Annual Report 2013
Year ended March 31, 2013

Our Profile

In the 100-plus years since its founding in Japan in 1906, Bando Chemical Industries, Ltd. has

Management Philosophy

been pursuing industrial development by making various contributions to rubber and plastic
fabrication technologies in such areas as power transmission belts and systems, belts used inprecision devices, and multimedia parts made from urethane and resins.
We are highly regarded by customers throughout the world owing to our efforts to develop
new technologies and products that meet today’s needs while manufacturing and stably supplying people- and environmentally-friendly products of unsurpassed performance and quality.
Possessing an unwavering spirit spanning back to our foundation, we will create a brighter

With a spirit of harmony and in good faith,
and to ensure the company’s growth,
the Bando Group will work to earn the trust

future through the ceaseless innovation of our business.

of our customers and society
by creating and providing products and services
Contents

of added value and high quality.
With pride as members of the Bando Group,

Our Profile
Our Products

2

Our History

4

Our Network

6

Our Highlights

8

To Our Stakeholders and Investors

11

Our Future

12

Our New Challenges

16

Our Business18

Our CSR20

Our Corporate Governance

22

Management

25

Financial Section

26

26
29
30
32
33
34
35

Financial Review
Business Risks
Consolidated Balance Sheets
Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Corporate Data/Investor Information47

we will contribute to society as a whole.

Cautionary Note Concerning
Forward-Looking Statements
This annual report includes forward-looking
statements related to the Company’s future
performance forecasts. These statements arerationally determined by management basedon information available at the time and therefore are subject to risk and uncertainty. Actual
performance may differ from targets due tosuch factors as changes in the operating environment.

Annual Report 2013

1

Our Products

The Bando Group’s products boast world-class performanceand quality based on technologies developed over many years.
Bando’s specialty products display our superior design anddevelopment capabilities.
Note: ‌The following section lists the business segments used through fiscal 2012, which have been reorganized by
the Group into the Belts business segment and Elastomer Products business segment from fiscal 2013 onward.

Main Products

Power Transmission
BusinessHigh‌shares with OEMs in the automotive, officeautomation device, agricultural and industrial
equipment industries

Industrial Products
BusinessStrengths and Characteristics‌Belts
made to heat- and oil-resistant specifications
to enable the transport of various materials

RIB ACETM

G-CARRYTM

Flexowell® Conveyor Belts*‌Technologythat facilitates the production of low
rolling-resistance belts for sealed-state, inclining/
declining and curved system conveyance‌Precisely
meets customer needs, including belts
that prevent frayed edges, and non-slip andanti-electrostatic belts

Strengths and Characteristics

Main Products

BANDO ECO CARRYTM

Automatic tensioners* ‌Flexowell® is a registered trademark of ContiTech Transportbandsysteme
GmbH; used by permission.

SUNLINETM Belts‌
Environmentally-friendly
power transmission
systems‌Comprehensive
product lines suitable for various
fields
STS/HP-STS/CeptorTM-VI

SYNCHROBELTTM

Main Products

Multimedia Parts
Business

Plastics Products
BusinessStrengths and Characteristics‌Suppliesbacking material films for various applications, such as in the printing and medical fields

BANDO GLANMESSETM

BANDO TECHRIATM‌Satisfies
various customer needs through added
product function by compounding or multi-layering
plastics’ component features

Strengths and Characteristics‌Draws
on optimal material traits and adds Bando’s
material and structural design technologies

Main Products

BANCOLLANTM Blades

Development Rollers‌Precision
process technology that builds accuracy
and quality into each productD‌ evelops sophisticated products in consideration
for the environment that are compatible withnew materials and satisfy the future needs ofcustomers

Medical films

‌
Reads
market trends to create products that area step ahead of customer needs and expectations
BANDO Squeegees

2

BANDO CHEMICAL INDUSTRIES, LTD.

ALPHAFLEXTMVINYBANTM

Annual Report 20133

Our History
History of Global Expansion
Rather than simply being satisfied with the high level of trustand brand quality cultivated over our 100-plus years of history,
we will advance new innovations and take on new challenges inorder to continue evolving over the next century.

History of ProductDevelopment

Established new plant in India
2013
Opened technical center in Thailand
2013
Reorganized Shanghai-based subsidiary into a management company
2012
Commenced sales of TENSION MASTER, atension meter featuring an acceleration sensor
Established subsidiary in Vietnam
2012
Opened technical center in China
2012
Commenced sales of non-flammable BANDO GLANMESSE
2011
2011

Opened Representative
Office in Russia
2009

Opened Representative Officein Argentina

2008

2010
2010

Commenced sales of BANCOLLAN Cleaning Blade G-Module
Developed BANDO MDEC, a new method for eliminating
microscopic dust

Commenced sales of DS5M, double-sided, synchronous power transmission belts
Commenced sales of G-CARRY environment-friendly,
energy-saving conveyor belts

Commenced sales of RIB ACE ECO-HT high-load automotive V-ribbed belts
Commenced sales of thin polyolefin films
Commenced sales of FlowMetal, low-temperature sintering nanoparticles
Commenced sales of the Hyper Flat Drive System
2008

2008
2008
2008

Established subsidiaries in India and Turkey
2003
Established subsidiary in Shanghai, China
2002
Established subsidiary in Tianjin, China
1998
Established subsidiary in Hong Kong
1995
Established subsidiaries in Indonesia, Malaysia, and South Korea
1988
Established subsidiaries in Thailand and Spain
1987
Established subsidiary in Taiwan
1985
1982
1981

Established subsidiary in Singapore
1980
Established subsidiaries in the United States and West Germany
1978
Equity participation in industrial rubber product1975
Commenced full-scale production of photocopier cleaning blades
manufacturers in the Philippines and Malaysia
1972
Commenced sales of Japan’s first light-duty conveyor belts
1970

Opened Representative Offices
1969
in the United States and West Germany 1964

Commenced sales of polyurethane products
1959
Commenced sales of SYNCHROBELT toothed belts
1950
Commenced sales of plastic films and sheets
1932
Commenced sales of Japan’s first V belts
1921
Commenced production of Japan’s first conveyor belts
1913
Commenced production of rubber belts
1906
Commenced production of cotton belts

4

BANDO CHEMICAL INDUSTRIES, LTD.

Developed BANDO AVANCE, the world’s first dry belt for continuously variable transmissions (CVT)

Commenced sales of MULITE high-performance plastics products
Commenced sales of RIB ACE automotive V-ribbed belts

Other1970 Listed on the First Sectionof the Tokyo Stock Exchange

Commenced production of Japan’s first single-ply conveyor belts

1962
1961

Commenced sales of BANDO Automatic Tensioners, automatic automotive belt tensioners

1962 Listed on the Second Sectionof the Osaka Securities Exchange

A pioneer belt manufacturer since its founding in Japan, the Company
has now grown to manufacture and sell products throughout theworld as it continues to develop products in support of industry.

Annual Report 20135

Our Network

Aiming to become a standout supplier worldwide,
we are expanding our global network based inJapan, Asia, the United States, and Europe.

EuropeAsia

Bando Belt
Manufacturing(Turkey), Inc.

Bando Jungkong
Ltd.

Bando
Manufacturing(Dongguan) Co., Ltd.

Pengeluaran Getah
Bando (Malaysia)
Sdn. Bhd.

Bando Iberica,
S.A.

Bando Korea Co.,Ltd.

Bando Siix Ltd.

Kee Fatt
Industries, Sdn.
Bhd.

Bando Europe
GmbH

Bando Belt
(Tianjin) Co., Ltd.

Sanwu Bando Inc.

Bando Chemical
Industries’
Global Network

Japan*

Bando (Singapore)
Pte. Ltd.
Head OfficeAmerica*Japanese business locations are leading
the development of environment-friendly
products and the expansion of highvalue-added businesses.

Sales by Region
Bando (Shanghai)Management Co.,
Ltd.*

Philippine Belt
Manufacturing
Corp.

P.T. Bando
Indonesia(as of March 2013)

Overseas sales
mix: 41.3%

Bando USA, Inc.
Bando (Shanghai)Industrial Belt Co.,
Ltd.

Bando
Manufacturing(Vietnam) Co., Ltd.

Bando (India) Pvt.
Ltd.

Business locations

Japan: 58.7%
Asia: 32.2%
America, Europe: 8.1%
Other: 1.0%

BL Autotec(Shanghai), Ltd.

6BANDO CHEMICAL INDUSTRIES, LTD.

Bando
Manufacturing(Thailand) Ltd.**
China Technical Center and Asia Technical Center wereopened in 2012 and 2013, respectively, both of which aredeveloping products with optimal specifications for markets.

Ashikaga Plant
Tokyo Branch Office
Nagoya Branch OfficeNankai Plant

Kobe Head Office/
R&D Center
Kakogawa Plant

Wakayama Plant/
Power Transmission Technical Research Center
Sales and Fabrication Service Affiliates

Manufacturing Affiliates

Bando Fukushima Products, Inc.
Higashinihon Bando Co., Ltd.
Vann Corporation
Koyo Sangyo Co., Ltd.
Hokuriku Bando, Inc.
Nishinihon Bando Co., Ltd.
Bando Elastomer Co., Ltd.

Fukui Belt Industries, Ltd.
Bando Machinery, Ltd.
BL Autotec, Ltd.
Bando-Scholtz Corporation
Other Service Affiliates

Bando Trading Co., Ltd.
Bando Kosan Co., Ltd.

Annual Report 20137

Our Highlights
Six–Year Summary of Consolidated Financial Statements

Major Indicators

Fiscal year endings are March 31 in the years shown below

Fiscal year endings are March 31 in the years shown below

2008

2009

2010

2011

2012

2013

Net sales

Millions of yen

98,66287,45373,59384,811

86,37285,772

Operating income

Millions of yen

7,325

2,115

2,450

5,056

4,571

4,095

Operating margin

%

7.4%

2.4%

3.3%

6.0%

5.3%

4.8%

Net sales

Operating income(¥ million)
100,000(¥ million)
8,000

(%)
8

6,000

6

4,000

4

2,000

2

80,000Operating margin

60,00040,000

5,289

(255)

1,234

3,333

1,440

2,510

Millions of yen

7,805

7,621

8,724

9,529

6,595

7,004

Millions of yen(9,830)(4,937)(3,147)(4,922)(4,768)(5,781)

Net income

Millions of yen

Net cash provided by (used in)operating activities
Net cash provided by (used in)investing activities

20,000002008 2009 2010 2011 2012 201302008 2009 2010 2011 2012 20132008 2009 2010 2011 2012 2013

Capital investment

Free cash flow

Net assets
Total assets(¥ million)
8,000(¥ million)
6,000(¥ million)
100,000

6,000

4,000

5,052

4,000

2,000

0

Net assets

Net cash provided by (used in)financing activities

Millions of yen(1,575)(675)(2,516)805(4,363)(463)

Depreciation and amortization

Millions of yen

5,684

6,073

5,411

4,907

4,804

4,389

Capital investment

Millions of yen

Total assets

80,00060,000

7,166

4,176

2,791

3,381

4,619

40,000Net assets

Millions of yen

44,97238,35240,02040,54239,444

43,2262,000

Total assets

Millions of yen

90,801

76,621

78,02082,90579,65982,2070Interest-bearing debt

Millions of yen

18,525

17,66915,744

17,653

14,595

15,746

Shareholders’ equity*

Millions of yen

44,04637,34539,18839,67738,55942,775

Earnings per share
Net assets per share
Annual dividend per share
Average number of shares
outstanding during the period

Yen
Yen
Yen

Thousand shares

52.68
439

(2.55)
372

12.31
391

33.74
405

14.84
402

26.47

Shareholders’ equity*
Equity ratio
Shareholders’ equity(¥ million)
45,000

7.00

6.00

8.00

8.00

8.00

100,393

100,313100,294

98,78897,034

94,811Equity ratio(%)
55

Payout ratio
(%)
60

53

8

48

41,00051

636

39,00049

424

37,00047

2

1235,00045

002008 2009 2010 2011 2012 2013

50.2

47.9

48.4

52.0

times

0.421

0.473

0.402

0.445

0.379

0.368

ROA

%

5.8

(0.3)

1.6

4.0

1.8

3.1

ROE

%

12.3

(0.6)

3.2

8.5

3.7

6.2

24,000

0.4

times

6.8

–

24.1

11.5

20.8

11.1

18,000

0.3

%

19.0

–

48.7

23.7

53.9

30.2

12,000

0.2

6,000

0.1

Raw material costs (indicators)

Interest-bearing debt
D/E ratio
Interest-bearing debt(¥ million)
30,0002008 2009 2010 2011 2012 2013

NaphthaD/E ratio(times)0.5

CottonNatural rubber

Aluminum

200
160

3,414

3,436

* ‘Shareholders’ equity’ on pages 8 to 9 = net assets – minority interests

3,285

3,427

3,545

3,592

BANDO CHEMICAL INDUSTRIES, LTD.

8

4
2

-2

2008 2009 2010 2011 2012 2013

Exchange rate transition
USD
(%)
120

THB

EUR

110

100

80
60
40

90

20
0

2008 2009 2010 2011 2012 20130.0

0’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3* Raw materials cost (indicators) base is 2007/3.

8

10

120
100

Number of employees

12

180
140

Payout ratio

ROE

0

48.7

P/E ratio

ROA
(%)
14

6

48.5

D/E ratio

Annual dividend per share
(yen)
10

2008 2009 2010 2011 2012 2013

ROA
ROE

43,000%Equity ratio02008 2009 2010 2011 2012 2013

Annual dividend per share
Payout ratio

455

10.00

-2,0002008 2009 2010 2011 2012 2013

20,00080’10/12’11/12’12/12 ’13/3* Exchange rate base is 2010/12.

