Business
Reportfor the 129th Term2013.4.1−2014.3.31

To Our Shareholders
First of all, thank you very much for your continued patronage. We are very glad to be able topresent our annual report for the 129th financial period, ended on 31st March, 2014.
As you well know, while the Japanese economy experienced a worsening of the balance ofpayments, there were improvements in the export environment due to the yen depreciation andeconomic recovery in Europe and the U.S. Corporate earnings improved particularly in exportoriented business, leading to signs of improvement in equipment investment and the employment
environment, and the economy performed relatively steadily.
Against such a backdrop, the Parker Group has been actively engaged in seeking new customers
and providing new technology which matches the needs of our customers, as well as bolstering
equipment investment in order to increase production capacity and steadily seize foreign demand
and taking other measures to strengthen our corporate performance and improve profitability. As aresult, our business achievements were as described in the later part of this report.
In consideration of the business achievements, the dividend will be fifteen yen per share, which isan increase of two and a half yen per share from the interim dividend.
It is anticipated that our Group will face an environment in which, while there will be a gradual
recovery in the Western economies and the Chinese economy is also expected to continue to growmoderately, there remains a high degree of uncertainty for the future. In addition to the developmentof surface modification technologies unsurpassed in innovation and originality, we will continue toactively promote equipment investment to increase our production capacity and do our utmost toimprove our business achievements to meet the expectations of our valued shareholders.
Thank you very much for your unerring support.
June, 2014

Chairman & C.E.O .

President & C.O.O.

Shun ONO

Kazuichi SATOMI-1-Parker Group Outlook
Business progress and results
In the global economy during this period, while the Chinese economy was sluggish, the European
economies, which had been languishing due to the debt problems in Southern Europe, graduallyrecovered. In addition, the U.S. economy picked up with an expansion in employment and increase inpersonal consumption. In Japan, while the Japanese economy experienced a worsening of the balanceof payments, there were improvements in the export environment due to the yen depreciation andeconomic recovery in Europe and the U.S. Corporate earnings improved particularly in export orientedbusiness, leading to signs of improvement in equipment investment and the employment environment,
and the economy performed relatively steadily.
The business environment faced by the Parker Group is one in which our key customers in theautomotive industry experienced a significant improvement in business results due to the effects of
the yen depreciation and other factors. However, domestic automotive manufacturing did not growsignificantly due to the shift of production bases overseas and in the steel industry also, while there
were signs of improvement in crude steel production, there was surplus supply due to increase in blast
furnace production at Chinese steel manufacturers, fuelling competition with global manufacturers.
Against such an economic backdrop, while the sense of stagnation in the domestic market for metal
surface modification grew, the Parker Group did our best to gain new customers and supply newtechnology matching customers’ requirements, as well as bolstering equipment investment to increase
production capacity mainly in North America, China and the ASEAN region to ensure that we steadilytake advantage of foreign demand. As a technology-driven company, we aim to create new technology
with a view to the future and are pouring our efforts into research and development activities. We havealso worked hard to increase corporate value by cutting costs through promoting efficiency in raw
materials procurement and constructing solar power plants to make effective use of idle land.
As a result of these efforts, our consolidated business achievements were as follows.
Nets sales were 99,793million yen (up 11.0% on the previous period), and operating income was15,393million yen (up 17.1% ditto). Ordinary income was 18,046million yen (up 18.9% ditto) andpure profit for the period was 10,142million yen (up 19.8% ditto).

