Challenge for
Growth and Evolution
Ishihara Sangyo Kaisha
Annual Report 2019Year Ended March 31, 2019

Contents
Consolidated Financial Highlights...........................................................................1
To Our Shareholders and Friends.............................................................................2
Business Overview.............................................................................................................4
Financial Statements
Consolidated Balance Sheet................................................................................5
Consolidated Statement of Income................................................................7
Consolidated Statement of Comprehensive Income...........................8
Forward-Looking Statements
Forward-looking statements in this report relating to operational
result forecasts are based on certain assumptions that theCompany believes are reasonable and involve risks anduncertainties. Actual results may differ significantly from these
forecasts, affected by various material factors.

Consolidated Statement of Changes in Net Assets...............................9
Consolidated Statement of Cash Flows.....................................................10
Notes to Consolidated Financial Statements..........................................11
Report of Independent Public Accountants...........................................37
Corporate Data..........................................................................................................39

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Financial Highlights
For the year ended March 31, 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

2019

2018

2017

2019

For the years ended March 31,
Net sales:
Domestic...........................................................................................

¥

52,829¥50,309¥46,734$475,937

Overseas...........................................................................................

53,612

57,692

54,867

482,991

Total......................................................................................................

106,441

108,001

101,601

958,928

Inorganic chemicals...........................................................................

54,88354,44147,504494,442

Organic chemicals.............................................................................

47,67250,46151,064429,477

Other businesses..............................................................................

3,886

3,099

3,033

35,009Total......................................................................................................

106,441

108,001

101,601

958,928

Operating income.................................................................................

11,372

10,022

8,416

102,450

Net income...........................................................................................

8,683

3,442

3,804

78,225

Depreciation and amortization of property, plant and equipment.........

4,631

4,639

4,660

41,721

Research and development costs.........................................................

8,071

8,707

8,173

72,712Current assets......................................................................................

107,080

103,387

104,005

964,685

Total assets...........................................................................................

168,690

159,767

156,871

1,519,730

Current liabilities....................................................................................

44,712

47,98547,311

402,811

Net assets.............................................................................................

75,335

67,13762,981

678,694

Sales classified by business segment:

As of March 31,

U.S. dollars(Note)Yen

Per share data
Net income...........................................................................................

¥

217.26

¥

86.12

¥

95.15

$

1.95

Net assets.............................................................................................

1,885.01

1,679.77

1,575.53

16.98

Number of employees (as of March 31).................................................

1,642

1,578

1,581

–

Note 1: The U.S. dollar amounts in this report have been translated from the yen amounts, for convenience only, at ¥111.00 = U.S.$1.00, the rate ofexchange prevailing on March 31, 2019.

Ishihara Sangyo Kaisha, Ltd.

1

To Our Shareholders and Friends
Looking at global markets during the current fiscal year, the USA continued to record strong
economic growth on firm personal consumption and capital investments. At the sametime, the European economy showed signs of economic slowdown on lower exports andproduction. In Asia, Chinese economic slowdown was evident but the economy was strong
on demand among emerging countries. The Japanese economy continued on a trend of mild
growth underpinned by continued improvements in corporate earnings and the employment
environment as well as steady personal consumption.
Looking at the market environment influencing the main operations of our Group, salesof titanium dioxide were firm on domestic and overseas demand. However, the lack oftransparency regarding second half demand and economic conditions is increasing due tothe influence of a Chinese flagging ecnomy. Agrochemicals showed signs of trending towards
a recovery in global shipment volumes on improved conditions in the South America market,
which had remained stagnant.
Kenichi Tanaka
President & CEO

Under such conditions, our Group launched our 7th Medium-term Business Plan aheadof 2020, the year of our 100th anniversary. We worked to protect and strengthen existing
businesses while also promoting aggressive initiatives toward a new growth.
As a result, the current fiscal year resulted in net sales of ¥106.4 billion [US$959 million](down ¥1.5 billion YoY) and operating income increased to ¥11.3 billion [US$102 million] (up¥1.3 billion YoY). Ordinary income was 11.1 billion yen [US$100 million] (up 2.7 billion yen
YoY) thanks to recording non-operating income on gains this fiscal year on foreign currency
exchange and on equity method after recording losses during the previous fiscal year. Profit
attributable to owners of parent increased significantly to 8.6 billion yen [US$78 million] (up5.2 billion yen YoY), mainly thanks to the elimination of provisions for environmental safety
arrangements recorded as extraordinary losses during the previous fiscal year.
The 7th Medium-term Business Plan outlines solidifying our footholds in existing businesses
while we aimed at “becoming a chemical company that is attractive to all stakeholders”
by reinforcing aggressive initiatives for further growth. In FY2018, the first year of this plan,
operating environment conditions from the second half onward worsened but we worked
to enhance profitability for existing businesses to record a favorable start that resulted inearnings greatly outperforming our original plan. We also engaged in aggressive investments
aimed at future growth, including capital investments to expand production capacity for
functional material products with strong market demand and financing a local agrochemical
manufacturing and sales company in Brazil, the world’s largest agrochemical market. During
the next fiscal year, we will continue to enhance our current profit platform while proactively
promoting aggressive initiatives towards future sales growth.
In the inorganic chemicals business, we will further accelerate initiatives to shift our
focus from common products to the development and sales of highly functional, high valueadded products. For titanium dioxide, we will further expand sales of steadily growing super
weatheralility products and our product for use in ink. At the same time, from the next fiscal year
we will focus on increasing sales of our finishes product for matte coating, which has gatheredattention among consumers. For functional materials, advancing automotive electronics and IoTcompatible electronics, demand is increasing for high-purity titanium dioxide and barium titanate
for electronic products, as well as for electro-conductive materials with antistatic functions. We
will steadily continue establishing development, production, and sales structures that enable us
to capture growing demand for these products.
For organic chemical products, we will work to improve the performance of main
agrochemicals, for which revenues are declining, to quickly return to a growth trajectory.
For sales, we will focus on strengthening sales and marketing for our own products. We will
maximize sales volume by further enhancing collaboration with sales subsidiaries in major

2Ishihara Sangyo Kaisha, Ltd.

markets and new sites established to strengthen overseas sales. We also will carefully formulate
sales strategies tailored to the needs of each region. For production, we will continue working to
reduce production costs and improve quality internally and at contract manufacturers to secure
a competitive cost advantage. We will maximize the value of our own products as we aim forincreased profitability and sustainable growth.
For product segments other than agrochemicals, we will promote market penetration for
the world’s first anti-pancreatitis drug for dogs, which we launched in Japan in autumn lastyear. The biopharmaceutical HVJ-E we are developing in collaboration with the University ofOsaka is steadily progressing with Phase II clinical trials. We will quickly undertake to establish
partnerships with external companies to compensate for functions we aren’t found in our Group.
The Group has formulated a “Basic Philosophy” and “Code of Conduct” to represent thefundamental and universal values shared by all its employees in the execution of their work
activities.

Basic Philosophy• Contribute to social development, protection of life and environmental preservation• Respect shareholders, customers, suppliers, local communities and employees• Abide by laws and regulations; maintain transparency in business activities

Code of Conduct• We will strictly observe laws, regulations, social norms and Company rules, while steadfastly
adhering to high ethical standards, so as to gain social trust in our business.
• In manufacturing activities, we will place the utmost priority on global environmental
protection, and worker safety, and will work to prevent any workplace accident or injury.
• On the basis of respect for human rights, we will promote mutual understanding andcooperation among employees, in order to create an open and friendly workplace.
• To maintain transparency in our business activities, as a corporate citizen, we will promote
communication with local communities and society, and will disclose corporate information ina timely and appropriate manner.
With all employees constantly mindful of and practicing the Basic Philosophy and Code of
Conduct, the ISK Group will strive to foster progress of society through growth as a robust
development-oriented corporation that adapts to the changing times and environment.
We look forward to your ongoing support and understanding.

Kenichi Tanaka
President & CEO

Ishihara Sangyo Kaisha, Ltd.

3

Business Overview
Inorganic Chemicals BusinessNet sales of titanium dioxide were 42.5 billion yen [US$383

Looking at profits and losses, income growth factors included

million] (down 0.7 billion yen YoY). Although we maintained highincreased revenues from functional materials and continued

production rates to meet supply needs driven by firm demand inefforts to improve export prices. However, these were offset by

Japan and overseas, we were unable to fully respond to demandrising costs for titanium ore and other raw materials.

from buyers.
Net sales of functional materials were ¥12.3 billion [US$111

As a result, net sales for the inorganic chemicals businesswere ¥54.8 billion [US$494 million] (up ¥0.4 billion YoY) andmillion] (up ¥1.2 billion YoY) on increased sales due to continued

operating income was ¥7.2 billion [US$65 million] (down ¥0.7

strong demand for electronic components.

billion YoY).

Organic Chemicals BusinessFor agrochemicals, domestic sales were largely unchanged year

active pharmaceutical ingredients also outperformed theon year but overseas sales decreased year on year. New products

previous year.

launched in the Americas as part of initiatives to increase sales

Looking at profits and losses, although income decreased

recorded steady growth and favorable sales of fungicides andon lower revenues, income increased thanks to a year-on-year

insecticides contributed to increased overseas sales but these

improvement in adjustments for unrealized gains on internal

were offset by decreased revenues in Europe on the influence oftransaction with overseas subsidiaries.

distribution inventory.
For product segments other than agrochemicals, in JapanAs a result, net sales for the organic chemicals business were¥47.6 billion [US$429 million] (down ¥2.7 billion YoY) and operating

we received approval to manufacture and sell the world’s

income increased to ¥5.9 billion [US$53 million] (up ¥2.3 billion

first anti-pancreatitis drug for dogs. We began sales of active

YoY).

ingredient to co-development company. Sales of contracted

Other Businesses
Net sales of other businesses were ¥3.8 billion [US$35 million](up ¥0.7 billion YoY) and operating income was ¥0.6 billion [US$6
million] (unchanged YoY).

4

Ishihara Sangyo Kaisha, Ltd.

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheet
As of March 31, 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

2019

2018

2019

AssetsCurrent assets:
Cash and deposits (Notes 4 and 18) ........................................................................
Trade receivables (Notes 5 and 18):
Notes ....................................................................................................................
Accounts...............................................................................................................

¥

23,984¥30,297$

216,072

Less allowance for doubtful receivables....................................................................
Trade receivables, net............................................................................................

3,259
30,63933,898(469)
33,4292,636
27,24529,881(414)
29,46729,360276,027
305,387(4,225)
301,162

Inventories (Note 7)....................................................................................................
Other current assets..................................................................................................
Total current assets................................................................................................

46,783
2,884
107,080

41,4942,129
103,387

421,469
25,982
964,685

Property, plant and equipment:
Land (Note 8).............................................................................................................
Buildings and structures (Note 8)...............................................................................
Machinery and equipment (Note 8)...........................................................................
Leased assets (Note 21)............................................................................................
Construction in progress...........................................................................................

5,399
39,583
115,459
2,615
3,683

5,709
36,810113,348
2,763
3,972

48,640356,604
1,040,170
23,55933,180Less accumulated depreciation.................................................................................
Property, plant and equipment, net (Notes 9 and 25).............................................

166,739(123,572)
43,167

162,602(121,759)
40,843

1,502,153(1,113,261)
388,892

Investments and other assets:
Investments in securities (Notes 6, 9 and 18):
Unconsolidated subsidiaries and affiliates.............................................................
Other.....................................................................................................................

2,248
4,771

2,137
2,048

20,252
42,982

Total investments in securities..............................................................................

7,019

4,185

63,234

Deferred income taxes (Notes 3 and 13)...................................................................
Asset for retirement benefits (Note 11).......................................................................
Other.........................................................................................................................
Total investments and other assets.......................................................................

