplus) depending on the equity
account charged upon the payment of such dividends until the total of aggregate
amount of legal reserve and additional paid-in capital equals 25% of the common
stock. Under the Companies Act, the total amount of additional paid-in
capital and legal reserve may be reversed without limitation. The Companies
Act also provides that common stock, legal reserve, additional paid-in capital,
other capital surplus and retained earnings can be transferred among theaccounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock
The Companies Act also provides for companies to purchase treasury stock anddispose of such treasury stock by resolution of the Board of Directors. The
amount of treasury stock purchased cannot exceed the amount available for
distribution to the shareholders which is determined by specific formula.

54

Expected dividend yield is based on the actual payout of dividend in the last
fiscal year and the closing price of the Company’s common stock on the grant
date. Expected volatility is based on the historical volatility of the Company’s
share over the most recent period commensurate with the expected term of theCompany’s stock options. Risk-free interest rate is based on the Japanese
government bonds yield curve in effect at the time of grant for a period commensurate with the expected term of the Company’s share options. Expected term of
options granted is based on the average remaining service period of directors,
assuming that those who are granted options will render service until the statedretirement date and they will exercise options immediately after their retirement.

14. SHARE-BASED COMPENSATIONThe Company adopted an annual stock option plan in the year ended March 31,
2009. Under the 2010 and 2009 stock option plan, the Company granted its
shares of common stock to directors of the Company excluding outside directors
and the Company’s wholly owned subsidiary, Wacoal Corp., in the years ended
March 31, 2010 and 2009. The Company believes that such awards better alignthe interests of its directors with those of its shareholders, by sharing both risk
and return from fluctuations in stock prices and giving motivation to heighten its
corporate value. The compensation cost is valued at fair value on the grant date.
Options vest over one year in proportion to the service months of directors, andare exercisable from the day after the date of retirement up to (i) twenty years
from the grant date or (ii) five years from the day after the date of retirement,
whichever is earlier.
The fair value of the options is estimated by using the Black-Scholes optionpricing model with following assumptions.

2009
2.0%
24.7%
1.0%
4.8 years

2010
2.1%
30.6%
0.5%
4.0 years

Expected dividends
Expected volatility
Risk-free interest rate
Expected term

A summary of option activity under the Plan as of March 31, 2010, and changes for the year ended March 31, 2010, were as follows:
Yen

Weighted-Average
Exercise Price

SharesOutstanding at April 1, 2009
GrantedExercised
Forfeited or expired
Outstanding at March 31, 2010
Exercisable at March 31, 2010

U.S. Dollars

57,00049,000
4,000

1
1
1

0
0
0

102,000
3,000

1
1

0
0

Years
Weighted-Average
Remaining
Contractual Term

Millions of Yen

18.5
4

113
3

Thousands of U.S.
Dollars

Aggregate Intrinsic Value

1,210
32

The total intrinsic values of options exercised was ¥5 million ($54 thousand) for the year ended March 31, 2010.
Total compensation cost recognized and the total recognized tax benefit related thereto for the year ended March 31, 2010 were ¥55 million($589 thousand) and ¥22 million ($236 thousand), respectively. Total compensation cost recognized and the total recognized tax benefit related thereto
for the year ended March 31, 2009 were ¥54 million and ¥22 million, respectively.
The weighted-average grant date fair values of options granted for the years ended March 31, 2010 and 2009, were ¥1,084 ($12) and¥1,137, respectively.
As of March 31, 2010, there were ¥9 million ($96 thousand) of total unrecognized compensation cost related to nonvested share-based
compensation arrangements granted under the Plan. That cost is expected to be recognized over three months.

55

WACOAL HOLDINGSANNUAL REPORT 2010

15. OTHER COMPREHENSIVE INCOME (LOSS)

The changes in the components of accumulated other comprehensive income (loss) including amounts attributable to noncontrolling interests were as follows:
Millions of Yen

2009

2010
Foreign currency translation adjustments
Unrealized gain (loss) on securities:
Unrealized holding gain (loss)
Reclassification adjustments
		 Net unrealized gain (loss)
Pension liability adjustment:
Unrealized holding gain (loss)
Reclassification adjustment
		 Net unrealized gain (loss)
Other comprehensive income (loss)

Pre-Tax
AmountTax Expense

Net Amount

Pre-Tax Tax (Expense)AmountCredit¥ 870¥ (75)¥ 795¥ (9,402)

4,319
1,293
5,612

(1,735)(526)(2,261)

2,584
767
3,351

1,575
1,123
2,698
¥9,180(641)(457)(1,098)¥ (3,434)

934
666
1,600
¥5,746

2008
Net Amount

Pre-Tax
Amount¥ 692¥ (8,710)¥ (536)¥(10,092)
1,828(8,264)

4,030
(744)
3,286

(6,062)
1,084(4,978)(14,685)(754)(15,439)

5,983
307
6,290

(8,702)(447)(9,149)(6,800)228(6,572)¥(24,238)

2,768
(93)
2,675
¥6,653(4,032)135(3,897)¥(17,585)(5,328)(770)(6,098)¥(22,073)

2,168
314
2,482
¥8,810(3,160)(456)(3,616)¥(13,263)

Tax Credit

38

Net Amount

¥

(498)

Thousands of U.S. Dollars

2010
Foreign currency translation adjustments
Unrealized gain on securities:
Unrealized holding gain
Reclassification adjustments
		 Net unrealized gain
Pension liability adjustment:
Unrealized holding gain
Reclassification adjustment
		 Net unrealized gain
Other comprehensive income

Pre-Tax
AmountTax Expense

Net Amount$ 9,315$   (803)$ 8,512

46,242
13,84460,086(18,576)(5,632)(24,208)

