Business
Reportfor the 131st Term2015.4.1−2016.3.31

To Our Shareholders
First of all, thank you very much for your continued patronage. We are very glad to be able topresent our annual report for the 131st period, ended on 31st March, 2016.
As you well know, in the Japanese economy during this period, although exports and production
were sluggish due to the deceleration of emerging economies and other factors, there remained
anticipation of a continued moderate recovery in Japan. In addition, advanced economies continued
to exhibit firm economic growth and this is expected to positively affect emerging economies,
stemming the slowdown in those countries, and leading to heightened expectations for an economic
recovery in Japan.
Against such a backdrop, the Parker Group has been actively engaged in meeting the requirementsof our customers by supplying high value added technology which will lead to high quality and low
cost, as well as investing in production equipment to steadily take advantage of increased foreign
demand, particularly in North America, Mexico, China and Thailand. In addition, in order to ensure
our continuing dominance of the market into the future, we have been strengthening basic research
and focusing on research and development to create new technology. As a result, our businessachievements were as described in the latter part of this report.
In consideration of the steady results achieved during this term and the valued support of ourshareholders, the year-end dividend will be nine yen per share.
It is anticipated that the Group will face an environment in which there is a high degree of
uncertainty both in Japan and abroad due to the continuation of the slowdown in growth in Asianeconomies, and the sharp appreciation of the yen following the New Year. However, in addition to
the development of surface modification technologies unsurpassed in innovation and originality, wewill continue to actively promote equipment investment to increase our production capacity and do
our utmost to improve our business achievements to meet the expectations of our valued
shareholders.
Thank you very much for your continuing support.
June, 2016

Chairman & C.E.O .

President & C.O.O.

Shun ONO

Kazuichi SATOMI-1-Parker Group OutlookBusiness progress and results
In the global economy during this period, there was a continued mild economic recovery in the U.S.
and an improvement in European economies, however the economic slowdown and tough conditions
continued in China and Asian emerging countries. In Japan the economy recovered somewhat due tothe monetary policy of the Bank of Japan, however the recovery was brought to a halt by factors suchas the sharp appreciation of the yen after the New Year and concerns about a downturn in overseas
economies, and the situation remains unpredictable.
The business environment faced by the Parker Group was one in which auto production was steadyin the U.S. for our key customers in the automotive industry however the situation in this industry inJapan remained difficult. Also, in the steel industry, the oversupply by China continued and thesituation was tough.
Against such an economic backdrop, the Parker Group has been actively engaged in meeting therequirements of our customers by supplying high value added technology which will lead to highquality and low cost, as well as investing in production equipment to steadily take advantage ofincreasing foreign demand, particularly in North America, Mexico, China and Thailand. In addition,in order to ensure our continuing dominance of the market into the future, we have been strengthening
basic research and focusing on research and development to create new technology.
As a result of these efforts, our consolidated business achievements were as follows.
Net sales were 109,063 million yen (up 6.4% on the previous period) and operating income was
15,766 million yen (up 6.2% ditto). Ordinary income was 17,921 million yen (up 2.7% ditto) and net
income attributable to parent company shareholders was 10,320 million yen (up 3.5% ditto).
The overview by each business segment is as follows.
(Chemicals Business)
Net sales were 43,741 million yen (up 0.9% on the previous period) and operating income was8,529 million yen (down 0.6% ditto). Our chemicals division manufactures and sells chemicals
to form conversion coating on the surface of metals and other substrates to improve theirfunctionality by improving corrosion resistance, wear resistance, lubricity and otherperformances, thereby adding value to the substrate materials. In Japan the market was sluggish
and income fell. However overseas, in part due to yen depreciation, sales expanded in China andIndia and results were fairly robust, leading to a rise in income. On the other hand, labor costsrose in Asia and the overall result in this segment was a rise in income and a fall in profit.

