Creating Corporate Value Report 2018
Financial Section
Year ended March 31, 2018

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Management’s Discussion and Analysis

0.4% year-on-year drop.

Group Outline
The S.T. CORPORATION Group is composed of S.T.
CORPORATION, six consolidated subsidiaries, three equity method

Cost of Sales, SG&A Expenses, and Operating Income

affiliated companies and other affiliated companies.

Thanks to improvements to profit composition by strengthening salesof high added-value products, reduction of returned goods, andSales Overview

production cost reduction throughout the company, the cost of sales

In the fiscal year ended March 31, 2018 (hereinafter called “the current

augmented 3.9% year on year to ¥28,552 million. Also, because ofyear”), the Japanese economy, backed by a favorable world

increase of shipping costs and storage fees due to a larger sales

economy, showed a modest recovery trend due to recovery ofvolume, launching the new brand “Senjou-Riki,” and aggressive

corporate earnings, improvement in the employment situation, andallocations of strategic marketing funds aimed at expanding newsigns of a rise in consumer spending. On the other hand, a sense of

products in Thailand, selling, general and administrative expenses

uncertainty about the future remains because expansion ofincreased 6.2% year on year to ¥16,594 million. As a result, operating

protectionist trade policies in the U.S. is raising worries over trade

income increased 21.9% year on year to ¥3,481 million.

friction and geopolitical risks are increasing.
Other Income (Expenses), Profit Before Income Taxes andIn these circumstances, the S.T. Group concentrated on “market
expansion,” “share increase,” and “profit-oriented management” forProfit Attributable to Owners of Parent

realizing sustainable growth and took measures for establishing a

As for other income and expenses, profit before income taxes wasbusiness division system with the basic policy of “brand value¥3,478 million, up 26.4% year on year, and profit attributable tomanagement,” while continuing narrowing down and concentratingowners of parent was ¥2,410 million, up 32.6% year on year, due toon targets, development of unprecedented products, and swift

absence of the impairment loss under extraordinary loss recognized inbusiness administration.

the previous year.
Accordingly, earnings per share was ¥109.58, up from the previous

The current year’s sales reached ¥48,627 million, up 5.8% year on
year, due to the favorable sales performance of the current existing

year’s figure: ¥83.57. The ratio of profit attributable to owners ofbusiness’s high-priced and high added-value products and theparent to sales increased from 4.0% to 5.0%, and ROE rose fromcontribution of new products in the mainstay categories of Air Care

7.6% to 9.0%.

and Cloth Care. As for the sales of each category, Air Care saw a
4.3% year-on-year growth, Cloth Care 4.3%, Thermal Care 12.3%,
Hand Care 5.3%, and Home Care 13.9%, while Humidity Care saw a

Operating income /Operating income margin
Operating income (millions of yen)

Profit attributable to owners of parent (millions of yen)
Return on sales (%)

Operating income margin (%)

7.2
6.2

16

17

18

14

15

16

1,817
1,234

2,854

2,342

1,813

2,131

48,62745,95844,661

46,99348,263

15

17

2.0

3,481

1.8

3.8

14

4.0

2.6

5.2

2,410

4.5

5.0

18

14

15

912

(millions of yen)

Profit attributable to owners of parent /Return on sales

892

Net sales

16

17

18

Note: ‌As a result of new accounting standards being applied effective from the fiscal year ended March 31, 2017, the figures for fiscal years 2016, 2017 and 2018 reflect those changes. The figures for fiscal years 2014 and 2015 are as
originally presented without retroactive application.

1

Financial Position

same period of the previous fiscal year, net cash used in investment

Total assets as of March 31, 2018 stood at ¥42,450 million, up

activities was ¥622 million). This is mainly due to the augmentation of¥3,992 million from the end of the previous year. Among them,purchase of property, plant and equipment. In addition, net cash usedcurrent assets grew ¥1,652 million to ¥24,119 million, mainly because

in financing activities was ¥428 million, as expenditure decreased

merchandise and finished goods increased. On the other hand,¥212 million year on year. This is mainly because of the increase in

non-current assets rose ¥2,340 million to ¥18,331 million, mainly due

short-term loans payable.
As a result, the balance of cash and cash equivalents at the end of

to the increase in investment securities.

the current year was ¥11,866 million, up ¥470 million from the end of

Total liabilities were ¥13,428 million, up ¥782 million from the end of

the previous year.

the previous year, mainly because of the augmentation ofelectronically recorded obligations. On the other hand, net assets
were ¥29,022 million, up ¥3,210 million from the end of the previous

Dividends and Return to Shareholders

year, mainly because of the growth of retained earnings.