27,666
8,212
35,87816,863
12,02428,887$98,288(6,863)(4,893)(11,756)$(36,767)

10,0007,131
17,131$61,521

16. INCOME TAXES

Income before income taxes, equity in net income (loss) of affiliated companies,
and net loss (income) attributable to noncontrolling interests were summarized
as follows:Japan
ForeignTotal

2010¥ 9,445(6,322)¥ 3,1232009¥12,553(4,926)¥ 7,627

Millions of Yen

Thousands of
U.S. Dollars

2008¥15,959(1,606)¥14,353

2010$101,124(67,687)$ 33,437

Income taxes expense consists of:Current:
Japan
Foreign
Deferred:Japan
Foreign
Total income taxes

Millions of Yen

Thousands of
U.S. Dollars

2010

2009

2008

2010

¥ 2,851310¥ 3,161¥2,214503¥2,717¥4,652925¥5,577$ 30,525
3,319$ 33,844¥(1,726)
139¥(1,587)¥ 1,574

¥ 522
(26)
¥ 496
¥3,213

¥ 280
(4)
¥ 276
¥5,853$(18,480)
1,488(16,992)$ 16,852

The Companies are subject to a number of different taxes based on income.
The effective income tax rates differed from the normal statutory rates for thefollowing reasons for the years ended March 31, 2010, 2009 and 2008:
Normal Japanese statutory rates
Increase in taxes resulting from:	Permanently non-deductible
expenses
Change in valuation allowance	Undistributed earnings of foreignsubsidiaries	Differences in foreign subsidiaries’
tax rate
Tax exemption
Unrecognized tax benefits
Other—net
Effective tax rates

2010
40.7%

2009
40.7%

2008
40.7%

13.0
(7.9)

5.8
4.1

2.9
(1.5)

2.6

(2.1)

2.6

(5.4)
(1.1)
6.5
2.0
50.4%

(3.4)
(0.3)
(1.0)
(1.7)
42.1%

(2.5)
(0.2)
(0.2)
(1.0)
40.8%

56

The approximate effect of temporary differences and tax loss carryforwards that gave rise to deferred tax balances at March 31, 2010 and 2009 were as follows:
Millions of Yen
Deferred Tax
AssetsSales returns
Allowance for doubtful receivables
Inventory valuation
Accrued bonuses
Impairment charges on marketable securities and investments
Advanced depreciation on property, plant and equipment
Undistributed earnings of foreign subsidiaries
Net unrealized gain on marketable securities and investments
Net realized gain on exchange of equity securities
Capitalized supplies
Enterprise taxes
Accrued vacation
Pension expense
Tangible fixed assets
Tax loss carryforwards
Intangible assets
Investment in a subsidiary
Other temporary differences
Total
Valuation allowance
Total

¥

Deferred Tax
Liabilities

Deferred Tax
Assets

¥

783
619
1,583
1,166
2,111

2010
Deferred Tax
Liabilities

838
257
1,737
1,415
985

Deferred Tax
Assets$   8,383
6,627
16,94812,48422,602$ 18,330
19,82940,27823,416

227
52
842
2,104
1,328
1,733

205
173
832
1,351
1,442
3,185
2,726
1,878
119
14,236¥14,236

Deferred Tax
Liabilities¥ 1,696
1,712
1,430
2,448

¥ 1,712
1,852
3,762
2,187

388
13,838(3,452)¥10,386

Thousands of U.S. Dollars

2009

2010

767
12,285(1,643)¥10,642

2,195
1,852
8,908
14,465
15,43934,101
3,337
1,878
4
12,505¥12,505

29,186
20,107
1,274
152,420

4,154
148,158(36,959)$111,199$152,420

The valuation allowance increased by ¥1,809 million ($19,368 thousand) and ¥225 million for the years ended March 31, 2010 and 2009, respectively.
As a result of changing the Companies’ legal structure, the Companies reversed certain of valuation allowance. Accordingly, the Companies utilized¥721 million ($7,719 thousand) of tax loss carryforwards, and recognized the tax benefits of ¥293 million ($3,137 thousand) for the year ended March 31, 2010.
At March 31, 2010, certain subsidiaries had loss carryforwards which areavailable to offset future taxable income of such subsidiaries expiring as follows:Year Carryforward Expires

2011
2012
2013
2014
2015
2016
2017
Indefinitely until utilized
Total

Millions of Yen

Thousands of
U.S. Dollars

¥ 224
329
863
1,024
472
786
3,181
1,098
¥7,977$ 2,398
3,522
9,240
10,964
5,054
8,415
34,05811,756$85,407

There was no portion of undistributed earnings of foreign subsidiaries whichwere deemed to be permanently invested as of March 31, 2010 and 2009.
The Companies adopted the guidance for the tax benefit from an uncertain
tax position effective April 1, 2007. As a result of implementation of thisguidance, the Companies recognized a tax benefit of ¥181 million as of April 1,
2007, and did not require a cumulative-effect adjustment to retained earnings.
A reconciliation of beginning and ending amount of unrecognized tax
benefits was as follows:

Millions of Yen

Balance at beginning of year
Additions based on tax
positions related to thecurrent year
Additions for tax positionsof prior years
Reductions for tax positionsof prior years
Settlements with tax
authorities
Balance at end of year

Thousands of
U.S. Dollars

2010

2009

2008

2010

¥106

¥420

¥181

$1,135

232

20

332

2,484

50

29

535

(41)

(122)

(439)

¥420

(278)
$3,437

(26)
¥321

(334)
¥106

Total amount of unrecognized tax benefits that, if recognized, would affectthe effective tax rate is ¥321 million ($3,437 thousand) and ¥106 million atMarch 31, 2010 and 2009, respectively.
Based on each of the items of which the Company is aware at March 31,
2010, no significant changes to the unrecognized tax benefits are expected
within the next twelve months.
The Companies recognize interest and penalties accrued related to unrecognized tax benefits in income taxes in the consolidated statements of income.
Total amounts of interest and penalties recognized in the consolidated
statements of income for the years ended March 31, 2010, 2009 and 2008 were
not material.

