Challenge for
Growth and Evolution
Ishihara Sangyo Kaisha
Annual Report 2017
Year Ended March 31, 2017

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 31,2017
Thousands of
U.S. dollars(Note)

Millions of yen

2017

2016

2015

2017

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

¥

46,734¥

48,982¥50,803$

416,598

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

54,86753,92152,528489,098

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

101,601

102,903103,331905,696

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

47,50449,922

51,342

423,462

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

51,06449,50949,031

455,197

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

3,033

3,472

2,958

27,037

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

101,601

102,903103,331905,696

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

8,416

8,315

11,10575,022

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

5,126

9,462

6,984

45,694

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

4,660

5,350

5,561

41,540Research and development costs.........................................................

8,173

8,989

9,330

72,856

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

103,997

110,484

107,470927,055

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

159,856

165,051

169,415

1,424,996

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

47,31149,72656,892421,742

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

66,571

61,59853,215593,430

Sales classified by business segment:

As of March 31,

U.S. dollars(Note)Yen

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

¥

128.22¥236.65¥174.63$

1.14

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

1,665.34

1,540.64

1,330.83

14.85

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

1,581

1,604

1,636

–

Note: T he U.S. dollar amounts in this report have been translated from the yen amounts, for convenience only, at ¥112.18 =U.S.$1.00, the rate of exchange
prevailing on March 31, 2017.

Ishihara Sangyo Kaisha, Ltd.

1

To Our Shareholders and Friends
The global markets in fiscal 2016, ended March 2017, saw an overall trend of economic
recovery as the USA economy continued to see mild economic growth supported by firm
corporate earnings and consumer spending and even Europe transitioned on a trend of
economic recovery despite concerns over the negative impact of Brexit. In Asia, whilesome regions showed signs of economic recovery, China, which is seeing the ongoing
contraction of excessive production facilities, was sluggish as overall the region remains
at an economic standstill. The Japanese economy was largely steady thanks to a positive
hiring environment and improved corporate earnings but we also saw troubling conditions
such as volatility on foreign currency markets and stock markets due to the Brexit issue
and policy trends of the new political administration in the USA.
Looking at the market environment influencing the main businesses of the ISK Group,
demand for paints application, the main use for titanium dioxide, in Japan was somewhat
Kenichi Tanaka
President & CEO

sluggish, which was unchanged from last year but improved demand from China
help drive a mild recovery on the overseas market and result in firm full-year demand.
Agrochemicals continued to see decline of global shipment value year on year. In addition
to a continuing trend of weak prices of agricultural crops and increasing inventory inBrazil, the world’s largest agrochemical consumer nation, abnormal weather conditions
occurring around the global have places strains on demand.
Under such conditions, the ISK Group has worked to implement the basic policies
of our 6th Medium-Term Management Plan (MTP) to strengthen existing businesses by
increasing overseas sales and expanding sales of high value added products and to
execute R&D for building a future growth platform.
As a result, net sales for the year under review decreased ¥1.3 billion to year on yearto ¥101.6 billion (US$ 906 million), operating income increased ¥0.1 billion to ¥8.4 billion(US$ 75 million), ordinary income was largely unchanged at ¥7.2 billion (US$ 65 million).
Net income attributable to parent company shareholders decreased ¥4.3 billion to¥5.1 billion (US$ 4.6 million) as we did not record extraordinary income on gains on thesale of land leasing rights recorded during the previous fiscal year.
To aim for the realization of the ideal model for our Group by 2020, the year of our100th anniversary, since fiscal 2015 the ISK Group has united as one to advance thepolicies outlined in our 6th MTP, a three-year plan based on the theme of “Innovation and
Implementation driving forward a strong chemical company” and which calls for us tostrengthen existing businesses and our growth platform. Emerging economies, whichhave driven market growth over the past two years, has slowed and we are now facing asevere business environment that is seeing a global reduction in demand for our mainstay
products titanium dioxide and agrochemicals. Last year, the first year of the plan,
earnings were strong as operating income outperformed MTP targets thanks to currency
markets that trended largely according to assumptions. This year, the second year of
our 6th MTP, while the inorganic chemicals business saw increased income underpinnedby an improved sales environment overseas, income declined for the organic chemicals
business, which has a high ratio of overseas sales, due to the negative impact of yen
appreciation. As a result, overall operating income underperformed targets.
Looking at financing, we used capital generated through the sale of land lease rights
for the commercial property of an overseas subsidiary and the sale of our main office2

Ishihara Sangyo Kaisha, Ltd.

building to fund the repayment of loans from financial institutions last year. As a result, we
succeeded in reducing interest-bearing loans at a rate exceeding targets, which helped
improve our financial structure.
The greatest issue facing management for the time being will be the rapid recoveryof earnings for the organic chemicals business, which is projected to see decreased
income mainly due to increased R&D expenses, in order to get the business backon a growth trajectory. To this end, the mainstay agrochemicals business is focusedon achieving launch to market for new self-developed products that will help drive
growth and enhancing overseas business. As new agents, on the domestic market
this year we launched a herbicide for corn and next year in Europe we are planning thelaunch of new proprietary agents. To enhance overseas operations, we will strengthen
partnerships with local distributors to achieve the rapid penetration of new products
into the market and expand sales of existing products while also enhancing our
agrochemical development and registration functions in the growth market of Asia. For
production, we are focused on cost reduction and quality improvements both internallyand at contracted manufacturers.
We are working on the development of new businesses such as veterinary drugs
and bio pharmaceuticals as future growth platforms but these efforts are projected
to result in increased R&D expenses. We are aware of how important it will be that
we work to reduce the impact on our financial status and effectively execute R&D
activities. To supplement for the functions our Group does not possess while pursuing
new businesses, thus far we have proactively participated in partnerships with othercompanies, universities, and other research institutions. We will further strengthen thesepartnerships in order to achieve the rapid commercialization of products utilizing thetechnology and seeds of the ISK Group.
For the inorganic chemicals business, we will continue to promote technology
development and sales route development in high added value fields as we shift from
common products to high value added, high function products. For titanium dioxide,
we are working on overseas market development for our Super Weatherability Gradeproducts, which are recording favorable sales growth in Japan. Additionally, we areworking to generate demand for heat-blocking, dust-proof, and other functional products
in response to the growing global awareness related to the environment and energy
conservation. For functional materials, we are promoting aggressively products thatare projected to see increased demand in the future and will tie these products to
expanded sales. This includes high purity titanium dioxide for use in advanced electronic
components and conductive materials for use as antistatic agents used in paints andplastics. For R&D, in addition to the development of existing technology aimed atachieving immediate contributions to earnings, we are expanding beyond our traditionalframework of inorganic and organic technology and undertaking research themes inareas that will lead into future business growth.
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 theirwork activities.

Ishihara Sangyo Kaisha, Ltd.

3

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 were largely unchanged on

conductive materials and electronic components were firm,

the domestic market while overseas sales outperformed theno sales were made on certain products due to a lack ofprevious year by the improved demand. We strove to revise

replacement demand.

export pricing in light of improved demand overseas but weIncome improved year on year. Although the drop in

were unable to make up for the drop experienced during theexport prices for titanium dioxide was a negative factor,

previous year. We also were impacted by yen appreciation

income grew driven by a decline in raw materials costs andthat continued beyond the first half of the year. As a result,operating rate improvement due to the recovery of overseas

net sales were down ¥1.1 billion year on year, to ¥37.0 billion

sales volume.

(US$ 330 million).
Sales of functional materials were down ¥1.2 billion,to ¥10.4 billion (US$ 93 million). Although sales for

As a result, segment net sales decreased ¥2.4 billion, to¥47.5 billion (US$ 423 million) and operating income increased
year on year, up by ¥2.4 billion to ¥5.0 billion (US$ 45 million).