Taking into consideration such factors as profit attributable to ownersof parent and the need to realize shareholder returns, we decided toConsequently, net assets per share increased from ¥1,148.41 at
the end of the previous year to ¥1,285.01. In addition, equity ratio

distribute a term-end dividend of ¥18.0 (¥31.0 for the full year,

increased from 65.3% at the end of the previous year to 66.8%,

including the interim dividend, with a consolidated payout ratio being

indicating sound financial standing.

28.3%). The company will continue to place importance on returns toshareholders.

Capital Expenditures and Depreciation and Amortization
Capital expenditures increased from ¥608 million in the previous year

Business and Operational Risks

to ¥1,822 million in the current year. Depreciation and amortization

Factors that could possibly impact the Group’s operating results,

decreased from ¥997 million in the previous year to ¥970 million in thefinancial position or stock prices include the following: (1) an

current year.

escalation in raw materials prices; (2) the impact on manufacturing
operations from natural disasters and changes in international politicalCash Flowsor other conditions; (3) sales fluctuations due to unseasonal weather;

Net cash provided by operating activities for the current year was(4) and the failure of initiatives to raise new businesses. Forward-¥2,660 million, down ¥2,490 million from the previous year. This

looking statements in this annual report are based on certain

decrease is mainly due to the growth of inventories. On the otherassumptions made by the Group as of the end of this fiscal year.

hand, net cash used in investment activities was ¥1,826 million (in the

Capital expenditures /Depreciation and amortization

Dividends per share /Payout ratio

ROA / ROE

Capital expenditures (millions of yen)
Depreciation and amortization (millions of yen)

ROA (%)ROE (%)

Dividends per share (yen)

53.9

9.0

970

997

16

17

18

14

15

24.0

22.0

22.0

1,128

2.7

2.7

608

844

5.0
4.1

22.0

6.0
4.2

28.3
31.0

1,822

1,758

1,486

15

28.7

6.1
4.0

894

942

14

52.4

38.8

7.6

Payout ratio (%)

16

17

18

14

15

16

17

18

2

Consolidated Balance Sheets
S.T.CORPORATION and consolidated subsidiaries
March 31, 2018 and 2017

thousands of
U.S. dollars (Note 2)

millions of yen

Assets

2018

2017

2018

Cash and time deposits (Notes 6, 10 and 16)¥11,910¥11,439$112,101

Trade notes and accounts receivable (Note 6)

5,430

5,220

51,114Merchandise and finished goods

4,928

3,940

46,387Work in process

251

266

2,361

Raw materials and supplies

832

867

7,831

Deferred tax assets (Note 11)

383

414

3,602

Other current assets

390

325

3,668

(4)

(4)

(42)

24,11922,467227,022

Land (Note 9)

3,418

3,096

32,171

Buildings and structures

7,523

7,441

70,815

Machinery, equipment and vehicles

6,617

6,548

62,280Tools, furniture and fixtures

4,044

3,908

38,065Construction in progress

776

—

7,307

Leased assets (Note 17)

924

937

8,694

(14,371)(13,929)(135,271)

Property, plant and equipment, net

8,931

8,001

84,061Intangible assets, net of accumulated amortization

262

334

2,463

262

334

2,463

457

423

4,299

7,629

6,092

71,811Long-term loans

12

15

113

Net defined benefit asset (Notes 1 and 12)

9

103

84

Deferred tax assets other than unrealized revaluation loss on land (Note 11)

11

11

107

1,021

1,013

9,606

9,139

7,657

86,020¥42,450¥38,458$399,566

Current assets:

Less - allowance for doubtful accounts
Total current assets

Property, plant and equipment, at cost:Less - accumulated depreciation

Total intangible assets

Investments and other assets:
Investments in non-consolidated subsidiaries and affiliates
Investment securities (Notes 6 and 8)

Other assets
Total investments and other assets
Total assets

3thousands of
U.S. dollars (Note 2)

millions of yen

Liabilities and net assets

2018

2017

2018

¥2,197¥2,159$20,675

3,624

2,937

34,113

174

—

1,638

Current liabilities:
Trade payables (Note 6)
Electronically recorded obligations-operating (Note 6)
Short-term loans payable
Lease obligations
Other payables (Note 6)
Accrued expenses

201

163

1,896

2,570

2,405

24,193

560

754

5,275

Electronically recorded obligations-non-operating

51

20

484

Income taxes payable

632

680

5,953

Consumption taxes payable

46

379

429

Allowance for sales returns

127

108

1,196

Other current liabilities

58

62

543

10,241

9,666

96,397

Total current liabilities
Long-term liabilities:
Lease obligations

233

435

2,196

Provision for directors’ retirement and severance benefits

124

127

1,167

Provision for executive officers’ incentive plan (Note 4)

62

40

586

Net defined benefit liability (Notes 1 and 12)

1,257

1,201

11,832

Deferred tax liabilities (Note 11)

1,144

718

10,764

262

262

2,468

Deferred tax liabilities - unrealized revaluation gain on land (Note 9)
Other non-current liabilities
Total long-term liabilities