WACOAL HOLDINGS

57

ANNUAL REPORT 2010

The Companies file income tax returns in Japan and various foreign tax
jurisdictions. In Japan the Companies are no longer subject to regular income
tax examinations by the tax authorities for years before 2009 with few exceptions. For other countries, the Companies are no longer subject to regularincome tax examinations by the tax authorities for years before 2006 with few
exceptions. In the year ended March 31, 2009, the transfer pricing examination of certain domestic subsidiaries’ 2002 to 2007 fiscal year and certain the
U.S. subsidiaries’ 2003 and 2004 fiscal year was completed.

17. RELATED PARTY TRANSACTIONSThe Companies purchase merchandise from numerous suppliers throughout theworld, including certain affiliated companies of the Companies. The Companies
purchased merchandise from affiliated companies in the amount of ¥1,209 million($12,944 thousand), ¥1,674 million and ¥1,031 million in the fiscal years ended
March 31, 2010, 2009 and 2008, respectively. The accounts payable to affiliatedcompanies were ¥15 million ($161 thousand) and ¥34 million at March 31, 2010
and 2009, respectively. All such merchandise were provided in the ordinary courseof business at prices and on terms and conditions that the Company believes are
the same as those that would result from arm’s-length negotiations between
unrelated parties.
The Companies also sell supplies, materials and products to certain affiliatedcompanies. Aggregate sales to affiliated companies were ¥354 million ($3,790
thousand), ¥958 million and ¥803 million in fiscal years ended March 31, 2010,2009 and 2008. The accounts receivable from affiliated companies were ¥60 million($642 thousand) and ¥123 million at March 31, 2010 and 2009, respectively.
The Companies earn royalties from the use of Wacoal Brand by certain
affiliated companies. The amount of royalty revenue earned was ¥199 million($2,131 thousand), ¥206 million and ¥229 million in the fiscal years ended
March 31, 2010, 2009 and 2008, respectively. Other accounts receivablesfrom affiliated companies, which are categorized in other current assets in the
consolidated balance sheet, were ¥163 million ($1,745 thousand) and ¥165
million at March 31, 2010 and 2009, respectively.
Transaction between the Company and President’s Immediate Family—
The Company purchased the building and land which were owned by thepresident’s immediate family to use as a Company’s memorial house for the
price based on a certification of real estate appraisal. The building and land
included in the consolidated balance sheet as of March 31, 2010 were ¥35
million ($375 thousand) and ¥539 million ($5,771 thousand), respectively.

18. EARNINGS PER SHARE AND AMERICAN DEPOSITARY RECEIPTThe Company accounts for its earnings per share in accordance with theguidance for earnings per share. Basic net income attributable to Wacoal Holdings Corp. per share has been computed by dividing net income attributable to
Wacoal Holdings Corp. by the weighted-average number of common stock
outstanding during each year. Diluted net income attributable to Wacoal
Holdings Corp. per share assumes the dilution that could occur if share-based
option to issue common stock were exercised.
The computation of earnings per American Depositary Receipt (“ADR”),
each ADR representing 5 shares of common stock, is based on the weighted-

average number of common shares outstanding. The weighted-average numberof common stock outstanding used in the computations of basic net income
attributable to Wacoal Holdings Corp. per share was 141,353,141 shares for
2010, 142,316,921 shares for 2009 and 141,304,256 shares for 2008. The
weighted-average number of diluted common stock outstanding used in thecomputations of diluted net income attributable to Wacoal Holdings Corp.
per share was 141,423,315 shares, 142,336,296 shares and 141,304,256 sharesfor 2010, 2009 and 2008, respectively.

19. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Fair Value of Financial Instruments
The carrying amounts and fair values of financial instruments at March 31, 2010 and 2009 were as follows:
Millions of Yen

2010

Assets:Marketable securities (Note 3)
Investments (Note 3)
Foreign exchange contracts
		 Total assets
Liabilities:
Foreign exchange contracts

Thousands of U.S. Dollars

Carrying Amount

Fair Value

Carrying Amount

Fair Value¥ 6,529
32,743
61¥39,333¥ 6,529
32,743
61¥39,333$ 69,904
350,567653$421,124$ 69,904
350,567653$421,124¥    (78)¥    (78)$    (835)$    (835)58Millions of Yen

2009

Assets:Marketable securities (Note 3)
Investments (Note 3)
		 Total assets
Liabilities:
Foreign exchange contracts

The carrying amounts of all other financial instruments approximate

Carrying Amount

Fair Value¥10,483
26,317¥36,800¥10,483
26,317¥36,800¥    (84)¥    (84)matters of significant judgment and therefore cannot be determined with

their estimated fair values.

precision. Changes in assumptions could significantly affect the estimates.

Financial Instruments—The Companies are exposed to foreign currency

Concentration of Credit Risk—The Companies’ business consists

exchange risks on the transactions denominated in foreign currencies

primarily of sales of women’s intimate apparel to a large number ofrelating to its ongoing business operations. Such risks are primarily

diverse customers in the Japanese retail industry, which include wellmanaged by using foreign currency exchange contracts. The Companies

established department stores, general merchandise stores and othermeasure forward currency exchange contracts at the fair value since theygeneral retailers and to specialty stores. No single customer constitutes

are not designated as a hedge.

