Wacoal Holdings Corp.
INTEGRATEDREPORTWacoal Story

Our Priorities

Contributing to
Women’s Beauty“Making women feel beautiful,” “Helping women to feel their most beautiful,” and“Contributing to the realization of women’s desires to express their beauty.”
These are the convictions Wacoal has put into practice since it was founded over half acentury ago. Through changing times we hold onto our unchanging values, and continue
moving forward together with women around the world.

Culture
Trust
Achieving the kind of mutual trust that we aim forrequires us to be trusted by everyone. It meansbuilding a body of people bound by trust andrespect, who more than merely getting along, always
act out of a deep and intense humanity. Regardlessof nation or era, we value this concept as theprincipal factor for co-existence andco-prosperity of people around the world.

Passion

The Wacoal Group is proud to have played a part in
helping Western style fashion take root in Japan in the
post-war period. While we functioned outside regularclothing manufacturing, we believe that theundergarments we provided played a major role inallowing Western style outfits to be widely accepted inwomen’s daily lives. Since our founding, our company
has ambitiously explored challenges to create
new culture as it moves forward.

Society
We extend our mutual trust far and wide throughout
society. The Wacoal Group was already considering themeaning of our own social existence in a long-term
management plan back in 1966. Our wish is to remain acompany that fulfills every stakeholder’s expectations
and then goes beyond them too.

In order to realize women’s desires tofeel beautiful, we listen to women’s voices andcreate products and services to meet thedemands of every era. Our passion for
manufacturing, one of the Wacoal Group’s
intangible assets, has been faithfully
instilled in every employee of the company.
Nothing is overlooked—not one stitch,
one millimeter, or one second—as we use
human science to continue creating products
loved by customers.

01

Wacoal Story

Creating Our Value

Wacoal today is the result of challenges met,each of which has become a turning
point on our path to growth.
We are united by a culture of mutual trust,and we are determined to build the
Wacoal Group into a global corporategroup by raising our value andinternational profile.

Turning Point1970
Establishing
Footholds in Global
Markets
Turning Point

1964
Origin of the Human
Science ResearchCenterMajor hits withseamless cup bras
and front-hook bras

Adoption of
mission statement andbasic management
policyTurning Point

1950

Growth throughexpansion of
department store sales

Net sales:(1978.9–1979.8)¥74.3 billion

A Stepping Stone
into Department
StoresTurning Point

1973

First steps toward
establishing thedomestic market

A National Brand
for General
MerchandiseStoresSigning of exclusive sales
agreement with an American
innerwear manufacturer

Founding
Founding

Net sales:(1950.9–1951.8)

Net sales:(1968.9–1969.8)¥9.7 billion¥35 million

1950s
02

1960s

1970s

Turning Point

2012
Starting a Fullfledged Businessin the European
MarketUnprecedented success with
“Good Up Bra”

¥195.9 billion

New head officebuilding completed

Establishment of Chinese
joint venture, Beijing Wacoal

Major hit with new“Shape Pants”

Net sales:(2016.4–2017.3)

Growth through M&A,
directly managed stores, andoverseas operations

Net sales:(2008.4–2009.3)

Net sales:(1998.4–1999.3)¥171.0 billion¥169.9 billion

Growth through expansionof sales in generalmerchandise stores
Turning Point

2001

Net sales:(1988.4–1989.3)

Foreseeing Changes
in Distribution,
Opening DirectlyManaged Stores¥107.9 billion
Turning Point

1995
Achieving Longsought Profitability
in the U.S.

Turning Point

2000

Accelerating China
Business by
Reorganization intoa Wholly Owned
SubsidiaryTurning
Points
1980s

1990s

2000s

2010s
03

Wacoal Story

Creating Our Value

Securing Our Domestic Foundation

Products for Every Era in
the Best Locations
Japanese department stores began carrying our products in 1950. That started off a series of challenges that in turn led
us to develop our wide range of sales channels and high-quality products. These remain the strong points of the Wacoal
Group to this day and have allowed us to acquire our current domestic market share. We think taking advantage of ourstrengths and opportunities while continuing to challenge ourselves is a key to the Group’s future growth.

EPISODE

1

Turning Point

04

EPISODE

2

Turning Point

1950

1964

A Stepping Stone
into Department Stores

Origin of the Human Science
Research Center“Please give us a chance to show customers how excellent
our products are,” urged Koichi Tsukamoto, Wacoal’s founder,
as he passionately implored acquaintances among the executives of the Kyoto branch of Takashimaya. He won a promise:“Compete with other companies for one week, and thosesales numbers will determine whether you receive space.”
The founder then entreated some of the female accounting
clerks to be the company’s first sales staff. The result was atriumph, opening the door to sales channel expansion in
department stores. Today, most department stores in Japan
display the Wacoal logo on their lingerie floors.

From brassieres provided by partner manufacturers abroad,those in the company became aware of detailed differencesin sizing configuration. A product research division was
launched to manufacture products suitable for Japanesewomen’s bodies. The division established a sizing structure
for brassieres, and succeeded in quantifying the ideal body
proportions for Japanese women based on the vast data collected from body measurements, and subsequently released
the “Golden Proportion.” Later, the product research division
evolved into the Human Science Research Center, expanding
researching scope to not only collect body shape data fromdifferent generation groups, but also to examine aspects likesensory comfort, physiology and movement, to utilize themfor the development of new products.

EPISODE

3

Turning PointEPISODE

4

Turning Point

1973

2001

A National Brand forGeneral Merchandise Stores

Foreseeing Changes in Distribution,
Opening Directly Managed Stores

In the 1970s, apparel sales at general merchandise storesexceeded those at department stores and they became alarge distribution channel that could not be ignored. Whensuch stores began switching their style of sales, from sourcing and selling non-branded products in large volumes toselling national brands at discounted prices, Wacoal wasapproached to join them. However, Wacoal, uninterested inquick profit, refused the invitation, willing to wait for the rightmoment. Finally, the general merchandise stores agreed to
Wacoal’s strict conditions of opening dedicated sales spaces
and applying a quotation price system. Thus, Wacoal’s
national brand “Wing” appeared across many of those stores’
lingerie floors. Today, general merchandise stores remain oneof the largest channels for our products.

The distribution of women’s innerwear fell into a turbulent
time in which department stores and general merchandise
stores lost popularity due to the emergence of successful
stores located in fashion-oriented buildings, station buildings,
and shopping malls. In March 2001, Wacoal opened Subito,its first SPA-style direct sales store, in Harajuku, Tokyo. Since
then, the company has opened a series of stores of various
styles that are tailored to specific customer bases and store
locations, and the brand continues efforts to increase customer footfall. Currently, the number of stores in Japan supporting the business, including the Peach John business, isabout 350 and growing.

05

Wacoal Story

Creating Our Value

Global Business Expansion

Think Globally, Act LocallyWacoal made progress toward becoming a global business when it entered Asian markets in 1970, andthe company currently operates in 23 countries worldwide, including China, the U.S., andnations in Europe. In order to enhance our presence all over the world, we strengthen
global development by building on a management style valuing locally rooted mutual trust.

EPISODE

5

Turning Point

06

EPISODE

6

Turning Point

1970

1995

Establishing Footholds
in Global Markets

Achieving Long-sought
Profitability in the U.S.

Two decades after its foundation, Wacoal established venture companies in Korea, Thailand, and Taiwan. First, it dispatched technical advisers from Japan to train local staff.
Later, the local staff took the lead in PR and sales initiatives.
It was the predawn of women’s inner garments in theseregions. With cooperative actions from our partners, theexpansion progressed following our success in the Japan
market, quickly leading to profitability. Currently, Wacoal
products in these areas have as strong a presence as they
do in Japan. The roots of the company’s global expansion
began to take hold in each region, building our footholds tobecome “Worldwide Wacoal.”

Unlike Asia, where our business grew favorably, our company struggled initially in the U.S. after its launch in 1983.
There, business improvement was elusive due to excess
inventories and rising selling, general and administrative
expenses. While the market fell into increasing price competition, we continued improving products manufactured at ourown facilities and retained our price points along with sales
consultants. Things started to change from 1992, when
Nordstrom, our biggest client at the time, awarded us with
their best partner award. In the 12 th year after the U.S.
launch, that business achieved profitability for an entire fiscal
year for the first time. Ever since, the U.S. market has been
one of our most profitable and most stable revenue sources.

EPISODE

7

Turning PointEPISODE

8

Turning Point

2000

2012

Accelerating China Businessby Reorganization into a
Wholly Owned Subsidiary

Starting a Full-fledged Businessin the European Market

Beijing Wacoal Co., Ltd. had been in operation as a joint venture company since 1986. While China’s rich potential
seemed obvious given the country’s huge population, thecompany was forced to accept inconvenient and inefficientbusiness operations. Some questioned whether it had been
too early to enter the China market. We decided to cancel the
initial joint venture agreement and make a fresh start with awholly owned subsidiary, which led to the performance
improving gradually, and we became one of the leading
brands at department stores there. Although it took time togain profit, the market there is still attractive as the middle
class population is expected to keep growing. We will maintain profitability there for the time being and look to opportunities for further expansion.

In 1990, from our representative office in Paris, we founded
Wacoal France S.A. For over two decades afterwards, the“Wacoal” brand was having difficulty growing in the European
market, where individuals have diverse preferences. This
started to change when the company acquired EvedenGroup Limited, a company that had multiple brands suited toa wide range of body shapes and sizes. From that point on,
our presence in the UK and the EU has grown significantly.
Having completed a post-acquisition reorganization, we arereviewing the brand portfolio and are on track to establish astronger revenue base.

07

Wacoal Story

Our Convictions

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 willcontinually strive to make the Company a
global leader in the industry.

Worldwide
WacoalValue Created by an Ever Enduring Spirit
Our employees share and realize our vision for the future and work with
passion alongside our trusted partners to create products that will ensure
customer satisfaction. We will continue to turn Wacoal’s businessphilosophy into reality through applying this virtuous circle on a global scale.

08

Contents
IFC

Wacoal Story

02
08

Our Priorities
Creating Our ValueOur Convictions

10

Our Value

12
14

16

18

Our Figures

Wacoal Future Story 03
A Message from the Vice President
Responsible for Financial
Management28

Spotlight 01
Adapting to Changing Channels
and Utilizing Wacoal’s Total Potential

Our Products
32

Spotlight 02
Wacoal Europe:
The Key to “Worldwide Wacoal”

Tangible Assets—
Financial Highlights
Intangible Assets—
Non-financial Highlights

36

Directors and Audit & Supervisory
Board Members

Wacoal Future Story 01

38

Corporate Governance

44

Building Mutual Trust with Society(CSR Activities)

52

Financial Section

94

Investor Information95

Our Website

A Message from the President

22

26

Wacoal Future Story 02
Characteristics of the Women’s
Innerwear Market and Medium-termManagement Plan Overview

09

Our Value
Creating Value through Trust and Passion

Management to
Build Trust
Strengthening intangible assets is afundamental tenet of management.
Tangible Assets

 roup plants in JapanG
and overseas

Financial
AssetsPhysicalAssetsAppealing sales areas
Rich product lineup

Value
Creation utonomous,A
innovative personnel
 xtensive and diverse
E
groups of specialists
 peration ofOwide range of stores

Organizational
AssetsStrong financial foundations
 verwhelming market shareO
in Japan and Asia nique designing for comfort,U
manufacturing technology, andquality control system bundant physique data andAknowledge of Human Science
Research Center stablishment ofErelationships of trust
through customer service

Beauty advisor training system ocial contribution
Sthrough businesses usiness management basedBon mutual trust

 avorable businessFpartnerships

10

Trust-related
AssetsAbundant capitalIntegrated manufacturing system
responsive to market feedback

Intangible Assets

 ommitment to stronger globalC
presence for the Wacoal GroupFor sustained growth, Wacoal continues to invest in and strengthen intangible assets.
Based on appropriate management strategies, intangible assets areincorporated into our business model, providing society with the three values of beauty,
comfort, and health. Women’s values and sense of beauty differ widely by country and region.
Considering the hearts, minds, and bodies of women in each part of the world,
we aim to build a consistent business model with local roots.
Underlying this is strong desire to help the women of the world to express their beauty.

Offering Beauty,
Comfort, and Health
The foundation of our business is the desire forhelping women to express their beauty.

R&D

Product
Planning

Think
Globally,
Act Locally

Sales

Manufacturing

Products loved
by customers

New products meetingcurrent needs

BeautyComfortConduct of businessin a fair manner

Health11

Our Products

Wacoal Junior bis
WACOAL BOYSFAIRY TIARA

Rich product lineups for everyone,
regardless of gender or age.

gra-P
Rakuraku Partner

To meet the varying requirements of customers’ lifestyles,
Wacoal offers a number of product brands manufactured
through leveraging our strengths.

WacoalL’ge

Wing

LASSÉEWACOAL DIA

amphi

TrèflePuliliSaluteune nana cool

PARFAGEPEACH JOHN
SUCCESS WALK12WACOAL MEN
BROS

WACOAL BRIDALSuperior-quality bridal lingerie for the
special day, maternity innerwear tokeep pre and postnatal mothers
comfortable, and baby underwear that
follows the baby’s growth.

Sportswear designed formobility and support duringphysical activities.

CW-X

WACOAL MATERNITY
WACOAL BABYWACOAL Swim Wear
Ai Swimwear
Think Sleeping
tsumori chisato SLEEPPajamas, and room wear essentials forrelaxing, and swimwear forsummer and resorts.

13

Our Figures

Tangible Assets—Financial Highlights (for the year ended March 31, 2017)

Financial Assets
Consolidated Financial Data

Net Sales

¥

195.9

Operating Income

ROE

11.1

5.5

billionbillion%

DOWN by 3.5%

DOWN by 20.2%

UP by 0.6%¥

Full-year Cash Dividends
per Share of Common Stock

¥

36.00
UP by ¥3

Operating Segment Information

9.2%

60.4 %

Other Businesses

Wacoal Business (Domestic)

Mainly operations ofNanasai Co., Ltd. andLecien Corporation

Mainly operations of Wacoal Corp.
in wholesale business for department
stores, general merchandise stores,
specialized stores, directly managed
stores, and online sales business, aswell as some domestic subsidiaries.

5.7%

Share of Sales
by Business Segment*

Peach John Business
Operations ofPeach John Co., Ltd.

Share of Sales
by Business(Wacoal Corp.)

24.7%
Wacoal Business (Overseas)

Wacoal Brand Operation Headquarters

Mainly operations of
Wacoal International Corp. (U.S.),
Wacoal China Co., Ltd., andWacoal Europe Ltd. (U.K.).

*Calculated based on net sales to external customers

52.5%

Wing Brand Operation Headquarters

22.1%

Retail Business Dept.

14.9%

Wellness Business Dept.

5.9%

Catalog Sales Business Dept.

4.6%

Operating Segment Net Sales/Operating Income (Loss)
Wacoal Business (Domestic)

Wacoal Business (Overseas)

Peach John Business

Other Businesses(¥ million)(¥ million)(¥ million)(¥ million)

Net Sales

Operating Income

2017

Operating Income

2017
6,959

118,3892016

48,423

3,055

120,570

2015
8,444

Operating Income

374

4,433

51,869258

11,107

4,776–6,296

Operating Income

677

17,962

2016
11,1902015
48,107

Net Sales

2017

2016

2015
112,203

Net Sales

2017

2016
8,810

14

Net Sales364

19,2882015
11,626

158

19,829

Information by Region
Consolidated Overseas Sales

¥

48.8

United Kingdom

CanadaNetherlands

billionHong Kong

FranceDOWN by 6.6%

South Korea
United States

China

Japan

VietnamIsraelTaiwanMyanmarOverseas Affiliates Sales¥

Dominican Republic

Philippines
India

38.6

ThailandCambodia

Sri Lanka

Indonesia
Americasand Europe

Malaysia
Singapore

12.6%

Australia

billion
DOWN by 15.8%
Number of Countries where the
Wacoal Group has Operating Bases

23
countries

Share of Salesby Geographic
Segment*

Asia and
Oceania

24.6%

Sales

11

Manufacturing

2

Manufacturing/Sales

10

Japan

62.7%

*Calculated based on net sales including net sales of overseas affiliates

Net Sales/Operating Income by Region (Consolidated)Japan

(¥ million)

2017
2016
2015

Asia and Oceania

(¥ million)

2017
7,738
9,308

143,250

2,351

19,187

1,758

2016
2015

(¥ million)

2017

147,061
150,673

Americas and Europe

2016
17,906

1,381
1,226

29,633

1,569

2015
16,26134,338

3,176
3,505

32,254

Physical Assets
Products Manufactured In-house*
More than 80% of our products
sold in Japan, and almost 100%of brassieres, are manufactured
in-house. This kind of in-housemanufacturing structure prevents our technological capability and manufacturing knowhow from leaking to external
parties, and allows us to maintain a dominant cost competitiveness that is little affected bymacroeconomic conditions.
* Wacoal Corp.

Worldwide Sales of Brassieres

Approx.
2017

More than

80

45.8

million2016
Approx. 45.0 million

2015

%

Approx. 44.6 million

15

Intangible Assets—Non-financial Highlights

Organizational Assets
Women Assuming More Active Roles
Percentage offemale employees*1 (FY2017)88

Percentage of employees whotake maternity/child leave (FY2017)99%

Japanese company
average*2

Percentage of women in
managerial positions*1 (FY2017)

19.8

20.7

12.1%

Japanese company
average*2* 1	Wacoal Corp.
* 2	2016 Basic Survey of Gender Equality in Employment
Management, Ministry of Health, Labour and Welfare

Directors and Audit & Supervisory Board Members
Number and percentage of female officers

18

Directors andAudit & Supervisory
Board members%

Number of outside officers andratio to total directors andAudit & Supervisory Board members

6
16

50

%

82%

Percentage of male employees
who take child care leave (FY2017)
Japanesecompany average*2

%

%

12
As of June 29, 2017

%

3.2%

Our Figures

Cumulative Measurement Data*1

More
than

40,000Countries &Regions Where Wacoal
Products are Sold

women

FY2017

Over nearly 50 years, we have studied the physiques ofover 40,000 women. This data is the source of Wacoal’s
competitive products that incorporate beauty, comfort,
and health.
Individual women on which we haveaccumulated data for nearly 30 years

More
than

51

100

Patents & Registrations in Japan*1
FY2017

Approx.

500

Average at competitors

170

Approx.

in Japan*2* 1	Wacoal Corp.
* 2	Estimated by Wacoal

Trust-related Assets
Beauty Advisors Worldwide

Approx.

8,000

Our beauty advisors (BA) are important. They not only provide consultation and information in stores, butalso understand what customers
need. Those customer needs andvoices will help new product planningand services, enhancing Wacoal’s
competitive position.

Quality Check150

criteria

In 1997, Wacoal became the first
ISO 9001* certified company inJapan’s apparel industry. At
Wacoal, innerwear product quality
control is maintained according toover 150 criteria tested during the
preproduction stage. We also
employ unique quality standards
for cutting and sewing, further
ensuring that we can be trusted
to deliver safe, reliable products.
*	An international standard that continuously
increases customer satisfaction and improves
quality management systems through assurance of
product and service quality.

17

WACOAL
FUTURE STORY

A Message from the President

Yoshikata Tsukamoto
President and Representative Director
Wacoal Holdings Corp.

Wacoal—Refocused on the
Global Challenge
Throughout its history, the Wacoal Group has achieved growthby continually taking up challenges in new markets andnew business areas. Today, Wacoal is Japan’s premiere women’s
innerwear manufacturer. Our continuing challenge is tobuild Wacoal into a global brand. We have begun toapproach this goal based on new perspectives,
while maintaining our legacy of mutual trust.

18

Turning Poin

The Courage to Stop, theResolve to Startt

Wacoal’s theme for 2017 is “The Courage to Stop, theResolve to Start.” These words express our commitment to embrace change as a company determined toreach its first centennial and beyond.
Wacoal was established 70 years ago. Our growthsince then would not have been possible without the
support of our stakeholders, including the customers
who love our products, the shareholders who havesupported our business activities, and the employees
who have worked long and hard to build a foundationof trust for our relationship with society. I would like toexpress our profound gratitude for that support.
However, our environment, together with the needs
and expectations of customers and other stakeholders
are changing at an accelerating rate. We will neverchange Wacoal’s fundamental values and philosophy,
including our founder’s mission to contribute to society
by helping women to express their beauty, and ourGroup culture based on mutual trust. Yet if Wacoal isto achieve continuing growth and success beyond its
100th anniversary, we cannot simply follow in the footsteps of our predecessors. We must have both thecourage to stop doing things that no longer reflect
today’s needs and no longer produce results, and theresolve to start new things.
A specific example of what we mean by the resolve
to start new things is a system we have establishedthat allows employees to submit new ideas as business proposals. Staff can propose new business initiatives in any field, provided that they are in line with our
corporate commitment to deliver beauty, comfort, andhealth. We will continue to take up new challenges thatbuild on our legacy of trust and brand power, and oursound financial structure.
Our vision for the future in our new medium-term
management plan is to establish a stronger global
presence for the Wacoal Group. Our founder began tobuild foundations for expansion into overseas markets
early in our history. We moved into the markets ofSouth Korea, Thailand, and Taiwan almost half a century ago in 1970.

We have moved forward along a trail blazed by our
founder, and we have expanded that path globally. Our
overseas business operations are now emerging as
growth drivers for the Wacoal Group. My task as thehead of management is to ensure that every Wacoal
Group employee throughout the world is able to work
independently while sharing our values andphilosophy.
I believe that if we can achieve this, we will be able
to entrust management responsibility to the employees
who show the greatest passion toward their work,
regardless of age, gender, or nationality, and regardless of whether they are working for overseas subsidiaries, companies added to the Group through M&A,
or companies established through new businessinitiatives.
Management is not a skill that can be learned inclassrooms. It can only be learned by doing. I am confident that I will be able to entrust the future of Wacoal
to a new generation of executives who have honed
their skills by continually taking up the challenge ofcreating new businesses or transforming existing
operations.

Operating Income Lower Year on
Year but Above the Target
We reached and passed our operating income target
in FY2017, the fiscal year ended March 2017. In
Japan, we worked to improve the productivity of ourwholesaling business and the profitability of our retail
operations. Overseas, our priority was the development and reinforcement of our business base.
Retail sales trends in Japan remained firm, but net
sales were lower year on year due to inventory cutbacks, especially by general merchandise stores. Net
sales from overseas operations exceeded the previous
year’s result on a local currency basis but were lower
year on year in yen terms because of a greater-than-expected rise in the value of the Japanese currency. As a result, consolidated net sales were 3.5%
below the previous year’s level at ¥195.881 billion.
Consolidated operating income amounted to¥11.065 billion, a year-on-year decline of 20.2%. The

19

lower figure reflects increased selling, general andadministrative expenses in Japan, and costs relating to
the liquidation of a subsidiary in France.
Income before income taxes increased by 10.8%
year on year to ¥16.569 billion. This growth resulted
from a gain on the sale of land in the first quarter. As aresult, net income attributable to shareholders of
Wacoal Holdings Corp. set a new record with a 12.2%
increase to ¥12.525 billion.
These results translate into a consolidated operating margin of 5.6%, and consolidated return on equity(ROE) of 5.5%.

Strengthening Business Structure
Development Initiatives under
Five Basic Policies
Under the new medium-term management plan
launched in the current year we want to increase the
Wacoal Group’s global presence. We have identified
five basic policies for the realization of this vision. First,
we will work to secure earnings in domestic businesses. Second, we will generate further growth inoverseas business. Third, we will create group synergies and strengthen competitiveness. Fourth, we willtake up the challenge of expanding our business portfolio. Fifth, we will improve our Group’s management
infrastructure. In FY2018, the year ending March 2018,
we will continue our efforts to develop and strengthen
our business structures under these basic policies.
1. Secure Earnings in Domestic Businesses
In the first year of our new medium-term management
plan we focused on the improvement of our grossmargin. We made significant progress toward this goalby expanding sales of high added-value products, byreducing discounting and returns, and by increasing
sales of common products through company-owned
channels.
In FY2018, we will improve our management
resource efficiency and strengthen our marketing
capabilities by integrating our marketing structures ingeneral merchandise stores. Looking ahead, we aim tobuild an omni-channel structure. We will approach thisby integrating our mission-critical IT systems, whichhave hitherto been optimized for each brand. We will
also establish a new Omni-channel Strategy Promotion
Department to create omni-channel services based on
the integration of retail stores, e-commerce, andwholesaling.
We will also continue our efforts to optimize our
product mix, while making further improvements in our

20

inventory management, and focusing on the profitability of each brand and product group.
2. Generate Further Growth in Overseas Business
Our price policy in the United States was successful in
reducing discounting and improving sales margins. We
also strengthened our overseas business structures,
especially in Europe and China, by reviewing unprofitable operations.
In FY2018, we will further strengthen business collaboration across different countries and regions. In
addition to the improvement of merchandising efficiency through information sharing between Europe
and North America, we will also integrate our marketing investment in Asia. Another goal will be theimprovement of our ability to keep pace with the
expansion of e-commerce in various countries throughfurther development of related infrastructure.
We also target improvements in quality and costcompetitiveness at our product supply bases in China
and ASEAN countries. This will allow us to supply highadded-value materials and products to Group companies in Japan and overseas, while also stabilizing procurement prices.
3.	Create Group Synergies
and Strengthen CompetitivenessChanges to the overseas operations of the PeachJohn business resulted in improved profitability lastyear. This reflects the success of a scheme based on
the use of the operating resources of overseas Wacoal
subsidiaries. In the next fiscal year, we will also apply
this method to sales in Taiwan.
4. Expand Our Business Portfolio
We have established a system that allows employees
to submit new business proposals. Our aim is to use
the brand reputation and financial strength that wehave built over the years as a foundation for expansion
into new areas of business. Several employee proposals are already under serious consideration. We established the Future Business Promotion Office inpreparation for further enhancement of the structuresneeded to support the commercial development ofthese proposals.
5. Improve Our Group Management Infrastructure
In FY2018, we will continue to train people with theabilities needed to run our global business operations.
We will also enhance our systems from a diversity perspective. Another focus for continuing efforts will be
the enhancement of corporate governance. In addition, we will further strengthen our management

W A CO A L F UT U R E STO RY 01
A Message from the President

emphasis on human rights and ethics, especially in
relation to our manufacturing and sales operations inemerging countries, and the working environments ofour suppliers.
The Wacoal Group has a high in-house production
ratio and its own large sales force. This means that our
growth as a company is closely linked to the personal
growth of our employees. By providing a stable environment for our employees, we ensure our stability as
a company. This concept is the basis for our vision for
Wacoal as a highly productive organization capable ofachieving sustainable growth.
Our consolidated financial performance forecasts
for FY2018 are net sales of ¥200 billion, with an operating income of ¥11.5 billion. These figures are 2.1%
and 3.9% higher, respectively, than the results for theprevious fiscal year. We are predicting that net income
attributable to shareholders of Wacoal Holdings Corp.
will be 28.1% lower year on year at ¥9 billion.

To Our Stakeholders
We are constantly aware that the growth achieved by
Wacoal would not have been possible without the support of our stakeholders. We want Wacoal to be perceived as a company that will survive and prosper
beyond its 100th anniversary while achieving further
improvement in its corporate value. We ask for yourcontinued support in our endeavors.

FY2019 Targets
Net Sales¥

215

Operating Income

billion¥15

Net Income

billion¥11

billionROE

5% or higher

Wacoal Business (Domestic)

Wacoal Business (Overseas)

Peach John Business

Other Businesses

Net Sales (¥ million)

Net Sales (¥ million)

Net Sales (¥ million)

Net Sales (¥ million)

2019
2019

122,500

2019
2019

2017
(Result)2017 (Result)

118,3892017(Result)2017 (Result)Operating Income (¥ million)
2019
2019
(Result)2017 (Result)
2017

8,000
6,959

58,00048,423

13,200

2019
2019
2017
(Result)2017 (Result)

11,107

21,3002019

17,9622017 (Result)(Result)

修正が入った場合は修正が入った場合は修正が入った場合は修正が入った場合はグラフの高さは1.125mm
グラフの高さは1.125mm
Operating Incomeグラフの高さは1.125mm(¥ million)
Operating Incomeグラフの高さは1.125mm(¥ million)
Operating Income (¥ million)

2019
2019
(Result)2017 (Result)
2017

5,300
3,055

2019
2019
(Result)2017 (Result)
2017

800
374

2019

900

(Result)2017 (Result)

修正が入っ
修正が入っ
グラフの高
グラフの高

677
21

WACOAL
FUTURE STORY

Characteristics of the Women’s Innerwear Market
and Medium-term Management Plan Overview

Medium- and Long-term Initiatives
to Become “Worldwide Wacoal”
The Wacoal Group drew up a new three-year medium-term plan that started in FY2017.
We aim to establish a stronger global presence for the Wacoal Group.
To fulfill this vision, we will continue to develop the trust of customers worldwide while we make
optimal use of management resources and the Group’s network to provide state-of-the-art products andfurther develop new areas of innerwear culture. We will also focus on business profitability andefficiency while enhancing the company’s value by challenging ourselves to delve into
new areas as well as focusing on those in which Wacoal has a competitive position.

MARKET WATCH Background Market Characteristics
Characteristics of Wacoal’s Business Worldwide

01

02

Business uniqueto each market

Wacoal’s business model does not simply
introduce products created for Japan to theglobal market. Instead, mainly with local
subsidiary staff in each country, we offer
products and services tailored to local cultures, practices, and preferences. Our integrated system, from manufacturing to sales,enables us to respond swiftly and flexibly to
local trends and customer needs.

Designs differ bycountry and region

Women’s physiques vary greatly, not only
among age groups and individuals, but also
among countries and regions. To deliver
innerwear that is comfortable for every
woman, Wacoal designs products for all
types of physiques and sensibilities worldw i d e . We b e l i e v e t h a t w i t h p ro d u c t s
designed to fit for everyone, we can contribute to the beauty of the world’s women inways that customers love.

03

Responding in detail,rather than scale

The women’s innerwear industry is labor
intensive, and uses small lot sizes of raw
materials. This makes the economy of scaleless effective, which is an obstacle for market
entry to mass production/mass retailingclothing companies. However, this creates anopportunity for Wacoal to respond to market
demands in superior detail.

Overview of the Medium-term Management Plan for FY2017–FY2019

Secure Earnings
in Domestic Business

Generate Further Growthin Overseas Business

Create Group Synergies andStrengthen Competitiveness

Expand Our
Business Portfolio

Improve Our Group Management Infrastructure

Improving Profitability
Improving Business Efficiency

22

Capital Policy

Shareholder Returns

J APAN

MARKET WATCH Domestic Market Perspective
JAPAN

Retail Market Size*1

Approx. ¥Women’s Innerwear Market Share as a Ratio of GDP

631.5

0.12

billion%The domestic innerwear market has relatively little price elasticity,and is relatively unaffected by economic cycles and changes in individuals’ incomes, making it easier to secure stable sales volume in
the market.
However, Japan’s domestic market has been contracting since
its peak in 1988, mainly due to falling average sales prices. This
market is expected to shrink further, given that the economically
productive population will be decreasing. On the other hand, womenare being encouraged to play more active roles throughout society,which could increase demand for and diversity of innerwear. Higher-quality products are expected to sell better, which should befavorable for Wacoal.

Domestic Market Size*1

Change in Average Sales Price*2

Change in Proportion by Sales Channels*1

Wacoal’s main products retail for over ¥4,000. Products priced above¥4,000 accounted for approximately 38% of the entire market in
1998, but fell to approximately 17% in 2015. On the other hand,products priced under ¥1,500 accounted for about 7% in 1998 androse to approximately 28% of the market in 2015

Wacoal’s main sales channels are department stores and general merchandise stores. In the overall market, though, department store sales
have peaked and are contracting.
General merchandise store market sales have recently shown atendency to decrease as well. On the other hand, as directly managed
stores and online sales are expanding, Wacoal is putting more effort
into opening direct stores and enhancing e-commerce websites.

CAGR

Approx.

¥930

Approx.