-2-(Equipment Business)
Net sales were 22,430 million yen (up 7.8% on the previous period) and operating income was
1,403 million yen (up 33.7% ditto). The equipment business segment manufactures and sells pretreatment equipment, painting equipment and powder coating equipment, etc. mainly to thetransportation machinery industry. In Japan income fell however sales of large equipment weremade in China and Indonesia, resulting in record net sales in this segment. Profitability was also
robust and this segment achieved a rise in both income and profit.
(Jobbing Business)
Net sales were 38,923 million yen (up 8.6% on the previous period) and operating income was
6,977 million yen (up 17.6% ditto). This division provides service modification jobbing services
such as heat treatment, rust prevention coating and plating. In the heat treatment jobbing business,overseas, in China sales of heat treatment jobbing services to the automotive parts industry rosesignificantly and sales were also robust in the U.S. and Vietnam. However in Indonesia
automotive output fell and the tough situation continued, and in Japan sales were sluggish due tothe shift of manufacturing overseas by automotive parts manufacturers. In the rust prevention
jobbing business, business was relatively brisk both in Japan and overseas, resulting in an increase
in income and profit in this segment.
(Other Business)
Net sales were 3,968 million yen (up 58.8% on the previous period) and operating income was269 million yen (up 32.4% ditto). This segment includes our building maintenance business,transportation business and solar power generation business. The building maintenance business
was steadfast and in addition, a new consolidated subsidiary engaged in the manufacture and salesof bolts joined our Group, resulting in an increase in income and profit in this segment.

-3-Sales by Business (Consolidated)

Chemical(JPY Million)

Equipment

120,000
100,000
80,00084,7582,81730,868

20,000109,063

3,453
33,79835,83920,66320,80322,43043,372

43,741

3,171

3,968
38,92331,30260,00040,000

Others102,514
2,498

99,79389,919Jobbing

15,25017,66935,822

37,776

41,878

2012

2013

2014

02015

2016

(Fiscal Year)

Status of Capital Expenditure
Equipment investment in this period totaled 10,539million yen, with the main investments in eachbusiness segment as follows.
Main facilities completed in this period:
Jobbing Business:
Parker Kako Co., Ltd.
Construction of building and installation of new equipment for rust prevention jobbing plant .
Jobbing Business:
Parker-Trutec Mexicana S.A. de C. V.
Construction of building and installation of new equipment for heat treatment jobbing plant.
Jobbing Business:
Foshan Parker Surface Modification Co., Ltd.
Construction of building and installation of new equipment for heat treatment jobbing plant.
Jobbing Business:
Thai Parkerizing Co., Ltd.
Construction of building and installation of new equipment for heat treatment jobbing plant.
-4-Main facilities in progress in this period:
Nihon Parkerizing Co., Ltd.
Construction of new company's own building.

Status of financing
Not applicable.

Issues to face
The Parker Group, based on the solid financial foundation we have built up over the years, will doits utmost to improve the strength of its corporate organization and profitability, tackling the following
important issues in order to ensure the continued superiority of the Parker Group in the surface
modification market.
① We will promote the expansion of the market for high value added products and the development
and establishment of a variety of surface modification technologies that are environmentallyfriendly and conserve energy, as well as technology that meets our customers’ requirements forcost savings.
② We will aggressively promote cost cutting throughout the organization including areas such as
materials procurement and distribution costs.
③ We will continue to reorganize Group businesses to improve efficiency in consolidated
management, optimize management resources and strengthen financial conditions.
④ In addition to ensuring transparency and fairness, we will promote swift decision-making andefficiency in management and work to improve business achievements by responding flexibly tochanges in the business environment and markets. Furthermore, we will maintain soundmanagement through strengthening and promoting internal controls and ensuring their effective
operation, and promote good corporate governance founded on continuous expansion anddevelopment of business operations and increasing corporate value.

Number of Employees
Consolidated:

3,886 persons-5-Principal Shareholders
Number of Shares
Name of Shareholders

Held(Thousands ofshares)

Shareholding
Ratio(%)

Nippon Life Insurance Company

7,015

5.53

Meiji Yasuda Life Insurance Company

5,578

4.39

5,328

4.20

The Chiba Bank, Ltd.

4,765

3.75

Yugen Co., Ltd.

4,708

3.71

The SATOMI Scholarship Foundation

4,633

3.65

Mizuho Bank, Ltd.

4,227

3.33

State Street Bank and Trust Company

3,527

2.78

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

3,472

2.73

Japan Trustee Services Bank,Ltd.(Trust account)

3,250

2.56

Trust & Custody Services Bank, Ltd. as trustee for Nippon Steel& Sumitomo Metal Corporation Retirement Benefit TrustAccount re-entrusted by Mizuho Trust and Banking Co., Ltd.