Organic Chemicals
Domestic sales of agrochemicals outperformed the previous

initiatives aimed at expanding the applicability and sales regions

year by the launch of a new horticultural fungicide and naturalfor key existing products.

enemy products. Overseas net sales were up year on year.
In addition to yen appreciation, reduced shipments to Brazil

For pharmaceuticals, sales of contracted pharmaceuticalingredients were largely unchanged year on year.

due to the impact of the growing use of insect resistant GMO

As a result, segment net sales increased ¥1.5 billion,

crops and reduced shipments of herbicides to Asia due to poorto ¥51.0 billion (US$ 455 million) while operating income

weather were negative factors. This was made up for by increased

decreased ¥2.3 billion to ¥4.9 billion (US$ 44 million). Althoughsales of insecticides in Europe thanks to weather factors. In

the reevaluation of expenditure timing and other efforts

North America we registered a new fungicide against Botrytis

resulting in a year on year decrease in R&D expenses, income

and Sclerotinia in additional countries. Sales also grew in otherwas impacted by yen appreciation.

regions due to the development of new demands and aggressive

Other Businesses
Net sales from other businesses decreased ¥0.4 billion to¥0.1 billion to ¥0.5 billion (US$ 5 million).

¥3.0 billion (US$ 27 million) and operating income increased

Ishihara Sangyo Kaisha, Ltd.

5

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheet
As of March 31, 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

2017

2016

2017

AssetsCurrent assets:
Cash and deposits (Notes 4, 9 and 17)......................................................................
Trade receivables (Note 17):
Notes.....................................................................................................................
Accounts...............................................................................................................

¥

28,347¥29,399$252,692

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

1,885
23,52325,408(195)
25,213

2,105
23,121
25,226(184)
25,042

16,803
209,690
226,493(1,738)
224,755

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

47,105
1,431
1,901
103,997

53,0701,097
1,876
110,484

419,906
12,756
16,946
927,055

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

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

5,411
35,367112,934
3,299
2,129

47,361
320,226
1,009,405
27,43826,476

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

160,519(121,335)
39,184

159,140(120,406)
38,7341,430,906(1,081,610)
349,296

Investments and other assets:
Investments in securities (Notes 5, 9 and 17):
Unconsolidated subsidiaries and affiliates.............................................................
Other.....................................................................................................................

4,903
1,883

3,856
1,483

43,707
16,785

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

6,786

5,339

60,492

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

7,945
16
1,928
16,675

8,015
16
2,463
15,83370,824143
17,186
148,645

165,051$ 1,424,996

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

Ishihara Sangyo Kaisha, Ltd.

¥

159,856¥

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

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

2017
Liabilities and net assets
Current liabilities:
Short-term bank loans (Notes 9 and 17)....................................................................
Current portion of long-term bank loans (Notes 9 and 17).........................................
Current portion of bonds (Notes 9 and 17)................................................................
Trade payables (Note 17):
Notes.....................................................................................................................
Accounts...............................................................................................................

¥

Lease obligations (Notes 9 and 17)............................................................................
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 17).....................................................................
Bonds (Notes 9 and 17).............................................................................................
Lease obligations (Notes 9 and 17)............................................................................
Liability for retirement benefits (Note 11)....................................................................
Deferred income taxes (Note 13)...............................................................................
Long-term deposits received ....................................................................................
Reserve for implementation of environmental and safety arrangements....................
Asset retirement obligations (Note 10).......................................................................
Other long-term liabilities...........................................................................................
Total long-term liabilities...................................................................................

13,65013,490
280

2016

¥

13,85814,093
280

2017

$

121,679
120,253
2,496

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

1,393
8,949
10,342
511
500
4,481
628
26
797
223
24
3,963
49,726

11,01881,17392,191
4,261
3,102
33,143
5,830
276
3,191
–
54
35,266
421,742

27,501280
878
12,603
13
1,173
1,052
781
1,693
45,97435,167560
935
12,958
21
1,029
1,086
828
1,143
53,727245,1512,496
7,827
112,346
116
10,4569,378
6,962
15,092409,824

43,421
10,627
15,18843,421
10,627
10,062

387,065
94,732
135,390(709)
68,527(703)
63,407(6,321)
610,866566(0)(1,976)(546)(1,956)
66,571
159,856

245–(1,273)(781)(1,809)61,598165,0515,045(0)(17,614)(4,867)(17,436)
593,430$ 1,424,996

Contingent liabilities (Note 12)
Net assets:
Shareholders’ equity (Note 14):
Common stock:
Authorized: 100,000 thousand in 2017 and 1,000,000 thousand shares in 2016
Issued:40,384 thousand in 2017 and 403,839 thousand shares in 2016....
Capital surplus.......................................................................................................
Retained earnings..................................................................................................
Less treasury stock, at cost:
409 thousand shares in 2017 and 4,020 thousand shares in 2016.....................
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, 2017

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

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

¥

2017
101,601¥2016
102,903$2017
905,696

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

70,623

71,534

629,551

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

30,97831,369276,145

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

22,562

23,054

201,123

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

8,416

8,315

75,022

Interest and dividend income....................................................................................

127

135

1,132
3,423

Other income:Equity in earnings of affiliates.....................................................................................

384

423

Reversal of reserve for Ferosilt removal ....................................................................

–

845

–

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

104

198

927

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

187

–

1,667

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

214

208

1,908

1,016

1,809

9,057

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

1,125

1,398

10,029Foreign exchange loss, net........................................................................................

372

830

3,316

Other expenses:

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

652

578

5,812

2,149

2,806

19,157

7,283

7,318

64,922Gain on sales of fixed assets.....................................................................................

–

7,317

–

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

33

16

294

Ordinary income...........................................................................................................
Extraordinary gains:

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

–

0

–

33

7,333

294
5,045

Extraordinary losses:
Loss on disposal of fixed assets................................................................................

566

377

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

2

1,186

18

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

967

716

8,620

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

33

18

294

1,568

2,297

13,977

5,748

12,354

51,239

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

939

745

8,371

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

(317)

2,147

(2,826)

622

2,892

5,545

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

5,126

9,462

45,694

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

8

Ishihara Sangyo Kaisha, Ltd.

¥

5,126

¥

9,462

$

45,694

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Comprehensive Income
For the year ended March 31, 2017

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

Net income

¥

2017
5,126

¥

2016
9,462

$

2017
45,694

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

322

(268)

2,870

Unrealized deferred loss on hedges..........................................................................

(0)

(0)

(0)

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

(405)

(372)

(3,610)Retirement benefits liability adjustments....................................................................

235

(383)

2,095

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

(298)

(52)

(2,656)

Total other comprehensive loss.................................................................................
Comprehensive income................................................................................................

(1,075)(146)(1,301)

¥

4,980

¥

8,387

$

44,393

¥

4,980

¥

8,387

$

44,393

Total 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, 2017
Millions of yen
Shareholders’ equity
Number ofshares ofcommonstock in issue

Commonstock

Balance at April 1, 2015...................... 403,839,431 ¥CapitalsurplusRetainedearnings

43,421 ¥ 10,627 ¥Net income attributable to ownersof parent for the period....................

–

–

–

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

–

–

–

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

–

–

0

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

–

–

–

Balance at April 1, 2016...................... 403,839,431 ¥Accumulated other comprehensive income (loss)

43,421 ¥ 10,627 ¥Treasurystock, at cost

600 ¥

Net
Unrealized
unrealized
deferredholding gain gain (loss) on Translation
on securities
hedgesadjustments(698) ¥

513 ¥

0¥

9,462

–

–

–

(5)

–

–

0

–

–

10,062 ¥(703)¥

Retirement
benefits
liability
adjustments

Total net
assets(850) ¥

(398) ¥

53,215

–

–

–

9,462

–

–

–

(5)

–

–

–

–

0

(268)

(0)

(423)

(383)

(1,074)

245 ¥

– ¥

(1,273) ¥(781) ¥

61,598Net income attributable to ownersof parent for the period....................

