Nisshinbo Industries, Inc.

Non-Consolidated Balance Sheets
31st March, 1999 and 1998ASSETS(millions of yen)
1999
1998

(thousands of
US dollars)(Note 1)
1999

Current assets:
Cash and cash equivalents
Cash................................................................................................................
Time deposits.................................................................................................
Marketable securities (Note 4) .........................................................................
Receivables
Notes receivable, trade ..................................................................................
Accounts receivable, trade ............................................................................
Subsidiaries and affiliates ..............................................................................
Other ..............................................................................................................
Less allowance for doubtful accounts...........................................................
Inventories (Note 3)..........................................................................................
Other current assets ..........................................................................................
Total current assets ....................................................................................

Property, plant and equipment:
Land ...................................................................................................................
Buildings and structures ...................................................................................
Machinery, equipment and tools .....................................................................
Construction in progress ..................................................................................
Less accumulated depreciation ........................................................................

Investments and other assets:
Investment securities (Note 4) .........................................................................
Investments in and advances to subsidiaries and affiliates (Note 4)..............
Other ..................................................................................................................

See Notes to Non-Consolidated Financial Statements.

16

¥

1,229
29,00730,236
12,027¥

1,448
21,00822,456
13,796$

10,242
241,725
251,967
100,225

4,743
16,953
19,851814
42,361(308)
42,05339,888398
124,602

4,742
19,692
25,616621
50,671(507)
50,16443,514445
130,375

39,525
141,275
165,425
6,783
353,008(2,567)350,441
332,400
3,317
1,038,350

8,048
71,000168,744
1,327
249,119(170,905)
78,214

7,791
68,361
164,522613
241,287(163,393)
77,89467,066591,667
1,406,200
11,0582,075,991(1,424,208)
651,783

23,31733,92013,64070,877¥ 273,693

15,68324,944933
41,560¥ 249,829

194,308
282,667
113,667
590,642$ 2,280,775

(millions of yen)
1999
1998

(thousands of
US dollars)(Note 1)
1999

35,440177

10,24025,489$ 295,334
1,475

6,577
2,219
5,068
13,864
4,576
2,481
1,253
397
58,188

6,864
2,258
2,690
11,812
4,849
2,441
1,576
320
56,72754,80818,492
42,233
115,533
38,133
20,675
10,442
3,308
484,900

175
18,07630,084
48,335352
17,655
8,147
26,154

1,458
150,634
250,700
402,792

27,58820,401
6,897
112,284
167,170¥ 273,693

27,58820,401
6,897
112,062
166,948¥ 249,829

229,900
170,008
57,475
935,700
1,393,083$ 2,280,775

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term bank loans (Note 5).......................................................................
Current portion of long-term debt (Note 5) ...................................................
PayablesAccounts payable, trade................................................................................
Subsidiaries and affiliates .............................................................................
Other..............................................................................................................
Employees’ savings deposits .............................................................................
Accrued expenses ..............................................................................................
Accrued income taxes (Note 7) ........................................................................
Other current liabilities.....................................................................................
Total current liabilities .............................................................................

Long-term liabilities:
Long-term debt (Note 5) ..................................................................................
Accrued severance benefits (Note 6)................................................................
Other long-term liabilities ...............................................................................

¥¥

Commitments and contingencies (Note 11)

Shareholders’ equity (Notes 9 and 12):
Common stock:
Authorised — 400,000,000 shares
Issued with par value of ¥50 per share —236,443,939 shares ...................................................................................
Additional paid-in capital.................................................................................
Legal reserve ......................................................................................................
Retained earnings .............................................................................................

17

Nisshinbo Industries, Inc.

Non-Consolidated Statements of Income
Years ended 31st March, 1999 and 1998

(millions of yen)
1999
1998

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

(thousands of
US dollars)(Note 1)1999

¥ 162,662¥ 170,318$ 1,355,516

Cost of sales .......................................................................................................
Selling, general and administrative expenses...................................................

145,480
16,530162,010

150,925
16,357167,282

1,212,333
137,750
1,350,083

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

652

3,036

5,433

2,300
(732)
1,768
3,336

2,286
(650)
(1,074)562

19,167(6,100)14,73327,800

3,988

3,598

33,233

Costs and expenses:

Other income (expenses):
Interest and dividend income ..........................................................................
Interest expenses ...............................................................................................
Other, net (Note 10) .........................................................................................

Income before income taxes ..............................................................................................................
Income taxes (Note 7).........................................................................................................................
Net income ..........................................................................................................................................

¥

2,050
1,938

¥

1,790
1,808

(yen)

$

17,083
16,150(US dollars)

Per share:
Net income .......................................................................................................
Cash dividends .................................................................................................

See Notes to Non-Consolidated Financial Statements.

18

¥

8.19
7.00

¥

7.64
7.00

$

0.07
0.06

Nisshinbo Industries, Inc.

Non-Consolidated Statements of Shareholders’ Equity
Years ended 31st March, 1999 and 1998

(millions of yen)
1999
1998

(thousands of
US dollars)(Note 1)
1999¥

27,588¥27,588$ 229,900¥

27,588¥27,588$ 229,900¥

20,401¥

19,709$ 170,008¥—
20,401¥

692
20,401—$ 170,008

Balance at beginning of year .............................................................................

¥

6,897

¥

6,897

$

57,475

Balance at end of year .......................................................................................

¥

6,897

¥

6,897

$

57,475

Balance at beginning of year .............................................................................
Add:
Net income....................................................................................................
Deduct:Cash dividends ..............................................................................................
Directors’ bonuses ........................................................................................
Balance at end of year .......................................................................................

¥ 112,062¥ 111,969$ 933,850

1,938

1,808

16,150(1,656)(60)¥ 112,284(1,655)(60)¥ 112,062(13,800)(500)$ 935,700

Common stock:
Balance at beginning of year
(1999 and 1998 — 236,443,939 shares).......................................................
Balance at end of year
(1999 and 1998 — 236,443,939 shares).......................................................
Additional paid-in capital:
Balance at beginning of year .............................................................................
Add:
Business acquisition......................................................................................
Balance at end of year .......................................................................................
Legal reserve:

Retained earnings:

See Notes to Non-Consolidated Financial Statements.