9,604
12
1,808
18,443

9,588
15
1,749
15,53786,523108
16,288
166,153

159,767$ 1,519,730

Total assets (Note 25)....................................................................................................

¥

168,690¥

Ishihara Sangyo Kaisha, Ltd.

5

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheet
As of March 31, 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

2019Liabilities and net assets
Current liabilities:
Short-term bank loans (Notes 9 and 18)....................................................................
Current portion of long-term bank loans (Notes 9 and 18).........................................
Current portion of bonds (Notes 9 and 18)................................................................
Trade payables (Notes 5 and 18):
Notes.....................................................................................................................
Accounts...............................................................................................................

¥

Lease obligations (Notes 9, 18 and 21)......................................................................
Accrued income taxes (Note 13)................................................................................
Accrued expenses.....................................................................................................
Accrued bonuses for employees...............................................................................
Reserve for sales returns...........................................................................................
Reserve for implementation of environmental and safety arrangements....................
Provision for maintenance.........................................................................................
Other current liabilities...............................................................................................
Total current liabilities.......................................................................................
Long-term liabilities:
Long-term bank loans (Notes 9 and 18).....................................................................
Bonds (Notes 9 and 18).............................................................................................
Lease obligations (Notes 9, 18 and 21)......................................................................
Liability for retirement benefits (Note 11)....................................................................
Long-term deposits received.....................................................................................
Reserve for implementation of environmental and safety arrangements (Note 16)....
Asset retirement obligations (Note 10).......................................................................
Provision for repairs...................................................................................................
Liabilities from application of equity method..............................................................
Other long-term liabilities (Note 3)..............................................................................
Total long-term liabilities...................................................................................

8,000
10,102
390

2018

¥

10,41013,538
390

2019

$

72,07291,0093,514

3,537
11,856
15,393
451
471
4,547
734
35
84
–
4,505
44,712

2,979
9,110
12,089
449
1,291
4,337
768
36
133
261
4,283
47,98531,865
106,811
138,676
4,063
4,243
40,964
6,613
315
757
–
40,585402,81125,6981,620
616
12,882
1,227
2,878
710
150
663
2,199
48,643

20,5752,010
721
12,778
1,198
3,642
717
41
908
2,055
44,645

231,514
14,5955,550
116,054
11,05425,928
6,396
1,351
5,973
19,810438,225

43,421
10,627
23,41943,421
10,627
14,736391,180
95,739210,982(723)
76,744(720)
68,064(6,513)
691,388478(1,444)(443)(1,409)75,335
168,690670(1,072)(525)(927)
67,137
159,767

4,306(13,009)(3,991)(12,694)
678,694$ 1,519,730

Contingent liabilities (Note 12)
Net assets:
Shareholders’ equity (Note 14):
Common stock:
Authorized: 100,000 thousand shares in 2019 and 2018
Issued:40,384 thousand shares in 2019 and 2018.....................................
Capital surplus.......................................................................................................
Retained earnings..................................................................................................
Less treasury stock, at cost:
418 thousand shares in 2019 and 416 thousand shares in 2018........................
Total shareholders’ equity................................................................................
Accumulated other comprehensive income (loss):
Net unrealized holding gain on securities...............................................................
Translation adjustments.........................................................................................
Retirement benefits liability adjustments................................................................
Total accumulated other comprehensive loss..................................................
Total net assets (Note 22).................................................................................
Total liabilities and net assets........................................................................................
6

Ishihara Sangyo Kaisha, Ltd.

¥¥

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Income
For the year ended March 31, 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

Net sales (Note 25)........................................................................................................

¥

2019
106,441¥2018
108,001$2019
958,928

Cost of sales (Notes 7 and 15)......................................................................................

70,66874,071

636,649

Gross profit...................................................................................................................

35,77333,930322,279

Selling, general and administrative expenses (Note 15).................................................

24,401

23,908219,829

Operating income (Note 25)..........................................................................................

11,372

10,022

102,450

160

218

1,441

Other income:Interest and dividend income....................................................................................
Equity in earnings of affiliates.....................................................................................

393

–

3,541

Foreign exchange gain, net.......................................................................................

141

–

1,270

Commission fee........................................................................................................

121

150

1,090

Gain on sales of raw materials...................................................................................

75

100

676

269

182

2,423

1,159

650

10,441Other.........................................................................................................................
Other expenses:
Interest expense........................................................................................................

718

919

6,468

Financial fee..............................................................................................................

388

250

3,495

Foreign exchange loss, net........................................................................................

–

709

–

Equity in losses of affiliates........................................................................................

–

52

–

Other.........................................................................................................................

281

328

2,532

1,387

2,258

12,495

Ordinary income...........................................................................................................

11,144

8,414

100,396

Gain on sales of fixed assets.....................................................................................

182

–

1,639

Gain on insurance claim............................................................................................

63

–

568

Subsidy income.........................................................................................................

–

7

–

245

7

2,207

Loss on disposal of fixed assets................................................................................

729

613

6,567

Loss on disaster........................................................................................................

311

45

2,802

Loss on impairment of fixed assets (Notes 8 and 25)................................................

121

55

1,090

Reserve for implementation of environmental and safety arrangements (Note 16)....

–

2,783

–

Extraordinary gains:

Extraordinary losses:

Other.........................................................................................................................

–

8

–

1,161

3,504

10,45910,228

4,917

92,144Current......................................................................................................................

1,391

1,563

12,532

Deferred....................................................................................................................

154

(88)

1,387

1,545

1,475

13,919

8,683

3,442

78,225

Income before income taxes.........................................................................................
Income taxes (Note 13):

Net income (Note 22)....................................................................................................
Net income attributable to:
Owners of parent.......................................................................................................

¥

8,683

¥

3,442

$

78,225

Ishihara Sangyo Kaisha, Ltd.

7

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Comprehensive Income
For the year ended March 31, 2019
Thousands of
U.S. dollars(Note 1Millions of yen

Net income

¥

2019
8,683

¥

2018
3,442

$

2019
78,225

Other comprehensive income (loss) (Note 20):
Net unrealized holding (loss) gain on securities ........................................................

(191)

104

(1,721)

Unrealized deferred gain on hedges..........................................................................

–

0

–

Translation adjustments ............................................................................................

(379)

719

(3,414)Retirement benefits liability adjustments....................................................................

82

21

739

Share of other comprehensive income (loss) of affiliates accounted
for by the equity method attributable to the Company............................................

6

(120)

54

Total other comprehensive (loss) income
Comprehensive income

724

(482)

(4,342)

¥

8,201

¥

4,166

$

73,883

¥

8,201

¥

4,166

$

73,883

Total comprehensive income attributable to:
Owners of parent.......................................................................................................

8

Ishihara Sangyo Kaisha, Ltd.

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Changes in Net Assets
Year ended March 31, 2019
Millions of yen
Shareholders’ equity
Number ofshares ofcommonstock in issue

Commonstock

Capitalsurplus

Accumulated other comprehensive income (loss)

Retainedearnings

Treasurystock, at cost

Balance at April 1, 2017...................... 40,383,943 ¥ 43,421 ¥ 10,627 ¥ 11,294 ¥Net income attributable to ownersof parent for the period....................

–

–

–

3,442

Acquisition of treasury stock...............

–

–

–

–

Disposition of treasury stock..............

–

–

0

–

Other changes....................................

–

–

–

–

Balance at April 1, 2018...................... 40,383,943 ¥ 43,421 ¥ 10,627 ¥ 14,736 ¥

(710)

Net
unrealized
Unrealized
holding gain deferred loss Translation
on securities on hedges adjustments

(0) ¥

–

–

–

–

–

3,442

(10)

–

–

–

–

(10)

0

–

–

–

–

0

–

104

0

599

21

724

670 ¥

– ¥

(1,072) ¥¥(1,671) ¥Total net
assets

566 ¥

(720)

¥

Retirement
benefits
liability
adjustments(546) ¥ 62,981(525) ¥ 67,137

Net income attributable to ownersof parent for the period....................

–

–

–

8,683

–

–

–

–

–

8,683

Acquisition of treasury stock...............

–

–

–

–

(3)

–

–

–

–

(3)

Disposition of treasury stock..............

–

–

0

–

0

–

–

–

–

0

Other changes....................................

–

–

–

–

–

(192)

–

(372)

82

(482)

478 ¥

– ¥

(1,444) ¥Balance at March 31, 2019................ 40,383,943 ¥ 43,421 ¥ 10,627 ¥ 23,419 ¥

(723)

¥

(443) ¥ 75,335

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Commonstock

Balance at April 1, 2018.....................

Capitalsurplus

Accumulated other comprehensive income (loss)

Retainedearnings

Treasurystock, at cost

$ 391,180 $ 95,739 $ 132,757 $Net income attributable to ownersof parent for the period...................

––

78,225Acquisition of treasury stock..............

–

–

–

Disposition of treasury stock.............

–

0

–

Other changes...................................

–

–

–

Balance at March 31, 2019...............

$ 391,180$ 95,739 $ 210,982 $(6,486)Net
unrealized
Unrealized
holding gain deferred loss Translation
on securities on hedges adjustments

Total net
assets6,036 $

– $(9,658) $

–

–

–

–

–

78,225

(27)

–

–

–

–

(27)

0

–

–

–

–

0

–

(1,730)–(3,351)739(4,342)

4,306 $

– $ (13,009) $(6,513)$Retirement
benefits
liability
adjustments$(4,730) $ 604,838(3,991) $ 678,694

Ishihara Sangyo Kaisha, Ltd.

9

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
For the year ended March 31, 2019
Thousands of
U.S. dollars(Note 1)Millions of yen

2019
Cash flows from operating activities
Income before income taxes.........................................................................................
Adjustments for:
Depreciation and amortization...................................................................................
Loss on disaster........................................................................................................
Loss on impairment of fixed assets...........................................................................
Increase in liabilities for retirement benefits, net.........................................................
Decrease in provision for loss on liquidation of a subsidiary......................................
(Decrease) increase in reserve for implementation ofenvironmental and safety arrangements.................................................................
Interest and dividend income....................................................................................
Interest expense........................................................................................................
Foreign exchange loss, net........................................................................................
Equity in (earnings) losses of affiliates, net.................................................................
(Gain) loss on disposal or sales of fixed assets, net...................................................
Other.........................................................................................................................
Changes in operating assets and liabilities:
Trade receivables...................................................................................................
Inventories.............................................................................................................
Other current assets..............................................................................................
Trade payables......................................................................................................
Accrued expenses and other current liabilities.......................................................
Subtotal..............................................................................................................
Interest and dividends received....................................................................................
Interest paid..................................................................................................................
Insurance claim received...............................................................................................
Disaster loss paid..........................................................................................................
Income taxes paid.........................................................................................................
Net cash provided by operating activities..................................................................
Cash flows from investing activities
Increase in time deposits...........................................................................................
Proceeds from withdrawal of time deposits...............................................................
Purchase of investment securities.............................................................................
Purchases of property, plant and equipment.............................................................
Proceeds from sales of property, plant and equipment.............................................
Increase in long-term loans receivable......................................................................
Collection of long-term loans receivables..................................................................
Other.........................................................................................................................
Net cash used in investing activities.......................................................................
Cash flows from financing activities
Proceeds from issuance of bonds.............................................................................
Redemption of bonds................................................................................................
Decrease in short-term bank loans, net.....................................................................
Proceeds from long-term bank loans........................................................................
Repayment of long-term bank loans..........................................................................
Repayment of lease obligations.................................................................................
Repayment of installment payable.............................................................................
Proceeds from deposits received..............................................................................
Repayment of deposits received...............................................................................
Increase in treasury stock, net...................................................................................
Net cash used in financing activities......................................................................
Effect of exchange rate changes on cash and cash equivalents...................................
(Decrease) increase in cash and cash equivalents........................................................
Cash and cash equivalents at the beginning of the year...............................................
Cash and cash equivalents at the end of the year (Note 4)............................................
10

Ishihara Sangyo Kaisha, Ltd.