Annual Report 20139

Our Highlights

Fiscal 2012 Topics
Global Expansion
March
Established the Asia Technical Center at Bando Manufacturing (Thailand)Ltd. in Thailand

January
DecemberAugustBando starts “Breakthroughs for the future,”
our new mid-to-long term business plan

Introduced a solar power
generation system at the
Nankai Plant

2013

NovemberEstablished Bando (Shanghai) Industrial Belt Co., Ltd.
in Shanghai, China for the endless processing andOctoberfabrication of light-duty SUNLINE Conveyor Belts
to expand sales in the food, factory automation,
package distribution and other industries using
Septemberconveyor equipment in China

Light-duty SUNLINE
Conveyor Belt

Aiming to become a dominant
supplier of belts andhigh-performance products in 10 years

February

Established the management company, Bando (Shanghai) Management
Co., Ltd., to promote operational efficiency by overseeing andsupporting product sales, marketing and management operationsin ChinaJuly

To Our Stakeholders and Investors

I hope that our stakeholders and investors overseas will find thisCommenced sales of TENSIONMASTER, a tension meterfeaturing an acceleration sensor

annual report valuable in describing the Company’s business
operations and identifying its strengths, and in explaining ourbusiness strategies.
During Bando’s previous mid-term business plan, which
ran from April 2010 to March 2013, we pursued the expansion

TENSION MASTER

of our operations in the global market, with special focus on ourbelt business, while taking measures to improve the earnings

Developed BANDO GLANMESSE, print
media for ultrafast inkjet printersstructure of all our operational divisions. At the same time, we

Juneworked to develop new products and open up new markets to

Developed non-flammable
BANDO GLANMESSEMay

BANDO GLANMESSE

April
Introduced the RIB ACE 2 (PL Series),
drive belts for large-sized industrial
machinery

March
2012

Mitsutaka Yoshii

serve as earnings drivers for the next generation and beyond.

President,
Bando Chemical Industries, Ltd.

Although we were unable to achieve our numerical goals
under this business plan, due to major changes in the businessenvironment as well as the impact of natural disasters, we

RIB ACE 2 (PJ, PK, PL)

succeeded in laying the groundwork for further rapid growth by
the Bando Group, notably the global expansion of our business

Commenced sales of S8M Long
Synchrobelts with high electrical resistanceCommenced sales of PS Belts (Precision Seamless) infray-prevention specification and in special-thickness
specification for specialized conveyance

operations.
All members of the Bando Group are currently working torealize the goal of our new mid-to-long term business plan—“Breakthroughs for the future.” Our ten-year goals are toachieve sustained growth in both belts and new business fields,
including high-performance products, and for the Group to be

S8M Long Synchrobelts

Product Development
10

BANDO CHEMICAL INDUSTRIES, LTD.

Fray-Prevention PS Belts (left)
and Special-Thickness PS Belts (right)

a standout supplier worldwide.
I hope that our stakeholders and investors will continue toprovide us with their support in our future endeavors.

Annual Report 201311

Our Future
Message from the President

Laying the groundworkfor further rapid growth

this brand name, which have received high praise from ourcustomers. We are also revamping our existing products
into high value-added products that embody these three
key concepts.
In developing new products for growth markets wehave introduced new technologies in the fabrication ofrubber and plastics, and are confident that we have sown
the seeds of future growth and profitability, particularly inthe field of optoelectronics.
We believe that these achievements under our
previous business plan constitute a solid foundation for the
rapid growth and development of Bando under the new
business plan currently underway.

Previous Mid-Term Business Plan Results
Numerical targets(consolidated)

Net sales
Operating income
ROA

Mitsutaka Yoshii

Results¥90.0 billion¥85.7 billion

5.0 %or above

3.1 %¥7.0 billion¥4.0 billion

Our new mid-to-long term business plan
overview and numerical targets

President,
Bando Chemical Industries, Ltd.

Overview of the previous business plan
In the fiscal year ended March 31, 2013, which was the
final year of Bando’s previous mid-term business plan, werecorded net sales of ¥85.7 billion, operating income of¥4.0 billion, and an ROA of 3.1%, all on a consolidated
basis. Although these figures fell short of our targets, wedeem the plan to have been a success in qualitative terms,
thanks to certain important achievements.
First, we succeeded in expanding our network ofbusiness bases overseas, centered on Asia, as part of ourplans for operational expansion on a global scale. We started
up production and sales operations at two new locations in
China and one in Vietnam, and in March 2013 commenced
fully integrated production at a plant in India. Another significant achievement in the Asian market was the establishmentof two technical centers—one in China and one in Thailand.
These centers will serve as bases for our marketing operations in their respective countries, and we believe this will bea key to the further growth of our overseas sales.
We also took steps to improve our earnings structure.

12

BANDO CHEMICAL INDUSTRIES, LTD.

We suffered sharp drops in demand for our products in2011 as a result of the Great East Japan Earthquake andtsunami in Japan as well as the major floods in Thailand.
Learning from this experience, we took measures to introduce a flexible manufacturing system that can cope easily
with changes in both product type and product volume.
We also strengthened our ability to respond to exchange
rate fluctuations by aggressively seeking out overseas supply sources for raw materials, worked to lower the productdefect rate in our manufacturing lines, and achieved a
degree of success in raising the cost competitiveness ofthe entire Bando Group by amalgamating domestic sales
companies. However, much remains to be done, and we
intend to continue focusing our energies on the new midto-long term business plan to realize further improvementin the Group’s earnings structure.
Our development of new products is directed by the
key concepts of environment, energy conservation, andclean. In November 2010 we adopted the new environmental brand eco moving, and since then we have beensteadily developing and manufacturing products under

future, and production costs are likely to be pushed up still
further by hikes in electric power charges in Japan. On theforeign exchange markets, meanwhile, the yen is forecast
to remain weak against the U.S. dollar, the euro, the Thaibaht, the South Korean won, and other currencies, andthis is expected to have a positive impact on the Group’sbusiness performance.
Amid this business environment, in fiscal 2012 theBando Group enjoyed the world’s top market share,at roughly 25% (fiscal 2012, estimate by Bando) in the
supply of automotive power transmission belts under
OEM contract, but the Group’s sales and profits haveremained flat for the past several years. We expect ouroperating environment to continue changing drasticallyin the foreseeable future. Amid this difficult situation, we
have determined the need to draw up a business strategy
from a longer-term perspective so as to address the issues
where we fell short under the previous business plan, andthus bring about a breakthrough from our current businessstagnation.

Under the first stage of our new mid-to-longterm business plan, we aim to capture the top
market shares in Asia and the rest of the world,
thanks to our advanced core technologies andreliable product quality

Our view of Bando’s current businessenvironment
In Bando’s principal customer markets—four- and twowheeled vehicles, agricultural and industrial equipment,
and light-duty conveyor belts used in the distribution
industry—demand is expected to increase strongly inemerging countries in line with population expansion andeconomic growth. In the industrialized countries, on theother hand, there is growing concern over environmental
degradation, rising demand for energy conservation,
and an increasing focus on safety. Against this backdrop,
severe competition is expected in the development of
new technologies that will make even more eco-friendly,
value-added products possible.
Turning to the cost of Bando’s manufacturing andsales activities, prices of raw materials such as naphtha
distilled in Japan, cotton yarn, natural rubber, andaluminum are expected to remain high for the foreseeable

The Bando Group has commenced “Breakthroughs for the
future,” a mid-to-long term business plan running from thecurrent fiscal year to fiscal 2022 (the term ending March
2023). Under this plan, we have set out a vision of the sortof enterprise we want the Company to be ten years fromnow. To attain this vision, we will further refine our coretechnologies and reliable product quality in the fields
of rubber, elastomers, and resins—where we have built
up an extensive fund of expertise since the Company’s
founding—to become a standout supplier of belts andhigh-performance products in the global market.
In the first stage of the plan, from fiscal 2013 to
fiscal 2017, we will work to expand the Group’s overseas
operations and strengthen its earnings structure in linewith the five guidelines set out below, with the targets forfiscal 2017 of ¥100 billion in consolidated net sales and¥10 billion in consolidated operating income. At the sametime, we will focus efforts on developing new businesses
worthy of priority allocation of the Group’s management
resources.
In the second stage, from fiscal 2018 to fiscal 2022,
we will concentrate on expanding earnings, with our belt
operations and the new businesses created during the firststage acting as twin earnings drivers. Our aim is to becomea truly global supplier by fiscal 2022, the final year under
the plan, with net sales of around ¥150 billion.

Annual Report 201313

Our Future

Outline of planned investment during thefirst stage
In the first stage of the business plan, we aim to establish
an earnings structure capable of regularly producing
operating margins of 10% or higher. For this purpose, overthe five-year period of the first stage we will implement
capital investment totaling ¥25 billion, in addition to ¥5billion in investment in research and development aimed atcreating new business. More specifically, these investments
will be implemented in accordance with the five guidelines
described below.
Guideline No. 1: Evolution of global market strategy

In our belt operations overseas, we aim to become theundisputed leader in Asia in terms of market share, andare currently working to strengthen our operations in thisfield to achieve this goal. We will expand the scale ofour existing production facilities in Thailand, Indonesia
and elsewhere, and in addition, we aim to expand our
production activities in emerging nations such as India andVietnam with a view to opening up new markets in theso-called Greater Mekong Subregion, where strong economic growth is anticipated in the coming years. We intend
to focus our efforts in this part of the world on increasing
our sales of power transmission belts for four-wheeled andtwo-wheeled vehicles, agricultural equipment, and generalindustrial equipment, and of lightweight conveyor belts foruse in the food and distribution industries. Our new factoryin India started up in March 2013, and operations weregoing smoothly as of August 2013. We plan to increase
production capacity at the factory to cope with growing
demand. Our new factory in Vietnam is also enjoying brisk

business, thanks to increased demand for belts for use in
two-wheeled vehicles. In China, meanwhile, our sales areholding relatively firm despite a slowdown in economic
growth. We are also working to create a supply chain
capable of supporting production expansion. This includes
a careful comparison of manufacturing costs and raw materials availability at each facility, enabling us to construct an
optimal production system for each location, as well as an
overall system in which production activity at our various
production bases is mutually complementary.
Turning to Bando’s operations in Japan, we arecontinuing to develop even more high-performance
products in our core product lines while combining themwith peripheral products into modules that we offer ourcustomers as part of proposal packages tailor-made to fit
their requirements. We also plan to raise the value-addedlevel of our core products by packaging them together withadditional design, installation, monitoring, and inspection
services. We will reinforce the marketing network that
we built under our previous business plan, viewing issues
from our customers’ perspective to create an optimal
sales system. Simultaneously, we will construct inventory
management, logistics, and processing systems finely
adjusted to the particular needs of each marketing area. By
these means, we hope to widen the sphere of operationsof peripheral businesses centered on our high-performance
products.

make this possible, we opened new technical centers in
China in 2012 and in Thailand in 2013. These centers play
the pivotal role in our provision of technical services andin our development of products specifically customized to
local market needs.
Regarding our eco moving* environmental brand, weare exploring further possibilities in such product features
as energy conservation and reduction in environmental
impact, and are also expanding our operational sphere in
relation to other core products, such as increasing added
value, combining different functions, and incorporatingcore products and their peripheral products into modules.

With effect from fiscal 2013, we set in operation the
BF (“Breakthroughs for the future”) Promotion Department
as one means of ensuring that progress is made in creating
new businesses. The personnel in this department collectand collate information from the Company’s marketingand technical staff, and closely scrutinize the various
development themes proposed. Only those development
proposals incorporating themes whose outcomes can beclearly envisaged will be selected for allocation of management resources.

*See P16-17 for an explanation of the eco moving concept

Guideline No. 2: Product evolution

We recognize that if we are to achieve a breakthrough fromour current business stagnation, it is an overriding imperative for us to create new businesses that can rank alongside
our belt operations as earnings drivers for the next generation. Accordingly, we have identified our priority markets
and product/service fields from a strategic viewpoint, andare now putting increased urgency into our development
efforts, guided by the key concepts of environment, energy
conservation, and high-performance.
Our priority markets include optoelectronics, automotive/transportation, energy, and robotics, in some of which
we made our first inroads during the period of the previous
business plan. We will continue to further refine our coretechnologies, including in compounding, dispersion,and composites of rubber, elastomers, resins, and othermaterials, to create cutting-edge technologies throughfusion with technological expertise in other fields. On thisbasis, we aim to develop and commercialize new products.
As far as priority product/service fields are concerned, weare focusing on power electronics, printed electronics,
exterior and interior materials, displays, illumination, andmedical-related.

The management of Bando Chemical Industries is working
to reinforce the Group’s business base to allow the Groupto display its comprehensive strengths on the global stage.
During the first five-year period of the new business plan,
we intend to focus on reshuffling our business portfolio in
response to changes in our markets. We will carry out strategic investment in products with good growth potential,
and will terminate the manufacture of unprofitable products
and close down unprofitable businesses. In overseas
markets, we will take a number of measures to strengthen
consolidated management, including introducing anenterprise resource planning (ERP) system to facilitate thevisualization of management indicators at our businessfacilities, and adopting the balanced scorecard (BSC) method and ABC analysis inventory control tools to strengthen
our control over the Group’s operations. To improve ourhiring and nurturing of the qualified human resources that
we need, we will design personalized career plans for each
employee, and adopt systems to foster the management
staff required for the next generation. We will also bolster
our global personnel hiring and management system totrain specialists and achieve effective diversity in the workplace. In addition, to realize a sounder financial position, we
intend to reduce our net interest-bearing debt to zero andstrengthen our exchange and interest-rate control system.
In April 2013 we carried out a wide-reaching organizational reform to enable us to steadily implement themeasures described above for strengthening our businessbase. We restructured the organization of the Bando Groupto facilitate the smooth application of our operational
strategies in every corner of our operational network,
including all our overseas facilities, and to ensure that thosestrategies are put into practice as rapidly as possible.
We will work to meet the expectations of all the
stakeholders of the Bando Group by steadily following thefive guidelines described above, so that we may become astandout supplier worldwide.