105

196

985

3,187

2,980

29,997

Net assets (Note 13):
Shareholders’ equity:
Common stock:
Authorized - 96,817,000 shares in 2018 and 2017
7,066

7,066

66,505

Capital surplus

Issued and outstanding - 23,000,000 shares in 2018 and 2017

7,068

7,068

66,527
120,767

Retained earnings

12,83011,016

Treasury stock, at cost

(1,230)(1,487)(11,577)

Total shareholders’ equity

25,734

23,662242,222

Unrealized holding gain on other securities, net of taxes

3,440

2,379

32,383

Unrealized revaluation loss on land, net of taxes (Note 9)

(537)

(537)

(5,056)

Translation adjustments

(264)

(354)

(2,481)Remeasurements of defined benefit plans

(22)

(25)

(209)

2,617

1,462

24,637

Accumulated other comprehensive income (loss):

Total accumulated other comprehensive income (loss)
Subscription rights

19

46

182

Non-controlling interests

652

642

6,132

Total net assets

29,02225,812

273,172¥42,450¥38,458$399,566

Total liabilities and net assets
See notes to consolidated financial statements.

4Consolidated Statements of Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2018 and 2017

thousands of
U.S. dollars (Note 2)

millions of yen

Net sales
Cost of sales (Notes 15 and 20)
Gross profit before reversal of allowance for sales returns
Allowance for sales returns
Reversal of allowance for sales returns
Gross profit
Selling, general and administrative expenses (Note 15)
Operating income
Non-operating income (expenses):
Interest and dividends received
Interest expense
Purchase discounts
Sales discounts
Share of profit of entities accounted for using equity method
Other, net
Total non-operating income (expenses)
Ordinary income
Special gains (losses), net:
Loss on disposition of property, plant and equipment, net
Impairment loss
Gain on reversal of subscription rights to shares
Loss on valuation of investment securities
Gain (loss) on sales of investment securities, net
Loss on abolishment of retirement benefit plan
Other
Total special gains (losses), net
Profit before income taxes
Income taxes (Note 11):
Current
Deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

2018

2017

2018

¥48,627
28,53320,094127
108
20,075
16,5943,481¥45,958
27,49018,468108
124
18,485
15,6302,854$457,705
268,570
189,135
1,196
1,018
188,957
156,195
32,763

104
(0)
152
(499)
9
223
(11)
3,470

106
(0)
144
(521)
25
295
48
2,903

982
(4)
1,435
(4,697)
83
2,100
(101)
32,662

(15)
—
—
(34)
57
—
—
8
3,478

(10)
(130)
5
—
4
(19)
(0)
(151)
2,751

(137)
—
—
(319)
535
—
—
80
32,741

1,047
(27)
1,021
2,458
48
¥2,410

873
(67)
806
1,946
129
¥1,817

9,858
(252)
9,606
23,136453$22,682

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2018 and 2017
thousands of
U.S. dollars (Note 2)

millions of yen

2018

2018

¥2,458¥1,946$23,136

Other comprehensive income (Note 5)
Unrealized holding gain on other securities, net of taxes
Translation adjustments
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income (loss) of entities accounted for using equity method
Total other comprehensive income
Comprehensive income

1,060
117
3
10
1,191
¥3,649

897
(76)
(5)
(18)
798
¥2,744

9,977
1,103
29
98
11,206$34,342

3,565
83

2,641
103

33,560782

Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

5

2017

ProfitConsolidated Statements of Changes in Net Assets
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2018 and 2017

millions of yen
Number of sharesof common stock(Thousands)

Balance at April 1, 2017
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2018

23,000Commonstock

CapitalsurplusRetainedearnings¥ 7,066¥ 7,068¥ 11,016
(554)
2,410

23,000¥ 7,066¥ 7,068

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit comprehensive
plansincomeTreasury stock,at cost¥ (1,487)

Total
shareholders’equity

(41)

(2)
259

¥ 23,662
(554)
2,410
(2)
218

¥ 12,830¥ (1,230)¥ 25,734

Subscription
rightsNon-controllinginterests

Total net
assetsmillions of yen
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2017
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2018

¥ 2,379¥ (537)¥ (354)¥ (25)¥ 1,462

¥ 46

¥ 642

1,062
¥ 3,440¥ (537)91¥ (264)3¥ (22)

1,156¥ 2,617

(27)
¥ 19

9
¥ 652

¥ 25,812
(554)
2,410
(2)
218
1,138
¥ 29,022

Treasury stock,at costTotal
shareholders’equitymillions of yen
Number of sharesof common stock(Thousands)

23,000

Balance at April 1, 2016
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Increase by merger
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2017

Commonstock

CapitalsurplusRetainedearnings¥ 7,066¥ 7,068¥ 9,739
(504)
1,817

¥ (1,734)