¥billion* 1 From Yano Research Institute, Ltd.

758

631.5
billion

2015

52%

2015

45%

1998

– ¥1,49928%¥4,000 – ¥7,49913%¥7,500 –4%

Approx.

¥

2005

2015

17%
¥4,000 – ¥7,49934%¥7,500 –4%

-1.8%

billion

1998

28%

38%
1998

CAGR

-2.8%

24%
Department stores25%
	General merchandise
stores27%

Department stores14%	General merchandise
stores31%
Directly managed stores13%
Online sales11%* 2 Estimated by Wacoal

Initiatives under the Medium-term Management Plan

01

Secure Earnings in Domestic Businesses

Understand environmental changes accurately, and build the channel mix with customers’ viewpoints in mind	Improving the productivity of the wholesale
business through the expansion of area
marketing structures	Improving the profitability of directly managed
stores through a profit-oriented store
establishment policy, and cost reductions
based on product mix optimization
	Creation of a customer-focused channel mix
to allow reciprocal customer referrals between
our e-commerce websites and direct stores

Progress in FY2017

Initiatives in FY2018

	Developed and expanded sales of
products with new functions & highadded-value	Optimized product supplies in stepwith in-store sales	Started sales of common merchandise
across brands
Expanded sales of “BRAGENIC”
products at directly managed stores	Integrate sales operations to handle
general merchandise stores
Strengthening of sales force, higher
productivity
	Establish Omni-channel Strategy Promotion Department
Realization of new services
	Integrate mission-critical IT systems
Sharing of inventory data

23

OVERSEAS

MARKET WATCH Overseas Market Perspective
UNITED STATESEUROPE (10 major EU countries)

CHINA

Retail Market Size*1

Retail Market Size*1

Retail Market Size*1

Approx. $15billionApprox.

c16 billion

120

Approx. RMB

Women’s Innerwear Market
Share as a Ratio of GDP

Women’s Innerwear Market
Share as a Ratio of GDP

Women’s Innerwear Market
Share as a Ratio of GDP

0.08

0.14

0.19

%

A number of American brands occupy overwhelming shares of the U.S. market, while
many other brands each hold less than about
5%. The largest sales channel is innerwear
specialty stores, followed by general merchandise stores, and then department stores,
which account for slightly less than 10% ofsales. Wacoal’s main sales channel is department stores, of which we hold the largest
share at 22%.

%The European market is characterized by wide
variation per country in designs, colors, andcustomer preferences, variation in customer
body types, and top brands that are all completely different. The Wacoal Group’s share of
the market is approximately 1%. No brandholds more than a 10% share because there
are so many brands in the market. Department
stores are clearly one of the largest sales channels in the United Kingdom and Germany, but
overall, including France and Italy, both boutique and chain innerwear specialty storesaccount for the main portion of sales channels.

billion%

The Chinese market’s annual rate of growth
has slowed to slightly less than 10%. Approximately 10% of the entire China innerwear
market is for mid- to high-end products soldmainly at department stores. Wacoal’s shareof these sales at department stores isapproximately 20%, while local Chinese
brands hold a market share of approximately
30%. E-commerce is the fastest growing
sales channel.

* 1 Estimated by Wacoal

Initiatives under the Medium-term Management Plan

02

Generate Further Growth in Overseas Business

Build robust operating foundations in our three large markets, the U.S., Europe, and China
UNITED STATES(Wacoal International Corp.)
	Firm pricing policy to maintain markets for
medium/high-end products	Development of new sales channels inneighboring countries	Training of next-generation management
and executive staff members

EUROPE(Wacoal Europe Ltd.)	Completion of organization restructuring	Revision of brand portfolio	Development trial based on humanscience research

Net Sales

Operating Income (¥ million) *2

201718,196

1,947

2016
2015
2,399

Net Sales2017

13,129250

2016

16,096

1,238
1,741

(Wacoal China Co., Ltd.)	Achievement of overwhelming superiority
in high-end products	Improvement of profitability of mid-range
brand “LA ROSABELLE”
	Expansion of sales on other companies’
e-commerce websites

24

Net Sales

18,097

Operating Income (¥ million) *2

2015

CHINA

20,2222,491

Progress in FY2017
	Pricing policy and reduction of
discounting (U.S.)	Strengthened digital marketing(major countries)
	Expanded e-commerce, launched B2B
website	Stepped back from underperforming
businesses (Europe, China)
	Liquidated “Huit”
	Suspended shop openings for“LA ROSABELLE”

16,054

Operating Income (¥ million) *2

2017
472

2016
487

2015
409

9,505
11,067
9,490

Initiatives in FY2018
	Inter-regional cooperation
	Improvement of product efficiency inEurope and the U.S.
	Improvement of marketing & investment efficiency in Asia
	Strengthen e-commerce capabilities
	Processing capacity and usability
	Develop ASEAN supply bases(Thai materials companies, Myanmar)* 2 Before consolidation adjustments

W A CO A L F UT U R E STO RY 02
Characteristics of the Women’s Innerwear Market
and Medium-term Management Plan Overview

Initiatives under the Medium-term Management Plan

03

Create Group Synergies andStrengthen CompetitivenessLeverage strengths of each Group company toenhance overall competitiveness
Peach
John

	Rebuild the brand image
	Enhance online-to-offline communication
	Expand store network and strengthen customer base

Lecien	Define and focus the business	Streamline planning and production
	Develop high added-value productsAi	Reinforce year-round stores and improve resort wear
products
	Jointly develop swimwear among Group subsidiaries
and introduce reciprocal product developments to
expand sales

Progress in FY2017

Initiatives in FY2018

	Strengthened directly managed
stores (Peach John)	Rebuilding of brand image
and expansion of stores	Cooperation with overseas
Wacoal subsidiaries(Peach John)	China, Hong Kong	Scaled back underperforming
businesses (Lecien)	Share domestic sales channels,
improve efficiency
in distribution andadministrative operations (Ai)	Cooperate in joint ventures(Peach John)
	Taiwan	Expand procurement within theGroup (Lecien)	Innerwear business, materials
business

05

Improve Our GroupManagement Infrastructure

Sincerely engage with stakeholders to achievesustainable growth	Fulfill management philosophy
	Continuously improve corporate governance	Respond to society’s demands and issues
	Develop human resources, including encouraging women to takemore active roles, etc.
Progress in FY2017

Initiatives in FY2018

	Selection as “Health andProductivity Stock” and“Nadeshiko Brand”(2nd straight year)
	Expansion of human resourcesand diversity programs
	Permeation of management
philosophy
	Training	Use of intranet in the Group	Continuous improvement ofcorporate governance	Regular audits of overseas
companies	Improvement of monitoring
and feedback system
	CSR procurement(human rights, ethics)
	Work style reforms
	Improvement in laborproductivity & support for
employees at every life stage

Capital Policy andShareholders Returns

Growth investment
and enhancement ofshareholder returns

04

Expand Our
Business Portfolio

Seek new business areas and markets basedon our strengths

Intangible
assetsThree values provided
by the Wacoal Group
Beauty Comfort HealthTake on challenges innew business areas(excluding innerwear)

Maintenance ofstrong financial
base

Focus on reductionof shareholders’equityTarget for FY2019: ROE of 5% or higher
Starting with securing a level commensuratewith the cost of equity

Entry into
new markets for
textile products

Improvement ofshareholder value
Progress in FY2017
	New business ideas from
employees
	Areas relating to beauty,
comfort, and health

Initiatives in FY2018
	Establishment of Future
Business Promotion Office	Specific commercializationplans

For more details, please see the message from Vice President
Wakabayashi on pages 26–27.

25

WACOAL
FUTURE STORY

A Message from the Vice President
Responsible for Financial Management

We will continue to enhance shareholder returns
by improving corporate value throughdynamic investment in future growth.
Under the current medium-term management plan, we aim to enhance shareholder returns and corporate value by investing in
future growth, while maintaining a sound financial structure. Our goal is to raise ROE to 5% or higher, which is commensuratewith our equity cost, in the third and final year of the plan, while also focusing on the reduction of shareholders’ equity.

Director and Vice President
Wacoal Holdings Corp.

Masaya Wakabayashi

Improving Capital Efficiency and
Maintaining Strong
Shareholder Returns
Capital policy and shareholder returns will be key priorities under our current medium-term management
plan, which covers the period to March 2019. Ouraims in relation to the distribution of income to shareholders and investors are to raise our share price byimproving our corporate value through aggressive
investment, while also focusing on our capital structure. Specifically, we will work to expand cash flows
by improving the profitability of our core activities,
reducing our operating capital, and reviewing our strategic shareholdings. We will use these increased cash
flows to fund investment in business growth andmaintain stable dividends, while flexibly implementing
share repurchase schemes.
In FY2017, the year ended March 2017, thispolicy enabled us not only to secure earnings, butalso to reduce inventories and accounts receivable,
thereby reducing operating capital by approximately¥2 billion. We also sold off strategic shareholdings. In
addition, we implemented two share repurchaseschemes with the aim of further improving capital efficiency and providing returns to shareholders. We
increased the final dividend for the current year by ¥3
to ¥36 per share. In FY2018, we plan to start paying
an interim dividend as a way of achieving greater flexibility in shareholder returns. The most effective way toprovide returns and the extent of those returns willvary according to multiple factors, such as the timingof business investments, share price trends, and cash
flows. That is why we do not make specific predictions about shareholder returns. However, we willcontinue to provide shareholder returns aggressively,
while monitoring related indicators, such as the total
payout ratio, the ratio of dividends to shareholders’equity, and the dividend yield.

26

Capital Expenditure in Excess of¥25 Billion Planned over a
Three-year Period: Improvement of
Productivity in Japan and
Acceleration of Growth Overseas
During the period covered by the medium-term management plan, we will invest over ¥25 billion in thereplacement and expansion of plants and facilities. In
Japan, we will undertake projects to improve our systems, including the integration of inventory and customer information management across multiple
brands, the introduction of RFID tags to facilitate thecollection of marketing information and reduce workloads. The purpose of this investment is to improve
productivity per worker and expand profit margins.
In our overseas operations, we will increase ourinvestment in e-commerce infrastructure to keep pacewith the accelerating global shift from store sales to
e-commerce. We will also consider capital allianceswith companies that have good business models andcustomer bases.
We will invest in additional machinery and equipment for our garment factory in Myanmar and material
manufacturing factory in Thailand, which we established last year. The aim of this investment is to createa stable global supply structure by improving quality
and expanding production capacity.
We have built our business in China through commercial agents in regional cities. We now aim to raise ourbrand visibility by establishing and operating our own outlets and switching to direct marketing. We will also use
store sales and customer data to strengthen our marketing capabilities. In step with these measures, we will
invest in the recruitment and training of new employees.

Targeting ROE above the Cost of
Shareholders’ Equity

My Role in Creating Structures to
Enable Wacoal to Fulfill its
Basic Mission
One of our basic policies is to conduct business in afair manner with a forward focus. One of my key tasks
as Vice President is to encourage employees to act inaccordance with this policy, while also informing
shareholders how these actions lead to improvementin our corporate value.
We will continue our efforts to raise corporate
value and increase net income per share, by improving our earning power through aggressive investment.
We will also maintain our basic policy of providing
stable dividends, while targeting further improvements
in shareholder returns, including flexible share repurchase programs. We look forward to the continuing
support and guidance of our shareholders.

Capital Policy and Shareholder Returns
FY2016(Planed)

Review ofstrategic
shareholdings

Net income¥

Working
capitalreduction

Shareholders’Equity224 billion

Stable dividends(Assets impairment)

Flexible share
repurchases

45 billion or more

We will reinvest and allocate
to shareholder returns
at least the amount of cash
generated during the period.

4.9 %Shareholders’Equity¥220 billion

ROE

Cash Generated

FY2017(Results)

25 billion or more

Depreciation¥¥

Investment inexisting businessNew business

Cash Generation

Profitability
improvement

ROE

Our ROE target under the current medium-term management plan is 5% or higher. In the current year, again on the sale of land resulted in record net profit.
We also improved our capital efficiency by implementing share repurchase programs. Because of thesefactors, consolidated ROE reached the target level at
5.5%. This is above the level of the present cost ofshareholders’ equity. We are determined to keep ourROE above the target level, while raising the percentage of income from core operating activities.

FY20195 % or higher

Cash Used

While operating income fell,
net income increased due tosale of land (+12.2%)

Capex:¥ 7.4 billion

Total dividends:¥ 4.6 billion

Decrease in inventories,
reduction of
accounts receivable: ¥ 2 billion

Purchase oftreasury stock(3.7 million shares): ¥ 4.5 billion

Sale of strategic
shareholdingsof 3 companies:¥ 0.8 billion

ROE

5.5%

27

01

SPOTLIGHT

Adapting to Changing Channels andUtilizing Wacoal’s Total Potential
One of the basic policies under the current medium-term management plan is to further secure earnings indomestic businesses by utilizing Wacoal’s total potential through the general merchandise stores channel.
To achieve this goal, we established the Chain Store Operation Division in April 2017. We also undertook a major
reorganization in relation to our biggest business channels in Japan with the aim of enhancing the value of
our flagship “Wacoal” and “Wing” brands. The following message from Kuniharu Suzuki, General Manager of the
Chain Store Operation Division, outlines the current situation and outlook.

Director, Managing Corporate Officer, Wacoal Corp.
General Manager, Chain Store Operation Division

Kuniharu Suzuki

Targeting Further Market
Expansion throughIntegration of Marketing
Structures for“Wacoal” and “Wing”
Chain stores are facing an increasingly
challenging business environment, including
a slump in apparel sales. Stores are being
closed at an accelerated rate, especially inregional areas. The Chain Store Operation
Division was created as a new fulcrum forour efforts to expand markets and earnings
at a time of increasing diversity in customer
needs and shopping styles. We restructured the Chain Store Sales Control Divisionof the Wacoal Brand Operation Headquarters and the Wing Brand Operation Headquarters to integrate “Wacoal” and “Wing”
marketing structures for the general merchandise stores channel. Our aim is tomaximize the effectiveness of brand products and management resources, including
employees, information, and time, bymoving away from vertical division of theorganizational structure by brand, toward
an integrated structure in which all staff
members, including management, sales
personnel, and beauty advisors market
both brands in general merchandise stores.
Initiatives in FY2018, the fiscal year
ended March 2018, will focus on the development of integrated sales infrastructure,
the improvement of our ability to provide
sales area advice and services, and theestablishment of an inventory management28

system. These measures will be followed byprogressive restructuring of salespersons’areas of responsibility and strengthening
support for retail outlets with steps including
integration of customer information, optimization of product mixes for both brands,
and integration of inventory management.
By FY2019, the final year of the current
medium-term management plan, we aim tocomplete the formation of a structure thatwill support the recovery of growth potential
in our wholesale business, and the reinforcement of earning performance.

Capturing Market Sharethrough a Balanced Mix ofAggressive andDefensive Strategies
While we have only just begun our transition to the new structure, initial indications
are very encouraging, and the changes are
already yielding tangible benefits, including
the use of zoning to facilitate collaboration
at the point of sale, and the implementationof joint campaigns. By giving all in-store
beauty advisors responsibility for bothbrands, we have been able to organize
shifts more efficiently and improve productivity per worker.
However, the real work lies ahead.
Success will depend on our ability to use

these two powerful brands to enhance
Wacoal’s total potential, and the extent towhich we can create customer satisfaction
and offer new ideas to existing customers.
We must capture market share by devisingstrategies that will ensure our success over
our competitors. The key words will be“aggressive” and “defensive.” We need toachieve overall optimization by balancing
these two opposing approaches.
Our aggressive scenario calls for thegeneration of synergy through the use ofresources, such as brands, products, andhuman resources gained through the integration, in addition to our organizational
leadership capabilities. We will establish
sales areas based on the new “Dual W”
format, which eliminates barriers between
brands and allows customers a free choiceof products. We will also move forward
quickly to create jointly developed productsthat reflect common trends or have thepotential to encourage customers to makepurchases on special occasions, such as
school enrollment or Mother’s Day. We alsoplan to optimize our merchandising as a wayof emphasizing both the individuality of ourbrands and our extensive product ranges.
Our defensive scenario is based on the
improvement of efficiency in various processes. The reduction of indirect costs
through integrated management, efficiency
gains resulting from changes to our prod-

uct mix, and flexible shift management for
beauty advisors will all contribute toimproved earning performance.
In both of these scenarios, we need to
avoid the loss of characteristics that distinguish the two brands. Our aim is to expand
the range of choices for customers and, byemphasizing the attractive qualities of bothbrands, expand their fan base. Homogenizing the brands would defeat the purpose of integrated management. Efficiency
improvement would also be meaningless if
it resulted in a shrinking balance.
These changes have initially caused
some confusion for our beauty advisors,
who previously belonged to brand-based
business divisions and worked in competition with each other. However, we areworking to raise awareness of the importance of realizing Wacoal’s total potential.
Going forward, beauty advisors will work toprovide optimal customer assistance basedon a thorough knowledge of both brands.
To e n s u re t h e s u c c e s s o f t h e s ereforms, we must create an environment inwhich all business divisions can pull
together in the same direction. As the
person responsible for leading this change,
I am absolutely determined to move forward resolutely to implement the right policies at the right times, so that we canmaximize our earnings while enhancing
customer satisfaction.

The Process of Enhancing the Value of Each Brand and Improving Operating Structure Efficiency

Chain Store Outlets

WacoalWing

Product Planning
Divided by Brand

Optimizationof productmixes

Extensiveproduct range
Inventory
management

Logistics

Sales

Improvement Of Operating Efficiency throughOrganizational Integration

Share
Expansion
through
Brand Value
Enhancement

Individual brandcharacteristics

IncomeExpansion

29

SPOTLIGHT

01

Adapting to Changing Channels andUtilizing Wacoal’s Total Potential

We have launched a newmarketing structure forgeneral merchandise stores
designed to maximize thepotential of our organizational
resources. We are committed
to change, starting from thefront lines.
Change is opportunity. Mid-level employees in the ChainStore Operation Division are playing a pivotal role in the
expansion of the general merchandise stores sales
channel in Japan. We asked them about the commitment,
pride, and passion that they bring to their work.

Maximizing Synergies between “Wacoal”
and “Wing” to Expand Our Market Share—	Now that you have established a new structure, how do you
view the changes from your various frontline perspectives?
Yamamoto: We now have an integrated sales organization forboth brands. This has resulted in a tangible improvement in ourability to meet customer needs. Because of the large variety of“Wing” brand products, we are better able to respond to a wide
spectrum of customer requirements. On the other hand, individual“Wacoal” brand products offer major advantages, including theirfunctionality and ability to enhance the body shape. We want to
use the strengths of both brands to capture a bigger share of themarket.
Niyama: Part of my work is to coordinate beauty advisors. We areable to provide a higher standard of customer service, because
we can now offer optimal products from both the “Wacoal” and“Wing” ranges. I’ve noticed that customers are being attracted by
the dependability of the “Wacoal” brand, and that loyalty to the“Wing” brand is also rising.
Miyake: I believe that we now have a deeper capacity to meet theneeds of various generations, from teens to seniors, and lifestyles,
covering customer categories from maternity to men’s. Because
we have changed the allotment of work for sales representatives,
I find that, for me, I have more time to visit “Wing” outlets. This is
an important advantage, because now I can provide detailed
follow-up.

30

Kazunari Okamoto

Kanako Miyake(with Wacoal since 2014)(with Wacoal since 2005)

Sales Section II, Chubu-Tokai Branch,
Sales Control Division

Sales Section I, Kinki-Chugoku Branch,
Sales Control Division

Okamoto: Because we now have a wider range of products,
we’re better able to go the extra mile to win sales. Thanks toorganizational integration, we’re also able to make faster decisions
in response to recommendations from the frontline. We’re working
to increase the number of new stores handling products such as
men’s innerwear and pajamas, too.

— You’re also developing new types of sales environments.
Yamamoto: “Dual W” is a new type of sales area that brings
together Wacoal’s total strengths. Since there are no barriers
between brands, customers are better able to compare various
products. We can also support different shopping styles, providing
consultation or leaving customers to make their own selection.
We created this environment through a trial-and-error process that
focused on responding to customer expectations.
Niyama: Shopping styles are becoming more diversified. Somecustomers want help from beauty advisors, while others want tobe free to select products themselves. The “Dual W” format was
designed as a solution to the needs of both types of shoppers.
Miyake: We’re also moving forward steadily with zoning changes
in our sales environments. We can actively promote products fromthe same categories in each brand, such as “GOCOCi” (“comfort”)
products in the “Wacoal” range and “Kichinto Raku Bra” (“well-fitted comfort bra”) in the “Wing” range. For example, we can create
special sales areas for campaigns. In the past, we ran separate
campaigns for each brand, but the customer response has beenmuch more positive with this new approach.

Sayuri Niyama

Masahide Yamamoto(with Wacoal since 1988)(with Wacoal since 2008)

Sales Section III, Kinki-Chugoku Branch,
Sales Control Division

West Japan Sales Planning Section,
Strategic Planning Division—	What has been the response in the generalmerchandise stores?
Niyama: Customers tell us that they feel more comfortablebecause there are always beauty advisors in our areas. In the past,
we were sometimes unable to follow up customer inquiries if, forexample, a “Wing” beauty advisor was present but a “Wacoal” one
was not. Now all beauty advisors can handle both brands and areable to respond to customer needs.

Taking Change as an Opportunity to
Invigorate Our Business in General
Merchandise Stores in Japan—	Have any issues become more apparent following the transition to the new structure?
Niyama: One issue is the need to focus on beauty advisor attitudes. In the past, beauty advisors worked with just one brand,
and there was a competitive environment within the company.
Naturally, they’ve found the transition a little confusing. Some havereported that they feel unable to respond to customers confidently
because they haven’t developed the necessary product knowledge. While this concern can be seen as proof of the professionalism of our beauty advisors, there is a risk that it could damage
their motivation, and we need to provide support. I’m working toraise frontline morale by taking the initiative in providing customer
service for brands that I’ve not previously handled, and by demon-

strating my willingness to work alongside beauty advisors.
Miyake: Another priority is to streamline report preparation andother secondary tasks as much as possible so that beauty advisors can focus on their core task, which is to sell products.
Okamoto: We integrated two brands with totally different operating methods and ranges of systems. This inevitably caused some
confusion among sales planning and sales representatives acrossall aspects of our work, not only in regards to report writing, butalso the methods used to disseminate product information andmaintain product stocks.
Yamamoto: When one sales representative is responsible for boththe “Wacoal” and “Wing” brands, simply speaking, the work doubles. So we need to modify our operations. In the past, we reliedon the capabilities of individual sales representatives to handle
various tasks, such as the preparation of documentation for negotiations with clients and period sales planning. Going forward, weneed to take this opportunity to make radical changes in our systems, so that we can use standardized documentation and raise
the level of proposals.

—	How would you sum up your personal determination torealize Wacoal’s total potential and ensure the success ofthe chain store operation strategies?
Yamamoto: We want to build an optimal product line-up basedon the strengths of both the “Wacoal” and “Wing” brands. We’ll
achieve optimization by identifying areas of duplication and areasof deficiency. From a sales planning perspective, we will also work
to improve systems for secondary tasks so that we can enhancethe efficiency of our frontline sales operations.
Niyama: The core players in this strategy and the key to its success are the beauty advisors. I want to work and grow with themso they can earn recognition from everyone for the way they can
use their advanced product knowledge to put customers at easeand respond fully to their needs by using our products to provide
an excellent customer experience and a high level of satisfaction.
Miyake: I want to take advantage of Wacoal’s total potential tomeet the needs of customers across a wide range of generations
and lifestyles. Information is readily accessible these days, andmany customers have extensive knowledge about innerwear. We
want to create sales environments in which we can offer an attractive and comprehensive range of brands and products to meetthe needs of these customers. I want to improve my own knowledge and the knowledge of my team members, so that people will
see us as innerwear professionals.
Okamoto: I want to increase our contribution to sales numbers bycreating sales areas and environments that our customers willlove. My goal is to provide our clients with the full value of bothbrands so that they will see us as an irreplaceable partner, and touse that partnership as the basis for further expansion of ourmarket share. It is not easy to adapt to change, but I see this as atruly great opportunity for us.

31

02

SPOTLIGHT

Wacoal Europe:
The Key to “Worldwide Wacoal”
Wacoal Europe has taken up the new challenge of achieving a double-digit operating margin
by strengthening its business base through organization restructuring. Initiatives toward
future growth are outlined in the following messages from Wacoal Europe’s Chairman,
Yuzo Ide, CEO Geoff Embley, and Brand Director Laura Simon.

Organization
Restructuring, theStart of Wacoal Europe’s
New Growth Path
Wacoal Europe was formed through themerger of Wacoal France S.A. and Wacoal(UK) Ltd. We integrated the offices andlogistics operations of the two companies
to create a single management structure.
The resulting improvement in organizational
efficiency is to generate enhanced busi-

ness results. As part of our brand portfolio
strategy, we disposed of the “Huit” brand,which consisted of products for average-size women, and wrote down the
resulting loss.
Before its acquisition by the Wacoal
Group, Eveden, the company that would
become Wacoal Europe, minimized investment in brands, human resources, IT systems, and other areas in order to maximize
short-term profits. In order to create astructure capable of consistently generating an operating margin of 10% or higher,

Director, Vice President andCorporate Officer, Wacoal Corp.
Chairman, Wacoal Europe Ltd.

Yuzo Ide

we are making appropriate investments
and have initiated a five-year plan toachieve organizational improvements.
When I was first appointed to this company, local employees were worried about
how the positioning and future of the existing Eveden brands would be impacted asa result of the company’s acquisition by the
Wacoal Group. However, we recognized
the value of the existing “FANTASIE,”“Freya,” “elomi,” and “Goddess” brands,
which fulfilled the needs of fuller-figured
women and women with fuller busts. We
therefore decided to apply Wacoal’s original
development technology to these brands.
The “Wacoal” brand was meanwhile positioned as a brand specifically for average-size women and a symbol of Wacoal
Europe in terms of designs and function.
This approach allowed us to build a
relationship of trust with local employees.
There was also increasing communication
between local and Japanese members of
our team, which allowed increased synergy. For example, local designers createdproducts for established local brands usingmaterials from Japanese designers. Goingforward, we aim to achieve further evolution by combining existing local technology
with the knowledge based on human science and engineering from Japan.

A Leading Force for the
Wacoal Group’s
Global Strategy
The Wacoal Group has business operations in 23 countries and regions world-

32

wide. The IT systems that we use inproduct planning, production management,
and other areas, such as computer-aided
design (CAD), computer-aided manufacturing (CAM), and product lifecycle management (PLM), are broadly divided into three
types within the Group. There is still scopefor improvement in product planning,
design, development, and production efficiency, and sharing of information between
business operations.
Our current concept focuses on efficiency improvement through systems integration, starting in Europe and North
America. Integration in Europe and North
America will be followed by the naturalalignment of operations in countries thatreceive production orders from the businesses in Europe and North America. This
will broaden and deepen the potential forsharing between America and Europe,
while steadily creating opportunities for avariety of synergies at all stages from product planning to production management.
If the creation of new systems proceeds faster than in Japan, we will be able
to apply the knowledge gained to systems
innovation in Japan.
There are also benefits to be gained
from the development of 3D CAD, but if we
tried to develop this technology ourselvesin Japan the costs would be prohibitive.
However, general-purpose systems madeby outside suppliers have already been
proven in Europe and North America.
Development will be much easier if we use
those systems.
I believe that there is potential toaccelerate the global expansion of the
Wacoal Group dramatically if we can
extend systems innovation from Europe
and North America.

and Thailand, and it will focus on investment to ensure that it can meet expectations in these countries. There will be major
business results if A Tech Textile can createa supply chain network centering on
Japan, since its shipments to Europe,
North America, China, and Thailand will beworth around ¥60 billion.

Supply Chain Evolution

Realizing the “Worldwide
Wacoal” Vision

There has been growing social concern
about serious cases of environmental degradation in China, with the result that Asian
countries have become unwilling to accept
companies involved in dyeing processes.
In 2016, we were able to establish A
Tech Textile Co., Ltd., a Wacoal subsidiary
involved in the production of materials in
Thailand. This was an important opportunity for the Wacoal Group, since it is very
unusual for a company with 60% foreign
ownership to be granted wastewater rights
for dyeing operations. The project wasrecognized as an excellent example of anenvironment-friendly business operation
backed by advanced Japanese technology. We think it would be wonderful if this
could lead to further business development in the future.
A Tech Textile’s priority is to supply
materials to Europe, North America, China,

To establish a stronger global presence, weneed to create business strategies thatallow us to maximize the benefits of ourscale within the Group, including sharing
and standardization in such areas as product planning, production management,
marketing, and inventory management,
while respecting regional characteristics
and autonomy. We are determined toextend initiatives by Wacoal Europe into
other regions.
Another current priority is investment in
the Indian market, which is expected toshow further growth in the future. We
believe that if the scale of our business
operations expands in India, we will beable to create momentum for the rapid
achievement of a positive bottom line byutilizing supply chains controlled by Wacoal
Europe, including the factories in locations
like Sri Lanka that offer preferential tariffs.

Completion of Organization Restructuring and Future Initiatives
Organization Restructuring: Creation of Business Base Capable ofGenerating Major Business Results

New Five-year Plan: Prioritized Investment
in Sustainable Growth

From Acquisition in 2012 to the Current Period (FY2017)

Brand
Value

Operations
Structure

BusinessBase	Elimination of Fauve
	Sale of “Huit” business	Expansion of countries/channels
for marketing	Integration of product planning operations
	Integration of marketing organization,
efficiency improvements
	Introduction of Group corporate
governance guidelines	Centralization of logistics sites
	Integration of mission-critical IT systems
	Increased utilization of own supply chain
network (plants, procurement of materials)

Brand Portfolio Redesign

Creation of portfolio suitable
for the market environment

Next Fiscal Year (FY2018)—
Brand Development

Value proposal, strengthening brand recognition
Product CompetitivenessImprovement of designs, comfort, technology
Establishment of
New Management Structure

Creation of Group synergies

Human Resources

Recruitment of people with excellent capabilities, training of nextgeneration managers
Compensation

Structure designed to enhance motivation and performance
Improvement of Business
Productivity

Initiation of systems
standardization, starting inEurope and North America

Facilities

Improvement of efficiency in buildings, logistics centers, office spaces
IT Systems

Product planning and production management (CAD, CAM, PLM),
sales reinforcement (B2B, B2C), management efficiency (ERP)33

SPOTLIGHT

02

Wacoal Europe:
The Key to “Worldwide Wacoal”

Seeking Synergies throughout the GroupThe support from
Wacoal Japan has been
just fantastic.
One of the distinguishing features of Wacoal
Europe is the broad range of countries
that we market into, across Europe, North
America, and Australia. Currently, ourprincipal markets are the UK, ourmost established market, the US, as
it is so vast, and Europe—particularly
France, and Germany, but we are
growing throughout Europe. Eachmarket has subtle differences, but
we tend to find that if a bra or design
is successful in one market, it is successful everywhere.

Working with Wacoal
When Wacoal took over in 2012,
I was serving as finance director.
They have been very encouraging,while also giving us some engaging
challenges. I was given a great opportunity as CEO to present a fiveyear plan in November 2016, when
we were effectively still a very new management team.
In order to bring out maximum local
enterprise and initiative, Wacoal urges thevarious Group entities to think and operate as self-managed units. As a result wehave been granted broad autonomy
throughout the process of bringing thetwo business cultures together. That process, too, is paying off, as our infrastruc-ture investment in things like logistics
streamlining, our branding strategy development, and group-wide global manufacturing rationalization are all based aroundthe proposals we were asked to come up
with quite early in our term. There aremany similarities in the way we’ve both

Encouraged by
Shared Strengths

The support of Wacoal Japan has been justfantastic, and one of the strengths we areable to contribute to Wacoal is our ability tohandle a lot of different brands, the many
lingerie brands plus swimwear. Thatability grew out of our history, and now
we are adding the “Wacoal” brand.
Another strength is our secondtier managers, the head-of-department
level, whose depth and experienceextend to every area of our business.
They bring a lot of design expertiseand assure that we can provide meaningful innovations for each brand. We
have solid expertise in the area of thefuller figure, which is of rising importance in our markets.
A third strength is our sales
force. We are pretty dominant in theUK, and we are making inroads into
Europe, particularly Germany andGeoff Embley
France, which is home to some of theCEO - Wacoal Europe Ltd.
world’s most famous innerwear
brands. Nevertheless, with support
done things, so the changes have beenfrom Wacoal, our sales organization is able
very simple. One change we made wasto unlock some pretty big doors against
adopting the Wacoal design process,some rather strong competition in Europe.
One of the biggest challenges in Europe
which is now starting to show results. We
remains brand awareness. The “Wacoal”
are now moving forward together in anticbrand is our lead brand in Europe, but
ipation of where we will be at the end of
there is, in fact, still insufficient awarenessthe first five years.
of the “Wacoal” brand there. Stepping up
brand communication is one of our firstorders of the day.