For us to strengthen our earnings structure, our existingproducts must evolve. First, to develop products whose
specifications best match the needs of each local market
overseas, we must procure more raw materials locally. To

Overview of the new mid-to-long term business plan—“Breakthroughs for the future”“Breakthroughs for the future” 1st stage

Sales/
earnings“Breakthroughs for the future” 2nd stage

New mid-term plan (2013 – 2017)

Vision for Bando Chemical 10 years from now

Five guidelines

Become a dominant global supplier of belts andhigh-performance products (including new businesses)
in growth markets, with net sales of about ¥150 billion

1. Evolution of global market strategy
2. Product evolution
3. Evolution in manufacturing
4. New businesses creation
5. Evolution in management quality

New business expansion

Expand global businesses/increase added value

To achieve the vision for 2022

Five years

2013

14

BANDO CHEMICAL INDUSTRIES, LTD.

Five years

2017

2022

Guideline No. 3: Evolution in manufacturing

To further cement our customers’ trust in our products
and services, we aim to develop advanced manufacturing
technologies that will realize a dramatic reduction in the
product defect rate, lowering the rate for all our products
and manufacturing lines. To do this, we will proactively
implement capital investment, push ahead with structural
reorganization, and take steps to improve the productivityof resources, labor, and capital. We will also reinforce ouractivities in the fields of target costing, development andprocurement, and will utilize Bando Production System (BPS)
activities to realize further improvement.
Guideline No. 4: New businesses creation

Guideline No. 5: Evolution in management quality

Annual Report 201315

Our New Challenges

Moving to Eco!

The eco moving Concept

Pursuing Environmental Performance Using Technologies
Featuring the World’s Highest Standards

We will accelerate the “move” to“eco” throughout the Group,
thoroughly develop products that
reduce environmental burden,

Committed to people- and environment-friendly manufacturing, Bando isaccelerating the development of green products based on its eco moving
brand to meet the increasing environmental and energy-saving needs of theautomotive and other industries.

and spread the new “movement” toour customers and society.

Characteristic No.1:

HFD systemTM

High Power Transmission and High
Efficiency(Hyper Flat Drive System)
The No.1 Ultra Energy-Saving Eco Drive System

Labeling standards for eco moving products
Products receive the eco moving label if they meet any of the following
three criteria.
1. Compared with reference products, show reduced CO2 emissions over the
product lifecycle, and meet one or more internally established Environmental
Claims (Energy Conservation, Waste Reduction, Use of Ecological Resources(recycled/non-petroleum), Carbon Offset, Resource Conservation, Use of
Recycled Materials, Reduction of CO2 Emissions)
2. Be granted certification from a third party operating an environmental
certification system
3. Industry standards may be used for comparison purposes for a new productwithout a corresponding reference product, so long as the new productmeets other necessary criteria

TENSION MASTERTM
The Next-Generation Tension Meter Featuring
the Highest Global Standard for Precision

Utilizing rubber and tensile cord design technologies
cultivated over many years in the automotive sector
to establish specifications for high power transmission, high-efficiency flat belts

Characteristic No. 2:

Long Lifespan and Maintenance Free
The HFD system is comprised of a flat belt, snaking
control device, and an automatic tensioner, the combination of which enables energy savings and reduces
CO2 emissions. In addition, this system enables superior transmission efficiency and lifespan that exceeds
V belts. It can be used in various industrial applications,
including heating, ventilation and air conditioning
equipment.

Using springs to stably control tension increases
lifespan and eliminates the need for maintenance.
Device configuration
Tension fine-tuning screw
SpringPower consumption verification results
Flat belt
3.0

V beltPower reduction ratio
14

Power difference in blowers with 7.5kW output

2.8

8

2.6
2.5

6

2.4

4

2.3

Characteristic No. 2:

Calculation Software
TENSION MASTERTM is a tension meter that uses anacceleration sensor to measure tension from vibration
frequencies produced by power transmission belts.
The lightweight main unit measures vibration frequency and a Smartphone application calculates tension.
In addition, proper tension calculations increase
belt lifespan. TENSION MASTERTM can be used forpre-shipment inspections of industrial equipment,
measuring power transmission belt tension in factories, and as a natural frequency meter for facilities andequipment.

Calculation software is reasonably priced thanks to
the use of specialized Smartphone applications*Compatible with either patterns that calculate
vibration frequency based on tension or patterns
that calculate tension based on vibration frequency*Applications available on Google Play (iPhone version underdevelopment)

Snaking control pulleyTension arm

2

2.2

16

Spring fixed
bracket

10

2.7

2.1

Dust cap

12

Capable of performing measurements even in noisy
environments because of its ability to measurevibrations directly rather than relying on methods
based on sonic waves

Ratio (%)

Power usage (kW/h)

2.9

Tension Meter Capable of the Highest
Global Standard for Measurement

Able to measure vibrations at the highest global
precision standard even with layouts and belts that
emit low-frequency sound, which is difficult whenmeasuring sonic waves

Realizing superior energy efficiency due to minimized loss thanks to lower belt bending rigidity

Using a tensioner pulley to control flat belt snaking
enables the autonomous control of belts andpulleys.

Characteristic No.1:

Day 1

Day 2

Day 3

Day 4

BANDO CHEMICAL INDUSTRIES, LTD.

Day 5

Day 6

0

Tensioner fixed support

Annual Report 201317

Our Business
The Company introduced dual Administrative Headquarters to implement the five guidelinesof the first stage of the mid-to-long term business plan—“Breakthroughs for the future,”(“BF-1”). This has facilitated greater synergy among the Company’s business segments.

Net sales by business segment

Belt

FY2012

85%

Business
Main productsThis section provides an explanation of the Company’s main business segments, whichwere restructured in fiscal 2013. An overview of operating results by the former businesssegments are provided in Management’s Discussion and Analysis of Operating Results andFinancial Position on pages 26 to 28.

Net sales by business segment

Elastomer Products

FY2012

15%

Business

Main products

Automotive power transmission belt products

Components for printers and other electrophotographic output equipment

Automotive power transmission belts and power transmission
systems products, etc.

High-performance rollers, cleaning blades, engineering
plastics products, etc.

Industrial power transmission belt products

Belts and components used in multimedia, precision equipment,
factory automation, etc.

High-performance film products
High-performance films and highly processed products
used in construction materials, decorative displays,
medical materials, industrial materials, daily living
products, etc.

Conveyor belts

Conveyor belts and systems products, related components, etc.

Key initiatives in BF-1
Strengthen initiatives to become No.1 in the AsianmarketKey initiatives in BF-1

• Enhance existing production facilities(Thailand, Indonesia, etc.)• Expand production at subsidiaries in emerging countries(India, Vietnam, etc.)• Cultivate markets, with emphasis on China and the ASEAN
region• Develop markets in the Greater Mekong Subregion

Raise added value in key markets• Strategic products:• Strategic
development products: Clean systems,
Precision abrasives

Raise added value in key markets

Key concepts:
environment, energy conservation, high performance• Provide belts and systems to automotive OEMs; provide
belts and peripheral plastic products for two-wheel
vehicles; and provide light-duty conveyor belts for food andpackage distribution

Key concepts:
environment, energy conservation, high-performance• Expand products using the eco moving label; shift fromsingle-function to multifunction products; provide modules
combining core products and peripheral products

18• Expand products using the eco moving label

Create new businesses using the key concepts above

Net sales and segment profit
FY2012 Results

Significantly reduce the product defect rate in all
products and manufacturing lines

Net sales

Innovate cost competitivenessSegment profit• Improve productivity of resources, labor, and capital

BANDO CHEMICAL INDUSTRIES, LTD.

Scraping function products,
Medical films

72,142 million¥

4,344 million¥• Optoelectronics: Print electronics, Power electronics
		Exterior, Interior materials
		
Display, Illumination• Automotive andtransportation: Power electronics
		Exterior, interior materials• Energy:
Power electronics• Robotics:
Public welfare and nursing care

Net sales and segment loss
FY2012 Results
Net sales
Segment loss

12,377 million¥(163) million¥

Annual Report 201319

Our CSR
Note: The tables below refer to Bando’s domestic facilities in Japan.

Basic Stance on Corporate Social Responsibility (CSR)
The Bando Group’s stance on CSR lies in business activities rooted in the positive contributions it makes to people’s lives
and the development of society, which are embodied in the Group’s management philosophy. In an effort to harmoniously
coexist with stakeholders—customers, shareholders and investors, employees, business partners (including suppliers
and retailers), and local communities—it is vital that we provide products and services that meet the needs of society
while undertaking business activities that help preserve the global environment. The chief objective of the Group’s CSR
activities is to gain the trust of society, which is consistent with its corporate culture and in keeping with its obligations tostakeholders.

CSR Management

Reduction of Energy Consumption

Curtailment of Waste Generation

Energy consumption

Waste generation(KL/GJ)
40,000CSR Promotion
Committee

President

Chair: Executive incharge of CSR

Head office/business facilities

6,000
4,000
30,000Group affiliates

2,000

The Company’s industrial waste largely consists of rubber and plastics.
Since recycling rubber is difficult, Bando works to curtail the generation ofthis type of waste.

Emission and Transfer Volumes of
PRTR Substances

Reduction of VOC Gas Emissions

(t)
300
250

256

279

Transfer volume (t)

201

200

CSR promotion themes
Major
achievements
CSR promotion themes
Major
achievements

20

Compliance/Business Ethics

The Environment

QualityWork for environmental preservation
by developing eco-friendly products
and by being attentive to the environment in manufacturing practices.

Provide safe and reliable products
and services.

Head Office Environment Committee;
Manufacturing Planning Center Safety andEnvironmental Promotion Department

Manufacturing Planning Center,
Quality Control Department• Developed two new eco moving products• Reduced unit volume of waste generation by 4.4%
• Reduced unit volume of energy consumption by 1.0%
• Suppressed VOC gas emissions by 33.2%• Installed a solar power generation systemat the Nankai Plant• Implemented biodiversity education and activities• Held an ASEAN QC Activities Convention

Target168• Convened a product quality case study
exhibition

Social Contribution

Information Disclosure

Recognize the importance of communication with society, individual
contributions to the community, andcompany-wide contributions to society for environmental preservation.

Timely and proper information
disclosure to stakeholders.
Finance and Accounting
Department; General
Administration Department• Held mental health classes and walking activities• Supported volunteer activities• Convened procurement policy briefings• Enhanced training programs for eachcareer stage and position• Participated in activities organized by local
resident associations, and cleanup, public
safety and disaster prevention initiatives• Published periodic CSR reports andbusiness reports, and provided information
via the Group’s websites• Conducted tours of Company facilities• Held investor relations briefings• Health and safety education and installation of disaster
simulation equipment (One work-related injury resulted
in lost time during the fiscal year under review)BANDO CHEMICAL INDUSTRIES, LTD.

74

100
0

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012
The Company is working to reduce the use and emission of chemical substances designated under PRTR (Pollutant Release and Transfer Register),search for alternatives, and steadily reduce their transfer.

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012
Photochemical oxidants and suspended particulate matter are the maincauses of VOCs (volatile organic compounds), and these emissions are
regulated by the Clean Air Act. We achieved our fiscal 2012 goals to reduce
VOC by 10% from fiscal 2011, update our VOC detoxification devices, andensure proper VOC handling.

The Company uses environmental accounting tools to determine and manage overall environmental costs, effectiveness,and volumes.
(¥ thousand)Environmental Conservation Costs• Improved quality through the use of
barcodesAllow employee growth throughtheir work, and provide safe, dynamic
workplaces.

General Administration Department

200

128

Environmental Accounting

Human Rights/Labor/Safety

Head Office Health and Safety Committee;
Human Resources Department;
Manufacturing Planning Center, Safety
and Environmental Promotion Department

Fiscal 2012 emission target: 174.3t

300

179

0

Legal compliance and acting withintegrity to gain the trust of society.

• Strengthened preventive measures against
unauthorized website access and computervirus infection

(t)
400

Transfer volume + emission volume

247

50

The Group engaged in various activities in line with six CSR promotion themes.

• Held Code of Conduct workshops ataffiliated companies

VOC emission volume

Emission volume (t)100

CSR Promotion Themes and Major Achievements in Fiscal 2012

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012

In fiscal 2012, Bando switched from heavy oil/liquid petroleum gas to natural
gas at the Ashikaga Plant and installed a solar power generation system at
the Nankai Plant to serve as a renewable energy source.

150

Legal Compliance Committee

0

FY1990 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012

PRTR substance emission and transfer volumes
CSR Promotion
Committee
secretariat

Waste generation (t)35,00025,000

The Bando Group’s CSR promotion system is led by the Company’s
CSR Promotion Committee.
Chaired by Bando’s executive in charge of CSR, the CSR
Promotion Committee decides on CSR policy for the entire Group,and monitors committees established for each CSR promotion
theme as well as the CSR functions of individual departments. The
Committee is also responsible for prioritizing issues, tracking the
progress of CSR activities, promoting public information disclosure,and interacting with stakeholders.

(t)
8,000

Energy consumption (KL/GJ)

Fiscal 2010

Fiscal 2011

Fiscal 2012

Depreciation
andCapitalamortization+
personnel
investment
expenses +overhead

Depreciation
andCapitalamortization+
personnel
investment
expenses +overhead

Capitalamortization
investment + personnel

Depreciation
andMain projects in fiscal 2012

expenses +overhead

3,812

63,402

8,009

44,195

7,387

68,024

Installed equipment and undergroundtanks, recovered oil separators

87,172

3,584

117,254

6,865

97,8203,976

Solar power generation

101
0

226,637
349

3,855
0

183,159773

0
0172,5940Administration cost

0

22,065027,3840

11,231

R&D cost

0

20,168024,701

10,56034,033Social activity cost

0

17,1850

12,588

168

9,590

0
91,086

0353,3900129,118

737
299,665

0
115,9360
299,448

Pollution control
Business Global environmental
area cost conservation
Resource recycling
Upstream/downstream cost

Environmental remediation costTotal(¥ thousand)Environmental conservation benefit
Business area
Upstream/downstream
Other
Total

Fiscal 2010
42,71009042,800Fiscal 2011
68,9830
133
69,116

Fiscal 2012
51,1950247
51,442

Industrial waste treatment and disposal
Monitored and measured environmental
burden, operated management systems
Developed products with reduced
environmental burden
Greening and beautification costs,
environmental and social activities

Installing a solar power generation systemeffectively reduced electricity.