¥

¥
¥

¥

10,228

2018
¥

4,917

2019
$

92,144

4,631
311
121
234
(1)

4,639
45
55
199
(5)

41,721
2,802
1,090
2,108
(9)

(813)
(160)
718
142
(352)
(20)
(270)

2,365
(218)
919
212
84
219
587

(7,324)(1,441)
6,468
1,279(3,171)(180)(2,431)(4,385)(5,763)
(732)
3,457
369
7,715
155
(739)
127
(49)
(2,302)
4,907(4,061)
6,090
90
1,579
195
17,911
127
(874)
7
–
(564)
16,607(39,505)(51,919)(6,595)31,144
3,324
69,505
1,396(6,658)
1,144(441)(20,739)
44,207––(2,899)(6,473)
701
(286)
359
7
(8,591)
–
(390)
(410)
15,000(15,313)
(497)
(211)
1,002
(1,652)(4)(2,475)(154)(6,313)30,29723,984

¥
¥

¥

(0)
190
(74)
(5,851)
161
(664)
261
(53)
(6,030)2,400(560)(3,240)8,980(15,857)
(512)
(134)
2,744
(2,319)(10)(8,508)71
2,140
28,15730,297$$$––(26,117)(58,314)6,315(2,577)3,234
63(77,396)–(3,514)(3,694)135,135(137,954)(4,477)(1,901)
9,027(14,883)(36)(22,297)(1,388)(56,874)
272,946
216,072

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
Year ended March 31, 2019

1. Basis of Preparation of Consolidated Financial Statements
The accompanying consolidated financial statements of Ishihara

consolidated financial statements include information which is not

Sangyo Kaisha, Ltd. (the “Company”) and its consolidated

required under accounting principles generally accepted in Japansubsidiaries have been prepared on the basis of accounting

but is presented herein as additional information.

principles generally accepted in Japan, which are different in

Certain amounts in the prior year’s consolidated financial

certain respects as to the application and disclosure requirements

statements have been reclassified to conform to the current year’sof International Financial Reporting Standards, and are compiled

presentation. Such reclassifications had no effect on consolidated

from the consolidated financial statements prepared by the

profit or net assets.

Company as required by the Financial Instruments and Exchange
Act of Japan.

The translation of yen amounts into U.S. dollar amounts
is included solely for convenience, as a matter of arithmetic

In preparing the accompanying consolidated financial

computation only, at ¥111.00 = U.S.$1.00, the approximate rate ofstatements, certain reclassifications and rearrangements haveexchange in effect on March 31, 2019. This translation should notbeen made to the consolidated financial statements issued

be construed as a representation that yen have been, could havein Japan in order to present them in a format which is morebeen, or could in the future be, converted into U.S. dollars at thefamiliar to readers outside Japan. In addition, the notes to theabove or any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation and accounting for investments inunconsolidated subsidiaries and affiliates(b) Foreign currency translation
Foreign currency transactions

The accompanying consolidated financial statements include

All monetary assets and liabilities denominated in foreign

the accounts of the Company and its 13 significant consolidated

currencies are translated into yen amounts at the rates ofsubsidiaries, consisting of ISK Bioscience K.K., ISK SINGAPORE

exchange in effect at the balance sheet date, except that

PTE. LTD., the ISK AMERICAS INCORPORATED Group (5receivables and payables hedged by qualified forward foreignsubsidiaries), ISK BIOSCIENCES EUROPE N.V., ISK Taiwan

exchange contracts are translated at their correspondingCo., Ltd., Fuji Titanium Industry Co., Ltd., Ishihara Techno

contracted rates.

Corporation, ISK Engineering Partners Corporation and ISKANIMAL HEALTH, LLC.

Revenue and expense items arising from transactions
denominated in foreign currencies are generally translated into yen

ISK ANIMAL HEALTH, LLC. has been included in the scopeat the exchange rates in effect at the respective transaction dates.

of consolidation since it was established as a subsidiary. Yokkaichi

Foreign exchange gain or loss is credited or charged to income

Energy Service Co., Ltd., which had been a consolidated

in the year in which such gain or loss is recognized for financial

subsidiary, was excluded from consolidation following anreporting purposes.

absorption-type merger into the Company.
The Company’s remaining subsidiaries, including ISK

Financial statements of overseas consolidated subsidiaries

BIOSCIENCES KOREA LTD., have not been consolidated because

The balance sheet accounts of the overseas consolidated

they are not significant in terms of total assets, retained earnings,

subsidiaries are translated into yen at the rates of exchange innet sales and net income.

effect at the balance sheet date, except that the components ofInvestments in significant affiliates are stated at theirunderlying net equity after the elimination of intercompany income.
Investments in unconsolidated subsidiaries and the remaining
affiliate companies are stated at cost.
The overseas consolidated subsidiaries are consolidated

net assets are translated at their historical rates. Revenue andexpense accounts are translated at the average rates of exchange
in effect during the year. Differences resulting from translating
financial statements denominated in foreign currencies have notbeen included in the determination of net income but are reported

on the basis of a fiscal period ending December 31, which

as translation adjustments which are components of accumulateddiffers from the balance sheet date of the Company. As a result,

other comprehensive loss.

adjustments have been made for any significant intercompany
transactions which took place during the period between the year(c) Cash and cash equivalents

end of these overseas consolidated subsidiaries and the year end

For the purposes of the consolidated statement of cash flows,of the Company.

cash and cash equivalents consist of cash on hand, cash in banks
which can be withdrawn at any time and short-term investments
Ishihara Sangyo Kaisha, Ltd.

11

with a maturity of three months or less when purchased which

the hedged items and those of the hedging instruments. However,can easily be converted to cash and are subject to little risk of

the assessment of interest rate swaps which the special method ischange in value.

applied is omitted.

(d) Inventories(g) Property, plant and equipment and depreciation (except forInventories of the Company and its domestic consolidated

leased assets)

subsidiaries are principally stated at lower of cost or net selling

Property, plant and equipment are stated at cost. Depreciation

value, cost being determined by the gross average method.

of property, plant and equipment is recognized primarily by
the straight-line method over the estimated useful lives of(e) Securities

the respective assets. The useful lives of property, plant andSecurities are classified into two categories: held-to-maturity debt

equipment are principally as follows:

securities and other securities. Held-to-maturity debt securities

Buildings and structures...........................3 to 55 years

are carried at amortized cost. Marketable securities classified

Machinery and equipment........................2 to 20 years

as other securities are carried at fair value, with any changes

Costs for maintenance, repairs and minor renewals arein unrealized holding gain or loss, net of the applicable income

charged to income as incurred. Major renewals and betterments

taxes, reported as a separate component of accumulated otherare capitalized.

comprehensive income (loss). Non-marketable securities classified
as other securities are carried at cost. Cost of securities sold is(h) Intangible assets (except for leased assets)

determined by the moving average method.

Intangible assets are amortized by the straight-line method over

Investments in investment business limited liability

the useful lives of the respective assets. Expenditures relating

partnerships and other similar partnerships, which are deemed toto computer software developed for internal use are charged to

be securities under Article 2, Clause 2 of the Financial Instruments

income as incurred, except if these are deemed to contributeand Exchange Act of Japan, are valued at the amount of theto the generation of future income or cost savings. Suchunderlying equity in their net assets based on the latest financial

expenditures are capitalized as assets and amortized by thestatements available as of the closing date stipulated in thestraight-line method over their estimated useful lives of 5 years.

partnership agreement.
(i) Research and development costs(f) Derivatives and hedging activities

Research and development costs are charged to income as

Derivative financial instruments are utilized by the Company

incurred.

and its domestic consolidated subsidiaries principally in orderto manage risk arising from adverse fluctuation in foreign(j) Leased assets

exchange rates and interest rates. The Company and its domestic

Leased assets under finance leases that transfer ownership ofconsolidated subsidiaries have established a control environment

the assets are depreciated by using the economic useful lives ofwhich includes policies and procedures for risk assessment,

leased assets.

including an assessment of the effectiveness of their hedging

Leased assets under finance lease contracts that do not

activities, and for the approval, reporting and monitoring oftransfer ownership to the lessee are depreciated to a residualtransactions involving derivatives.

value of zero by the straight-line method using the term of the

Derivatives are carried at fair value with any changes incontract as the useful life.

unrealized gain or loss credited or charged to income, except
for those which meet the criteria for deferral hedge accounting(k) Allowance for doubtful receivables

under which unrealized gain or loss is deferred and reported as a

The Company and its domestic consolidated subsidiaries havecomponent of accumulated other comprehensive income (loss).

provided an allowance for doubtful receivables based on their

Receivables and payables hedged by forward foreign exchange

historical experience of bad debts on ordinary receivables plus ancontracts which meet certain conditions are translated at theiradditional estimate of probable specific doubtful accounts fromcontracted rates (the “allocation method”). Interest-rate swaps

customers experiencing financial difficulties.

which meet certain conditions are accounted for as if the interest

The allowance for doubtful receivables of the overseas

rates which apply to the swaps had originally applied to theconsolidated subsidiaries has been provided at the estimatedunderlying debt (the “special method”).

aggregate amount of their probable bad debts.

The effectiveness of hedges is assessed based oncomparison of the cumulative changes in markets or cash flows of
12

Ishihara Sangyo Kaisha, Ltd.

(l) Accrued bonuses for employees(r) Accounting standard issued but not effective

Accrued employees’ bonuses are accounted for at an estimatedAccounting Standard and Implementation Guidance on Revenue

amount of the bonuses to be paid as allocated to the current

Recognition

fiscal year.

On March 30, 2018, the ASBJ issued “Accounting Standard
for Revenue Recognition” (ASBJ Statement No. 29) and(m) Reserve for sales returns“Implementation Guidance on Accounting Standard for Revenue

Reserve for sales returns is provided for estimated losses incurring

Recognition” (ASBJ Guidance No. 30).

due to the return of finished goods and merchandise sold during
the fiscal year subsequent to the balance sheet date, using thehistorical rate of such returns in prior years.

(1) Overview
This is a comprehensive accounting standard for revenue
recognition. Specifically, the accounting standard establishes(n) Reserve for implementation of environmental and safety
arrangements

the following five-step model that will apply to revenue from
customers:

The Company has provided the reserve for estimated

1. Identify the contract(s) with a customer

expenditures to promote environmental and safety arrangements.

2. Identify the performance obligations in the contract

In addition, the Company has also provided the reserve forthe expenses related to the remediation of soil and groundwatercontamination and measures for buried waste at Yokkaichi Plant.

3. Determine the transaction price
4. Allocate the transaction price to the performanceobligations in the contract
5. Recognize revenue when (or as) the entity satisfies a(o) Provision for maintenanceperformance obligation

Provision for maintenance is provided in an amount estimatedto be necessary for the maintenance for certain machinery andequipment.

(2) Scheduled date of adoption
The Company expects to adopt the accounting standard andimplementation guidance from the beginning of the fiscal year(p) Retirement benefits

ending March 31, 2022.

Liability for retirement benefits is provided at an amount calculated
based on the retirement benefit obligation and the fair value of thepension plan assets as of the balance sheet date.
The retirement benefit obligation for employees is attributed(3) Impact of the adoption of accounting standard andimplementation guidance
The Company is currently evaluating the effect of the adoption

to each period by the straight-line method over the estimatedof this accounting standard and implementation guidance on

years of service of the eligible employees.

its consolidated financial statements.