WACOAL EUROPE’S BRAND PROFILE

34

WacoalFANTASIE

Freya

Well crafted, progressive
products that deliver ona stylish, timeless look.
For the woman who isunderstated,sophisticated, andinformed, and believes in
the power of lingerie.
(Mid/Upper price focus)

The foundation for your day.
This fuller bust brandprovides womenwith the confidence,
comfort and support
they require every day,without compromisingon the look.
(Mid price focus)

Bold and colorful,with products thatreflect her diverse life.
A fuller bust fashion
brand that connectswith the dynamic,
sociable consumer.
(Moderate/Mid price focus)

We develop productsthat represent today’s
multidimensional woman.
We want to connect with
her in a way that builds astrong emotional affiliation with our brands.
When I arrived at Wacoal Europe
twelve months ago, I first spent timewith the various units of the designand sales functions to begin to identify what the Wacoal portfolio looked
like. We took a moment to step backand look at who we were trying totarget across each of our brands.
Then we started work on refreshing
the look and tone of voice, building
stronger personalities, clearer brandvalues, and more consistent messaging and clearer age ranges. This
work forms the foundation of ourjourney, an ongoing process of developing our portfolio, and allows thecreation of more cohesive collections
as we progress.

New Passion and
Direction
Wacoal Europe balances six major brands
within the lingerie, swimwear, and lifestylewear markets. For example, “Freya” is afashion lingerie line specifically for fuller bust
sizes, while the “Wacoal” brand is considered lifestyle, and “elomi” is a fuller figure

lingerie and swim brand. No matter thebrand, first on the list is brand recognition,then driving awareness and engagement,
and then over time gaining conversion,customer retention, and reward.
“Freya” is an example of a brand that
benefitted greatly from redefinition, since

exists on the behalf of women.” Using ourJapanese heritage and the craftsmanshipof the products themselves as key selling
points, we want to position “Wacoal” asa brand that represent female connoisseurship, or those who live in a world ofbeautiful things. We want to get “Wacoal”
into the “consideration set” of customers, making it top of mind when
making a purchase.

Focus on the Message
In communicating with most our customers, we are relying on social media and brand influencers. While theteam is taking into account regional
differences, we think there is a universal way to communicate brandmessaging. Rather than concentrate
too much on the medium, the focus
should be on the content and its relevance to customers in an effort tobuild a community of women around
Laura Simon
our brands.
Brand Director - Wacoal Europe Ltd.
We are also talking to retailers
who want to connect with consumwe realized that it seemed to have aged
ers in a different way. The brand commuwith its customers rather than retaining its
nication that we are attempting will be
own style. Now, the proposed “Freya”
category breaking for lingerie marketing.
customer is a woman age 25 to 35, whoWith the backbone of our strategies, andworks, goes to the gym, and lives a busy
our robust portfolio, we are excited to see
and connected life.
where this journey takes us. Some things
The team is also working on linking
will work and some things will not, but wethe “Wacoal” brand story back to its Japareally want to take this chance to leavenese origins. We are basing the concept
our mark.
on the company’s founding ideals: “Wacoal

elomi

Goddessb.tempt’dCombines excellent fit
plus striking design inall products.
Offering a wardrobe of
lingerie to inspire ayounger, more fashion
forward, fuller figure
consumer.
(Moderate/Mid price focus)

Offers dependable
products, great fit,
comfort and a modern
design.
Ensures our fuller
figure consumer
feels confident
and supported.
(Moderate price focus)

Proposes the fun
and freshness of the
New York trends.
For the woman who issensitive to trends andconsiders lingerie to be apart of her fashion.
(Moderate/Mid price focus)

35

Directors
andAudit
Audit& &Supervisory
Supervisory
Board
Members
Directors and
Board
Members
WacoalHoldings
Holdings
Corp.
Wacoal
Corp.
As
As of
of JuneJune29,29,20172017

Yoshikata Tsukamoto
President andRepresentative Director

Masashi Yamaguchi
Akira Katayanagi

Managing Director

Outside Audit & Supervisory
Board Member
Outside Audit & Supervisory
Board Member,
TOTO Ltd.

Hiroshi
HiroshiShirai
Shirai
OutsideOutsideAudit
Audit& &Supervisory
Supervisory
Board
BoardMember
MemberManaging
Managing
Partner,Partner,
ShiraiShiraiPublic
PublicAccountig
Accounting
Firm
Firm
OutsideOutside
Audit
Audit
&&
Supervisory
Supervisory
Board
Board
Member,Member,
NoritzNoritzCorporation
Corporation
OutsideOutside
Audit
Audit
&&
Supervisory
Supervisory
Board
Board
Member,Member,
ALTECOALTECO
Co.,
Co.,
Ltd.
Ltd.

36

Mitsuhiro Hamamoto
Outside Audit & Supervisory
Board Member
Partner,
Kikkawa Law OfficeOutside Director,
Toa Valve Engineering Inc.

Masaya Wakabayashi
Director andVice PresidentOur Management
Shigeru Saito
Outside Director
Representative Director
and Chairman, and CEO,TOSE CO., LTD.
Outside Director,
SCREEN Holdings Co., Ltd.

Kiyotaka Hiroshima
Tomoki Nakamura
Standing Audit &Supervisory
Board Member

Hironobu Yasuhara
Director and Vice President

Standing Audit &Supervisory
Board Member

Atsushi Horiba

Madoka Mayuzumi

Outside Director

Outside Director

Representative
Director and Chairman andPresident, HORIBA, Ltd.

Visiting Professor,
Kitasato University

Representative Director and Chairman,
HORIBA STEC, Co., Ltd.

Councilor,
Governing Council of East Japan Railway
Culture Foundation

Outside Director,
Rock Field Co., Ltd.

Councilor,
The National Art Center, Tokyo

37

Corporate GovernanceTo build a relationship of mutual trust with every stakeholder, the Wacoal Group’s overriding goal of
corporate governance is to continuously grow enterprise value by ensuring that management is highly
transparent, equitable, and objective with respect to all stakeholders.

Revisions in Wacoal’s Corporate Governance System
1977

Wacoal issues ADRs*(American Depositary Receipt)

Wacoal becomes the 8th Japanese company to issue ADRs. Upon issuance, the SEC(U.S. Securities and Exchange Commission) requires consolidated financial statements
and accounting report in accordance with U.S. GAAP.

2002

Introduction of the corporate officer system
Number of directors: 13
9

In June 2002, the company employs a corporate officer system in order to delegate
authority and clarify responsibility more appropriately and efficiently. At the same time, thenumber of directors is reduced.

Switches to a pure holding company

We switch to a holding company system for effective, strategic decision-making andresource placement in order to execute quickly and clarify responsibilities and delegationof responsibilities at operating affiliate companies.

Appointment of outside officers

To promote fairness and independence of the Board of Directors and the Audit & Supervisory Board, the Group increases the number of outside directors by two members andoutside Audit & Supervisory Board members by one member.

2007

Established Executive Compensation Advisory Committee
Number of committee members(including outside directors): 4

Regarding appointment, promotion, and remuneration of the directors and executive officers, the Executive Compensation Advisory Committee, chaired by the Director of the
Administrative Department, was established with outside directors included as members.

2010

All outside officers are registered with theTokyo Stock Exchange as independent officers
Independent officers registered: 6

All outside directors and outside Audit & Supervisory Board members are registered with
the Tokyo Stock Exchange as independent officers.

2015

Independent Outside Officer Meeting is established

The Independent Outside Officer Meeting is established with the intention of sharing information about improving corporate governance, Board of Directors meetings, internal
audits, etc. The committee includes independent outside officers.

2005*In 2013, Wacoal stops listing ADRs on the U.S. NASDAQ market and de-registers with the SEC.

Corporate Governance Guidelines
The Role of the Board of Directors and the Responsibilities of the Directors
The Board of Directors makes decisions on important matters as
stipulated in laws and regulations and the articles of incorporation.
They also consider management strategies and social priorities
from medium- to long-term perspectives. To ensure that the supervisory functions of the Board of Directors are performed effectively
and in a timely manner, the Board of Directors and the Audit &Supervisory Board members formulate Group management strategies and consider important management issues at the GroupManagement Meeting. The Group Strategy Meeting and the Quarterly Business Results Review Committee share information aboutpriorities and monitor quarterly results. The directors are required
to perform their duties fully by collaborating with the management
team and the Audit & Supervisory Board members as necessary;by collecting sufficient information; and by proactively putting forward views and engaging in debate. Persons appointed as directors must have a thorough understanding of related laws andregulations, the articles of incorporation, the rules of the Board of
Directors, and other internal rules and regulations, as well as befully aware of the level of responsibility the position entails.

Decision-making Process for Compensation of Company Officers
Compensation for company officers is determined under a highly
objective and transparent system designed by the Executive Compensation Advisory Committee, which includes the independent
outside directors. Compensation for directors consists of a fixedbasic remuneration, together with bonuses linked to the company’s performance each year, and stock options, which are linked tomedium- to long-term performance trends. Independent outside
directors and Audit & Supervisory Board members receive only the
fixed basic remuneration, since it would be inappropriate for themto receive performance-linked remuneration.

38

Compensation is set at a level that is appropriate comparedwith other companies in the same industry or of a similar size, andcommensurate with the company’s business performance andsize. The amount of bonuses to be paid is determined according
to the company’s business performance on the basis of a resolution passed at the regular general meeting of shareholders eachfiscal year. The upper limit for stock options was set at ¥70 million
per year by a resolution passed at the 60 th regular meeting ofshareholders held on June 27, 2008.

Details of Remuneration Paid to Officers
Aggregate Amount of Remunerations, etc., by Type Thereof (Millions of yen)
Aggregate
Amount ofRemunerations, etc.
Retirement
Basic
Stock
Bonus
(Millions of yen)
Allowance
Remuneration
Options

Category of Officers

Number of
Relevant
Officers

Directors (Excluding outside directors)

286

190

46

49

—

5

Audit & Supervisory Board members(Excluding outside Audit & Supervisory Board members)

35

35

—

—

—

2

Outside officers

46

46

—

—

—

6

Compliance Structure
In April 2017, we merged the Risk Management Committee andCorporate Ethics Committee to form the Corporate Ethics and Risk
Management Committee. The aim of this change was to enhancethe effectiveness of corporate ethics and risk management in the
Wacoal Group. Under Group compliance and risk policies formulated by the committee, directors and employees perform theirduties in compliance with laws, regulations, and the articles ofincorporation and sound social norms. We have also formulated

the Wacoal Ethics Code and the Wacoal Conduct Code. These
require us to reject any demands from antisocial elements. Our
Risk Management Manual similarly stipulates that Wacoal will haveno relationship with any antisocial group. We have established astructure that requires a director or employee who becomes awareof an issue that could involve violations of the Corporate Ethics:
Wacoal Conduct Code to report the matter immediately throughour internal reporting system.

Basic Policy on Constructive Dialogue with Shareholders and Other Stakeholders
We have adopted a basic policy on constructive dialogue withshareholders and other stakeholders and published it on our website. Company officers and employees attend meetings with shareholders and other stakeholders. Managing directors coordinate
such meetings. Various factors are considered in relation torequests for meetings with directors, including the topic of themeeting and the affiliations of the person seeking the meeting.

In addition to fair, timely, and accurate disclosure of information
about our business and financial situation to shareholders andinvestors in Japan and overseas, we also help stakeholders to gaina better understanding about our situation and thinking by actively
distributing information about the market environment and ourunique strengths.

State of IR Activities
Presentations for individual investors

Presentations hosted by securities companies: around eight per year

IR office

Presentations for analysts andinstitutional investors

Presentation of financial results twice a year (end of second quarter,end of financial year); presentations focusing on individual business areas
or key topics and facility tours at various times

Representative directors
and directors, IR office

Presentations for overseas investors

Presentations during individual visits: 1-2 times per year
(August 2016, Singapore; November 2016, London)

Directors, IR office

Basic Policy on Information Disclosure
We see timely disclosure of accurate information as the foundation
for trusting relationships with all stakeholders. We are also keenly
aware that disclosure is essential for accurate assessments of ourcorporate value. We actively disclose information while complying
with all related regulatory requirements.
We have identified three basic requirements for information
disclosure. First, important information must be disclosed accu-

rately and in a timely manner, regardless of whether it is positive or
negative for us. Second, information must be expressed in language that is easy for all stakeholders to understand and disclosed
using various methods to ensure ease of access and fairness.
Third, organizational, personal, physical, and technical steps must
be taken to prevent leakage of information before timely, appropriate disclosure.

39

Management decision-making process, management organization according tobusiness operations and supervision, and other corporate governance structures(As of June 29, 2017)

Corporate Governance Structure
In-house(male)

Outside(male)

Outside(female)General Shareholders’ MeetingGroup Management Meeting
4 Directors

Board of Directors

2 Audit & Supervisory
Board members

7 Directors

Audit &
Supervisory Board
5 Audit & Supervisory
Board members

Independent
Accountants

Quarterly BusinessResults Review Committee

Group Strategy Meeting

7 Directors

4 Directors

5 Audit & Supervisory
Board members

Audit & Supervisory Board Secretariat

Independent Outside Officers Meeting
3 Directors

5 Audit & Supervisory
Board members

3 Audit & Supervisory
Board members

2 Audit & Supervisory
Board members

2

Representative Director

Executive Compensation Advisory Committee
3 Directors

Company and Department
Representatives

Major Company andDepartment Representatives

2 Others

3

Office ofCorporate Auditors
Operating Subsidiary

Corporate Ethics and Risk Management Committee

1
Operating Subsidiary

Corporate Ethics Hot-line

Compliance Committee

Operating Subsidiary

1 Corporate Ethics and Risk Management Committee*

2 Independent Outside Officers Meeting

This committee consists of the directors and Audit & Supervisory
Board members of Wacoal Holdings and Wacoal Corp., and theheads of key business departments and the heads of administrative departments of Wacoal Holdings. Its task is to monitor risks
affecting all areas of the Group’s business operations, to engage inactivities to mitigate those risks, and to respond to risk situations.
The committee also works to strengthen and ensure compliancewith corporate ethics. Other tasks include education and disseminating information about corporate ethics, and handling complaints
and other situations related to corporate ethics in cooperation withthe relevant departments.

It consists of independent outside officers, and takes place at least
once per year with an agenda including issues of corporate governance, improvement of operation of the Board of Directors, and sharing of information about internal audits, etc. The meeting can hireadvisors from various fields, with fees to be borne by the Company.

*From April 2017, the Risk Management Committee and Corporate Ethics Committee were
integrated to form the Corporate Ethics and Risk Management Committee.

40

Operating Subsidiary

3 Executive Compensation Advisory Committee
The committee is established in an advisory function to the Representative Director. It discusses and submits reports on the appointment, promotion, recognition, and remuneration of the directors
and executive officers. The Executive Compensation Advisory
Committee has an independent outside director as a member.

Corporate Governance

FOCUS

Initiatives for Strengthening Corporate Governance
Outlined below are some of the ways in which Wacoal works to enhance the effectiveness of corporate governance.

Interviews at Independent Outside Officers Meeting
We have begun to distribute documentation to independent outside
officers concerning issues identified in effectiveness assessments inthe previous fiscal year. Issues identified in this year’s effectivenessassessment and actions taken were as follows.
• There was inadequate reporting of medium- and long-term management priorities and progress on the medium-term management Plan.
• Improvements are needed in relation to information sharing between
outside directors and the Internal Audit Department.
We will increase opportunities to report medium- and long-term management issues to the Board of Directors and ensure that the views
and advice from outside officers are better reflected in management.
We will also consider regular reporting of internal audits.
 olicy on training for directors and Audit & Supervisory BoardP
members
Directors and Audit & Supervisory Board members undergo management and audit training and are provided with knowledge about company law, corporate governance, and other aspects, as well as useful
information about regulatory compliance and management. Whenthey are appointed, outside directors and outside Audit & Supervisory
Board members are briefed in order to deepen their understanding of
the management strategies of the Wacoal Group, general aspects ofour business operations, and Wacoal’s business environment, including the industry situation, and other aspects. They continue to receive
information updates thereafter.
 upport structure for outside directors and outside Audit &S
Supervisory Board members
We offer various types of support for outside directors and outside
Audit & Supervisory Board members including briefings in advance ofBoard of Directors’ meetings, to enable them to carry out their monitoring and supervisory roles effectively. The Corporate Planning Office
distributes the agendas of the Board of Directors meetings to outside
directors in advance and provides briefings on important matters.
Internal Audit & Supervisory Board members provide outside Audit &Supervisory Board members with advance briefings ahead of board
meetings. They also attend monthly Audit & Supervisory Board meetings, which are coordinated with the regular Board of Directors meetings. Special meetings of the Audit & Supervisory Board are held ifnecessary.

Outside Directors and Audit & Supervisory Board Members
Reasons for Appointment of the Said Outside Directors*
Atsushi Horiba
It is anticipated that he will help strengthen the overseas development of theCompany’s businesses given his abundant experience and insight as a corporate manager in relation to business development in Japan and overseas as wellas his strong leadership and extensive knowledge.

Reasons for Appointment of the
Said Outside Audit & Supervisory Board Members
Akira Katayanagi
Long experience in the financial industry and a wide range of experience and expertise in other industries make him an appropriate outside
Audit & Supervisory Board member for the Group.

Madoka Mayuzumi
As a haiku poet, she has made wide-ranging contributions to the fields of art
and culture in Japan and overseas. Her expertise and experience is expected tocontribute to our efforts to realize business management that emphasizes diversity, making her an appropriate outside director for the Group.

Hiroshi Shirai
Specialized knowledge of accounting and finance as a certified public
accountant make him an appropriate outside Audit & Supervisory
Board member for the Group.

Shigeru Saito
It is anticipated he will enhance management supervisory functions by providing
input from various perspectives based on his extensive knowledge and experience as a representative director of another company.

Mitsuhiro Hamamoto
His experience and specialized knowledge as an attorney make him anappropriate outside Audit & Supervisory Board member.

*Wacoal newly documented “Criteria for the Election of Directors” and “Criteria for Independence of Outside Officers” at the Board of Directors meeting on April 30, 2015.

Criteria to Ensure Independence of Outside Executives
For more details on our Criteria to Ensure Independence of Outside Executives, please see our Corporate Governance Report.

http://www.wacoalholdings.jp/en/ir/pdf/governance_report.pdf

Attendance of Outside Directors at
Meetings of the Board of Directors

Attendance of Outside Audit & Supervisory Board Members at
Meetings of the Board of Directors and the Audit & Supervisory Board(April 2016–March 2017)(April 2016–March 2017)

Atsushi Horiba

Attended

11 of 13

Madoka Mayuzumi

Attended

13 of 13

Mamoru Ozaki

Attended

12 of 13

Board of Directors

Audit & Supervisory Board

Akira Katayanagi

Attended

12 of 13

Attended

13 of 15

Hiroshi Shirai

Attended

12 of 13

Attended

14 of 15

Yoko Takemura

Attended

13 of 13

Attended

13 of 15

41

DIALOGUE

Enhancing the Effectiveness of theBoard of Directors
Wacoal has strengthened its management supervisory functions by appointing Outside Audit &Supervisory Board members to three of the five positions. These Outside Audit & Supervisory Board members
contribute to the reinforcement and enhancement of corporate governance from an independent perspective.
We asked two of them about Wacoal Holdings’ governance activities and the current state of the company.

Continuing Evolution of
Structure in Line with the
Corporate Governance Code—	How do you view the corporate
governance structure of Wacoal
Holdings from your perspective as an
Audit & Supervisory Board member?

The Independent Outside Officers Meetingis an important forum for assessing theeffectiveness of the Board of Directors.
We intend to make extensive use ofthis mechanism going forward.

Hiroshi Shirai
Outside Audit & Supervisory Board Member
Managing Partner, Shirai Public Accounting Firm
Outside Audit & Supervisory Board Member,
Noritz Corporation
Outside Audit & Supervisory Board Member,
ALTECO Co., Ltd.

42

Katayanagi:I feel that the structure has
evolved steadily in the seven years since
my appointment as an Outside Audit &Supervisory Board Member. Since Japan’s
Corporate Governance Code went into
effect in June 2015, Wacoal has made particular efforts to strengthen its structures
under its corporate guidelines. I believethat this has resulted in improvements insocial consciousness and transparency.
Shirai: I became an Outside Audit &Supervisory Board Member two years ago.
During that time, Wacoal Holdings hastaken specific steps to administer its busi-

ness operations in accordance with thefundamental principles of the Corporate
Governance Code. My impression is that
there has been steady progress in all areas,
including accurate disclosure, transparency, and engagement with stakeholders.
Katayanagi: For example, the company
has significantly strengthened its risk management, which is a key aspect of corporate governance. The detailed reports that
we receive from the Risk Management
Committee give us a clear picture of what
has happened and where, areas in which
problems have occurred, actions taken in
response to those problems, and otherdevelopments. I hope that the company
will learn from these case studies andstrengthen preventive control systems.
—	Last year you held the inaugural
meeting of the Independent
Outside Officers Meeting.
Shirai: The Independent Outside Officers

Corporate Governance

Meeting was created to enhance the effectiveness of the Board of Directors. We
intend to make full use of this mechanism
as a forum in which outside directors andAudit & Supervisory Board members canmeet to express their views and work
toward improvements.
Katayanagi:The first meeting was devoted
mainly to presentations about the reasonsfor the establishment of the new mechanism and the significance of the Corporate
Governance Code, and discussions about
information sharing. Going forward, we
p l a n t o d i s c u s s a p p ro a c h e s t o t h eimprovement of management supervisory
functions from various perspectives.
Shirai:We aim to maintain lively, in-depth
discussions by choosing a new theme foreach meeting. I believe that the Independent
Outside Officers Meeting will also have abeneficial effect in terms of facilitating communications with the outside officers. I lookforward to increasingly energized debate.
Katayanagi:I agree. We gather for Audit &Supervisory Board meetings frequently andmeet on other occasions, so we knoweach other well enough to be able to speak
frankly. The Independent Outside Officers
Meeting will provide opportunities todeepen our communications with the outside directors. I am sure that this will resultin stronger governance structures.

Outside Directors’ Views
Crucial to the Effectivenessof the Board of Directors—	The appointment of a new outside
director was approved at this year’s
general meeting of shareholders.
Shirai:Wacoal has added a new outside
director with experience of business management. I look forward to a further deepening of our discussions through input froma business management perspective.
Katayanagi: The inside directors havedetailed and exhaustive discussions before
each board meeting, so it would be fair to saythat the main purpose of the board meetings
is to hear the views of the outside directors.
Shirai: That tendency has become stronger
in recent years as companies have comeunder increasingly intense shareholder scrutiny. I welcome the recent appointment as a
response to this situation. It is a sign that
Wacoal is actively listening to input frompeople involved in business management.
Katayanagi: Perceptions within a company may differ from outside perceptions.
Important concepts that may have been
missed by those working within a company can often be discovered via input
and questions from outsiders. Sometimes
perspectives will clash, but those clashes
are really the source of new value.
—	Are there any areas in which
improvements are needed interms of making effective use of
input from outside directors?
Katayanagi:We always receive briefings
on various projects now, but I believe thatfurther improvements could be achieved byenhancing the quality and quantity of priorbriefings. What do you think, Mr. Shirai?
Shirai: I agree. Some topics, such as
investment projects, are quite complex,
and it can be very difficult even for a
person with expert knowledge to form an
opinion in a short period of time.
Katayanagi: The Audit & Supervisory
Board members are briefed about proposals, segment performance, and other information at meetings of the Audit &Supervisory Board and Quarterly BusinessResults Review Committee. I think that
there should also be opportunities for theoutside directors to hear reports about
management issues and progress underthe medium-term plan.
Shirai: If we are thoroughly briefed inadvance and given time to assimilate information, our questions will be deeper andmore incisive, and there will be greater
benefits for the company.

Contributing to Sustainable
Growth and the Improvement of Corporate Value—	How do you envision your role as
Audit & Supervisory Board members
going forward?

Since the Corporate Governance Codewent into effect, we have worked tostrengthen structures and optimize
management soundness andtransparency.

Akira Katayanagi
Outside Audit & Supervisory Board Member
Outside Audit & Supervisory Board Member,
TOTO Ltd.

or not the company is being governed
appropriately. Our basic stance will remainunchanged. I believe that we need to bealert to changing times and changes in theenvironment. We will maintain a certain distance from the company’s operations,while working to strengthen corporate governance and contribute to sustainablegrowth and the improvement of corporate
value over the medium- to long-term future.
Katayanagi: Whenever I visit a Wacoal
facility, I see an organization in which thecompany’s founding principles and thespirit of mutual trust permeate. Workplace
education is excellent, and individual workers are highly motivated. I find this very
reassuring, and I feel confident that problems are unlikely to arise in this environment. This is an important strength, and an
asset that helps to underpin corporate
governance. As social values become
increasingly diverse, I hope that Wacoal will
maintain its excellent corporate culture andcontinue to move forward as a trusted
company. I am determined to use theknowledge and experience that I havegained to contribute to sound corporate
development.

Shirai:We fulfill our role by judging whether

43Building Mutual Trust with Society (CSR Activities)

Building Mutual Trustwith Society
Earning the Trust of Society by Meeting
Society’s Demands and Expectations

Under the Wacoal management philosophy, building mutual
trust with society is our corporate goal and raison d’etre. Comprising Our Mission, Our Vision, and Our Values, this management philosophy serves as a compass for our CSR initiatives.
By responding to society’s needs and expectations we build
the trust and relationships that are essential to our continuing
existence as a company and our ability to procure management
resources from markets.
We will continue to heed the voice of society, and our business activities will continue to be guided by our consideration
for the societies in which our markets exist. Creating mutual
trust with society is the goal of Wacoal’s CSR activities.

CSR Action Policy
Wacoal’s fundamental CSR objectives are to manufacture productsthat customers love, develop products that meet current needs, andconduct business fairly to pave the way to a better future.
We conduct business in a fair manner and provide products that
customers need. “Manufacturing” is our first step toward building
relationships of trust with customers and society, as well as the foundation of our CSR activities.
To advance CSR initiatives, Wacoal established its Basic Policies
on CSR based on the ISO 26000 standards published in November
2010 (Japan Standards Association, 2010) according to seven basic
principles (for accountability, transparency, ethical behavior, respect
for stakeholders’ interests, respect for the rule of law, respect forinternational codes of conduct, and respect for human rights) andseven core subjects (organizational governance, human rights, labor
practices, environment, fair operating practices, consumer issues,
community involvement and development).
Furthermore, as part of its business strategy, Wacoal conducts
continuous CSR activities to address social issues that are related tothe main business. This also strengthens brand power andcompetitiveness.

44

CSR Highlights
Reaching Our Communities

Pink Ribbon Kyoto*

Stamp Rally
Participants
2012

2016
Approx.

Approx.

1,100(first year)600

peoplepeopleStamp Rally
Participants in Wacoal’s stamp rally visit historic sites and attractions in Kyoto, where
they earn stamps by answering questions on breast cancer and visiting company
booths that promote the importance of breast cancer examination.
*Pink Ribbon Kyoto operates in collaboration with doctors and nurses from medical institutions, NPOs, local
companies based in Kyoto, students, Kyoto City and Prefectural governments, and the mass media.

Tsubomi School

Tsubomi School
Participants
2001(first year)
Approx.

Wacoal’s Core CSR Subjects

2017(cumulative asof the end of March)
Approx.

110,000

232
peoplepeopleOrganizational
GovernanceCommunity
Involvement andDevelopment

The Tsubomi School is an itinerant educational program thatteaches young girls (aged 10–14) and their caregivers about
the physical and emotional changes that occur during adolescence, and about the selection of undergarments. In
recent years, we have also run the Aging Seminar, whichhelps adults to understand the aging process.

Human
RightsConsumer Issues

Labor
Practices(responding tocustomers)

Bra Recycling
Fair Operating
Practices

Environment

CSR Activities Linked to Wacoal’s Main BusinessBusiness
activities

CSR

Uniquepersonalityof Wacoal

Wacoal’s
CSR

CSR Activities Based on
Wacoal’s Business Characteristics

Pink Ribbon Activities

Remamma Project

Bra Recycling
Campaign

We have run Bra Recycling campaigns since 2008 as part of ourenvironmental activities. The garments are recovered in bags, which
are processed unopened, into recycled solid fuel for industrial use(Refuse Paper & Plastic Fuel/RPF).

Number ofBras Recycled2008(first year)
Approx.

30,000bras

2017(cumulative asof the end of March)
Approx.

1,413,900
bras

Nadeshiko Brand 2017
In both fiscal 2016 and 2017,
Wacoal Holdings was selected by
the Ministry of Economy, Trade andIndustry and the Tokyo Stock
Exchange as a Nadeshiko Brand.
This designation is awarded tocompanies that practice diversity
management, especially in regards
to women’s needs.

Selected

2 years

in a row

For more details on our CSR activities, please see our website.
Breast Cancer
Examination Support

Tsubomi School

http://www.wacoalholdings.jp/en/csr/index.html

45

Wacoal Society
Wacoal’s Unique Social Contributions
Wacoal’s mission states “We will contribute to society by helping women to express their beauty.” We believethat this mission can only be truly achieved by applying the knowledge and culture that we have accumulated
through our business activities to society in general. We want women to participate fully in society withconfidence and pride. This commitment inspires our efforts to build mutual trust with society and carry on
business activities that reflect our unique characteristics, which in turn leads to the improvement of publicconfidence in Wacoal and increased motivation for our employees.

Our Partnershipwith Women
Wacoal’s Breast Care Activities Around the WorldIn support of women, Wacoal is on a mission to eliminate suffering frombreast cancer. Wacoal advances Breast Care Activities that promote raisingawareness of breast cancer, breast cancer screenings, and post-surgicalsupport. The three pillars of Pink Ribbon activities, AIO, and Remamma Project, has been put into action and gained trust worldwide. These initiatives
lead people to become long-term customers of Wacoal products.

Remamma
Project

Through Pink Ribbon Activities, we support the early diagnosis of breast cancer.
During the Pink Ribbon Fitting Campaign,
we make a ¥10 donation for every time acustomer tries on a bra in approximately
2,000 outlets throughout Japan.

We are helping fulfill women’s wishes tofeel beautiful by using accumulated datafrom our decades of research on thefemale body to create innerwear andswimwear for women who have undergone major breast surgery.

Wacoal purchased AIO, a mobile breast
cancer screening unit, which has beenused since October 2009 to provide
women with an easier and more comfortable way to undergo examinations. We
are currently expanding this initiative
through mass-screenings organized byhealth insurance associations, businesscorporations, and other groups.