Annual Report 201321

Our Corporate Governance

Basic Stance on Corporate Governanceand monthly management conferences. Moreover, theBoard of Corporate Auditors assigns individual cor-

In order to improve corporate value, the actions ofporate auditors to attend various internal committee

the Company are based on an adherence to the law

meetings and conduct hearings to determine the oper-

and social norms as a member of society. In addition,

ational status of subsidiaries when deemed necessary.

the Company recognizes the importance of building

Through these and other actions, the corporate auditor

positive relationships with customers (end users),

system is able to fully monitor the performance of

current and potential investors, business partners, local

directors and corporate executive officers. In the fiscal

communities and others. Accordingly, the Company

year ended March 31, 2013, the Board of Corporate

focuses on ensuring sound, transparent and efficient

Auditors met 14 times, with the three external auditors

management by enhancing its corporate governanceattending 98% of those meetings.

Board of Directors
The Company maintains a system centered on direc-

1. Seven directors as of March 31, 2013 (including one external director)
2. Four corporate auditors as of March 31, 2013 (including three external auditors)
3. ‌The total amount of external director and external auditor compensation listed
above is as follows.
One external director: ¥6 million
Three external auditors: ¥34 million
4. ‌The total amount of director compensation listed above includes performance-related salary based on the Company’s performance-related salary
criteria. However, in the fiscal year ended March 31, 2013, performance-related
income was not paid since said criteria were not met.
5. ‌In addition to the above-listed information, salaries and bonuses for employees
who concurrently serve as directors are as follows.
Four employee salaries: ¥81 million
Four employee bonuses: ¥13 million

Basic Stance on the Elimination ofAntisocial Forces
The Group takes stringent measures to eliminate
antisocial forces by investigating prospective business
partners prior to commencing new transactions basedon relevant Group policies and the Bando Group Codeof Conduct, which stresses the overriding importanceof adhering to the law and corporate ethics. In
addition, the Group maintains an internal reporting
system to thoroughly raise awareness of the necessity

system.

Nominating Committee andCompensation Committee

Notes:

of avoiding any actions that are illegal or contrary toInternal Control

corporate ethics. In the event that a business partner

To meet the requirements stipulated in the Financial

is revealed to be an antisocial organization, the Group

Instruments and Exchange Act pertaining to financial

will immediately dissolve its relationship with thisDespite having no legal obligation under thereporting performed by internal control reportingorganization.

tors and corporate auditors to ensure management

Companies Act, the Company has establishedsystems, the Bando Group maintains internal control in

efficiency and to strengthen its audit and supervisory

the Nominating Committee and Compensationaccordance with the basic frameworks for internal con-functions. The Company’s Board of Directors consists

Committee to serve as consultative bodies of thetrol outlined in Financial Services Agency criteria, andCompliance Promotionof six directors, as of fiscal 2013, including one external

Board of Directors in an effort to further strengthen

undertakes evaluations and reporting as defined by

The Group has formulated and distributes to all

director. The Board makes decisions concerning basic

corporate governance. Decisions regarding director

said criteria. The Company will work to further improveGroup executives and employees the Bando Groupmanagement policies, important management issues,

appointments and compensation are made by a reso-

the effectiveness of internal control primarily throughCode of Conduct, which stipulates proper actions inand legally stipulated matters, as well as monitors thelution of the Board of Directors following deliberations

the Internal Control Promotion Office and based onsuch areas as “compliance with laws and corporate

work performance of directors and corporate executiveby the Nominating and Compensation committees.

the four objectives of internal control: (1) reliability of

ethics,” “product and service safety,” “honest andofficers. As a rule, the Board meets once per month. In

In addition, these committees include the externalfinancial reporting, (2) operational effectiveness andfair business activities,” and “fair and equitable

addition, the Company maintains a corporate executive

director and external auditors who have been desig-

efficiency, (3) legal compliance regarding businessprocurement transactions.” In addition, the Group

officer system to improve operational efficiency andnated as independent executives to maintain a highly

activities, and (4) asset protection.

works to raise awareness of compliance by designating

speed, and has established the Management Advisorytransparent system for making decisions about director

Council to assist the president with management

nominations and compensation. In the fiscal year

decisions. In the fiscal year ended March 31, 2013,

ended March 31, 2013, the total amount of director andthe Board of Directors met 17 times, with the external

corporate auditor compensation was as follows.

director attending 100% of those meetings.

Board of Corporate Auditors
The Company has adopted a corporate auditor system.
The Board of Corporate Auditors consists of four corporate auditors, including three external auditors, andDirectors
Corporate
auditors

Numberof Persons

Total
Compensation

Compensation
Limit

7

¥106 million¥240 million
or less annually

4¥54 million

meets monthly. The internal auditor and one external
auditor serve on a full-time basis. All of the Company’s

Total

11

¥161 million¥7 million
or less monthly

Management organization and corporate governance
General Meeting of Shareholders
Election

Election
Appointment

Board of Directors

MonitorBoard of Corporate Auditors/
Corporate Auditors

Nominating Committee
Compensation Committee

Audit

President/
Corporate Executive Officers

corporate auditors attend Board of Directors’ meetings

Accounting Auditors/
Certified Public Accountants
Accounting
audit

Executive Organizational Units

22

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201323

Our Corporate GovernanceOctober as the Bando Group Corporate Ethics Month,conducting training sessions on the Bando GroupManagement (As of June 25, 2013)

Board of Directors

Code of Conduct at Company business facilities ordomestic and overseas affiliates every other year,
and providing opportunities to discuss these topics
internally. Moreover, the Group has established asystem to further promote compliance by adopting aninternal reporting system that includes external lawyers
as well as a service for providing information on theformulation, revision and abolition of relevant laws.

Internal Audits

Chairman:Vice Chairman:

The Company has established the Internal Audit

Akio Ogura

Kazuyoshi Tani

Director:

Director:

External Director:

Shinji Kashiwada

Yutaka Kato

Department, an independent organization that is

President andRepresentative Director:

Mitsutaka Yoshii

staffed by three people reporting directly to thepresident. The Internal Audit Department implements
systematic and comprehensive internal audits (which
include the internal control system) of all departments as well as domestic and overseas affiliates.
Accompanied by corporate auditors, the Internal
Audit Department conducts on-site audits within the
Company and at affiliates, the results of which arereported to the president, directors and auditors.

Masao Ohara

Information Disclosure
The Company promotes fair and highly transparent
management by disclosing important information in an
appropriate and timely manner to shareholders and allother stakeholders.
The Company maintains PR functions that
include timely information disclosure by the General
Administration Department. In addition, the Company
has established a system to facilitate the timely disclosure of information to stock exchanges and discloses
such information on the Company website.

24

BANDO CHEMICAL INDUSTRIES, LTD.

Corporate Auditors

Corporate Executive Officers

External Auditor: Hiroshi Kii(full-time)

President:

Auditor:Shinichiro Miyamoto

External Auditors: Keizo Ogawa

Toru Tada

Mitsutaka Yoshii
Senior Executive Officers: Masao Ohara
Keiji Iwai
Yoshihisa Tamagaki
Masayuki Kitabayashi
Hisashi Samejima
Executive Officers:
Yoshitaka Oshima
Kyosuke Nakamura
Shinji Kashiwada
Joseph David Laudadio
Katsuhiko Hata
Katsuya Yamaguchi

Annual Report 201325

Financial Review
Management’s Discussion and Analysis of Operating Results and Financial Position

Operating Environment

Aiming to expand sales in growth markets centered onbelts fell, sales rose for such accessory drive power

Industrial Products Businessemerging countries, we promoted production capac-

transmission systems as automatic tensioners and the

Although sales increased for steep-incline conveyor

During the fiscal year ended March 31, 2013, theity enhancements primarily in Asia and focused on

BANDO SMOOTH COUPLER (pulleys with a built-in

belts used in thermal power plants as well as otherglobal economy showed a stronger tendency towards

expanding sales in China, India, and the ASEAN region.

one-way clutch), backed by higher demand in Asia.

types of conveyor belts, sales of railway track-related

stagnation overall, despite indications of a gradual

At the same time, the Group undertook measures to

In industrial power transmission belt products,

economic recovery in the United States. These eco-strengthen profitability and global cost competitive-

sales of V belts used in industrial machinery decreased

Segment net sales decreased 2.3% year on year

nomic conditions were mainly attributable to negativeness, such as reducing defects and production loss;

in Japan and North America but rose in Asia owing toto ¥17,252 million, but segment profit surged 85.3% togrowth in Europe caused by the European sovereign

improving productivity; and integrating specifications

expanded marketing activities in growth markets.

¥891 million thanks to efforts to improve the profitabili-

debt crisis, particularly in Greece, and a slowing ofand undertaking value analysis/value engineering (VA/

economic expansion in China, India and numerous

VE) activities to curb materials costs.

Segment net sales increased 2.7% year on year toty of conveyor belts.

¥55,029 million, but segment profit decreased 17.9% toother emerging countries in Asia.

Plastics Products Business¥3,460 million.

In Japan, signs of an economic recovery began

products fell.

Sales of medical and industrial films declined primarily

to appear following the change in government in

Operating Results

December 2012, which included a weakening of exces-

In the fiscal year ended March 31, 2013, consolidated net

Despite market releases of new products, sales ofreflecting the ongoing strength of the yen during thesively high yen rates and an improvement in export

sales amounted to ¥85,772 million, nearly on par withblades, precision belts, and other products fell as

first half of the fiscal year under review.

conditions. Nevertheless, harsh conditions prevailed

the previous fiscal year. Operating income decreaseda result of shrinking markets for printers and other

Segment net sales decreased 8.1% year on year

throughout the fiscal year under review due largely to

10.4% year on year to ¥4,095 million in spite of efforts toelectrophotographic output devices, mainly reflecting

to ¥4,525 million, and segment profit dropped 87.1% to

the global economic slowdown, the persistently strong

reduce costs. This result was due mainly to slightly lower

economic stagnation in Europe.

¥16 million.

yen until 2012, and a decrease in exports triggered bysales coupled with higher raw material prices.

friction in Japan-China relations.

Business Overview

Multimedia Parts Business

Segment net sales decreased 12.9% year on yearto ¥7,856 million, while segment loss stood at ¥179

million chiefly thanks to the recording of foreign

million, compared with a segment loss of ¥518 million

The Company engages in new businesses such as theexchange gains from the weakening of the yen and ain the previous fiscal year.

manufacture and sale of metal nanoparticles, as well

Under these circumstances, the Bando Groupits management objectives based on fundamental
strategies established in the mid-term business plan,

Operating Results by Business Segment
Power Transmission BusinessIn light of deteriorating market conditions,as robot-related devices. Segment net sales decreased

the Company recorded an impairment loss on fixed

16.8% year on year to ¥1,494 million, and segment

assets held by the Ashikaga Plant, which manufactures

profit fell 28.1% to ¥73 million.

products in the Multimedia Parts business segment.
Consequently, the Company posted an extraordinary“DOING MORE on the new frontier 2nd stage” (April

In automotive power transmission belt products,

loss of ¥852 million. The Company will further restruc-2010–March 2013), which concluded in fiscal 2012.

although sales of accessory drive power transmission

ture this business segment in the future.

Net sales*

Other Business

Net income jumped 74.3% year on year to ¥2,510

decline in extraordinary loss.

aggressively implemented various initiatives to achieve

because of a fall in overseas sales by customers,

Operating income*Net income or loss*

Net assets
Total assets*
Net assets(¥ million)
100,000(¥ million)
6,000

87,45380,00084,811

86,37285,772

3,333

5,056
4,571

73,593
4,000

3,000

2,510

4,095
2,000

60,0002,115

40,000Total assets(¥ million)
100,000(¥ million)
4,000

2,450

76,621

78,02082,90579,65982,20760,000

1,440

1,234

80,0001,000

40,00038,35240,02040,54239,444

2009

2010

2011

2012

43,2262,000
020,00020,000

(255)
0

2009

2010

2011

2012

2013

0

2009

2010

2011

2012

2013

-1,000

2009

2010

2011

2012

2013

0

2013

* Fiscal year endings are March 31.

26

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201327

Financial Review

Risks that could potentially impact the performance and financial position of the Bando Group

Financial Position

Cash Flow

Total assets as of March 31, 2013 increased ¥2,547

Net cash provided by operating activities was ¥7,004

million compared with the previous fiscal year-end to

million, up from ¥6,595 million provided in the previous¥82,207 million largely due to upswings in cash andfiscal year, with the recording of income before income

deposits, and investment securities. Total liabilities

taxes and minority interests of ¥3,541 million, anddecreased ¥1,233 million compared with the previous

depreciation and amortization of ¥4,389 million. Net

Increasing Overseas Transactions

fiscal year-end to ¥38,981 million because of suchcash used in investing activities was ¥5,781 million, up

The Group primarily uses foreign exchange contracts

Raw Material Market Fluctuations andProcurement

factors as a fall in notes and accounts payable—trade.

from ¥4,768 million used in the previous fiscal year,

to hedge the risks associated with the significant

The Group negotiates with business partners regarding

Net assets rose ¥3,781 million from the previous fiscal

primarily due to outflows totaling ¥4,280 million for thenumber of foreign currency receivables it currently

delivery dates and prices by closely examining market

year-end to ¥43,226 million. This was primarily attrib-

purchase of property, plant and equipment. Net cash

carries and will implement other appropriate measures

prices as well as supply-demand circumstances. The

utable to higher retained earnings accompanying theused in financing activities was ¥463 million, down fromto hedge against such risks in the future. Nevertheless,Group forecasts further increases in raw material prices

posting of net income as well as lower foreign currency¥4,363 million used in the previous fiscal year, largely

the Group’s performance could be adversely affectedaccompanying higher crude oil prices. Accordingly,

translation adjustment (debit balance). Consequently,

reflecting cash dividends paid by the Company totalingby fluctuations in foreign currency exchange rates.

the Group promotes research on alternative materials

the equity ratio increased 3.6 percentage points from¥761 million.

the previous fiscal year-end to 52.0%.