(1)
248

(36)
0
23,000¥ 7,066¥ 7,068

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plansincome¥ 11,016¥ (1,487)¥ 22,138
(504)
1,817
(1)
212
0
¥ 23,662

millions of yen
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2016
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Increase by merger
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2017

Subscription
rightsNon-controllinginterests¥ 1,482¥ (537)¥ (287)¥ (20)

¥ 638

¥ 75

¥ 646

896
¥ 2,379¥ (537)(67)¥ (354)(5)¥ (25)

824¥ 1,462

(29)
¥ 46

(3)
¥ 642

¥ 23,496
(504)
1,817
(1)
212
0
792
¥ 25,812

Total net
assetsTotalshareholders’equitythousands of U.S. dollars (Note 2)
Number of sharesof common stock(Thousands)

Balance at April 1, 2017
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2018

23,000Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at cost$ 66,505$ 66,527$ 103,688(5,215)22,682$ (13,998)

23,000$ 66,505$ 66,527

Translation
adjustments

Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plansincome

(389)

(16)
2,437

$ 222,723(5,215)22,682(16)
2,048$ 120,767$ (11,577)$ 242,222

thousands of U.S. dollars (Note 2)
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2017
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2018

Subscription
rightsNon-controllinginterests

Total net
assets$ 22,388$ (5,056)$ (3,336)$ (237)$ 13,759$ 435$ 6,046

9,995$ 32,383$ (5,056)854$ (2,481)29$ (209)10,878$ 24,637

(253)
$ 182

86
$ 6,132$ 242,962(5,215)22,682(16)
2,048
10,711$ 273,172

See notes to consolidated financial statements.

6

Consolidated Statements of Cash Flows
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2018 and 2017

thousands of
U.S. dollars (Note 2)

millions of yen

2018

2017

2018

¥3,478¥2,751$32,741

970
—
—
15
(23)
—
0
120
(3)
22
19
(104)
0
(78)
(9)

997
130
(5)
10
(4)
19
(0)
(239)
—
23
(16)
(106)
0
(170)
(25)

9,130
—
—
137
(216)
—
5
1,130
(32)
208
178
(982)
4
(738)
(83)

(172)
(897)
674
(333)
(59)
3,619
108
(0)
(1,066)
2,660

144
838
(32)
363
957
5,637
109
(0)
(595)
5,150

(1,623)(8,444)
6,346(3,139)(559)
34,0611,017(2)(10,034)
25,042

Cash flows from investing activities:
Payments into deposits (more than three months)
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Other investments, net
Net cash used in investing activities(1)(1,821)
5
(63)
77
(23)
(1,826)

(33)
(449)
8
(9)
13
(152)
(622)

(6)
(17,144)
49
(594)
724
(216)
(17,186)

Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Purchases of treasury stock
Proceeds from disposal of treasury stock
Payments of dividends
Payments of dividends to non-controlling interests
Other finance, net
Net cash used in financing activities

174
(2)
191
(554)
(74)
(163)
(428)

(45)
(1)
185
(504)
(106)
(169)
(640)

1,638
(16)
1,795
(5,215)(696)(1,530)(4,024)62
470
11,396

(50)
3,839
7,552

588
4,420
107,269—¥11,8665¥11,396—$111,689

Cash flows from operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash
provided by operating activities:
Depreciation and amortization
Impairment loss
Gain on reversal of subscription rights to shares
Loss on sales of property, plant and equipment
Loss (gain) on sales and valuation of investment securities
Loss on abolishment of retirement benefit plan
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in net defined benefit asset and liability
Increase (decrease) in provision for directors’ retirement and severance benefits
Increase (decrease) in provision for executive officers’ incentive plan
Increase (decrease) in allowance for sales returns
Interest and dividends received
Interest expenses
Foreign exchange losses (gains)Share of (profit) loss of entities accounted for using equity method
Changes in operating assets and liabilities:
Receivables
Inventories
Payables and accrued expenses
Accrued consumption taxes
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from merger withunconsolidated subsidiaries
Cash and cash equivalents at end of year (Note 16)
See notes to consolidated financial statements.

7

Notes to Consolidated Financial Statements
S.T.CORPORATION and Consolidated Subsidiaries
March 31, 2018