-2-

The overview by each business segment is as follows.
(Chemicals Business)
Nets sales were 41,878million yen (up 10.9％ on the previous period) and operating income
was 11,632million yen (up 18.7% ditto). Our chemicals division manufactures and sells chemicals
to form conversion coating on the surface of metals and other substrates to improve theirfunctionality by improving corrosion resistance, wear resistance, lubricity and otherperformances, thereby adding value to the substrate materials. Domestic chemicals businessprogressed steadily and overseas business results in Europe, Indonesia, Thailand and China also
improved even above the effects of the yen depreciation, leading to an increase in income andprofit in this segment.
(Equipment Business)
Net sales were 20,663million yen (up 16.9％ on the previous period) and operating income
was 1,315million yen (up 9.1％ ditto). The equipment business segment manufactures and sells
pre-treatment equipment, painting equipment and powder coating equipment etc. mainly to thetransportation machinery industry. Due to the expansion in demand for equipment overseas fromautomotive manufacturers, sales increased even further than the last fiscal year which had been
robust and exceeded 20,000 million yen for the first time ever in this segment, resulting in an
increase in income and profit.
(Jobbing Business)
Net sales were 33,798million yen (up 8.0％ on the previous period) and operating income was6,425million yen (up 4.4％ ditto). This division provides surface modification jobbing services
such as heat treatment, rust prevention coating and plating. The environment was difficult withrising labor costs in Thailand, Indonesia and elsewhere leading to rising income and falling profit.
However domestically the jobbing business was relatively steady despite the stagnation in
automotive production as the division exerted its utmost efforts to seek new demand, resulting in
an increase in income and profit.
(Other Business)
Net sales were 3,453million yen (up 8.9％ on the previous period） and operating income was503million yen (up 47.8％ ditto）. This segment includes our building maintenance, real estateleasing, financial lease and transportation business. Income increased in the building maintenancebusiness and profitability rose in the transportation business leading to an increase in income andprofit.

-3-Sales by Business (Consolidated)

Chemical(JPY Million)

Equipment

Jobbing

120,000

99,79369,393

2,817

3,027

3,028
60,00084,75880,483100,000
80,000

Others30,86830,94325,71989,919

3,453

3,171
33,79831,302

9,911

15,25017,66920,66340,000

8,505

20,00032,13936,60135,822

37,776

41,878

2009

2010

2011

2012

2013

0
(Fiscal Year)

Status of Capital Expenditure
Equipment investment in this period totaled 7,791million yen, with the main investments in eachbusiness segment as follows.
Main facilities completed in this period:
Jobbing Business:
Thai Parkerizing Co., Ltd.
Installation of new equipment in rust prevention coating and heat treatment jobbing plant.
Jobbing Business:
Foshan Parker Surface Modification Co., Ltd.
Construction of building and installation of new equipment for heat treatment jobbing plant.

-4-Issues to face
Regarding the economic outlook, while a gradual recovery is anticipated in the European and U.S.
economies and China’s economy is also expected to continue to expand moderately, a high degree ofuncertainty remains in the outlook for the global economy. In Japan the economic cycle is moving ina favorable direction due to the policies of the government and the Bank of Japan, however Japan’scurrent account balance is worsening and further reforms are needed to recover the competitivenessof Japanese businesses which may take time.
Against such a difficult backdrop, in order to secure its position as leader in the surface modifications
market, the Parker Group, under its motto of “Back to the Basics”, will pursue the development ofsurface modification technologies which cannot be beaten in terms of its innovation and originality.
Furthermore, in order to strengthen corporate performance and profitability, the Parker Group will
promote cost reduction activities throughout the whole business, improve efficiency in consolidated
business and actively promote equipment investment to increase production capacity.

Number of Employees
Consolidated:

3,536 persons-5-Principal Shareholders
Number of Shares
Name of Shareholders

Held(Thousands ofshares)

Shareholding
Ratio
(%)

Nippon Life Insurance Company

3,596

5.67

Meiji Yasuda Life Insurance Company

2,789

4.39

2,664

4.20

The Chiba Bank, Ltd.

2,382

3.75

Yugen Co., Ltd.

2,354

3.71

The SATOMI Scholarship Foundation

2,316

3.65

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

2,125

3.35Mizuho Bank, Ltd.

2,113

3.33

Japan Trustee Services Bank, Ltd. (Trust account)

1,739

2.74

State Street Bank and Trust Company

1,643

2.59

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

-6-

Financial Highlights (Consolidated)(JPY Million)
2006

2007

2008

2009

2010

2011

2012

2013

Net sales

97,115 103,489

90,807

69,39380,48384,75889,91999,793

Ordinary profit

14,247

15,464

9,828

9,055

13,64912,901

15,17918,046

Net profit

6,983

8,088

4,439

4,131

7,454

6,314

8,463

10,142

Total assets

131,348 132,595 111,088 119,101 124,925 130,517 146,739 165,914

Net sales(JPY Million)