–

–

–

5,126

–

–

–

–

–

5,126

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

–

–

–

–

(6)

–

–

–

–

(6)

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

–

–

0

–

0

–

–

–

–

0

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

–

–

–

–

321

(0)

(703)

235

(147)

15,188 ¥(709) ¥

566 ¥

(0) ¥

(1,976) ¥(546) ¥

66,571

Balance at March 31, 2017................ 40,383,943 ¥

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

Commonstock

Balance at April 1, 2016.....................

CapitalsurplusRetainedearnings

Treasurystock, at cost

94,732 $89,696 $

–

–

–

–

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

–

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

–Net income attributable to ownersof parent for the period...................
Acquisition of treasury stock .............

Balance at March 31, 2017...............
See notes to consolidated financial statements.

10

Ishihara Sangyo Kaisha, Ltd.

$ 387,065 $Accumulated other comprehensive income (loss)
Net
unrealized
Unrealized
holding gain deferred loss Translation
on securities on hedges adjustments

Retirement
benefits
liability
adjustments(6,267) $2,184 $

45,694

–

–

–

–

–

45,694

–

(54)

–

–

–

–

(54)

0

–

0

–

–

–

–

0

–

–

–

2,861

(0)

(6,266)

2,095(1,310)(6,321) $5,045 $

(0) $ (17,614) $$ 387,065 $ 94,732 $ 135,390 $– $ (11,348) $Total net
assets(6,962) $ 549,100(4,867) $ 593,430

Ishihara Sangyo Kaisha, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
For the year ended March 31, 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

2017
Cash flows from operating activities
Income before income taxes.........................................................................................
Adjustments for:
Depreciation and amortization...................................................................................
Loss (gain) 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........................................................................................
(Decrease) increase in liabilities for retirement benefits, net.......................................
Reversal of reserve for Ferosilt removal ....................................................................
(Decrease) increase in reserve for implementation of environmental and safety arrangements........
Interest and dividend income....................................................................................
Interest expense........................................................................................................
Equity in earnings 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...........................................................................................
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..................................................................
Proceeds from liquidation of a subsidiary..................................................................
Other.........................................................................................................................
Net cash (used in) provided by investing activities.................................................
Cash flows from financing activities
Redemption of bonds ...............................................................................................
Decrease in short-term bank loans, net.....................................................................
Proceeds from long-term bank loans........................................................................
Repayment of long-term bank loans..........................................................................
Repayment of lease obligations.................................................................................
Repayment of installment payable.............................................................................
Proceeds from deposits received..............................................................................
Repayment of deposits received...............................................................................
Increase in treasury stock, net...................................................................................
Net cash used in financing activities......................................................................
Effect of exchange rate changes on cash and cash equivalents...................................
(Decrease) increase in cash and cash equivalents........................................................
Cash and cash equivalents at beginning of year...........................................................
Cash and cash equivalents at end of year (Note 4).......................................................

¥

¥
¥

¥

5,748

2016
¥

12,3542017$

51,239

4,660
240
967
(16)
146
(2)
–
(473)
(127)
1,125
(248)
(120)

5,350
(7,106)
716
(288)
368
356
(2,459)
1,051
(135)
1,398
(334)
193

41,540
2,139
8,620
(143)
1,301
(18)
–
(4,216)(1,132)
10,029(2,211)(1,070)

(617)
5,267
5
584
(442)
16,697
117(1,143)16(1,055)
14,632

3,286
(746)
(287)
(1,513)274
12,478119(1,441)
78(965)
10,269(5,500)46,951
45
5,206(3,939)148,841
1,043(10,189)
143(9,405)130,433(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)
(60)
(3,543)
13,318
(375)
267
41
9
9,657
(280)
(1,542)
7,150(16,409)
(569)
(18)
1,780
(2,028)(5)(11,921)(78)
7,927
21,282
29,209$$$(0)(9,761)(47,272)
5,179(3,227)
2,282
–
(241)
(53,040)(2,496)(1,854)52,505(126,226)(4,974)(811)
14,361(16,277)(54)(85,826)(945)(9,378)260,376
250,998

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, 2017

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 ¥112.18 = U.S.$1.00, the approximate rate ofstatements, certain reclassifications and rearrangements haveexchange in effect on March 31, 2017. 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 Groupat the exchange rates in effect at the respective transaction dates.

(5 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.

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 not

The overseas consolidated subsidiaries are consolidated on

been included in the determination of net income but are reported

the basis of fiscal periods ending December 31, which differs fromas translation adjustments which are components of accumulated

the balance sheet date of the Company. As a result, adjustments

other comprehensive loss.

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

these overseas consolidated subsidiaries and the year end of the

For the purposes of the consolidated statement of cash flows,

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

However, the assessment of interest rate swaps which the special

Inventories of the Company and its domestic consolidated

method is applied is omitted.

subsidiaries are principally stated at lower of cost or net selling
value, cost being determined by the gross average method.

(g) Property, plant and equipment and depreciation (except for(e) Securities

Property, plant and equipment are stated at cost. Depreciation

Securities are classified into three categories: trading securities,of property, plant and equipment is recognized primarily by

held-to-maturity debt securities and other securities. Trading

the straight-line method over the estimated useful lives of

securities, consisting of debt and marketable equity securities, arethe respective assets. The useful lives of property, plant andcarried at fair value. Gain and loss, both realized and unrealized,

equipment are principally as follows:leased assets)are credited or charged to income. Held-to-maturity debt

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

securities are carried at amortized cost. Marketable securities

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

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

Costs for maintenance, repairs and minor renewals arechanges in unrealized holding gain or loss, net of the applicablecharged to income as incurred. Major renewals and betterments

income taxes, reported as a separate component of accumulated

are capitalized.

other comprehensive income (loss). Non-marketable securities
classified as other securities are carried at cost. Cost of securities(h) Intangible assets (except for leased assets)sold is 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 flowsof the hedged items and those of the hedging instruments.
Ishihara Sangyo Kaisha, Ltd.

13

(l) Accrued bonuses for employees(q) Retirement benefits

Accrued employees’ bonuses are accounted for at an estimatedLiability for retirement benefits is provided at an amount calculated

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

based on the retirement benefit obligation and the fair value of theyear.

pension plan assets as of the balance sheet date.

(m) Reserve for sales returns

to each period by the straight-line method over the estimatedReserve for sales returns is provided for estimated losses incurring

years of service of the eligible employees.

The retirement benefit obligation for employees is attributed

due to the return of finished goods and merchandise sold during

Actuarial gain or loss is amortized in the year following thethe fiscal year subsequent to the balance sheet date, using theyear in which such gain or loss is recognized, principally by thehistorical rate of such returns in prior years.

straight-line method, over the estimated average remaining yearsof service of the employees participating in the plans.

(n) Reserve for implementation of environmental and safety
arrangements
The Company has provided the reserve for estimatedPrior service cost is amortized by the straight-line method
over the estimated average remaining years of service of theemployees participating in the plans.

expenditures to promote environmental and safety arrangements.
(r) Income taxes(o) Provision for maintenance

Income taxes are calculated based on taxable income andProvision for maintenance is provided in an amount estimatedcharged to income on an accrual basis. Certain temporary

to be necessary for the maintenance for certain machinery anddifferences exist between taxable income and income reported forequipment.

financial statement purposes which enter into the determinationof taxable income in a different period. The Company and(p) Provision for loss on liquidation of a subsidiaryits consolidated subsidiaries recognize the tax effect of such

Provision for loss on liquidation of a subsidiary is provided based

temporary differences in their consolidated financial statements.

on an estimate of expenditures necessary to complete theprocess of liquidating of a subsidiary.
(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.