Fitting Campaign

Nationwide Seminars

AIO Screening(number of participants and bras)(number of participants and venues)(number of women examined and days of operation)

2007

46

Breast Cancer
Diagnosis Examination
Support Project (AIO)

Pink Ribbon
Activities

2016(First year)(cumulative)

111,989 women
273,288 bras

1,592,479 women
4,149,368 bras

1993

2016

(First year)(cumulative)

537 participants
4 venues

24,562 participants
201 venues

2009

2016

(First year)(cumulative)

369 women
15 days

34,158 women
788 daysBuilding Mutual Trust with Society (CSR Activities)

Working with Communities
Nishi-Oji Station Area Beautification Association
The Nishi-Oji Station Area Beautification Association was formed in 1997 as apartnership among the local neighborhood association, Kyoto City, the Minami
Ward Office, the Ministry of Land, Infrastructure and Transport, the Minami Police
Station, and other government agencies, together with six local companies. Its
purpose was to find a solution to illegal bicycle parking in the area around JR
Nishi-Oji Station, where Wacoal’s head office building is located.
Wacoal decided to provide part of its land for a bicycle parking area. We also
engage in three main activities in the area: litter removal, promotion of the use of
bicycle parking areas, and the removal of illegal advertising.
Every Monday, Wacoal employees participate in collecting litter in the areaaround Nishi-Oji Station. This activity fosters relationships with the community andlocal businesses and contributes to awareness of safety and to crime prevention.

Culture and
Education
Wacoal Study Hall Kyoto
In addition to providing beauty through our products, we want tohelp women enhance their inner beauty by cultivating taste andknowledge. That is why we opened the Wacoal Study Hall Kyoto in
October 2016.
We host lecture programs focusing on themes relating to physical beauty, the beauty of good taste, and social beauty. Guests
can also freely browse books on beauty anddeepen their knowledge in a relaxing library andco-working space. Other facilities include a gallery and a shop.
The catchphrase for Wacoal Study Hall Kyoto
is “Giving full rein to aesthetic curiosity.” Our vision
for the facility was to create a place where women
could attend lectures and read books that would
stimulate their aesthetic curiosity in ways thatwould inspire them to enrich their lives. We want
Wacoal Study Hall Kyoto to be a place where
women can learn new things and satisfy their curiosity, and create
beautiful lifestyles and beautiful relationships for the future.

For more details on Wacoal Study Hall Kyoto, please see our website.

http://www.wacoal.jp/studyhall

47

DIALOGUE

Creating Paths to a Better Future
by Deepening Relationshipsof Trust throughout Our Entire
Supply Chains
One of the CSR priorities of the Wacoal Group, as we work to achievesustainable, healthy corporate growth, is solving any problems relating to thework environments involved in our supply chains. We asked Director andVice President Hironobu Yasuhara and sustainability expert Mizue Unno
about initiatives to achieve harmonious coexistence with suppliers.

We are working to build
effective management
systems for our expanding
and increasingly complex
supply chains.
Unno:As a result of globalization, those in
the business community are increasingly
aware of the need to give priority to thereinforcement of CSR initiatives, especiallyin supply chains.
Yasuhara: That’s true. As I’m sure you
know, an international human rights NGO
critiqued the working conditions at one of
our subcontracting garment factories in
Myanmar last November. We responded
to that by working with our subsidiaries
to draw up a list of all of our suppliers inJapan and overseas, and by restructuring
our management systems.
Unno:Companies can easily manage factories that they own directly, but it’s oftenvery difficult for large corporations to supervise overseas suppliers, those supplying orders placed by their subsidiaries, or48

even those supplying their subsidiaries’
suppliers. However, that level of management oversight is essential these days.
Yasuhara: We have, of course, always
monitored working conditions and otheraspects of operations in our own factories, as well as in factories operated byoutside suppliers and contractors, andeven suppliers of materials. Where possible, these efforts included site visits. This
type of monitoring is essential to ensure
product quality. To create products thatwill satisfy our customers, we need not
only advanced technology, but also a lotof human effort, and carefully selectedmaterials. Every condition has to be right,
including environmental factors, management conditions, and employee motivation. These ideas are reflected in ourefforts to create systems within which we
can achieve harmonious coexistence with
our suppliers.
Unno:That is very much what I would expect from a company that never compromises on quality. But were there any
aspects that you overlooked?
Yasuhara:Yes. We missed problems relating to small quantities of products procured though trading companies. We
even overlooked problems relating to operations in our own factories. We thenbegan to survey conditions in facilities operated by the suppliers on our list andthink about stepping up our initiatives withtrustworthy suppliers.
Unno:Starting with stronger laws and reg-

Hironobu Yasuhara
Director and Vice President
Wacoal Holdings Corp.

ulations, companies in Europe and theUnited States are facing an increasingly
strict environment. It’s no longer acceptable to say that a problem only involved
small quantities of products or was causedby companies at the end of supply chains.
Globally active companies have heavy
responsibilities.
Yasuhara:Indeed. We implement extensive checks at Group factories supplying
products to Europe and the United States.
For the United States, it’s become thenorm for companies to disclose their supplier lists. For our businesses in othercountries, we have built supply chains that
do not go through Japan, and we haveestablished separate systems to comply
with the different rules in each country.
Unno: I recently visited your factory in
Vietnam and had the opportunity toBuilding Mutual Trust with Society (CSR Activities)

lieve that quality is more important thancost. We foster mutual trust by putting
down roots in one place and providing
people with an environment in which they
can work with confidence. This helps
them to assimilate and learn technologicalskills. We see this approach as a goodfoundation for our products.

We are creating new value
by closely communicatingwith stakeholders andbuilding good relationships.

Mizue Unno

speak with employees. My impression
was that they are all very positive andhighly motivated.
Yasuhara:Our factory in Vietnam is ourbiggest single manufacturing facility andplays a core role in our operations. Currently there’s just one Japanese employee, and the rest of the staff are all
local people. I think the workers are highly
motivated because we’ve fully localized
the factory, and because everyone isaware of having their own roles.
Unno: In China and elsewhere, many
Japanese-owned companies seek tominimize costs by reducing the numberof full-time employees and using large
numbers of contract workers. What is
Wacoal’s approach?
Yasuhara: All of our workers are employed full-time. That’s because we be-

Unno: The level of scrutiny companies
face over human rights and labor practices these days means that even with diligent efforts in these areas, there is still achance NGOs or labor organizations willraise issues that need to be resolved.
What are your thoughts on how companies should respond in such cases?
Yasuhara: Obviously, the first step is tounderstand the real intentions behind thecriticism. The next step is to identify issues and take immediate action to rectify
them. That’s all that a company can do.
Unno:When a company receives a comm e n t f ro m a c u s t o m e r i t re s p o n d s
promptly and in good faith. Likewise,
since NGOs and labor organizations arealso stakeholders, a company should
treat them the same way. When an issue
is raised, it’s best to send someone toaddress the problem in person. Moreover, I think it’s important to maintain an
ongoing commitment to good communications, rather than simply responding
passively to criticism.
Yasuhara:We received similar commentsfrom people within the company related
to this incident. We are still in the processof creating additional rules to cover working environments, and we intend to makeopportunities for active sharing of views.
Unno:It’s important that you put thosemeasures into effect. I think the ideal
relationship is one based on trust andcooperation toward the shared goal of
improvement.

Wacoal’s quality-first
approach to supply chain
management reflects ourdetermination to achievesustainable business growth.
Unno:The role of supply chains is to support sustainable business growth, butwhat kinds of issues do you face going
forward?
Yasuhara:Our biggest manufacturing bottleneck is dyeing. Every country has stringent wastewater regulations, and it has
become very difficult to operate profitably
because of the heavy capital expenditureburden. The working conditions are hard,so the number of dyeing factories continues to shrink. We need to tackle this problem across all of our supply chains as partof our efforts to achieve sustainable production and consumption.
Unno:You have built robust supply chainsin Japan, China, Myanmar and Vietnam.
How will you adapt your business models
to achieve further development?
Yasuhara:We do not believe in relocating
our operations from place to place insearch of lower costs. Our priority is dependable quality. That is why we areworking to optimize our supply chains, including infrastructure, while also considering the environment and human rights. We
are convinced that this is the way to respond to the trust of our customers, andto achieve sustainable business growth.

Mizue Unno
Managing Director
So-Tech Consulting
She uses original analysis techniques to provide
Japanese companies with advice about strategic
aspects of CSR and sustainability in the context
of global strategies. This supports business practices targeted toward the realization of sustainable management strategies.

49

Environmental Conservation Activities

Preserving the Environment as a Global BusinessConducting business worldwide, Wacoal considers preserving the global environment to be its
responsibility as a company and promotes environmental activities based on the spirit of mutual trust with society.
Currently, six domestic companies and two overseas companies in the Group are certified according to thestandards of ISO 14001 (environment management system) and four domestic plants are certified according to
KES (Kyoto Environmental Management System Standard).

Results of Activities

Electricity use

Office paper use

Gas useWaste emissions

FY2017FY2017FY2017

11,821 thousand kwh

24.6 million sheets

685 thousand m

1,181 tCompared to FY2007

Compared to FY2007

Compared to FY2007

Compared to FY2007

29.4%

16.3%

Down

CO2 emissions*

27.6%

Down

Waste incineration(electricity, gas)

FY2017
3

25.6%

Down

Water use

Down

Recycle percentage

FY2017FY2017FY2017

6,227 t73.8 t

112 thousand m

94 %Compared to FY2007

Compared to FY2007

Compared to FY2007

Compared to FY2007

29.3%

77.2%

Down

FY2017
3

20.0%

Down

14.0%

Down

Up

*Only CO2 emissions resulting from electricity and gas equivalent values based on FY2011

The Wacoal Group’s Original Self-evaluation Indicators(for Wacoal Holdings Corp. and Wacoal Corp.)

Value-added
Carbon Footprint* Ratio
We measure effect by calculating how muchvalue we have added per unit of CO2 emissions.
This indicator is shown as the product of value-added labor productivity (value added/total
hours worked) and CO 2 emissions per work
hour. We aim to affect the actions of each individual by adopting a different approach that
focuses on two areas: heightening the capabilities of each employee so that they work efficiently and reducing environmental burden
during operational hours.
*Carbon footprint (CFP) includes CO2 emissions resulting fromelectricity, gas, water, and waste. For CO2 emissions resulting
from energy, equivalent values for each region are used.

Value-addedcarbon footprint
ratio

Value added

Total hours
workedCFP

Total hours
workedCFP

Value added

Total hours worked

Value added

Total hours worked¥ 29.13

9,197¥ 30.24

9,461

billionthousand hours

billionthousand hours

Total hours worked

CFP

Total hours worked

CFP

9,197

3,328 t9,461

4,127tthousand hours

thousand hours

FY2011¥ 8.75 million/t

For more details on our environmental activities, please see our website.

http://www.wacoalholdings.jp/en/csr/pr_environment.html

50

Value added

1.42 million/t

Down ¥FY2017¥ 7.33 million/ tBuilding Mutual Trust with Society (CSR Activities)

Health Management

Your health keeps the company healthy!
Wacoal GENKI Project 2020

Theme

Targets

Lifestyle disease
countermeasures

reduction

25%

100%

OutlineReduction of lifestyle disease rate

Increased percentageof people tested
for five major cancer types

Cancercountermeasures

Mental healthcountermeasures

FY2015FY2017(Before project initiatives)(Results)

29.2%
Lung

96.1%

Stomach79.3%

Colorectal

90.5%

Breast81.0%

Uterine65.0%

33.1 %
95.9 %
73.9 %
91.0 %
80.4 %
65.8 %

100%

Percentage of people at highrisk of disease who takesecondary examination

67.0%

77.5 %

15% or lower

Decreasing rate of smokers

20.4%

18.1 %

Reduction of number of employeeswith long-term absences due tomental health reasons × absent days

9,555

11,8647,000
or lower

Under the Wacoal GENKI Project 2020, the company and employees are independently managing their health in partnership with the company. We have set
medium-term goals for this initiative to build an energized and healthy corporate
environment.
There are numerical targets for countermeasures against lifestyle diseases,
cancer, and mental health problems. The company, the Wacoal Health Insurance
Union, and Labor Union are working together in partnership to implement various
measures toward the achievement of these numerical targets. While we have had
mixed progress so far, we expect significant outcomes to emerge from our efforts
in various areas, including the expansion of opportunities to undergo healthexaminations.
Initiatives to achieve our targets will include increased efforts to encourage
employees to undergo health examinations, the extension of awareness-raising
activities to include outside workers, and the expansion of no-smoking hours andthe establishment of no-smoking days. We will also enhance employee health literacy, raise employee awareness, and create an environment to support organized
health management initiatives.
In the previous fiscal year, we continued to support activities that enable people to improve their health while having fun. We also introduced the “health mileage” system, which allows employees to earn points that can be redeemed for
products by achieving lifestyle improvement challenges that they set for themselves. Another focus was health education. We held a variety of seminars, including a uterine cancer seminar presented by a gynecologist, and cancer seminars byoutside medical experts. We also took steps to make the seminars more accessible to employees by holding them both within and outside of working hours.
As a result of these initiatives, the Ministry of Economy, Trade and Industry(METI) and the Tokyo Stock Exchange (TSE) recognized Wacoal in its “Health &Productivity Stock” category for the second straight year.

Wacoal Selected for“Health & Productivity Stock”
for Two Straight Years
Every year the Ministry of Economy, Trade andIndustry (METI) and the Tokyo Stock Exchange(TSE) select companies that enhance corporate
value through employee health management initiatives. Wacoal has achieved this designation for two
consecutive years.
Under the Wacoal Health Declaration ofNovember 2015, we actively help our employees tomanage their health. Senior management has taken
responsibility for creating a good environment for
wide-ranging health maintenance and improvement
activities, including breast and uterine cancer
examinations for female employees.

51

Financial Section

Eleven-Year Financial Summary
Wacoal Holdings Corp.: Key Consolidated Financial Data

2017

2016

2015

Performance
Net sales
Cost of sales% of net sales
Selling, general and administrative expenses% of net sales
EBITDA
Operating income% of net sales
Income before income taxes and equity in net income of affiliated companies
Net income attributable to Wacoal Holdings Corp.
Return on equity (ROE)
Return on assets (ROA)

195,881
92,95047.5%
91,866
46.9%
16,097
11,065
5.6%
16,56912,5255.5%
5.6%

202,91795,901
47.3%
93,15145.9%
18,68013,865
6.8%
14,957
11,1594.9%
5.0%

191,765
90,722
47.3%
87,94045.9%
12,156
7,082
3.7%
11,342
8,444
3.9%
4.0%

Financial Condition
Total assets
Total shareholders’ equity
Net property, plant and equipment
Inventories

294,958
227,568
55,28843,822292,854
224,374
53,93844,445300,272
228,857
49,18842,893

Cash FlowsNet cash provided by operating activities
Net cash provided by (used in) investment activities
Net cash provided by (used in) financing activities
Free cash flow
Cash and cash equivalents

16,351(3,032)(13,055)
13,31933,995

12,635(11,407)(4,547)1,228
34,05914,337164(8,391)
14,501
38,410

7,445
5,032

8,978
4,815

4,478
5,074

1,658.53
90.13
36.00
4,225
2.6%
39.9%
15.24
0.83

1,592.90
79.23
33.00
4,648
2.5%
41.7%
16.95
0.84

1,624.93
59.95
30.00
3,944
2.2%
50.0%
22.55
0.83

118,389
48,423
11,107
17,962

120,570
51,869
11,19019,288112,203
48,107
11,626
19,829

6,959
3,055
374
677

8,810
4,433
258
364

8,444
4,776
(6,296)
158

21,13920,65518,986

Investment
Capital expenditures
Depreciation and amortization
Per Share of Common Stock
Shareholders’ equity per share
Net income per share attributable to Wacoal Holdings Corp.
Dividends per share
Total dividend amount
Dividend yield
Dividend payout ratio
Price earnings ratio (Times)
Price book-value ratio (Times)
Operating Segment Information
Net sales:
Wacoal business (Domestic)
Wacoal business (Overseas)
Peach John business
Other
Operating income (loss):
Wacoal business (Domestic)
Wacoal business (Overseas)
Peach John business
Other
Employees
Employees within group (Persons)* Consolidated financial statements for the fiscal year ended March 31, 2011, and prior fiscal years have been retroactively revised in accordance with the changes of the settlement
dates for certain consolidated subsidiaries that took place in the fiscal year ended March 31, 2012.
* In accordance with changes in segment carried out in the fiscal year ended March 31, 2011, segment information for the fiscal year ended March 31, 2010, and prior fiscal years has
been omitted.

52

For more details on our financial indicators, please see our website.

http://www.wacoalholdings.jp/en/ir/financial/index.html(Millions of yen, except per share amounts)

2014

2013

2012

2011

2010

2009

2008

2007

193,781
91,00847.0%
88,91345.9%
18,896
13,8607.2%
15,033
10,1065.2%
5.7%

180,230
84,54846.9%
84,331
46.8%
13,387
8,499
4.7%
10,940
7,880
4.4%
4.6%

171,897
81,891
47.6%
79,62946.3%
15,037
10,377
6.0%
10,207
6,913
4.1%
4.7%

165,548
81,65949.3%
77,716
46.9%
9,086
4,401
2.7%
3,927
2,785
1.6%
1.8%

163,548
80,101
49.0%
78,524
48.0%
8,594
3,829
2.3%
3,155
2,475
1.5%
1.4%

170,960
83,87949.1%
77,24845.2%
14,377
9,833
5.8%
7,329
5,062
2.9%
3.2%

165,201
82,94350.2%
68,921
41.7%
17,22913,337
8.1%
14,153
4,845
2.6%
5.8%

166,41084,65850.9%
68,856
41.4%
16,631
12,896
7.7%
13,920
9,029
4.8%
5.7%

271,988
205,106
48,97840,211

254,536
186,646
49,66537,807221,098
171,496
49,07832,847215,276
167,480
49,73430,956

222,889
171,860
51,804
32,103

213,827
166,767
49,16531,153240,053
184,128
51,18530,020250,266
193,278
52,78230,1998,949
1,658(5,554)
10,60730,65812,309(23,520)
5,379(11,211)24,514

10,060(3,467)(2,824)
6,593
29,985

10,441(703)(4,965)
9,738
26,316

9,463(3,573)(5,363)5,890
22,3288,202(4,759)(7,448)3,443
21,954

14,2493,709(9,400)17,95827,0699,339(1,185)(8,404)
8,154
19,816

3,464
5,036

3,330
4,888

3,554
4,660

3,323
4,685

5,736
4,765

4,216
4,544

2,788
3,892

2,536
3,735

1,456.32
71.75
33.00
3,944
3.1%
46.0%
14.68
0.72

1,325.19
55.95
28.00
2,817
2.8%
50.0%
18.11
0.76

1,217.57
49.08
28.00
2,824
2.9%
57.0%
19.99
0.81

1,189.08
19.73
20.00
3,511
1.9%
101.4%
53.12
0.88

1,215.17
17.51
20.00
3,584
1.7%
114.2%
66.70
0.96

1,187.37
35.57
25.00
3,093
2.2%
70.3%
32.05
0.96

1,284.54
34.29
25.00
2,878
1.7%
72.9%
42.96
1.15

1,374.89
63.18
22.00
2,878
1.5%
34.8%
23.63
1.09

118,085
43,636
12,482
19,578

115,657
23,081
11,972
26,444

115,870
21,396
13,836
20,795

110,856
20,01011,575
23,107

9,284
4,037
83
456

8,423
1,430
(2,701)
947

8,172
1,440
529
236

5,620
1,322
(2,879)338

18,912

18,65016,52416,013

15,686

14,382

13,562

13,39753

Management’s Discussion and Analysis
Wacoal Holdings Corp. and Subsidiaries

Financial information contained in this section is based on the consolidated financial statements included in this integrated report, prepared inaccordance with generally accepted accounting principles in the UnitedStates (U.S. GAAP). The Wacoal Group consists of one holding company (the Company), 57 subsidiaries, and eight affiliates.
The Wacoal Group manufactures, wholesales, and—for certain
products—retails women’s foundation garments and lingerie, nightwear,
children’s underwear, outerwear and sportswear, hosiery, and other textile products. Other operations include restaurant businesses, culturaland service-related operations, and the construction of interiors forcommercial premises.

Share of Net Sales

OVERVIEW.........................................................................................
We are a leading designer, manufacturer, and marketer in Japan of
women’s intimate apparel, with the largest share of the Japanesemarket for foundation garments and lingerie. Foundation garments (primarily brassieres and girdles) and lingerie (primarily slips, bra-slips, andwomen’s briefs) accounted for 74.1% of our consolidated net sales forfiscal year 2017. We also design, manufacture, and sell nightwear, children’s underwear, outerwear, sportswear, hosiery and other apparel andtextile goods, and provide several other services.

Nightwear
4.7%

2017

Other textile products andrelated products
4.8%

Hosiery
1.1%

Other
5.8%

Outerwear andsportswear
8.8%Children’s
underwear
0.7%

Foundation garments
and lingerie
74.1%• SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Our selling, general and administrative expenses principally consist of
employee compensation and benefit expenses and promotional
expenses, such as advertising costs and renovation costs. Other selling, general and administrative expenses include shipping and handlingcosts, payment fees (including outsourcing payments), and rental payments for directly managed retail stores.

• NET SALES

We principally generate revenues from sales of innerwear (consisting offoundation garments and lingerie, nightwear, and children’s underwear),outerwear and sportswear, hosiery, textile goods, and other products.
For fiscal year 2017, approximately 78% of the net sales of the
Wacoal business (domestic) (the net sales of which account for approximately 60% of our consolidated net sales) were apparel sales made on
a wholesale basis to department stores, general merchandisers, andother general retailers and approximately 20% were apparel sales madethrough directly managed retail stores, catalog sales, and the Internet.
Sales from our other businesses (which include cultural products andother services) constituted the remaining, approximately 2%, of the
Wacoal business’s (domestic) net sales for fiscal year 2017.
Over the past five fiscal years, fluctuations in our sales have typically reflected changes in unit volume, as average unit prices have generally remained stable during this period.

• KEY INDUSTRY TRENDS

We believe that the following have been key trends in our industry
during the last two fiscal years:( i )	In the domestic innerwear market, there was no sign of recovery inconsumer spending due to the continued impact of a decline in
response to the consumption tax increase, while the female population is declining. The outlook for recovery in consumer spending
remains uncertain despite the postponement in April 2017 of a consumption tax increase. In addition, a slowdown is seen in consumption by inbound tourists, while the number of tourists visiting
Japan is increasing. With intensifying competition within the industry, the environment remains very difficult as consumer spending
continues to be weak.
(ii)	As for sales channels, the amount of purchases has increased at
locations other than our traditional sale spaces such as department• COST OF SALES

Our cost of sales arises principally from material and manufacturingcosts related to the production of our apparel products.

Net Sales to External Customers (and Percentage) by Product Category
Millions of yen

2017

2016

2015

Innerwear
Foundation garments and lingerie¥145,188

74.1%¥151,166

Nightwear

9,154

4.7%

10,098Children’s underwear

1,429

0.7%

1,386

155,77179.5%

162,650

Outerwear and sportswear

17,1898.8%

Hosiery

2,235

1.1%

Textile products

9,346

Other

11,340Total¥195,881

Total innerwear

54

74.5%

¥142,681

74.4%

5.0%

9,514

5.0%

0.7%

1,373

0.7%

80.2%

153,568

80.1%

19,0749.4%

16,227

8.4%

2,178

1.1%

2,437

1.3%

4.8%

7,161

3.5%

7,616

4.0%

5.8%

11,854

5.8%

11,9176.2%

100.0%¥202,917

100.0%¥191,765

100.0%

Financial Section

stores, general merchandise stores and specialty stores for underwear. Our sales channels have changed and diversified as seen ingrowing sales online, at directly managed retail stores and casual
apparel shops. On the other hand, with respect to directly managed
retail stores, certain competitors have focused on profitability bylimiting shop openings and closing underperforming stores.
(iii)	Retailers and specialty store retailers of private label apparel havebeen making efforts to increase the number of customer contacts
through direct retail sales, website sales, and other online sales,
and to integrate direct retail sales with website sales (realization ofomni-channel services). General merchandise stores have also
strengthened the development of their “private brand” merchandise. Manufacturers have made efforts to strengthen direct sales
and OEM and to develop new sales channels.
(iv)	These manufacturers and other competitors have produced lower
priced women’s innerwear garments by sourcing fabric and producing garments in lower cost countries in Asia, but due to increasing raw material prices and rising costs associated with increases inprocessing fees, they have come to focus on improving the value-added components of products.
		
During the last two fiscal years, which are the reporting periodsof the audited consolidated financial statements included in thisreport, we made efforts to cultivate new customers and to achievecustomer optimization in the domestic market, to rebuild ourGroup’s production base, and to expand sales and profits in theoverseas market in order to address the above trends. With regard
to the domestic market, we implemented initiatives to respond tomarket diversification and optimization, which include strengthening
our geographically-focused sales system, achieving synergies fromthe acquired swimwear business, realizing omni-channel services,
reducing costs related to our retail business, and building business
infrastructure. With respect to our production base, we have established a new factory in Myanmar and two new raw materials manufacturing companies in Thailand. We aim to build a global
production base by aligning these newly established companies
and our existing manufacturing companies in the ASEAN region.
With regard to the overseas market, in the United States, Wacoal
America Inc. is expanding sales from e-commerce websites andour exports to surrounding countries. In Europe, we have completed business restructuring. In our business in China, we havecontinued to make efforts to improve profitability, while our businesshas been weak due to the deteriorating market conditions in China.
In addition, we have developed our business and initiated sales inIndia. Despite these management initiatives and sales efforts, ourconsolidated business results for the current fiscal year were as follows: ¥195,881 million in sales, a decrease of 3.5% as comparedto the previous fiscal year, due to an increase in retirement benefit
expenses, recognition of expenses in connection with the openingof a new building and the business restructuring expenses in
Europe, and the impact of foreign exchange rates; ¥11,065 million
in operating income, a decrease of 20.2% as compared to the previous fiscal year; and ¥16,569 million in income before income
taxes and equity in net income of affiliated companies, an increaseof 10.8% as compared to the previous fiscal year, due to gain onsale of fixed assets (land).

strengthen our competitiveness and (v) to attempt to expand our business portfolio. Also, we intend to improve our corporate value by implementing an efficient capital policy.
During the current fiscal year, we steadily focused on increasing the
productivity of our wholesale business and the profitability of our retailbusiness in Japan, as well as improving and strengthening the foundations of our overseas business. While the domestic market continues toexperience a slowdown in consumption of luxury goods and a series ofclosings of general merchandise stores, we moved forward with thedevelopment of products with new features and the standardization of
goods for campaigns implemented at our directly managed stores. With
respect to our overseas business, while respecting the local management, we continued to improve the value of our brands by providing
high-end goods backed by craftsmanship and quality and to strengthen
our ability to respond to the immensely growing e-commerce market.
Also, two material manufacturers in Thailand and one sewing company
in Myanmar commenced operations, enabling us to upgrade the infrastructure for the stable supply of our high-quality and cost-competitive
materials/products.
As a result of the above, our consolidated sales for the current
fiscal year fell below the consolidated sales for the previous fiscal year
due to tighter management of inventories by our clients, even though
the over-the-counter sales of our domestic business were steady.
Sales from our overseas business in Europe on a local currency basis
exceeded such sales for the previous fiscal year, mainly due to thefavorable effect of the depreciation of the British pound. However, sales
from our business in the United States and China remained unchanged
from the previous fiscal year. As a result, on a yen converted basis,consolidated sales on the Japanese yen basis fell below the consolidated sales for the previous fiscal year due to the inflation of theJapanese yen.
Although our consolidated operating income fell much below theconsolidated operating income for the previous fiscal year due toincreases in selling, general and administrative expenses which resulted
from our domestic business and expenses related to the liquidation proceedings by our French subsidiary, it exceeded our initial plan for thecurrent fiscal year. On the other hand, income before income taxes andequity in net income of affiliated companies largely exceeded that forthe previous fiscal year due to gain on sale of fixed assets (land) for the
first quarter of the current fiscal year.
As a result of the above, with respect to our consolidated businessresults for the fiscal year ended March 31, 2017, the consolidated operating income margin was 5.6%, and the consolidated ROE (i.e., returnon Wacoal Holdings Corp. shareholders’ equity for the current fiscal
year) was 5.5%.
Net sales:¥195,881 million(down 3.5% compared to fiscal 2016)

Operating income:¥11,065 million(down 20.2% compared to fiscal 2016)

Income before income taxes
and equity in net income ofaffiliated companies:¥16,569 million(up 10.8% compared to fiscal 2016)

Net income attributable to
Wacoal Holdings Corp.:¥12,525 million(up 12.2% compared to fiscal 2016)

SUMMARY OF BUSINESS RESULTS...............................................
• SUMMARY OF BUSINESS OPERATIONSOur Group entered the first year of our three-year mid-term plan (fromfiscal year 2017 to fiscal year 2019), and we have been making efforts
to improve profitability and business efficiency in line with the five elements of the basic policies, which are (i) to improve the infrastructure of
our Group management base as a foundation, (ii) to ensure profits fromour domestic business, (iii) to achieve further growth of our overseas
business, (iv) to achieve Group synergies through collaboration and to

Cost of Sales

Our cost of sales decreased 3.1% from ¥95,901 million for fiscal year
2016 to ¥92,950 million for fiscal year 2017. This decrease was mainly
due to cost of sales from our foreign consolidated subsidiaries that
decreased due to the appreciation of the Japanese yen, in addition to adecrease in cost of sales caused by sales fluctuations. Cost of sales asa percentage of net sales for fiscal year 2016 and fiscal year 2017 were
47.3% and 47.5%, respectively.

55

Selling, General and Administrative Expenses

Our selling, general and administrative expenses decreased 1.4% from
¥93,151 million for fiscal year 2016 to ¥91,866 million for fiscal year
2017. This decrease was mainly due to selling, general and administrative expenses at our foreign consolidated subsidiaries that were deflatedby the appreciation of the Japanese yen.
Operating Margin

Our operating margin decreased 1.2% from 6.8% for fiscal year 2016 to
5.6% for fiscal year 2017 as selling, general and administrative
expenses rose as a percentage of the total cost. This increase wasmainly due to recognition of expenses in connection with the opening
for business at our new building, IT related expenses, and expenses
related to the liquidation proceedings for our foreign consolidated
subsidiary.
Other Income/Expenses

We recorded ¥5,504 million as other income, an increase of ¥4,412 million, as compared to ¥1,092 million of other income recorded for fiscal
year 2016. This increase was mainly due to ¥3,770 million of gain onsale of property, plant and equipment, the gain on sale and exchange ofmarketable securities and investments, which increased from fiscal year
2016.
Net Income Attributable to Wacoal Holdings Corp.