19

Nisshinbo Industries, Inc.

Non-Consolidated Statements of Cash Flows
Years ended 31st March, 1999 and 1998
(thousands of
US dollars)(Note 1)
1999

(millions of yen)
1999
1998

Cash flows from operating activities:
Net income ...................................................................................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation ........................................................................................................
Provision for severance benefits .........................................................................
Payment of severance benefits ............................................................................
(Gain) loss on sale of property, plant and equipment .......................................
Gain on sale of marketable securities ..................................................................
(Gain) loss on sale of investment securities ........................................................
Write-down of marketable securities and investment securities .....................
Changes in operating assets and liabilities:
Receivables ...........................................................................................................
Inventories ...........................................................................................................
Other current assets .............................................................................................
Payables.................................................................................................................
Employees’ savings deposits ................................................................................
Accrued expenses .................................................................................................
Accrued income taxes ..........................................................................................
Other current liabilities ........................................................................................
Other, net
Net cash provided by operating activities

¥

1,938

¥

1,808

$

16,15010,562
1,479(1,058)(9)(1,779)(7,374)
5,422

10,957
1,542
(728)
362
(925)
79
1,114

88,016
12,325(8,817)(75)(14,825)(61,450)
45,183

8,310
3,626
47
(485)
(273)
40
(323)
77
475
20,675(1,411)(2,540)
(127)
(622)
(763)
(34)
(64)
(31)
95
8,712

69,25030,217392(4,042)(2,275)333(2,692)
642
3,959
172,291

14,295
180,126

58
144,820

119,125
1,501,050

7,750(13,813)(176,094)—(10,502)(139,330)

64,583(115,108)(1,467,450)(22,892)—(214)(10,842)(3,430)447
160(7,777)(190,767)—(1,783)(90,350)

Cash flows from financing activities:
Repayment of long-term debt .....................................................................................
Increase (decrease) in other long-term liabilities ......................................................
Increase (decrease) in short-term bank loans .............................................................
Cash dividends paid .....................................................................................................
Directors’ bonuses paid ................................................................................................
Net cash used in financing activities .................................................

(25,489)(48)
25,200(1,656)(60)(2,053)

(703)
46
(20)
(1,655)(60)(2,392)(212,408)(400)
210,000(13,800)(500)(17,108)

Net increase (decrease) in cash and cash equivalents .....................................................................
Cash and cash equivalents at beginning of year ..............................................................................
Cash and cash equivalents at end of year .........................................................................................

7,780
22,45630,236(1,457)
23,91322,456

64,833
187,134$ 251,967

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment ...............................................
Proceeds from sale of marketable securities ...............................................................
Proceeds from sale of investment securities and investments
in and advances to subsidiaries and affiliates .........................................................
Payment for purchase of property, plant and equipment ..........................................
Payment for purchase of marketable securities ..........................................................
Payment for purchase of investment securities andinvestments in and advances to subsidiaries and affiliates ....................................
Business acquisition .....................................................................................................
Other, net ......................................................................................................................
Net cash used in investing activities ..................................................

Cash paid during the year for:
Interest ..........................................................................................................................
Income taxes .................................................................................................................
Noncash investing and financing activities :Assets acquired by incurring accounts payable ...........................................................

See Notes to Non-Consolidated Financial Statements.

20

¥

¥

¥

704
1,766

¥

650
1,435

$

5,867
14,717

¥

2,537

¥

—

$

21,142

Nisshinbo Industries, Inc.

Notes to Non-Consolidated Financial Statements

1. BASIS OF PRESENTING FINANCIAL STATEMENTS:
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Japanese
Securities and Exchange Law and its related accounting regulations and in conformity with generally accepted accounting
principles and practices in Japan.
In preparing these financial statements, however, certain reclassifications have been made to the financial statements issued
domestically in Japan in order to present them in a form which is more familiar to readers outside Japan.
A statement of cash flows is not required for domestic reporting purposes but is presented herein for the readers’ convenience.
In addition, the accompanying footnotes include information which is not required under generally accepted accounting
principles and practices in Japan but is presented herein as additional information.
The United States dollar ($) amounts included herein are given solely for convenience and are stated, as a matter ofarithmetical computation only, at the rate of ¥120 = $1, the approximate exchange rate at 31st March, 1999. The translations
should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be,converted into United States dollars.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:(a) Foreign currency transactions
Short-term receivables and payables in foreign currencies are translated into Japanese yen at the current exchange rates as of
the balance sheet dates. Investments in and advances to subsidiaries and affiliates and long-term debt in foreign currencies aretranslated at the historical rates effective at the dates of transaction from which such accounts were originated.
(b) Cash and cash equivalents
In reporting cash flows, the Company considers cash and time deposits with maturities of one year or less to be cash and cash
equivalents. Such time deposits may be withdrawn on demand without diminution of principal.
(c) Investments
Current and non-current portfolios of marketable debt and equity securities are stated at the lower of cost or market. Other
investments are stated at cost.
(d) Inventories
Inventories are stated at the lower of cost or market, cost being determined by the average cost method.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed principally on the declining balance method overtheir estimated useful lives.
(f) Accrued severance benefits
The annual provision for severance payments is calculated to state the liability at the amount that would be required if all
employees eligible for severance payments should terminate their employment at the balance sheet date, less amounts funded.
Such provision includes those for directors and statutory auditors of the Company. Normal and prior service costs of theCompany’s non-contributory pension plan are charged to income and funded currently.
(g) Income taxes
Income taxes are provided for amounts currently payable for each fiscal year. No tax effect of temporary differences between
tax and financial reporting purposes is recognised.
3. INVENTORIES:
Inventories at 31st March, 1999 and 1998 were as follows:

Finished products..............................................................................................................
Work in process.................................................................................................................
Materials and supplies ......................................................................................................