10.0% or more of the total sales, although the general retail customers that

Limitations—Fair value estimates are made at a specific point in time, based

are consolidated companies in the Aeon Group collectively accounted foron relevant market information and information about the financial instru-

approximately 10.4%, 9.8% and 11.2% of the total sales in fiscal years ended

ment. These estimates are subjective in nature and involve uncertainties andMarch 31, 2010, 2009 and 2008, respectively.

20. FAIR VALUE MEASUREMENTS

Level 1—Inputs are quoted prices in active markets for identical assets or

The Companies adopted the guidance for fair value measurements on
April 1, 2008. The guidance defines fair value as the price that would be

liabilities.
Level 2—Inputs are quoted prices for similar assets or liabilities in active

received to sell an asset or paid to transfer a liability (an exit price) in themarkets, quoted prices for identical or similar assets or liabilities inprincipal or most advantageous market for the asset or liability in anmarkets that are not active, inputs other than quoted prices that areorderly transaction between market participants at the measurement date.

observable, and inputs that are derived principally from or corrobo-

The guidance establishes a three-level fair value hierarchy that prioritizes

rated by observable market data by correlation or other means.

the inputs used to measure fair value as follows:

Level 3—Inputs are unobservable.

Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities at fair value on a recurring basis as of March 31, 2010 and 2009 were as follows:
Millions of Yen

2010

Assets:Marketable securities:
		 Government bonds
		 Municipal bonds
		 Corporate bonds
		 Bank debt securities
		 Mutual fund			 Total marketable securities
Investments:
		 Listed shares
Financial instruments:
		 Foreign exchange contracts
			 Total assets
Liabilities:
Financial instruments:
		 Foreign exchange contracts

Level 1

Level 2

¥ 1,160

1,160¥   10
1,855
100
3,404
5,369

32,743¥33,903

Level 3

Total

¥ 1,160
10
1,855
100
3,404
6,529
32,743

61¥5,43061¥39,333¥ (78)¥    (78)59

WACOAL HOLDINGSANNUAL REPORT 2010

Millions of Yen

2009

Assets:Marketable securities:
		 Government bonds
		 Municipal bonds
		 Corporate bonds
		 Commercial paper
		 Bank debt securities
		 Mutual fund			 Total marketable securities
Investments:
		 Listed shares
			 Total assets
Liabilities:
Financial instruments:
		 Foreign exchange contracts

Level 1

¥ 1,662

Level 2

Level 3

Total

1,662

¥ 10
3,923
1,000
100
3,788
8,821

¥ 1,662
10
3,923
1,000
100
3,788
10,483

26,317¥27,979¥8,821

26,317¥36,800¥ (84)¥    (84)Thousands of U.S. Dollars

2010

Assets:Marketable securities:
		 Government bonds
		 Municipal bonds
		 Corporate bonds
		 Bank debt securities
		 Mutual fund			 Total marketable securities
Investments:
		 Listed shares
Financial instruments:
		 Foreign exchange contracts
			 Total assets
Liabilities:
Financial instruments:
		 Foreign exchange contracts
Marketable securities and investments presented in Level 1 are valued using
an unadjusted quoted market price in active markets with sufficient volume
and frequency of transactions. Marketable securities presented in Level 2 arevalued using quoted market price obtained from third parties.
As presented in Note 3, the Companies recorded impairment charges onmarketable securities and investments if a decline in fair value of marketablesecurities and investments is determined to be other than temporary.
Financial instruments are comprised of foreign currency exchange contracts.
Financial instruments are valued using quotes obtained from third parties.

Level 1

Level 2

$ 12,420

12,420$ 107
19,861
1,071
36,44557,484

350,567$362,987

Level 3

Total

$ 12,420107
19,861
1,071
36,44569,904
350,567653$58,137653$421,124$ (835)$    (835)The changes in the fair value of the foreign currency exchange contracts arerecorded in earnings, since the foreign currency exchange contracts are notdesignate as a hedge. The Companies recognized ¥103 million ($1,103
thousand), ¥62 million and ¥35 million in other income (expenses) in theyears ended March 31, 2010, 2009 and 2008, respectively.
The Companies recorded the financial instruments as other current assets andother current liabilities in the consolidated balance sheet at fair value of ¥61
million ($653 thousand) and ¥78 million ($835 thousand), respectively. The
financial instruments presented as other current liabilities were ¥84 million atMarch 31, 2009.

60

Assets Measured at Fair Value on a Nonrecurring Basis
Assets at fair value on a nonrecurring basis as of March 31, 2010 were as follows:
Millions of Yen

Level 1

Level 2

Property, plant and equipment held and used:Land
Buildings and building improvements
		 Total property, plant and equipment held and used
Goodwill (Note 8)
Customer relationship (Note 8)

Level 3Total¥    616¥   22¥    616¥   22

1,378

1,378

Total Gains(Losses)¥    (4)(19)¥   (23)(71)(1,023)¥(1,117)

Thousands of U.S. Dollars

Level 1

Property, plant and equipment held and used:Land
Buildings and building improvements
		 Total property, plant and equipment held and used
Goodwill (Note 8)
Customer relationship (Note 8)

In accordance with the guidance for the impairment or disposal of property,
plant and equipment, property, plant and equipment held and used with acarrying amount of ¥45 million ($482 thousand) were written down to theirfair value of ¥22 million ($236 thousand), because certain company residenceswere temporary idled and fair value of these assets was below the Company’sbook value at March 31, 2010. Fair value was measured based on the market
price under recent similar market transactions adjusted with additional
reasonably available information. An impairment charge of ¥23 million($246 thousand) was included in earnings for the period.
In accordance with the guidance for intangibles - goodwill and other,goodwill with a carrying amount of ¥71 million ($760 thousand) was written
down to its implied fair value of zero, resulting in an impairment charge of ¥71
million ($760 thousand), which was included in earnings for the period. To
measure the fair value of that reporting unit, the Company uses the expected
present value of future cash flows and incorporates relevant unobservable
inputs, such as management’s internal assumptions about future cash flows andappropriately risk-adjusted discount rates, which reflect the management’s
estimate of assumptions that market participants would use in pricing the asset
in a current transaction as of the measurement date.
As for other intangible assets, customer relationship with a carrying amountof ¥2,401 million ($25,707 thousand) was written down to its implied fair