Net income attributable to Wacoal Holdings Corp. for fiscal year 2017was ¥12,525 million, an increase of ¥1,366 million as compared to thatfor fiscal year 2016 as a result of an increase in other income, despite
an increase in tax expenses.
• SUMMARY OF OPERATIONS BY OPERATING SEGMENT
Wacoal Business (Domestic)

With respect to our Wacoal brand business, sales of brassiere productswith new features, which provide comfort to wearers, increased steadily,and sales of our pajama products, of which design focuses on comfort
for sleep, increased by winning consumers. On the other hand, sales of
our luxury-line products and underwear products were poor due to factors such as a slowdown in the consumption of luxury goods, adecrease in average spending per inbound tourist, the impact of awarm winter and the absence of the temporary demand increase we
experienced in the previous fiscal year. As a result, overall sales fell
below the overall sales for the previous fiscal year.
With respect to our Wing brand business, the shop sales of brassiere products for the whole current fiscal year were steady due to thestrong sales of our spring/summer line of products. Also, our brand forthe junior generation, the “Pulili” business, largely exceeded the results
for the previous fiscal year due to the increase in the number of retailers
selling this brand. However, as the sales of bottoms products were poor
as compared to the sales for the previous fiscal year and general merchandise stores increasingly elected to close unprofitable stores andreduce inventories, overall sales fell below the overall sales for the previous fiscal year.
In our retail business, sales of our directly managed retail store,“AMPHI,” and our outlet store, “Factory Store,” remained unchanged
from the previous fiscal year, despite a decrease in the number ofbuying customers, due to our success in updating our sales approach,including introducing in-store discounts that resulted in an increase inaverage spending per customer. However, due to efforts such as the
expansion of sales of our common products for the campaign“BRAGENIC,” overall sales exceeded the overall sales for the previous
fiscal year.
In our wellness business, although sales of our sports bra products
under the “CW-X” brand were steady, sales of functional sport tights
were poor at both sport specialty chain stores and outdoor specialty
stores, due to increased competition in the market. Export sales for themarket in the United States were also weak. As a result, overall sales fell
below the overall sales for the previous fiscal year.
In our catalog sales business, although there was a turnaround insales in the fourth quarter of the current fiscal year due to our campaign
using the SNS “LINE,” review of the number of issues of catalogs published and expansion in demand through improved communications
with member customers, overall sales for the whole current fiscal year
fell below the overall sales for the previous fiscal year due to the underperformance of our catalog products from the first quarter of the current
fiscal year to the third quarter of the current fiscal year.
With respect to Ai Co., Ltd., although sales from our e-commerce
website focusing on swimwear grew steadily, overall sales dropped
compared to overall sales for the previous fiscal year, due to the underperformance of our seasonal stores opened only during a period ofpeak demand, as well as the reduction of sales space at department
stores and the increased returns of our products resulting from poorly-functioning e-commerce websites managed by other companies.
As a result, sales attributable to our “Wacoal Business (Domestic)”
segment decreased 1.8% from such sales for the previous fiscal year.
Operating income decreased 21.0% from the previous fiscal year due toan increase in retirement benefit expenses at Wacoal Corp., recognitionof one-time expenses and depreciation expenses in connection with the
opening for the business at the New Kyoto Building, and an increase in
tax as a result of the introduction of pro-forma basis taxation.
Net sales:¥118,389 million(down 1.8% compared to fiscal 2016)

Operating income: ¥6,959 million(down 21.0% compared to fiscal 2016)
SG&A Expenses / % of Net Sales(¥ billion / %)SG&A Expenses

Wacoal Business (Overseas)% of Net Sales

2017
2016
2015
2014
2013

46.9

91.9

45.9

93.2

45.9

87.9

45.9

88.9

46.8

56

84.3

With respect to Wacoal America, Inc., department-store sales on a local
currency basis were weak due to the shifting focus in the retail environment in the United States from physical store sales to e-commerce
sales, a trend that has become more prominent. On the other hand,overall sales on a local currency basis remained unchanged from theprevious fiscal year, as sales from our own e-commerce website
increased significantly and sales of our products through e-commerce
websites managed by department stores and other companies grew
substantially. The gross profit rate improved because discounts weredecreased by our pricing policy and also due to a higher ratio of e-commerce sales. However, operating income on a local currency basis fell
below the operating income for the previous fiscal year due to increasesof expenses associated with strengthening of e-commerce sales,
increases of labor costs in healthcare costs as a result of increases inFinancial Section

medical insurance premiums, and impact of expenses from closure ofour directly managed outlet stores that were underperforming.
With respect to sales on a local currency basis for Wacoal Europe(the United Kingdom), sales at department stores in the United
Kingdom were steady and e-commerce sales in North America werestrong. Also, sales from our plus-size brand “Elomi” greatly exceeded
sales for the previous fiscal year in various countries including Europe,
North America and Australia. Although sales were significantly andnegatively impacted by the “Huit” brand business, which was liquidated, overall sales exceeded the overall sales for the previous fiscal
year due to the currency appreciation in non-British pound markets. In
terms of operating income on a local currency basis, although grossprofit increased due to increased sales, our overall operating income
largely fell below the operating income for the previous fiscal year due
to the impact of expenses related to the liquidation proceedings for
our French subsidiary and increased expenses under IT-related
investments.
With respect to our business in China, as a result of consumers
becoming more sophisticated in balancing quality and service against
price, sales of “Wacoal” brand products were poor and over-thecounter sales at department stores grew at a stagnant pace. However,
e-commerce sales were steady due to strong sales on the online shopping festival day called “Double Eleven.” As a result, although overallsales on a local currency basis for the first half of the fiscal year were
weak, the overall sales on a local currency basis for the whole current
fiscal year remained unchanged from the previous fiscal year. Operating
income on a local currency basis exceeded the operating income forthe previous fiscal year due to the closure of underperforming storesand suspension of opening of shops for the “LA ROSABALLE,” ourbrand targeting the middle-class consumers.
As a result of the above, and due to the impact of foreign exchange
rates caused by the appreciation of the Japanese yen during the current fiscal year, the overall sales attributable to our “Wacoal Business(Overseas)” segment on the Japanese yen basis decreased 6.6% andthe operating income decreased 31.1% compared to the results for theprevious fiscal year.
Net sales:¥48,423 million(down 6.6% compared to fiscal 2016)

Operating income: ¥3,055 million(down 31.1% compared to fiscal 2016)
Peach John BusinessWith respect to Peach John Co., Ltd., retail sales at stores exceeded
retail sales from mail-order catalogs for the current fiscal year. This isdue to strong sales of our domestic directly managed stores, especiallyat the existing stores located in Tokyo. We also experienced significant
growth in sales through e-commerce websites managed by other companies for the whole current fiscal year. Overseas subsidiaries in Hong
Kong and China both experienced positive growth. On the other hand,because the sales of outerwear from domestic mail order catalogs fellsignificantly below such sales for the previous fiscal year, the results forthe overall sales remained unchanged from the previous fiscal year. In
terms of operating income, as the gross profit rate improved due tofavorable foreign exchange rates, as well as reduction in production
cost for direct mail sales catalogs and our Chinese subsidiaries returning to profitability, operating income largely exceeded the operating
income for the previous fiscal year.
Net sales:¥11,107 million(down 0.7% compared to fiscal 2016)

Operating income: ¥374 million(up 45.0% as compared to fiscal 2016)

Other

With respect to the business of Lecien Corporation (“Lecien”), sales of
the innerwear business, which is its main business division, were poor
for the whole current fiscal year, as sales during the fall and winter werepoor, while the “brassiere for school club activities” campaign conducted during the fourth quarter of the current fiscal year proved to be
successful. The art & hobby business, which mainly deals in handcraft
items, performed poorly, as the anticipated repeat orders from North
America did not materialize. As a result, overall sales from Lecien fell
below the overall sales from the previous fiscal year. However, withrespect to operating income, we moved to surplus from deficit for theprevious fiscal year, due to the increased gross profit rate as a result offavorable foreign exchange rates, as well as increases in unit prices of
innerwear products and a shift towards sales of high-profit products inboth the innerwear and art & hobby businesses.
With respect to Nanasai Co., Ltd. (“Nanasai”), while the rental business performed well in areas such as seasonal shops and events, its
business aimed at permanent stores such as department stores performed poorly. Sales from the construction business fell below the sales
for the previous fiscal year due to continued postponement by ourvalued clients of sales space renovation projects because of worsenedbusiness confidence in the clothing industry. The poor sales of the sales
business were the result of postponement of construction projects. As aresult, overall sales from Nanasai fell below the overall sales for the previous fiscal year. Operating income fell below the operating income forthe previous fiscal year in spite of our efforts to reduce operating
expenses, due to the decrease in the gross profit rate caused byincreases in rental business costs and the increase in the percentage of
low-profit construction projects.
As a result of the above, overall sales attributable to our “Other”
segment decreased 6.9% from the overall sales for the previous fiscal
year, and operating income increased 86.0% from the operating income
for the previous fiscal year.
Net sales:¥17,962 million(down 6.9% compared to fiscal 2016)

Operating income: ¥677 million(up 86.0% compared to fiscal 2016)• SUMMARY OF OPERATIONS BY REGIONJapan

The summary of operations of this segment (Japan) reflects the resultsof net sales and operating income attributable to “(i) Wacoal Business(Domestic)” under the operation segment above and the results under“(iii) Peach John Business” and “(iv) Other” segments that are attributable to our domestic business.
As described in the summary of operations by operating segment
above, both net sales and operating income attributable to Wacoal
Corp. (which accounts for a large portion of this segment) fell below theresults for the previous fiscal year.
Sales of Peach John Co., Ltd. remained unchanged from the previous fiscal year. In the current fiscal year, while we experienced significant growth in our storefront business due to strong sales of our directly
managed stores, net sales were weak, as a result of weak sales frommail-order catalogs. Operating income largely exceeded the results forthe previous fiscal year as the gross profit rate improved due to favorable foreign exchange rates.
As described above, sales of Lecien fell below the results for the previous fiscal year due to the poor results of the innerwear and the art &hobby businesses. However, we achieved operating income in improvement from operating loss for the previous fiscal year, due to a significant
improvement in the gross profit rate from favorable foreign exchange
rates, as well as a shift towards sales of highly profitable products.
As a result of the above, both net sales and operating income fell
below the results for the previous fiscal year.

57

Net sales:

Europe/North America¥147,061 million(down 2.4% compared to fiscal 2016)

Operating income: ¥7,738 million(down 16.9% compared to fiscal 2016)
Asia/Oceania

With respect to our business in China, as described in the summary ofoperations by operating segment, sales on a local currency basis
remained unchanged from the previous fiscal year, and operating
income on a local currency basis exceeded the results for the previous
fiscal year.
With respect to our business in Hong Kong, while sales on a local
currency basis of “Wacoal” brand products were poor due to changes
in the sale space as a result of renovations at major department stores,
sales of “Peach John” brand were strong due to the strong results ofour flagship stores, among other things. As a result, sales of our business in Hong Kong remained unchanged from the previous fiscal year.
Operating income fell below the results for the previous fiscal year due
to a higher sales ratio of Peach John brand products at low profitability
levels and increases in labor costs as a result of an increase in thenumber of sales representatives.
This Asia/Oceania segment includes sales in Oceania and Israel inwhich our subsidiaries of Wacoal Europe Ltd. develop businesses.
Sales on a local currency basis from Oceania and Israel significantly
exceeded the results for the previous fiscal year due to the growing
sales from “Wacoal” brand and our plus-size brand “Elomi.” The
increased gross profit rate as a result of the depreciation of the British
pound had a positive impact on operating income. In addition, we
achieved operating income with respect to Israel, in improvement fromoperating loss for the previous fiscal year.
Also, two material manufacturers in Thailand and one sewing company in Myanmar commenced operations from the current fiscal year,
and sales and operating losses, on the Japanese yen basis, from these
operations have reached approximately ¥3,200 million and ¥300 million,
respectively.
As a result of the above, both net sales and operating income, on
the Japanese yen basis, have exceeded the results for the previous
fiscal year.
Net sales:¥19,187 million(up 7.2% compared to fiscal 2016)

Operating income: ¥1,758 million(up 27.3% compared to fiscal 2016)

Net sales:

LIQUIDITY AND CAPITAL RESOURCES...........................................
Our current policy is to fund our cash needs from cash flows from operations, which allows us to secure working capital, make capital investments, and pay dividends without relying on substantial borrowings orother financing from outside of our Group companies. As of March 31,
2017, we had credit facilities at financial institutions totaling ¥34,893
million, and the unused lines of credit for short-term financing amounted
to ¥7,949 million. Of this credit, ¥2,500 million is available to Wacoal
Holdings Corp., ¥2,418 million is available to Wacoal Europe Ltd.,¥2,717 million is available to Wacoal Service Co., Ltd., and ¥235 million
is available to Nanasai.
In general, most of our credit facilities have automatically renewed
terms, and we are not aware of any issues with respect to any of ourlenders that could cause these facilities to become unavailable. Even if
any of our subsidiaries loses access to funds from our credit facilities,
we believe that it is possible for other companies in our Group to provide any necessary funds. Our borrowing requirements are not affectedby seasonality.
We are not aware of any restrictions on the transfers of funds froma subsidiary to a parent company in the form of a cash dividend. We
believe our working capital is adequate for our present requirements
and for our business operations in the short to long term.

Capital Investment(¥ billion)(¥ billion)

2017

2017
16.4
12.6

2015

2013

8.9

9.0
4.5

2014
2013

12.3

7.4

2016
2015

14.3

2014

¥29,633 million(down 13.7% compared to fiscal 2016)

Operating income: ¥1,569 million(down 50.6% compared to fiscal 2016)

Net Cash Provided by Operating Activities

2016

58

As described in the summary of operations by operating segment, salesof Wacoal International Corp. on a local currency basis remained
unchanged from the previous fiscal year, and operating income on a
local currency basis fell below the results for the previous fiscal year.
Sales of Wacoal Europe Ltd. on a local currency basis exceeded
the results for the previous fiscal year due to steady sales at department
stores in the United Kingdom, strong e-commerce sales in North
America, as well as strong sales at specialty stores in the Eurozone
area. However, operating income fell significantly below the results forthe previous fiscal year due to the impact of expenses related to the liquidation proceedings for our French subsidiary.
As a result of the above and due to the impact of foreign exchange
rates caused by the appreciation of the Japanese yen, both net sales
and operating income, on the Japanese yen basis, fell significantly
below the results for the previous fiscal year.

3.5
3.3

Financial Section

CASH FLOW STATUS........................................................................
The balance of cash and cash equivalents at the end of fiscal year 2017was ¥33,995 million, a decrease of ¥64 million as compared to the endof the previous fiscal year.
• CASH FLOW PROVIDED BY OPERATING ACTIVITIESCash flow provided by operating activities during the fiscal year 2017was ¥16,351 million, an increase of ¥3,716 million as compared to theprevious fiscal year. It is the result after the net income of ¥12,648 million was adjusted for depreciation expenses, deferred taxes andchanges in assets and liabilities.
• CASH FLOW USED IN INVESTING ACTIVITIESCash flow used in investing activities during the fiscal year 2017 was¥3,032 million, a decrease of ¥8,375 million as compared to the previous fiscal year, due to capital expenditures.
• NET CASH USED IN FINANCING ACTIVITIESCash flow used in financing activities during the fiscal year 2017 was¥13,055 million, an increase of ¥8,508 million as compared to the previous fiscal year, due to the cash dividend payments and repurchase oftreasury stock.

SUMMARY OF CAPITAL INVESTMENT, ETC...................................
The amount of capital investment for the fiscal year ended March 31,
2017, was ¥7,445 million. A majority of our capital investment was usedin our new construction project of a business-use building, the information
system investment for our domestic subsidiaries, and maintenance andrepair work implemented for the real properties held by the Company.
The amounts of capital investment made in Wacoal Business(Domestic), Wacoal Business (Overseas), Peach John Business, andOther were ¥5,233 million, ¥1,799 million, ¥355 million, and ¥58 million,
respectively.
DIVIDEND POLICY.............................................................................
Our basic policy on profit distribution to shareholders is to make stable
distributions based on consideration of our consolidated performance,
while seeking to increase our enterprise value through active investment
aimed at higher profitability and to increase net income per share.
Based on such a policy, we plan to distribute the year-end dividend of ¥36 per share as a distribution of earnings for the current
fiscal year.
As for retained earnings, with the aim of improving our corporate
value, we have actively invested in expanding new points of contact
with consumers for our domestic business and investing in our overseas businesses. We also plan to use our retained earnings in our strategic investments for maintaining competitiveness and reinforcing
growth. With these efforts, we seek to benefit our shareholders by
improving future profitability. We also intend to flexibly acquire treasury
stock, and we will try to improve capital efficiency and return profits toour shareholders.
In addition, although we have paid only year-end dividends so far, inorder to enhance the opportunity to return profits to the Company’s
shareholders, our Articles of Incorporation have been amended toauthorize the Company to make interim dividends as stipulated in
Paragraph 5, Article 454 of the Companies Act, by a resolution of the69th Ordinary General Meeting of Shareholders held on June 29, 2017.
Accordingly, our basic policy is to distribute earnings twice a year in
the form of interim and year-end dividends and the Board of Directors isthe decision-making body for the distribution of earnings.
We also provide that the Company may distribute earnings subject
to the resolution of the Board of Directors pursuant to the provisions ofParagraph 1, Article 459 of the Companies Act.

RESEARCH AND DEVELOPMENT....................................................
Our research and development activities are mainly conducted by our
Human Science Research Center to achieve harmony between thehuman body and clothing and to support better product making.
Since 1964, we have been conducting research into the female
body in order to accurately understand the Japanese woman’s physique. In particular, we have developed a silhouette analysis system andintroduced a three-dimensional measuring system. We are also working
on an even more advanced measurement of sensory comfort. Our
research and development activities focus on addressing the proportional, physiological, and mental aspects of garment design. One of ourmost important research results was the enrichment of our research on
sensory comfort through our participation in a project led by the Ministryof Trade and Industry (presently the Ministry of Economy, Trade andIndustry) from 1995 to 1998. Based on this research, we have been
focusing on developing new products that are not only comfortable forthe wearer, but also have a positive physiological effect based on thebasic study of three factors, which are pressure, heat, and touch. In
2005, we developed and created a new market for our breakthroughStyle Science series products, which support the creation of a healthy
and beautiful body by changing the idea of everyday walking to walking
for exercise. In 2010, we conducted an analysis and announced principles on the physiological changes associated with the aging period
from a person’s 20s to their 50s. We also strengthened the development of new products coping with aging and have been working on
developing new functional products based on the lifestyle habits ofpeople as they undergo small physical changes associated with aging.
Our Human Science Research Center is promoting research anddevelopment that is based on a survey analysis of the body shapes andneeds of young customers, including customers at an age at which our
products are first introduced, and the senior generation.
We strengthened our research and development during the current
fiscal year by focusing on the concepts of “new beauty,” extending tobeauty in motion from standstill, “comfort” and “modeling.”
As a result of the above, we recorded ¥810 million for our researchand development during the fiscal year ended March 2017.
Our research and development activities cover a wide range of
research from basic research to product development, mainly of women’s innerwear. Therefore, it is difficult to relate each of these activities toa specific segment, and thus, we do not provide information regarding
research and development activities by segment.
In order to promote “the realization of an industry supporting
women with unbounded living beauty,” we will make efforts to enrichresearch and development activities that contribute to the improvementof customer satisfaction and corporate value based on the key concepts of beauty, comfort, and health. We will also work toward strengthening product appeal and developing new products or services that cangain support from and satisfy our customers.

59Consolidated Balance Sheets
Wacoal Holdings Corp. and Subsidiaries
Millions of yen
March 31, 2017 and 2016

Thousands of
U.S. dollars (Note 2)

2017

2016

2017

¥ 33,995¥ 34,059$ 305,134

2,722

2,131

24,432ASSETS
CURRENT ASSETS:

Cash and cash equivalents
Time deposits
Marketable securities (Notes 3, 19 and 20)

1,457

1,880

13,078Notes and accounts receivable (Note 17)

25,56326,936229,450

Allowance for returns and doubtful receivables (Note 4)(2,477)(2,229)(22,233)

Inventories (Note 5)

43,82244,445393,340

Deferred income taxes (Note 16)

4,049

3,832

36,343

Other current assets (Notes 17, 20, 21 and 23)

4,683

5,797

42,034

113,814

116,851

1,021,578

Land (Notes 9 and 20)

21,555

21,677

193,475

Buildings and structures (Notes 9 , 11 and 20)

72,66465,056652,222

Machinery and equipment (Note 20)

17,722

17,552

159,070

274

5,419

2,459

112,215

109,704

1,007,226(56,927)(55,766)(510,969)

55,28853,938496,257

Investments in affiliated companies (Note 6)

20,86820,713

187,308

Investments (Notes 3, 19 and 20)

59,84756,021

537,178

Goodwill (Notes 7 and 8)

16,071

17,911

144,251

Other intangible assets (Note 8)

11,84912,112

106,355

Prepaid pension expense (Note 12)

10,2878,145

92,335

Deferred income taxes (Note 16)

1,060

1,036

9,514

Total current assets

PROPERTY, PLANT AND EQUIPMENT:

Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment

OTHER ASSETS:

Other
Total other assets

TOTAL
See notes to consolidated financial statements.

60

5,874

6,127

52,724

125,856

122,065

1,129,665¥294,958¥292,854$2,647,500

Financial Section

Millions of yen

2017

2016

7,716

¥ 11,759

Thousands of
U.S. dollars (Note 2)

2017

LIABILITIES AND EQUITYCURRENT LIABILITIES:

Short-term bank loans (Note 9)¥$

69,258Notes and accounts payable:
Trade notes payable

1,438

1,431

12,907

Trade accounts payable (Note 17)

11,60512,017104,165

Other payables

6,185

6,106

55,516

Accrued payroll and bonuses

7,093

7,152

63,666

Income taxes payable (Note 16)

2,964

711

26,604

50

293

449

Current portion of long-term debt (Notes 9 and 19)
Other current liabilities (Notes 20 and 21)
Total current liabilities

4,008

4,874

35,97541,05944,343

368,540

185

95

1,661

LONG-TERM LIABILITIES:Long-term debt (Notes 9 and 19)
Liability for termination and retirement benefit (Note 12)

1,956

1,703

17,557

Deferred income taxes (Note 16)

17,862

15,588160,327

Other long-term liabilities (Notes 11, 12 and 16)
Total long-term liabilities

1,414

1,724

12,691

21,417

19,110192,236

13,26013,260119,020COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)

EQUITY:WACOAL HOLDINGS CORP. SHAREHOLDERS’ EQUITY (Note 14):

Common stock, no par value authorized, 500,000,000 shares in 2017 and 2016;
issued 143,378,085 shares in 2017 and 2016
Additional paid-in capital (Note 14)

29,707

29,686

266,646

Retained earnings

170,062

162,196

1,526,452

Foreign currency translation adjustments

1,212

5,177

10,878

Unrealized gain on securities

21,075

17,966

189,166(414)(1,035)(3,716)

21,873

22,108196,328(7,334)(2,876)(65,829)

227,568

224,374

2,042,617

4,914

5,027

44,107

232,482

229,401

2,086,724¥294,958¥292,854$2,647,500

Accumulated other comprehensive income (Note 15):Pension liability adjustments (Note 12)
Total accumulated other comprehensive income
Treasury stock, at cost - 6,167,211 shares and 2,519,350 shares in 2017 and 2016, respectively
Total Wacoal Holdings Corp. shareholders’ equity
NONCONTROLLING INTERESTS

Total equity

TOTAL

61

Consolidated Statements of Income
Wacoal Holdings Corp. and Subsidiaries

Years Ended March 31, 2017, 2016 and 2015

NET SALES (Note 17)
OPERATING COSTS AND EXPENSES:
Cost of sales (Notes 12 and 17)
Selling, general and administrative expenses (Notes 1, 10, 11, 12, 13, 20 and 22)
Impairment charges on goodwill (Notes 8 and 20)
Impairment charges on other intangible assets (Notes 8 and 20)
Total operating costs and expenses
OPERATING INCOME
OTHER INCOME (EXPENSES):Interest income
Interest expense
Dividend income
Gain (loss) on sale or exchange of marketable securities
and investments – net (Note 3)
Valuation gain (loss) on marketable securities and investments – net (Note 3)
Gain on sale of property, plant and equipment
Gain on bargain purchase (Note 7)
Gain on sales of paintings
Other – net (Notes 1, 15 and 21)
Total other income (expenses) – net
INCOME BEFORE INCOME TAXES AND EQUITY IN NET INCOME
OF AFFILIATED COMPANIESINCOME TAXES (Note 16):
Current
Deferred
Total income taxes
INCOME BEFORE EQUITY IN NET INCOME OF AFFILIATED COMPANIESEQUITY IN NET INCOME OF AFFILIATED COMPANIES (Note 6)
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO WACOAL HOLDINGS CORP.

Thousands of
U.S. dollars (Note 2)

2017¥195,881

2016¥202,917

2015¥191,765

2017$1,758,200

92,95091,866

95,901
93,151

834,306
824,576

184,816
11,065

189,052
13,86590,722
87,9404,845
1,176
184,683
7,082

1,658,882
99,318

157
(27)
1,176

161
(65)
1,057

142
(98)
1,011

1,409
(242)
10,556

441

90

1,585

3,958

1
3,770

(20)

(14)

9
33,839

173

(14)
5,504

(304)
1,092

1,405
229
4,260

(126)
49,403

16,56914,957

11,342

148,721

4,830
450
5,280
11,2891,359
12,648(123)¥ 12,525

3,442
1,288
4,730
10,227
1,245
11,472(313)¥ 11,159

5,223(1,920)
3,303
8,039
705
8,744
(300)
¥ 8,444

43,354
4,039
47,393
101,328
12,199113,527(1,104)$ 112,423

Yen

U.S. dollars (Note 2)

2017

2016

2015

Years Ended March 31, 2017, 2016 and 2015

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
DilutedMillions of yen

¥
¥

90.13
89.85

¥ 450.65¥ 449.27

¥
¥

79.23
79.00

¥ 396.15¥ 394.99

¥
¥

2017

59.95
59.80

$
$

0.81
0.81

¥ 299.77¥ 299.00

$
$

4.04
4.03

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31, 2017, 2016 and 2015

NET INCOME
OTHER COMPREHENSIVE INCOME, NET OF TAX (Note 15):
Foreign currency translation adjustments:
Amounts arising during the year
Reclassification adjustments
Total foreign currency translation adjustments
Unrealized gain (loss) on securities:
Amounts arising during the year
Reclassification adjustments
Total unrealized gain (loss) on securities
Pension liability adjustments:
Amounts arising during the year
Reclassification adjustments
Total pension liability adjustments
OTHER COMPREHENSIVE (LOSS) INCOME
COMPREHENSIVE INCOME (LOSS)COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TONONCONTROLLING INTERESTSCOMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TOWACOAL HOLDINGS CORP.
See notes to consolidated financial statements.

62

Millions of yen

Thousands of
U.S. dollars (Note 2)

2015
8,744

2017
$ 113,527

2017¥ 12,6482016¥ 11,472(4,079)(5,670)8,671(36,613)(4,079)(5,670)8,671(36,613)

3,413
(304)
3,109

(2,833)(47)(2,880)10,216(974)
9,242

30,635(2,729)27,906

619
(1)
618
(352)
12,296(2,327)(644)(2,971)(11,521)
(49)

2,332
(176)
2,156
20,06928,813

5,556
(9)
5,547
(3,160)110,367

(6)

(270)

(472)

(54)

(319)

¥ 28,341$ 110,313¥ 12,290¥¥

Financial Section

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

Years Ended March 31, 2017, 2016 and 2015

BALANCE, APRIL 1, 2014
Net income
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, ¥165 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Share-based compensation granted (exercised) (Note 13)
Equity transactions with noncontrolling interests
BALANCE, MARCH 31, 2015
Net income
Foreign currency translation adjustments
Unrealized loss on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, ¥150 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Disposal of treasury stock
Share-based compensation granted (exercised) (Note 13)
Increase due to establishment of subsidiaries (Note 7)
BALANCE, MARCH 31, 2016
Net income
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, ¥165 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Share-based compensation granted (exercised) (Note 13)
Equity transactions with noncontrolling interests
BALANCE, MARCH 31, 2017

Shares of
Outstanding
Common Stock(Thousands)

CommonStock

Additional
Paid-in
Capital140,839¥13,260¥29,587

Accumulated
Other
Retained Comprehensive
Earnings
Income¥151,468
8,444¥13,689

Total Wacoal
Treasury Holdings Corp.
Stock, Shareholders’at CostEquity¥(2,898)

8,521
9,215
2,161
(4,648)¥205,106
8,444
8,521
9,215
2,161

Noncontrolling
Interests

Total Equity¥2,430
300
150
27
(5)

¥207,536
8,744
8,671
9,242
2,156

(4,648)(4,648)
(190)

(3)
5
140,841

13,26055
029,642(3)
6
155,264
11,15933,586(2,895)(5,654)(2,855)(2,969)(4,225)(3)61
0228,857
11,159(5,654)(2,855)(2,969)

(1)
2,711
313
(16)
(25)
(2)

(4,225)(4,225)
(206)

(5)
1
22
140,859

13,26044(2)29,686

162,196
12,525

22,108

(7)
1
25

(7)
1
67

(2,876)

224,374
12,525(3,965)
3,109
621(3,965)
3,109
621(4,648)

2,252
5,027
123
(114)
0
(3)

(4,648)137,211¥13,26021(11)¥29,707¥170,062¥21,873(4,522)64(4,522)
74¥(7,334)¥227,568

(206)
(7)
1
67
2,252
229,401
12,648(4,079)3,109
618(4,648)(167)(3,703)
55

(190)
(3)
61
(1)
231,568
11,472(5,670)(2,880)(2,971)

48¥4,914(167)(4,522)74
48¥232,482

Thousands of U.S. dollars (Note 2)

Year Ended March 31, 2017

BALANCE, MARCH 31, 2016
Net income
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, $1 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Share-based compensation granted (exercised) (Note 13)
Equity transactions with noncontrolling interests
BALANCE, MARCH 31, 2017

CommonStock

Additional
Paid-in
Capital$119,020$266,457

Accumulated
Other
Retained Comprehensive
Earnings
Income$1,455,848
112,423$198,438(35,590)
27,906
5,574

Total Wacoal
Treasury Holdings Corp.
Stock, Shareholders’at CostEquity$(25,815) $2,013,948
112,423(35,590)
27,906
5,574(41,720)

Noncontrolling
Interests(41,720)(41,720)(1,499)$119,020

189

(99)

$266,646$1,526,452(40,589)575$196,328(40,589)
665$(65,829) $2,042,617

Total Equity$45,121 $2,059,069
1,104
113,527(1,023)(36,613)0
27,906
(27)
5,547

431
$44,107(1,499)(40,589)665
431$2,086,724

See notes to consolidated financial statements.

63

Consolidated Statements of Cash Flows
Wacoal Holdings Corp. and Subsidiaries
Millions of yen

2017

2016

2015

2017

¥ 12,648¥ 11,472¥ 8,744$ 113,527

5,032
74
264
450
(3,374)

4,815
67
(117)
1,288
59
256

5,074
60
(45)
(1,920)38

45,167
664
2,370
4,039
(30,285)

Years Ended March 31, 2017, 2016 and 2015

OPERATING ACTIVITIES:Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Share-based compensation (Note 13)
Allowance for returns and doubtful receivables – net
Deferred income taxes(Gain) loss on sales or disposal of property, plant and equipment – net
Impairment charges on long-lived assets
Impairment charges on goodwill (Notes 8 and 20)
Impairment charges on other intangible assets (Notes 8 and 20)(Gain) loss on sale or exchangeof marketable securities and investments – net (Note 3)
Valuation (gain) loss on marketable securities and investments – net (Note 3)
Gain on bargain purchase (Note 7)
Gain on sales of paintings
Equity in net income of affiliated companies, less dividends received
Changes in assets and liabilities:
Decrease (increase) in notes and accounts receivable
Increase in inventories
Decrease (increase) in other current assets(Decrease) increase in notes and accounts payable
Decrease in liability for termination and retirement benefit
Increase (decrease) in accrued expenses, income taxes payable
and other current liabilities
Other
Net cash provided by operating activities
INVESTING ACTIVITIES:
Increase in time deposits
Decrease in time deposits
Proceeds from sales and redemption of available-for-sale securities (Note 3)
Payments to acquire available-for-sale securities
Proceeds from redemption of held-to-maturity debt securities
Payments to acquire held-to-maturity debt securities
Proceeds from sales of paintings
Proceeds from sales of property, plant and equipment
Capital expenditures
Payments to acquire intangible assets (Note 8)
Proceeds from sales of other investments
Payments to acquire other investments
Proceeds from sales of shares of affiliated companies
Payments to acquire additional shares of a subsidiary
Payments associated with the acquisitionof a business (net of cash and cash equivalents acquired) (Note 7)
Other
Net cash (used in) provided by investing activities
FINANCING ACTIVITIES:(Decrease) increase in short-term bank loans
with original maturities of three months or less – net
Proceeds from issuance of long-term debt
Repayments of long-term debt
Purchase of treasury stock
Proceeds from sales of treasury stock
Dividends paid on common stock
Dividends paid to noncontrolling interests
Proceeds from payments from noncontrolling interests
Net cash used in financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEARADDITIONAL CASH FLOW INFORMATION:
Cash paid for:
Interest
Income taxes
NONCASH INVESTING ACTIVITIES:Acquisition of property, plant and equipment by assuming payment obligation
See notes to consolidated financial statements.