¥¥(millions of yen)
1999
1998

(thousands of
US dollars)
1999

27,4975,255
7,136
39,888$ 229,142
43,792
59,466$ 332,400¥¥

31,042
5,936
6,536
43,51421

4. MARKETABLE EQUITY SECURITIES:At 31st March, 1999 and 1998, the aggregate cost and market value of current and non-current portfolios of marketable equity
securities included in marketable securities, investment securities and investments in subsidiaries and affiliates were summarised
as follows:

Current portfolios:
Cost and carrying amount ...........................................................................................
Market value .................................................................................................................
Non-current portfolios:
Cost and carrying amount ...........................................................................................
Market value .................................................................................................................

(millions of yen)
1999
1998

(thousands of
US dollars)
1999

12,027
41,674

12,80247,098$ 100,225
347,283

21,396
128,945

305,100
1,054,358¥¥

36,612
126,523

5. SHORT-TERM BANK LOANS AND LONG-TERM DEBT:
Short-term bank loans at 31st March, 1999 and 1998 were represented substantially by notes issued by the Company to banks,
generally due in 365 days. The annual interest rates applicable to the short-term bank loans at 31st March, 1999 and 1998 were0.7% to 1.6%.
Long-term debt at 31st March, 1999 and 1998 consisted of the following:(thousands of
US dollars)
1999(millions of yen)
1999
1998

Long-term debt with collateral:
4.65% loan from a bank, maturing serially to 2002 ...................................................
Non-interest bearing loan from a governmental institutematuring serially to 1999 .........................................................................................
Long-term debt without collateral:
1.7% convertible bonds, convertible into common
stock at ¥1,800.50, due in 1999 ................................................................................

¥

245

Less current portion .........................................................................................................
¥

¥

315

$

2,042

107

214

891

—
352
(177)
175

25,312
25,841(25,489)
¥
352

—
2,933
(1,475)
1,458$

Annual maturities of long-term debt were as follows:Year ending 31st March,
2000............................................................................................................................
2001............................................................................................................................
2002............................................................................................................................
2003............................................................................................................................

(millions of yen)

¥

¥

22

177
70
70
35
352

(thousands of US dollars)

$

$

1,475
583
583
292
2,933

At 31st March, 1999 and 1998, net book value of assets pledged as collateral for long-term loans from a bank and agovernmental institute was as follows:(thousands of
US dollars)
1999(millions of yen)
1999
1998

Property, plant and equipment ....................................................................................
Investment securities ....................................................................................................

¥

3
85
88

¥

¥
¥

3
79
82

$
$

25
708
733

6. RETIREMENT AND PENSION PLANS:
Under most circumstances, employees terminating their employment are entitled to lump-sum severance payments based on
the rate of pay at termination, years of service and certain other factors.
Provisions for severance payments charged to income for the years ended 31st March, 1999 and 1998 were ¥1,479 million($12,325 thousand) and ¥1,542 million, respectively.
In addition to the lump-sum severance payments described above, most employees are covered by the Company’s noncontributory pension plan. Pension costs charged to income for the years ended 31st March, 1999 and 1998 were ¥190 million($1,583 thousand) and ¥68 million, respectively.
7. INCOME TAXES:Japanese taxes on income applicable to the Company would normally result in an aggregate tax rate of approximately 48% for 1999
and 51% for 1998.
The effective income tax rates on income before income taxes in the accompanying non-consolidated financial statements
differ from the normal Japanese tax rates. The principal reasons for such differences are (a) the accounting policy of notproviding for deferred income taxes arising from temporary differences between financial and tax reporting and (b) certain
expenses which are not deductible for income tax purposes.
8. LEASING ARRANGEMENTS:
The Company leases machinery and other facilities under non-cancellable agreements.
Future minimum rental payments on the above leases are as follows:Year ending 31st March,
2000............................................................................................................................
2001............................................................................................................................
2002............................................................................................................................
2003............................................................................................................................
2004 and thereafter ...................................................................................................

(millions of yen)

¥

504
425
347
213
33

(thousands of US dollars)

$

4,200
3,542
2,892
1,775
275

Rental expenses charged to income for the years ended 31st March, 1999 and 1998 were ¥526 million ($4,383 thousand) and¥685 million, respectively.

23

9. SHAREHOLDERS’ EQUITY:The Japanese Commercial Code provides that an amount equal to at least 10% of all cash payments which are made as an
appropriation of retained earnings be appropriated as a legal reserve until such reserve equals 25% of stated value of capital stock.
This reserve is not available for dividends but may be used to reduce a deficit by resolution of the shareholders or may becapitalised by resolution of the Board of Directors.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividend is applicable.
In addition, a semi-annual interim dividend may be paid upon resolution of the Board of Directors, subject to limitations
imposed by the Code.
The computation of net income per share is based on the weighted average number of shares of common stock outstanding
during each fiscal year.
10. OTHER INCOME (EXPENSES) — OTHER, NET:
Other income (expenses) — Other, net consisted of the following:(thousands of
US dollars)
1999(millions of yen)
1999
1998

Gain (loss) on sale of property, plant and equipment ...................................................
Gain on sale of securities ..................................................................................................
Devaluation of securities ..................................................................................................
Other, net ..........................................................................................................................

9 (¥
9,153
(5,422)(1,972)
1,768 (¥

¥

¥

362)
846
(1,114)(444)
1,074)$

75
76,275(45,183)(16,434)$ 14,733

11. COMMITMENTS AND CONTINGENCIES:
Contingent liabilities at 31st March, 1999 and 1998 for trade notes discounted with banks amounted to ¥600 million ($5,000 thousand).
Contingent liabilities at 31st March, 1999 and 1998 for loans guaranteed amounted to ¥14,491million ($120,758 thousand) and ¥8,912
million, respectively.
Commitments for capital expenditures outstanding at 31st March, 1999 and 1998 were in the approximate amounts of ¥10,976 million($91,467 thousand) and ¥7,863 million, respectively.
12. SUBSEQUENT EVENTS:
On 29th June, 1999, the shareholders authorised the appropriation of retained earnings as follows:(millions of yen)

Cash dividends (¥3.50 per share) .....................................................................................
Directors’ bonuses.............................................................................................................