Capital Investment andFund Procurement

are listed below. The forward-looking statements listed in this document are based on judgments
made by the Group as of March 31, 2013.

In addition, the Group’s performance and finan-

to stabilize supply and demand; revises and increases

As a result, cash and cash equivalents as of Marchcial position could be adversely affected by changes

product prices in response to rising raw material

31, 2013 totaled ¥12,267 million, up ¥1,245 million

in economic conditions in individual regions despite

prices; and strengthens measures to reduce overall

compared with the previous fiscal year-end.

efforts to strengthen its overseas production and sales

costs. Nevertheless, the Group’s performance could be

systems.

adversely affected by a downturn in demand, a backlog
in supply, or prolonged increases in material and/or

March 31, 2013 totaled ¥5,052 million. Major capital

Basic Policy regarding
the Distribution of Profits

Recalls

investment items are shown below. The financing

The Company’s basic policy is to enhance profits andAs a components manufacturer, the Company delivers

required for this capital investment was obtained frommaintain stable dividend payments for shareholders

items to automotive, office automation equipment,

the following sources: the Company’s own funds, thewhile taking into consideration its earning position. In

consumer product and other manufacturers. In addi-

Earthquakes and Other Natural
Disasters

liquidation of notes and accounts receivable—trade,

addition, distribution of profits is based on an examina-

tion, its subsidiaries and affiliates mainly manufacture,

There are indications that a major earthquake could

and borrowings.

tion of total shareholder returns, including share repur-

process and sell these parts. Considering productoccur in the Tokai, Tonankai or Nankai regions ofchases. Internal reserves are invested over the long

quality to be of paramount importance for maintaining

Japan. In addition, the potential for typhoons andCapital investment undertaken in the fiscal year ended

Business
Segment

fuel prices that exceed expectations.

Amount(¥million)

Main Activities

term in such areas as R&D; new product, production

and developing current business operations, thefloods exists. In the event of such a disaster, business

PowerTransmission¥3,323

Installed new and expanded
existing manufacturing equipment, upgraded molds

technology and market development; the strengthen-Group focuses on implementing various initiatives

sites including the Nankai Plant could sustain damage

ing of business structure; internationalization; and theto ensure product quality to the maximum extent

to production or other facilities, potentially leading toMultimedia
Parts

Streamlined and improved theefficiency of manufacturing
equipment

expansion into new business domains. Through these

possible. However, recalls and other actions could arise

a temporary cessation of operations. Accordingly, each389

initiatives, we will work to further increase corporate

in cases where defects in automobiles and other itemsof the Company’s four plants has formulated a businessvalue. In line with this basic policy, the annual dividend

are caused by products (components) supplied by thecontinuity plan (BCP) based on the assumption that326

Upgraded existing and installed
new manufacturing equipment

for the fiscal year ended March 31, 2013 was ¥8 perGroup.

it could be damaged under such circumstances. The

In such cases, the Group will likely be required to

BCPs include undertaking system upgrades to minimize

235

Improved manufacturing
processes

cover all obligatory legal or contractual costs of recalls

disruptions to operations, notably the formulation ofand other actions, which could adversely affect the

repair plans and the supplementary supply of products

Other

778

Introduced Enterprise Resource
Planning (ERP) systems ataffiliates and a solar power
generation system

Group’s performance.

by overseas plants. Nevertheless, the Group’s perfor-

Total¥5,052

Industrial
Products
Plastics
Products

28

Business Risks

BANDO CHEMICAL INDUSTRIES, LTD.

share, unchanged from the previous fiscal year.

mance could be significantly impacted depending on
the size of the disaster.

Annual Report 201329

Consolidated Balance Sheets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
March 31, 2013 and 2012

Thousands of
U.S. dollars(Note 4)

Millions of yen

2013

Assets2012

2013

Time deposits (Note 7)¥12,267¥11,022$  130,487

226

99

2,408

		Trade16,912

17,496

179,896

		Other

1,150

1,090

12,228

(29)

(30)

(308)

10,4609,896

111,261

Deferred tax assets (Note 12)

231

363

2,454

Other current assets

657

588

6,983

41,87340,522445,410

Allowance for doubtful accounts

Inventories (Note 6)

Total Current Assets

2013

2012

2013

¥ 2,285¥ 2,072$ 24,305

2,864

2,702

30,462

		Trade14,803

16,160157,458

		

2,985

2,542

31,757

349

359

3,710

Liabilities and Net Assets
Short-term borrowings (Notes 7 and 10)
Current portion of long-term debt (Notes 7 and 10)
Notes and accounts payable (Note 7):

Notes and accounts receivable (Note 7):		Millions of yen

Current Liabilities:

Current Assets:
Cash and cash equivalents (Note 7)

Thousands of
U.S. dollars(Note 4)

Construction and other

Income taxes payable
Other current liabilities (Note 12)

2,860

2,869

30,417

26,14526,704

278,109

Long-term debt (Notes 7 and 10)

10,626

9,857

113,030

Allowance for employees’ retirement benefits (Note 11)

2,008

2,154

21,359

202

1,500

2,154

12,836

13,511

136,543

10,952

10,952

116,498

Capital surplus

2,968

3,537

31,573Retained earnings

31,92030,171

339,538

Total Current Liabilities
Long-term Liabilities:

Other long-term liabilities (Note 12)
Total Long-term Liabilities
Property, Plant and Equipment:
Land

6,261

6,865

66,597

Buildings and structures

23,97924,467

255,071

Machinery and equipment

48,767

48,829518,748

Net Assets (Note 13):

Construction in progress

3,273

1,562

34,815

Common stock

Other

12,044

12,244

128,112

94,324

93,9681,003,343

Accumulated depreciation(65,890)(65,583)(700,887)

Property, Plant and Equipment, Net

28,43428,385

302,456

Commitments (Note 16)		Authorized: 378,500,000 shares		Issued 2012 — 96,427,073 shares		Issued 2013 — 94,427,703 shares

Treasury stock, at cost

Other Assets:
Other intangible assets

1,112

1,270

11,826

Investments in securities (Notes 7 and 8)

5,052

4,067

53,734

Investments in affiliates (Note 7)

3,994

3,305

42,483

Deferred tax assets (Note 12)

543

879

5,773

Other — net

1,200

1,231

12,767

Total Other Assets

11,90010,752

126,583

Total¥82,207¥79,659$  874,450		

2012 — 497,936 shares		2013 — 315,201 shares

Total Shareholders’ Equity

(90)

(161)

(954)

45,75044,499486,654

Accumulated other comprehensive income		

Unrealized gain on available-for-sale securities

1,107

476

11,774		Foreign currency translation adjustments(4,082)(6,415)(43,423)(2,975)(5,939)(31,649)

451

885

4,793

Total Net Assets

43,22639,444

459,798

Total Liabilities and Net Assets¥82,207¥79,659$874,450

Total Accumulated Other Comprehensive Income
Minority interests

See accompanying notes to consolidated financial statements.

30

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201331

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Net Assets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012
Millions of yen

Consolidated Statements of Income

2013

2012

2013

Net Sales
Cost of Sales
Gross profit¥85,772
63,311
22,461¥86,372
63,132
23,240$912,369
673,448
238,920

Selling, General and Administrative Expenses (Note 14)
Operating income

18,366
4,095

18,6694,571

195,363
43,558Other Income (Expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Foreign exchange gains (losses), net
Gain on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on sales of property, plant and equipment
Loss on impairment of fixed assets (Note 19)
Other, net
Income before income taxes and minority interests
Income Taxes (Note 12):Current
Prior years
DeferredIncome before minority interests
Minority Interests
Net Income

172
(304)
560
(335)
13
(322)
(652)
(756)
(177)
(1,802)
2,769

163
(264)
528
437
5
(112)
(4)
(1,157)
(150)
(554)
3,541

1,738
(2,813)
5,616
4,645
53
(1,187)(42)(12,309)(1,596)(5,895)37,663

833
—
149
982
2,559

1,069
99
119
1,287
1,483

8,863
—
1,584
10,44627,21849¥ 2,51042¥ 1,440516$ 26,702
U.S. dollars(Note 4)Yen
Per Share of Common Stock (Note 15)
Basic net income
Cash dividends

Thousandsof shares

Thousands of
U.S. dollars(Note 4)

2013

2012

2013

¥26.478.00¥14.84
8.00

$0.28
0.09

See accompanying notes to consolidated financial statements.

Balance at April 1, 2011

Millions of yen

Consolidated Statements of Comprehensive Income

2013

2012

2013

Income before Minority Interests
Other Comprehensive Income (Note 17):
Unrealized gains (losses) on available-for-sale securities
Foreign currency translation adjustments
Share of other comprehensive income in affiliates
Total other comprehensive income
Comprehensive Income¥2,559

¥1,483$27,217

636
2,039
322
2,998
¥5,55794(1,082)(197)(1,186)¥  297

6,769
21,6903,430
31,889$59,106

Comprehensive Income Attributable to:Shareholders of the parent
Minority interests¥5,47482¥  26730$58,230
876

Commonstock

Capitalsurplus99,927¥10,952

Retainedearnings

Treasurystock,
at costUnrealized
gain onavailablefor-salesecurities

Foreigncurrencytransaction
adjustments

Minority
interests

Total
net assets¥4,682¥29,514¥ (703)¥  380¥(5,147)¥865¥40,543

Net income

—

—

—

1,440

—

—

—

—

1,440

Cash dividends

—

—

—

(784)

—

—

—

—

(784)

Purchases of treasury stock

—

—

—

—

(603)

—

—

—

(603)

Sales of treasury stock

—

—

(0)

—

0

—

—

—

0

(3,500)—(1,145)

—

1,145

—

—

—

—

Retirement of treasury stock
Net change during the year
Balance at March 31, 2012

—

—

—

—

—

96

(1,268)20(1,152)96,427

10,952

3,537

30,171(161)

476(6,415)885

39,444

Net income

—

—

—

2,510

—

—

—

—

2,510

Cash dividends

—

—

—

(761)

—

—

—

—

(761)

Purchases of treasury stock

—

—

—

—

(498)

—

—

—

(498)

Sales of treasury stock

—

—

—

—

—

—

—

—

—

Retirement of treasury stock(2,000)

—

(569)

—

569

—

—

—

—

Net change during the year

—

—

—

—

—

631

2,333

(434)

2,530

94,427¥10,952¥2,968¥31,920¥  (90)¥1,107¥(4,082)¥451¥43,226

Balance at March 31, 2013

Thousands of U.S. dollars (Note 4)

Balance at March 31, 2012

Unrealized
gain onavailablefor-salesecurities

Foreigncurrencytransaction
adjustments

Minority
interests

Total
net assets

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost$116,498$37,626$320,929$(1,713)$ 5,063$(68,242)$9,410$419,571——

26,700————26,700Net income
Cash dividends——(8,091)

—

—

—

—

(8,091)

Purchases of treasury stock

—

—

—

(5,294)———(5,294)

Sales of treasury stock

—

—

—

—

—

—

—

—

Retirement of treasury stock—(6,053)

—

6,053

—

—

—

—

Net change during the year

—

—

—

—

6,711

24,819(4,617)

26,913$31,573 $339,538$  (954)$11,774$(43,423)$4,793$459,798

Balance at March 31, 2013
Thousands of
U.S. dollars(Note 4)

Millions of yen

Number ofshares ofcommonstock
outstanding$116,498

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

32

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201333

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars(Note 4)

Millions of yen
2013

2012

2013

¥ 3,541¥ 2,769$ 37,663(1,131)(1,975)(12,028)

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Adjustments for:
Income taxes paid
Income taxes refunded
Depreciation and amortization
Amortization of goodwill and negative goodwill
Loss on impairment of fixed assets

202

—

2,144

4,389

4,804

46,683

(59)

31

(626)

1,157

756

12,309Decrease in allowance for doubtful accounts

(10)

(20)

(106)

Increase (decrease) in allowance for retirement benefits

(164)

19

(1,741)

Foreign exchange losses (gains), net

(103)

89

(1,094)Equity in earnings of affiliates

(528)

(560)

(5,616)

Loss on sales and disposal of property, plant and equipment

111

962

1,176

1,341

(1,618)14,262

Changes in assets and liabilities:
Decrease (increase) in notes and accounts receivable — trade8(1,256)

88

Increase (decrease) in notes and accounts payable — trade

Increase (decrease) in inventories(2,103)

2,910(22,373)

Decrease (increase) in notes and accounts receivable — other

136

(186)

1,451

Other, net
Net Cash Provided by Operating Activities

217

(132)

2,315

7,004

6,595

74,507Purchases of property, plant and equipment

(81)

987

(861)

(4,280)(5,576)(45,527)

Proceeds from sales of property, plant and equipment

492

136

5,234

Purchases of intangible assets

(299)

(255)

(3,183)Purchases of investments in securities

(50)

(13)

(534)

Purchases of investments in subsidiaries

(457)

—

(4,859)(1,077)—(11,454)

Payments related to disposal of investments
in subsidiaries resulting in change in scope of consolidation (Note 5)
Other, net
Net Cash Used in Investing Activities

(29)

(48)

(309)

(5,781)(4,768)(61,494)(41)(3,504)(432)

Cash Flows from Financing Activities:
Decrease in short-term borrowings
Proceeds from long-term borrowings

3,541

3,317

37,662

Payments on long-term borrowings(2,682)(5,745)(28,524)

—

2,978

—

Purchases of treasury stock

(497)

(602)

(5,286)

Cash dividends paid

(761)

(784)

(8,091)

Proceeds from issuance of bonds(3) Cash and cash equivalents

Bando Chemical Industries, Ltd. (hereinafter, the “Company”) is apioneer belt manufacturer in Japan. The Company manufacturesand sells power transmission belts for automobiles, industrial
machines, agricultural machines, home appliances and information terminal devices, heavy and light duty conveyor belts, products for office automation and household appliances and films fora variety of markets.