Actuarial gain or loss is amortized in the following year inwhich such gain or loss is recognized, principally by the straightline method, over the estimated average remaining years ofservice of the employees participating in the plans.
Prior service cost is amortized as incurred by the straight-line
method over the estimated average remaining years of service ofthe employees participating in the plans.
(q) Income taxes
Income taxes are calculated based on taxable income andcharged to income on an accrual basis. Certain temporary
differences exist between taxable income and income reported forfinancial statement purposes which enter into the determinationof taxable income in a different period. The Company andits consolidated subsidiaries recognize the tax effect of such
temporary differences in their consolidated financial statements.

Ishihara Sangyo Kaisha, Ltd.

13

3. Change in Presentation
Applying the “Partial Amendments to Accounting Standard for Tax

in other current liabilities in current liabilities previously presented

Effect Accounting”

in consolidated balance sheet as of March 31, 2018 have been
reclassified and included within ¥9,588 million of deferred tax

The Company and its consolidated subsidiaries haveadopted “Partial Amendments to Accounting Standard for Tax

assets in investments and other assets and ¥2,055 million of other

Effect Accounting” (ASBJ Statement No. 28, February 16, 2018)

long-term liabilities in long-term liabilities, respectively.

(hereinafter, the “Partial Amendments”) from the beginning of

Also, “Note 13 Income Taxes” in the Notes to thethe fiscal year ended March 31, 2019. As such, deferred income

consolidated financial statements has been expanded intaxes are included within investments and other assets and long-accordance with Note 8 and Note 9 of Interpretive Notes toterm liabilities, and related income tax disclosures have been

Accounting for Tax Effect Accounting. However, comparative

expanded.

information for the year ended March 31, 2018 has not been
disclosed in Note 13 in accordance with the transitional provisions

As a result, ¥2,166 million of deferred income taxes in

set forth in Article 7 of the Partial Amendments.

current assets and ¥6 million of deferred income taxes included

4. Cash and Deposits
The reconciliation between cash and cash equivalents in the accompanying consolidated statements of cash flows and cash anddeposits in the accompanying consolidated balance sheets as of March 31, 2019 and 2018 is presented as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and deposits........................................................................................................

¥

2019
23,984¥2018
30,297$2019
216,072

Cash and cash equivalents...........................................................................................

¥

23,984¥30,297$

216,072

5. Notes Receivable and Notes Payable
As the balance sheet date for the year ended March 31, 2019 fell on a bank holiday, notes receivable, trade of ¥348 million ($3,135
thousand) and notes payable, trade of ¥674 million ($6,072 thousand) with a due date of March 31, 2019 were included in the respectivebalances in the consolidated balance sheet at March 31, 2019 and were settled on the next business day.

6. Investments in Securities
Marketable securities classified as held-to-maturity debt securities and other securities at March 31, 2019 and 2018 were as follows:(a) Held-to-maturity debt securities
Millions of yen

Carrying value

2019

2018

Estimated fairvalue

Estimated fairvalue

Unrealized gain

Carrying value

Unrealized gain

Securities whose estimated fair value exceeds theircarrying value..........................................................

¥

9

¥

10

¥

1

¥

10

¥

10

¥

0

Total...........................................................................

¥

9

¥

10

¥

1

¥

10

¥

10

¥

0

Thousands of U.S. dollars

2019
Carrying value

Estimated fairvalue

Unrealized gain

Securities whose estimated fair value exceeds theircarrying value..........................................................

$

81

$

90

$

9

Total...........................................................................

$

81

$

90

$

9

14

Ishihara Sangyo Kaisha, Ltd.

(b) Other securities
Millions of yen

2018

2019
Carrying value

Acquisition cost

Unrealized gain
(loss)

Securities whose carrying value exceeds theiracquisition cost: Equity securities............................

¥ 1,326¥¥675¥ 1,591

Subtotal..............................................................

1,326

651

675

1,591

692

899

Securities whose acquisition cost exceeds theircarrying value: Equity securities...............................

109

140

(31)

78

86

(8)

Subtotal..............................................................

109

Total...........................................................................

¥ 1,435

651

791

¥

Acquisition cost

Unrealized gain
(loss)

¥

¥

(31)

78

644

¥ 1,669

140¥

Carrying value

692

899

86
¥

(8)

778

¥

891

Thousands of U.S. dollars

2019
Securities whose carrying value exceeds theiracquisition cost: Equity securities
Subtotal..............................................................

Carrying value

Acquisition cost

Unrealized gain
(loss)$ 11,946$ 5,865$ 6,081

11,946

5,865

6,081

982

1,261

(279)

Securities whose acquisition cost exceeds theircarrying value: Equity securities
Subtotal..............................................................

982

1,261

(279)

Total...........................................................................

$ 12,928$7,126$ 5,802

The redemption schedule subsequent to March 31, 2019 for held-to-maturity debt securities classified as other securities is described in
Note 18.

7. Inventories
Inventories at March 31, 2019 and 2018 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Finished goods and merchandise.................................................................................

¥

201925,217¥

2018
22,908$

2019
227,181Work in process............................................................................................................

5,976

4,526

53,838Raw materials and supplies..........................................................................................

15,59014,060140,450

Total..............................................................................................................................

¥

46,783¥41,494$421,469

Net gain on reversal of devaluation of inventories included in cost of sales for the years ended March 31, 2019 and 2018 amounted to¥277 million ($2,495 thousand) and ¥637 million, respectively.

Ishihara Sangyo Kaisha, Ltd.

15

8. Loss on Impairment of Fixed Assets
For the year ended March 31, 2019, the Company recorded a loss on impairment of fixed assets. The main components of loss on
impairment of fixed assets are as follows:
Thousands of U.S.
dollars

Millions of yen

Location

Major use

Classification

Sasagawa company house(Yokkaichi City, Mie Prefecture)

Company-owned housing

Land

2019
¥

64

2019
$

576

Buildings and structures

57

514

Other

0

0

Total

¥

121

$

1,090

The Company and its consolidated subsidiaries group theirhousing located at Sasagawa company house in the above table.

assets based on the business segment and production process

The Company recognized the land as an asset held for sale andfor assessment of loss on impairment. Idle assets which are notrecorded a loss on impairment.

anticipated to be utilized in the future and leased real estate are

The recoverable amount of the land was measured at net

classified as individual cash-generating units. Assets not definitely

selling value, which was reasonably estimated by considering thelinked to a specific business, such as the head-office building,market value.

the facilities for research and development and the facilities for
welfare, are classified as corporate assets.
The Company plans to sell land used for company-owned

For the year ended March 31, 2018, the Company recorded aloss on impairment of fixed assets. The main components of loss
on impairment of fixed assets are as follows:
Millions of yen

Location
Hiratsuka Plant(Hiratsuka City, Kanagawa Prefecture)

Major use
Company-owned housing

Classification
Land

¥

2018
55

Fuji Titanium Industry Co., Ltd., a consolidated subsidiary of the

The recoverable amount of the land was measured at net

Company, plans to sell land used for company-owned housing

selling value, which was reasonably estimated by considering thelocated at the Hiratsuka Plant in the above table. The Company

market value.

recognized the land as an asset held for sale and recorded a loss
on impairment.

16

Ishihara Sangyo Kaisha, Ltd.

9. Short-Term Bank Loans, Long-Term Bank Loans, Lease Obligations and Bonds
The average annual interest rate on short-term bank loans at March 31, 2019 and 2018 were approximately 1.2% and 1.5%, respectively.
Long-term bank loans, including the current portion of long-term bank loans, at March 31, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Secured bank loans......................................................................................................

¥

201914,2142018
15,351¥$

2019
128,054

Unsecured bank loans..................................................................................................

21,586

18,762

194,469

Subtotal........................................................................................................................

35,80034,113

322,523

Less amounts due within one year................................................................................

(10,102)(13,538)(91,009)

Total..............................................................................................................................

¥

25,698¥20,575$

231,514

The annual average interest rates applicable to long-term bank loans due within one year presented in the above table at March 31, 2019and 2018 were 1.5% and 1.8%, respectively.
The annual average interest rates applicable to long-term bank loans due after more than one year presented in the above table atMarch 31, 2019 and 2018 were 1.2% and 1.4%, respectively.
These bank loans become due from April 2020 through to March 2027.
Bonds at March 31, 2019 and 2018 were as follows:
Thousands of
U.S. dollars

Millions of yen

Unsecured bonds, payable in yen at rate of 0.257%, due 2024....................................

¥

2019
2,010

¥

1,620

Less amounts due within one year ...............................................................................
Total..............................................................................................................................

¥

2018
2,400

¥

2,010

$

2019
18,109$14,595

(390)

(390)

(3,514)

Lease obligations at March 31, 2019 and 2018 were as follows:
Thousands of
U.S. dollars

Millions of yen

Finance lease obligations (ownership not transferred to the lessee)..............................

¥

Less amounts due within one year................................................................................
Total..............................................................................................................................

2019
1,067

2018
1,170

¥

(449)

(451)
¥

616

$

¥

721

2019
9,613
(4,063)$

5,550

Information on the payment schedules of long-term bank loans, bonds, and lease obligations subsequent to March 31, 2019 is describedin Notes 17 and 18.
At March 31, 2019 and 2018, the following assets were pledged as collateral for short-term bank loans, the current portion of longterm bank loans and long-term bank loans:Thousands of
U.S. dollars

Millions of yen

Property, plant and equipment, net of accumulated depreciation.................................

¥

2019
23,408¥23,435Investments in securities...............................................................................................
Total..............................................................................................................................

¥

2018
21,255¥21,350$2019
210,883$

211,126

95

27

243

Ishihara Sangyo Kaisha, Ltd.

17

Short-term bank loans, the current portion of long-term bank loans and long-term bank loans secured by such collateral at March 31,
2019 and 2018 were as follows:
Thousands of
U.S. dollars

Millions of yen

2019
6,020

2018
¥6,690Current portion of long-term bank loans.......................................................................

5,799

8,443

52,243Long-term bank loans...................................................................................................

8,415

6,908

75,811

20,234¥22,041

Short-term bank loans..................................................................................................

Total..............................................................................................................................

¥

¥

2019
54,234$$

182,288

10. Asset Retirement Obligations
The asset retirement obligations include legal obligations for

The asset retirement obligations are measured at present

disposal of items including polychlorobiphenyl pursuant to thevalue calculated based on the discount rate applicable to“Law Concerning Special Measures Against PCB Waste” andgovernment bonds and the estimated useful lives of the assets,other legal obligations for the removal of leasehold improvements

which are estimated to be from 3 years to 8 years since theirand restoration of premises around the Yokkaichi Plant to theiracquisitions.

original condition upon termination of lease contracts.
The following is a summary of changes in the carrying amounts of the asset retirement obligations for the years ended March 31, 2019and 2018.
Thousands of
U.S. dollars

Millions of yen

Asset retirement obligation balance at the beginning of the year..................................

¥

2019
717

2018
¥781

$

2019
6,459

Accretion expense........................................................................................................

0

0

0

Liabilities settled............................................................................................................

(7)

(64)

(63)

710

¥717

Asset retirement obligation balance at the end of the year............................................

¥

$

6,396

11. Retirement Benefits
The Company and certain consolidated subsidiaries have a

Certain consolidated subsidiaries have calculated their

lump-sum payment plan as a retirement benefit plan for eligible

retirement benefit obligations and retirement benefit expenses

employees upon retirement. Retirement payments are determinedbased on the amount which would be payable at the year end

by reference to basic salary, years of service and certain otherif all eligible employees terminated their services voluntarily (thefactors. In addition to this, the Company and certain domestic“Simplified Method”).

consolidated subsidiaries have defined contribution pension plans.
The changes in retirement benefit obligations during the years ended March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligations at the beginning of the year...........................................