24

¥

828
50

(thousands of US dollars)

$

6,900
417

Report of Independent Certified Public Accountant on Non-Consolidated Financial Statements
To the Board of Directors
Nisshinbo Industries, Inc.
I have examined the non-consolidated balance sheet of Nisshinbo Industries, Inc. as of 31st March, 1998, and therelated statements of income, shareholders’ equity and cash flows for the year then ended, all expressed in Japaneseyen. My examination was made in accordance with generally accepted auditing standards in Japan and, accordingly,
included such tests of the accounting records and such other auditing procedures as I considered necessary in thecircumstances.
In my opinion, the non-consolidated financial statements referred to above present fairly the financial position of
Nisshinbo Industries, Inc. as of 31st March, 1998, and the results of its operations and its cash flows for the year thenended, in conformity with generally accepted accounting principles in Japan applied on a basis consistent with that ofthe preceding year.
The United States dollar amounts shown in the non-consolidated financial statements have been translated solely
for convenience. I have reviewed this translation and, in my opinion, the non-consolidated financial statements
expressed in Japanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba
Certified Public Accountant

26th June, 1998
Tokyo, Japan

Report of Independent Certified Public Accountants on Non-Consolidated Financial Statements
To the Board of Directors
Nisshinbo Industries, Inc.
We have examined the non-consolidated balance sheet of Nisshinbo Industries, Inc. as of 31st March, 1999, and therelated statements of income, shareholders’ equity and cash flows for the year then ended, all expressed in Japaneseyen. Our examination was made in accordance with generally accepted auditing standards in Japan and, accordingly,
included such tests of the accounting records and such other auditing procedures as we considered necessary in thecircumstances.
In our opinion, the non-consolidated financial statements referred to above present fairly the financial position of
Nisshinbo Industries, Inc. as of 31st March, 1999, and the results of its operations and its cash flows for the year thenended, in conformity with generally accepted accounting principles in Japan applied on a basis consistent with that ofthe preceding year.
The United States dollar amounts shown in the non-consolidated financial statements have been translated solely
for convenience. We have reviewed this translation and, in our opinion, the non-consolidated financial statements
expressed in Japanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba

Etsuko Nagashima

Certified Public Accountant

Certified Public Accountant

29th June, 1999
Tokyo, Japan

25

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Balance Sheets
31st March, 1999 and 1998ASSETS(thousands of
US dollars)(Note 1)
1999

(millions of yen)
1999
1998

Current assets:
Cash and cash equivalents
Cash ................................................................................................................
Time deposits .................................................................................................
Marketable securities (Note 4) ..........................................................................
Receivables
Notes receivable, trade...................................................................................
Accounts receivable, trade .............................................................................
Non-consolidated subsidiaries and affiliates ................................................
Other...............................................................................................................
Less allowance for doubtful accounts ...........................................................
Inventories (Note 3)...........................................................................................
Other current assets............................................................................................
Total current assets....................................................................................

Property, plant and equipment:
Land.....................................................................................................................
Buildings and structures ....................................................................................
Machinery, equipment and tools.......................................................................
Construction in progress ...................................................................................
Less accumulated depreciation ..........................................................................

Investments and other assets:
Investment securities (Note 4)...........................................................................
Investments in and advances to non-consolidated
subsidiaries and affiliates (Note 4)................................................................
Other ...................................................................................................................

Adjustments on foreign currency statement translation................................................................

See Notes to Consolidated Financial Statements.

26

¥

5,145
39,602
44,747
12,947¥

5,615
33,007
38,622
15,635$42,875330,017372,892
107,892

11,91530,543
14,5691,089
58,116(505)
57,611
48,819897
165,021

12,39432,711
19,165869
65,139(681)
64,45852,851
1,141
172,707

99,292
254,525
121,408
9,075
484,300(4,208)480,092
406,825
7,475
1,375,176

14,984
91,487200,394
7,200
314,065(201,467)
112,598

14,64088,761
196,196
1,159
300,756(193,011)
107,745

124,866
762,392
1,669,950
60,0002,617,208(1,678,892)
938,316

31,33818,818261,150

34,17814,50280,01828,004
1,828
48,650284,817
120,850
666,817

1,753—

14,608¥ 359,390¥ 329,102$ 2,994,917

(millions of yen)
1999
1998

(thousands of
US dollars)(Note 1)
1999

55,333
4,359

30,39526,473$ 461,108
36,325

18,773
1,102
5,634
25,509
5,092
3,873
1,527
872
96,565

19,181
1,049
3,374
23,604
5,394
4,002
1,843
516
92,227

156,442
9,183
46,950212,575
42,43332,275
12,725
7,267
804,708

8,916
21,70330,05860,677

5,548
21,2638,740
35,551

74,300180,858
250,484
505,642

Adjustments on foreign currency statement translation................................................................

—

546

—

Minority interests in consolidated subsidiaries...............................................................................

1,369

1,405

11,40927,58820,401
6,897
145,894
200,780(1)
200,779¥ 359,390

27,58820,401
6,897
144,488
199,374(1)
199,373¥ 329,102

229,900
170,008
57,4751,215,783
1,673,166(8)
1,673,158$ 2,994,917

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term bank loans (Note 5).......................................................................
Current portion of long-term debt (Note 5) ...................................................
PayablesNotes and accounts payable, trade ..............................................................
Non-consolidated subsidiaries and affiliates ..............................................
Other .............................................................................................................
Employees’ savings deposits .............................................................................
Accrued expenses ..............................................................................................
Accrued income taxes (Note 7) ........................................................................
Other current liabilities.....................................................................................
Total current liabilities ............................................................................

Long-term liabilities:
Long-term debt (Note 5) ..................................................................................
Accrued severance benefits (Note 6)................................................................
Other long-term liabilities ................................................................................

¥¥

Commitments and contingencies (Note 11)
Shareholders’ equity (Notes 9 and 12):
Common stock:
Authorised — 400,000,000 shares
Issued with par value of ¥50 per share —236,443,939 shares ...................................................................................
Additional paid-in capital.................................................................................
Legal reserve ......................................................................................................
Retained earnings .............................................................................................
Less shares in treasury.......................................................................................