120,000

97,115

103,489

99,79390,807100,000

80,483 84,758

89,91969,39380,00060,00040,00020,000
0
2006

2007

2008

2009

2010

2011

2012

2013

(Fiscal Year)

Ordinary profit(JPY Million)

20,00018,00016,00014,00012,00010,000
8,000
6,000
4,000
2,000
0

18,046
14,247

15,464

13,649
9,828

2006

2007

2008

15,17912,901

9,055

2009

2010

(Fiscal Year)-7-2011

2012

2013

Net profit(JPY Million)

12,00010,142

10,000
8,000

8,463

8,088

7,454

6,983

6,314

6,000

4,439

4,131

4,000
2,000
0
2006

2007

2008

2009

2010

2011

2012

2013

(Fiscal Year)

Total assets(JPY Million)

165,914180,000
160,000

146,739

131,348 132,595

140,000

111,088

119,101 124,925

130,517

120,000
100,000
80,00060,00040,00020,000
0
2006

2007

2008

2009

2010

(Fiscal Year)-8-2011

2012

2013

Consolidated Balance Sheets
Fiscal year ended March 312014

2013(JPY Million)
AssetsCurrent assets

86,01577,062

Cash and deposits

38,00531,985

Notes and accounts receivable-trade30,16728,148

Short-term investment securities

3,649

3,419

Inventories

10,238

9,388

Deferred tax assets

1,456

1,529

Others

2,635

2,725

Allowance for doubtful accounts

△137

△134

Fixed assets

79,89969,677

Tangible assets

42,772

37,211

Buildings and fixtures, net

13,747

12,184

Machinery, equipment and vehicles, net

10,141

7,702

Land

15,375

15,167

Construction in progress

2,450

1,156

Others, net

1,057

999

Intangible assets

2,697

2,469

Goodwill

689

785

Others

2,008

1,684

Investments and other assets

34,42829,996

Investment in securities

23,916

20,114

118

43

Deferred tax assets

1,365

1,373

Others

9,159

8,623

Allowance for doubtful accounts

△131

△157

Long-term loans receivable

Total assets

165,914-9-

146,739

Fiscal year ended March 312014

2013

Liabilities
Current liabilities

32,412

31,450Notes and accounts payable-trade

14,53813,433

Short-term loans payable

1,680

1,697

360

1,833

Corporate Income taxes payable

2,759

2,659

Provision for bonuses

2,396

2,203

-255

Others

10,676

9,368

Fixed liabilities

15,82914,551Long-term loans payable

2,108

2,090-9,864

10,313-856

999

Deferred tax liabilities

1,424

372

Others

1,127

1,225

Total liabilities

48,24146,002

Shareholders' equity

91,39682,921

Paid-in capital

4,560

4,560

Capital surplus

3,913

3,913

Retained earnings

86,54678,073

Treasury stock△3,623△3,625Current portion of long-term loans payable

Provision for loss on retirement of fixed assets

Provision for retirement benefits
Net defined benefit liability
Provision for directors' retirement benefits

Net assets

Accumulated other comprehensive profit

7,247

Valuation difference on available-for-sale securities

6,203

4,531

33

Foreign currency translation adjustment

1,176△2,769Remeasurements of defined benefit plans△135-

Minority interests

19,02816,050Total net assets

117,672

100,737

Total liabilities and net assets

165,914

146,739

Deferred gains or losses on hedges- 10 -

1,765

Consolidated Statements of income
Fiscal year ended March 312014

2013(JPY Million)
Net sales

99,79389,919

Cost of sales

63,065

57,118Gross profit

36,72832,800

Selling, general and administrative expenses

21,335

19,654Operating income

15,393

13,146

Non-operating profit

2,941

2,391

Interest income

206

161

Dividends income

367

304

Rent income

335

322

Technical support fee

290

286

Equity in earnings of affiliates

931

624

Foreign exchange gains

470

234

Others339

456

Non-operating expenses

288

358

Interest expenses

73

77

Others214

280

18,04615,179Extraordinary income

571

641

Extraordinary loss

202

459

Income before income taxes and minority interests

18,415

15,361

Income taxes-current

5,727

5,260

Income taxes-deferred

232

△13

Income before minority interests

12,456

10,115Minority interests in income

2,313

1,651

Net profit for the period

10,142

8,463

Ordinary income- 11 -