3. Additional Information
Implementation Guidance on Recoverability of Deferred Tax Assets
Effective April 1, 2016, the Company and its domestic consolidated subsidiaries adopted “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets” (Accounting Standards Board of Japan Guidance No. 26 of March 28, 2016).

14

Ishihara Sangyo Kaisha, Ltd.

4. Cash and Deposits
The reconciliation between cash and cash equivalents in the accompanying consolidated statements of cash flows and cash anddeposits in the accompanying consolidated balance sheets as of March 31, 2017 and 2016 is presented as follows:
Thousands of
U.S. dollars

Millions of yen

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

2017
28,347¥

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

2016
29,399¥¥28,157$250,998

(190)

(190)

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

$

2017
252,692¥(1,694)29,2095. Investments in Securities
Marketable securities classified as held-to-maturity debt securities and other securities at March 31, 2017 and 2016 were as follows:(a) Held-to-maturity debt securities
Millions of yen

2017
Carrying value

2016

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

2017
Carrying value

Estimated fairvalue
Unrealized gain

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

$

89

$

89

$

0

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

$

89

$

89

$

0

Ishihara Sangyo Kaisha, Ltd.

15

(b) Other securities
Millions of yen

2017
Carrying value

Acquisition
cost

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

¥ 1,461

¥

720

2016
Unrealized gain
(loss)
Carrying value

¥

¥

741

975

Acquisition
cost¥

Unrealized gain
(loss)

614

¥

361

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

1,461

720

741

975

614

361

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

40

46

(6)

118

141

(23)

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

40

46

(6)

118

141

(23)

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

¥ 1,501735¥ 1,093

¥

766

¥

¥

755

¥

338

Thousands of U.S. dollars

2017
Carrying value

Acquisition
cost

Unrealized gain
(loss)

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

$ 13,023$ 6,418$ 6,605

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

13,023

6,418

6,605

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

357

410

(53)

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

357

410

(53)

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

$ 13,380$ 6,828$ 6,552

Proceeds from sales of other securities and the aggregate gain for the years ended March 31, 2017 and 2016 are summarized asfollows:
Thousands of
U.S. dollars

Millions of yen

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

¥

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

2017
2

¥

2016
9

2017
18

$

7

1

9

The redemption schedule subsequent to March 31, 2017 for held-to-maturity debt securities classified as other securities is described in
Note 17.

6. Inventories
Inventories at March 31, 2017 and 2016 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2017
30,243¥

2016
34,317$

2017269,594

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

3,932

3,907

35,051

Raw materials and supplies..........................................................................................

12,93014,846115,261

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

¥

47,105¥53,070$419,906

Net gain on reversal of devaluation of inventories included in cost of sales amounted to ¥538 million ($4,796 thousand) for the year
ended March 31, 2017 and net loss on devaluation of inventories included in cost of sales amounted to ¥1,003 million for the year ended
March 31, 2016.

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, 2017 and 2016 totaled ¥33 million ($294 thousand) and ¥15 million, respectively.

8. Loss on Impairment of Fixed Assets
For the year ended March 31, 2017, 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
Yokkaichi Plant(Yokkaichi City, Mie Prefecture)

Major use
Production equipment

Classification
Buildings and structures¥

Machinery and equipment

2017
13

2017
116

$

339

3,022

Leased asset

13

116

Demobilization cost

602

5,366

Total

¥

967

$

8,620

As a part of production equipment located at the Yokkaichi

The Company and its consolidated subsidiaries group theirassets based on the business segment and production process

Plant in the above table, such as equipment for organic

for assessment of loss on impairment. Idle assets which are notcompound, is not anticipated to be utilized in the future, theanticipated to be utilized in the future and leased real estate are

Company classified the production equipment as idle assets andclassified as individual cash-generating units. Assets not definitely

recognized a loss on impairment.

linked to a specific business, such as the head-office building,

For the year ended March 31, 2016, the Company recorded a

the facilities for research and development and the facilities forloss on impairment of fixed assets. The main components of loss

welfare, are classified as corporate assets.

on impairment of fixed assets are as follows:
Millions of yen

Location
Yokkaichi Plant(Yokkaichi City, Mie Prefecture)

Major use
Production equipment

Classification
Buildings and structures¥

Machinery and equipment

99

Demobilization cost

468

Subtotal
Bunkyo-ku, Tokyo

Office equipment

2016
115

Buildings and structures

682¥

Subtotal
Total

34
34

¥

716

As a part of production equipment located at the Yokkaichi Plant

not anticipated to be utilized in the future, the Company andin the above table, such as equipment for organic compounds, is

its consolidated subsidiary classified it as assets scheduled for

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

disposal and recognized a loss on impairment. The Company andthe production equipment as idle assets and recognized a loss

its consolidated subsidiary wrote down the book value of theseon impairment. In addition, on March 11, 2016, the Board ofassets to nil.

Directors of the Company approved the relocation of the Tokyo
branch. Therefore, as the office equipment of Tokyo branch is

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, 2017 and 2016 was approximately 1.5%.
Long-term bank loans, including the current portion of long-term bank loans, at March 31, 2017 and 2016 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen

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

¥

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

2017
18,081¥

2016
19,348$29,912

22,9102017
161,178
204,226

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

40,99149,260365,404

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

(13,490)(14,093)(120,253)

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

¥

27,501¥35,167$245,151

The annual average interest rates applicable to long-term bank loans due within one year presented in the above table at March 31, 2017and 2016 were 1.9% and 2.0%, 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, 2017 and 2016 were 1.8% and 2.0%, respectively.
These bank loans become due from April 2017 through to March 2024.
Bonds at March 31, 2017 and 2016 were as follows:
Thousands of
U.S. dollars

Millions of yen

Unsecured bonds, payable in yen at rate of 0.106%, due 2019.....................................

¥

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

2017
560

¥

280

$

(280)

(280)
¥

2016
840

¥

560

2017
4,992
(2,496)$

2,496

Lease obligations at March 31, 2017 and 2016 were as follows:
Thousands of
U.S. dollars

Millions of yen

2017
Finance lease obligations (ownership not transferred to the lessee)..............................

¥

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

1,356

2016
¥

878

2017
$

(511)

(478)
¥

1,446

¥

935

12,088(4,261)$

7,827

Information on the payment schedules of long-term bank loans, bonds, and lease obligations subsequent to March 31, 2017 is describedin Note 17.
At March 31, 2017 and 2016, 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.................................

¥

2017
25,518¥

2016
25,616$

2017
227,473

Investments in securities...............................................................................................

98

84

874

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

190

190

1,694

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

18

Ishihara Sangyo Kaisha, Ltd.

¥25,806¥25,890$230,041

Short-term bank loans, the current portion of long-term bank loans and long-term bank loans secured by such collateral at March 31,2017 and 2016 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2017
7,240

2016
7,530

¥

2017
64,539$Current portion of long-term bank loans.......................................................................

4,844

5,761

43,181Long-term bank loans...................................................................................................

13,237

13,587

117,998

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

¥

25,321¥

26,878$

225,718

In addition, buildings and structures of ¥88 million, land of ¥219 million were pledged as collateral to secure future loans from certain
financial institutions at March 31, 2016. However, there were no corresponding liabilities at March 31, 2016.

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, 2017and 2016.
Thousands of
U.S. dollars

Millions of yen

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

¥

Liabilities incurred due to the acquisition of property, plant and equipment..................

2017
828

¥

2016
840

$

2017
7,381

14

–

–

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

0

0

0

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

(47)

(26)

(419)

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

¥

781

¥

828

$

6,962

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.