¥

Service cost..................................................................................................................

2019
12,068¥

2018
11,856$

2019108,721593

606

Interest cost..................................................................................................................

11

10

99

Actuarial (gain) loss.......................................................................................................

(22)

78

(198)

Retirement benefits paid...............................................................................................

(474)

(499)

(4,270)

Other.............................................................................................................................
Retirement benefit obligations at the end of the year....................................................
18

Ishihara Sangyo Kaisha, Ltd.

17

(10)
¥

12,166

5,342¥

12,068(90)$

109,604

The changes in plan assets during the years ended March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Plan assets at the beginning of the year........................................................................

2019
178

¥

2018
153

¥

$

2019
1,604

Expected return on plan assets....................................................................................

1

1

9

Actuarial (loss) gain.......................................................................................................

(6)

16

(54)

Contributions paid by the Company and subsidiaries...................................................

31

27

279

Retirement benefits paid...............................................................................................

(9)

(19)

(81)

Other.............................................................................................................................

(0)

0Plan assets at the end of the year.................................................................................

¥

195

¥

178

(0)
$

1,757

The changes in retirement benefit obligations calculated by the Simplified Method during the years ended March 31, 2019 and 2018 are
as follows:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligations at the beginning of the year...........................................

2019
873

¥

2018
884

¥

$

2019
7,865

Retirement benefit expenses.........................................................................................

82

94

739

Retirement benefits paid...............................................................................................

(56)

(105)

(505)

Retirement benefit obligations at the end of the year....................................................

¥

899

¥

873

$

8,099

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March
31, 2019 and 2018 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

Funded retirement benefit obligation.............................................................................

2019
¥335

2018
¥313

2019
$3,018Plan assets at fair value.................................................................................................

(195)

(178)

(1,757)

140

135

1,261

Unfunded retirement benefit obligation.........................................................................

12,73012,628

114,685

Net amount of asset and liability for retirement benefits
in the consolidated balance sheet..............................................................................

12,87012,763

115,946

Liability for retirement benefits......................................................................................

12,882

12,778116,054

Asset for retirement benefits.........................................................................................

(12)

(15)

(108)

Net amount of asset and liability for retirement benefits
in the consolidated balance sheet..............................................................................

¥12,870¥12,763$115,946

The components of retirement benefit expenses for the years ended March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost..................................................................................................................

¥

2019
593

¥

2018
606

$

2019
5,342

Interest cost..................................................................................................................

11

10

99

Expected return on plan assets....................................................................................

(1)

(1)

(9)

Actuarial loss.............................................................................................................

83

79

748

Prior service cost.......................................................................................................

20

19

180

Retirement benefit expenses calculated by the Simplified Method............................

82

94

Amortization:

Retirement benefit expenses ........................................................................................

¥

788

¥

807

739
$

7,099

Ishihara Sangyo Kaisha, Ltd.

19

The components of retirement benefits liability adjustments included in other comprehensive income (before tax effect) for the years
ended March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019
100

2018
¥17

Prior service cost..........................................................................................................

20

19

180

Others...........................................................................................................................

(2)

(3)

(18)

118

¥33

Actuarial gain and loss..................................................................................................

Total..............................................................................................................................

¥

¥

2019
901

$

$

1,063

The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial gain and loss...........................................................................

¥

Unrecognized prior service cost...................................................................................
Total..............................................................................................................................

¥

2019
494

2018
¥593

133

152

627

¥745

$

2019
4,451
1,198

$

5,649

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2019 and 2018 are as follows:

Debt securities..............................................................................................................

2019
84%

2018
85%

Equity securities............................................................................................................

10

10

Cash and deposits........................................................................................................

6

5

Total..............................................................................................................................

100%

100%

The expected return on plan assets has been estimated based on the anticipated allocation to each asset class at present and in the
future and the expected long-term returns on assets held in each category at present and in the future.
The assumptions used in accounting for the defined benefit plans for the years ended March 31, 2019 and 2018 are as follows:

Discount rate.................................................................................................................

2019
Principally 0.1%

2018
Principally 0.1%

Expected long-term rate of return on plan assets.........................................................

Principally 1.7%

Principally 1.5%

Expected rates of salary increase.................................................................................

Principally 6.3%

Principally 6.3%

Total contributions paid by the Company and certain consolidated subsidiaries to the defined contribution pension plans for the years
ended March 31, 2019 and 2018 amounted to ¥89 million ($802 thousand) and ¥89 million, respectively.

20

Ishihara Sangyo Kaisha, Ltd.

12. Contingent Liabilities
Guarantees
At March 31, 2019, the Company was contingently liable for the following:Thousands of
U.S. dollars

Millions of yen

Trade notes receivable discounted with banks......................................................................................

¥

2019
69

$

2019
622

13. Income Taxes
Income taxes applicable to the Company and its domestic

approximately 30.2% and 30.4%, respectively. Overseas

consolidated subsidiaries consist of corporation, inhabitants’ andsubsidiaries are subject to the income taxes of the respective

enterprise taxes. The applicable statutory tax rate in Japan for

countries in which they operate.

the years ended March 31, 2019 and 2018 was, in the aggregate,
The effective tax rates reflected in the accompanying consolidated statement of income for the years ended March 31, 2019 and 2018
differs from the above statutory tax rate for the following reasons:Statutory tax rate......................................................................................................................................

2019
30.2%

2018
–%

Permanently non-deductible expenses.................................................................................................

0.3–

Permanently non-taxable income..........................................................................................................

(0.1)

–

Per capita portion of inhabitants’ taxes.................................................................................................

0.3–

Tax deduction for experiment and research expenses..........................................................................

(3.5)

–

Share of profit of equity method affiliates...............................................................................................

(1.1)

–

Unrealized gain on intercompany transactions......................................................................................

(0.6)

–

Changes in valuation allowance.............................................................................................................

(13.5)–

Difference tax rates applied to subsidiaries...........................................................................................

(0.3)

–

Other.....................................................................................................................................................

3.4–

Effective tax rate.......................................................................................................................................

15.1%

–%

Since the difference between the normal effective statutory tax rate and the actual effective tax rate was not significant, the reconciliation
for the year ended March 31, 2018 was omitted.

Ishihara Sangyo Kaisha, Ltd.

21

Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the assets andliabilities for financial reporting purposes and the corresponding amounts for income tax purposes. The significant components of theCompany’s and consolidated subsidiaries’ deferred tax assets and liabilities at March 31, 2019 and 2018 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Deferred tax assets:
Tax loss carryforwards..............................................................................................

¥

10,475¥

11,543$94,369Liability for retirement benefits...................................................................................

3,913

3,878

Loss on devaluation of inventories.............................................................................

293

218

2,640

Unrealized gain on intercompany transactions..........................................................

1,657

1,832

14,92835,252

Accrued expenses.....................................................................................................

518

514

4,667

Accrued bonuses for employees...............................................................................

224

234

2,018

Reserve for implementation of environmental and safety arrangements....................

895

1,171

8,063

Asset retirement obligations......................................................................................

214

216

1,928

Loss on liquidation of a subsidiary.............................................................................

16

16

144

Other.........................................................................................................................

2,007

2,150

18,081Gross deferred tax assets.............................................................................................

20,212

21,772

182,090

Valuation allowance for tax loss carryforwards (Note 2)................................................

(8,562)–(77,135)

Valuation allowance for total future deductible temporary differences etc.....................

(1,504)–(13,550)

Less: total valuation allowance (Note 1).........................................................................

(10,066)(11,575)(90,685)

Total deferred tax assets...............................................................................................

10,146

10,19791,405

Deferred tax liabilities:
Property, plant and equipment..................................................................................

(21)

(21)

(189)

Unrealized holding gain on securities........................................................................

(126)

(200)

(1,135)

Other.........................................................................................................................

(409)

(436)

(3,685)

Total deferred tax liabilities............................................................................................
Net deferred tax assets.................................................................................................

(657)

(556)
¥

9,590

¥

9,540

(5,009)$86,396Note 1: Valuation allowance decreased by ¥1,509 million ($13,595 thousand) in the year ended March 31, 2019. This decrease is mainly due to decreaseof the valuation allowance for tax loss carryforwards by ¥366 million ($3,297 thousand), decrease of the valuation allowance for reserve for
implementation of environmental and safety arrangements by ¥173 million ($1,559 thousand) and decrease of the valuation allowance for otherfuture deductible temporary differences by ¥531 million ($4,784 thousand).

22

Ishihara Sangyo Kaisha, Ltd.

Note 2: A breakdown of tax loss carryforwards and valuation allowance by expiry date as of March 31, 2019 will expire as follows:
Millions of yen

2019
Due in 1 year
or less

Net operating loss carryforwards (*)......

¥

Valuation allowance...............................
Deferred tax assets...............................

–

Due after 1 year
through 2 years

¥

–
¥

–

–

Due after 2 years Due after 3 years Due after 4 years Due after 5 years
through 3 years
through 4 years
through 5 years

¥

–
¥

–

–

¥

–

–
¥

–

¥

–
¥

–

¥

Total

–

¥ 10,475–(8,562)¥ 10,475–¥ 1,913¥ 1,913 (**)

Due after
5 years

Total(8,562)Thousands of U.S. dollars

2019
Net operating loss carryforwards (*)......

Due in 1 year
or less

Due after 1 year
through 2 years

Due after 2 years Due after 3 years Due after 4 years
through 3 years
through 4 years
through 5 years

$

$

$

Valuation allowance...............................
Deferred tax assets...............................

–
–

$

–

–
–

$

–

–

$

–
$

–

–

$

–
$

–

$

–

$ 94,369$ 94,369–(77,135)(77,135)–$ 17,234$ 17,234 (**)(*) The amount is determined by multiplying the corresponding net operating loss carryforwards by the effective statutory tax rate.
(**) The Company and consolidated subsidiaries have recorded tax loss carryforwards in the amount of ¥10,475 million ($94,369 thousand) after
multiplying statutory tax rates, and recognize deferred tax assets in the amount of ¥1,913 million ($17,234 thousand) for the tax loss carryforwards.
These deferred tax assets are all recognized for part of the Company’s tax loss carryforwards in the amount of ¥5,221 million ($47,036 thousand).
These tax loss carryforwards, for which the deferred tax assets are recognized, arose mainly due to the taxable loss related to closing of ISK
SINGAPORE PTE. LTD., a consolidated subsidiary of the Company, recorded during the year ended March 31, 2016, and were assessed to be
recoverable based on the estimated taxable income in the future period.

14. Shareholders’ Equity
The Company Act of Japan (the “Act”) provides that an amountcertain conditions are met.

equal to 10% of the amount to be disbursed as distributions

Under the Act, upon the issuance and sale of new shares ofof capital surplus (other than the capital reserve) and retainedcommon stock, the entire amount of the proceeds is required toearnings (other than the legal reserve) be transferred to the capitalbe accounted for as common stock, although a company may, byreserve and the legal reserve, respectively, until the sum of theresolution of the Board of Directors, account for an amount not

capital reserve and the legal reserve equals 25% of the capital

exceeding one-half of the proceeds of the sale of new shares asstock account. Such distributions can be made at any time byadditional paid-in capital.

resolution of the shareholders or by the Board of Directors if
Common stock and treasury stock
Movements in common stock and treasury stock during the years ended March 31, 2019 and 2018 are summarized as follows:
Thousands of shares

2019
April 1, 2018

Increase

Decrease

March 31, 2019

Common stock....................................................................

40,384––40,384

Treasury stock.....................................................................

416

2

0

418

Thousands of shares

2018
April 1, 2017

Increase

Decrease

March 31, 2018

Common stock....................................................................

