Challenge for
Growth and Evolution
Ishihara Sangyo Kaisha
Annual Report 2018Year Ended March 31, 2018

Contents
Consolidated Financial Highlights...........................................................................1
To Our Shareholders and Friends.............................................................................2
Business Overview.............................................................................................................5
Financial Statements
Consolidated Balance Sheet................................................................................6
Consolidated Statement of Income................................................................8
Consolidated Statement of Comprehensive Income...........................9
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............................10
Consolidated Statement of Cash Flows.....................................................11
Notes to Consolidated Financial Statements..........................................12
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, 2018
Thousands of
U.S. dollars(Note)

Millions of yen

2018

2017

2016

2018

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

¥

50,309¥46,734¥

48,982$473,496

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

57,692

54,86753,921

542,984

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

108,001

101,601

102,903

1,016,480

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

54,44147,50449,922

512,386

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

50,46151,06449,509474,927

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

3,099

3,033

3,472

29,167

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

108,001

101,601

102,903

1,016,480

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

10,022

8,416

8,315

94,325

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

3,442

3,804

9,152

32,395

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

4,639

4,660

5,350

43,661

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

8,707

8,173

8,989

81,948Current assets......................................................................................

105,554

104,005

110,494

993,449

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

159,767

156,871

163,056

1,503,689

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

47,99147,31149,726451,680

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

67,13762,98158,934

631,877

Sales classified by business segment:

As of March 31,

U.S. dollars(Note)Yen

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

¥

86.12

¥

95.15

¥

228.88$0.81

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

1,679.77

1,575.53

1,474.01

15.81

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

1,578

1,581

1,604

–

Note: T he U.S. dollar amounts in this report have been translated from the yen amounts, for convenience only, at ¥106.25 =U.S.$1.00, the rate of exchange
prevailing on March 31, 2018.

Ishihara Sangyo Kaisha, Ltd.

1

To Our Shareholders and Friends
The global markets in fiscal 2017, ended March 2018, saw stable economic growth in the
USA on growth in personal consumption and capital investments, and a steady trend towards
economic recovery in Europe. In Asia, the economy overall continued on a trend of mild
recovery thanks to steady economic growth in China on improved infrastructure investments
and exports. The Japanese economy maintained a trend of mild growth underpinned byfavorable corporate earnings, increased capital investments, and steady consumer spending.
The market influencing the main businesses of the ISK Group saw improvement in the sales
environment by continued growth in overseas markets due to a tightening of the global supply
and demand balance for titanium dioxide. On the other hand, rising titanium ore prices and aclear trend towards rising raw materials costs have created conditions that make it impossible
to avoid the impact on costs in the future. Agrochemical market demand was stagnant overall
and general inconsistency between regions. It was firm in North America and Asia on increases
in land used for crop planting area and the impact of good weather. However, the demand in
Kenichi Tanaka
President & CEO

South America was kept low due to continuously high inventory stock at distribution levels in
Brazil.
Under such conditions, the ISK Group entered into the final year of our 6th Medium-TermBusiness Plan (MTP). The inorganic chemicals business worked on technology development
and sales development in high value-added fields. The organic chemicals business advanced
efforts related to launching new agrochemicals to market and strengthening our overseas sales
offices.
As a result, net sales for the year under review increased to ¥108.0 billion [US$1,016
million] (up ¥6.3 billion YoY), operating income increased to ¥10.0 billion [US$94 million] (up ¥1.6
billion YoY), and ordinary income increased to ¥8.4 billion [US$79 million] (up ¥2.4 billion YoY),
representing increased revenues and income compared to the previous fiscal year. On the other
hand, net income attributable to parent company shareholders decreased to ¥3.4 billion [US$32
million] (down ¥0.3 billion YoY). Income declined due to having recorded extraordinary losses
in the form of a provision for environmental and safety arrangements incidental to becoming
able to make reasonable estimates of the expenses required in relation to soil and groundwaterpollution at the Yokkaichi Plant, which were announced following a general complianceinspection conducted in 2008. These expenses include costs related to landfill construction,
future response, and removal.
This year represented the first time in 13 fiscal years that we were able to eliminate losses
carried forward for nonconsolidated accounting.
Under the slogan of “Challenge for 2020”, to aim for the realization of the ideal model of “acompany with a brand power as strong and responsible chemical company” for our Group by
2020, the year of our 100th anniversary, the ISK Group has outlined our 7th MTP, a three-yearplan for fiscal 2018 through fiscal 2020.

Ideal model for the ISK Group ahead of our 100th anniversary (2020)
A strong and responsible chemical company with excellent brand power“A strong chemical company”• Use proprietary technology to develop a globally competitive business• Develop high value-added and highly profitable businesses that realize continuous
growth and stable income supported by technical innovation“A responsible chemical company”• As a good corporate citizen, conduct environment activities and social contribution
activities, communicate with local residents, focus on increasing value for stakeholders,and be a company of which employees be proud.

2

Ishihara Sangyo Kaisha, Ltd.

Policies of MTP
This MTP continues to undertake the business issues outlined in the previous MTP strengthening existing businesses and growth platforms. We will firmly protect existing
businesses while enhancing aggressive initiatives aimed at growth. We will aim for the realizationof a chemical company that is appealing for all our stakeholders.
In the final year of the MTP in fiscal 2020, we will aim for consolidated net sales of ¥131.0
billion [US$1,191 million] and consolidated operating income of ¥12.1 billion [US$110 million]. We
will steadily accumulate fiscal year income and enhance shareholder capital while also building
a firm income platform and financial platform capable of withstanding changes in the external
environment in order to achieve the resumption of dividends as soon as possible during thisthree-year period of the MTP.
For the inorganic chemicals business, we will use our record of providing a stable supply oftitanium dioxide in the domestic paint and ink industries as a platform for developing original
materials with the value required by the market and users. Aiming to launch these materials
globally, we will focus on building a framework of protection and aggression that maintains
our existing profitability while enabling us to pursue growth. Specifically, we will continue tosolidify our top share on the domestic market and technical superiority for titanium dioxide. We
also will implement aggressive initiatives aimed at expanding sales of highly functional, highvalue-added products that take advantage of our proprietary particle synthesis technology andsurface treatment technology, including our super weatherability pigments, which are steadily
increasing sales on the domestic markets, as well as our newly developed matte finishes
and creative pigments. For functional materials, we will utilize the strengths of our advanced
microparticulation technology and vast product line to accelerate sales growth, particularly forelectronic component materials and conducive materials, areas that are expected to grow in
the future. For development, we will not be bound by the business domains of inorganic andorganic. We will advance development into new materials and technology based on innovativeideas that account for the changing times.
For the organic chemicals business, we will enhance our capabilities in the areas oforganic synthesis technology, which has enabled us to create highly safe and highly effective
products, increase registration of agrochemicals in countries around the world, and strengthen
our development and registration capabilities in local markets. Through these initiatives, wewill grow into an R&D-oriented manufacturer with a presence on global agrochemical markets.
Specifically, amid strengthening global regulation of agrochemicals, we will steadily work to obtainand maintain registrations for proprietary agents in countries around the world. For sales, we will
enhance our internal network of sales promotion sites in Japan and overseas to reinforce sales
promotion policies for proprietary agents. For production, we will work to further reduce costs andincrease competitiveness. For R&D, we will focus on elevating R&D to a stage of environmentallyand people friendly innovation for new agrochemicals. Through these initiatives, we will soundly
protect our existing business platform while advancing aggressive initiatives aimed at expanding
sales of new agents in major markets and capturing growth demand in emerging markets.
As a new growth platform, we are developing new businesses in fields such as animal
health products and biopharmaceuticals. Looking to generate income from an early stage, wewill reduce the impact on our financial structure while promoting efficient business development.
Specifically, we will gain solid results from the launch of animal health product sales in Japan
during 2018 and accelerate development in Europe and America. The biopharmaceutical HVJ-E
we are developing in collaboration with the University of Osaka is steadily progressing withclinical trials. We will quickly establish partnerships with external companies to compensate forfunctions we cannot fulfill within our Group in order to develop our Group’s first cancer drug intoa major product.
Ishihara Sangyo Kaisha, Ltd.