Ishihara Sangyo Kaisha, Ltd.

19

The changes in retirement benefit obligations during the years ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

201712,199¥2016
11,405$

2017
108,745

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

623

592

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

11

108

98

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

(229)

589

(2,042)Retirement benefits paid...............................................................................................

(737)

(479)

(6,570)

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

(11)

(16)

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

¥

11,856¥

12,199

5,554

(98)
$

105,687

The changes in plan assets during the years ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2017
140

¥

2016
162

$

2017
1,248

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

1

1

9

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

(5)

(9)

(45)

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

24

24

214

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

(7)

(38)

(62)

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

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

¥

153

¥

140

0
$

1,364

The changes in retirement benefit obligations calculated by the Simplified Method during the year ended March 31, 2017 and 2016 are as
follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2017
883

¥

2016
828

$

2017
7,871

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

95

99

847

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

(94)

(44)

(838)

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

20

Ishihara Sangyo Kaisha, Ltd.

¥

884

¥

883

$

7,880

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March
31, 2017 and 2016 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.........................................................................

2017
298

2016
243

¥

$

2017
2,656

(153)

(140)

(1,364)

145

103

1,292

12,442

12,839110,911

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

12,587

12,942112,203

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

12,603

12,958112,346

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

(16)

(16)

(143)

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

¥

12,587¥

12,942$112,203

The components of retirement benefit expenses for the years ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2017
623

2016
592

¥

$

2017
5,554

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

11

108

98

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

(1)

(1)

(9)

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

96

46

856

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

20

19

178

Amortization:

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

99

95
¥

844

¥

863

847
$

7,524

The components of retirement benefits liability adjustments included in other comprehensive income (loss) (before tax effect) for the years
ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2017
320

2016
(552)

¥

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

20

19

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

(5)0

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

¥

335

¥

(533)

$

2017
2,853
178
(45)

$

2,986

The components of retirement benefits liability adjustments included in accumulated other comprehensive loss (before tax effect) as ofMarch 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial loss..........................................................................................

¥

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

2017
607

¥

2016
923

¥

1,113

190

171
¥

778

$

2017
5,411
1,524

$

6,935

Ishihara Sangyo Kaisha, Ltd.

21

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2017 and 2016 are as follows:

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

2017
84%

2016
83%

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

11

11

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

5

6

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, 2017 and 2016 are as follows:

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

2017
Principally 0.1%

2016
Principally 0.1%

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

Principally 1.3%

Principally 2.1%

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

Principally 6.1%

Principally 6.6%

Total contributions paid by the Company and certain consolidated subsidiaries to the defined contribution pension plans for the years
ended March 31, 2017 and 2016 amounted to ¥87 million ($776 thousand) and ¥86 million, respectively.

12. Contingent Liabilities(a) Guarantees
At March 31, 2017, the Company was contingently liable for the following:Thousands of
U.S. dollars

Millions of yen

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

¥

As guarantor for borrowings of unconsolidated subsidiaries..................................................................
Total.......................................................................................................................................................

(b) Remediation measures in response to contaminated soil

2017
57

$

2017
508

$

1,400

100
¥

157

892

extraordinary losses to the extent that were paid during theand underground water and waste assumed to be buried atyear or reasonably estimated as of the balance sheet date. The

Yokkaichi Plant of the Company (the “Plant”)

Company does not record any costs that cannot be reasonably

As a result of soil and underground water surveys conducted at

estimated at the balance sheet date, such as costs for permanent

the Plant after an assessment by a comprehensive compliancecontamination remediation measures.

test in 2008, contamination was identified, which seems to be

The following information on buried waste that must

mainly derived from past production activities. In response to

be removed from the Plant has been officially announced

this, the Company submitted certain documents to Yokkaichiin connection with the assessment of the comprehensive

City, which has jurisdiction over the matter, notifying thecompliance test in 2008. The measures required to remove theauthorities of these findings, in accordance with the “Ordinanceburied waste will probably have an impact on the Company’s

for Conservation of the Living Environment” enacted by Mie

future business performance, however, the Company had not

Prefecture. Subsequently, under the guidance and advice frombeen able to conduct the detailed investigations efficiently as thethe Environmental Expert Committee, which consists of academic

vacant area in the Plant was used for temporarily storing removed

advisors, the Company conducted a survey to identify the status

Ferosilt.

and source of the contamination and set up pumping and water

In December 2015, the Company completed the disposal

treatment facilities in order to prevent dispersal of contaminatedof the removed Ferosilt that had been temporarily stored at the

ground water. While full-scale pumping is continuing, thePlant and proceeds work based on close discussions with theCompany also conducts detailed surveys and considers theauthorities about the location, extent, nature and volume of buried

appropriate countermeasures. The Company records costs

waste, and appropriate methods to dispose such waste. The

for preventing dispersal of contaminated ground water as

Company reserves costs to the extent that can be reasonably

22

Ishihara Sangyo Kaisha, Ltd.

estimated as of the balance sheet date such as costs for boring

underground metallic and type of soil, which is different from othersurvey of inorganic sludge described in (2) below. The Company

layers.

does not record any costs that cannot be reasonably estimated at
the balance sheet date, such as costs for disposal of buried waste.

(2) Inorganic sludge and other substances at a former(1) Buried waste in area No. 2

As a result of the excavation operation at certain sections in the

Since area No. 2 was previously the site of a sedimentation

SR Plant site, inorganic sludge had been identified. Disposal ofpond, certain legally permitted waste was also buried there.

such identified inorganic sludge had commenced from April, 2016

Consequently, prior to waste removal, the Company will need

and was completed during the year ended March 31, 2017. The

to distinguish between legally and illegally buried wastes. In the

Company is currently preparing for the boring survey in order toprocess of identifying the exact location of the inappropriately

specify buried waste at the SR Plant site sections.

Synthesis Rutile (“SR”) Plant siteburied waste, the Company is confirming the presence of

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

approximately 30.4% and 32.6%, respectively. Overseas

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

enterprise taxes. The applicable statutory tax rates in Japan for

countries in which they operate.

the years ended March 31, 2017 and 2016 were, in the aggregate,
The effective tax rates reflected in the accompanying consolidated statement of income for the years ended March 31, 2017 and 2016
differs from the above statutory tax rates for the following reasons:Statutory tax rate......................................................................................................................................

2017
30.4%

2016
32.6%

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

0.6

0.3

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

(0.8)

(0.5)

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

0.6

0.3

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

(1.6)

(0.7)

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

1.6

0.1

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

(22.5)

3.4(14.3)

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

0.8

Decrease of deferred tax assets resulting from change in tax rates......................................................

–

3.7

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

1.7

(1.5)

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

10.8%

23.4%

Ishihara Sangyo Kaisha, Ltd.

23

Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the assets and liabilities
for financial reporting purposes and the corresponding amounts for income tax purposes. The significant components of the Company’s
and consolidated subsidiaries’ deferred tax assets and liabilities at March 31, 2017 and 2016 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

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

¥

15,391¥

16,542$

137,199

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

3,825

3,931

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

211

185

1,881

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

1,192

1,304

10,62634,097

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

498

400

4,439

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

197

192

1,756

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

428

598

3,815

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

235

249

2,095

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

16

16

143

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

2,203

2,118

19,638Gross deferred tax assets.............................................................................................

24,19625,535

215,689

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

(14,192)(15,925)(126,511)

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

10,0049,610

89,178Property, plant and equipment..................................................................................