1 Summary of Significant Accounting Policies(a) Basis of presentation
S.T. CORPORATION (the “Company”) and its domestic subsidiaries
maintain their books of account in conformity with accounting principles
generally accepted in Japan, and its overseas subsidiaries maintain theirbooks of account in conformity with those of their countries of domicile.
Effective April 1, 2008, the Company adopted the “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (PITF No. 18, issued by the
Accounting Standards Board of Japan (ASBJ) on May 17, 2006).
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted inJapan, which are different in certain respects as to the application anddisclosure requirements of IFRS, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made to the consolidated financial
statements issued domestically for readers outside Japan. The notes tothe consolidated financial statements include information which is not
required under accounting principles generally accepted in Japan but ispresented herein as additional information. Furthermore, certain amounts
in the prior year’s financial statements have been reclassified to conform tothe current year’s presentation.
As permitted by Financial Instruments and Exchange Act, amounts arerounded to the nearest million yen. Consequently, the totals shown in theaccompanying consolidated financial statements (both in yen and U.S.
dollars) do not necessarily agree with the sum of the individual amounts.
(b) Scope of consolidation(1) Number of consolidated subsidiaries:
6 companies(2) Names of consolidated subsidiaries:
	‌S.T. TRADING CO., LTD., S.T. BUSINESS SUPPORT CO., LTD., S.T.
(THAILAND) CO., LTD., FAMILY GLOVE CO., LTD. (TAIWAN), S.T.
KOREA CORPORATION (SOUTH KOREA), and SHALDAN (THAILAND)
CO., LTD.
(3) Name of major non-consolidated subsidiary:
JAPAN AROMA LABORATORY CO., LTD.
(Reasons for exclusion from scope of consolidation)
	‌The non-consolidated subsidiary has been excluded from the scope of
consolidation because the total amounts of its assets, net sales,
profit or loss (amount equivalent to equity interests), retained earnings(amount equivalent to equity interests) and other amounts are limited,
and the effect on the consolidated financial statements as a whole isnot significant.
(c) Scope of application of equity-method accounting(1) Number of affiliated companies accounted for by the equity method:
3 companies(2) Names of major companies:	‌SHALDAN (PHILIPPINES), INC., AEKYUNG S.T. CO., LTD., and NS
FAFA JAPAN CO., LTD.
(3)	‌Name of non-consolidated subsidiary for which equity method is notapplied	‌The non-consolidated subsidiary to which the equity method does not
apply (JAPAN AROMA LABORATORY CO., LTD.) is accounted forusing the cost method rather than the equity method because the total
amounts of its profit or loss (amount equivalent to equity interests),
retained earnings (amount equivalent to equity interests) and otheramounts are limited, and the effect on the consolidated financial
statements as a whole is not significant.

(d) Accounting period
The accounting period of the Company begins on April 1 and ends on
March 31 of the following year. The four overseas subsidiaries have fiscal
years ending on December 31. The necessary adjustments for significant
transactions, if any, during the intervening period are made on
consolidation.
(e)	‌Translation of foreign currency transactions and financial
statements
Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the rates of exchange in effect at the balance sheet
date and the accounts of the overseas consolidated subsidiaries aretranslated into yen at the rates of exchange in effect at the balance sheet
date. Foreign exchange gains and losses are credited or charged toincome and translation adjustments are included in net assets.
(f) Marketable securities and investment securities
Other securities with determinable market value are carried at market value
with any changes in unrealized holding gain or loss, net of the related
deferred income tax assets or liabilities, included in net assets. Other
securities without determinable market value are stated at cost determinedby the moving-average method and the cost of other securities sold iscomputed based on the moving-average method. During the years ended
March 31, 2018 and 2017, the Company and its consolidated subsidiaries
did not have any trading securities.
(g) Inventories
Inventories are stated at the lower of cost or net selling value, cost being
determined by the average method.
(h)	‌Property, plant and equipment, except for leased assets, anddepreciation
Property, plant and equipment are stated at cost. Depreciation of property,
plant and equipment of the Company and its domestic subsidiaries,
except for buildings (excluding structures attached to the buildings)
acquired on or after April 1, 1998, and facilities attached to the buildings
and structures acquired on or after April 1, 2016, is computed by the
declining-balance method in conformity with the Corporation Tax Law ofJapan. Depreciation of property and equipment of overseas subsidiaries
and buildings (excluding structures attached to the buildings) acquired on
or after April 1, 1998 and facilities attached to the buildings and structuresacquired on or after April 1, 2016 of the Company and domestic
subsidiaries is computed by the straight-line method.
The estimated useful lives of the major depreciable assets are as follows:
Buildings and structures
3 to 50 years
Machinery, equipment and vehicles
2 to 17 years
Tools, furniture and fixtures
2 to 20 years(i) Intangible assets
Intangible assets, except for leased assets, are amortized by the straightline method. Cost of software purchased for internal use is amortized by
the straight-line method over a period of mainly 5 years, the useful life
applicable to commercially available software.
(j) Leases
Non-cancelable lease transactions that transfer substantially all the risks
and rewards associated with the ownership of the leased assets areaccounted for as finance leases. All other lease transactions are accounted
for as operating leases and related payments are charged to income as
incurred.
Depreciation is computed by the straight-line method over therespective lease terms assuming a nil residual value.
(k) Allowance for doubtful receivables
The allowance for doubtful receivables is provided based on pastexperience for normal receivables and on an estimate of the collectabilityof receivables from companies in financial difficulty.