3

Management targets (consolidated)
100 millions of yen

Millions of U.S. dollars (Note)

FY2018Target

FY2019TargetFY2020Target

FY2018Target

FY2019TargetFY2020TargetNet sales¥1,090¥1,200¥1,310$ 991$ 1,091$ 1,191

Operating income(margin)

44 (4%)

80 (7%)

121 (9%)40 (4%)

73 (7%)

110 (9%)Ordinary income

33

69

108

30

63

98

Net income attributableto owners of parent

18

49

81

16

45

74

ROE (return on equity)

3%

7%

10%

3%

7%

10%

Note: The US$ amounts in this table are converted based on ¥110 = US$1, the assumed rate for thethree-year period between fiscal 2018 and fiscal 2020.

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, whilesteadfastly adhering to high ethical standards, so as to gain social trust in ourbusiness.
• 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
and cooperation 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 in a 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
4

Ishihara Sangyo Kaisha, Ltd.

Business Overview
Inorganic Chemicals
Sales volume of titanium dioxide outperformed the previous year

Income increased thanks to sales volume growth pushed

both in Japan and overseas thanks to a tightening of the global

by firm demand for titanium dioxide and functional materials,

demand and supply balance, resulting in net sales of ¥43.3 billion

continued efforts to revise the sales price for titanium dioxide, and[US$408 million] (up ¥6.2 billion YoY).

the benefits of cost reduction efforts.

Functional materials recorded net sales of ¥11.1 billion

As a result, net sales for the inorganic chemicals business[US$105 million] (up ¥0.6 billion YoY) on increased sales due toincreased to ¥54.4 billion [US$512 million] (up ¥6.9 billion YoY) andstrong demand for electronic components and favorable sales ofoperating income increased to ¥7.9 billion [US$75 million] (up ¥2.9

conducive materials.

billion YoY).

Organic Chemicals
For agrochemicals, sales in Japan were largely unchanged year
on year thanks to domestic and overseas sales activities aimed at
the launch of new products and promoting products immediately
after launch to market. However, overseas sales decreased year

Sales of contracted active pharmaceutical ingredients werelargely unchanged from the previous year.
Income decreased due to a decline in overseas sales ofagrochemicals and increased R&D expenses.

on year. In recent years, sales in North America and Asia, where

As a result, net sales for the organic chemicals business

we have worked to increased sales promotion, have been firm

decreased to ¥50.4 billion [US$475 million] (down ¥0.6 billion YoY)

supported by increased demand for insecticides and herbicides.

and operating income decreased to ¥3.5 billion [US$34 million]

However, in Europe sales decreased for insecticides, for which(down ¥1.3 billion YoY).

sales were favorable last year, and sales of fungicides decreased
due to the influence of weather.

Other Businesses
Net sales from other businesses were largely unchanged at ¥3.0

billion [US$6 million] (up ¥0.1 billion YoY).

billion [US$29 million] and operating income increased to ¥0.6

Ishihara Sangyo Kaisha, Ltd.

5

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheet
As of March 31, 2018
Thousands of
U.S. dollars(Note 1)Millions of yen

2018

2017

2018

AssetsCurrent assets:
Cash and deposits (Notes 3, 9 and 18).....................................................................
Trade receivables (Notes 4 and 18):
Notes.....................................................................................................................
Accounts...............................................................................................................

¥

30,297¥28,347$285,148

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

2,636
27,24529,881(414)
29,467

1,885
23,52325,408(195)
25,21324,809256,424
281,233(3,897)277,336

Inventories (Note 6)....................................................................................................
Deferred income taxes (Note 13)...............................................................................
Other current assets..................................................................................................
Total current assets................................................................................................

41,494
2,167
2,129
105,554

47,1051,439
1,901
104,005

390,532
20,39520,038993,449

Property, plant and equipment:
Land (Notes 8 and 9).................................................................................................
Buildings and structures (Notes 8 and 9)...................................................................
Machinery and equipment (Notes 7, 8 and 9)............................................................
Leased assets (Note 8)..............................................................................................
Construction in progress...........................................................................................

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

5,313
35,923
113,235
3,078
2,970

53,732
346,447
1,066,805
26,00537,383

Less accumulated depreciation.................................................................................
Property, plant and equipment, net (Note 24)........................................................

162,602(121,759)
40,843

160,519(121,335)
39,184

1,530,372(1,145,967)
384,405

Investments and other assets:
Investments in securities (Notes 5, 9 and 18):
Unconsolidated subsidiaries and affiliates.............................................................
Other.....................................................................................................................

2,137
2,048

1,893
1,883

20,113
19,275

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

4,185

3,776

39,388Deferred income taxes (Note 13)...............................................................................
Asset for retirement benefits (Note 11).......................................................................
Other.........................................................................................................................
Total investments and other assets.......................................................................

7,421
15
1,749
13,370

7,963
16
1,927
13,682

69,845141
16,461
125,835

156,871$ 1,503,689

Total assets (Note 24)....................................................................................................
See notes to consolidated financial statements.
6

Ishihara Sangyo Kaisha, Ltd.

¥

159,767¥

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars(Note 1)Millions of yen

2018
Liabilities 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 4 and 18):
Notes.....................................................................................................................
Accounts...............................................................................................................

¥

Lease obligations (Notes 9 and 18)............................................................................
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.........................................................................................
Provision for loss on liquidation of a subsidiary.........................................................
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 and 18)............................................................................
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).......................................................................
Liabilities from application of equity method..............................................................
Other long-term liabilities...........................................................................................
Total long-term liabilities...................................................................................

10,41013,538
390

2017

¥

13,65013,490
280

2018

$

97,976
127,416
3,671

2,979
9,110
12,089
449
1,291
4,337
768
36
133
261
1
4,288
47,991

1,236
9,106
10,342
478
348
3,718
654
31
358
–
6
3,956
47,311

28,03885,741
113,779
4,226
12,15140,819
7,228
339
1,252
2,456
9
40,358451,680

20,5752,010
721
12,778
1,198
3,642
717
908
2,090
44,63927,501280
878
12,603
1,173
1,052
781
605
1,706
46,579193,647
18,918
6,786
120,264
11,27534,2786,748
8,546
19,670420,132

43,421
10,627
14,73643,421
10,627
11,294

408,668
100,019
138,691(720)
68,064(710)
64,632(6,776)640,602670–(1,072)(525)(927)
67,137
159,767566(0)(1,671)(546)(1,651)
62,981
156,871

6,306–(10,090)(4,941)(8,725)
631,877$ 1,503,689

Contingent liabilities (Note 12)
Net assets:
Shareholders’ equity (Note 14):
Common stock:
Authorized: 100,000 thousand shares in 2018 and 2017
Issued:40,384 thousand shares in 2018 and 2017.....................................
Capital surplus.......................................................................................................
Retained earnings..................................................................................................
Less treasury stock, at cost:
416 thousand shares in 2018 and 409 thousand shares in 2017........................
Total shareholders’ equity................................................................................
Accumulated other comprehensive income (loss):
Net unrealized holding gain on securities...............................................................
Unrealized deferred loss on hedges.......................................................................
Translation adjustments.........................................................................................
Retirement benefits liability adjustments................................................................
Total accumulated other comprehensive loss..................................................
Total net assets................................................................................................
Total liabilities and net assets........................................................................................

¥¥

See notes to consolidated financial statements.

Ishihara Sangyo Kaisha, Ltd.

7

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Income
For the year ended March 31, 2018
Thousands of
U.S. dollars(Note 1)Millions of yen

Net sales (Note 24)........................................................................................................

¥

2018
108,001¥2017
101,6012018$ 1,016,480

Cost of sales (Notes 6 and 15)......................................................................................

74,071

70,623

697,139

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

33,93030,978319,341

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

23,90822,562225,016

Operating income (Note 24)..........................................................................................

10,022

8,416

94,325Interest and dividend income....................................................................................