Level 2

Level 3Total$    64172$   236$    64172$   236

14,754

14,754

Total Gains(Losses)

$  

(43)
(203)
$   (246)(760)(10,953)$(11,959)

value of ¥1,378 million ($14,754 thousand), resulting in an impairment chargeof ¥1,023 million ($10,953 thousand), which was included in earnings for theperiod. To measure the fair value of customer relationship, the Company uses
the excess earnings method and incorporates relevant unobservable inputs,
such as management’s internal assumptions about future cash flows, thepercentage of orders that the Company expects to receive from the customers
existed at the point of acquisition and appropriately risk-adjusted discount rate,
which reflected the management’s estimate of assumptions that market
participants would use in pricing the asset in a current transaction as of themeasurement date. Future cash flows are based on the management’s cash flow
projections for the future five years, and after five these years, future cash flows
was estimated using the perpetuity growth rate of zero %. The management’s
cash flow projections were developed using estimates for expected future
revenue growth rates, profit margins and working capital levels of the reporting
units. The percentage of orders that the Company expects to receive from thecustomers existed at the point of acquisition was estimated based on thehistorical trend of the percentage of sales to the pre-acquisition customers.
Risk-adjusted discount rate of 4.8% representing weighted average cost ofcapital (WACC), was determined using the Capital Asset Pricing Model.

WACOAL HOLDINGS61

ANNUAL REPORT 2010

21. SEGMENT INFORMATION

Certain foreign private issuers, including the Company, have been exemptedfrom the segment disclosure requirements of ASC 280, “Segment Reporting”
in filings with the SEC under the Securities Exchange Act of 1934.
However, in September 2008, the SEC issued its “Foreign Issuer Reporting
Enhancements” (“FIRE”) rule. The FIRE rule eliminates an instruction to theForm 20-F that permitted certain foreign private issuers to omit segment
disclosures required by U.S. GAAP from their financial statements. This
aspect of the FIRE rule regarding elimination of ability to omit segment
disclosures is effective for fiscal years ended on or after December 15, 2009 andwas adopted by the Companies in the year ended March 31, 2010 for all
periods presented.
Operating Segment Information
The Companies have four reportable segments: “Wacoal business (domestic),”“Peach John,” “Nanasai” and “Wacoal business (overseas),” which are based on

their location and brands. These segments represent components of theCompanies for which separate financial information is available and for which
operating profit (loss) is reviewed regularly by the management in deciding
how to allocate the Companies’ resources and in assessing their performance.
The accounting policies used for these reportable segments are the same as
those described in the summary of significant accounting policies in Note 1.
"Wacoal business (domestic)” segment primarily produces and sells innerwear(consisting of foundation, lingerie, nightwear and children’s innerwear), outerwear, sportswear and hosiery. “Peach John” segment produces and sells innerwear (consisting of foundation, lingerie, nightwear and children’s innerwear),outerwear, and other textile-related products, which are sold with “Peach John”
brand. “Nanasai” segment sells and rents mannequins and shop furnitures, anddesigns and builds interiors for commercial premises. “Wacoal business (overseas)” segment produces and sells innerwear (consisting of foundation, lingerie,nightwear and children’s innerwear), outerwear, sportswear and hosiery.

Information about operating results and assets for each segment as of and for the years ended March 31, 2010, 2009 and 2008 was as follows:
Millions of Yen

2010

Net sales:
External customers
Intersegment
		 Total
Operating cost and expenses:
Operating cost and expenses
Depreciation on other intangible assets (Note 8)
Impairment charges on goodwill (Note 8)	Impairment charges on other intangible assets(Note 8)
		 Total
Operating profit (loss)
Total assets

Wacoal Business(Domestic)

Peach John

Wacoal Business(Overseas)

Nanasai

Other

Elimination¥113,929
1,793
115,722¥13,224
7
13,231¥18,8996,226
25,125¥7,502
1,069
8,571¥9,743
2,171
11,914¥(11,266)(11,266)

111,180

13,053480

23,7959,214

11,937(11,266)¥163,297

71
1,023
14,556(1,325)24,803

23,795
1,330
26,632

Wacoal Business(Domestic)

Peach John

Wacoal Business(Overseas)

Nanasai

Other

Elimination¥124,228
1,765
125,993¥14,893
5
14,898¥22,323
6,148
28,471¥9,7291,306
11,035¥1,103
1,656
2,759¥(10,880)(10,880)

118,523

13,515480
13,995903
27,03026,903

11,101

2,505(10,880)

26,903
1,568
25,406

11,101
(66)
6,799

2,505
254
7,995

(10,880)

Peach John

Wacoal Business(Overseas)

NanasaiOther

26,200¥26,142
6,262
32,40429,503
2,901
29,172¥12,099
1,452
13,551
13,268283
7,129¥1,165
1,695
2,860
2,619
241
8,600

111,180
4,542
205,136

9,214
(643)
5,691

12,008(94)
15,353

Consolidated(11,266)(54,228)

163,297
157,913
480
71
1,023
159,487
3,810
223,387
Millions of Yen

2009

Net sales:
External customers
Intersegment
		 Total
Operating cost and expenses:
Operating cost and expenses
Depreciation on other intangible assets (Note 8)
		 Total
Operating profit (loss)
Total assets