64

Thousands of
U.S. dollars (Note 2)

4,845
1,176
(441)

(90)

(1,585)(3,958)

(1)

20
(173)

14

(9)

(837)

(482)

(1,405)(27)(7,513)

882
(378)
475
(95)
(417)

(195)
(1,008)(1,111)(45)(2,101)534(1,038)(442)
1,302(1,601)

7,917(3,393)
4,264(853)(3,743)

1,615

(261)

505

14,496454
16,351

241
12,635108
14,337

4,074
146,764(4,336)
3,717
1,968
(313)
109
(330)

(2,459)
2,889
602
(420)
739
(629)

(38,919)
33,363
17,664(2,809)978(2,962)

3,585(5,504)(1,941)
15
(39)
4

775
(7,546)(1,432)
12(3,548)3,383
4,499(1,353)
114
(568)
1,785
174
(3,093)(1,385)124

632,178(49,403)(17,422)
135
(350)
36

6
(1)

(3,822)33(3,032)(122)(11,407)

27
164

296
(27,215)(3,613)

2,101(6,784)(32,430)

4,460(1,226)(3)

2,244(3,617)(40,589)(4,648)
(190)

250
(403)
(4,522)(4,648)(167)
48(13,055)(328)(64)
34,059¥ 33,995(4,463)(7)
1(4,225)(206)
2,252(4,547)(1,032)(4,351)
38,410¥ 34,059(8,391)
1,642
7,752
30,658¥38,410(41,720)(1,499)431(117,180)(2,944)(575)
305,709$ 305,134

¥

27
2,812

¥

67
5,756

¥

100
4,497

$

242
25,240

¥

795

¥

736

¥

419

$

7,136

Financial Section

Notes to Consolidated Financial Statements
Wacoal Holdings Corp. and Subsidiaries

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES..................................................................................................
BASIS OF FINANCIAL STATEMENTS—Wacoal Holdings Corp. (the“Company”) and subsidiaries are predominantly engaged in one industry,
the manufacture and sale of apparel, including foundation garments, lingerie, nightwear and outerwear, in Japan, the United States of America,
Europe and certain other Asian countries.
The accompanying consolidated financial statements, stated inJapanese yen, have been prepared on the basis of accounting principles
generally accepted in the United States of America (“U.S. GAAP”).
CONSOLIDATION—The consolidated financial statements include theaccounts of the Company and its majority-owned subsidiaries (collectively,
the “Companies”). All intercompany transactions and balances have been
eliminated.
Some 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 end. Necessary adjustments have been made for significant
events related to subsidiaries that occurred during the period between
their fiscal year ends and March 31.
Investments in affiliated companies where the Companies’ ownershipis 20% to 50% are accounted for using the equity method.
Significant influence is generally deemed to exist if the Companies
have an ownership interest in the voting stock of the investee from 20% to50%, although other factors are considered in determining whether theequity method of accounting is appropriate.
USE OF ESTIMATES—The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS—Cash and cash equivalents include
all highly liquid investments with original maturities of three months or less.
FOREIGN CURRENCY TRANSLATION—Assets and liabilities of foreignsubsidiaries 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 consolidated financial statements, net oftax, are included in accumulated other comprehensive income, which is aseparate component of equity. Exchange gains and losses resulting fromforeign currency transactions and the conversion of monetary assets andliabilities denominated in foreign currencies are included in other income(expenses) in the consolidated statements of income.
Foreign currency translation gains (losses) for the years ended March
31, 2017, 2016 and 2015 were ¥(175) million, ¥(519) million and ¥300 million, respectively. They have been included in other - net of other income(expenses).
MARKETABLE SECURITIES AND INVESTMENTS—The Companies
classify their marketable securities and investments into one of three categories: trading, available-for-sale or held-to-maturity. Trading securities arerecorded at fair value and unrealized holding gains and losses on trading
securities are included in earnings. Available-for -sale securities arerecorded at fair value with a corresponding recognition of unrealized holding gain or loss (net of tax) in accumulated other comprehensive income
or loss, which is a separate component of equity, until realized.

Held-to-maturity securities are measured at amortized cost. The
Companies classify debt securities as held-to-maturity only if theCompanies have the positive intent and ability to hold those securities tomaturity. Equity securities that do not have readily determinable fair values
are recorded at cost. Gains and losses on sales of investments are computed 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 recordedin the consolidated statements of income. The Companies periodicallydetermine whether a decline in the fair value of marketable securities andinvestments is deemed to be other than temporary based on criteria that
include the duration of the market decline, the extent to which costexceeds fair value, the financial position and business outlook of the issuer
and the intent and ability of the Companies to retain the impaired marketable securities and investments for a sufficient period of time for anticipated recovery in fair value.
ALLOWANCE FOR SALES RETURNS—An allowance for sales returns isestimated based on historical products returns experience, sales movements, and the overall retail industry considerations.
ALLOWANCE FOR DOUBTFUL RECEIVABLES—An allowance for
doubtful notes and receivables is estimated based on historical collection
experience and additional information including current economic conditions and creditworthiness of each applicable customer.
INVENTORIES—Inventories are stated at the lower of cost or market,
cost being determined by 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 laborcost, factory overhead and charges for customs duties.
PROPERTY, PLANT AND EQUIPMENT—Property, plant and equipment
is stated at cost less accumulated depreciation and impairment charges.
Depreciation of property, plant and equipment is computed by the declining-balance method, except for buildings acquired on or after April 1,
1998 as well as building improvements and structures acquired on or after
April 1, 2016, which are depreciated using the straight-line method based
upon the estimated useful lives of the assets. The estimated useful lives
are as follows:
Buildings and structures
2–50 years (mainly 38 years)
Machinery and equipment(except for the part of the painting)
2–20 years (mainly 5 years)
Depreciation expenses for the years ended March 31, 2017, 2016
and 2015 are ¥3,443 million, ¥3,278 million and ¥3,356 million,
respectively.
IMPAIRMENT OF LONG-LIVED ASSETS—The carrying amount of longlived assets held and used by the Companies is evaluated for impairment
whenever there is an event or change in circumstances that indicates thatsuch 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 the sum of the undiscounted cash
flows expected to result from the use and eventual disposition of theasset. That assessment is based on the carrying amount of the asset atthe date it is tested for recoverability, whether in use or under development. The impairment charge is measured as the amount by which thecarrying amount of a long-lived asset exceeds its fair value. Impairment
charges on long-lived assets for the year ended March 31, 2016 were¥256 million in selling, general and administrative expenses in the65consolidated statements of income. The Companies recorded no impairment charges on long-lived assets for the years ended March 31, 2017and 2015.
GOODWILL AND OTHER INTANGIBLE ASSETS—Goodwill represents
the excess of the purchase price of an acquired entity over the fair value of
assets acquired and liabilities assumed.
Goodwill and other intangible assets with indefinite useful lives aretested for impairment annually, or more frequently if conditions indicate an
earlier review is necessary. The goodwill is allocated to the reporting unit inwhich the business that created the goodwill resides. To test for goodwill
impairment, the carrying amount of each reporting unit is compared with
its fair value. If the carrying amount of a reporting unit exceeds its fairvalue, the second step of the goodwill impairment test is performed bycomparing the carrying amount of reporting unit goodwill with its impliedfair value. If the carrying amount of reporting unit goodwill exceeds its
implied fair value, an impairment charge is recognized in an amount equal
to that excess.
To test for impairment of other intangible assets with indefinite useful
lives, the carrying value of an intangible asset is compared with its fairvalue. If the carrying amount of an intangible asset with indefinite useful life
exceeds its fair value, an impairment charge is recognized in an amountequal to that excess.
Other intangible assets with estimable useful lives consist primarily ofbrands and software and are amortized over their estimated useful lives
using the straight-line method. The estimated useful lives are as follows:
Brands
20–25 years (mainly 25 years)
Software5 years
ASSET RETIREMENT OBLIGATIONS—The Companies have obligations arising from contractual commitments to remove leasehold
improvements from leased facilities and return the property to a specified
condition when the lease terminates. The Companies recognize asset
retirement obligations at the inception of a lease. The asset retirement
obligations are measured with an expected present value techniquebased on historical experience and recorded in other long-term liabilities
in the consolidated balance sheets and subsequently adjusted forchanges in estimated disposal costs. The difference between the grossexpected future cash flow and its present value is accreted over the lifeof the related lease, which is determined using best estimate because
the Companies’ lease contracts generally have automatic renewal articles. The estimated asset retirement costs are capitalized as part of thecarrying amount of the associated long-lived asset and depreciated overits useful life.
TERMINATION AND RETIREMENT PLANS—Termination and retirement
benefits are accounted for in accordance with the guidance for retirement
benefits. The Companies amortize net actuarial gains and losses and priorservice cost over the average employees’ remaining service period by the
declining-balance method and by the straight-line method, respectively.
LEASES—Certain noncancelable leases are classified as capital leases
and the leased assets are included as part of property, plant and equipment. Other leases are classified as operating leases and are not capitalized. 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 Companies account for acquisitions using theacquisition method in accordance with the guidance for business combinations. The Companies allocate the purchase price to the assets
acquired and liabilities assumed based on the estimated fair values at the66

date of acquisition, including intangible assets that can be identified andnamed. The purchase price in excess of the fair value of the net assets isrecorded as goodwill. In the case where the purchase price is below thefair value of the net assets, the Companies recognize the excess of fairvalue of the net assets over the purchase price in earnings as a gain on
bargain purchase in the consolidated statements of income.
REVENUE RECOGNITION—The Companies recognize revenue on sales
to retailers, mail order catalog sales and web sales when (1) persuasive
evidence of an arrangement exists, (2) delivery has occurred resulting intransfer of title and risk of loss, (3) the sales price is fixed or determinable,and (4) collectability is reasonably assured. As for consignment sales, theCompanies 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 thecustomer.
SHIPPING AND HANDLING COSTS—Shipping and handling fees billed
to customers are classified in net sales. Shipping and handling costs are
expensed as incurred. Shipping and handling costs for the years ended
March 31, 2017, 2016 and 2015 were ¥5,249 million, ¥5,560 million and¥5,487 million, respectively, and have been included in selling, general andadministrative expenses.
ADVERTISING EXPENSES—Advertising costs are expensed as incurred.
Advertising expenses for the years ended March 31, 2017, 2016 and2015 were ¥12,694 million, ¥13,167 million and ¥13,103 million, respectively, and have been included in selling, 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, 2017, 2016 and 2015 were ¥810 million,¥839 million and ¥869 million, respectively, and have been included in selling, general and administrative expenses.
CONSUMPTION TAXES—Consumption taxes are excluded from sales,
costs, and expenses in the consolidated statements of income.
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 statements and tax
bases of assets and liabilities and tax loss carryforwards at presently
enacted tax rates. A valuation allowance is recorded when it is more likely
than not that some portion or all of the deferred tax assets will not be realized in the future.
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 the
fiscal year. For those tax positions only where there is greater than a 50%
likelihood that the tax position will be sustained, the Companies record thelargest amount of tax benefit that may potentially be realized upon ultimate
settlement with a taxing authority that has full knowledge of all relevant
information.
SHARE-BASED COMPENSATION—Share-based compensation is
accounted for in accordance with the guidance for stock compensation.
The Company measures share-based compensation cost at the grantdate, based on the fair value of the award and recognizes the cost over
the requisite service period, which is the vesting period. The fair value ofthe award is estimated using the Black-Scholes option-pricing model.
DERIVATIVES—Derivative instruments, including certain derivative instruments embedded in other contracts, are accounted for in accordancewith the guidance for derivatives and hedging. Because such derivative

Financial Section

instruments are not designated as hedges, changes in the fair value of thederivatives are recorded in earnings or losses.
SUBSEQUENT EVENTS—In accordance with the guidance for subsequent events, the Company has evaluated subsequent events throughJune 29, 2017.
RECLASSIFICATIONS—Certain reclassifications have been made to theprior years’ consolidated financial statements to conform to the current
year’s presentation.
RECENT ACCOUNTING PRONOUNCEMENTS:
REVENUE RECOGNITION—In May 2014, the Financial AccountingStandards Board (the “FASB”) issued a new accounting guidance related
to revenue recognition. This guidance is based on the principle that revenue is recognized to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. This standard provides comprehensive guidance, and requires the disclosure of
information to enable users of financial statements to understand thenature, amount, timing, and uncertainty of revenue and cash flows arisingfrom contracts with customers. In August 2015, the FASB issued additional guidance and deferred the effective date of the guidance for a year.
In May 2016, the FASB also issued additional guidance to improve theabove guidance by reducing the potential for diversity in practice at initial
application and the cost and complexity of applying Topic 606 both attransition and on an ongoing basis. This guidance is effective for fiscal
years beginning after December 15, 2017 and interim periods within thatannual period. The Companies are currently evaluating the potential
impact of adoption on the Companies’ consolidated financial position andresults of operations.
EXTRAORDINARY AND UNUSUAL ITEMS—In January 2015, the FASB
issued a new accounting guidance related to extraordinary and unusual
items. This guidance eliminates from U.S. GAAP the concept of extraordinary items and the requirements to 1) segregate an extraordinary item fromthe results of ordinary operations, 2) present the item separately on theincome statement, net of tax, after income from continuing operations, and
3) disclose income taxes and earnings per share data applicable to theextraordinary item. This guidance is effective for fiscal years and interim periods within that annual period, beginning after December 15, 2015.
Adoption of this guidance did not have an impact on the Companies’ consolidated financial position, results of operations, or cash flows.
FAIR VALUE MEASUREMENT—In May 2015, the FASB issued a new
guidance which amends fair value measurement. This guidance removes
the requirement to categorize within the fair value hierarchy all investments
for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to makecertain disclosures for all investments that are eligible to be measured atfair value using the net asset value per share practical expedient. Rather,those disclosures are limited to investments for which the entity has
elected to measure the fair value using that practical expedient. This guidance is effective for fiscal years beginning after December 15, 2015, andinterim periods within those fiscal years. The adoption of this guidance did
not have an impact on the Companies’ consolidated financial position,
results of operations, or cash flows.
MEASUREMENT OF INVENTORY—In July 2015, the FASB issued a new
guidance related to simplifying the measurement of inventory. Currently anentity is required to measure inventory at the lower of cost or market.
Market could be replacement cost, net realizable value, or net realizablevalue less an approximately normal profit margin. This guidance requires
an entity to measure inventory at the lower of cost or net realizable value.

This guidance is effective for fiscal years beginning after December 15,
2016, and interim periods within those fiscal years. The adoption of thisguidance is not expected to have a significant impact on the Company’s
consolidated financial position, results of operations, or cash flows.
BALANCE SHEET CLASSIFICATION OF DEFERRED TAXES—In
November 2015, the FASB issued a new accounting guidance related tobalance sheet classification of deferred taxes. This guidance requires anentity to classify deferred tax liabilities and assets as noncurrent on the
consolidated financial position. This guidance is effective for fiscal years
beginning after December 15, 2016. The carrying amount of the current
portion of deferred tax assets in the Companies’ consolidated balance
sheet as of March 31, 2017 was ¥4,049 million. There was no current portion of deferred tax liabilities as of March 31, 2017.
RECOGNITION AND MEASUREMENT OF FINANCIAL
INSTRUMENTS—In January 2016, the FASB issued new accounting
guidance related to recognition and measurement of financial assets andfinancial liabilities. This guidance requires an entity to measure equity
investments (except those accounted for under to the equity method of
accounting or those that result in consolidation of the investee) at fairvalue with changes in fair value recognized in net income and change ofrelated disclosures. This guidance is effective for fiscal years beginning
after December 15, 2017, and interim periods within those fiscal years.
The Company is currently evaluating the potential impact of adoption on
the Company’s consolidated financial position, and results of operations.
LEASE—In February 2016, the FASB issued new accounting guidance
related to leases. This guidance requires an entity to recognize leaseassets and lease liabilities on the balance sheet for, with a few exceptions,those leases classified as operating leases under current U.S. GAAP. This
guidance is effective for fiscal years beginning after December 15, 2018,
and interim periods within that annual period. The Company is currently
evaluating the potential impact of adoption on the Company’s consolidated financial position, and results of operations.
CLASSIFICATION OF CERTAIN CASH RECEIPTS AND CASH
PAYMENTS—In August 2016, the FASB issued new accounting guidance
related to classification of certain cash receipts and cash payments. This
guidance is intended to reduce existing diversity in practice with respect toclassification of certain cash receipts and payments in the statement ofcash flows. This guidance is effective for fiscal years beginning after
December 15, 2017, and interim periods within that annual period. The
Company is currently evaluating the potential impact of adoption on the
Company’s consolidated statement of cash flows.
INCOME TAXES—In October 2016, the FASB issued new accounting
guidance related to income taxes. This guidance requires an entity to recognize income tax consequences of intra-entity transfers of assets otherthan inventory. This guidance is effective for fiscal years beginning after
December 15, 2017, and interim periods within that annual period. The
Company is currently evaluating the potential impact of adoption on the
Company’s consolidated financial position, and results of operations.
SIMPLIFYING THE TEST FOR GOODWILL IMPAIRMENT—In January
2017, the FASB issued new accounting guidance related to goodwill andother intangible assets. This guidance simplifies the goodwill impairment
test by eliminating Step 2 from the test. This guidance is effective for fiscal
years beginning after December 15, 2020, and interim periods within thatannual period. The Company is currently evaluating the potential impact of
adoption on the Company’s consolidated financial position, and results ofoperations.
PERIODIC PENSION COST—In March 2017, the FASB issued new
accounting guidance related to periodic pension cost and net periodic

67

post retirement benefit cost. This guidance requires an entity to disaggregate the service cost component from the other components of net periodic benefit costs. This guidance is effective for fiscal years beginning after

December 15, 2017, and interim periods within that annual period. The
Company is currently evaluating the potential impact of adoption on the
Company’s consolidated financial position, and results of operations.

2. TRANSLATION INTO U.S. DOLLAR STATEMENTS..........................................................................................................
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates.
The translation of Japanese yen amounts into U.S. dollar amounts is
included solely for the convenience of readers outside of Japan and has

been made at the rate of ¥111.41 to $1, the noon buying rate for yen in
New York City as of March 31, 2017. Such translation 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...........................................................................................................
HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES—The fair value of debt and marketable equity securities classified as held-to-maturity
and available-for-sale is based on quoted market prices as of March 31, 2017 and 2016. The cost, gross unrealized gain and loss and the fair value ofheld-to-maturity and available-for-sale securities by major security type were as follows:
Millions of yen
2017

Available-for-sale securities:
Current:
Municipal bonds
Mutual funds
Total
Noncurrent:
Equity securities
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

Cost

¥
¥

10
701
711

¥23,153

Gross
Unrealized Gain

¥

Gross
Unrealized Loss

Fair Value

0
168
168

¥ 1
¥ 1

¥

¥34,833¥10¥57,976

¥

¥

10
868
878

¥

567

¥ 3

¥

564

¥

566

¥ 4

¥

562

Millions of yen
2016

Available-for-sale securities:
Current:
Municipal bonds
Corporate debt securities
Mutual funds
Total
Noncurrent:
Equity securities
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

Cost

¥

Gross
Unrealized Gain

10
395
1,083
¥ 1,488¥¥23,592

¥

114

¥

808

¥

Gross
Unrealized Loss

279
279

¥0
1
¥1

10
395
1,361
¥ 1,766¥30,336¥3¥53,925

¥1

¥

113

¥3

¥

805

¥

0

Fair Value0¥

Gross unrealized holding losses and fair values of held-to-maturity securities, all of which have been in a continuous unrealized loss position for more than
12 months as of March 31, 2017 and 2016, were as follows:
Millions of yen

2017

Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

68

2016

Fair Value

Gross
Unrealized Loss

Fair Value

Gross
Unrealized Loss

¥340

¥3

¥114

¥1

¥345

¥3

Financial Section

Gross unrealized holding losses and fair values of available-for-sale and held-to-maturity securities, all of which have been in a continuous unrealized loss
position for less than 12 months as of March 31, 2017 and 2016, were as follows:
Millions of yen

2017
Fair Value

Gross
Unrealized Loss

8

¥ 1

¥395
480

¥0
1

¥172

¥10

¥102

¥3

¥224

¥ 0

¥562

¥ 4

¥232

¥0

Fair Value

Available-for-sale securities:
Current:
Corporate debt securities
Mutual funds
Noncurrent:
Equity securities
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities¥

As of March 31, 2017, the available-for-sale securities in a continuous
unrealized loss position are composed of three equity securities and one
mutual fund. The percentage of decline was less than 11.5%. The
Companies periodically determine whether a decline in the fair value ofavailable-for-sale and held-to-maturity securities is deemed to be otherthan temporary based on criteria that includes the duration of the market
decline, the extent to which cost exceeds fair value, the financial position
and business outlook of the issuer, and the intent and ability of theCompanies to retain the impaired available-for-sale and held-to-maturity
securities for a sufficient period of time for anticipated recovery in fair value
as described in Note 1. No available-for-sale or held-to-maturity securities
were identified that meet the Companies’ criteria for recognition of an
impairment charge on available-for-sale and held-to-maturity securities inan unrealized loss position presented above. Therefore, the Companies do
not believe the unrealized losses represent an other-than-temporary
impairment as of March 31, 2017 and 2016.
Future maturities of debt securities and mutual funds classified as available-for-sale excluding debt securities and mutual funds without fixedmaturities as of March 31, 2017 were as follows:
Millions of yen

Due within one year
Due after one year through five years
Due within ten years
More than ten years
Total

Cost

Fair Value

¥305

¥308

280
¥585

291
¥599

Future maturities of debt securities classified as held-to-maturity as ofMarch 31, 2017 were as follows:
Millions of yen

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

Cost

Fair Value

¥ 567
566
¥1,133¥ 564
562¥1,1262016

Gross
Unrealized Loss

Proceeds from sales of available-for-sale securities and the gross realized
gain or loss on the sales of available-for-sale securities during the years
ended March 31, 2017, 2016 and 2015 were as follows:
Millions of yen

2017

2016

2015

Proceeds from sales ofavailable-for-sale securities¥1,573¥102¥3,499Gross realized gain on sales ofavailable-for-sale securities

458

90

1,516

Gross realized loss on sales ofavailable-for-sale securities

17

During the year ended March 31, 2017, the Companies exchanged certain equity securities for other marketable securities. The Companies
recorded newly-received securities at fair value and recognized a loss of¥0 million for the year ended March 31, 2017. There was no exchange ofmarketable securities for the year ended March 31, 2016. The Companies
recorded newly-received securities at fair value and recognized a gain of¥1 million for the year ended March 31, 2015.
The amount of impairment charges the Companies recognized on
available-for-sale securities in which declines in fair value were deemed tobe other than temporary was ¥3 million, ¥20 million and ¥4 million for theyears ended March 31, 2017, 2016 and 2015, respectively.
TRADING SECURITIES—A subsidiary in the United States of America
has trading securities consisting of mutual funds, which are recorded as
investments at a fair value of ¥44 million as of March 31, 2017. There
were no trading securities as of March 31, 2016. The Companies
recorded a gain of ¥4 million for the year ended March 31, 2017. There
was no gain or loss related to trading securities for the years ended
March 31, 2016 and 2015.
COST METHOD SECURITIES—Investments in nonmarketable equity
securities for which there are no readily determinable fair values were
accounted for using the cost method and aggregated ¥1,273 million and¥1,288 million as of March 31, 2017 and 2016, respectively. Investments
in nonmarketable equity securities are reviewed annually or upon theoccurrence of an event for other-than-temporary impairment. There were
no impairment charges on investments in nonmarketable equity securities
for the year ended March 31, 2017. The Companies recognized impairment charges on investments in nonmarketable equity securities of ¥0 million and ¥10 million for the years ended March 31, 2016 and 2015,
respectively.

69

4. ALLOWANCES FOR DOUBTFUL RECEIVABLES AND SALES RETURNS.......................................................................
Information related to the Companies’ allowance for doubtful receivables was as follows:
Millions of yen

Balance at the beginning of the year
Charged to costs and expenses
Balances written-off/reversed
Balance at the end of the year

2017

2016

2015

¥196
68
(45)
¥219

¥ 198
110
(112)
¥ 196

¥201
45
(48)
¥198

2017

2016

2015

¥ 2,033
2,258(2,033)¥ 2,258¥ 2,211
2,033(2,211)¥ 2,033¥ 2,120
2,211(2,120)¥ 2,211

Information related to the Companies’ allowance for sales returns was as follows:
Millions of yen

Balance at the beginning of the year
Charged to costs and expenses
Balances utilized
Balance at the end of the year

5. INVENTORIES.....................................................................................................................................................................
The components of inventories as of March 31, 2017 and 2016 were as follows:
Millions of yen

Finished products
Work in process
Raw materials
Total

2017

2016

¥37,586
3,743
2,493¥43,822¥37,689
4,056
2,700¥44,445

6. INVESTMENTS IN AFFILIATED COMPANIES...................................................................................................................
Certain investments are accounted for using the equity method if theinvestment provides the Companies with the ability to exercise significant
influence over an investee. Significant influence is generally deemed toexist if the Companies have an ownership interest in the voting stock of
the investee between 20% and 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 shareof an affiliated companies’ income or loss based on the most recently
available financial statements.
The primary affiliated companies and percentage of ownership as ofMarch 31, 2017 and 2016, were as follows:

The following tables represent the affiliated companies’ summarized information from the balance sheets as of March 31, 2017 and statements ofincome for the years ended March 31, 2017 and 2015. Summarized
information of the balance sheet and statement of income of affiliatedcompanies for the year ended March 31, 2016 is not disclosed as it isimmaterial.
Millions of yen

2017

Current assets
Noncurrent assets
Total
Current liabilities
Long-term liabilities
EquityTotal¥40,589
41,773¥82,362¥8,5387,366
66,458¥82,362

Percentage of ownership (%)
Name of Investee

Shinyoung Wacoal Inc.
Taiwan Wacoal Co., Ltd.
THAI WACOAL PUBLIC CO., LTD.
PT. Indonesia Wacoal
House of Rose Co., Ltd.

2017

2016

25
50
34
42
24

25
50
34
42
24

Aggregate carrying amounts and fair values of investments in affiliatedcompanies which have a quoted market price as of March 31, 2017 and2016, were as follows:
Millions of yen

Carrying amount
Aggregate value of quoted market price

70

2017

2016

¥13,556
11,754¥13,522
11,561Millions of yen

Net sales
Gross profit
Income before income taxes
Net income

2017

2015

¥59,172
30,2005,105
4,089¥62,459
31,5192,848
2,196

Dividends received from affiliated companies were ¥522 million, ¥763
million and ¥678 million for the years ended March 31, 2017, 2016 and2015, respectively.
Retained earnings includes net undistributed earnings of affiliatedcompanies of ¥15,689 million and ¥15,226 million as of March 31, 2017and 2016, respectively.

Financial Section

7. ACQUISITIONS...................................................................................................................................................................
On April 1, 2015, Ai Co., Ltd., a wholly-owned domestic subsidiary of theCompany, acquired the swimwear business and underwear business from
San-Ai Co., Ltd. and San-Ai Style Co., Ltd., and the difference between
the acquisition cost and the estimated fair values of the identifiable assets
acquired and liabilities assumed, the details of which were investigatedand analyzed, was recorded on the consolidated statements of income asa gain on bargain purchase in the amount of ¥173 million.
The fair values of the assets and liabilities as of the date of the acquisition have been revised based on updated information obtained after thedate of acquisition, and were adjusted retroactively to the date of theacquisition.
In January 2016, Wacoal Corp., a wholly-owned subsidiary of theCompany, established A Tech Textile Co., Ltd. (“A Tech”) and G Tech
Material Co., Ltd. (“G Tech”) in the Kingdom of Thailand pursuant to joint
venture agreements executed on November 13, 2015. A Tech and G Tech
executed business transfer agreements with Textile Prestige PublicCompany Limited (“TPC”) and Erawan Textile Company Limited (“ETC”),
respectively, and transfers of the material business assets and liabilities
were completed on February 1, 2016.
In connection with these business transfers, A Tech and G Techagreed to pay the purchase price for the assets acquired and liabilities
assumed, in the amount of ¥2,334 million (THB 699 million) and ¥693 million (THB 208 million), respectively.
By establishing these two subsidiaries, the Group will build a worldwide system to supply materials and products in the ASEAN region, which
has the potential to further develop and grow, improve the manufacturing
quality and cost competitiveness of our entire group and to stably supply
high value-added materials and products to the global network of the
Wacoal group and customers in the future.
As a result of purchase price allocations for A Tech and G Tech,
goodwill was recognized and recorded in the consolidated balance sheet
in the year ended March 31, 2016. Goodwill is not deductible for tax
purposes.
Furthermore, based on updated information obtained after the date of
the transfers, the fair values of the assets and liabilities as of the date of
the transfers were adjusted. A Tech and TPC reached a final agreementon the purchase price. As a result of these changes, the amount of goodwill relating to A Tech and G Tech decreased by ¥39 million and ¥18 million, respectively. These adjustments during the measurement period werereflected in the consolidated balance sheet as of March 31, 2017.
The fair value of the assets and liabilities of the businesses, which A
Tech and G Tech acquired, were as follows:
Before Adjustment
Millions of yen
February 1, 2016
A TechG TechCash and cash equivalents
Notes and accounts receivable
Inventories
Other current assets
Property, plant and equipment
Goodwill
Other noncurrent assets
Total
Current liabilities
Other long-term liabilities
Total
Total shareholder’s equity

¥ 210
557
608
18
1,243
246
2,882
281
251
532
¥2,350

¥150
101
4
342
223
1
821
82
46
128
¥693
After Adjustment

Millions of yen
February 1, 2016
A TechG TechCash and cash equivalents
Notes and accounts receivable
Inventories
Other current assets
Property, plant and equipment
Goodwill
Other noncurrent assets
Total
Current liabilities
Other long-term liabilities
Total
Total shareholder’s equity

¥ 210
557
608
18
1,265
207
2,865
282
249
531
¥2,334

¥150
101
4
342
205
1
803
64
46
110
¥693

8. GOODWILL AND OTHER INTANGIBLE ASSETS..............................................................................................................
GOODWILL—The changes in the carrying amount of goodwill by operating segment for the years ended March 31, 2017, 2016 and 2015 were as follows.
For information about the Companies’ operating segments, see Note 24.
Millions of yen

2017
Wacoal Business(Overseas)

Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Adjustments during the measurement period
Foreign currency translation adjustments
Balance at the end of the year:
Goodwill
Accumulated impairment charges
Total¥13,586
13,586(57)(1,783)
11,746¥11,746

Peach John

Total

¥11,203(6,878)
4,325¥24,789(6,878)17,911(57)(1,783)

11,203(6,878)¥ 4,325

22,949(6,878)¥16,071

71

Millions of yen

2016
Wacoal Business(Overseas)

Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Acquisition during the year
Foreign currency translation adjustments
Balance at the end of the year:
Goodwill
Accumulated impairment charges
Total¥14,425
14,425469(1,308)13,586¥13,586

Peach John

Total

¥11,203(6,878)
4,325¥25,628(6,878)18,750469(1,308)

11,203(6,878)¥ 4,325

24,789(6,878)¥17,911
Millions of yen

2015
Wacoal Business(Overseas)

Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Foreign currency translation adjustments
Impairment charges
Balance at the end of the year:
Goodwill
Accumulated impairment charges
Total¥13,553
13,553872

14,425¥14,425

Peach John

Total

¥11,203(2,033)
9,170(4,845)¥24,756(2,033)22,723872(4,845)

11,203(6,878)¥ 4,325

25,628(6,878)¥18,750

During the year ended March 31, 2015, the Companies recorded impairment charges on goodwill of ¥4,845 million in the Peach John segment. See Note
20 for further information.
OTHER INTANGIBLE ASSETS—The components of intangible assets excluding goodwill as of March 31, 2017 and 2016 were as follows:
Millions of yen

2017

2016

Gross Carrying
AmountAccumulated
Amortization andImpairment Charge

Gross Carrying
AmountAccumulated
Amortization andImpairment Charge¥ 5,8539,692
1,601¥17,146¥1,311
5,434
660¥7,405¥ 6,766
8,034
1,646¥16,446¥1,212
4,597
633¥6,442¥ 5,316114¥ 5,430¥3,322¥ 5,316114¥ 5,430¥3,322

Year Ended March 31

Amortized intangible assets:
BrandsSoftware
OthersTotal
Unamortized intangible assets:
Trademarks
Other
Total
Other intangible assets acquired during the year ended March 31, 2017,2016 and 2015 totaled ¥1,941 million, ¥1,432 million and ¥1,385 million,
all of which primarily consist of software with an estimated useful life of
five years.
The gross carrying amounts of brands include foreign currency translation adjustments.
During the year ended March 31, 2015, the Companies recorded an
impairment charge on other intangible assets for the trademarks of ¥1,176
million in the Peach John segment. During the years ended March 31,2017 and 2016, the Companies recorded no impairment charge on otherintangible assets. See Note 20 for further information.