218

127

2,052

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

100

104

941

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

150

187

1,412

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

182

214

1,713

650

632

6,118

Interest expense........................................................................................................

919

1,125

8,649

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

709

372

6,673

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

51

951

480

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

579

652

5,450

2,258

3,100

21,252

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

8,414

5,948

79,191

7

33

66

7

33

66

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

613

566

5,769

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

2,783

2

26,193

Loss on impairment of fixed assets (Notes 8 and 24).................................................

55

967

518

Other income:

Other expenses:

Extraordinary gains:
Subsidy income.........................................................................................................
Extraordinary losses:

Other.........................................................................................................................
Income before income taxes.........................................................................................

53

33

499

3,504

1,568

32,979

4,917

4,413

46,278

Income taxes (Note 13):
Current......................................................................................................................

1,563

940

14,711

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

(88)

(331)

(828)

1,475

609

13,883

Net income (Note 22)....................................................................................................

3,442

3,804

32,395

Net income attributable to:
Owners of parent.......................................................................................................
See notes to consolidated financial statements.

8

Ishihara Sangyo Kaisha, Ltd.

¥

3,442

¥

3,804

$

32,395Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Comprehensive Income
For the year ended March 31, 2018
Thousands of
U.S. dollars(Note 1)Millions of yen

Net income

¥

2018
3,442

¥

2017
3,804

$

2018
32,395

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

104

322

979

Unrealized deferred gain (loss) on hedges.................................................................

0

(0)

0

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

719

(419)

6,767

Retirement benefits liability adjustments....................................................................

21

235

198

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

(120)

112

(1,130)Total other comprehensive income
Comprehensive income

250

724

6,814

¥

4,166

¥

4,054

$

39,209

¥

4,166

¥

4,054

$

39,209Total comprehensive income attributable to:
Owners of parent.......................................................................................................
See notes to consolidated financial statements.

Ishihara Sangyo Kaisha, Ltd.

9

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Changes in Net Assets
Year ended March 31, 2018
Millions of yen
Shareholders’ equity
Number ofshares ofcommonstock in issue

Commonstock

Balance at April 1, 2016...................... 403,839,431 ¥CapitalsurplusRetainedearnings

43,421 ¥ 10,627 ¥Retirement
benefits
liability
adjustments

–

–

–

–

–

3,804

–

(7)

–

–

–

–

(7)

0

–

0

–

–

–

–

0

–

–

–

322

(0)

(307)

235

250

11,294 ¥(710) ¥

566 ¥

(0) ¥

(1,671) ¥(546) ¥

62,981

–

–

–

–

–

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

––

Other changes.................................... (363,455,488)–

43,421 ¥ 10,627 ¥– ¥ (1,364) ¥Total net
assets3,804–

7,490 ¥

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

244 ¥Acquisition of treasury stock...............

40,383,943 ¥Treasurystock, at cost(703) ¥Net income attributable to ownersof parent for the period....................

Balance at April 1, 2017......................

Accumulated other comprehensive income (loss)(781) ¥ 58,934

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

–

–

–

3,442

–

–

–

–

–

3,442

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

–

–

–

–

(10)

–

–

–

–

(10)

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

–

–

0

–

0

–

–

–

–

0

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

–

–

–

–

–

104

0

599

21

724

14,736 ¥(720) ¥

670 ¥

– ¥

(1,072) ¥(525) ¥

67,137

Balance at March 31, 2018................

40,383,943 ¥

43,421 ¥ 10,627 ¥Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Commonstock

Balance at April 1, 2017.....................

CapitalsurplusRetainedearnings

–

–

–

–

–

32,395

–

(94)

–

–

–

–

(94)

0

–

0

–

–

–

–

0

–

–

–

979

0

5,637

198

6,814

(6,776) $6,306 $–

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

––

Ishihara Sangyo Kaisha, Ltd.

$ 408,668 $ 100,019 $ 138,691 $(0) $ (15,727) $Total net
assets32,395––

10Retirement
benefits
liability
adjustments

5,327 $–

See notes to consolidated financial statements.

Net
unrealized
Unrealized
holding gain deferred loss Translation
on securities on hedges adjustments(6,682) $Acquisition of treasury stock..............

Balance at March 31, 2018...............

Treasurystock, at cost

$ 408,668 $ 100,019 $ 106,296 $Net income attributable to ownersof parent for the period...................

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

Accumulated other comprehensive income (loss)– $ (10,090) $(5,139) $ 592,762(4,941) $ 631,877

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
For the year ended March 31, 2018
Thousands of
U.S. dollars(Note 1)Millions of yen

2018
Cash flows from operating activities
Income before income taxes.........................................................................................
Adjustments for:
Depreciation and amortization...................................................................................
Loss on disposal or sales of fixed assets, net............................................................
Loss on impairment of fixed assets...........................................................................
Decrease in provision for loss on liquidation of a subsidiary......................................
Foreign exchange loss, net........................................................................................
Increase (decrease) in liabilities for retirement benefits, net.......................................
Increase (decrease) in reserve for implementation of environmental andsafety arrangements...............................................................................................
Interest and dividend income....................................................................................
Interest expense........................................................................................................
Equity in losses of affiliates, 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...............................................................................................
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...................................
Increase (decrease) 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 3)............................................

¥

¥
¥

¥

4,917

2017
¥

4,413

2018
$

46,278

4,639
219
55
(5)
212
199

4,660
240
967
(16)
146
(2)

43,661
2,061
518
(47)
1,995
1,873

2,365
(218)
919
84
587

(473)
(127)
1,125
1,087
(120)

22,259(2,052)
8,649
791
5,525

(4,061)
6,089
90
1,579
241
17,911
127
(874)
7
(564)
16,607

(617)
5,267
5
585
(443)
16,697
117(1,143)16(1,055)
14,632(38,221)57,308847
14,861
2,268
168,574
1,195(8,226)66(5,308)156,301

(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

¥
¥

¥

(0)
–
(1,095)(5,303)
581
(362)
256
(27)
(5,950)
–
(280)
(208)
5,890
(14,160)
(558)
(91)
1,611
(1,826)(6)(9,628)(106)(1,052)
29,20928,157

$
$

$

(0)
1,788
(696)
(55,068)
1,515(6,249)2,456(499)(56,753)
22,588(5,271)(30,494)
84,518(149,242)(4,819)(1,261)
25,826(21,826)(94)(80,075)
668
20,141
265,007285,148

See notes to consolidated financial statements.

Ishihara Sangyo Kaisha, Ltd.

11

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
Year ended March 31, 2018

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 ¥106.25 = U.S.$1.00, the approximate rate ofstatements, certain reclassifications and rearrangements haveexchange in effect on March 31, 2018. 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
The accompanying consolidated financial statements include
the accounts of the Company and its 13 significant consolidated

receivables and payables hedged by qualified forward foreignexchange contracts are translated at their corresponding
contracted rates.
Revenue and expense items arising from transactions

subsidiaries, consisting of ISK Bioscience K.K., ISK SINGAPORE

denominated in foreign currencies are generally translated into yen

PTE. LTD., the ISK AMERICAS INCORPORATED Group (5at the exchange rates in effect at the respective transaction dates.

subsidiaries), ISK BIOSCIENCES EUROPE N.V., ISK Taiwan Co.,

Foreign exchange gain or loss is credited or charged to income

Ltd., Fuji Titanium Industry Co., Ltd., Ishihara Techno Corporation,in the year in which such gain or loss is recognized for financial

Yokkaichi Energy Service Co., Ltd. and ISK Engineering Partners

reporting purposes.

Corporation.
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 fiscal periods 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(c) Cash and cash equivalents

year ends of these overseas consolidated subsidiaries and the

For the purposes of the consolidated statement of cash flows,

year end 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(b) Foreign currency translation

with a maturity of three months or less when purchased which

Foreign currency transactions

can easily be converted to cash and are subject to little risk of

All monetary assets and liabilities denominated in foreignchange in value.

currencies are translated into yen amounts at the rates of
exchange in effect at the balance sheet date, except that
12

Ishihara Sangyo Kaisha, Ltd.