118,523
7,470
198,590(52,334)

Consolidated¥172,276
172,276
161,667480
162,147
10,129213,486
Millions of Yen

2008

Net sales:
External customers
Intersegment
		 Total
Operating cost and expenses:
Operating profit (loss)
Total assets

Wacoal Business(Domestic)¥126,355
1,484
127,839
117,724
10,115
222,754

Elimination¥(10,893)(10,893)(10,893)(52,236)

Consolidated¥165,761
165,761
152,221
13,540241,619

62

Thousands of U.S. Dollars

2010

Net sales:
External customers
Intersegment
		 Total
Operating cost and expenses:
Operating cost and expenses
Depreciation on other intangible assets (Note 8)
Impairment charges on goodwill (Note 8)	Impairment charges on other intangible assets(Note 8)
		 Total
Operating profit (loss)
Total assets

Wacoal Business(Domestic)

Peach John

Wacoal Business(Overseas)

Nanasai

Other

Elimination$1,219,797
19,1971,238,994$141,585
75
141,660$202,345
66,660269,005$80,321
11,44591,766$104,314
23,244
127,558$(120,621)(120,621)

1,190,364

139,754
5,139

254,765

98,651

127,805(120,621)$1,748,362

760

1,190,364
48,6302,196,317

10,953
155,846(14,186)
265,557

254,765
14,240285,139

98,651(6,885)60,932

Consolidated

128,565(1,007)
164,379(120,621)(580,600)

1,748,362
1,690,718
5,139
760
10,953
1,707,570
40,792
2,391,724

The Companies account for intersegment sales and transfers as if the sales and transfers were to third parties. Operating profit (loss) represents net sales lessoperating costs and expenses.
Products and Service Information
Information by products and services for the years ended March 31, 2010, 2009 and 2008 was as follows:

Innerwear:
Foundation and lingerieNightwear
Children’s underwear
		 Sub total
Outerwear/Sportswear
Hosiery
Other textile goods and related products
Others		 Total

Millions of Yen

Thousands of
U.S. Dollars

2010

2009

2008

2010

¥116,068
9,438
1,608
127,114¥ 17,241
1,701
7,462
9,779
¥163,297¥123,368
11,0191,950
136,337¥ 15,498
1,657
6,270
12,514¥172,276¥123,460
10,611
1,953
136,024¥ 8,920
1,803
3,963
15,051¥165,761$1,242,698
101,049
17,2171,360,964$ 184,593
18,212
79,893
104,700$1,748,362

Millions of Yen

Thousands of
U.S. Dollars

Geographic Information
Information by major geographic area as of and for the years ended March 31, 2010, 2009 and 2008 was as follows:

Net sales:
Japan
Asia
Americas and Europe
		 Consolidated
Long-lived assets:
Japan
Asia
Americas and Europe
Elimination
		 Consolidated

2010

2009

2008

2010

¥144,048
7,885
11,364¥163,297¥149,927
7,573
14,776¥172,276¥139,618
7,646
18,497¥165,761$1,542,270
84,422
121,670$1,748,362¥ 47,597
2,527
1,901
(205)
¥ 51,820¥ 45,430
1,827
1,991
(209)
¥ 49,039¥ 46,814
2,312
2,635
(213)
¥ 51,548$ 509,604
27,056
20,353(2,195)$ 554,818

Countries or areas are classified according to geographical proximity. Long-lived assets include property, plant and equipment and other intangible assets.

22. SUBSEQUENT EVENTSOn May 11, 2010, the Board of Directors resolved to pay a cash dividend of ¥100 ($1) per 5 shares of common stock to holders of record as of March 31, 2010
(aggregate amount of ¥2,828 million ($30,278 thousand)).

WACOAL HOLDINGSANNUAL REPORT 2010

management’s report on internal control over financial reporting

The management of Wacoal Holdings Corp. is responsible for establishing and maintaining adequate internal control overfinancial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The company’s internal control
over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial
officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles and includes those policies and procedures that:	  • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company;	  • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statementsin accordance with generally accepted accounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of the company; and	  • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or dispositionof the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Wacoal Holdings Corp’s management assessed the effectiveness of internal control over financial reporting as of March 31,
2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission in Internal Control-Integrated Framework (the COSO criteria).
Wacoal Holdings Corp’s management also excluded Lecien, which became our wholly-owned subsidiary on August 17,
2009, and its subsidiaries from its assessment of the effectiveness of internal control over financial reporting as of March 31,
2010. Total assets of Lecien and its subsidiaries were 3.8% of our consolidated total assets of March 31, 2010, and net sales ofLecien and its subsidiaries were 5.4% of our consolidated net sales for the year ended March 31, 2010.
Based on its assessment, management concluded that, as of March 31, 2010, Wacoal Holdings Corp’s internal control overfinancial reporting was effective based on the COSO criteria.
Wacoal Holdings Corp’s independent registered public accounting firm, Deloitte Touche Tohmatsu LLC, has issued anattestation report on the effectiveness of our internal control over financial reporting as of March 31, 2010.