-6-Financial Highlights (Consolidated)(JPY Million)
2009

2010

2011

2012

2013

2014

Net sales

90,807

69,39380,48384,75889,91999,793 102,514 109,063

Ordinary income

9,828

9,055

13,64912,901

15,17918,046

17,453

17,921

4,439

4,131

7,454

6,314

8,463

10,142

9,975

10,320Net income attributable toparent company shareholders

2015

2016

Total liabilities and net assets 111,088 119,101 124,925 130,517 146,739 165,914 187,116 189,377

Net sales(JPY Million)

120,000
100,000

99,793 102,514

90,80780,483109,063

84,758 89,919

69,39380,00060,00040,00020,000
0
2009

2010

2011

2012

2013

2014

2015

2016

18,046

17,453

17,921

2014

2015

2016

(Fiscal Year)

Ordinary income(JPY Million)

20,00018,00016,00014,000
12,00010,000
8,000
6,000
4,000
2,000
0

15,17913,6499,828

2009

12,901

9,055

2010

2011

2012

2013

(Fiscal Year)-7-

Net income attributable to parent
company shareholders(JPY Million)

12,00010,142

10,000

10,320

8,463

7,454

8,000
6,000

9,975

6,314
4,439

4,131

4,000
2,000
0
2009

2010

2011

2012

2013

2014

2015

2016

(Fiscal Year)

Total liabilities and net assets(JPY Million)

200,000
180,000
160,000
140,000
120,000
100,000
80,00060,00040,00020,0000

187,116 189,377
165,914
146,739
119,101 124,925

130,517

2010

2012

111,088

2009

2011

2013

(Fiscal Year)-8-2014

2015

2016

Consolidated Balance Sheets
Fiscal year ended March 312016

2015(JPY Million)
AssetsCurrent assets

94,05389,812

Cash and deposits

44,937

38,835

Notes and accounts receivable-trade32,822

32,675

Short-term investment securities

3,334

2,090

Inventories

9,271

10,765

Deferred tax assets

1,372

1,425

Others

2,475

4,190

Allowance for doubtful accounts

△158

△169

Fixed assets

95,32397,303

Tangible assets

54,66550,911

Buildings and fixtures, net

17,491

16,393

Machinery, equipment and vehicles, net

15,411

12,851

Land14,994

15,235Construction in progress

4,567

4,481

Others

2,199

1,949

Intangible assets

1,413

1,616

Goodwill

202

466

Others

1,210

1,149

Investments and other assets

39,244

44,775Investment in securities

26,70332,376

Deferred tax assets

1,083

1,088

Others11,555

11,410△98△99

189,377

187,116

Allowance for doubtful accounts
Total assets-9-Fiscal year ended March 312016

2015

Liabilities
Current liabilities

33,16632,710Notes and accounts payable-trade

15,36915,535-144752399

Corporate Income taxes payable

2,416

1,888

Provision for bonuses

2,421

2,345

Others

12,206

12,397

Fixed liabilities

18,32018,282Long-term loans payable

2,998

1,854

904

901

Net defined benefit liability

9,969

9,711

Deferred tax liabilities

2,523

3,938

Others

1,924

1,875

Total liabilities

51,48750,992

107,220

98,793Paid-in capital

4,560

4,560

Capital surplus

3,912

3,913

Retained earnings

102,377

93,949Treasury stock△3,629△3,628

Accumulated other comprehensive profit

9,262

15,492

Valuation difference on available-for-sale securities

7,20810,615

2△3Foreign currency translation adjustment

2,127

4,910

Remeasurements of defined benefit plans

△76

△29

Non-controlling interests

21,406

21,836

Total net assets

137,890

136,123

Total liabilities and net assets

189,377

187,116

Short-term loans payable
Current portion of long-term loans payable

Provision for director’s retirement benefits

Net assets
Shareholders' equity

Deferred gains or losses on hedges- 10 -

Consolidated Statements of income
Fiscal year ended March 312016

2015(JPY Million)
Net sales

109,063

102,514

Cost of sales

68,62764,779

Gross profit

40,43637,735

Selling, general and administrative expenses

24,66922,884

Operating income

15,766

14,850Non-operating profit

3,025

3,048

Interest income

308

238

Dividends income

555

431

Rent income

355

381

Technical support fee

389

354

1,012

791

-497

Others405353

Non-operating expenses

871

445

Interest expenses

5326

Foreign exchange loss

566

-Others

251

418

17,921

17,453Extraordinary income

152

419

Extraordinary loss

173

384

Income before income taxes

17,90017,488

Income taxes-current

5,243

5,041

Income taxes-deferred381

661

Net income

12,275

11,785

Net income attributable to non-controlling interests

1,954

1,809

Net income attributable to parent company shareholders

10,3209,975

Equity in earnings of affiliates
Foreign exchange gains

Ordinary income- 11 -