(21)

(21)

(187)

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

(152)

(73)

(1,355)

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

(468)

(425)

(4,172)

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

(641)

(519)

Deferred tax liabilities:

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

¥

9,363

¥

9,091

(5,714)$

83,464

14. Shareholders’ Equity
The Company Act of Japan (the “Act”) provides that an amountUnder the Act, upon the issuance and sale of new shares of

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

common stock, the entire amount of the proceeds is required toof capital surplus (other than the capital reserve) and retained

be accounted for as common stock, although a company may, by

earnings (other than the legal reserve) be transferred to the capital

resolution of the Board of Directors, account for an amount notreserve and the legal reserve, respectively, until the sum of theexceeding one-half of the proceeds of the sale of new shares ascapital reserve and the legal reserve equals 25% of the capital

additional paid-in capital.

stock account. Such distributions can be made at any time byresolution of the shareholders or by the Board of Directors if
certain conditions are met.

24

Ishihara Sangyo Kaisha, Ltd.

Common stock and treasury stock
Movements in common stock and treasury stock during the years ended March 31, 2017 and 2016 are summarized as follows:
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

Thousands of shares

2016
April 1, 2015

Increase

Decrease

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

403,839––

March 31, 2016

403,839

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

3,973

47

0

4,020

The increases in treasury stock were due to purchases of sharesof ten shares into one share and sales of shares at requests ofof less than one voting unit for the years ended March 31, 2017

shareholders who own less than one voting unit, and for the yearand 2016. The decreases in common and treasury stock for theended March 31, 2016 were mainly due to sales of shares atyear ended March 31, 2017 were mainly due to consolidation

requests of shareholders who own less than one voting unit.

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

ended March 31, 2017 and 2016 totaled ¥8,173 million ($72,856

and selling, general and administrative expenses for the years

thousand) and ¥8,989 million, respectively.

16. Leases
Operating lease transactions
Future minimum lease payments subsequent to March 31, 2017 under non-cancelable operating leases are summarized as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

2018........................................................................................................................................................

¥

2019 and thereafter.................................................................................................................................
Total........................................................................................................................................................

292

$

667
¥

959

2,603
5,946

$

8,549

17. Financial Instruments
Overview(2) Types of financial instruments and related risk

(1) Policy for financial instruments

Trade receivables – trade notes and accounts receivable – are

In consideration of plans for capital expenditures or cash

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

management, the Company and its consolidated subsidiaries

the Group has global operations and the percentage of sales(collectively, the “Group”) raise funds through bank loans ortransactions denominated in foreign currencies is high. As a result,issuing bonds for its domestic and overseas business. The Groupthe Group is exposed to foreign currency exchange risk arising

manages temporary cash surpluses through low-risk financialfrom receivables denominated in foreign currencies.

assets. The Group uses derivatives for the purpose of reducing

Marketable securities and investments in securities are

fluctuation risk of foreign exchange and interest rates. However,exposed to market risk. Those securities are composed of mainly

the use of derivatives is limited within the extent of risk at theheld-to-maturity debt securities and the shares of common

basis of the actual demand and the Group does not enter into

stock of other companies with which the Group has businessderivatives for speculative or trading purposes.

relationships, or affiliated companies. The Group has also loans
receivable from other companies with which it has business
relationships. These loans receivable are exposed to credit risk.
Ishihara Sangyo Kaisha, Ltd.

25

Regarding trade payables – trade notes and accounts

the unfavorable impact caused by foreign currency exchange

payable – the Group is exposed to the risk of failure of settlement

fluctuations on accounts receivable deriving from forecastedof these payables at the due date because of working capital

export sales transactions, the Group may enter into forward

issue, which may result in loss of credit. The Group is also

foreign exchange contracts to the extent it is probable that

exposed to foreign currency exchange risk arising from those

those forecasted export sales take place. In order to mitigate thepayables denominated in foreign currencies due to the import ofinterest rate risk for loans payable and bonds bearing interest at

raw materials and other supplies.

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

A portion of bank loans and bonds has some financial
covenants, which may result in the risk of early repaymenttransactions.
For marketable securities and investments in securities,

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

the Group periodically reviews the fair values of such financial

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

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

are exposed to interest rate fluctuation risk. The repayment dates

the Group continuously evaluates whether securities otherof the debt extend up to 7 years from the balance sheet date.

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

Regarding derivatives, the Group enters into forward foreignexchange contracts to reduce the foreign currency exchange
risk arising from the receivables and payables denominated in

be maintained taking into account their fair values and therelationships with the issuers.
In conducting derivative transactions, the division in charge of

foreign currencies. The Group also enters into interest rate swap

derivative transactions follows the internal policies, and requests

transactions to reduce fluctuation risk deriving from interest

divisions that perform such derivative transactions to report thesepayable for long-term bank loans bearing interest at variabletransactions, and reconciles this information with transaction

rates. Information regarding the method of hedge accounting isdetails obtained from financial institutions. The division preparesdescribed in Note 2 (f).

monthly reports which include actual transaction data, thecontracted amounts, principals, fair value of these derivatives and(3) Risk management for financial instruments

valuation gains or losses. These reports are then submitted to the(a) Monitoring of credit risk (the risk that customers or

Board of Directors for their review.

counterparties may default)
In accordance with the internal policies for credit limit
management, the Group reduces certain risks arising from credit(c) Monitoring of liquidity risk (the risk that the Group may not beable to meet its obligations on scheduled due dates)transactions with customers by setting credit limits for individual

Based on the reports from each cash management division, thecustomers, managing maturity dates and outstanding amounts,

Group prepares and updates its cash flow plans on a monthly

recognizing the existing risks and controlling all receivables

basis to manage liquidity risk. The Group also reports theseappropriately. The Group monitors the financial situation ofplans to the Board of Directors and takes actions if necessary to

its main customers periodically and compares outstanding

maintain a specified level of cash position.

receivables balances with the amounts of credit limit by eachcustomer periodically and confirms that the internal policies areappropriately applied.
In accordance with the internal policies for asset(4) Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted

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

market price, if available. When there is no quoted market pricewith high credit ratings. Accordingly, the Group believes that theavailable, fair value is reasonably estimated. Since various

credit risk deriving from such debt securities is insignificant.

assumptions and factors are reflected in estimating the fair value,

The Group also believes that the credit risk of derivatives

different assumptions and factors could result in different fairis insignificant as it enters into derivative transactions only withvalue. In addition, the notional amounts of derivatives in Note 18

financial institutions or trading companies which have a soundare not necessarily indicative of the actual market risk involved in

credit profile.

the derivative transactions.

(b) Monitoring of market risks (the risks arising from fluctuations inforeign exchange rates, interest rates and others)
For trade receivables and payables denominated in foreign
currencies, the Group identifies the foreign currency exchange
risk for each currency on a monthly basis and enters into forward
foreign exchange contracts to hedge such risk. In order to mitigate
26

Ishihara Sangyo Kaisha, Ltd.

Estimated Fair Value of Financial Instruments

following table does not include financial instruments for which it is

The carrying value of financial instruments on the consolidated

extremely difficult to determine the fair value. (Please refer to Notebalance sheets, estimated fair value and the differences as of17(b) below).

March 31, 2017 and 2016 are shown in the following table. The(a) Estimated fair value of financial instruments
Millions of yen

2017

2016

Carrying value

Estimated fairvalue

Estimated fair
value

¥

¥

Difference

Carrying value

Difference

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

28,34725,40828,347¥–25,408–¥29,399¥25,22629,399¥–25,226–0(3) Securities and investments in securities:
Held-to-maturity debt securities................................

10

10

0

10

10

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

1,501

1,501

–

1,093

1,093

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

¥

55,266¥55,266¥

0¥55,728¥55,728–¥0Liabilities:(1) Trade payables.........................................................

10,342

10,342–

10,342

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

13,65013,650–13,85813,858–(3) Long-term bank loans, including current portion........