Cash and cash equivalents primarily consist of cash on hand andin banks, and other highly liquid investments with original maturities of three months or less.

(5) Inventories

2. Basis for Preparation of Consolidated Financial
Statements
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Law and its
related accounting regulations and in conformity with accounting
principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements fromInternational Financial Reporting Standards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to thefinancial statements issued domestically in order to present themin a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made to the prior year’s
financial statements to conform to the current year’s presentation.


3. Summary of Significant Accounting Policies

Cash Flows from Investing Activities:
Decrease (increase) in time deposits

1. Description of Business

Cash dividends paid to minority shareholders

(10)

(10)

(110)

Other, net

(13)

(12)

(141)

Net Cash Used in Financing Activities(463)(4,363)(4,922)

Effect of Exchange Rate Changes on Cash and Cash Equivalents

484

(315)

5,152

Net Increase (Decrease) in Cash and Cash Equivalents

1,245(2,851)

13,242

Cash and Cash Equivalents at Beginning of Year

11,022

13,873

117,244

Cash and Cash Equivalents at End of Year¥12,267¥11,022$130,487(1) Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and its 27 subsidiaries (collectively, the“Companies”) as of March 31, 2013 and 2012. Investments in 7
affiliates, on which the Company has significant influence, areaccounted for by the equity method as of March 31, 2013 and2012.
The overseas consolidated subsidiaries have a year-end of
December 31. Adjustments have been made for preparing theconsolidated financial statements to reflect significant transactions which occurred between their year end and that of theCompany.
All significant intercompany balances and transactions
have been eliminated in consolidation. All material unrealized
profits included in assets resulting from transactions within the
Companies are eliminated.
(2) Foreign currency transactions
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at the balance sheet date. The foreign currency exchange
gains or losses from transactions are charged to income.
Assets and liabilities of the overseas subsidiaries are translated into Japanese yen at the exchange rate prevailing at eachbalance sheet date. Differences arising from such translations arerecorded as foreign currency translation adjustments and minority
interests in the consolidated balance sheet. Income and expense
accounts are translated at the average exchange rate for the year.

(4) Allowance for doubtful accounts
Allowance for doubtful accounts is provided at the amounts
calculated based on the past loss experience and an additional
estimate of potential losses in the specific receivables.

Finished goods, work in process and raw materials are stated at
the lower of cost or net selling value with cost determined by the
first-in, first-out method. Merchandise and supplies are stated at
the lower of cost or net selling value with cost determined by thegross average method.
Meanwhile, inventories held by domestic consolidated subsidiaries are stated at the lower of cost determined principally by
the gross average method or net selling value. Inventories heldby overseas consolidated subsidiaries are stated at the lower ofcost determined mostly by the first-in, first-out method or net
selling value.
(6) Investments in securities
Investments in securities are classified into three categories:
trading securities, held-to-maturity debt securities or availablefor-sale securities. Trading securities are carried at fair value. Gainor loss, both realized and unrealized, is recognized in income.
Held-to-maturity debt securities are carried at amortized cost.
Marketable securities classified as available-for-sale securities
are carried at fair value with changes in unrealized holding gainor loss, net of the applicable income taxes, reported in net
assets. Non-marketable securities classified as available-for-salesecurities are carried at cost determined by the moving-averagemethod.
(7) Property, plant and equipment
Property, plant and equipment are depreciated principally by
the declining-balance method over their estimated useful lives.
Buildings acquired on or after April 1, 1998 by the Company andits domestic consolidated subsidiaries are depreciated by thestraight-line method over their estimated useful lives. Useful lives
are as follows: three to 50 years for buildings and structures, andfive to ten years for machinery and equipment.
(8) Goodwill
Goodwill represents the cost in excess of fair value of net assets
acquired in business combination accounted for by the purchasemethod. Goodwill is amortized over five years by the straight-line
method. Negative goodwill which occurred before March 31,
2010 is amortized over five years by the straight-line method.
(9) Other intangible assets
Capitalized computer software costs for internal use are amortized by the straight-line method over five years.
(10) Research and development costs
Research and development costs are charged to income as
incurred.

See accompanying notes to consolidated financial statements.

34

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201335

Notes to Consolidated Financial Statements(11) Leases
Leased assets under finance leases which do not transfer ownership to the lessee are capitalized and depreciated or amortizedby the straight-line method with no residual value over their leaseterms.

(Accounting Standards Board of Japan (“ASBJ”) Statement
No. 26, issued on May 17, 2012) and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25, issued
on May 17, 2012). The effects of adopting these accounting standards are currently under examination.

(12) Retirement benefits
Employees serving the Company and certain of its consolidated subsidiaries are generally entitled to retirement benefits
determined by reference to current basic rates of pay, lengthof service and conditions under which the terminations occur.
The Companies principally account for allowance for retirement
benefits based on projected benefit obligations and plan assets
at each balance sheet date.
Prior service cost is amortized by the straight-line method
over ten years from the year in which they arise.
Actuarial gain or loss is amortized by the straight-line method
over ten years from the next year in which they arise.
(13) Income taxes
The provision for income taxes is computed based on income
before income taxes in the consolidated statements of income.
The liability method is used to recognize deferred tax assets
and liabilities for the future tax consequences of the temporary
differences between the carrying amounts of assets and liabilities
for financial and income tax reporting purposes. The Companies
provide a valuation allowance when they believe that tax assets
are not recoverable based on expected future taxable income.
(14) Derivatives and hedging activities
The Companies use derivative financial instruments to manage
their exposures to changes in foreign currency exchange rates
and interest rates. Foreign currency forward contracts are used
to reduce foreign exchange risk. Interest rate swap contracts areused to reduce interest rate risk. The Companies do not enter
into derivatives for trading or speculative purpose.
If derivatives are used for hedging purpose and qualify forhedge accounting, gains or losses on derivatives are deferred
until maturity of hedged items. If the foreign currency forward
contracts qualify for hedge accounting, the hedged receivables
and payables denominated in foreign currencies are translated
at the contracted rates. The interest rate swap contracts which
qualify for hedge accounting and meet certain hedging criteria
are not measured at market value, but the differential paid or
received under the swap contracts is recognized and included ininterest expense.
(15) Per share information
Net income per share is computed by dividing net income available to common shareholders by the weighted-average numberof common shares outstanding for the year.
Cash dividends per share presented in the consolidated
statements of income are dividends attributable to the respective
years including dividends to be paid after the year-end.
(16) A ccounting standards that have not been adopted by theCompany
Effective from the consolidated fiscal year beginning on April 1,
2013, the Company and its domestic consolidated subsidiaries
will adopt “Accounting Standard for Retirement Benefits”

36

BANDO CHEMICAL INDUSTRIES, LTD.

4. U.S. Dollar Amounts
The translations of Japanese yen amounts into U.S. dollar
amounts are included solely for the convenience of readers outside Japan. These translations should not be construed as representations that the Japanese yen amounts actually represent, or
have been or could be converted into U.S. dollars.
The rate of ¥94.01 = U.S.$1.00, the approximate rate ofexchange as at March 31, 2013, has been used for the purpose ofsuch translations.


5. Cash Flow Information
Major components of assets and liabilities of the company which
is no longer a consolidated subsidiary as a result of the disposalof the shares during the year ended March 31, 2013
Major assets and liabilities of Nishihyogo Kaihatsu Co., Ltd. atthe time of sale of the shares, selling price of the shares and cash
outflow due to sale are as follows:

Current assets
Fixed assets
Current liabilities
Long-term liabilities
Other
Selling priceCash and cash equivalents
Cash outflow due to sale

Millions of yen

Thousands of
U.S. dollars¥ 1,313174(13)(1,265)11
220(1,297)¥(1,077)$ 13,963
1,851
(133)
(13,458)
117
2,340(13,794)$(11,454)

6. Inventories
Inventories held by the Companies as of March 31, 2013 and 2012
consisted of the following:
Millions of yen

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

Thousands of
U.S. dollars

2013

2012

2013

¥ 6,5691,424
2,466¥10,460¥6,4991,382
2,015¥9,896$ 69,880
15,151
26,230$111,261

7. Financial Instruments(1) Policy for financial instruments
The Companies raise funds from stable and low-cost financing
sources, mainly bank borrowings and bonds, as needed in light of
the financial plan developed as a part of the annual management
plan. The Companies invest temporary cash surplus in highly
liquid and secured financial instruments. The Companies use
derivatives to the extent necessary for financial risk management
purposes.

(2) Nature and extent of risks arising from financial instruments
Receivables such as notes and accounts receivable-trade areexposed to customers’ credit risk. Receivables denominated inforeign currencies are exposed to foreign exchange risk.
Investments in securities, mainly equity instruments, areexposed to market risk. The Companies quarterly review fairvalues of marketable securities.
Payables such as notes and accounts payable-trade are generally paid within four months. Payables denominated in foreign
currencies are exposed to foreign exchange risk.
Bank borrowings and bonds are used to fund working capitaland capital expenditures. Some of them are exposed to interest
rate risk. The Companies reduce such risk arising from certain
long-term borrowings by interest rate swap contracts.
Derivatives include foreign currency forward contracts used
to hedge foreign exchange risk on receivables and payables
denominated in foreign currencies, and interest rate swap
contracts used to hedge interest rate risk on bank borrowings.
Hedging instruments, hedged items, hedge policy, assessment
method for hedge effectiveness and other matters related tohedge accounting are described in Note 3 (14), “Derivatives andhedging activities.”

Book values and fair values of the financial instruments as ofMarch 31, 2013 and 2012 were as follows:
Financial instruments whose fair values were not readily available were excluded from the following table:
Millions of yen
2013

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was applied

Book value

Fair value

Difference¥12,267
226
16,912¥12,267
226
16,912

¥—
—
—

4,816
¥34,221¥14,803
2,285
349
10,4623,000¥30,898

4,816¥34,221¥14,803
2,285
349
10,503
3,028¥30,967

—
¥—
¥—
—
—
40
28
¥68

¥    (15)¥    (15)

¥—

—

—

—

Millions of yen(3) Risk management for financial instruments(a) Credit risk management
The Companies regularly monitor the financial position of customers to reduce the risk of defaults.
Since the Companies enter into derivative transactions onlywith highly-rated financial institutions, they believe there is little
risk of defaults.
(b) Market risk management
The Companies use foreign currency forward contracts to hedge
foreign exchange risk identified by currency and month for receivables and payables denominated in foreign currencies. With
respect to investments in securities, the Companies regularly
monitor fair values and the financial positions of the issuers andreview the holding purpose of these securities.
(c) Liquidity risk management in financing activities
The Companies prepare and update the cash management plan
in a timely manner, and maintain a certain level of liquidity on
hand to reduce liquidity risk. The Companies have commitmentline contracts to prepare for any contingency.
(4) Fair values of financial instruments
Fair values of financial instruments include market prices andvalues calculated reasonably when market prices are not readily
available. As calculation of such value incorporates variable factors, using different assumptions may result in different values.

2012

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was applied

Book value

Fair value

Difference¥11,02299
17,496¥11,02299
17,496

¥—
—
—

3,832
¥32,449¥16,160
2,072
359
9,524
3,000
¥31,115

3,832¥32,449¥16,160
2,072
359
9,593
3,005
¥31,189

—
¥—
¥—
—
—
69
5
¥74

¥    —¥    —

¥—

—

—

—

Thousands of U.S. dollars
2013

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was applied

Book value

Fair value

Difference$130,487
2,408
179,896$130,487
2,408
179,896$ ———51,224$364,015$157,458
24,3053,710
111,288
31,911$328,672

51,224$364,015$157,458
24,305
3,710
111,718
32,208$329,399

—
$ —
$ —
—
—
430
297
$727

$    (163)$    (163)

$ —

—

—

—

Annual Report 201337

Notes to Consolidated Financial Statements

Cash and cash equivalents, Time deposits, Notes and accounts
receivable-trade2013

The fair values approximate book values because of the shortterm maturities of these instruments.
Investments in securities
The fair values are measured at the quoted market prices of thestock exchange.
Notes and accounts payable-trade, Short-term borrowings,
Income taxes payable
The fair values approximate book values because of the shortterm maturities of these instruments.

The fair values represent present values of the aggregatedinterest and principal discounted at interest rates that would beapplied to new similar borrowings.
Long-term borrowings include the current portion of longterm borrowings.

The fair values are measured at the quoted market prices.
Derivative transactions
Please see Note 9, “Derivatives.”

Thousands of
U.S. dollars

Millions of yen
2013

2012

2013

¥  236
3,994¥4,230¥  2353,305¥3,540$ 2,510
42,483$44,993

The above items were not included in investments in securities (available-for-sale securities) because their market price was
not available and it was extremely difficult to determine their fairvalues.
Monetary assets and receivables with maturities were as
follows:
Millions of yen
2013

Due within
1 yearDue after
1 yearthrough
5 years

Due after
5 years
through
10 years

Due after
10 years¥12,267
226

¥—
—

¥—
—

¥—
—

16,912¥29,405

—
¥—

—
¥—

—
¥—

Millions of yen$130,487
2,408

$—
—

$—
—

$—
—

179,896$312,791

—
$—

—
$—

—
$—

Please see Note 10, “Short-term Borrowings and Long-term
Debt” for annual maturities of long-term debt.

Millions of yen
2013

Interest rate and currency swap contracts:
Floating rate receipt, fixed rate payment:
Japanese yen receipt/Indian rupee payment
U.S. dollar receipt/Indian rupee payment
Total

Due within
1 yearDue after
1 yearthrough
5 years

Due after
5 years
through
10 years

Due after
10 years¥11,022
99

¥—
—

¥—
—

¥—
—

17,496¥28,617

—
¥—

—
¥—

—
¥—

BANDO CHEMICAL INDUSTRIES, LTD.