27

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Income
Years ended 31st March, 1999 and 1998

(millions of yen)
1999
1998

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

(thousands of
US dollars)(Note 1)1999

¥ 226,800¥ 240,249$ 1,890,000

Cost of sales .......................................................................................................
Selling, general and administrative expenses ..................................................

201,447
24,980226,427

211,305
24,955236,260

1,678,725
208,167
1,886,892

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

373

3,989

3,108

2,533
(1,780)
7,478
8,231

2,278
(1,649)(1,231)(602)

21,108(14,833)
62,317
68,592

8,604

3,387

71,700

2,466

2,434

20,5506,138
71(2,048)
4,161

953
88
46
1,087

51,150592(17,067)$ 34,675

Costs and expenses:

Other income (expenses):
Interest and dividend income ..........................................................................
Interest expenses ...............................................................................................
Other, net (Note 10) .........................................................................................

Income before income taxes, minority interests andequity in earnings (losses) of affiliates .........................................................................................
Income taxes (Note 7).........................................................................................................................
Income before minority interests andequity in earnings (losses) of affiliates .........................................................................................
Minority interests ...............................................................................................................................
Equity in earnings (losses) of affiliates .............................................................................................
Net income...........................................................................................................................................

¥

¥

(yen)

(US dollars)

Per share:
Net income ........................................................................................................
Cash dividends ..................................................................................................

See Notes to Consolidated Financial Statements.

28

¥

17.60
7.00

¥

4.60
7.00

$

0.15
0.06

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Shareholders’ Equity
Years ended 31st March, 1999 and 1998

(millions of yen)
1999
1998

(thousands of
US dollars)(Note 1)
1999¥

27,588¥27,588$ 229,900¥

27,588¥27,588$ 229,900¥

20,401¥

19,709$ 170,008¥—
20,401¥

692
20,401$—
170,008

Balance at beginning of year .............................................................................

¥

6,897

¥

6,897

$

57,475

Balance at end of year .......................................................................................

¥

6,897

¥

6,897

$

57,475

Balance at beginning of year .............................................................................
Add:
Net income....................................................................................................
Adjustments due to increase in consolidated subsidiaries .........................
Adjustments due to increase in ownership interest in
20%~50% owned affiliates ......................................................................
Deduct:Cash dividends ..............................................................................................
Directors’ and statutory auditors’ bonuses .................................................
Adjustments due to increase in 1999 and decrease in 1998 inconsolidated subsidiaries .........................................................................
Adjustments due to decrease in ownership interest in
20%~50% owned affiliates ......................................................................
Balance at end of year .......................................................................................

¥ 144,488¥ 144,565$ 1,204,067

4,161
—

1,087
1,191

34,675——78—(1,656)(92)(1,655)(86)(13,800)
(767)

(959)

(692)

(7,992)(48)¥ 145,894—¥ 144,488(400)$ 1,215,783

Common stock:
Balance at beginning of year
(1999 and 1998 — 236,443,939 shares).......................................................
Balance at end of year
(1999 and 1998 — 236,443,939 shares).......................................................
Additional paid-in capital:
Balance at beginning of year .............................................................................
Add:
Business acquisition......................................................................................
Balance at end of year .......................................................................................
Legal reserve:

Retained earnings:

Treasury stock at cost:
Balance at beginning of year .............................................................................

(¥

1) (¥

1) ($

8)

Balance at end of year .......................................................................................

(¥

1) (¥

1) ($

8)

See Notes to Consolidated Financial Statements.

29

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
Years ended 31st March, 1999 and 1998
(thousands of
US dollars)(Note 1)
1999

(millions of yen)
1999
1998

Cash flows from operating activities:
Net income ....................................................................................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation .........................................................................................................
Equity in (earnings) losses of affiliates ................................................................
Provision for severance benefits ..........................................................................
Payment of severance benefits .............................................................................
(Gain) loss on sale of property, plant and equipment .......................................
Gain on sale of marketable securities...................................................................
(Gain) loss on sale of investment securities and investments inand advances to non-consolidated subsidiaries and affiliates .......................
Write-down of marketable securities and investment securities ......................
Unrealized exchange losses ..................................................................................
Other .....................................................................................................................
Changes in operating assets and liabilities:
Receivables ...........................................................................................................
Inventories ............................................................................................................
Other current assets .............................................................................................
Payables .................................................................................................................
Employees’ savings deposits ................................................................................
Accrued expenses .................................................................................................
Accrued income taxes ..........................................................................................
Other current liabilities ........................................................................................
Net cash provided by operating activities .........................................

¥

4,161

¥

1,087

$

34,675

13,2252,048
1,889(1,449)(5)(1,848)

13,634
(46)
1,977
(942)
386
(1,053)

110,208
17,067
15,742(12,075)(42)(15,400)(7,372)810(2,176)
370

82
1,142
1,144
2,490

(61,433)
6,750(18,133)
3,083

7,023
4,032
244
(632)
(302)
(129)
(316)
356
19,929(259)(3,821)(512)(1,751)
(737)
(49)
(643)
(49)
12,08058,52533,6002,033(5,267)(2,517)(1,075)(2,633)
2,967
166,075

14,377
212,607109
193,402

119,808
1,771,725

7,780(15,481)(207,601)52(12,333)(188,479)

64,833(129,008)(1,730,008)(23,404)
77(11,645)(1,815)151(8,913)(195,033)
642(97,041)

Cash flows from financing activities:
Proceeds from issuance of long-term debt ..................................................................
Repayment of long-term debt ......................................................................................
Increase (decrease) in other long-term liabilities .......................................................
Increase in short-term bank loans ...............................................................................
Cash dividends paid ......................................................................................................
Directors’ and statutory auditors’ bonuses paid .........................................................
Net cash used in financing activities .................................................

3,130(26,496)(179)
23,134(1,656)(92)(2,159)165(1,136)223
601(1,655)(86)(1,888)26,083(220,800)(1,491)
192,783(13,800)(767)(17,992)

Net increase in cash and cash equivalents .......................................................................................
Cash and cash equivalents at beginning of year ..............................................................................
Cash and cash equivalents at end of year .........................................................................................