Yoshikata Tsukamoto
President and Representative Director

Ikuo Otani
Director and General Manager of Corporate Planning
June 29, 2010

63

64

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte Touche Tohmatsu LLC
Shijokarasuma FT Square
20, Naginataboko-cho
Karasuma-higashiiru, Shijo-doriShimogyo-ku, Kyoto 600-8008
Japan
Tel: +81 (75) 222 0181
Fax: +81 (75) 231 2703
www.deloitte.com/jp

To the Board of Directors and Stockholders of Wacoal Holdings Corp.
Kyoto, Japan
We have audited the accompanying consolidated balance sheets of Wacoal Holdings Corp. and subsidiaries (the “Companies”) as of March 31, 2010
and 2009, and the related consolidated statements of income, comprehensive income (loss), equity, and cash flows for each of the three years in the
period ended March 31, 2010, which are all expressed in Japanese yen. These financial statements are the responsibility of the Companies’ management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our report dated June 26, 2009, we expressed a qualified opinion, because certain information required by Accounting Standards Codification(“ASC”) 280 “Segment Reporting” had not been presented in the 2009 and 2008 consolidated financial statements. As discussed in Note 21 to theconsolidated financial statements, the Company has now presented segment information required by ASC 280 in the 2009 and 2008 consolidated
financial statements. Accordingly, our present opinion on the 2009 and 2008 consolidated financial statements, as expressed herein, is different fromthat expressed in our prior report on the previously issued 2009 and 2008 consolidated financial statements.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Wacoal Holdings Corp. andsubsidiaries as of March 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended
March 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, from the first quarter beginning April 1, 2009, the Company changed its method of
accounting for noncontrolling interests to conform to ASC 810 “Consolidation” and, retrospectively, adjusted the consolidated balance sheet as ofMarch 31, 2009 and related consolidated statements of income, comprehensive income (loss), equity and cash flows for each of the years ended March
31, 2008 and 2009 for the change.
Our audits also comprehended the translation of the Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made in conformity with the basis stated in Note 2. The translation of the financial statement amounts into U.S. dollars has been made solely forconvenience of readers outside of Japan.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companies’
internal control over financial reporting as of March 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 29, 2010 expressed an unqualified opinion
on the Companies’ internal control over financial reporting.
.
June 29, 2010

WACOAL HOLDINGSANNUAL REPORT 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte Touche Tohmatsu LLC
Shijokarasuma FT Square
20, Naginataboko-cho
Karasuma-higashiiru, Shijo-doriShimogyo-ku, Kyoto 600-8008
Japan
Tel: +81 (75) 222 0181
Fax: +81 (75) 231 2703
www.deloitte.com/jp

To the Board of Directors and Stockholders of Wacoal Holdings Corp.
Kyoto, Japan
We have audited the internal control over financial reporting of Wacoal Holdings Corp. and subsidiaries (the “Companies”) as of March 31, 2010, basedon criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control overfinancial reporting at Lecien Corp. and its subsidiaries, which were acquired on August 17, 2009 and whose financial statements constitute 3.8% of total
assets and 5.4% of net sales of the consolidated financial statement amounts as of and for the year ended March 31, 2010. Accordingly, our audit did notinclude the internal control over financial reporting at Lecien Corp. and its subsidiaries. The Companies’ management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in theaccompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companies’
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that amaterial weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing suchother procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive andprincipal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and proceduresthat (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management overrideof controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of theeffectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Companies maintained, in all material respects, effective internal control over financial reporting as of March 31, 2010, based on
the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended March 31, 2010 of the Companies and our report dated June 29, 2010 expressed an unqualified opinion on thosefinancial statements.
June 29, 2010

65

66

CORPOR ATE DATA
As of March 31, 2010

Head Office
29, Nakajima-cho, Kisshoin,
Minami-ku, Kyoto 601-8530, Japan
Tel: (075) 682-5111 Fax: (075) 661-5603

Overseas Joint Ventures
Wacoal Holdings Equity Owned
Shinyoung Wacoal Inc. (South Korea)
Thai Wacoal Public Co., Ltd.
Taiwan Wacoal Co., Ltd.
Indonesia Wacoal Co., Ltd.
Wacoal Malaysia Sdn. Bhd.
Shanghai Yadie Fashion Co., Ltd.

Websitewww.wacoalholdings.jp/index_e.html
Date of Foundation
June 15, 1946
Date of Establishment
November 1, 1949

Wacoal America, Inc.
136 Madison Avenue,
New York, NY 10016, U.S.A.
Tel: 1-212-532-6100

Number of Employees (Consolidated)
15,614

Domestic Principal Joint Ventures
Wacoal Holdings Equity Owned
House of Rose Co., Ltd.
Overseas Principal Subsidiaries
Wacoal Holdings Equity Owned
Wacoal International Corp. (U.S.A.)
Wacoal America, Inc.
Wacoal France S.A.
Wacoal (UK) Limited
Wacoal Singapore Pte. Ltd.
Wacoal Hong Kong Co., Ltd.
Wacoal International
Hong Kong Co., Ltd.
Wacoal China Co., Ltd.
Guangdong Wacoal Inc.
Dalian Wacoal Co., Ltd.
Vietnam Wacoal Corp.
Wacoal Dominicana Corp.
Philippine Wacoal Corp.
Wacoal Sports Science Corp.
Wacoal (Shanghai) Human
Science R&D Co., Ltd.

25
34
50
42
50
20

International Network

Shareholders’ Equity¥171,630 million

Domestic Principal Subsidiaries
Wacoal Holdings Equity Owned
Wacoal Corp.
Peach John Co., Ltd.
LECIEN Corporation
Une nana cool Corp.
Kyushu Wacoal
Manufacturing Corp.
Niigata Wacoal Sewing Corp.
Fukuoka Wacoal Sewing Corp.
Miyazaki Wacoal Sewing Corp.
Hokuriku Wacoal Sewing Corp.
Torica Inc.
Nanasai Co., Ltd.
Wacoal Distribution Corp.