8Notes to Consolidated Financial Statements(l) Allowance for sales returns
The allowance for sales returns is provided for losses on sales returns
subsequent to the balance sheet date at an amount equivalent to that
calculated based on the actual percentage of returns in prior years.
(m) Employees’ retirement and severance benefits(1) Method of attributing expected benefit payments to the period	‌In calculating the retirement benefit obligation, the method of
attributing expected benefit payments to periods is based on thebenefit formula.
(2) Amortization method of actuarial gains/losses	‌Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method over a
period of a certain number of years (5 years) which is shorter than the
average remaining years of service of the employees.
(3) Adoption of a simplified method in some consolidated subsidiaries	‌Some consolidated subsidiaries adopt the simplified method whichassumes retirement benefit obligation to be equal to the benefits
payable if all eligible employees voluntarily terminated their employment
at the end of fiscal year for the calculation of net defined benefit liability
and retirement benefit expenses.

(n) Provision for directors’ retirement and severance benefits
The Company has accrued provision for directors’ retirement andseverance benefits at the amount which would be required to be paid if all
directors resigned from their positions and left the Company as of thebalance sheet date in accordance with its internal regulations.
(o) Provision for executive officers’ incentive plan
The Company has established an executive officers’ incentive plan trust
and a provision is made at the amount required for stock awards based on
the Company’s internal regulations for awarding stock.
(p) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts
exclusive of consumption taxes.
(q) Cash and cash equivalents
Cash and cash equivalents in the accompanying consolidated statementsof cash flows consist of cash on hand, demand deposits and liquid
short-term investments with a maturity of three months or less from theirrespective dates of acquisition.

2 Basis of Translation
The consolidated financial statements presented herein are expressed inyen and, solely for the convenience of the reader, have been translated
into U.S. dollars at ¥106.24 = U.S.$1.00, the approximate exchange rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2018. Thistranslation should not be construed as a representation that all amounts
shown could have been, or could in the future be, converted into U.S.
dollars at that or any other rate.

3 Accounting Standards not yet Applied, etc.
· ‌Accounting Standard for Revenue Recognition (Statement No.29,
March 30, 2018 issued by the Accounting Standards Board of Japan(ASBJ))· ‌Implementation Guidance on Accounting Standard for Revenue
Recognition (Implementation Guidance No.30, March 30, 2018
issued by the ASBJ)(1) Summary
The International Accounting Standards Board (IASB) and US Financial
Accounting Standards Board (FASB) co-developed a new comprehensive
revenue recognition standard and issued “Revenue from Contracts with
Customers” in May 2014 (IASB: IFRS 15; FASB: Topic 606). Considering
IFRS 15 will be applied from fiscal years beginning on or after January 1,
2018 and Topic 606 from fiscal years beginning after December 15, 2017,
the ASBJ developed a comprehensive accounting standard on revenue
recognition and issued it together with implementation guidance.

9

The fundamental policy for developing Accounting Standard for Revenue
Recognition by the ASBJ was that the accounting standard would
incorporate the fundamental principles of IFRS 15 as the starting pointfrom the perspective of comparability of financial statements, which is theone of the benefits of achieving consistency with IFRS. If there are any
matters to be taken into consideration with regard to actual practices inJapan, etc., additional alternative accounting treatments will be provided
that do not impair financial statement comparability.
(2) Scheduled date of application
The accounting standard and guidance will be applied from the beginningof the fiscal year ending March 31, 2022.
(3) Impact of application
The Company is currently assessing the impact of applying the accounting
standard and guidance on its consolidated financial statements.

4 Additional Information(Transactions of Delivering the Company’s Own Stock to Employees etc.
through Trusts)(a) Board Benefit Trust (BBT)The Company introduced a “Board Benefit Trust” with the goal ofincreasing awareness of the importance of contributing to further
enhancing the Company’s corporate value and performance over the
medium-to-long-term.
(1) Summary	‌The Company awards the Company’s stock to the executive officers
who satisfy certain requirements based on predetermined regulations
for awarding stocks. Executive officers are granted a certain number ofpoints depending on the financial results, and upon their retirement,
the officers will receive stock depending on the number of points they
have accumulated.
The Company has established the Trust by contributing funds to be
used for the acquisition of the Company’s stock on behalf of executive
officers. The Trust will acquire the Company’s stock to be awarded tothe executive officers in the future, and the shares are managed astrust assets.
(2) The Company’s stock in the Trust	‌The Company’s own stock in the Trust is recorded in treasury shares
under net assets based on the book value of the shares in the Trust(excluding ancillary expenses). The book value and the number ofthese treasury shares in the Trust as of March 31, 2018 were ¥102
million (U.S.$960 thousand) and 97,400 shares, respectively.