Contract amountContract amountdue after 1 year

Fair value

Unrealized gains(losses)¥  400679¥1,079

¥320
543
¥863

¥(16)
1
¥(15)

¥(16)
1
¥(15)

Thousands of U.S. dollars
2013

Marketable securities classified as available-for-sale securities asof March 31, 2013 and 2012 were as follows:
Millions of yen
2013
Acquisition
cost

Fair value(Book value)

Unrealized
gains (losses)¥2,928¥4,584¥1,656249¥3,177232¥4,816(17)¥1,639Unrealized gains(losses)$ 4,255
7,226$11,481$3,404
5,781$9,185$(174)
11$(163)$(174)
11$(163)* The fair value is based on prices provided by financial institutions.

Acquisition
cost

Fair value(Book value)

Unrealized
gains (losses)¥1,159¥2,105¥946

2,000¥3,1591,727¥3,832(273)¥673

Millions of yen
2013

Foreign currency forward contracts:
Sell:
U.S. dollar
EuroInterest rate swap contracts:
Floating rate receipt, fixed rate payment

2013
Acquisition
cost

Fair value(Book value)

Unrealized
gains (losses)$31,145$48,762$17,617

2,648$33,793

2,462$51,224(186)$17,431

The Companies recognize impairment losses on availablefor-sale securities when the market value declines by more than
30 percent and the possibility of market value recovery is remote.
For the year ended March 31, 2013 and 2012, impairment losses
were ¥33 million ($347 thousand) and ¥2 million, respectively.

Main hedged item

Contract amountContract amountdue after 1 year

Fair value

Notes and accounts
receivable-trade¥  598
191

¥   —
—

*
*

Long-term
borrowings¥7,729¥5,588*Millions of yen
2012

Thousands of U.S. dollars

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Fair value

Derivative transactions to which hedge accounting was applied for the years ended March 31, 2013 and 2012 were as follows:

2012

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Interest rate and currency swap contracts:
Floating rate receipt, fixed rate payment:
Japanese yen receipt/Indian rupee payment
U.S. dollar receipt/Indian rupee payment
Total

Contract amountContract amountdue after 1 year

Foreign currency forward contracts:
Sell:
U.S. dollar
EuroInterest rate swap contracts:
Floating rate receipt, fixed rate payment

Main hedged item

Contract amountContract amountdue after 1 year

Fair value

Notes and accounts
receivable-trade¥  458
115

¥   —
—

*
*

Long-term
borrowings¥7,111¥4,987*

Thousands of U.S. dollars
2013

Foreign currency forward contracts:
Sell:
U.S. dollar
EuroInterest rate swap contracts:
Floating rate receipt, fixed rate payment

Main hedged item

Contract amountContract amountdue after 1 year

Fair value

Notes and accounts
receivable-trade$ 6,3592,032$    ——**

Long-term
borrowings$82,215$59,441** The fair value of such derivative transactions was included in that of hedged items.

2012

38

Due after
10 yearsMillions of yen

Financial instruments whose fair values were not available as ofMarch 31, 2013 and 2012 were as follows:

Cash and cash equivalents
Time deposits
Notes andaccounts receivable-trade
Total

Due within
1 yearDue after
5 years
through
10 years

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Bonds

Cash and cash equivalents
Time deposits
Notes andaccounts receivable-trade
Total

Cash and cash equivalents
Time deposits
Notes andaccounts receivable-trade
Total

Derivative transactions to which hedge accounting was not applied for the year ended March 31, 2013 were as follows:

Due after
1 yearthrough
5 years

8. Investments in Securities

Long-term borrowings

Available-for-sale securities
Unlisted equity securities
Investments in affiliates
Total

9. Derivatives

Thousands of U.S. dollars

Annual Report 201339

Notes to Consolidated Financial Statements

10. Short-term Borrowings and Long-term Debt

11. Retirement Benefits

12. Income Taxes

13. Net Assets

Short-term borrowings at March 31, 2013 and 2012 represented
bank overdrafts with weighted average interest rates of 1.08%
and 1.45%, respectively. The Companies had commitment line
contracts to prepare for any contingency with one financial
institution for an aggregated maximum amount of ¥6,000 million($63,823 thousand). ¥3,759 million ($39,989 thousand) was unused
as of March 31, 2013.
Long-term debt as of March 31, 2013 and 2012 consisted of
the following:

The Company and certain of its consolidated subsidiaries havedefined contribution pension plans and defined benefit pension
plans for employees. The Company places plan assets in an
employee retirement benefit trust.
Allowance for retirement benefits as of March 31, 2013 and2012 consisted of the following:

Deferred tax assets and liabilities as of March 31, 2013 and 2012
consisted of the following:

Significant provisions in the Companies Act of Japan (the “Act”)
that affect financial and accounting matters are summarized below:

Millions of yen
2013

Unsecured long-term borrowings
from banks and other financial
institutions with weighted
average interest rate of 1.69%
in 2013 and 1.49% in 2012
Unsecured bonds due 2017, 0.99%
Obligations under finance leases
Less current portion of
long-term debt
Total

¥10,4623,000
28
13,4902,864¥10,6262012¥ 9,5243,000
35
12,5592,702¥ 9,857

Thousands of
U.S. dollars
2013$111,288
31,911
293
143,492
30,462$113,030

Annual maturities of long-term debt outstanding as of March
31, 2013 were as follows:Year ending at March 31

Millions ofyen

Thousands of
U.S. dollars

2014
2015
2016
2017
2018
2019 and thereafterTotal¥ 2,864
2,205
2,036
3,468
2,917
—
¥13,490$ 30,462
23,456
21,66236,88631,026—$143,492

Millions of yen

Projected benefit obligation (*)
Plan assets at fair value
Unrecognized actuarial loss
Unrecognized prior service cost
Total recognized in
the consolidated balance sheet

Thousands of
U.S. dollars

2013

2012

2013

¥(11,762)
8,021
1,852
(119)

¥(11,053)
6,942
2,122
(165)

$(125,112)
85,324
19,695(1,266)¥ (2,008)¥ (2,154)$ (21,359)* Certain consolidated subsidiaries have adopted a simplified method to
calculate their projected benefit obligation.

Net periodic benefit costs for the years ended March 31, 2013
and 2012 consisted of the following:
Millions of yen

Service cost (*1)
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Other (*2)
Total

Thousands of
U.S. dollars

2013

2012

2013

¥477
204
(134)
220
(46)
193
¥914

¥  501
205
(136)
388
(90)
166
¥1,034$5,077
2,176(1,426)
2,339
(489)
2,050
$9,727*1 Expenses for employees’ retirement benefits of consolidated subsidiaries are included in service cost.
*2 Other includes payments for the defined contribution pension plans.

Assumptions used in the calculation for the years ended
March 31, 2013 and 2012 consisted of the following:
Discount rate
Expected rate of return on plan assets
Method of attributing expected
benefit to periods
Amortization period for
unrecognized prior service cost
Amortization period for
unrecognized actuarial gains (losses)

2013

2012

1.2%
2.5%
Straight-line
basis

2.0%
2.5%
Straight-line
basis

10 years

10 years

10 years

10 yearsThousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Allowance for employees’
retirement benefits
Transfer of certain marketablesecurities to retirement
benefit trust
Loss on impairment of
fixed assets
Tax loss carryforwards
Other
Valuation allowancefor deferred tax assets
Total
Deferred tax liabilities:
Gain on set-up of
retirement benefit trust
Unrealized gain on
available-for-sale securities
Reserve for deferred capitalgains related to property,
plant and equipment
Other
Total
Net deferred tax assets

2013

2012

2013

¥   689¥   735$ 7,332

1,370

1,361

14,578

307
355
901

534
470
891

3,266
3,768
9,583

(924)
¥ 2,698(1,085)¥ 2,906(9,834)$ 28,693¥(1,080)¥(1,080)$(11,483)

(530)

(200)

(5,641)(266)(86)¥(1,962)¥   736(366)(54)¥(1,700)¥ 1,206(2,833)(913)$(20,870)$ 7,823

Net deferred tax assets were included in the following
accounts in the consolidated balance sheets as of March 31, 2013
and 2012:
Millions of yen

Current assets — Deferred tax assets
Other assets — Deferred tax assets
Current liabilities — Other
Long-term liabilities — Other

Thousands of
U.S. dollars

2013

2012

2013

¥231
543
0
38

¥362
879
4
31

$2,4545,773
2402

Reconciliation of the statutory tax rate to the effective income
tax rate for the years ended March 31, 2013 and 2012 was asfollows:
Statutory tax rate
Different income tax rates applicable
to income in certain foreign countries
Equity in earnings of affiliates
Nondeductible expenses
Nontaxable income
Tax deduction
Change in valuation allowance
Adjustment of deferred tax assets and liabilities
for enacted changes in tax laws and rates
Effect of reassessment of prior years’ income taxes
Other, net
Effective income tax rate

2013

2012

38.0%

40.6%

(6.6)
(5.7)
3.2
(0.3)
(0.5)
(2.8)

(6.8)
(8.2)
4.4
(0.4)
(3.7)
12.0

—
0.1
2.3
27.7%

4.6
1.1
2.9
46.5%

(1) Dividends
The Act allows Japanese companies to pay dividends at any time
during the year in addition to the year-end dividend upon resolution at the shareholders’ meeting.
The Act permits Japanese companies to distribute dividends
in kind (non-cash assets) to shareholders subject to certain limitations and additional requirements. Semiannual interim dividends
may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company so stipulate. The Act also 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
the shareholders, but the amount of equity after dividends must
be maintained at no less than ¥3 million.
(2) Increases/decreases and transfer of common stock, reserveand surplus
The Act requires that an amount equal to 10% of dividends must
be appropriated as a legal reserve (of retained earnings) or as
additional paid-in capital (of capital surplus) depending on theequity account charged upon the payment of such dividends
until the total aggregate amount of legal reserve and additional
paid-in capital equals 25% of common stock. Under the Act,the total amount of additional paid-in capital and legal reserve
may be increased without limitation. The Act also provides that
common stock, legal reserve, additional paid-in capital, othercapital surplus and retained earnings can be transferred among
the accounts under certain conditions upon resolution of theshareholders.
(3) Treasury stock and treasury stock acquisition rights
The Act also requires Japanese companies to repurchase/disposeof treasury stock based on resolutions of the Board of Directors.
The amount of treasury stock purchased cannot exceed theamount available for distribution to the shareholders which isdetermined by specific formula.
Under the Act, stock acquisition rights are presented as aseparate component of equity.
The Act also provides that companies can purchase bothtreasury stock acquisition rights and treasury stock. Such treasury
stock acquisition rights are presented as a separate componentof equity or deducted directly from stock acquisition rights.

14. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended
March 31, 2013 and 2012 principally consisted of the following:
Millions of yen

Salaries
Packing and delivery expenses
Research and development costs
Net periodic benefit costs
Provision for doubtful accounts

40

BANDO CHEMICAL INDUSTRIES, LTD.

Thousands of
U.S. dollars

2013

2012

2013

¥5,285
1,964
1,109
414
5

¥5,209
1,062
889
432
15

$56,218
20,896
11,7984,406
56Annual Report 201341

Notes to Consolidated Financial Statements

15. Net Income per Share

17. Consolidated Statements of Comprehensive Income

The Companies had no dilutive securities for the years ended
March 31, 2013 and 2012.
Basic net income per share for the years ended March 31,
2013 and 2012 was as follows:

Amounts reclassified to net income (loss) in the current periodthat were recognized in other comprehensive income in thecurrent or previous periods and tax effects for each component ofother comprehensive income are as follows:

Net income available
to common stockholders

2013

2012

2013

¥2,510¥1,440$26,702

Thousands of shares

Weighted-average number of shares

2013

2012

94,812

97,034Yen

Net income per share

Millions ofyen

Thousands of
U.S. dollars

Unrealized gain (loss) on available-for-sale securities:
Net unrealized holding gains for the year
Reclassification adjustments
Net change during the year
Income tax effects
Total¥  968
32
1,000
(364)
636

$10,296
348
10,644(3,875)
6,769

Foreign currency translation adjustments
Net change during the year
Total

2,039
2,039

21,69021,690Thousands of
U.S. dollars

Millions of yen

U.S. dollars

2013

2012

2013

¥26.47¥14.84$0.28(3) Sales, profit or loss, assets, and other items by reportable segments
Millions of yen
2013
Reportable segments

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Loss on impairment of fixed assets

Power
Transmission

Multimedia Parts

Industrial
Products

Plastics Products

Total reportablesegments

Other

Total

¥54,917112¥55,029¥ 3,460¥54,928¥7,856—¥7,856¥ (179)¥6,374¥17,225
27¥17,252¥   891¥13,318¥4,522
3¥4,525¥   16¥2,830¥84,520
142¥84,662¥ 4,188¥77,450¥1,252242¥1,494¥   73¥1,513¥85,772384¥86,156¥ 4,261¥78,963¥ 2,757¥  788¥   606¥  225¥ 4,376¥   30¥ 4,406¥ 3,323¥    —¥  389¥  852¥   326¥    —¥  236¥    —¥ 4,274¥   852¥  155¥  305¥ 4,429¥ 1,157

Millions of yen

16. Leases
The Companies lease certain machinery, vehicles and equipment,
and software.
Total lease payments under finance leases for the years
ended March 31, 2013 and 2012 were ¥16 million ($167 thousand)and ¥54 million, respectively.
Information about non-capitalized finance leases, if capitalized, at March 31, 2013 and 2012 was as follows:
Acquisition cost and accumulated depreciation:
Millions of yen
2013

Acquisition cost
Accumulated depreciation
Net book value

Machinery andequipment

Other

¥32
30
¥ 2

¥65
62
¥ 3

Millions of yen
2012

Acquisition cost
Accumulated depreciation
Net book value

Machinery andequipment

Other

¥104
95
¥  9

¥220
201
¥ 19

Thousands of U.S. dollars
2013

Acquisition cost
Accumulated depreciation
Net book value

Machinery andequipment

Other

$347
321
$ 26

$690
656
$ 34

Future contractual lease payments:
Millions of yen

Due within one year
Due after one year
Total

42

Thousands of
U.S. dollars

2013

2012

2013

¥5
1
¥6

¥20
7
¥27

$54
6
$60

BANDO CHEMICAL INDUSTRIES, LTD.