72¥3,322¥3,322Aggregate amortization expenses for the years ended March 31,
2017, 2016 and 2015 related to other intangible assets were ¥1,589 million, ¥1,537 million and ¥1,536 million, respectively. Future estimatedamortization expenses as of March 31, 2017 were as follows:Year Ending March 31

Estimated amortization expense
2018
2019
2020
2021
2022
Total

Millions of yen¥1,568
1,382
1,124
840
633
¥5,547

Financial Section

9. SHORT-TERM BANK LOANS AND LONG-TERM DEBT...................................................................................................
Short-term bank loans as of March 31, 2017 and 2016 consisted of thefollowing:
Millions of yen

Unsecured bank loans

2017

2016

¥7,716¥11,759

The weighted-average annual interest rate on short-term bank loans as ofMarch 31, 2017 and 2016 was 0.4%.
Unused lines of credit for short-term financing as of March 31, 2017and 2016 aggregated ¥26,830 million and ¥24,779 million, respectively.
The Companies compensate banks for these facilities in the form of commitment fees, which were not material during the years ended March 31,2017 and 2016.
Long-term debt as of March 31, 2017 and 2016 is summarized below.
The interest rates and maturities are for loans as of March 31, 2017.
Millions of yen

Collateralized bank loans, with fixed interest
at 0.6%, maturing through 2022
Unsecured bank loans, with fixed interest
at 0.4%, maturing through 2022
Total
Less current portionLong-term debt, less current portion

2017

2016

¥ 95

¥ 231

140

157

235
(50)
¥185

388
(293)
¥ 95

The annual maturities of long-term debt as of March 31, 2017 were as
follows:
Millions of yen

Year Ending March 31

2018
2019
2020
2021
2022
Total

¥ 50
50
50
50
35
¥235

A subsidiary has pledged assets as security for loans. As of March 31, 2017and 2016, assets pledged as collateral for bank loans were as follows:
Millions of yen

Land
Buildings
Total

2017

2016

¥150
213
¥363

¥150
236
¥386

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.
The bank has the right to offset cash deposits against obligations thathave become due or, in the event of default, against all obligations due tothe bank.

10. LEASES.............................................................................................................................................................................
The Companies lease most of their store premises and certain equipment.
Most leases have automatic renewal provisions and allow the Companies
to extend the lease term beyond the initial base period, subject to theterms agreed at lease inception. Future minimum rental commitments on
operating leases having a remaining noncancelable lease term in excess
of one year as of March 31, 2017 are presented below:

Millions of yen

Year Ending March 31

2018
2019
2020
2021
2022
Thereafter
Total

¥ 495
466
157
72
8
10
¥1,208

Rental expenses were ¥7,862 million, ¥7,902 million and ¥6,476 million forthe years ended March 31, 2017, 2016 and 2015, respectively, and havebeen included in selling, general and administrative expenses.

11. ASSET RETIREMENT OBLIGATIONS..............................................................................................................................
The 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 of 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 the beginning of the year
Accretion expense
Liabilities incurred
Liabilities settled
Change due to translation of foreign currencies
Balance at the end of the year

2017

2016

2015

¥ 878
2
84
(111)
2
¥ 855

¥777
20
157
(74)
(2)
¥878

¥728
8
66
(32)
7
¥777

73

12. TERMINATION AND RETIREMENT PLANS.....................................................................................................................
EMPLOYEE RETIREMENT PLANS—The Company and certain subsidiaries sponsor termination and retirement benefit plans that cover substantially all
employees. Benefits are based on the employee’s years of service, position and performance. If the termination is involuntary or caused by death, theemployee is usually entitled to greater payments than in the case of voluntary termination.
The Company and certain subsidiaries have a contributory defined retirement benefit plan and several unfunded termination plans administered by theCompany and certain subsidiaries. Benefits under the contributory defined retirement benefit plan are usually paid in a lump sum at the earlier of termination or retirement, although periodic payments are available under certain conditions. Benefits under the other termination and retirement benefit plan are
paid either as lump-sum payments or periodic payments under certain conditions. The benefits are usually paid as a lump-sum 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 statusof the plans:Millions of yen

Change in benefit obligations:Benefit obligations at the beginning of the year
Service cost
Interest cost
Participants' contributions
Actuarial (gain) loss
Prior service cost arising during the year
Benefits paid from plan assets
Settlement paid from plan assets
Settlement paid by the Company and certain subsidiaries
Changes in foreign currency exchange rate
Change in the scope of consolidation
Benefit obligations at the end of the year
Change in plan assets:
Fair value of plan assets at the beginning of the year
Actual return on plan assets
Employer contributions
Participants' contributions
Benefit payments
Settlement payments
Changes in foreign currency exchange rate
Fair value of plan assets at the end of the year
Funded status at the end of the year

2017

2016

2015

¥35,777
1,103
183
65
(509)
271
(958)
(865)
(125)
(7)

¥34,085
1,074
321
66
1,893

¥33,712
1,021
417
66
1,001
(908)
(1,075)(149)

34,935

(950)
(850)
(100)
(6)
244
35,777¥42,156
2,176
633
65
(958)
(865)
(4)
43,203¥ 8,268¥43,137
(516)
1,275
66
(950)
(850)
(6)
42,156¥ 6,379

34,085¥37,738
5,565
1,751
66
(908)
(1,075)
43,137¥ 9,052

Amounts recognized in the consolidated balance sheets as of March 31, 2017 and 2016, consist of:Millions of yen

Prepaid pension expense
Other current liabilities
Liability for termination and retirement benefit
Total

2017

2016

¥10,287(63)(1,956)¥ 8,268¥ 8,145(63)(1,703)¥ 6,379

Amounts recognized in accumulated other comprehensive income, pre-tax, as of March 31, 2017 and 2016 were as follows:
Millions of yen

Actuarial loss (gain)
Prior service benefit
Total

2017

2016

¥667
121
¥788

¥(1,264)607¥ (657)

The accumulated benefit obligation for all defined retirement benefit plans as of March 31, 2017 and 2016 was as follows:
Millions of yen

Accumulated benefit obligation

74

2017

2016

¥34,935¥35,777

Financial Section

The projected benefit obligations and the fair value of the plan assets for the Company’s and certain subsidiaries’ pension plans with projected benefit obligations in excess of plan assets, and the accumulated benefit obligations and the fair value of the plan assets for the Company and certain subsidiaries’
pension plans with accumulated benefit obligations in excess of plan assets were as follows:
Millions of yen

Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations
Fair value of plan assets
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligations
Fair value of plan assets

2017

2016

¥2,905886¥2,659
893

2,905
886

2,659
893

Net periodic benefit costs for the Company and certain subsidiaries’ plans consisted of the following for the years ended March 31, 2017, 2016 and 2015:
Millions of yen

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

2017

2016

2015

¥1,103
183
(967)
213
(215)
¥ 317

¥1,074
321
(967)
(461)
(491)
¥ (524)¥1,021
417
(865)
220
(492)
¥ 301

The unrecognized net actuarial gain or loss and prior service benefit are being amortized within 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 for the years ended March 31, 2017, 2016 and 2015
were as follows:
Millions of yen

Actuarial gain (loss)
Amortization of actuarial loss (gain)
Prior service cost arising during the year
Amortization of prior service benefit

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

Actuarial loss
Prior service benefit¥(124)(122)

The Company and certain subsidiaries use a measurement date of March
31 for their plans. The weighted-average assumptions used as of March
31, 2017 and 2016 in computing the benefit obligations shown above
were as follows:

Discount rate

2017

2016

0.6%

0.5%

The weighted-average assumptions used as of March 31, 2017, 2016
and 2015 in computing the net periodic benefit cost shown above wereas follows:

Discount rate
Rate of increasein future compensation
Expected long-term rateof return on plan assets

2017

2016

2015

0.5%

1.0%

1.3%

5.3%

5.3%

7.6%

2.5%

2.5%

2.5%

2017

2016

2015

¥1,718
213
(271)
(215)
¥1,445¥(3,376)(461)¥3,699220(491)¥(4,328)(492)¥3,427The Company’s approach to establishing the discount rate is based upon
corporate bond indices. The discount rate assumption is based upon theeffective yields as of March 31, 2017 on the corporate bond indices forwhich maturity dates approximate the timing of the expected future benefit
payments.
The retirement benefit plans of the Company and a certain subsidiaryis a point-based benefits system, and, therefore, the rate of compensation
increase has not been included in computing the benefit obligations.
The expected long-term rate of return on plan assets is derived proportionally from return assumptions determined for each of the major
asset classes. The return expectations for each of the asset classes are
based largely on assumptions about economic growth and inflation, which
are supported by long-term historical data. The estimated long-term rateof return is based on an asset allocation of equity securities of 26.0%,
debt securities of 54.0%, life insurance company general accounts of
18.0% and other short-term investments of 2.0%.
The Company’s and certain subsidiaries’ plan investment strategy is
to maintain actual asset weightings within a preset range of target allocations. The Company’s and certain subsidiaries’ plan investments arebroadly diversified, consisting primarily of equity and debt securities. The
Company and certain subsidiaries believe these ranges represent anappropriate risk profile for the planned benefit payments of the plans
based on the timing of the estimated benefit payments.

75

The asset allocation as of March 31, 2017 and 2016, was as follows:

Equity securities
Debt securities
Life insurance company general accounts
Real estate
Other short-term investments

2017

2016

48.3%
26.3%
11.1%
3.9%
10.4%

46.4%
30.6%
12.2%
3.9%
6.9%

The target allocation percentages are reviewed and approved by thePension Committee. The actual allocations for 2017 and 2016 are different
from the target allocation percentages primarily because Wacoal Corp.
maintained additional equity securities within a separate plan asset which is
assigned to the plan based on an agreement between Wacoal Corp. andits employees and is 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 forsome other types of assets is lower than the target allocation.

The following tables present the Company’s and certain subsidiaries’ plan assets using the fair value hierarchy as of March 31, 2017 and 2016. The fairvalue hierarchy has three levels based on the reliability of the inputs used to determine the fair value. For the reference to each level, see Note 20.
Millions of yen
2017

Assets evaluated by other than net asset value per share
Equity securities:
Japanese companies
Foreign companies
Debt securities:
Foreign government bonds
Life insurance company general accounts
Other types of investments:
Other short-term investments
Assets evaluated by net asset value per share (a)Equity securities:
Pooled funds (b)Debt securities:
Pooled funds (c)Other types of investments:
Hedge funds (d)Pooled funds (e)TotalLevel 1

Level 2

Level 3

¥ 9,96225

Total¥ 9,96225

67¥4,805

67
4,805

3,235

3,235

10,021
7,894¥10,054¥8,040Level 1

Level 2

1,377
5,817
¥43,203
Millions of yen

2016

Assets evaluated by other than net asset value per share
Equity securities:
Japanese companies
Debt securities:
Foreign government bonds
Life insurance company general accounts
Other types of investments:
Other short-term investments
Assets evaluated by net asset value per share (a)Equity securities:
Pooled funds (b)Debt securities:
Pooled funds (c)Other types of investments:
Hedge funds (d)Pooled funds (e)Total¥9,508

Level 3

Total

¥ 9,50825¥5,135

25
5,135

1,391

1,391

9,397
9,139

¥9,533¥6,5261,273
6,288¥42,156(a)	Certain assets evaluated by net asset value per share (or its equivalent) are not categorized in the fair value hierarchy. Total amounts in the above table are presented to reconcile the amounts in the fairvalue hierarchy to the amounts stated on the consolidated balance sheets.
(b) This class includes common stock of approximately 34% Japanese companies and 66% foreign companies as of March 31, 2017 and 32% and 68%, respectively, as of March 31, 2016.
(c)	This class includes approximately 15% of Japanese government bonds, 2% of Japanese municipal bonds, 38% of foreign government bonds, 44% of corporate bonds and 1% of other short-term
investments as of March 31, 2017. This class includes approximately 27% of Japanese government bonds, 4% of Japanese municipal bonds, 36% of foreign government bonds and 33% of corporate
bonds as of March 31, 2016.
(d) This class consists of hedge funds that invest in both long- and short-term debt securities as of March 31, 2017 and 2016.
(e)	This class includes approximately 35% of corporate bonds, 2% of common stock of Japanese companies, 13% of common stock of foreign companies, 29% of real estate and 21% of othershort-term investments as of March 31, 2017. This class includes approximately 39% of corporate bonds, 2% of common stock of Japanese companies, 8% of common stock of foreign companies,
27% of real estate and 24% of other short-term investments as of March 31, 2016.

76

Financial Section

Equity securities and debt securities presented in Level 1 are primarily
valued using a market approach based on the quoted market prices ofidentical instruments. Pooled funds in equity securities or debt securities
and hedge funds which are categorized in Level 2 are valued by thesponsor of the funds primarily based on quoted prices in both active andinactive market for identical instruments which comprise the funds. Life
insurance company general accounts include contracts with insurancecompanies with guaranteed rates of return and capital, and those values
are based on the sum of original value and return. Pooled funds arevalued using the net asset value per share provided by the administratorof the fund.
The Company’s and certain subsidiaries’ funding policy for the fundedplans is to contribute amounts computed in accordance with actuarial
methods accepted by Japanese tax law. The Company and certain subsidiaries expect to contribute ¥613 million to their plans in the year ending
March 31, 2018.
The following benefit payments, which reflect expected future services, as appropriate, are expected to be paid:
Year Ending March 31

2018
2019
2020
2021
2022
Thereafter

Millions of yen¥1,879
1,996
2,007
2,008
1,943
9,623

DEFINED CONTRIBUTION PLAN—Certain subsidiaries have defined
contribution plans. The amounts of cost recognized for their contributions
to the plan were ¥249 million, ¥219 million and ¥203 million for the years
ended March 31, 2017, 2016 and 2015, respectively.
EMPLOYEE EARLY RETIREMENT PROGRAM—The Company and certain subsidiaries provide additional benefits to employees that elect to participate in the Company’s and certain subsidiaries’ early retirement
program. Retirement benefits of ¥143 million, ¥125 million and ¥114 million were paid in addition to normal benefits and charged to selling, general and administrative expenses for the years ended March 31, 2017,2016 and 2015, respectively.
TERMINATION PLAN FOR DIRECTORS—The Company previously had,and a certain subsidiary currently has, termination plans for directors.
Payment of termination benefits to directors is made in a lump sum upon
termination and requires the approval of the shareholders before payment.
In June 2005, the Company rescinded its termination plan for directors
upon the approval of its shareholders. The amount of benefit for each individual was fixed as of June 29, 2005 and will remain frozen until the retirement of each respective director. The outstanding liabilities were ¥340
million as of March 31, 2017 and 2016 and were recorded in other longterm liabilities. A certain subsidiary has plans for its directors and recorded
a liability for termination benefit for directors at the amount that would beneeded if all directors were to resign at each balance sheet date in accordance with the guidance for determination of vested benefit obligation fora defined benefit pension plan.

13. SHARE-BASED COMPENSATION...................................................................................................................................
The Company adopted an annual stock option plan in the year ended
March 31, 2009. Under the stock option plan, the Company granted sharesof its common stock to directors of the Company, excluding outside directors and directors of the Company’s wholly-owned subsidiary, Wacoal
Corp., in the years ended March 31, 2017, 2016 and 2015. The Company
believes that such awards better align the interests of its directors withthose of its shareholders, by sharing both risk and return from fluctuations instock prices and giving motivation to enhance its corporate value. Eachstock option is exercisable to acquire 1,000 shares of the Company’scommon stock at ¥1 per share. The compensation cost is measured at fairvalue on the grant date. Options vest over one year in proportion to the services rendered by the directors, and are exercisable from the day after thedate of retirement up to (i) 20 years from the grant date or (ii) 5 years fromthe day after the date of retirement, whichever is earlier.

The fair value of the options is estimated by using the Black-Scholes
option-pricing model with the following assumptions.
Expected dividend yield is based on the actual payout of dividends inthe last fiscal year and the closing price of the Company’s common stockon the grant date. Expected volatility is based on the historical volatility of
the Company’s share price over the most recent period commensuratewith the expected term of the Company’s stock options. The risk-freeinterest rate is based on the Japanese government bond yield curve in
effect at the time of grant for a period commensurate with the expected
term of the Company’s share options. The 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 thestated retirement date and they will exercise options immediately after
their retirement.

Expected dividend yield
Expected volatility
Risk-free interest rate
Expected term

2017

2016

2015

2.9%
25.1%
(0.2)%
2.5 years

2.0%
20.9%
0.0%
2.6 years

3.2%
18.7%
0.1%
3.1 years

A summary of stock option activities under the plan for the year ended March 31, 2017, was as follows:
Yen

Outstanding as of April 1, 2016
GrantedExercised
Outstanding as of March 31, 2017
Exercisable as of March 31, 2017

Years

Shares

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual Term

431,000
69,00055,000445,000
52,000¥1
1
1
1
1

14.58 years
3.10 years

Millions of yen
Aggregate
Intrinsic Value

¥611
71

77

The total intrinsic value of options exercised was ¥69 million, ¥31 millionand ¥6 million as of years ended March 31, 2017, 2016 and 2015,
respectively.
The total compensation costs recognized for the years ended March
31, 2017, 2016 and 2015 were ¥74 million, ¥67 million and ¥60 million,
respectively. The total recognized tax benefits related thereto for the years
ended March 31, 2017, 2016 and 2015 were ¥23 million, ¥21 million and¥21 million, respectively.

The weighted-average grant date fair values of options granted for theyears ended March 31, 2017, 2016 and 2015 were ¥1,044, ¥1,419 and¥937, respectively.
As of March 31, 2017, there was ¥11 million in total unrecognizedcompensation cost related to nonvested share-based compensation
arrangements granted under the plan. That cost is expected to be recognized over three months.

14. EQUITY.............................................................................................................................................................................
Japanese companies are subject to the Companies Act of Japan (the“Companies Act”). The significant provisions in the Companies Act that
affect financial and accounting 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 the shareholders’ meeting. Additionally, for companies that meet certain
criteria including (1) having a Board of Directors, (2) having independent
auditors, (3) having an Audit and Supervisory Board, and (4) the term ofservice of the directors being prescribed as one year rather than thenormal two-year term by its articles of incorporation, the Board of
Directors may declare dividends (except for dividends-in-kind) at any time
during the fiscal year if the company has prescribed so in its articles ofincorporation. The Company meets all the above criteria and, accordingly,
the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year.
The Companies Act permits companies to distribute dividends-in-kind(noncash 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 thecompanies so stipulate. The Companies Act provides certain limitations
on the amounts available for dividends or the purchase of treasury stock.

The limitation is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
(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 additional 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 bereversed 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 the accounts undercertain conditions upon resolution of the shareholders.
(c) Treasury stock
The Companies Act also provides for companies to purchase treasury
stock and dispose of such treasury stock by resolution of the Board of
Directors. The amount of treasury stock purchased cannot exceed theamount available for distribution to the shareholders which is determinedby a specific formula.

15. OTHER COMPREHENSIVE INCOME (LOSS)..................................................................................................................
The changes in the components of accumulated other comprehensive income, including amounts attributable to noncontrolling interests were as follows:
Millions of yen

2017

Balance at the beginning of the year (after-tax)
Amount arising during the year:
Pre-tax amountTax credit
Net amount
Reclassification adjustments:
Pre-tax amountTax credit
Net amount
Other comprehensive income (loss) attributable
to noncontrolling interests (after-tax)
Balance at the end of the year (after-tax)

78

2016

Pension Liability
Adjustments

Foreign Currency
Translation
Adjustments

Unrealized Loss on
Securities

Pension Liability
Adjustments¥17,966¥ (1,035)¥10,831¥20,821¥ 1,934

4,905(1,492)
3,413

1,062
(443)
619

(5,890)220(5,670)(4,169)1,336(2,833)(3,418)1,091(2,327)

(438)
134
(304)

(2)
1
(1)

(70)
23
(47)

(952)
308
(644)

Foreign Currency
Translation
Adjustments

Unrealized Gain on
Securities¥ 5,177(4,109)30(4,079)114(0)¥ 1,212¥21,075

¥

3

16

25

2

(414)

¥ 5,177¥17,966¥(1,035)

Financial Section

Millions of yen

2015
Foreign Currency
Translation
Adjustments

Unrealized Gain on
Securities

Pension Liability
Adjustments¥ 2,310¥11,606¥ (227)

9,019
(348)
8,671

15,809(5,593)
10,216

3,651(1,319)2,332(1,513)
539
(974)

(272)
96
(176)

(150)

(27)

5

¥10,831¥20,821¥ 1,934

Balance at the beginning of the year (after-tax)
Amount arising during the year:
Pre-tax amountTax credit
Net amount
Reclassification adjustments:
Pre-tax amountTax credit
Net amount
Other comprehensive income (loss) attributable
to noncontrolling interests (after-tax)
Balance at the end of the year (after-tax)

Reclassification adjustments (pre-tax) of unrealized gain or loss on securities are included in “Gain on sales or exchange of marketable securities andInvestments - net” and “Valuation gain or loss on marketable securities and investments – net” in the consolidated statements of income.
Reclassification adjustments (pre-tax) of pension liability adjustments are included in “Cost of sales” and “Selling, general and administrative expenses”
in the consolidated statements of income as the net periodic benefit costs.

16. INCOME TAXES................................................................................................................................................................
Domestic and foreign components of income before income taxes andequity in net income of affiliated companies for the years ended March 31,
2017, 2016 and 2015 were summarized as follows:
Millions of yen

JapanForeign
Total

2017

2016

2015

¥ 27,487(10,918)¥ 16,569¥24,002(9,045)¥14,957¥19,902(8,560)¥11,342

Domestic and foreign components of income tax expense for the years
ended March 31, 2017, 2016 and 2015 consist of:Millions of yen

Current:
Japan
Foreign
Deferred:Japan
Foreign
Total income taxes

2017

2016

2015

¥3,2301,600¥4,830¥1,666
1,776¥3,442¥ 3,852
1,371¥ 5,223

¥ 690
(240)
¥ 450
¥5,280¥1,483(195)¥1,288¥4,730¥(1,983)63¥(1,920)¥ 3,303

Income taxes in Japan applicable to the Companies, imposed by the national, prefectural and municipal governments, in the aggregate resulted in anormal effective statutory tax rate of approximately 30.9%, 33.1% and 35.6% for the years ended March 31, 2017, 2016 and 2015, respectively. Foreignsubsidiaries are subject to income taxes of the countries in which they operate.
The Companies are subject to a number of different taxes based on income. The effective income tax rates differed from the normal effective statutory
tax rates for the following reasons for the years ended March 31, 2017, 2016 and 2015:

Normal Japanese effective statutory tax rates
Increase (decrease) in taxes resulting from:
Permanently nondeductible expenses
Change in valuation allowance
Undistributed earnings of associated companies
Differences in foreign subsidiaries' tax rate
Tax exemption
Unrecognized tax benefits
Impairment charges on goodwill
Changes in Japanese income tax rates
Other – net
Effective tax rates

2017

2016

2015

30.9%

33.1%

35.6%

2.4
3.1
(2.1)
(0.5)
(0.4)
(1.8)

2.8
1.1
0.1
(1.2)
(0.2)
(0.1)

0.2
0.1
31.9%

(3.0)
(1.0)
31.6%

3.6
(9.4)
(0.5)
(3.3)
(0.1)
0.0
15.2
(10.7)
(1.4)
29.0%

79

The Act on the Partial Revision of the Income Tax Act, etc. (Act No. 9 of
2015) and the Act on the Partial Revision of Local Tax Act, etc. (Act No. 2
of 2015), were issued on March 31, 2015, and the corporate tax rate has
been lowered starting from the consolidated fiscal year beginning on andafter April 1, 2015. Accordingly, from the end of the fiscal year ended
March 31, 2015, with respect to the Company and our major domestic
subsidiaries, the effective statutory tax rate used for the calculation ofdeferred tax assets and deferred tax liabilities has been changed from thecurrent 35.6% to 33.1% for the temporary differences which were
expected to reverse during the consolidated fiscal year beginning April 1,2015 and to 32.3% for the temporary differences which are expected toreverse in and after the consolidated fiscal year beginning April 1, 2016.
Due to this tax rate change, the deferred income taxes recognized in
the fiscal year ended March 31, 2015 decreased by ¥1,209 million as aresult of the reversal of the deferred tax assets and deferred tax liabilities.
Following the amendments described above, new amendments, theAct on the Partial Revision of the Income Tax Act, etc. (Act No. 15 of
2016) and the Act on the Partial Revision of Local Tax Act, etc. andRelated Matters (Act No. 13 of 2016) were enacted in the Diet session on
March 29, 2016, and the corporate tax rate is lowered starting from theconsolidated fiscal year beginning on or after April 1, 2016. Accordingly,
with respect to the Company and our major domestic subsidiaries, theeffective statutory tax rate used for the calculation of deferred tax assets
and deferred tax liabilities has been changed from 32.3% to 30.9% for
the temporary differences which are expected to reverse during the consolidated fiscal year beginning April 1, 2016 and the consolidated fiscal
year beginning April 1, 2017, and to 30.6% for the temporary differences
which are expected to reverse in and after the consolidated fiscal year
beginning April 1, 2018.
Due to this tax rate change, the deferred income taxes recognized in
the fiscal year ended March 31, 2016 decreased by ¥454 million as aresult of the reversal of the deferred tax assets and deferred tax liabilities.

The approximate effect of temporary differences and tax loss carryforwards that gave rise to deferred tax balances as of March 31, 2017 and 2016 wereas follows:
Millions of yen

2017
Deferred Tax
AssetsAllowance for returns
Allowance for doubtful receivables
Accruals not currently deductible
Inventory valuation
Accrued bonuses
Impairment charges on marketable securities and investments
Advanced depreciation on property, plant and equipment
Undistributed earnings of associated companies
Net unrealized gain on marketable securities and investments
Net realized gain on exchange of investments
Capitalized supplies
Enterprise taxes
Accrued vacation
Asset retirement obligation
Prepaid pension expense
Liability for termination and retirement benefit
Tangible fixed assets
Tax loss carryforwards
Intangible assets
Other temporary differences
Total
Valuation allowance
Total

80

¥

Deferred Tax
Liabilities

2016
Deferred Tax
Assets

¥

713
14
221
830
963
972

638
17
139
964
1,038
1,118
¥ 1,126
2,564
9,395
818

¥ 1,992
2,209
10,738
818

167
86
743
277

162
298
761
267

1,872

2,462

415
1,439
2,017

478
1,472
1,491
525
9,167
(1,845)¥ 7,322

Deferred Tax
Liabilities

1,761
95
20,075¥20,075577
9,635(2,360)¥ 7,275

2,017
203
17,995¥17,995

Financial Section

The valuation allowance decreased by ¥515 million and ¥175 million forthe years ended March 31, 2017 and 2016, respectively.
On November 28, 2014, the Company resolved a restructuring planfor its group organization. Based on the resolution, most of the assets
and liabilities of Lecien Corp. (“Lecien”), a wholly-owned subsidiary of
the Company, were transferred to a newly-established subsidiary, andWacoal Corp., another wholly-owned subsidiary of the Company,
merged with Lecien, including Lecien’s remaining of assets and liabilities
on April 1, 2015.
In conjunction with the merger, deferred tax assets for temporary differences related to the merged assets and liabilities and tax loss carryforwards were transferred from Lecien to Wacoal Corp., such deferred tax
assets which had been fully covered by a valuation allowance due to thepoor operating results of Lecien. However, as a result of considering thechange in the realizability of deferred tax assets triggered by the resolution, the Company reversed ¥1,398 million of valuation allowance and recognized the same amount of income tax benefit for the year ended March
31, 2015.
The Companies reversed a part of the valuation allowance and utilized¥257 million and ¥189 million of tax loss carryforwards, and recognizedtax benefits of ¥77 million and ¥56 million for the years ended March 31,2017 and 2016, respectively.
As of March 31, 2017, certain subsidiaries had tax loss carryforwards,
which are available to offset future taxable income of such subsidiaries,
expiring as follows:Year Ending March 31

2018
2019
2020
2021
2022
2023
2024
2025
2026
Thereafter
Total

Millions of yen

¥267
439
812
194
414

There was no portion of undistributed earnings of foreign subsidiaries andforeign corporate joint ventures which was deemed to be permanently
invested as of March 31, 2017 and 2016.
A reconciliation of beginning and ending amounts of unrecognized tax
benefits was as follows:
Millions of yen

Balance at the beginningof the year

2017

2016

2015

¥ 300

¥312

¥296

1

1

16

(297)

(13)

4

¥300

Additions based on tax positions
related to the current year
Reductions for tax positionsof prior years
Balance at the end of the year

¥

¥312

The total amount of unrecognized tax benefits that, if recognized, would
affect the effective tax rate is ¥4 million, ¥300 million and ¥312 million asof March 31, 2017, 2016 and 2015, respectively.
The Companies recognize interest and penalties accrued related tounrecognized 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, 2017,2016 and 2015 were not material.
The Companies file income tax returns in Japan and various foreign
tax jurisdictions. In Japan, the Companies are no longer subject to regularincome tax examinations by the tax authorities for years before 2014 withfew exceptions. For other countries, the Companies are no longer subject
to regular income tax examinations by the tax authorities for years before
2010 with few exceptions. The transfer pricing examinations of certain
domestic and U.S. subsidiaries’ 2007 and 2010 fiscal years werecompleted.

43
121
657
2,253
¥5,20081

17. RELATED PARTY TRANSACTIONS.................................................................................................................................
The Companies purchase merchandise from numerous suppliers throughout the world, including certain affiliated companies of the Companies.
The Companies purchased merchandise from affiliated companies in theamount of ¥2,646 million, ¥2,468 million and ¥2,581 million in the years
ended March 31, 2017, 2016 and 2015, respectively. The accounts payable to affiliated companies were ¥237 million and ¥188 million as ofMarch 31, 2017 and 2016, respectively.
The Companies also sell supplies, materials and products to certain
affiliated companies. Aggregate sales to affiliated companies were ¥1,898
million, ¥335 million and ¥386 million in the years ended March 31, 2017,2016 and 2015, respectively. The accounts receivable from affiliated companies were ¥513 million and ¥97 million as of March 31, 2017 and 2016,
respectively.
The Companies earn royalties from the use of the Wacoal Brand bycertain affiliated companies. The amount of royalty revenue earned was¥263 million, ¥266 million and ¥288 million in the years ended March 31,
2017, 2016 and 2015, respectively. Other accounts receivable from affiliated companies, which are included in other current assets in the consolidated balance sheets, were ¥226 million and ¥225 million as of March 31,2017 and 2016, respectively.

18. 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 shares outstanding
during each year. Diluted net income attributable to Wacoal Holdings
Corp. per share assumes the dilution that would occur if share-based
options to issue common stock were exercised.
The weighted-average number of common shares outstanding usedin the computations of basic net income attributable to Wacoal Holdings

Corp. per share was 138,966,630 shares, 140,842,184 shares and
140,839,059 shares for the years ended March 31, 2017, 2016 and 2015,
respectively. The weighted-average number of diluted common shares
outstanding used in the computations of diluted net income attributable to
Wacoal Holdings Corp. per share was 139,393,263 shares, 141,255,241
shares and 141,203,998 shares for the years ended March 31, 2017,2016 and 2015, respectively.

19. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK.......................................................................
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of financial instruments as of March 31, 2017 and 2016 were as follows:
Millions of yen

2017

Assets:Marketable securities (Notes 3 and 21)
Investments (Notes 3 and 21)
Total assets
Liabilities:
Long-term debt including current portion
Total liabilities

There are investments in nonmarketable equity securities and debt securities for which there are no readily determinable fair values. See Note 3 forfurther information. The carrying amounts of all other financial instruments
approximate their estimated fair values because of the short maturity of
those instruments. For information about fair values of foreign exchange
contracts, see Note 20.
MARKETABLE SECURITIES AND INVESTMENTS—Held-to-maturity
debt securities are classified as marketable securities and investments asof March 31, 2017 and 2016. The fair value of these held-to-maturity debt
securities are classified as Level 1. For all other investments included inmarketable securities and investments, see Notes 3 and 20.
LONG-TERM DEBT—The fair values for long-term debt are estimated bydiscounted cash flow analysis, using rates currently available for similar

82

2016

Carrying Amount

Fair Value

Carrying Amount

Fair Value¥ 1,445
58,586¥60,031¥ 1,442
58,582¥60,024¥ 1,880
54,733¥56,613¥ 1,879
54,730¥56,609

¥
¥

¥
¥

¥
¥

¥
¥

235
235

235
235

388
388

389
389

types of borrowings with similar terms and remaining maturities. The estimated fair value is based on Level 2 inputs.
LIMITATIONS—Fair value estimates are made at a specific point in time
based on relevant market information and information about the financial
instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
CONCENTRATION OF CREDIT RISK—The Companies’ business consists primarily of sales of women’s intimate apparel to a large number ofdiverse customers in the Japanese retail industry, which include well-established department stores, general merchandise stores and other general retailers and specialty stores.

Financial Section

20. FAIR VALUE MEASUREMENTS.......................................................................................................................................
The guidance for fair value measurements defines fair value as the pricethat would be received to sell an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants at the measurement
date. The guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value as follows:

Level 1—Inputs are quoted prices in active markets for identical assets or
liabilities.
Level 2—Inputs are quoted prices for similar assets or liabilities in active
markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, inputs other than quoted pricesthat are observable, and inputs that are derived principally fromor corroborated by observable market data by correlation orother means.
Level 3—Inputs are unobservable.

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2017 and 2016 were as follows:
Millions of yen
2017

Assets:Marketable securities:
Municipal bonds
Mutual funds
Total marketable securities
Investments:
Equity securities
Mutual funds
Total investments
Derivative instruments:
Foreign exchange contracts
Total assets
Liabilities:
Derivative instruments:
Foreign exchange contracts
Total liabilities

Level 1

Level 2

Level 3

¥ 10
868
878

Total

¥

¥57,97644
58,02010868
878

57,97644
58,020¥58,0202¥880

2¥58,900

¥
¥

¥
¥

4
4

4
4

Millions of yen
2016

Assets:Marketable securities:
Municipal bonds
Corporate bonds
Mutual funds
Total marketable securities
Investments:
Equity securities
Total assets
Liabilities:
Derivative instruments:
Foreign exchange contracts
Total liabilities

Investments presented in Level 1 are valued using unadjusted quoted
market prices in active markets with sufficient volume and frequency oftransactions. Bonds presented in Level 2 are valued by financial institutions using quoted market prices for identical instruments in markets thatare not active. Mutual funds presented in Level 2 are valued by financial
institutions based on quoted prices in an inactive market for identical
instruments which are included in the mutual funds.

Level 1

Level 2

10
395
1,361
1,766

¥53,925¥53,925

Level 3

Total

¥

¥

10
395
1,361
1,766

¥1,76653,925¥55,691

¥ 297
¥ 297

¥
¥

297
297

As discussed in Note 3, the Companies recorded impairment charges
on marketable securities and investments if a decline in fair value of marketable securities and investments is determined to be other than
temporary.
Foreign exchange contracts presented in Level 2 are valued by financial institutions based on market data in both active and inactive market.

83

ASSETS MEASURED AT FAIR VALUE ON A NONRECURRING BASIS
There were no assets measured at fair value on a nonrecurring basis as of March 31, 2017. Assets measured at fair value on a nonrecurring basis as ofMarch 31, 2016 were as follows:
Millions of yen
Level 1

2016

Level 2Land
Buildings and Structures
Machinery and equipment

During the fiscal year ended March 31, 2016, the Company categorized acertain asset group as real estate for rent. The Company performed an
impairment analysis as of March 31, 2016 and determined that the fairvalue of the real estate was below its carrying amount. Accordingly, theCompany reduced the carrying amount from ¥366 million to ¥133 million
for land and from ¥8 million to ¥0 million for buildings and structures,
respectively. The fair value was measured mainly based on the real estateappraisal value. An impairment charge on the long-lived assets of ¥241
million was included in an operating expense of Wacoal Business(Domestic) in the segment information.
As of March 31, 2015, goodwill with a carrying amount of ¥9,170 million was written down to its implied fair value of ¥4,325 million, resulting in
an impairment charge of ¥4,845 million, which is included in earnings forthe year ended March 31, 2015. The impairment arose due to the decline
in its fair value, which was mainly caused by a downturn in consumption
due to general market conditions. To measure the fair values of the reporting units, the Companies used the expected present value of future cash
flows and incorporated relevant unobservable inputs, such as management's internal assumptions about future cash flows and appropriately
risk-adjusted discount rates, which reflected management's estimate ofassumptions that market participants would use in pricing the asset in an
arm's length transaction as of the measurement date.
Trademarks with a carrying amount of ¥3,170 million as of March 31,
2015 were written down to their fair values of ¥1,994 million, resulting inrecognition of an impairment charge of ¥1,176 million for the year ended
March 31, 2015. The impairment arose due to the decline in their fairvalue, which was mainly caused by a downturn in consumption due togeneral market conditions. To measure the fair value of the trademarks,
the Companies used the relief-from-royalty method and incorporated

Level 3

Total

Total Losses

¥133
0
0

¥133
0
0

¥(233)(8)(15)¥(256)

relevant unobservable inputs, such as management's internal assumptions about future cash flows, the rate of royalty, and appropriately
risk-adjusted discount rate, which reflected management's estimate ofassumptions that market participants would use in pricing the asset in an
arm's length transaction as of the measurement date. Future cash flows
were based on the management's cash flow projections for the next
future five years, and after five years, future cash flows were estimatedusing the perpetuity growth rate of 0%. 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 rate of royalty used for the valuation was based on the actual
royalty ratio used in transactions. The risk-adjusted discount rate represents a weighted-average cost of capital (WACC) adjusted for inherent
risk spread.
Valuation process:
The valuation process involved in Level 3 measurements for applicable
assets and liabilities is governed by the valuation policies and procedures,
including evaluation method for fair value measurements, pre-approved by
the Companies. Based on the policies and procedures, either personnel
from the accounting division or personnel in charge of valuation determine
the valuation model to be utilized to measure each asset and liability at fairvalue. We engage independent external valuation experts to assist us in
the valuation process for certain assets over a specific amount, and theirresults of their valuations are reviewed by the responsible personnel of theCompanies. All valuations, including those performed by the external
experts, are reviewed and approved by management of the Companies
before being recorded in the general ledger.

Quantitative information regarding Level 3 fair value measurements:
Information about valuation techniques and significant unobservable inputs used for Level 3 assets measured at fair value for the year ended March 31,
2015 is as follows:
Millions of yen

84

March 31, 2015

Fair Value

Valuation TechniquePrincipal Unobservable Input

Trademarks¥1,994

Relief-from royalty method

Discount rate
Royalty rate
Short-term revenue growth rates (within five years)
Perpetuity growth rate (over five years)

Range

7.3%–11.3%
3.0%–4.0%
2.3%–5.3%0%Financial Section

21. DERIVATIVE INSTRUMENTS...........................................................................................................................................
RISK MANAGEMENT POLICY—The Companies are exposed to the riskof changes in foreign currency exchange rates. Derivative instruments areused to manage such risk. Derivative instruments are used based on
Company policy and administrative provisions. There were no derivative
instruments used for the purpose of speculative trading. The Companies
consider the related credit risk to be low since these derivative instruments
are provided by the financial institutions with international credibility.
FOREIGN EXCHANGE RISK—Assets and liabilities denominated in foreign currencies, which are primarily related to international business, areexposed to the risk of changes in foreign currency exchange rates.
Foreign exchange contracts are used to mitigate such risk.
DERIVATIVE INSTRUMENTS NOT DESIGNATED AS A HEDGE—
Foreign exchange contracts are classified as derivative instruments, which
are not designated as a hedge since these derivative instruments do not
qualify for hedge accounting. These derivative instruments are used tomitigate the risk of changes in foreign currency exchange rates, and thechanges in fair value of such derivative instruments are recorded in earnings immediately.
Notional contract amounts of foreign currency exchange contracts
that are not designated as hedges are ¥1,313 million and ¥5,366 million
as of March 31, 2017 and 2016, respectively. The changes in the fair valueof the foreign currency exchange contracts are recorded in earnings, since
the foreign currency exchange contracts are not designated as hedges.
The Companies recognized a gain of ¥295 million, a loss of ¥(506) million
and a gain of ¥192 million in other - net of other income (expenses) for theyears ended March 31, 2017, 2016 and 2015, respectively.
The Companies recorded the derivative instruments at fair value in the
consolidated balance sheets as other current assets and other current liabilities in the amount of ¥2 million and ¥4 million, respectively, as of March
31, 2017, and as other current liabilities of ¥297 million as of March 31,
2016.

22. REORGANIZATION EXPENSES.......................................................................................................................................
Eveden Huit SAS, a wholly-owned subsidiary of the Company which sold underwear and swimwear, filed with the Rennes Commercial Court in France forreorganization on April 1, 2016. On July 9, 2016, the subsidiary was instructed to transfer its business to Trendy Capital Co., which operates in France.
Accordingly, in connection with this reorganization, expenses of ¥750 million were recognized during the year ended March 31, 2017. The total amount ofreorganization expenses are estimated to be ¥805 million.
The changes in the amount of related liabilities for the year ended March 31, 2017 were as follows:
Millions of yen

2017

Balance at the beginning of the year:
Reorganization expenses
Expenses without cash payment
Cash payments madeForeign currency translation adjustments
Balance at the end of the year

Retirement Cost

¥ 237
(237)

Depreciation and
Loss on Disposalof Assets without
Cash Payment – net

¥ 301
(301)

Other RelatedExpenses

Total

¥ 212
(2)
(121)
(2)
¥ 87

¥ 750
(303)
(358)
(2)
¥ 87

The Companies recorded ¥211 million and ¥539 million of reorganization expenses in costs of sales and selling, general and administrative expenses,
respectively, in the consolidated statement of income for the year ended March 31, 2017. These expenses were included in the operating costs andexpenses for Wacoal Business (Overseas) in the segment information.

23. ASSETS CLASSIFIED AS HELD FOR SALE....................................................................................................................
The Companies transferred land, located at the site of the Nagoya branch,on April 27, 2016 to make effective use of resources because it was
unlikely that the Companies would use this site for future business.
The Companies recorded ¥295 million of land held for sale in other current
assets in the consolidated balance sheet as of March 31, 2016, which

was included in the asset group for Wacoal Business (Domestic) in thesegment information.
As a result of the transfer, the Companies recorded a gain on sale ofproperty, plant and equipment of ¥3,770 million in the consolidated statement of income for the year ended March 31 2017.

85

24. SEGMENT INFORMATION...............................................................................................................................................
OPERATING SEGMENT INFORMATIONThe Companies have three reportable segments: “Wacoal business(domestic),” “Wacoal business (overseas),” and “Peach John,” which are
based on their locations and brands. These segments represent components of the Companies for which separate financial information is available and for which operating income (loss) is reviewed regularly by thechief operating decision-maker in deciding how to allocate theCompanies’ resources and in assessing their performance. The accounting policies used for these reportable segments are the same as thosedescribed in the summary of significant accounting policies in Note 1.
The “Wacoal business (domestic)” segment primarily produces andsells innerwear (consisting of foundation, lingerie, nightwear and children’s
innerwear), outerwear, sportswear and hosiery. The “Wacoal business(overseas)” segment produces and sells innerwear (consisting of foundation, lingerie, nightwear and children's innerwear), outerwear, sportswear,
hosiery and other textile-related products. The “Peach John” segment
produces and sells innerwear (consisting of foundation, lingerie, nightwear), outerwear, and other textile-related products, which are sold underthe “Peach John” brand. The “Other” produces and sells innerwear (consisting of foundation, lingerie, nightwear and children’s innerwear), outerwear, other textile-related products, mannequins and construction of
stores and interior design.

Information about operating results and assets for each segment as of and for the years ended March 31, 2017, 2016 and 2015 is as follows:
Millions of yen
2017

Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Total
Operating income
Total assets and capital expenditures:
Total assets
Capital expenditures

Wacoal Business(Domestic)

Wacoal Business(Overseas)

Peach John

Other

Elimination¥118,389
1,098
119,487¥48,4239,236
57,659¥11,107
1,006
12,113¥17,962
5,947
23,909¥(17,287)(17,287)

109,280
3,248
112,528
6,959

53,3201,284
54,604
3,055

11,427
312
11,739374

23,044
188
23,232
677(17,287)259,531
5,233

77,313
1,799

11,882355

18,684
58(72,452)

Wacoal Business(Domestic)

Wacoal Business(Overseas)

Peach John

Other

Elimination¥120,570
1,427
121,997¥51,869
8,595
60,464¥11,190775
11,965¥19,288
6,102
25,390¥(16,899)(16,899)

110,144
3,043
113,187
8,810

54,711
1,320
56,031
4,433

11,442
265
11,707258

24,839187
25,026364

254,269
6,977

80,580
1,694

11,959245

18,86662

Consolidated¥195,881(17,287)

195,881
179,784
5,032
184,816
11,065294,958
7,445
Millions of yen

2016

Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Total
Operating income
Total assets and capital expenditures:
Total assets
Capital expenditures

86

Consolidated¥202,917(16,899)(16,899)(72,820)

202,917
184,237
4,815
189,052
13,865292,854
8,978

Financial Section

Millions of yen
2015

Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Impairment charges on goodwill (Note 8)
Impairment charges onother intangible assets (Note 8)
Total
Operating income (loss)
Total assets and capital expenditures:
Total assets
Capital expenditures

Wacoal Business(Domestic)

Wacoal Business(Overseas)

Peach John

Other

Elimination¥112,203
1,906
114,109¥48,107
8,592
56,699¥11,626650
12,276¥19,829
5,046
24,875¥(16,194)(16,194)

102,789
2,876

50,444
1,479

12,080471
4,845

24,469248(16,194)

173,588
5,074
4,845

105,665
8,444

51,923
4,776

18,572(6,296)

24,717
158(16,194)

184,683
7,082

261,467
3,338

78,143742

11,748300

20,78998(71,875)

300,272
4,478

Consolidated¥191,765

1,176

191,765

1,176

The sum of the operating income (loss) of the reportable segments is consistent with the operating income on the consolidated statements of income. For
a reconciliation from operating income to income before income taxes and equity in net income of affiliated companies, see other income (expenses) on the
consolidated statements of income.
The Companies account for intersegment sales and transfers at cost plus a markup. Operating income (loss) represents net sales less operating costs
and expenses.
PRODUCTS AND SERVICE INFORMATIONNet sales information by product and service for the years ended March 31, 2017, 2016 and 2015 is as follows:
Millions of yen

Innerwear:
Foundation and lingerieNightwear
Children’s underwear
Subtotal
Outerwear/Sportswear and others
Hosiery
Other textile goods and related products
Others
Total

2017

2016

2015

¥145,188
9,154
1,429
155,771¥ 17,189
2,235
9,346
11,340¥195,881¥151,166
10,098
1,386
162,650¥ 19,074
2,178
7,161
11,854¥202,917¥142,681
9,514
1,373
153,568¥ 16,227
2,437
7,616
11,917¥191,765

GEOGRAPHIC INFORMATION
Information by major geographic area as of and for the years ended March 31, 2017, 2016 and 2015 is as follows:
Millions of yen

Net sales:Japan
Asia and Oceania
Americas and Europe
Consolidated
Long-lived assets:Japan
Asia and Oceania
Americas and Europe
Consolidated

2017

2016

2015

¥147,061
19,187
29,633¥195,881¥150,673
17,90634,338¥202,917¥143,250
16,261
32,254¥191,765¥ 47,452
4,661
3,175
¥ 55,288¥ 46,136
4,490
3,312
¥ 53,938¥ 43,200
2,998
2,990
¥ 49,188

Countries or areas are classified according to their geographical proximity.
Asia and Oceania includes East Asia, Southeast Asia, West Asia and Australia.
Net sales are attributed to countries or areas based on the location where sold.
Long-lived assets represent property, plant and equipment.

8725. SUBSEQUENT EVENTS...................................................................................................................................................
(Purchase of Treasury Stock)
On May 10, 2017, the Board of Directors resolved to purchase treasury
stock with the specific purchasing method as described below pursuant
to the provisions of Paragraph 1, Article 459 of the Companies Act asfollows.
a. Reason for Purchase:	To improve capital efficiency and to implement our capital policy withincreased flexibility tailored to the business environment
b. Type of Shares to Be Purchased:
Common stock of the Company
c. Total Number of Shares to Be Purchased:
2,800,000 shares (at maximum)d. Purchase Period:
From May 15, 2017 through December 31, 2017e. Total Amount to Be Purchased:¥4,000 million (at maximum)(Share Consolidation and Amendment of the Number of
Shares Constituting One Share Unit)
On May 10, 2017, the Board of Directors resolved to submit a proposal
for share consolidation and amendment of the number of shares constituting one share unit to the 69th ordinary general meeting of shareholders
held on June 29, 2017, and the proposal was approved.
a.	Reason for Share Consolidation and Amendment of the Number of
Shares Constituting One Share Unit:	All Japanese stock exchanges issued the “Plan of Action for
Consolidating Unit of Trading,” and have purpose the minimum trading
unit of common stock for domestically listed companies to aiming tounify 100 shares and a unit trading price within a range from ¥50,000 to¥500,000. In response to this, the number of shares constituting one
share unit was amended to 100 shares from 1,000 shares, and a shareconsolidation pursuant to which two shares will be consolidated into
one share was implemented, which was determined based on the
Company’s mid- and long-term stock price fluctuations.
b. Details of the Share Consolidation:
Type of shares subject to the share consolidation:
		 Common stock of the Company
Method and ratio of share consolidation:
		From October 1, 2017, shares possessed by shareholders of record
as of September 30, 2017 (September 29, 2017 in fact) are consolidated in at a ratio of one for two shares.

88

Number of decreasing shares due to the share consolidation:
		 Total number of authorized shares (on March 31, 2017)

143,378,085 shares
		 Decrease in shares due to the share consolidation
71,689,043 shares
		 Total number of authorized shares after the share consolidation
71,689,042 shares	The “Decrease in shares due to the share consolidation” is theoreticalvalue calculated by multiplying the total number of authorized shares
before the share consolidation and the ratio of share consolidation.
Correspondence to fractional shares occurring:		If any fractional shares arise as a result of the share consolidation,
the Company will collectively purchase all such fractional shares anddistribute the proceeds to each of the shareholders holding fractional
share(s) in proportion to the number of fractional share(s) held by
each of such shareholders, pursuant to the provisions of theCompanies Act.
c.	Contents of Amendment of the Number of Shares Constituting One
Share Unit:	Resulting from the share consolidation, the number of shares constituting one share unit was amended to 100 shares from 1,000 shares.
d.	Schedule of the Share Consolidation and Amendment of the Number of
Shares Constituting One Share Unit:
		 Resolution day of the Board of Directors
May 10, 2017
		 Resolution day of the ordinary general meeting of shareholdersJune 29, 2017		Share consolidation and amendment of the number of shares constituting one share unit
October 1, 2017 (scheduled)e. Effect on Per Share Information:	Assuming that the share consolidation had taken place on April 1,
2015, per share information for the years ended March 31, 2017 and2016 would be as follows:
Yen

Shareholder’s equity per share
Basic net income attributable
to Wacoal Holdings Corp. per share
Diluted net income attributable
to Wacoal Holdings Corp. per share

2017

2016

¥3,317.06¥3,185.80¥ 180.26¥ 158.46¥ 179.71¥ 158.00(Dividend Declaration)
On May 10, 2017, the Board of Directors resolved to pay a cash dividendof ¥180 per 5 shares of common stock to holders of record as of March
31, 2017 (aggregate amount of ¥4,940 million).

Financial Section

Independent Auditors’ Report

To the Board of Directors and Stockholders of Wacoal Holdings Corp.
Kyoto, Japan
We have audited the accompanying consolidated financial statements of Wacoal Holdings Corp. and its subsidiaries (the “Company”), which comprisethe consolidated balance sheets as of March 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, equity andcash flows for each of the three years in the period ended March 31, 2017 (all expressed in Japanese yen), and the related notes to the consolidated
financial statements.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance withauditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation andfair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wacoal Holdings
Corp. and its subsidiaries as of March 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period
ended March 31, 2017, in accordance with accounting principles generally accepted in the United States of America.

Convenience Translation
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 for convenience of readers outside of Japan.

Report on Management’s Report on Internal Control over Financial Reporting
Notwithstanding the second paragraph of the “Auditors’ Responsibility” section, we have performed an audit of management’s report on internal control
over financial reporting (“ICFR”) under the Financial Instruments and Exchange Act of Japan. A translated copy of management’s report on ICFR alongwith a translated copy of our report is included within this Annual Securities Report as information for readers.

June 29, 201789

Management’s Annual Report on Internal Control Over Financial Reporting (Translation)

NOTE TO READERS
The following is an English translation of management’s report on internal control over financial (“ICFR”) filed under the Financial Instruments andExchange Act of Japan. This report is presented merely as supplemental information.
There are differences between the management assessment of ICFR under the Financial Instruments and Exchange Act (“ICFR under FIEA”)
and one conducted under the attestation standards established by the American Institute of Certified Public Accountants (“AICPA”).
In the management assessment of ICFR under FIEA, there is detailed guidance on the scope of management’s assessment of ICFR, such as
quantitative guidance on business units selection and/or account selection. In the management assessment of ICFR under the attestation standards
established by the AICPA, there is no such detailed guidance. Accordingly, based on the quantitative guidance which provides an approximate measure for the scope of assessment of internal control over business processes, we designated the business units that accounted for approximately
two-thirds of the aggregated sales for the previous fiscal year on a consolidated basis as “significant business units” which should be subject to theprocess-level controls.

1. Matters Relating to the Basic Framework for Internal Control over Financial Reporting
Yoshikata Tsukamoto, President and Representative Director, and Masaya Wakabayashi, Director and Vice President, are responsible for the designing and operating effective internal control over financial reporting of Wacoal Holdings Corp. (the “Company”), and have designed and operated
internal control over financial reporting in accordance with the basic framework for internal control set forth in “The Standards and PracticeStandards for Management Assessment and Audit of Internal Control Over Financial Reporting” published by the Business Accounting Council.
The internal control is designed to achieve certain objectives to the extent reasonable through the effective function and combination of its basic
elements. Therefore, there is a possibility that misstatements may not be completely prevented or detected by internal control over financial
reporting.

2. Matters Relating to Scope of Assessment, the Assessment Date, and Assessment Procedures
The assessment of internal control over financial reporting was performed as of March 31, 2017. The assessment was performed in accordancewith assessment standards for internal control over financial reporting generally accepted in Japan.
In conducting this assessment, we evaluated internal controls which may have a material effect on the entire financial reporting in a consolidation (“company-level controls”) and, based on the result of this assessment, we appropriately selected business processes to be evaluated, analyzed
these selected business processes, identified key controls that may have a material impact on the reliability of our financial reporting, and assessed
the design and operation of these key controls. These procedures have allowed us to evaluate the effectiveness of its internal controls.
We determined the required scope of the assessment of internal control over financial reporting for the Company, as well as its consolidated
subsidiaries and equity method affiliated companies, from the perspective of the materiality that may affect the reliability of our financial reporting.
The materiality that may affect the reliability of our financial reporting is determined taking into account the materiality of quantitative and qualitative
impacts. We confirmed that we had reasonably determined the scope of assessment of internal controls over business processes in light of theresults of assessment of company-level controls conducted for the Company, its consolidated subsidiaries and equity method affiliated companies.
We did not include those consolidated subsidiaries and equity method affiliated companies which do not have any quantitatively or quantitatively
material impact on the consolidated financial statements in the scope of the assessment of company-level controls.
Regarding the scope of assessment of internal control over business processes, we designated the business locations that accounted forapproximately two-thirds of the aggregated sales for the previous fiscal year on a consolidated basis as “significant business locations” which should
be subject to process-level controls.
At the selected significant business units, we included, in the scope of our assessment, those business processes leading to sales or accounts
receivable and inventories, as significant accounts that may have a material impact on our business objectives. Further, not only at selected significant business units, but also at other business units, we added to the scope assessment, as business processes having greater materiality considering their impact on financial reporting, (1) those business processes relating to greater likelihood of material misstatements and significant
accounts involving estimates and management’s judgment, and (2) those business processes relating to businesses or operations dealing high risk
transactions.

90

Financial Section

3. Matters Relating to the Results of Assessment
As a result of the assessment above, we concluded that our internal control over financial reporting was effective as of March 31, 2017.

4. Supplementary Matters
Not applicable.

5. Special Information
Not applicable.

Yoshikata Tsukamoto
President and Representative Director
WACOAL HOLDINGS CORP.
Masaya Wakabayashi
Director and Vice President
WACOAL HOLDINGS CORP.

91

Independent Auditors’ Report

NOTE TO READERS:
The following is an English translation of the Independent Auditors’ Report filed under the Financial Instruments and Exchange Act of Japan. This report ispresented merely as supplemental information.
There are differences between an audit of internal control over financial reporting (“ICFR”) under the Financial Instruments and Exchange Act (“ICFR
under FIEA”) and one conducted under attestation standards established by the American Institute of Certified Public Accountants (“AICPA”).
In an audit of ICFR under FIEA, the auditors express an opinion on management’s report on ICFR, and do not express an opinion on the Company’s
ICFR directly. In an audit of ICFR under attestation standards established by the AICPA, the auditors express an opinion on the Company’s ICFR directly.
Also, in an audit of ICFR under FIEA, there is detailed guidance on the scope of an audit of ICFR, such as quantitative guidance on business unit selection
and/or account selection. In an audit of ICFR under attestation standards established by the AICPA, there is no such detailed guidance. Accordingly, basedon the quantitative guidance which provides an approximate measure for the scope of assessment of internal control over business processes, we used ameasure of approximately 70% of total assets on a consolidated basis and income before income taxes on a consolidated basis for the selection of significant business units.

(TRANSLATION)
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Fumihiko Kimura
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Hiroaki Sakai
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Seiichiro Nakashima

To the Board of Directors of Wacoal Holdings Corp.

Audit of Financial Statements
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited the consolidated financial statements
included in the Financial Section, namely, the consolidated balance sheet as of March 31, 2017 of Wacoal Holdings Corp. and its consolidated subsidiaries(the “Company”), and the consolidated statements of income, comprehensive income, equity and cash flows for the fiscal year from April 1, 2016 to March
31, 2017, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America pursuant to the third paragraph of the Supplementary Provisions of the Cabinet Office Ordinance forPartial Amendment of the Regulations for Terminology, Forms and Preparation Methods of Consolidated Financial Statements (No. 11 of the Cabinet Office
Ordinance in 2002), and for such internal control as management determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.

92

Financial Section

Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance withauditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wacoal Holdings Corp.
and its consolidated subsidiaries as of March 31, 2017, and the results of their operations and their cash flows for the year then ended in accordance withaccounting principles generally accepted in the United States of America.

Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited management’s report on internal control over financial reporting of the Company as of March 31, 2017.

Management’s Responsibility for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the preparation and fair presentation of its
report on internal control in accordance with assessment standards for internal control over financial reporting generally accepted in Japan. There is a possibility that misstatements may not be completely prevented or detected by internal control over financial reporting.

Auditors’ Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal control audit. We conducted our internal control audit in accordance with auditing standards for internal control over financial reporting generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether management’s report on internal control is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of the assessment of internal control over financial
reporting in management’s report on internal control. The procedures selected depend on the auditors’ judgment, including the significance of effects on
reliability of financial reporting. An internal control audit includes examining representations on the scope, procedures and results of the assessment of internal control over financial reporting made by management, as well as evaluating the overall presentation of management’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion
In our opinion, management’s report on internal control over financial reporting referred to above, which represents that the internal control over financial
reporting of Wacoal Holdings Corp. and its consolidated subsidiaries as of March 31, 2017 is effectively maintained, presents fairly, in all material respects,
the results of the assessment of internal control over financial reporting in accordance with assessment standards for internal control over financial reporting
generally accepted in Japan.

Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required under the provisions of the Certified Public
Accountants Act.

June 29, 201793Investor Information
As of March 31, 2017

Ownership and Distribution of Shares

STOCK LISTINGTokyo

Securities firms

FISCAL YEAR-END
March 31

1.52%

Individuals and others

19.60 %

SECURITIES CODE
3591
COMMON STOCK
Issued: 143,378,085 shares
Outstanding: 137,210,874 shares

Financial
institutions

40.40 %
Other Japanesecompanies

TRADING UNIT
1,000 shares

19.22 %SHAREHOLDER REGISTER AGENT FOR
COMMON STOCK
Mitsubishi UFJ Trust andBanking Corporation,
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Foreign institutions
and individuals

19.26 %AMERICAN DEPOSITARY RECEIPTS
Cusip No.: 930004205
Ratio (ADR:ORD): 1:5Market: OTCQX
Symbol: WACLY

Major Shareholders*%

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

4.80

Meiji Yasuda Life Insurance Company

4.44

Japan Trustee Services Bank Ltd. (Trust Account)

4.21

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)
www.adrbny.com

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

3.79

The Bank of Kyoto, Ltd.

3.42

Nippon Life Insurance Company

2.67

The Shiga Bank, Ltd.

2.65

Mitsubishi UFJ Trust and Banking Corporation

2.22

The Dai-ichi Life Insurance Company, Ltd.

1.99

Asahi Kasei Fibers Corp.

1.80

NUMBER OF SHAREHOLDERS
14,230*The percentages exclude treasury stock.

Stock Price/Trading Volume
Stock Price (¥)
2,000
1,500
1,000
500

0
Trading Volume (Thousand shares)
15,00012,000
9,000
6,000
3,000
0

08/1

09/1

10/1

11/1

12/1

13/1

14/1

15/1

16/1

17/1

Forward-Looking Statements: Statements contained in this integrated report that are not historical facts are forward-looking statements, which reflect the Company’s plans and expectations at the timeof writing.
These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, performance, or achievements to differ materiallyfrom those anticipated in these statements.

94

Our Website

WACOAL’SWEBSITE

Please find more informationon our website.

Top page

http://www.wacoalholdings.jp/en

To Our Shareholders

http://www.wacoalholdings.jp/en/ir
Corporate Strategy

IR News

Corporate Governance

IR ScheduleFinancial Results

For Personal Investors

Monthly Sales Data

Other Information

CSR

http://www.wacoalholdings.jp/en/csr
CSR Objectives
Relations with Stakeholders
Basic Policies (ISO 26000)
Other Information

Editorial Policy for This Report
In accordance with international norms for integrated
reporting, the Wacoal Group has been issuing integrated
reports since FY2011 as part of its communication withshareholders and other investors.
This integrated report explains the Wacoal Group’s
value creation activities not only through financial information but also through nonfinancial information about unique,significant assets and other facets of the Group’s business.
Further, the website of Wacoal Holdings Corp. includes
a wide range of information about the Group. We hope thatreferring to this integrated report in conjunction with thewebsite will further understanding of the Group. Going forward, we will continue pursuing an editorial policy that
responds to changes in reader expectations.

Publications to Help Stakeholders Understand Wacoal

Integrated ReportNews for
Shareholders

Annual
Handbook95

Published: 20170901-DN-AT3

Printed in Japan
Cover photo: Wacoal 2017 calendar, March–April
Photographer: kisimari