(d) Inventories
Inventories of the Company and its domestic consolidated(g) Property, plant and equipment and depreciation (except forleased 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
the hedged items and those of the hedging instruments. However,
the assessment of interest rate swaps which the special method isapplied is omitted.

Ishihara Sangyo Kaisha, Ltd.

13

(l) Accrued bonuses for employees

Prior service cost is amortized as incurred by the straight-line

Accrued employees’ bonuses are accounted for at an estimatedmethod over the estimated average remaining years of service ofamount of the bonuses to be paid as allocated to the current fiscal

the employees participating in the plans.

year.
(r) Income taxes(m) Reserve for sales returns

Income taxes are calculated based on taxable income andReserve for sales returns is provided for estimated losses incurring

charged to income on an accrual basis. Certain temporary

due to the return of finished goods and merchandise sold during

differences exist between taxable income and income reported forthe fiscal year subsequent to the balance sheet date, using thefinancial statement purposes which enter into the determination

historical rate of such returns in prior years.

of taxable income in a different period. The Company andits consolidated subsidiaries recognize the tax effect of such(n) Reserve for implementation of environmental and safety

temporary differences in their consolidated financial statements.

arrangements
The Company has provided the reserve for estimated(s) Accounting standard issued but not effective

expenditures to promote environmental and safety arrangements.

Accounting Standard and Implementation Guidance on Revenue

In addition, the Company has also provided the reserve for

Recognition

the expenses related to the remediation of soil and groundwater

On March 30, 2018, the ASBJ issued “Accounting Standard

contamination and measures for buried waste at Yokkaichi Plant.

for Revenue Recognition” (ASBJ Statement No. 29) and“Implementation Guidance on Accounting Standard for Revenue(o) Provision for maintenance

Recognition” (ASBJ Guidance No. 30).

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

(1) Overview
This is a comprehensive accounting standard for revenue
recognition. Specifically, the accounting standard establishes(p) Provision for loss on liquidation of a subsidiary

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

Provision for loss on liquidation of a subsidiary is provided based

customers:on an estimate of expenditures necessary to complete the

1. Identify the contract(s) with a customer

process of liquidating of a subsidiary.

2. Identify the performance obligations in the contract
3. Determine the transaction price(Additional information)
ISK SINGAPORE PTE. LTD., a consolidated subsidiary of theCompany, terminated the operations during the year ended March
31, 2014 and has been under the liquidation proceedings.
(q) Retirement benefits

4. Allocate the transaction price to the performanceobligations in the contract
5. Recognize revenue when (or as) the entity satisfies a
performance obligation(2) Scheduled date of adoption

Liability for retirement benefits is provided at an amount calculated

The Company expects to adopt the accounting standard andbased on the retirement benefit obligation and the fair value of theimplementation guidance from the beginning of the fiscal year

pension plan assets as of the balance sheet date.

ending March 31, 2022.

The retirement benefit obligation for employees is attributed
to each period by the straight-line method over the estimatedyears of service of the eligible employees.

(3) Impact of the adoption of accounting standard andimplementation guidance

Actuarial gain or loss is amortized in the following year in

The Company is currently evaluating the effect of the adoption

which such gain or loss is recognized, principally by the straight-of this accounting standard and implementation guidance online method, over the estimated average remaining years of

its consolidated financial statements.

service of the employees participating in the plans.

14

Ishihara Sangyo Kaisha, Ltd.

3. 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, 2018 and 2017 is presented as follows:
Thousands of
U.S. dollars

Millions of yen

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

2018
30,297¥

Time deposits with maturities in excess of three months..............................................

2017
28,347¥¥30,297$285,148(190)–

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

$

2018
285,148¥–

28,157

4. Notes Receivable and Notes Payable
As the balance sheet date for the year ended March 31, 2018 fell on a bank holiday, notes receivable, trade of ¥245 million ($2,306 thousand)and notes payable, trade of ¥549 million ($5,167 thousand) with due dates of March 31, 2018 were included in the respective balances in
the consolidated balance sheet at March 31, 2018 and were settled on the next business day.

5. Investments in Securities
Marketable securities classified as held-to-maturity debt securities and other securities at March 31, 2018 and 2017 were as follows:(a) Held-to-maturity debt securities
Millions of yen

2018
Carrying value

2017

Estimated fairvalue
Unrealized gain Carrying value

Estimated fairvalue
Unrealized gain

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

¥

10

¥

10

¥

0

¥

10

¥

10

¥

0

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

¥

10

¥

10

¥

0

¥

10

¥

10

¥

0

Thousands of U.S. dollars

2018
Carrying value

Estimated fairvalue
Unrealized gain

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

$

94

$

94

$

0

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

$

94

$

94

$

0

Ishihara Sangyo Kaisha, Ltd.

15

(b) Other securities
Millions of yen

2018
Carrying value

Acquisition
cost

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

¥ 1,591

¥

692

2017
Unrealized gain
(loss)
Carrying value¥899¥ 1,461

Acquisition
cost¥

Unrealized gain
(loss)

720

¥

741

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

1,591

692

899

1,461

720

741

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

78

86

(8)

40

46

(6)

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

78

86

(8)

40

46

(6)

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

¥ 1,669891¥ 1,501

¥

778

¥

¥

766

¥

735

Thousands of U.S. dollars

2018
Carrying value

Acquisition
cost

Unrealized gain
(loss)

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

$ 14,974$ 6,513$ 8,461

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

14,974

6,513

8,461

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

734

809

(75)

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

734

809

(75)

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

$ 15,708$ 7,322$ 8,386

Proceeds from sales of other securities and the aggregate gain for the years ended March 31, 2018 and 2017 are summarized asfollows:
Thousands of
U.S. dollars

Millions of yen

Proceeds from sales.....................................................................................................

¥

Aggregate gain..............................................................................................................

2018
–

¥

2017
2

$

2018
–

1

–

–

The redemption schedule subsequent to March 31, 2018 for held-to-maturity debt securities classified as other securities is described in
Note 18.

6. Inventories
Inventories at March 31, 2018 and 2017 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
22,908¥2017
30,243$

2018
215,605

Work in process............................................................................................................

4,526

3,932

42,598Raw materials and supplies..........................................................................................

14,06012,930132,329

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

¥

41,494¥

47,105$

390,532

Net gain on reversal of devaluation of inventories included in cost of sales for the years ended March 31, 2018 and 2017 amounted to¥637 million ($5,995 thousand) and ¥538 million, respectively.

16

Ishihara Sangyo Kaisha, Ltd.

7. Acquisition Costs of Property, Plant and Equipment
The accumulated amounts deducted from the acquisition costs of machinery and equipment due to receiving government subsidies at
March 31, 2018 and 2017 totaled ¥7 million ($66 thousand) and ¥33 million, respectively.

8. Loss on Impairment of Fixed Assets
For the year ended March 31, 2018, 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
Hiratsuka Plant(Hiratsuka City, Kanagawa Prefecture)

Major use
Company-owned housing

Classification
Land

¥

2018
55

$

2018
518

The Company and its consolidated subsidiaries group theirlocated at the Hiratsuka Plant in the above table. The Company

assets based on the business segment and production process

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

for assessment of loss on impairment. Idle assets which are noton 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.
Fuji Titanium Industry Co., Ltd., a consolidated subsidiary of

For the year ended March 31, 2017, the Company recorded aloss on impairment of fixed assets. The main components of loss
on impairment of fixed assets are as follows:

the Company, plans to sell land used for company-owned housing
Millions of yen

Location
Yokkaichi Plant(Yokkaichi City, Mie Prefecture)

Major use
Production equipment

Classification
Buildings and structures¥

Machinery and equipment

2017
13
339

Leased asset

13

Demobilization cost

602

Total

¥

967

As a part of production equipment located at the Yokkaichi Plant

The recoverably amounts of these assets were measured

in the above table, such as equipment for organic compound, is

at net selling value and the net book value of these assets were

not anticipated to be utilized in the future, the Company classified

reduced to zero.

the production equipment as idle assets and recognized a loss on
impairment.