(b) Employee Stock Ownership Plan (ESOP) Trust
The Company introduced an Employee Stock Ownership Plan (ESOP)
Trust as an employee incentive plan with the aim of raising awareness of
the Company’s share price and strengthening financial performance.
(1) Summary	‌The Company awards the Company’s stock to the employees who
satisfy certain requirements based on predetermined regulations forawarding stocks.
If the Company’s profit is higher than a pre-determined standard,
the Company awards a certain number points to employees. Upon
their retirement, employees will receive the Company’s stock
depending on the number of points they have accumulated.
The Company has established the Trust by contributing funds to be
used for the acquisition of the Company’s stock on behalf ofparticipating employees. The Trust will acquire the Company’s stock
to be awarded to employees in the future, and the shares aremanaged as trust assets.
(2) The Company’s stock in the Trust	‌The Company’s own stock in the Trust is recorded in treasury shares
under net assets based on the book value of the shares in the Trust(excluding ancillary expenses). The book value and the number ofthese treasury shares in the Trust as of March 31, 2018 were ¥126
million (U.S.$1,183 thousand) and 120,000 shares, respectively.

5 Consolidated Statements of Comprehensive Income
The amount of recycling and amount of income tax effect associated with other comprehensive income for the years ended March 31, 2018 and 2017 wereas follows:
thousands of
U.S. dollars

millions of yen

2018

2017

2018

¥1,565
(23)
1,542
(482)
1,060

¥1,286
(4)
1,282
(385)
897

$14,728(216)
14,512(4,535)
9,977

Translation adjustments
Amount recognized in the year

117

(76)

1,103

Remeasurements of defined benefit plans, net of tax
Amount recognized in the year
Reclassification adjustments included in the statement of income
Before income tax effect adjustment
Amount of income tax effectRemeasurements of defined benefit plans, net of tax

(25)
30
4
(1)
3

(25)
18
(7)
2
(5)

(237)
278
41
(13)
29

10
—
10
¥1,191

(15)
(2)
(18)
¥798

98
—
98
$11,206

Unrealized holding gain (loss) on other securities, net of taxes
Amount recognized in the year
Reclassification adjustments included in the statement of income
Before income tax effect adjustment
Amount of income tax effectUnrealized holding gain (loss) on other securities, net of taxes

Share of other comprehensive income (loss) of entities accounted for using equity method
Amount recognized in the year
Reclassification adjustments included in the statement of income
Share of other comprehensive income (loss) of entities accounted for using equity method
Total other comprehensive income10Notes to Consolidated Financial Statements

6 Financial Instruments(1) Current status of financial instruments(a) Policy in relation to financial instruments	‌The Company and its consolidated subsidiaries (collectively, the “Group”)
raise necessary funds following capital investment plans for undertaking
the manufacturing-and-selling businesses. Surplus funds of the Groupare only invested in highly secure financial assets.
(b) Details of financial instruments and related risk	‌Trade receivables—trade notes and accounts receivable—are
exposed to credit risk in relation to customers. In addition, receivables
denominated in foreign currencies are exposed to foreign currency
exchange risk.
	‌	 Investment securities, most of which are stocks of other companies
with which the Group has business relationships, are exposed tomarket price fluctuation risk.
	‌	 Substantially all trade payables—notes and accounts payable-trade,electronically recorded obligations-operating and other payables—havepayment due dates within one year. In addition, payables denominatedin foreign currencies are exposed to foreign currency exchange risk.
(c) Risk management system for financial instruments	‌(Credit risk management—the risk that customers or counterparties
may default)	‌The Company has established a management policy whereby theCompany evaluates the financial conditions of its customers and monitors

11

due dates and outstanding balances regularly to identify and mitigate
risks of bad debts from customers who are having financial difficulties.
	‌	 The consolidated subsidiaries perform equivalent management
procedures as the Company.
	‌(Market risk management—the risk arising from fluctuations in
exchange rates and interest rates)	‌The Company uses forward exchange contract transactions with theaim of avoiding risk related to fluctuation in future foreign exchange.
	‌	 For investment securities, the Company periodically confirms themarket value of such financial instruments and reports to the director
in charge. The Company reviews the status of these investments on acontinuing basis.
	‌(Liquidity risk management—the risk that the Group may not able tomeet its payment obligations on the schedule dates)	‌The Company manages liquidity risk by means of preparing monthly
financial plans.
(d)	‌Supplementary explanation of items relating to the fair value of financial
instruments	‌The fair value of financial instruments is based on their quoted market
prices if available. If there are no market prices available, fair value isreasonably estimated. Because estimation of fair values incorporates
variable factors, adopting different assumptions can change the value.