40,991

41,13649,260145

49,452

192

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

¥

64,983¥65,128¥145¥

73,460¥73,652¥

192

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

¥

37

¥

37

¥

–

¥

95

¥

95

¥

–

Thousands of U.S. dollars

2017
Carrying value

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

$ 252,692$ 252,692(2) Trade receivables........................................................

226,493

226,493

–

89

89

0

Difference

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

13,38013,380Total assets......................................................................

$ 492,654$ 492,654–$0Liabilities:(1) Trade payables.........................................................

92,191

92,191–(2) Short-term bank loans................................................

121,679

121,679–(3) Long-term bank loans, including current portion........

365,404

366,697

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

$ 579,274$ 580,567

$

1,293

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

$

$

$

–

330

330

1,293

(*) 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

Assets:instruments and other matters related to securities and derivative(1) Cash and deposits and (2) Trade receivablestransactions are as follows:

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

Ishihara Sangyo Kaisha, Ltd.

27

(3) Securities and investments in securities(3) Long-term bank loans, including current portion

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

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

market prices.

value approximates estimated fair value because their interest rate

Regarding the information on securities and investments inreflects the market interest rate.
The estimated fair value of long-term bank loans withsecurities corresponding to holding purposes, please refer to

fixed interest rates is based on the present value of the total ofNote 5.

principal and interest discounted by the interest rate to be applied
Liabilities:

assuming new loans under the similar conditions to existing loans(1) Trade payables and (2) Short-term bank loans

are made.

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

Derivatives:
Please refer to Note 18 “Derivatives.”(b) Financial instruments whose fair values were extremely difficult to determine
Thousands of
U.S. dollars

Millions of yen

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

¥

2017
5,251

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

2016
4,204

¥

2017
46,809

$

32

24

214

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

Millions of yen

2017
Due in one
year or less

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

¥

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

28,3362016

Due after one
year throughfive years

Due after five
years throughten years

Due after ten
years

¥

¥

¥

25,408––––Due after one
year throughfive years

Due in one
year or less– ¥29,390 ¥––25,226–

Due after five
years throughten years¥

Due after ten
years

– ¥

–

–

–

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

–¥

53,744

–
¥

–

10
¥

10

–

Thousands of U.S. dollars

2017
Due in one
year or less

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

$ 252,594

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

226,493

Due after one
year throughfive years

Due after five
years throughten years

Due after ten
years

$

$

$

–
–

–
–

–
–

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

–

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

$ 479,087

28

Ishihara Sangyo Kaisha, Ltd.

–
$

–

89
$

89

–

–
¥

–
$

–

¥

54,616 ¥

–

10

– ¥

10

–
¥

–

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

2017Long-term bank loans...................................

Due in one year
or less

Due after one
year through two
years

¥

¥

13,49015,198Due after two
years throughthree years

¥

8,109

Due after three
years throughfour years

¥

2,594

Due after four
years through five
years

¥

1,288

Due after five
years

¥

312

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

280

280

–

–

–

–

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

478

369

275

159

62

13

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

¥

14,248¥15,847

¥

8,384

¥

2,753

¥

1,350

¥

325

Thousands of U.S. dollars

2017
Due in one year
or less

Due after one
year through twoyears

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

$ 120,253$ 135,479

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

2,496

2,496

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

4,261

3,289

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

$ 127,010$ 141,264

Due after two
years throughthree years$

72,286

Due after three
years throughfour years$–
74,738$

11,481–

2,452$

23,124Due after four
years through fiveyears

24,541

$

2,781

–

1,417
$

Due after five
years

–

553
$

12,034

116
$

2,897

18. 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, 2017 and 2016 were as follows:(a) Currency-related transactions
Forward foreign exchange contracts:
Millions of yen

Notional amount

2017

2016

Estimated fairvalue

Estimated fairvalue

Unrealized gain

Notional amount¥¥

Unrealized gain
(loss)

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

¥

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

3,767

¥

49

49

4,552

¥

89

¥

89

343

7

7

–

–

–

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

372

(19)

(19)

370

5

5

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

18

0

0

–

–

Buy:

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

¥

4,500

¥

37

¥

37

¥

4,922

¥

94

–
¥

94

Thousands of U.S. dollars

2017
Estimated fairvalue

Notional amount

Unrealized gain

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

$

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

33,580

$

437

$

437

3,058

62

62

3,316

(169)

(169)

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

160$

40,114

0
$

330

0
$

330
Ishihara Sangyo Kaisha, Ltd.

29

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

2017
Method ofaccounting

Classification

Hedged item

Deferred hedge Buy:
methodU.S. dollars

Accounts
payableThe allocation Buy:
methodU.S. dollars

Accounts
payableTotal

Notional amount

Notional amount(over one year)

¥

5

¥

–

¥

32

¥

–

27

2016
Estimated fairvalue (*)¥–

0

Notional amount

Notional amount(over one year)

¥

–

¥

–

¥

–

¥

–

–

(**)
¥

0

Estimated fairvalue (*)

¥

–

¥

–

–

–

Thousands of U.S. dollars

2017
Method ofaccounting

Classification

Hedged item

Deferred hedge Buy:
methodU.S. dollars

Accounts
payableThe allocation Buy:
methodU.S. dollars

Accounts
payableTotal

Notional amount

Notional amount(over one year)

$

44

$

–

$

285

$

–

241

Estimated fairvalue (*)

$

–

0
(**)

$

0

(*) 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

2017
Method ofaccounting

Classification

Hedged item

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

Notional amount

Notional amount(over one year)

¥

¥

9,492

6,161

2016
Estimated fairvalue (*)¥(**)

Notional amount

Notional amount(over one year)

¥

¥

8,732

6,983

Estimated fairvalue (*)¥(**)

Thousands of U.S. dollars

2017
Method ofaccounting

Classification

Hedged item

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

Notional amount

Notional amount(over one year)¥¥

84,61454,921

Estimated 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.

19. Gain on Sales of Fixed Assets
The gain on sales of fixed assets for the year ended March 31,

the Company, in the amounts of ¥639 million and ¥6,661 million,

2016 mainly consisted of gain on sales of land and a building at

respectively.

the Company’s head office, and gain on sales of land leasing
rights of ISK Singapore PTE. Ltd., a consolidated subsidiary of

30Ishihara Sangyo Kaisha, Ltd.

20. Other Comprehensive Loss
The following table presents reclassification adjustments and tax effects for components of other comprehensive loss for the years ended
March 31, 2017 and 2016:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

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

¥

400

¥

(339)

$

3,565

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

400

(339)

3,565

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

(78)

71

(695)

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

322

(268)

2,870

(0)

(0)

(0)

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

–

0

–

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

(0)

(0)

(0)

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

0

0

0

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

(0)

(0)

(0)

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

(405)

(372)

(3,610)(3,610)Translation adjustment:
Before tax effect....................................................................................................

(405)

(372)

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

–

–

–

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

(405)

(372)

(3,610)

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

219

(598)

1,952

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

116

65

1,034

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

335

(533)

2,986

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

(100)

150

(891)

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

235

(383)

2,095

Retirement benefits liability adjustments:

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

(52)

(298)
¥

(146)

¥

(1,075)(2,656)$(1,301)

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 ¥434 million ($3,869 thousand) and ¥550 million andlease obligations of ¥469 million ($4,181 thousand) and ¥594 million under finance leases for the years ended March 31, 2017 and 2016,
respectively.

Ishihara Sangyo Kaisha, Ltd.

31

22. Amounts per ShareYen

U.S. dollars

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

2017¥ 1,665.34

2016¥ 1,540.64

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

128.22236.65

2017
14.85

$

1.14

Net income attributable to owners of parent per share is based

for the years ended March 31, 2017 and 2016 is not presented

on the net income attributable to shareholders of common stock

since no potentially dilutive securities have been issued.

and the weighted-average number of shares of common stock

Ten shares of common stock were consolidated into one

outstanding during each year. Net assets per share are based

share on October 1, 2016. However, net income attributable toon the number of shares of common stock outstanding at theowners of parent per share and net assets per share have beenyear end.

computed as if the consolidation of shares was executed on

Diluted net income attributable to owners of parent per share

April 1, 2015.