6,125
38,622
44,747

1,279
37,34338,622

51,042321,850$ 372,892

1,411
2,597

$

14,60818,650—$21,142

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment ...............................................
Proceeds from sale of marketable securities ................................................................
Proceeds from sale of investment securities and investments
in and advances to non-consolidated subsidiaries and affiliates ...........................
Payment for purchase of property, plant and equipment ..........................................
Payment for purchase of marketable securities ..........................................................
Payment for purchase of investment securities andinvestments in and advances to non-consolidated subsidiaries and affiliates ......
Other, net ......................................................................................................................
Net cash used in investing activities ..................................................

Cash paid during the year for:
Interest ...........................................................................................................................
Income taxes .................................................................................................................
Noncash investing and financing activities :Assets acquired by incurring accounts payable ...........................................................
See Notes to Consolidated Financial Statements.

30

¥
¥

1,753
2,238

¥

2,537

¥
¥

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

1. BASIS OF PRESENTING FINANCIAL STATEMENTS:
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in theJapanese Securities and Exchange Law and its related accounting regulations and in conformity with generally accepted
accounting principles and practices in Japan.
In preparing these financial statements, however, certain reclassifications have been made to the financial statements issued
domestically in Japan in order to present them in a form which is more familiar to readers outside Japan.
A statement of cash flows is not required for domestic reporting purposes but is presented herein for the readers’ convenience.
In addition, the accompanying footnotes include information which is not required under generally accepted accounting
principles and practices in Japan but is presented herein as additional information.
The United States dollar ($) amounts included herein are given solely for convenience and are stated, as a matter ofarithmetical computation only, at the rate of ¥120 = $1, the approximate exchange rate at 31st March, 1999. The translations
should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be,converted into United States dollars.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:(a) Basis of consolidation
The accompanying consolidated financial statements include the accounts of Nisshinbo Industries, Inc. (“Nisshinbo”) and its
majority-owned subsidiaries (together “Nisshinbo and its consolidated subsidiaries”).
Investments in 20~50% owned affiliates were accounted for by the equity method.
Intercompany transactions and accounts have been eliminated.
(b) Foreign currency transactions
Short-term receivables and payables in foreign currencies are translated into Japanese yen at the current exchange rates as of thebalance sheet dates.
Investments in and advances to subsidiaries and affiliates and long-term debt in foreign currencies are translated at thehistorical rates effective at the dates of transaction from which such accounts were originated.
(c) Foreign currency financial statements
Assets, liabilities, income and expenses of foreign subsidiaries are translated into Japanese yen at the current exchange rates asof the balance sheet date.
(d) Cash and cash equivalents
In reporting cash flows, Nisshinbo and its consolidated subsidiaries consider cash and time deposits with maturities of one year
or less to be cash and cash equivalents. Such time deposits may be withdrawn on demand without diminution of principal.
(e) Investments
Current and non-current portfolios of marketable debt and equity securities are stated at the lower of cost or market. Other
investments are stated at cost.
(f) Inventories
Inventories are stated principally at the lower of cost or market, cost being substantially determined by the average cost
method.
(g) Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed principally on the declining balance method overtheir estimated useful lives.
(h) Accrued severance benefits
The annual provision for severance payments is calculated to state the liability at the amount that would be required if all
employees eligible for severance payments should terminate their employment at the balance sheet date, less amounts funded.
With minor exceptions, such provision includes those for directors and statutory auditors of Nisshinbo and its consolidated
subsidiaries. Normal and prior service costs of Nisshinbo and its consolidated subsidiaries’ non-contributory pension plans arecharged to income and funded currently.
(i) Income taxes
Income taxes are provided for amounts currently payable for each fiscal year. No tax effect of temporary differences between
tax and financial reporting purposes is recognised.

31

3. INVENTORIES:
Inventories at 31st March, 1999 and 1998 were as follows:

Finished products..............................................................................................................
Work in process.................................................................................................................
Materials and supplies.......................................................................................................

¥¥(millions of yen)
1999
1998

(thousands of
US dollars)
1999

29,832
8,691
10,296
48,819$ 248,600
72,42585,800$ 406,825¥¥

33,7699,747
9,335
52,851

4. MARKETABLE EQUITY SECURITIES:At 31st March, 1999 and 1998, the aggregate cost and market value of current and non-current portfolios of marketable equity
securities included in marketable securities, investment securities and investments in non-consolidated subsidiaries and affiliates
were summarised as follows:

Current portfolios:
Cost and carrying amount ............................................................................................
Market value ..................................................................................................................
Non-current portfolios:
Cost and carrying amount ............................................................................................
Market value ..................................................................................................................

¥(millions of yen)
1999
1998

(thousands of
US dollars)
1999

12,67742,872

13,42948,275$ 105,642
357,267

39,735132,029

383,192
1,080,250¥

45,983
129,630

5. SHORT-TERM BANK LOANS AND LONG-TERM DEBT:
Short-term bank loans at 31st March, 1999 and 1998 were principally represented by 180 to 365 days notes issued by Nisshinbo
and its consolidated subsidiaries to banks. The annual interest rates applicable to the short-term bank loans at 31st March, 1999
and 1998 were 0.7% to 8.8% and 1.0 % to 9.5%, respectively.
Long-term debt at 31st March, 1999 and 1998 consisted of the following:(thousands of
US dollars)
1999(millions of yen)
1999
1998

Long-term debt with collateral:
Loans from banks maturing serially to 2007, ranging from 1.4% to 4.7% ................
Non-interest bearing loan from a governmental institutematuring serially to 1999 ..........................................................................................
Long-term debt without collateral:
Loans from banks maturing serially to 2003, ranging from 1.6% to 6.6% ................
1.7% convertible bonds, convertible into common
stock at ¥1,800.50, due in 1999 ................................................................................
8.3% notes, due in 1999 ................................................................................................
Capital lease obligations, due through 2010 ................................................................