Share of other comprehensive income in affiliates
Net change during the year
Total
Total other comprehensive income

2012

322
322
¥2,9983,430
3,430$31,889

18. Segment Information(1) Description of reportable segments
The Companies’ reportable segments are components for which
separate financial information is available, whose operating
results are reviewed regularly by the chief operating decision
maker in order to decide allocations of resources and assess
segment performance.
The Company has adopted the division system. Each operating division develops a comprehensive strategy for respective
products/services for domestic and overseas markets andconducts business activities. Therefore, the Companies consist offour reportable segments according to products based on operating divisions: “Power Transmission Belt,” “Multimedia Parts,”“Industrial Products” and “Plastics Products.”
The “Power Transmission Belt” segment includes the manufacture and sale of power transmission belts for automobiles
and industrial machines, etc. The “Multimedia Parts” segment
includes the manufacture and sale of cleaning blades, conductive
rollers, precision belts, polyurethane functional components, etc.
The “Industrial Products” segment includes the manufacture andsale of heavy and light duty conveyor belts, etc. The “Plastics
Products” segment includes films for a variety of markets.
(2) Methods of calculating sales, profit or loss, assets and otheritems by reportable segments
The accounting methods applied to the reportable segments isgenerally the same as those described in Note 3, “Summary of
Significant Accounting Policies.” Segment profit is based on
operating income. Intersegment sales are based on market
prices.

Reportable segments

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Loss on impairment of fixed assets

Power
Transmission

Multimedia Parts

Industrial
Products

Plastics Products

Total reportablesegments

Other

Total

¥53,469
122¥53,591¥ 4,214¥48,222¥9,0201¥9,021¥ (518)¥7,896¥17,626
30¥17,656¥   481¥13,818¥4,90716¥4,923¥  122¥2,971¥85,022169¥85,191¥ 4,299¥72,907¥1,350446¥1,796¥  102¥2,151¥86,372
615¥86,987¥ 4,401¥75,058¥ 2,816¥  933¥   727¥  278¥ 4,754¥   43¥ 4,797¥ 3,422¥    80¥  503¥   —¥   470¥    —¥  161¥   —¥ 4,556¥    80¥   63¥   42¥ 4,619¥   122

Thousands of U.S. dollars
2013
Reportable segments

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Loss on impairment of fixed assets

Power
Transmission

Multimedia Parts

Industrial
Products

Plastics Products

Total reportablesegments

Other

Total

$584,161
1,195$585,356$ 36,807$584,280$83,565—$83,565$ (1,909)$67,801$183,226
293$183,519$  9,478$141,658$48,097
32$48,129$   168$30,105$899,049
1,520$900,569$ 44,544$823,844$13,320
2,569$15,889$   782$16,097$912,369
4,089$916,458$ 45,326$839,941$ 29,332$ 8,377$  6,445$ 2,395$ 46,549$   317$ 46,866$ 35,352$     —

$ 4,138$ 9,063$  3,471$     —

$ 2,507$    —$ 45,468$  9,063$ 1,649$ 3,246$ 47,117$ 12,309*1 “Other” category represents operating segments not included in any reportable segments.
*2 Effective April 1, 2012, the Company changed the method to calculate segment profit and restated segment profit and depreciation of other items for theyear ended March 31, 2012 to the amounts calculated under the new method. As a result, segment profit decreased by ¥2,631 million in Power Transmission
Belt, by ¥897 million in Multimedia Parts, by ¥926 million in Industrial Products, and ¥280 million in Plastics Products, compared to those under the previous
method. Also, depreciation of other items increased by ¥522 million in Power Transmission Belt, by ¥185 million in Multimedia Parts, by ¥177 million in
Industrial Products, and ¥57 million in Plastics Products, compared to those under the previous method. Refer to “(5) Changes in reportable segments” fordetails of the changes in calculation method.
*3 “Depreciation and amortization” includes amortization of long-term prepaid expenses.
*4 “Increase in property, plant and equipment and other intangible assets” includes an increase in long-term prepaid expenses.

Annual Report 201343

Notes to Consolidated Financial Statements(4) Reconciliation of total reportable segments to the amountrecognized in the consolidated financial statements
Thousands of
U.S. dollars

Millions of yen

Total reportable segment profit
Income of “Other” category
Corporate expenses
Other
Operating income in the
consolidated financial statements

2013

2012

2013

¥4,188
73
(121)
(45)

¥4,299
102
214
(44)

$44,544782(1,291)(477)¥4,095¥4,571$43,558* C orporate expenses represent differences between the estimatedgeneral administrative expenses and research and development costs
allocated to each reportable segment and the actual amount incurred.
Thousands of
U.S. dollars

Millions of yen

Total reportable segment assets
Assets of “Other” category
Elimination of receivables ofadministrative departments of
the Company
Corporate assets
Total assets in the consolidated
financial statements

2013

2012

2013

¥77,450
1,513¥72,907
2,151$823,844
16,097(5) Changes in reportable segments

19. Loss on Impairment of Fixed Assets(Changes in method to measure reportable segments’ profit and loss)
The Company’s corporate expenses consisting of headquarter
expenses and research and development cost had not been
allocated to reportable segments until the year ended March 31,
2012. After a review of the performance management system,
however, such treatment was changed to allocate corporate
expenses to each reportable segment using a certain allocation
ratio from the year ended March 31, 2013.
The restated amount of the previous period calculated using
the new method is presented in “(3) Sales, profit or loss, assets,
and other items by reportable segments.”

The details of loss on impairment of fixed assets for the year ended March 31, 2013 were as follows:(4,634)
9,235(38,600)
73,109

Information about geographic areas was as follows:(a) Net sales

Shiso, Hyogo¥79,659¥82,207

Purpose of use

Asia

Other

Total

¥50,312¥27,670¥7,790¥85,772

Location

Idle assets

Kinokawa, Wakayama

Assets held for sale

Kobe, Hyogo

Operating assets

Shiso, Hyogo

Other

—

2012
Japan

Asia

Other

Total

¥52,686¥26,422¥7,264¥86,372

Thousands of U.S. dollars
2013

2013
Total
reportablesegments

Other

Adjustment

Consolidated¥4,376¥ 30¥ 32¥4,438

Japan

Asia

Other

Total

$535,178$294,334$82,857$912,369(b) Property, plant and equipment
4,274

155

623

5,052

852

305

—

1,157

Millions of yen

Thousands of
U.S. dollars

Buildings and structures
Machinery and equipment
Construction in progress¥  332450
17$ 3,527
4,788
183

Other
Total
Buildings and structures
Machinery and equipment
Land
Software
Other
Total

53
852
128
5
166
5
1
305
¥1,157

565
9,063
1,355
57
1,766
54
14
3,246
$12,309

The details of loss on impairment of fixed assets for the year ended March 31, 2012 were as follows:Japan$874,450

Millions of yen

Asset type

Total

Millions of yen

Millions of yen

Millions of yen
2013
Japan

Asia

Other

Total

¥17,040¥8,461¥2,933¥28,434

Total

Asset type

Land
Total
Buildings and structures
Land
Other
Total
Buildings and structures
Total
Goodwill
Total

Millions of yen

¥ 13
13
8
605
7
620
43
43
80
80
¥756

In reviewing fixed assets for impairment, the Companies categorize their operating assets mainly by operating division and idle assets
by individual property.
For the year ended March 31, 2013, loss on impairment of fixed assets except for goodwill was recognized for the assets whose
recoverable amount fell below the book value.
Recoverable amount is measured using net selling price or value in use. Net selling price is based on estimated selling price and value
in use is calculated by discounting future cash flows at 5%.

Millions of yen

2012

Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Loss on impairment of
fixed assets

Operating assets

Ashikaga, Tochigi

Millions of yen* Corporate assets were principally buildings and software of the Company
not attributable to any reportable segments.

Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Loss on impairment of
fixed assets

Operating assets

Location

Information related to reportable segments

2013(3,629)6,873

Purpose of use

2012

Total
reportablesegments

Other

Adjustment

Consolidated¥4,754¥43¥   40¥4,837

Japan

Asia

Other

Total

¥19,679¥5,994¥2,712¥28,385

Thousands of U.S. dollars

4,556

63

1,032

5,651

80

42

634

756

2013
Japan

Asia

Other

Total

$181,252$90,004$31,200$302,456

Thousands of U.S. dollars
2013
Total
reportablesegments

Depreciation and amortization $46,549
Increase in property,
plant and equipment
and other intangible assets
45,468Loss on impairment of
fixed assets
9,063

Other

Adjustment

Consolidated$  317$  344$47,210

1,649

6,628

53,745

3,246—

12,309*1 Adjustment is principally related to property, plant and equipment,
intangible assets and long-term prepaid expenses not attributable toany reportable segments.
*2 “Depreciation and amortization” includes amortization of long-term
prepaid expenses.
*3 “Increase in property, plant and equipment and other intangible assets”
includes an increase in long-term prepaid expenses.

44

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201345

Notes to Consolidated Financial Statements

20. Subsequent Events
On October 25, 2012, the Company’s Board of Directors Meeting resolved to merge the Company’s consolidated subsidiaries Higashinihon
Bando Co., Ltd. and Hokkaido Bando Co., Ltd., and other consolidated subsidiaries Nishinihon Bando Co., Ltd. and Kyushu Bando Co.,
Ltd., and both mergers took place on April 1, 2013.
1. Names and business description of the merging companies, legal form of the business combination, name of the company after themerger and overview of the transaction including the purpose of the transaction
1) Merger of Higashinihon Bando Co., Ltd. and Hokkaido Bando Co., Ltd.
(1) Names and business description of the merging companies
Higashinihon Bando Co., Ltd. (manufacture and sale of power transmission belts, conveyor belts, polyurethane functional components)
Hokkaido Bando Co., Ltd. (manufacture and sale of power transmission belts and conveyor belts)(2) Legal form of business combination
Absorption-type merger with Higashinihon Bando Co., Ltd. as the surviving company, and Hokkaido Bando Co., Ltd. ceased toexist.
(3) Name of the company after the merger
Higashinihon Bando Co., Ltd.
(4) Overview of the transaction including the purpose of the transaction
The purpose is to enhance the operating structure including reorganization of the operation base in the entire general industrial
and maintenance markets, as well as to improve efficiency and competitiveness of the consolidated business management.
Shares of Higashinihon Bando Co., Ltd. were allocated to shareholders of Hokkaido Bando Co., Ltd. using the share exchange
ratio based on the financial results for the year ended March 31, 2012.
2) Merger of Nishinihon Bando Co., Ltd. and Kyushu Bando Co., Ltd.
(1) Names and business description of the merging companies
Nishinihon Bando Co., Ltd. (manufacture and sale of power transmission belts, conveyor belts, polyurethane functional components)
Kyushu Bando Co., Ltd. (manufacture and sale of power transmission belts, conveyor belts, polyurethane functional components)(2) Legal form of business combination
Absorption-type merger with Nishinihon Bando Co., Ltd. as the surviving company, and Kyushu Bando Co., Ltd. ceased to exist.
(3) Name of the company after the merger
Nishinihon Bando Co., Ltd.
(4) Overview of the transaction including the purpose of the transaction
The purpose is to enhance the operating structure including reorganization of the operation base in the entire general industrial
and maintenance markets, as well as to improve efficiency and competitiveness of the consolidated business management.
Shares of Nishinihon Bando Co., Ltd. were allocated to shareholders of Kyushu Bando Co., Ltd. using the share exchange ratio
based on the financial results for the year ended March 31, 2012.
2. Overview of the accounting treatment applied
The Company accounted for the business combination as transactions under common control in accordance with Accounting Standards
Board of Japan (“ASBJ”) Statement No. 21, “Accounting Standard for Business Combinations” (December 26, 2008) and ASBJ GuidanceNo. 10, “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” (December
26, 2008).

Corporate Data/Investor Information

Corporate Data
Company name:Bando Chemical Industries, Ltd.

Founded:April 14, 1906

Capital:¥10,952 mil. (As of March 31, 2013)

Consolidated sales:¥85,772 mil. (FYE March 2013)

Employees (Consolidated):3,592 (As of March 31, 2013)

Investor Information (As of March 31, 2013)
Capital Stock

Principal Shareholders (As of March 31, 2013)

Shares Authorized:

378,500,000

Shares Outstanding:

94,427,073

Bando business partner stakeholders
Sumitomo Mitsui Banking Corporation
Mitsubishi UFJ Trust and Banking
Corporation
Meiji Yasuda Life Insurance Company
Mizuho Corporate Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Nippon Life Insurance Company
Aioi Nissay Dowa Insurance Co., Ltd.
Japan Trustee Services Bank, Ltd.
(trust account)
Tokio Marine & Nichido Fire InsuranceCo., Ltd.

(including 260,622 shares of treasury stock)

Number of Shareholders:

11,167

Securities Traded: Tokyo Stock Exchange, Inc.
Composition of Shareholders
Composition of Shareholders
Individuals and others:
36,879,455
39.16%

Financial institutions/
Securities firms:
36,505,884
38.77%

Other corporations:
12,175,750
12.93%

75

Foreign Corporations:
8,605,362
9.14%
267

Investment
ratio
(%)

6,905
4,651

7.33
4.93

4,004

4.25

4,000
3,600
3,150
2,936
2,351

4.24
3.82
3.34
3.11
2.49

2,112

2.24

1,839

1.95

Notes: 1. Investment ratios are calculated after deducting treasury stock(260,622 shares).
2. Investment ratios listed above are rounded down to two decimal places.

10,705120

Number ofshares held
(thousands)

Number of shareholders

Stock Price and Trading Volume
(Yen)

500
400
300
200
100
(Thousand shares)

0

10,000
8,000
6,000
4,000
2,000
0

46

BANDO CHEMICAL INDUSTRIES, LTD.

4

7

2008

10

1

4

7

2009

10

1

4

7

2010

10

1

4

7

2011

10

1

4

7

2012

10

1

2013

Annual Report 201347

www.bando.co.jp

6-6, Minatojima Minamimachi 4-chome, Chuo-ku, Kobe, 650-0047, Japan