Ishihara Sangyo Kaisha, Ltd.

17

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, 2018 and 2017 was approximately 1.5%.
Long-term bank loans, including the current portion of long-term bank loans, at March 31, 2018 and 2017 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen

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

¥

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

2018
15,351¥

2017
18,081$

22,91018,762

2018
144,480
176,583

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

34,11340,991

321,063

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

(13,538)(13,490)(127,416)

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

¥

20,575¥27,501$

193,647

The annual average interest rates applicable to long-term bank loans due within one year presented in the above table at March 31, 2018and 2017 were 1.8% and 1.9%, 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, 2018 and 2017 were 1.4% and 1.8%, respectively.
These bank loans become due from April 2018 through to March 2025.
Bonds at March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

Unsecured bonds, payable in yen at rate of 0.256%, due 2024....................................

¥

2018
2,400

¥

2,010

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

¥

2017
560

$

2018
22,589$18,918

(280)

(390)
¥

280

(3,671)

Lease obligations at March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2018
Finance lease obligations (ownership not transferred to the lessee)..............................

¥

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

1,170

2017
¥

721

2018
$

(478)

(449)
¥

1,356

¥

878

11,012(4,226)$

6,786

Information on the payment schedules of long-term bank loans, bonds, and lease obligations subsequent to March 31, 2018 is describedin Notes 17 and 18.
At March 31, 2018 and 2017, 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.................................

¥

2018
21,255¥201725,518Investments in securities...............................................................................................

95

98

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

–

190

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

18

Ishihara Sangyo Kaisha, Ltd.

¥

21,350¥25,806$2018
200,047894–$

200,941

Short-term bank loans, the current portion of long-term bank loans and long-term bank loans secured by such collateral at March 31,2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
6,690

2017
7,240

¥

2018
62,965$Current portion of long-term bank loans.......................................................................

8,443

4,844

79,464Long-term bank loans...................................................................................................

6,908

13,23765,016

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

¥

22,041¥

25,321$

207,445

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, 2018and 2017.
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
781

2017
828

¥

$

2018
7,350

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

0

0

0

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

(64)

(47)

(602)

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

¥

717

¥

781

$

6,748

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, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
11,856¥2017
12,199$2018
111,586

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

606

623

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

10

11

94

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

78

(229)

734

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

(499)

(737)

(4,696)

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

17

(11)

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

¥

12,068¥

11,856

5,704

160
$

113,582

Ishihara Sangyo Kaisha, Ltd.

19

The changes in plan assets during the years ended March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
153

¥

2017
140

$

2018
1,440

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

1

1

9

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

16

(5)

151

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

27

24

254

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

(19)

(7)

(179)

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

0

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

¥

178

¥

153

0
$

1,675

The changes in retirement benefit obligations calculated by the Simplified Method during the years ended March 31, 2018 and 2017 are
as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
884

¥

2017
883

$

2018
8,320

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

94

95

885

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

(105)

(94)

(989)

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

¥

873

¥

884

$

8,216

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March
31, 2018 and 2017 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

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

¥

Plan assets at fair value.................................................................................................
Unfunded retirement benefit obligation.........................................................................

2018
313

¥

2017
298

$

2018
2,946

(178)

(153)

(1,675)

135

145

1,271

12,62812,442

118,852

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

12,763

12,587

120,123

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

12,77812,603

120,264

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

(15)

(16)

(141)

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

¥

12,763¥

12,587$

120,123

The components of retirement benefit expenses for the years ended March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
606

¥

2017
623

$

2018
5,704

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

10

11

94

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

(1)

(1)

(9)

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

79

96

743

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

19

20

179

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

94

95

Amortization:

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

20

Ishihara Sangyo Kaisha, Ltd.

¥

807

¥

844

885
$

7,596

The components of retirement benefits liability adjustments included in other comprehensive income (before tax effect) for the years
ended March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
17

2017
320

¥

2018
160

$

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

19

20

179

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

(3)

(5)

(28)

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

¥

33

¥

335

$

311

The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

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

2018
593

2017
607

¥

171

152
¥

745

$

¥

2018
5,581
1,431

778

$

7,012

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2018 and 2017 are as follows:

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

2018
85%

2017
84%
11

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

10

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

5

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, 2018 and 2017 are as follows:

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

2018
Principally 0.1%

2017
Principally 0.1%

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

Principally 1.5%

Principally 1.3%

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

Principally 6.3%

Principally 6.1%

Total contributions paid by the Company and certain consolidated subsidiaries to the defined contribution pension plans for the years
ended March 31, 2018 and 2017 amounted to ¥89 million ($838 thousand) and ¥87 million, respectively.

12. Contingent Liabilities
Guarantees
At March 31, 2018, the Company was contingently liable for the following:Thousands of
U.S. dollars

Millions of yen

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

¥

2018
99

$

2018
932

Ishihara Sangyo Kaisha, Ltd.

21

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

the years ended March 31, 2018 and 2017 was, in the aggregate,consolidated subsidiaries consist of corporation, inhabitants’ andapproximately 30.4%. Overseas subsidiaries are subject to theenterprise taxes. The applicable statutory tax rate in Japan forincome taxes of the respective countries in which they operate.

The effective tax rates reflected in the accompanying consolidated statement of income for the years ended March 31, 2018 and 2017
differs from the above statutory tax rate for the following reasons:
2018
–%

2017
30.4%

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

–

0.7

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

–

(1.0)

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

–

0.7

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

–

(2.1)

Investment gains from equity method....................................................................................................

–

7.4

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

–

1.7

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

–(29.5)

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

–

0.2

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

–

5.3

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

–%

13.8%

Statutory tax rate......................................................................................................................................

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.
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, 2018 and 2017 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

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

¥

11,543¥

15,391$

108,640

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

3,878

3,825

36,499Loss on devaluation of inventories.............................................................................

218

211

2,052

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

1,832

1,253

17,242

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

514

498

4,838

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

234

197

2,202

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

1,171

428

11,021

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

216

235

2,033

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

16

16

151

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

2,150

2,203

20,234Gross deferred tax assets.............................................................................................

21,772

24,257

204,913

Less valuation allowance..............................................................................................

(11,575)(14,246)(108,941)

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

10,197

10,011

95,972

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

(21)

(21)

(198)

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

(200)

(152)

(1,882)Other.........................................................................................................................

(436)

(447)

(4,104)

Total deferred tax liabilities............................................................................................

(657)

(620)

(6,184)

Net deferred tax assets.................................................................................................
22

Ishihara Sangyo Kaisha, Ltd.

¥

9,540

¥

9,391

$

89,788

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, 2018 and 2017 are summarized as follows:
Thousands of shares

2018
April 1, 2017

Increase

Decrease

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

40,384––

March 31, 2018

40,384

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

409

7

0

416

Thousands of shares

2017
April 1, 2016

Increase

Decrease

March 31, 2017

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

403,839–

363,455

40,384

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

4,020

23

3,634

409

The increases in treasury stock were due to purchases of sharesin common and treasury stock for the year ended March 31, 2017of less than one voting unit for the years ended March 31, 2018

were mainly due to consolidation of ten shares into one share andand 2017. The decrease in treasury stock for the year ended

sales of shares at requests of shareholders who own less thanMarch 31, 2018 was mainly due to sales of shares at requests ofone voting unit.

shareholders who own less than one voting unit. The decreases

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

ended March 31, 2018 and 2017 totaled ¥8,707 million ($81,948

and selling, general and administrative expenses for the years

thousand) and ¥8,173 million, respectively.

16. Reserve for Implementation of Environmental and Safety 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 contaminatedcompliance test in 2008, the Company had recorded costs for

soil, underground water and buried waste, the corresponding

the remediation including the investigation as extraordinary losses

costs can now be reasonably estimated. As result, the Company

to the extent that they were paid or reasonably estimated to be

additionally recorded reserve for implementation of environmental

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

and safety arrangements in the amount of ¥2,580 million ($24,282

that could not be reasonably estimated as contingent liabilities.

thousand).