¥

Less current portion ..........................................................................................................
¥

32

1,590

¥

1,231

$

13,250

107

214

892

2,089

394

17,408

—
3,519
5,970
13,275(4,359)8,916

25,312
3,958
912
32,021(26,473)¥
5,548—
29,32549,750110,625(36,325)$ 74,300

Annual maturities of long-term debt were as follows:Year ending 31st March,
2000............................................................................................................................
2001 .........................................................................................................................................
2002............................................................................................................................
2003............................................................................................................................
2004 and thereafter ...................................................................................................

(millions of yen)¥¥(thousands of US dollars)

4,359
1,151
830
767
6,168
13,275$36,325
9,592
6,917
6,391
51,400$ 110,625

At 31st March, 1999 and 1998, net book value of assets pledged as collateral for short-term bank loans and long-term loans
from banks and a governmental institute was as follows:(thousands of
US dollars)
1999(millions of yen)
1999
1998

Property, plant and equipment ........................................................................................
Investment securities.........................................................................................................

¥

4,559
85
4,644

¥

¥
¥

3,186
79
3,265

$
$

37,992708
38,7006. RETIREMENT AND PENSION PLANS:
Under most circumstances, employees terminating their employment are entitled to lump-sum severance payments based on
the rate of pay at termination, years of service and certain other factors.
Provisions for severance payments charged to income for the years ended 31st March, 1999 and 1998 were ¥1,889 million($15,742 thousand) and ¥1,977 million, respectively.
In addition to the lump-sum severance payments described above, most employees are covered by Nisshinbo and its
consolidated subsidiaries’ non-contributory pension plans. Pension costs charged to income for the years ended 31st March, 1999
and 1998 were ¥347 million ($2,892 thousand) and ¥236 million, respectively.
7. INCOME TAXES:Japanese taxes on income applicable to Nisshinbo and its domestic consolidated subsidiaries would normally result in an aggregate tax
rate of approximately 48% for 1999 and 51% for 1998.
The effective income tax rates on income before income taxes, minority interests and equity in earnings of affiliates in theaccompanying consolidated financial statements differ from the normal Japanese tax rates. The principal reasons for suchdifferences are (a) the accounting policy of not providing for deferred income taxes arising from temporary differences between
financial and tax reporting and (b) certain expenses which are not deductible for income tax purposes.
8. LEASING ARRANGEMENTS:
The Company and its consolidated subsidiaries lease machinery and other facilities under non-cancellable agreements.
Future minimum rental payments on the above leases are as follows:Year ending 31st March,
2000............................................................................................................................
2001 .........................................................................................................................................
2002 .........................................................................................................................................
2003............................................................................................................................
2004 and thereafter ...................................................................................................

(millions of yen)

¥

833
703
589
401
225

(thousands of US dollars)

$

6,942
5,858
4,908
3,342
1,875

Rental expenses charged to income for the years ended 31st March, 1999 and 1998 were ¥900 million ($7,500 thousand) and¥1,066 million, respectively.
33

9. SHAREHOLDERS’ EQUITY:The Japanese Commercial Code provides that an amount equal to at least 10% of all cash payments which are made as an
appropriation of retained earnings be appropriated as a legal reserve until such reserve equals 25% of stated value of capital stock.
This reserve is not available for dividends but may be used to reduce a deficit by resolution of the shareholders or may becapitalised by resolution of the Board of Directors.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividend is applicable.
In addition, a semi-annual interim dividend may be paid upon resolution of the Board of Directors, subject to limitations
imposed by the Code.
The computation of net income per share is based on the weighted average number of shares of common stock outstanding
during each fiscal year.
10. OTHER INCOME (EXPENSES) — OTHER, NET:
Other income (expenses) — Other, net consisted of the following:(thousands of
US dollars)
1999(millions of yen)
1999
1998

Gain (loss) on sale of property, plant and equipment ...................................................
Gain on sale of securities...................................................................................................
Devaluation of securities ..................................................................................................
Other, net ..........................................................................................................................

¥

5 (¥
9,220
(810)
(937)
7,478 (¥

¥

386)
971
(1,142)(674)
1,231)$$

42
76,833(6,750)(7,808)62,317

11. COMMITMENTS AND CONTINGENCIES:
Contingent liabilities at 31st March, 1999 and 1998 for trade notes discounted with banks and tradenotes delivered with endorsementsfor payments amounted to ¥1,540 million ($12,833 thousand) and ¥2,004 million, respectively. Contingent liabilities at 31st March, 1999
and 1998 for loans guaranteed amounted to ¥1,048 million ($8,733 thousand) and ¥2,690 million, respectively.
Commitments for capital expenditures outstanding at 31st March, 1999 and 1998 were in the approximate amounts of ¥11,021 million($91,842 thousand) and ¥8,045 million, respectively.
12. SUBSEQUENT EVENTS:
On 29th June, 1999, Nisshinbo’s shareholders authorised the appropriation of retained earnings as follows:(millions of yen)

Cash dividends (¥3.50 per share) .....................................................................................
Directors’ bonuses.............................................................................................................

34

¥

828
50

(thousands of US dollars)

$

6,900
417

Report of Independent Certified Public Accountant on Consolidated Financial Statements
To the Board of Directors
Nisshinbo Industries, Inc.
I have examined the consolidated balance sheet of Nisshinbo Industries, Inc. and consolidated subsidiaries as of
31st March, 1998, and the related statements of income, shareholders’ equity and cash flows for the year then ended,
all expressed in Japanese yen. My examination was made in accordance with generally accepted auditing standards inJapan and, accordingly, included such tests of the accounting records and such other auditing procedures as I
considered necessary in the circumstances.
In my opinion, the consolidated financial statements referred to above present fairly the financial position of
Nisshinbo Industries, Inc. and consolidated subsidiaries as of 31st March, 1998, and the results of their operations andtheir cash flows for the year then ended, in conformity with generally accepted accounting principles in Japan applied
on a basis consistent with that of the preceding year.
The United States dollar amounts shown in the consolidated financial statements have been translated solely forconvenience. I have reviewed this translation and, in my opinion, the consolidated financial statements expressed inJapanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba
Certified Public Accountant