%

%

100
100
100
100
100
100
100
100
90
57
82
100

%

20
(%)
100
100
100
100
100
80
100
100
100
100
100
100
67
100
100

Wacoal France S.A.
7/11 Rue des Gazometres,
93218 Saint-Denis La Plaine Cedex, France
Tel: 33-1-5593-0310
Wacoal (UK) Limited
4th Floor, Hardy House,
16-18 Beak Street,
London W1R 3HA,
United Kingdom
Tel: 44-207-439-6190
Wacoal Singapore Pte. Ltd.
215 Henderson Road,#01-08 Henderson Industrial Park,
Singapore 159554
Tel: 65-6270-2887
Wacoal Hong Kong Co., Ltd.
8th Floor, EGL Tower,
No. 83 Hung To Road, Kwun Tong, Kowloon,
Hong Kong
Tel: 852-2811-3202
Wacoal International Hong Kong Co., Ltd.
8th Floor, EGL Tower,
No. 83 Hung To Road, Kwun Tong, Kowloon,
Hong Kong
Tel: 852-2561-9191
Wacoal China Co., Ltd.
Jia 16 Tongji North Road,
Beijing Economic & Technological
Development Area,
Beijing 100176, P. R. C.
Tel: 86-10-6787-2185
Guangdong Wacoal Inc.
Huahai Industrial District,
Xinhua Town, Huadu Qu,
Guangzhou City,
Guangdong, P. R. C.
Tel: 86-20-8686-1170˜3
Dalian Wacoal Co., Ltd.
#42 Economic & TechnicalDevelopment Zone, Dalian,
Liaoning, P. R. C.
Tel: 86-411-8733-7722

Vietnam Wacoal Corp.
110 Amata Road,
Amata Mordern Industrial Park,
Long Binh Ward, Bien Hoa City,
Dong Nai Province,
Socialist Republic of Vietnam
Tel: 84-61-892060˜2
Wacoal Dominicana Corp.
Zona Franca Industrial,
Las Americas KM22,
Autopista Las Americas,
Santo Domingo, Dominican Republic
Tel: 1-809-549-1090
Philippine Wacoal Corp.
3rd Floor, 6788 Ayala Avenue,
Makati Metro Manila, Philippines
Tel: 63-2-893-7432
Shinyoung Wacoal Inc.
345-54, Ka San Dong, Cum Chone Gu, Seoul,
Republic of Korea
Tel: 82-2-818-5120
Thai Wacoal Public Co., Ltd.
930/1 Soi Pradoo 1,
Sathupradith Bangkholaem,
Bangkok, Thailand
Tel: 66-2-289-3100˜9
Taiwan Wacoal Co., Ltd.
15, Jingkwo Road, Taoyuan,
Taiwan, R.O.C.
Tel: 886-3-326-9369˜80
Indonesia Wacoal Co., Ltd.
Jl. Tarikolot No. 59,
Citeureup-Bogor, Indonesia
Tel: 62-21-875-3611
Wacoal Malaysia Sdn. Bhd.
5th Floor, Plaza Hamodal,
Lot 15, Jalan 13/2 (Section 13),46200 Petaling Jaya, Selangor, Malaysia
Tel: 60-3-7960-8308
Wacoal Sports Science Corp.
136 Madison Avenue,
New York, NY 10016, U.S.A.
Tel: 1-212-743-9849
Wacoal (Shanghai) Human Science
R&D Co., Ltd.
7th Floor, Jiangnan Zaochuan Bldg.,
600 Luban Road, Luwan District,
Shanghai, P. R. C.
Tel: 86-21-6390-7448

WACOAL HOLDINGS67

ANNUAL REPORT 2010

INVESTOR INFORMATIONAs of March 31, 2010

Ownership and Distribution of Shares

Stock Listings
Tokyo, Osaka, NASDAQ

Securities Firms
1.25%

Fiscal Year-End
March 31
Securities Code3591

Individuals
and Others
21.20%

Common Stock
Issued: 143,378,085 shares
Outstanding: 141,198,346 shares

143,378
thousandsharesTrading Unit
1,000 shares

Other JapaneseCompanies
18.86%

Shareholder Register Agentfor Common Stock
Mitsubishi UFJ Trust andBanking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Foreign Institutions
and Individuals
18.97%

Major Shareholders

%

The Bank of New York Mellon as depositary bank fordepositary receipt holders*
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Meiji Yasuda Life Insurance Company
Mika Noguchi
Nippon Life Insurance Company
The Bank of Kyoto, Ltd.
The Dai-ichi Mutual Life Insurance Company
The Shiga Bank, Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
Mitsubishi UFJ Trust and Banking Corporation

American Depositary Receipts
Cusip No.: 930004205
Ratio (ADR:ORD): 1:5
Exchange: NASDAQ
Symbol: WACLY
Depositary
The Bank of New York Mellon
101 Barclay Street,
New York, NY 10286, U.S.A.
Tel: 1-212-815-8161
U.S. toll free: 888-269-2377(888-BNY-ADRS)URL: http://www.adrbny.com
Number of Shareholders
10,350Financial
Institutions
39.72%

11.65
4.88
4.88
4.67
3.84
3.28
2.72
2.54
2.31
2.12

* Shares deposited to issue American Depositary Shares traded on the NASDAQ stock market.

Stock Price/Trading Volume
2,000

¥

1,500

1,000

500
20,000Forward-Looking Statements
Statements contained in this annual reportthat are not historical facts are forwardlooking statements which reflect theCompany’s plans and expectations. These
forward-looking statements involve known
and unknown risks, uncertainties, and otherfactors that may cause the Company’s actual
results, performance, or achievements todiffer materially from those anticipated inthese statements.

Thousand shares

15,00010,000

5,000

0
01/4

02/1

Stock Price

03/1

Trading Volume

04/1

05/1

06/1

07/1

08/1

09/1

10/1

WAC OA L HOL DI NG S

A N N UA L R E P ORT 2010

29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan

Printed in Japan
100824-FA-WT3