The financial data for the computation of basic net income attributable to owners of parent per share for the years ended March 31, 2017and 2016 in the table above is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

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

5,126

¥

9,462

¥

5,126

$

45,694$45,694

–

–
¥

9,462

–

Thousands of shares

2017
39,979Weighted-average number of shares of common stock outstanding during the year......

2016
39,984

The financial data for the computation of net assets per share at March 31, 2017 and 2016 in the above table is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2017
66,571¥

66,571¥

2016
61,598¥61,598$

2017593,430$

593,430

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

––

Thousands of shares

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

32

Ishihara Sangyo Kaisha, Ltd.

2017
39,9752016
39,982–

23. Related Party Transactions
Major transactions and balances between the Company and an affiliated company for the years ended and as of March 31, 2017 and2016 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

2017
¥

465

2016

2017

471

$ 4,145¥

Thousandsof U.S.
dollars

Millions of yen

2017

Account

Trade receivables

¥

154

2016

2017

94

$ 1,373¥

Major transactions and balances between a consolidated subsidiary and an affiliated company for the years ended and as of March 31,2017 and 2016 were as follows:
Transactions

Balances

Millions of yen
Name of affiliated company

Type of transaction

2017

BELCHIM CROPPROTECTION N.V.

Sales of products¥ 18,189

2016

Thousandsof U.S.
dollars

Millions of yen

2017¥ 17,152 $162,141

2017

2016

2017

¥ 2,545¥ 3,109$ 22,687

Account

Trade receivables

Thousandsof U.S.
dollars

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 andInorganic 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.

assetscharacteristics of titanium dioxide and other inorganic chemicals.

Ishihara Sangyo Kaisha, Ltd.

33

(c) Reportable segment information
Millions of yen

2017
Reportable segments
Inorganic
chemicals

Organic
chemicals¥ 47,504¥ 51,064

Otherbusinesses

Subtotal

Elimination andcorporate (*1)

Consolidated(*2)¥¥ 101,601

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

¥

3,033

¥ 101,601–

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

–

–

3,594

3,594

(3,594)–

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

47,50451,064

6,627

105,195(3,594)

101,601

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

¥

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

5,019

¥

4,911

¥

517

¥ 10,447¥(2,031)¥

8,416¥ 67,555¥ 55,393¥

2,944¥ 125,892¥ 33,964¥ 159,856

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

Millions of yen

2016
Reportable segments
Inorganic
chemicals

Organic
chemicals

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

¥ 49,922¥ 49,509

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

–

–

Other
businesses

Subtotal

Elimination andcorporate (*1)

Consolidated
(*2)

¥

–

¥ 102,903(2,962)–

Net sales and operating income:Net sales:

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

49,922

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

¥

2,568

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

¥ 68,875¥

49,5093,472¥ 102,903

2,962

2,962

6,434

105,865

7,238

¥

394

¥ 10,200¥¥ 58,665¥

3,121¥ 130,661¥ 34,390¥ 165,051¥(2,962)(1,885)102,903¥

8,315

Other items:

34

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

3,321

966

58

4,345

113

4,458

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

–

682

7

689

27

716

Increase in fixed tangible and intangible assets....

3,743

782

20

4,545

110

4,655

Ishihara Sangyo Kaisha, Ltd.

Thousands of U.S. dollars

2017
Reportable segments
Inorganic
chemicals

Organic
chemicals

Otherbusinesses

Subtotal

Elimination andcorporate (*1)

Consolidated(*2)

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

$ 423,462$ 455,197$ 27,037$ 905,696

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

––

32,03832,038$(32,038)$ 905,696–

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

423,462455,197

59,075

937,734(32,038)

905,696

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

$ 44,741$ 43,778$

93,127$ (18,105)$

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

$ 602,202$ 493,787$ 26,244$1,122,233$ 302,763$1,424,996

28,142

8,005

491

36,638936

37,574

Net sales and operating income:Net sales:

4,608

$

–

75,022Other items:
Depreciation and amortization of
intangible assets.................................................
Loss on impairment of fixed assets.......................

553

6,516

–

7,069

1,551

8,620

Increase in fixed tangible and intangible assets....

35,497

12,551

27

48,075436

48,511

million includes ¥781 million ($6,962 thousand) and ¥716 million of
offset of inter-segment receivables and payables, and ¥34,745 million($309,725 thousand) and ¥35,106 million of corporate assets, which
are not allocable to a reportable segment as of March 31, 2017 and2016, respectively. Corporate assets consist of investments of surplus
funds (cash and securities), long-term investments (investments insecurities), assets for common use so forth.
(*2) Segment income corresponds to operating income in the
consolidated statements of income.

(*1) The elimination and corporate applicable to segment income
amounted to ¥2,031 million ($18,105 thousand) and ¥1,885 million in
the above tables and includes ¥43 million ($383 thousand) and ¥(71)
million of eliminations of intersegment transactions and ¥1,988 million($17,722 thousand) and ¥1,956 million of corporate expenses, which
are not allocable to the reportable segments for the years ended
March 31, 2017 and 2016, respectively. Corporate expenses mainlycomprise expenses incurred by the administration department of theCompany, which are not allocable to any reportable segment.
The elimination and corporate applicable to segment assets
amounted to ¥33,964 million ($302,763 thousand) and ¥34,390

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, 2017 and 2016.
Geographical information
Net sales by geographical segment for the years ended March 31, 2017 and 2016 are summarized as follows:
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

Millions of yen

Year ended March 31, 2016
Japan

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

¥

48,982

Asia¥

18,411

America¥

11,293

Europe¥23,970

Other

¥

247

Total

¥ 102,903

Thousands of U.S. dollars

Year ended March 31, 2017
Japan

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

$ 416,598

Asia

America

Europe$ 166,777$ 100,713$ 219,148

Other

$

2,460

Total

$ 905,696

Ishihara Sangyo Kaisha, Ltd.

35

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

China, Taiwan, South Korea, Thailand, Indonesia 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, 2017 and 2016 are summarized as follows:
Millions of yen

At March 31, 2017
Japan

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

¥

38,131

Asia¥

America

138

¥

885

Europe

¥

30

Total

¥

39,184

Millions of yen

At March 31, 2016
Japan

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

¥

37,766

Asia¥

America

142

¥

784

Europe

¥

42

Total

¥

38,734

Thousands of U.S. dollars

At March 31, 2017
Japan

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

$ 339,909

Asia

$

1,230

America$

7,889

Europe

$

268

Total

$ 349,296

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

represents more than 10% of net sales in the consolidated

Information about major customers is not disclosed for thestatement of income.

year ended March 31, 2017, because there is no customer that
Sales transactions with major customers for the year ended March 31, 2016 are as follows:
Millions of yen
Customer name

MITSUI & CO., LTD.

36

Ishihara Sangyo Kaisha, Ltd.

Relevant reportable segments

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

		
¥		

2016
10,709

Report of Independent Public Accountants

Ishihara Sangyo Kaisha, Ltd.

37

Corporate Data
(As of June 29, 2017)

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
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
Masanari Kato
Kiyomitsu Yoshida
Hiroshi Yoshizawa
Yasunobu Kawazoe

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
Hideo Takahashi
Kiyoshi Masuda
Hisashi Takenaka
Masaki Shimojo
Hiroshi Kimura

Ishihara Sangyo Kaisha, Ltd.

39

Ishihara Sangyo Kaisha, Ltd.

Printed in Japan