40,384––40,384

Treasury stock.....................................................................

409

7

0

416

The increases in treasury stock were due to purchases of shares

March 31, 2019 and 2018 was mainly due to sales of shares atof less than one voting unit for the years ended March 31, 2019

requests of shareholders who own less than one voting unit.

and 2018. The decrease in treasury stock for the year ended

Ishihara Sangyo Kaisha, Ltd.

23

15. Research and Development Costs
Research and development costs included in manufacturing costs

ended March 31, 2019 and 2018 totaled ¥8,071 million ($72,712

and selling, general and administrative expenses for the years

thousand) and ¥8,707 million, respectively.

16. Reserve for Implementation of Environmental and Safely Arrangements
In terms of the remediation measures on the contaminatedDuring the year ended March 31, 2018, since the Company

soil, underground water and buried waste at Yokkaichi Plant ofcompleted the discussions with the responsible governmental

the Company, which was announced after a comprehensive

agency and finalized the plan for the removal of contaminated soil,

compliance test in 2008, the Company had recorded costs forunderground water and buried waste, the corresponding costs

the remediation including the investigation as extraordinary losses

can be reasonably estimated. As result, the Company additionallyto the extent that they were paid or reasonably estimated to berecorded reserve for implementation of environmental and safety

incurred. On the other hand, the Company had disclosed costs

arrangements in the amount of ¥2,580 million for the year ended

that could not be reasonably estimated as contingent liabilities.

March 31, 2018.

17. Leases
Operating lease transactions
Future minimum lease payments subsequent to March 31, 2019 under non-cancelable operating leases are summarized as follows:Year ending March 31,

Millions of yen

2020.......................................................................................................................................................

¥

2021 and thereafter................................................................................................................................
Total.......................................................................................................................................................

308

Thousands of U.S.
dollars

$

403
¥

711

2,775
3,630

$

6,405

18. Financial Instruments
Overview

held-to-maturity debt securities and the shares of common(1) Policy for financial instruments

stock of other companies with which the Group has businessIn consideration of plans for capital expenditures or cash

relationships, or affiliated companies. The Group has also loans

management, the Company and its consolidated subsidiaries

receivable from other companies with which it has business(collectively, the “Group”) raise funds through bank loans or

relationships. These loans receivable are exposed to credit risk.

issuing bonds for its domestic and overseas business. The Groupmanages temporary cash surpluses through low-risk financial

Regarding trade payables – trade notes and accounts payable

assets. The Group uses derivatives for the purpose of reducing– the Group is exposed to the risk of failure of settlement offluctuation risk of foreign exchange and interest rates. However,these payables at the due date because of working capital issue,

the use of derivatives is limited within the extent of risk at thewhich may result in loss of credit. The Group is also exposedbasis of the actual demand and the Group does not enter into

to foreign currency exchange risk arising from those payables

derivatives for speculative or trading purposes.

denominated in foreign currencies due to the import of raw
materials and other supplies.

(2) Types of financial instruments and related risk

A portion of bank loans and bonds has some financial

Trade receivables – trade notes and accounts receivable – arecovenants, which may result in the risk of early repayment

exposed to credit risk in relation to customers. In addition,

depending on the fluctuation of the financial position of the Group.

the Group has global operations and the percentage of sales

Short-term and long-term bank loans with variable interest rates

transactions denominated in foreign currencies is high. As a result,are exposed to interest rate fluctuation risk. The repayment dates

the Group is exposed to foreign currency exchange risk arisingof the debt extend up to 8 years from the balance sheet date.

from receivables denominated in foreign currencies.

Regarding derivatives, the Group enters into forward foreign

Marketable securities and investments in securities areexchange contracts to reduce the foreign currency exchange

exposed to market risk. Those securities are composed of mainly

risk arising from the receivables and payables denominated in

24Ishihara Sangyo Kaisha, Ltd.

foreign currencies. The Group also enters into interest rate swap

the Group periodically reviews the fair values of such financialtransactions to reduce fluctuation risk deriving from interest

instruments and the financial position of the issuers. In addition,

payable for long-term bank loans bearing interest at variable

the Group continuously evaluates whether securities otherrates. Information regarding the method of hedge accounting isthan those classified as held-to-maturity debt securities should

described in Note 2 (f).

be maintained taking into account their fair values and therelationships with the issuers.

(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or
counterparties may default)

In conducting derivative transactions, the division in charge ofderivative transactions follows the internal policies, and requests
divisions that perform such derivative transactions to report theseIn accordance with the internal policies for credit limit

transactions, and reconciles this information with transaction

management, the Group reduces certain risks arising from credit

details obtained from financial institutions. The division preparestransactions with customers by setting credit limits for individual

monthly reports which include actual transaction data, thecustomers, managing maturity dates and outstanding amounts,

contracted amounts, principals, fair value of these derivatives andrecognizing the existing risks and controlling all receivables

valuation gains or losses. These reports are then submitted to theappropriately. The Group monitors the financial situation ofBoard of Directors for their review.

its main customers periodically and compares outstanding
receivables balances with the amounts of credit limit by eachcustomer periodically and confirms that the internal policies areappropriately applied.
In accordance with the internal policies for asset(c) Monitoring of liquidity risk (the risk that the Group may not beable to meet its obligations on scheduled due dates)
Based on the reports from each cash management division, theGroup prepares and updates its cash flow plans on a monthly

management, the Group invests in held-to-maturity debt securities

basis to manage liquidity risk. The Group also reports thesewith high credit ratings. Accordingly, the Group believes that theplans to the Board of Directors and takes actions if necessary tocredit risk deriving from such debt securities is insignificant.

maintain a specified level of cash position.

The Group also believes that the credit risk of derivatives
is insignificant as it enters into derivative transactions only withfinancial institutions or trading companies which have a soundcredit profile.

(4) Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no quoted market price(b) Monitoring of market risks (the risks arising from fluctuations inforeign exchange rates, interest rates and others)

available, fair value is reasonably estimated. Since various
assumptions and factors are reflected in estimating the fair value,

For trade receivables and payables denominated in foreign

different assumptions and factors could result in different faircurrencies, the Group identifies the foreign currency exchange

value. In addition, the notional amounts of derivatives in Note 19

risk for each currency on a monthly basis and enters into forward

are not necessarily indicative of the actual market risk involved inforeign exchange contracts to hedge such risk. In order to mitigate

the derivative transactions.

the unfavorable impact caused by foreign currency exchange
fluctuations on accounts receivable deriving from forecasted

Estimated Fair Value of Financial Instruments

export sales transactions, the Group may enter into forward

The carrying value of financial instruments on the consolidated

foreign exchange contracts to the extent it is probable that thosebalance sheets, estimated fair value and the differences as offorecasted export sales take place. In order to mitigate the interest

March 31, 2019 and 2018 are shown in the following table. The

rate risk for loans payable and bonds bearing interest at variable

following table does not include financial instruments for which it isrates, the Group may also enter into interest rate swap transactions.

extremely difficult to determine the fair value. (Please refer to Note

For marketable securities and investments in securities,

18(b) below)

Ishihara Sangyo Kaisha, Ltd.

25

(a) Estimated fair value of financial instruments
Millions of yen

2019

2018

Carrying value

Estimated fairvalue

Difference

Carrying value

Estimated fairvalue

Difference(1) Cash and deposits.................................................

¥ 23,984¥ 23,984¥–¥ 30,297¥ 30,297¥(2) Trade receivables...................................................

33,89833,898–29,881

29,881

–

9

10

1

10

10

0

Assets:–(3) Securities and investments in securities:
Held-to-maturity debt securities............................
Other securities.....................................................

–

1,669

1,669

1

¥ 61,857¥ 61,857

15,393–12,08912,089

–

8,000

–

10,41010,410

–

1,435

1,435

¥ 59,326¥ 59,327(1) Trade payables.......................................................

15,393(2) Short-term bank loans............................................

8,000

Total assets

¥

–
¥

0

Liabilities:(3) Long-term bank loans, including current portion....

35,80036,211

411

34,11334,248

Total liabilities..............................................................

¥ 59,193¥ 59,604¥

411¥ 56,612¥ 56,747¥

135

Derivatives (*)..............................................................

¥

¥

¥

–

¥

¥

¥

–

5

5

70

70

135

Thousands of U.S. dollars

2019
Carrying value

Estimated fairvalue

Difference(1) Cash and deposits.................................................

$ 216,072$216,072$(2) Trade receivables...................................................

305,387

305,387–

Assets:–(3) Securities and investments in securities:
Held-to-maturity debt securities............................

81

90

9

Other securities.....................................................

12,92812,928–

Total assets.................................................................

$ 534,468$534,477(1) Trade payables.......................................................

138,676

138,676(2) Short-term bank loans............................................

72,072

72,072–(3) Long-term bank loans, including current portion....

322,522

326,225

3,703

Total liabilities..............................................................

$ 533,270$ 536,973

$

3,703

Derivatives (*)..............................................................

$

$

$

–

$

9

Liabilities:

45

45

–

(*) Assets and liabilities arising from derivatives are shown at net value with the amount in parentheses representing net liability position.

Methods to determine the estimated fair value of financial(3) Securities and investments in securities

instruments and other matters related to securities and derivative

The fair value of equity and debt securities is based on quoted

transactions are as follows:market prices. Regarding the information on securities andinvestments in securities corresponding to holding purposes,

Assets:please refer to Note 6.

(1) Cash and deposits and (2) Trade receivables
Since these items are settled in a short time period, their carrying

Liabilities:

value approximates estimated fair value.

(1) Trade payables and (2) Short-term bank loans
Since these items are settled in a short time period, their carrying
value approximates estimated fair value.

26

Ishihara Sangyo Kaisha, Ltd.

(3) Long-term bank loans, including current portion

principal and interest discounted by the interest rate to be applied

For long-term bank loans with floating interest rates, their carrying

assuming new loans under the similar conditions to existing loansvalue approximates estimated fair value because their interest rate

are made.

reflects the market interest rate.
The estimated fair value of long-term bank loans withDerivatives:

fixed interest rates is based on the present value of the total of

Please refer to Note 19 “Derivatives.”(b) Financial instruments whose fair values were extremely difficult to determine
Thousands of
U.S. dollars

Millions of yen

Unlisted equity securities..............................................................................................

¥

2019
5,572

Investments in limited partnerships...............................................................................

2018
2,485

¥

2019
50,198

$

21

2

18

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are notincluded in the preceding table.
(c) Redemption schedule of deposits, monetary receivables and securities with maturities
Millions of yen

Millions of yen

2019

2018

Due in 1 year
or less

Due after 1 year Due after 5 years
through 5 years through 10 years

Deposits....................................

¥ 23,975¥

Trade receivables......................

33,898–¥––Due after
10 years¥–

Due in 1 year
or less

Due after 1 year Due after 5 years
through 5 years through 10 years–¥ 30,288¥–

29,881–¥––

Due after
10 years

¥

–

–
–

Investments in securities:
Held-to-maturity debt
securities.............................

–

Total..........................................

¥ 57,873

9
¥

9

–
¥

–

¥

–

–

–

¥ 60,169

10
¥

10

–
¥

–

–
¥

–

Thousands of U.S. dollars

2019
Due in 1 year
or less

Due after 1 year Due after 5 years
through 5 years through 10 years

Deposits....................................

$ 215,991$

Trade receivables......................

305,387

–

$

–

–

Due after
10 years

$

–

–
–

Investments in securities:
Held-to-maturity debt
securities.............................

–

Total..........................................

$ 521,378

81
$

81

–
$

–

–
$

–

Ishihara Sangyo Kaisha, Ltd.