Ishihara Sangyo Kaisha, Ltd.

23

17. Leases
Operating lease transactions
Future minimum lease payments subsequent to March 31, 2018 under non-cancelable operating leases are summarized as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

2019........................................................................................................................................................

¥

2020 and thereafter................................................................................................................................
Total........................................................................................................................................................

296

$

542
¥

838

2,786
5,101

$

7,887

18. Financial Instruments
Overview

are exposed to interest rate fluctuation risk. The repayment dates(1) Policy for financial instrumentsof the debt extend up to 7 years from the balance sheet date.

In consideration of plans for capital expenditures or cash

Regarding derivatives, the Group enters into forward foreign

management, the Company and its consolidated subsidiaries

exchange contracts to reduce the foreign currency exchange(collectively, the “Group”) raise funds through bank loans orrisk arising from the receivables and payables denominated in

issuing bonds for its domestic and overseas business. The Group

foreign currencies. The Group also enters into interest rate swap

manages temporary cash surpluses through low-risk financialtransactions to reduce fluctuation risk deriving from interest

assets. The Group uses derivatives for the purpose of reducing

payable for long-term bank loans bearing interest at variablefluctuation risk of foreign exchange and interest rates. However,rates. Information regarding the method of hedge accounting is

the use of derivatives is limited within the extent of risk at thedescribed in Note 2 (f).

basis of the actual demand and the Group does not enter into
derivatives for speculative or trading purposes.

(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or(2) Types of financial instruments and related risk

counterparties may default)

Trade receivables – trade notes and accounts receivable – are

In accordance with the internal policies for credit limit

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

management, the Group reduces certain risks arising from credit

the Group has global operations and the percentage of sales

transactions with customers by setting credit limits for individualtransactions denominated in foreign currencies is high. As a result,customers, managing maturity dates and outstanding amounts,

the Group is exposed to foreign currency exchange risk arising

recognizing the existing risks and controlling all receivablesfrom receivables denominated in foreign currencies.

appropriately. The Group monitors the financial situation ofMarketable securities and investments in securities are

its main customers periodically and compares outstanding

exposed to market risk. Those securities are composed of mainly

receivables balances with the amounts of credit limit by eachheld-to-maturity debt securities and the shares of common

customer periodically and confirms that the internal policies arestock of other companies with which the Group has businessappropriately applied.

relationships, or affiliated companies. The Group has also loans

In accordance with the internal policies for asset

receivable from other companies with which it has business

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

relationships. These loans receivable are exposed to credit risk.

with high credit ratings. Accordingly, the Group believes that theRegarding trade payables – trade notes and accounts
payable – the Group is exposed to the risk of failure of settlement

credit risk deriving from such debt securities is insignificant.
The Group also believes that the credit risk of derivativesof these payables at the due date because of working capitalis insignificant as it enters into derivative transactions only withissue, which may result in loss of credit. The Group is alsofinancial institutions or trading companies which have a soundexposed to foreign currency exchange risk arising from thosecredit profile.

payables denominated in foreign currencies due to the import of
raw materials and other supplies.
A portion of bank loans and bonds has some financial(b) Monitoring of market risks (the risks arising from fluctuations inforeign exchange rates, interest rates and others)

covenants, which may result in the risk of early repayment

For trade receivables and payables denominated in foreigndepending on the fluctuation of the financial position of the Group.

currencies, the Group identifies the foreign currency exchange

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

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

24

Ishihara Sangyo Kaisha, Ltd.

foreign exchange contracts to hedge such risk. In order to mitigate(c) Monitoring of liquidity risk (the risk that the Group may not be

the unfavorable impact caused by foreign currency exchange

able to meet its obligations on scheduled due dates)

fluctuations on accounts receivable deriving from forecasted

Based on the reports from each cash management division, theexport sales transactions, the Group may enter into forward

Group prepares and updates its cash flow plans on a monthly

foreign exchange contracts to the extent it is probable thatbasis to manage liquidity risk. The Group also reports thesethose forecasted export sales take place. In order to mitigate theplans to the Board of Directors and takes actions if necessary tointerest rate risk for loans payable and bonds bearing interest at

maintain a specified level of cash position.

variable rates, the Group may also enter into interest rate swap
transactions.

(4) Supplementary explanation of the estimated fair value ofFor marketable securities and investments in securities,

financial instruments

the Group periodically reviews the fair values of such financial

The fair value of financial instruments is based on their quoted

instruments and the financial position of the issuers. In addition,market price, if available. When there is no quoted market pricethe Group continuously evaluates whether securities otheravailable, fair value is reasonably estimated. Since various

than those classified as held-to-maturity debt securities should

assumptions and factors are reflected in estimating the fair value,

be maintained taking into account their fair values and thedifferent assumptions and factors could result in different fairrelationships with the issuers.

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

In conducting derivative transactions, the division in charge ofderivative transactions follows the internal policies, and requests

are not necessarily indicative of the actual market risk involved in
the derivative transactions.

divisions that perform such derivative transactions to report thesetransactions, and reconciles this information with transaction

Estimated Fair Value of Financial Instruments

details obtained from financial institutions. The division prepares

The carrying value of financial instruments on the consolidated

monthly reports which include actual transaction data, thebalance sheets, estimated fair value and the differences as ofcontracted amounts, principals, fair value of these derivatives andMarch 31, 2018 and 2017 are shown in the following table. The

valuation gains or losses. These reports are then submitted to thefollowing table does not include financial instruments for which it isBoard of Directors for their review.

extremely difficult to determine the fair value. (Please refer to Note18(b) below)(a) Estimated fair value of financial instruments
Millions of yen

2018

2017

Carrying value

Estimated fair
value

Carrying value

Estimated fair
value

¥

¥

¥

¥

Difference

Difference

Assets:(1) Cash and deposits......................................................
(2) Trade receivables........................................................

30,29729,88130,297¥–29,881–

28,34725,40828,347¥–25,408–(3) Securities and investments in securities:
Held-to-maturity debt securities................................

10

10

0

10

10

0

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

1,669

1,669

–

1,501

1,501

–

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

¥

61,857¥61,857¥

0¥55,266¥55,266¥0Liabilities:(1) Trade payables.........................................................

12,08912,089–10,342

10,342(2) Short-term bank loans................................................

10,41010,410–13,65013,650––(3) Long-term bank loans, including current portion........

34,11334,248135

40,991

41,136145

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

¥

56,612¥56,747¥135¥

64,983¥65,128¥145

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

¥

70

¥

70

¥

–

¥

37

¥

37

¥

–

Ishihara Sangyo Kaisha, Ltd.

25

Thousands of U.S. dollars

2018
Carrying value

Estimated fairvalue(1) Cash and deposits......................................................

$ 285,148$ 285,148(2) Trade receivables........................................................

281,233

281,233

–

94

94

0

Difference

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

15,70815,708

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

$ 582,183$ 582,183(1) Trade payables.........................................................

113,779

113,779–(2) Short-term bank loans................................................

97,976

97,976––$0Liabilities:(3) Long-term bank loans, including current portion........

321,063

322,334

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

$ 532,818$ 534,089

$

1,271

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

$

$

$

–

659

659

1,271

(*) 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

Liabilities:

instruments and other matters related to securities and derivative(1) Trade payables and (2) Short-term bank loans

transactions are as follows:

Since these items are settled in a short time period, their carrying
value approximates estimated fair value.

Assets:(1) Cash and deposits and (2) Trade receivables(3) Long-term bank loans, including current portion

Since these items are settled in a short time period, their carrying

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

value approximates estimated fair value.

value approximates estimated fair value because their interest rate
reflects the market interest rate.

(3) Securities and investments in securities

The estimated fair value of long-term bank loans with

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

fixed interest rates is based on the present value of the total ofmarket prices. Regarding the information on securities andprincipal and interest discounted by the interest rate to be appliedinvestments in securities corresponding to holding purposes,

assuming new loans under the similar conditions to existing loans

please refer to Note 5.

are made.
Derivatives:
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..............................................................................................
Investments in limited partnerships...............................................................................