26th June, 1998
Tokyo, Japan

Report of Independent Certified Public Accountants on Consolidated Financial Statements
To the Board of Directors
Nisshinbo Industries, Inc.
We have examined the consolidated balance sheet of Nisshinbo Industries, Inc. and consolidated subsidiaries as of
31st March, 1999, and the related statements of income, shareholders’ equity and cash flows for the year then ended,
all expressed in Japanese yen. Our examination was made in accordance with generally accepted auditing standards inJapan and, accordingly, included such tests of the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the financial position of
Nisshinbo Industries, Inc. and consolidated subsidiaries as of 31st March, 1999, and the results of their operations andtheir cash flows for the year then ended, in conformity with generally accepted accounting principles in Japan applied
on a basis consistent with that of the preceding year.
The United States dollar amounts shown in the consolidated financial statements have been translated solely forconvenience. We have reviewed this translation and, in our opinion, the consolidated financial statements expressedin Japanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba

Etsuko Nagashima

Certified Public Accountant

Certified Public Accountant

29th June, 1999
Tokyo, Japan35

Board of Directors and Statutory Auditors
President

Senior Executive Director

DirectorStanding Statutory Auditor

Akihiro Mochizuki

Yukio Hosoya

Suguru Miyazu

Shinsuke Takahashi

Senior Executive Director

Director

Statutory Auditor

Hisao Ishikawa

Seiji Yamamoto

Masaaki Nagai

Director

Statutory Auditor

Tadashi Nakai

Tetsuo Furuya

Executive Director

Director

Statutory Auditor

Tsuyoshi Sugaizumi

Hiroshi Nogami

Akira Onishi

Executive Director

Director

Yoshimasa Hasegawa

Akira Baba

Executive Director

Director

Yoshikazu Sashida

Kenji Tasaki

Executive Director

Director

Koushi Fujino

Takashi Iwashita

Executive Director

Director

Hisayoshi Arata

Kunihiro Toda
Director

Yasuo Takeuchi

Corporate Data
Founded:February 5, 1907

Head Office:2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo 103-8650
Tel: 03-5695-8833 Fax: 03-5695-8970
Url: http://www. nisshinbo. co. jp/

Osaka Branch:

2-4-2, Kitakyuhoji-cho, Chuo-ku, Osaka 541-0057
Tel: 06-6267-5501 Fax: 06-6267-5679

Nagoya Branch:

5-2-38, Sakae, Naka-ku, Nagoya 460-0008
Tel: 052-261-6151 Fax: 052-263-9480

Hong Kong Representative Office:Room 1126, Ocean Centre, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong
Tel: 2736-7886 Fax: 2730-2181

Nisshinbo do Brasil Industria
Textil Ltda.:

Av. Paulista 1009, 11˚andar Cj. 1101/1103, CEP 01311-100, São Paulo, s.p., Brasil
Tel: 011-289-9255 Fax: 011-288-7902

Nisshinbo California Inc.:

2885 South Cherry Avenue, Fresno, CA 93706, U.S.A.
Tel: 209-486-6241 Fax: 209-264-6417

Nisshinbo Automotive Corporation:

42355 Merrill Road, Sterling Heights, MI 48314, U.S.A.
Tel: 810-997-1000 Fax: 810-997-1010

Nisshinbo Europe B.V.:

World Trade Center, Strawinskylaan B1425 1077XX Amsterdam, The Netherlands
Tel: 020-5753349 Fax: 020-5753350

Nisshinbo Hong Kong Limited:

Room 1126, Ocean Centre, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong
Tel: 2736-7886 Fax: 2730-2181

Employees:

4,935

Common Stock:
Par Value:¥50 — US$0.42

Authorized:

400,000,000 shares

Issued:236,443,939 shares¥27,588 million — US$230 million

Shareholders:36(As of March 31, 1999)

15,700Organization Chart

Board of Directors

President

General Affairs Division

General Affairs Dept.
Secretary Dept.
Purchasing Dept.

Accounting and Finance Division

Finance Dept.
Accounting Dept.

Personnel Division

Personnel Dept.
Labor Administration Dept.
Health and Medicine Dept.

Engineering Administration Division

Utilities, Construction andEnvironmental Affairs Dept.

Research and Development Division

Research Planning Dept.
Research Administration Dept.
Market Development Dept.
Patent Dept.

Trademark Committee

Tokyo Research Center

Policy Board

Textile Sales DivisionFirst Group

Raw Materials Dept.
Yarns Dept.
Knits Dept.
Shirt Fabrics Dept.

Second Group

Spandex Dept.
Industrial Materials Dept.
Home Textiles Dept.

Third Group

Outer-Wear Fabrics Dept.

Board of
Statutory Auditors

Products Development Dept.
Marketing and Planning Dept.

Statutory
Auditors

Hong Kong Representative OfficeOsaka Branch

Administration Dept.
Nagoya Branch

Textile Engineering Division

Spinning and Weaving Dept.
Dyeing and Finishing Dept.
Spandex Dept.
Research and Development Dept.

Mechatronics DivisionMarketing Dept.
Research and Development Dept.
Engineering Dept.

Brake DivisionMarketing Dept.
Engineering Dept.

ABS DivisionMarketing Dept.
Research and Development Dept.
Engineering Dept.

Chemical Products DivisionMarketing Dept.
Engineering Dept.
New Carbon Dept.

Paper Products Division

Household Paper Sales Dept.
Specialty Paper Sales Dept.
Engineering Dept.
Color Systems Dept.

Business Planning OfficeInformation Systems OfficeEnvironmental Affairs Committee
Advertising Committee
Product Safety Committee

Information Dissemination
Committee

Hamamatsu Plant
Shimada Plant
Fujieda Plant
Toyama Plant
Nagoya Plant
Harisaki Plant
Notogawa Plant
Kawagoe Plant

Miai Plant
Miai Mechatronics Plant
Hamakita Plant
Tokushima Plant
Tokyo Plant
Tatebayashi Plant
Chiba Plant
Fuji Plant

37