27

(d) Redemption schedule of long-term debt
Millions of yen

2019
Due in 1 year or lessLong-term bank loans...................................

¥

10,102

Bonds...........................................................

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

Due after 5 years

¥

¥

¥

¥

¥

7,780

390

Lease obligations..........................................
Total..............................................................

Due after 1 year
through 2 years

390

451
¥

10,943

6,513
390

333
¥

8,503

5,387
390

203
¥

7,106

3,973

73
¥

2,045

210

240

6

5,850

¥

4,189

1
¥

2,286

Thousands of U.S. dollars

2019
Due in 1 year or lessLong-term bank loans...................................

$

91,009Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

Due after 5 years

$

$

$

$

$

70,09058,676

48,53135,793

18,424

Bonds...........................................................

3,514

3,514

3,514

3,514

1,891

2,162

Lease obligations..........................................

4,063

3,000

1,829

658

54

9

Total..............................................................

$

98,586$76,604$64,019$52,703$37,738$20,595

19. Derivatives
The notional amounts and the estimated fair value of the derivative instruments outstanding which did not qualify for deferral hedge
accounting at March 31, 2019 and 2018 were as follows:(a) Currency-related transactions
Forward foreign exchange contracts:
Millions of yen

2019

2018

Notional amount

Notional amount(over 1 year)

Estimated fairvalue (*)

Unrealized gain
(loss)

Notional amount

Notional amount(over 1 year)

Estimated fairvalue (*)

Unrealized gain
(loss)

¥

¥

¥

¥

¥

¥

¥

¥

Sell:
Euro..............................

–

–

–

–

1,349

–

56

56

Buy:
Japanese yen...............

369

U.S. dollars...................
Total

–

39
¥

408

5

–
¥

–

(0)
¥

5

580

5

90

(0)
¥

5

–

¥

2,019

(10)

–
¥

–

(10)

(1)
¥

45

(1)
¥

Thousands of U.S. dollars

2019
Notional amount

Notional amount(over 1 year)

Estimated fairvalue (*)

Unrealized gain

$

$

$

$

Sell:
Euro..............................

–

–

–

–

Buy:
Japanese yen...............

3,325

–

45

U.S. dollars...................

351

–

(0)

Total

$

3,676

$

–

$

45

45
(0)
$

45

(*) The estimated fair value of forward foreign currency exchange contracts is computed using prices provided by counterparty financial institutions.

28

Ishihara Sangyo Kaisha, Ltd.

45

(b) Currency-related transactions (hedge accounting is applied)
Forward foreign exchange contracts:
Millions of yen

2019
Method of accounting

Classification

Hedged item

Deferred hedge
methodSell:
EuroAccounts
receivable

The allocation
methodSell:
EuroAccounts
receivable

Buy:
U.S. dollars

Accounts
payableTotal

Notional amount

¥

–

2018

Notional amount(over 1 year)

¥

–

–

–

¥

–

–

–
¥

Estimated fairvalue (*)

–

¥

–

–
¥

Notional amount

–

¥

–

50

–
¥

645

Notional amount(over 1 year)

700

¥

–

5
¥

Estimated fairvalue (*)

(**)

–
¥

–

24

(**)
¥

24

Thousands of U.S. dollars

2019
Method of accounting

Classification

Hedged item

Deferred hedge
methodSell:
EuroAccounts
receivable

The allocation
methodSell:
EuroAccounts
receivable

Buy:
U.S. dollars

Accounts
payableTotal

Notional amount

Notional amount(over 1 year)

Estimated fairvalue (*)

$

$

$

–

–

–

–

–
$

–

–

–

$

–

–

–
$

–

(*) The estimated fair value of forward foreign currency exchange contracts is computed using prices provided by counterparty financial institutions.
(**) Because forward foreign exchange contracts are accounted for as if the exchange rates applied to the forward foreign exchange contracts hadoriginally applied to the accounts receivable or payable, their fair values were included in accounts receivable or payable.

(c) Interest-related transactions (hedge accounting is applied)
Millions of yen

2018

2019
Method of accounting

The special
methodClassification

Receive/floating
and pay/fixed

Hedged item

Long-termbank loans

Notional amount

Notional amount(over 1 year)

Estimated fairvalue (*)

¥

¥

¥

7,188

4,280

(**)

Notional amount

Notional amount(over 1 year)

Estimated fairvalue (*)

¥

¥

¥

7,261

3,588

(**)

Thousands of U.S. dollars

2019
Method of accounting

The special
methodClassification

Receive/floating
and pay/fixed

Hedged item

Long-termbank loans

Notional amount

Notional amount(over 1 year)

Estimated fairvalue (*)$$$

64,75738,559(**)(*) The estimated fair value of forward foreign currency exchange contracts is computed using prices provided by counterparty financial institutions.
(**) Because interest rate swap agreements are accounted for as if the interest rates applied to the swaps had originally applied to the long-term bankloans, their estimated fair values were included in estimated fair value of long-term bank loans.

Ishihara Sangyo Kaisha, Ltd.

29

20. Other Comprehensive Income
The following table presents reclassification adjustments and tax effects for components of other comprehensive income (loss) for theyears ended March 31, 2019 and 2018:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Net unrealized holding (loss) gain on securities:
Amount arising during the year..................................................................................

¥

(266)

¥

152

$

(2,396)

Before tax effect....................................................................................................

(266)

152

(2,396)

Tax effect...............................................................................................................

75

(48)

675

Total.......................................................................................................................

(191)

104

(1,721)

Amounts arising during the year................................................................................

–

0

–

Reclassification adjustments for gains and losses included in net income................

–

0

–

Before tax effect....................................................................................................

–

0

–

Tax effect...............................................................................................................

–

(0)

–

Total.......................................................................................................................

–

0

–

Amount arising during the year..................................................................................

(379)

719

(3,414)

Before tax effect........................................................................................................

(379)

719

(3,414)

Tax effect...................................................................................................................

–

–

–

Total..........................................................................................................................

(379)

719

(3,414)

Unrealized deferred gain on hedges:

Translation adjustments:

Retirement benefits liability adjustments:
Amount arising during the year..................................................................................

13

(65)

117

Reclassification adjustments for gains and losses included in net income................

105

98

946

Before tax effect....................................................................................................

118

33

1,063

Tax effect...............................................................................................................

(36)

(12)

(324)

Total.......................................................................................................................

82

21

739

Other comprehensive income (loss) of affiliates accounted for by the equity method
attributable to the Company.......................................................................................
Total other comprehensive (loss) income......................................................................

(120)

6
¥

(482)

¥

724

54
$

(4,342)

21. Supplemental Information to Consolidated Statements of Cash Flows
Information on significant non-cash transactions
The Company and its consolidated subsidiaries recorded new leased assets of ¥366 million ($3,297 thousand) and ¥302 million andlease obligations of ¥395 million ($3,559 thousand) and ¥325 million under finance leases for the years ended March 31, 2019 and 2018,
respectively.

30

Ishihara Sangyo Kaisha, Ltd.

22. Amounts per ShareYen

Net assets per share.....................................................................................................

¥Net income attributable to owners of parent per share.................................................
Net income attributable to owners of parent per share is based

2019
1,885.01

U.S. dollars

2018
1,679.77

¥

2019
16.98

$

86.12

217.26

1.95

number of shares of common stock outstanding at the year end.
Diluted net income attributable to owners of parent per shareon the net income attributable to shareholders of common stockand the weighted-average number of shares of common stock

for the years ended March 31, 2019 and 2018 is not presented

outstanding during each year. Net assets per share are based on thesince no potentially dilutive securities have been issued.

The financial data for the computation of basic net income attributable to owners of parent per share for the years ended March 31, 2019and 2018 in the table above is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

8,683

¥3,442

–

–

8,683

¥3,442

2019

Information on basic net income attributable to owners of parent per share:
Net income attributable to owners of parent.................................................................

¥Net income not attributable to common shareholders..................................................
Adjusted net income attributable to common shareholders..........................................

¥$

78,225–$78,225

Thousands of shares2019
39,967Weighted-average number of shares of common stock outstanding during the year....

2018
39,971

The financial data for the computation of net assets per share at March 31, 2019 and 2018 in the above table is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Total net assets.............................................................................................................

¥

201975,335¥75,335¥

2018
67,138¥67,138$

2019
678,697$

678,697

Deductions from total net assets:
Non-controlling interests...........................................................................................
Total net assets used in the calculation of net assets per share....................................

–

–

–

Thousands of shares

Number of shares used in the calculation of net assets per share................................

2019
39,9652018
39,968Ishihara Sangyo Kaisha, Ltd.

31

23. Related Party Transactions
Major transactions and balances between the Company and an affiliated company for the years ended and as of March 31, 2019 and2018 were as follows:
Transactions

BalancesThousands of
U.S. dollars

Millions of yen
Name of affiliated company

Type of transaction

BELCHIM CROPPROTECTION N.V.

Sales of products

2018

2019
¥

–

¥

2019

399 $

–

Thousands of
U.S. dollars

Millions of yen

2018

2019

Account

Trade receivables

¥

¥

–

2019

– $

–

Major transactions and balances between a consolidated subsidiary and an affiliated company for the years ended and as of March 31,
2019 and 2018 were as follows:
Transactions

BalancesThousands of
U.S. dollars

Millions of yen
Name of affiliated company

Type of transaction

BELCHIM CROPPROTECTION N.V.

Sales of products

2019

2018

2019

¥ 11,267 ¥ 17,038 $101,505

Thousands of
U.S. dollars

Millions of yen

2019

Account

Trade receivables

2018

2019

¥ 2,755 ¥ 4,118 $ 24,820

The condensed financial statements of BELCHIM CROP PROTECTION N.V. as the significant related party as of and for the years ended
March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen
March 31

Current assets..............................................................................................................

¥

Fixed assets..................................................................................................................

201955,839¥¥Current liabilities............................................................................................................

¥

$

2019
503,654

7,843

7,154

Total assets...............................................................................................................

March 312018
52,68964,451

62,993¥60,532$567,505

57,065¥52,313$514,099

Long-term liabilities.......................................................................................................

11,268

8,855

101,514

Total liabilities.........................................................................................................

68,333

61,168615,613

Total net assets......................................................................................................

(5,340)(636)

Total liabilities and net assets....................................................................................

Net sales.......................................................................................................................

¥¥

Income before income taxes.........................................................................................
Net (loss) income..........................................................................................................

32

Ishihara Sangyo Kaisha, Ltd.

¥62,993¥60,532(48,108)$

567,505

Millions of yen

Thousands of
U.S. dollars

For the years ended March 31

For the year ended
March 312019
54,626¥2018
59,280$2019
492,126(2,648)560

23,856(3,504)(478)(31,568)24. Business Combination
Transactions under common control
At the meeting of the Board of Directors held on August 10, 2018,
the Company resolved to implement an absorption-type merger

4. Name of the company after the business combination
Ishihara Sangyo Kaisha, Ltd.
5. Other items related to the outline of the transaction

with its consolidated subsidiary, Yokkaichi Energy Service Co.,The Company decided to implement an absorption-type

Ltd. Based on this resolution, the Company, as the surviving

merger with Yokkaichi Energy Service Co., Ltd., withcompany, merged with Yokkaichi Energy Service Co., Ltd.,the aim of consolidating the all management resources

effective October 1, 2018.

related to Yokkaichi Plant and improving the efficiency of its
operations.

(1) Outline of the merger
1. Name and business description of the company involved in(2) The Accounting methods applied

the merger

In accordance with the “Accounting Standard for Business

Name of the company involved in the merger: Yokkaichi

Combinations” (ASBJ Statement No. 21, September 13, 2013)

Energy Service Co., Ltd.

and the “Guidance on Accounting Standard for BusinessBusiness description: Production, supply and sale ofCombinations and Accounting Standard for Business Divestitures”

electric power and steam for industrial use(ASBJ Guidance No. 10, September 13, 2013), the merger has

2. Date of the business combination

been accounted for as a transaction under common control.