¥

2018
2,485
21

¥

2017
2,241
24

$

2018
23,388198

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.

26

Ishihara Sangyo Kaisha, Ltd.

(c) Redemption schedule of deposits, monetary receivables and securities with maturities
Millions of yen

Millions of yen

2018
Due in one
year or less

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

¥

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

30,2882017

Due after one
year throughfive years

Due after five
years throughten years¥¥

29,881––

Due after ten
years

Due after one
year throughfive years

Due in one
year or less

– ¥

– ¥

28,336 ¥–––25,408–Due after five
years throughten years¥

Due after ten
years

– ¥

–

–

–

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

–¥

60,169

10
¥

10

¥

–

–

– ¥

–

–
¥

53,744 ¥

–

10

– ¥

10

–
¥

–

Thousands of U.S. dollars

2018
Due in one
year or less

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

$ 285,064

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

281,233

Held-to-maturity debt
securities..............................

–

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

$ 566,297

Due after one
year throughfive years

Due after five
years throughten years$$–

Due after ten
years

– $

–

–

–

–

94

–

–

– $

–

Investments in securities:

$

94

$

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

2018Long-term bank loans...................................

Due in one year
or less

Due after one
year through two
years

¥

¥

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

390

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

13,53814,377¥354¥

10,3724,436

Due after three
years throughfour years

¥

390

390

449
¥

9,628

Due after two
years throughthree years

5,063

¥

390

237
¥

3,029

Due after four
years through five
years

3,527

¥

390

108
¥

1,903

Due after five
years

1,579
450

22
¥

2,315

–
¥

2,029

Thousands of U.S. dollars

2018
Due in one year
or less

Due after one
year through twoyears

Long-term bank loans...................................

$ 127,416$

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

3,671

3,671

3,671

3,671

3,671

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

4,226

3,332

2,231

1,016

207

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

$ 135,313$

90,616

97,619Due after two
years throughthree years$$

41,75047,652

Due after three
years throughfour years$$

28,50833,195Due after four
years through five
years

$

$

17,911

21,789Due after five
years

$

14,862
4,234–$

19,096

Ishihara Sangyo Kaisha, Ltd.

27

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, 2018 and 2017 were as follows:(a) Currency-related transactions
Forward foreign exchange contracts:
Millions of yen

2018

2017

Estimated fairvalue

Notional amount

Unrealized gain
(loss)

Notional amount¥¥

Estimated fairvalue

Unrealized gain
(loss)

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

¥

1,349

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

¥

56

56

3,767

¥

49

¥

49

–

–

–

343

7

7

580

(10)

(10)

372

(19)

(19)

Buy:
Japanese yen............................................
U.S. dollars................................................
Total..............................................................

90
¥

(1)

2,019

¥

45

18

(1)
¥

¥

45

4,500

0
¥

37

0
¥

37

Thousands of U.S. dollars

2018
Estimated fairvalue

Notional amount

Unrealized gain

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

$

12,696

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

$

527

$

527

–

–

–

Japanese yen............................................

5,459

(94)

(94)

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

847

(9)

Buy:

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

$

19,002

$

424

(9)
$

424

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

2018
Method ofaccounting

Classification

Deferred hedge Sell:methodEuro
Sell:
U.S. dollars
The allocation Sell:methodEuro
Buy:
U.S. dollars
Total

28

Hedged item

Accounts
receivable

Notional amount

Notional amount(over one year)

¥

¥

–

¥

24

Notional amount

Notional amount(over one year)

¥

¥

–

–

Estimated fairvalue (*)¥–

Accounts
payable

–

–

–

5

–

(0)

Accounts
receivable

50

–

(**)

–

–

–

Accounts
payable5¥

Ishihara Sangyo Kaisha, Ltd.

645

2017
Estimated fairvalue (*)

700

–
¥

–

27

(**)
¥

24

¥

32

–
¥

–

(**)
¥

(0)

Thousands of U.S. dollars

2018
Method ofaccounting

Classification

Deferred hedge Sell:methodEuro
Sell:
U.S. dollars
The allocation Sell:methodEuro
Buy:
U.S. dollars

Hedged item

Accounts
receivable

Notional amount

Notional amount(over one year)$ 6,070$–

Estimated fairvalue (*)$

226

Accounts
payable–––Accounts
receivable

471

–

(**)

Accounts
payable

Total

47

–

$ 6,588

$

–

(**)
$

226

(*) 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
Method of accounting

Classification

Hedged item

The special
methodReceive/floating
and pay/fixedLong-termbank loans

Notional amount

Notional amount(over one year)

¥

¥

7,261

3,588

2017
Estimated fairvalue (*)¥(**)

Notional amount

Notional amount(over one year)

¥

¥

9,492

6,161

Estimated fairvalue (*)¥(**)

Thousands of U.S. dollars

2018
Method of accounting

Classification

Hedged item

The special
methodReceive/floating
and pay/fixedLong-termbank loans

Notional amount

Notional amount(over one year)¥¥

68,33933,769Estimated fairvalue (*)$(**)(*) 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 loss for the years ended
March 31, 2018 and 2017:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

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

¥

152

¥

401

$

1,431

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

152

401

1,431

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

(48)

(79)

(452)

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

104

322

979

0

(0)

0

Unrealized deferred gain (loss) on hedges:
Amounts arising during the year ...............................................................................
Reclassification adjustments for gains and losses included in net income................

0

–

0

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

0

(0)

0

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

(0)

0

(0)

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

0

(0)

0

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

719

(419)

6,767

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

719

(419)

6,767

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

–

–

–

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

719

(419)

6,767

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

(64)

219

(602)

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

98

116

922

Translation adjustment:

Retirement benefits liability adjustments:

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

33

335

311

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

(12)

(100)

(113)

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

21

235

198

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

112

(120)
¥

724

¥

250

(1,130)$6,814

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 ¥302 million ($2,842 thousand) and ¥434 million andlease obligations of ¥325 million ($3,059 thousand) and ¥469 million under finance leases for the years ended March 31, 2018 and 2017,
respectively.

30

Ishihara Sangyo Kaisha, Ltd.

22. Amounts per ShareYen

U.S. dollars

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

2018¥ 1,679.77

2017¥ 1,575.53

Net income attributable to owners of parent per share.................................................

86.12

95.15

Net income attributable to owners of parent per share is based

2018
15.81

$

0.81

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, 2018 and 2017 is not presented

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

the number of shares of common stock outstanding at the year
The financial data for the computation of basic net income attributable to owners of parent per share for the years ended March 31, 2018and 2017 in the table above is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

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..........................................

3,442

¥

3,804

¥

3,442

$

32,395

–

–
¥

3,804

–
$

32,395

Thousands of shares2018
39,971

Weighted-average number of shares of common stock outstanding during the year......

2017
39,979The financial data for the computation of net assets per share at March 31, 2018 and 2017 in the above table is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2018
67,138¥2017
62,981$

2018
631,887

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

––¥

67,138¥62,981–$

631,887

Thousands of shares

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

2018
39,9682017
39,975

Ishihara 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, 2018 and2017 were as follows:
Transactions

BalancesThousandsof U.S.
dollars

Millions of yen
Name of affiliated company

Type of transaction

BELCHIM CROPPROTECTION N.V.

Sales of products

2018
¥

399

2017

2018

465

$ 3,755¥

Thousandsof U.S.
dollars

Millions of yen

2018

Account

Trade receivables

¥

–

2017
¥

154

2018
$

–

Major transactions and balances between a consolidated subsidiary and an affiliated company for the years ended and as of March 31,2018 and 2017 were as follows:
Transactions

Balances

Millions of yen
Name of affiliated company

Type of transaction

2018

BELCHIM CROPPROTECTION N.V.

Sales of products¥ 17,038

2017

Thousandsof U.S.
dollars

Millions of yen

2018¥ 18,189 $160,358

Thousandsof U.S.
dollars

2018

2017

2018

¥ 4,118¥ 2,545$ 38,758

Account

Trade receivables

The condensed financial statements of BELCOM CROP PROTECTION N.V as the significant related party as of and for the years ended
March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen
March 31¥2018
52,689Total assets¥

Current liabilities¥

Current assets
Fixed assets

March 31¥2017
39,438$

2018
495,943

60,532¥

45,113$569,767

52,313¥40,145$492,404

5,675

7,843

73,824Long-term liabilities

8,855

4,649

83,349Total liabilities

61,16844,794

575,753

Total net assets
Total liabilities and net assets

Net sales

319

(636)
¥

¥

60,532¥

45,113(5,986)$

569,767

Millions of yen

Thousands of
U.S. dollars

For the years ended
March 31

For the years
ended
March 312018
59,280¥2017
57,273$

2018557,982

Income before income taxes

560

2,552

5,271

Net (loss) income

(478)

1,538

(4,499)32

Ishihara Sangyo Kaisha, Ltd.

24. 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 andassetsInorganic chemicals

The accounting policies for the reportable business segments

This reportable segment includes the business of manufacturing

are the same as those described in Note 2. Intersegment sales

and sales of titanium dioxide, functional materials, which areare recorded at the same prices used in transactions with third

value-added products designed to take advantage of theparties.

characteristics of titanium dioxide and other inorganic chemicals.

(c) Reportable segment information
Millions of yen

2018
Reportable segments
Inorganic
chemicals

Organic
chemicals

Otherbusinesses

External customers...............................................

¥ 54,441¥ 50,461

3,099¥ 108,001

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

–

–

4,937

4,937

(4,937)–

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

54,44150,461

8,036

112,938(4,937)108,001

Subtotal

Elimination andcorporate (*1)

Consolidated(*2)¥¥ 108,001

Net sales and operating income:Net sales:¥–

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

¥

3,576

¥

618

¥ 12,178¥(2,156)¥ 10,022

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

¥ 69,542¥ 51,706¥

2,798¥ 124,046¥ 35,721¥ 159,767

Depreciation and amortization of
intangible assets.................................................

3,178

873

49

4,100

114

4,214

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

55

–

–

55

–

55

Increase in fixed tangible and intangible assets....

5,335

788

24

6,147

293

6,440

7,984

¥

Other items:

Ishihara Sangyo Kaisha, Ltd.

33

Millions of yen

2017
Reportable segments
Inorganic
chemicals

Organic
chemicals

Otherbusinesses

External customers...............................................

¥ 47,504¥ 51,064

3,033¥ 101,601

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

–

–

3,594

3,594

(3,594)–

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

47,50451,064

6,627

105,195(3,594)

101,601

Subtotal

Elimination andcorporate (*1)

Consolidated(*2)¥¥ 101,601

Net sales and operating income:Net sales:

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

¥

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

5,019

¥

¥

–

4,911

¥

517

¥ 10,447¥(2,031)¥

8,416¥ 67,555¥ 52,390¥

2,944¥ 122,889¥ 33,982¥ 156,871

3,157

898

55

4,110

105

4,215

Other items:
Depreciation and amortization of
intangible assets.................................................
Loss on impairment of fixed assets.......................

62

731

–

793

174

967

Increase in fixed tangible and intangible assets....

3,982

1,408

3

5,393

49

5,442

Thousands of U.S. dollars

2018
Reportable segments
Inorganic
chemicals

Organic
chemicals

Otherbusinesses

Subtotal

External customers...............................................

$ 512,386$ 474,927$ 29,167$ 1,016,480

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

––

46,466

46,466

Elimination andcorporate (*1)

Consolidated
(*2)

$

–

$ 1,016,480(46,466)–

Net sales and operating income:Net sales:

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

512,386

474,927

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

$ 75,144$ 33,656$

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

$ 654,513

Depreciation and amortization of
intangible assets.................................................
Loss on impairment of fixed assets.......................
Increase in fixed tangible and intangible assets....

75,633

1,062,946(46,466)

5,816$ 114,616$ (20,291)$

1,016,480$ 486,645$ 26,334$1,167,492$ 336,197$1,503,689

29,911

8,216

461

38,588

1,073

39,661

518

–

–

518

–

518

50,2127,416

226

57,854

2,758

60,612

94,325

Other items:(*1) The elimination and corporate applicable to segment income amounted
to ¥2,156 million ($20,291 thousand) and ¥2,031 million in the abovetables and includes ¥79 million ($743 thousand) and ¥43 million ofeliminations of intersegment transactions and ¥2,077 million ($19,548
thousand) and ¥1,988 million of corporate expenses, which are notallocable to the reportable segments for the years ended March 31,2018 and 2017, respectively. Corporate expenses mainly compriseexpenses incurred by the administration department of the Company,
which are not allocable to any reportable segment.
The elimination and corporate applicable to segment assets

34

Ishihara Sangyo Kaisha, Ltd.

amounted to ¥35,721 million ($336,197 thousand) and ¥33,982 million
includes ¥959 million ($9,026 thousand) and ¥763 million of offset
of inter-segment receivables and payables, and ¥36,680 million($345,223 thousand) and ¥34,745 million of corporate assets, which
are not allocable to a reportable segment as of March 31, 2018 and2017, respectively. Corporate assets consist of investments of surplus
funds (cash and securities), long-term investments (investments insecurities), 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, 2018 and 2017.
Geographical information
Net sales by geographical segment for the years ended March 31, 2018 and 2017 are summarized as follows:
Millions of yen

Year ended March 31, 2018
Japan

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

¥

50,309Asia¥

22,928America¥

12,384

Europe¥22,097

Other

¥

283

Total

¥ 108,001

Millions of yen

Year ended March 31, 2017
Japan

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

¥

46,734

Asia¥

18,709America¥

11,298Europe¥24,584

Other

¥

276

Total

¥ 101,601

Thousands of U.S. dollars

Year ended March 31, 2018
Japan

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

$ 473,496

Asia

America

Europe$ 215,793$ 116,555$ 207,972

Other

$

2,664

Total

$1,016,480

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 and Singapore

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, 2018 and 2017 are summarized as follows:
Millions of yen

At March 31, 2018
Japan

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

¥

39,810

Asia

¥

141

America¥

849

Europe

¥

43

Total

¥

40,843

Millions of yen

At March 31, 2017
Japan

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

¥

38,131

Asia

¥

138

America¥885

Europe

¥

30

Total

¥

39,184

Thousands of U.S. dollars

At March 31, 2018
Japan

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

$ 374,682

Asia

$

1,327

America$

7,991

Europe

$

405

Total

$ 384,405

Ishihara Sangyo Kaisha, Ltd.

35

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, 2018 are as follows:
Millions of yen
Customer name

MITSUI & CO., LTD.

Relevant reportable segments

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

		
¥		

2018
11,717

Thousands of
U.S. dollars

		
$		

2018
110,278

Information about major customers is not disclosed for the year ended March 31, 2017, because there is no customer that represents
more than 10% of net sales in the consolidated statement of income.

36

Ishihara Sangyo Kaisha, Ltd.

Report of Independent Public Accountants

Ishihara Sangyo Kaisha, Ltd.

37

Corporate Data
(As of June 29, 2018)

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
Michiyoshi Arata
Chimoto Honda
Teruaki Matsue
Norihiro Kato
Kiyomitsu Yoshida
Outside Directors
Noriyuki Yonemura
Hiroshi Katsumata

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

Executive Officers
President & Chief Executive Officer
Kenichi Tanaka
Senior Managing Executive Officers
Michiyoshi Arata
Chimoto Honda
Managing Executive Officers
Teruaki Matsue
Norihiro Kato
Kiyomitsu Yoshida
Masanari Kato
Yasunobu Kawazoe
Hideo Takahashi

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

Executive Officers
Yoichi Kobayashi
Kiyoshi Masuda
Hisashi Takenaka
Masaki Shimojo
Hiroshi Kimura
Yasuhiro Fujii
Mikiya Horie
Shigeru Mitani

Ishihara Sangyo Kaisha, Ltd.

39

Ishihara Sangyo Kaisha, Ltd.

Printed in Japan