October 1, 2018
3. Legal form of the business combination
The Company, as the surviving company, has absorbed
Yokkaichi Energy Service Co., Ltd. which has been
dissolved upon the merger.

25. Segment Information(a) Overview of the reportable segments

Organic chemicals

The Company’s reportable segments are determined on the basis

This reportable segment includes the business of manufacturingthat such segments provide the Board of Directors with specificand sales of organic intermediates such as agrochemicals andinformation to determine the business activity policy and allocation

active pharmaceutical ingredients.

of management resources and to evaluate their businessperformance. Consequently, the Company has classified its

Other businesses

business into three reportable segments of “Inorganic chemicals,”This reportable segment principally includes the trading business“Organic chemicals,” and “Other businesses” based on theand the construction business.

properties of products and services sold, manufacturing methods
and processes.

(b) Valuation method for reportable segment sales, income andInorganic chemicals

The accounting policies for the reportable business segments areThis reportable segment includes the business of manufacturing

the same as those described in Note 2. Intersegment sales areand sales of titanium dioxide, functional materials, which arerecorded at the same prices used in transactions with third parties.

assetsvalue-added products designed to take advantage of thecharacteristics of titanium dioxide and other inorganic chemicals.

Ishihara Sangyo Kaisha, Ltd.

33

(c) Reportable segment information
Millions of yen

2019
Reportable segments
Inorganic
chemicals

Organic
chemicals

Other businesses

Elimination andcorporate (*1)

Subtotal

Consolidated (*2)

Net sales and operating income:Net sales:
External customers...............................................

¥

54,883 ¥47,672 ¥3,886 ¥ 106,441 ¥–¥ 106,441

Intersegment.........................................................

–

–

5,538

5,538

(5,538)–Net sales...............................................................

54,88347,6729,424

111,979(5,538)106,441

13,835 ¥(2,463) ¥11,372

Segment income..........................................................

¥

7,268 ¥

5,903 ¥

Segment assets...........................................................

¥

78,592 ¥57,746 ¥Depreciation and amortization of intangible
assets.................................................................

3,229

851

49

4,129

137

Loss on impairment of fixed assets.......................

–

–

–

–

121

121

Increase in fixed tangible and intangible assets....

6,165

915

96

7,176

63

7,239

Elimination andcorporate (*1)

Consolidated (*2)

664 ¥3,697 ¥ 140,035 ¥

28,655 ¥ 168,690

Other items:
4,266

Millions of yen

2018
Reportable segments
Inorganic
chemicals

Organic
chemicals

Other businesses

Subtotal

Net sales and operating income:Net sales:
External customers...............................................

¥

54,441 ¥

50,461 ¥3,099 ¥ 108,001 ¥–¥108,001

Intersegment.........................................................

–

–

4,937

4,937

(4,937)–

Net sales...............................................................

54,44150,461

8,036

112,938(4,937)108,001

Segment income..........................................................

¥

7,984 ¥

3,576 ¥

Segment assets...........................................................

¥

69,542 ¥

51,706 ¥618 ¥Depreciation and amortization of intangible
assets.................................................................

3,178

873

49

Loss on impairment of fixed assets.......................

55

–

–

Increase in fixed tangible and intangible assets....

5,335

788

24

12,178 ¥2,798 ¥ 124,046 ¥(2,156) ¥10,02235,721¥159,767

4,100

114

4,214

55

–

55

6,147

293

6,440

Other items:

34

Ishihara Sangyo Kaisha, Ltd.

Thousands of U.S. dollars

2019
Reportable segments
Inorganic
chemicals

Organic
chemicals

Other businesses

Elimination andcorporate (*1)

Subtotal

Consolidated (*2)

Net sales and operating income:Net sales:
External customers...............................................

$ 494,442 $ 429,477 $

35,009 $ 958,928 $–$ 958,928

Intersegment.........................................................

––

49,89249,892(49,892)–

Net sales...............................................................

494,442

429,477

84,901

1,008,820(49,892)

958,928

65,477 $53,180 $Segment income..........................................................

$

Segment assets...........................................................

$ 708,037 $ 520,234 $

5,982 $ 124,639 $(22,189) $ 102,450

33,306 $ 1,261,577 $ 258,153 $ 1,519,730

Other items:
Depreciation and amortization of intangible
assets.................................................................

29,0907,667

441

37,198

1,234

Loss on impairment of fixed assets.......................

–

–

–

–

1,090

1,090

Increase in fixed tangible and intangible assets....

55,5408,243

865

64,648568

65,21638,432(*1)		 The elimination and corporate applicable to segment income amounted to ¥2,463 million ($22,189 thousand) and ¥2,156 million in the above tables
and includes ¥120 million ($1,081 thousand) and ¥79 million of eliminations of intersegment transactions and ¥2,343 million ($21,108 thousand) and¥2,077 million of corporate expenses, which are not allocable to the reportable segments for the years ended March 31, 2019 and 2018, respectively.
Corporate expenses mainly comprise expenses incurred by the administration department of the Company, which are not allocable to any
reportable segment.
		 The elimination and corporate applicable to segment assets amounted to ¥28,655 million ($258,153 thousand) and ¥35,721 million includes¥1,142 million ($10,288 thousand) and ¥959 million of offset of inter-segment receivables and payables, and ¥29,797 million ($268,441 thousand)and ¥36,680 million of corporate assets, which are not allocable to a reportable segment as of March 31, 2019 and 2018, respectively. Corporate
assets consist of investments of surplus funds (cash and securities), long-term investments (investments in securities), assets of the administration
department and so forth.
(*2)		 Segment income corresponds to operating income in the consolidated statements of income.

Related information
Products and services information
The information on each product and service is omitted because it is the same as that of reportable segment information for the years
ended March 31, 2019 and 2018.
Geographical information
Net sales by geographical segment for the years ended March 31, 2019 and 2018 are summarized as follows:
Millions of yen

Year ended March 31, 2019Japan

Net sales.......................................................

¥

52,829 ¥Asia

America

22,930 ¥14,955 ¥EuropeOther

15,466 ¥

Total

261 ¥

106,441

Millions of yen

Year ended March 31, 2018
Japan

Net sales.......................................................

¥

50,309 ¥Asia

America

22,928 ¥12,384 ¥EuropeOther

22,097 ¥

Total

283 ¥

108,001

Thousands of U.S. dollars

Year ended March 31, 2019
Net sales.......................................................

$

Japan

Asia

475,937 $

206,577 $America

134,730 $EuropeOther139,333 $

2,351 $

Total

958,928

Ishihara Sangyo Kaisha, Ltd.

35

The regions are determined on the basis of geographic proximity and the Company’s business activities as follows:
Asia:

China, Taiwan, South Korea, Thailand, Indonesia, Singapore and India

America: The United States, Canada, Brazil, Argentina and Mexico
Europe: Germany, the Netherlands, France, the United Kingdom, Belgium, Italy, Eastern Europe and the Middle East
Other:

Australia, New Zealand and Africa

Property, plant and equipment by geographical segment as of March 31, 2019 and 2018 are summarized as follows:
Millions of yen

At March 31, 2019
Japan

Property, plant and equipment..............................................

¥

Asia

42,180 ¥America133 ¥Europe

Total

827 ¥

27 ¥

43,167

Millions of yen

At March 31, 2018
Japan

Property, plant and equipment..............................................

¥

Asia

39,810 ¥America141 ¥Europe

Total

849 ¥

43 ¥

40,843Thousands of U.S. dollars

At March 31, 2019
Japan

Property, plant and equipment..............................................

$

Asia

380,000 $America

1,198 $

Europe7,450 $

Total

244 $

388,892

Geographical segments are determined on the basis of geographic proximity and the Company’s business activity as follows:
Asia:

TaiwanAmerica: The United States
Europe: Belgium
Information on sales transactions with major customers
Sales transactions with a major customer for the year ended March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen
Customer name

MITSUI & CO., LTD.

Relevant reportable segments

Inorganic chemicals and Organic chemicals...................

¥

201911,9202018¥ 11,717$2019
107,387

26. Subsequent Events
Cash dividends
The following distribution of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial
statements for the year ended March 31, 2019 was approved at a meeting on the shareholders of the Company held on June 27, 2019:
Millions of yen

Cash dividends (¥12.00 = US $0.11 per share)..........................................................................................

36

Ishihara Sangyo Kaisha, Ltd.

¥

480

Thousands of U.S.
dollars$

4,324

Report of Independent Public Accountants

Ishihara Sangyo Kaisha, Ltd.

37

Corporate Data
(As of June 28, 2019)

Head Office

Overseas Affiliated Companies

1-3-15 Edobori, Nishi-ku, Osaka 550-0002, Japan
Tel: +81-6-6444-1451(General Affairs Division)
Fax: +81-6-6445-7798(General Affairs Division)

ISK Taiwan Co.,Ltd
Empire Bldg., Fl 11-1., 87, Sung Chiang Road
Taipei, Taiwan
Tel: +886-2-2504-5387 Fax: +886-2-2509-4961

Board of Directors
Executive Director President
Kenichi Tanaka
Directors
Teruaki Matsue
Kiyomitsu Yoshida
Yasunobu Kawazoe
Hideo Takahashi
Outside Directors
Hiroshi Katsumata
Tatsuo Hanazawa

Board of Corporate Auditors(Standing) Corporate Auditor
Taizo Kato
Michiyoshi Arata
Outside Corporate Auditors
Yoshitaka Akikuni
Masaaki Harima

Executive Officers
President & Chief Executive Officer
Kenichi Tanaka
Managing Executive Officers
Teruaki Matsue
Kiyomitsu Yoshida
Yasunobu Kawazoe
Hideo Takahashi
Masanari Kato
Masaki Shimojo
Executive Officers
Yoichi Kobayashi
Kiyoshi Masuda
Hisashi Takenaka
Hiroshi Kimura
Mikiya Horie
Shigeru Mitani
Hiroyuki Watanabe

ISK KOREA CORPORATION#421 Cheonggu Blueville, 11-1 Sunae-dong, Bundang-gu
Seongnam-City, Gyeonggi-do,
463-825 Korea
Tel: +82-31-778-6393 Fax: +82-31-778-6392
ISK Biosciences Korea Ltd.
4F Kairos Bldg., 837-2 Yeoksam-dong, Gangnam-gu,
Seoul , 135-937 Korea
Tel: +82-2-555-1401 Fax: +82-2-563-1408
ISK Americas, Incorporated
7474 Auburn Road
Concord, OH 44077-9703, U.S.A.
Tel: +1-440-357-4600 Fax: +1-440-357-4611
ISK Biosciences Corporation
7470 Auburn Road, Suite A
Concord, OH 44077-9703, U.S.A.
Tel: +1-440-357-4640 Fax: +1-440-357-4661
ISK Biocides, Inc.
416 East Brooks Road, Memphis, TN
38109-0158, U.S.A.
Tel: +1-901-344-5350 Fax: +1-901-344-5387
ISHIHARA CORPORATION (U.S.A.)
601 California Street Suite 1700
San Francisco, CA 94108, U.S.A.
Tel: +1-415-421-8207 Fax: +1-415-397-5403
ISK Biosciences Europe N.V.
Pegasus Park Building 6, 4th Floor De
Kleetlaan 12B – Box9 1831 Diegem Belgium
Tel: +32-2-627-8611 Fax: +32-2-627-8600

Ishihara Sangyo Kaisha, Ltd.

39

Ishihara Sangyo Kaisha, Ltd.

Printed in Japan