(2) Estimated fair value of financial instruments
The carrying value of financial instruments recognized on the consolidated balance sheets as of March 31, 2018 and 2017, the estimated fair value of such items
and the differences between them are shown below. Financial instruments for which fair value is extremely difficult to estimate are not included in the following table.
millions of yen
Year ended March 31, 2018

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets¥11,910
5,430
7,574
¥24,914¥11,910
5,430
7,574
¥24,914————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities¥2,1973,624
2,570¥8,391¥2,1973,624
2,570¥8,391————

Year ended March 31, 2017

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets¥11,439
5,220
6,077
¥22,736¥11,439
5,220
6,077
¥22,736————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities¥2,159
2,937
2,405¥7,501¥2,159
2,937
2,405¥7,501————

Year ended March 31, 2018

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets$112,101
51,11471,292$234,507$112,101
51,11471,292$234,507————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities$20,675
34,11324,193$78,982$20,675
34,11324,193$78,982————

Difference

millions of yen
Difference

thousands of U.S. dollars
Difference

Notes: 1. Method of estimating the fair value of financial instruments and other matters relating to investment securities
Assetsa. Cash and time deposits and b. Trade notes and accounts receivable
Because these items are settled over the short term, the fair value and carrying value are nearly equivalent. Therefore, the relevant carrying value is used.
c. Investment securities
	‌Stocks are valued at the exchange trading price. Bonds are valued at the exchange trading price or at the price provided by the financial institutions offering these securities. For information on securities classified by purpose ofholding, please refer to the “Investment Securities” section of the notes to the financial statements.
Liabilities
a. Trade payables, b. Electronically recorded obligations-operating and c. Other payables
Because these items are settled over the short term, the fair value and carrying value are nearly equivalent. Therefore, the relevant carrying value is used.
2. Financial instruments for which fair value is extremely difficult to determine
Carrying value
thousands of
U.S. dollars

millions of yen

Unlisted equity securities

2018
¥ 55

2017
¥ 15

2018
$ 519

Because the fair value of these financial instruments is extremely difficult to determine, given that no quoted market price is available, they are not included in the above table.

12Notes to Consolidated Financial Statements

3. Redemption schedule for receivables and other securities with maturity dates at March 31, 2018 and 2017 are summarized as follows:Year ended March 31, 2018

Time deposits
Trade notes and accounts receivable
Investment securities
Other
Total

Year ended March 31, 2017

Time deposits
Trade notes and accounts receivable
Investment securities
Other
Total

One year or lessmillions of yen
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

More than 10 years¥11,908
5,430

—
—

—
—

—
—

100
¥17,439

—
—

—
—

—
—

One year or lessmillions of yen
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

More than 10 years¥11,438
5,220

¥—
—

—
—

—
—

—
¥16,659

100
¥100

—
—

—
—

thousands of U.S. dollars
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

Year ended March 31, 2018

One year or lessTime deposits
Trade notes and accounts receivable
Investment securities
Other
Total

$112,090
51,114

—
—

—
—

—
—

941
$164,145

—
—

—
—

—
—

More than 10 years

7 Derivatives
The Company and its consolidated subsidiaries had no derivative instruments outstanding at March 31, 2018 and 2017.

8 Investment Securities(1) Other securities
The acquisition cost and related carrying value of other securities with a determinable market value at March 31, 2018 and 2017 are summarized as follows:
thousands of
U.S. dollars

millions of yen

Acquisition cost
Carrying value
Total unrealized gain
Total unrealized loss2018¥2,618
7,574
4,963
7

2017
¥2,662
6,077
3,446
31

2018
$24,639
71,292
46,71866

At March 31, 2018 and 2017, unlisted stocks (whose carrying value was ¥55 million (U.S.$519 thousand) and ¥15 million, respectively) are not included in
the above table because their fair value is extremely difficult to determine, given that no quoted market price is available.

13(2) Sales of other securities(Year ended March 31, 2018)
millions of yen(1) Stocks(2) Bonds
1. Government bonds
2. Corporate bonds
3. Others(3) Other securities
Total

Proceeds from sales

Gain on sales

Loss on sales

¥ 77

¥ 57

—

—
—
—
—
¥ 77

—
—
—
—
¥ 57

—
—
—
—
—

(Year ended March 31, 2017)
millions of yen(1) Stocks(2) Bonds
1. Government bonds
2. Corporate bonds
3. Others(3) Other securities
Total

Proceeds from sales

Gain on sales

Loss on sales

¥ 13

¥4

—

—
—
—
—
¥ 13

—
—
—
—
¥4

—
—
—
—
—

(Year ended March 31, 2018)
thousands of U.S. dollars(1) Stocks(2) Bonds
1. Government bonds
2. Corporate bonds
3. Others(3) Other securities
Total

Proceeds from sales

Gain on sales

Loss on sales

$ 724

$ 535

—

—
—
—
—
$ 724

—
—
—
—
$ 535

—
—
—
—
—

(3) Impairment of investment securities
The Company recognized impairment loss on investment securities of ¥34 million (U.S.$319 thousand) for the year ended March 31, 2018.
There were no significant impairment losses on investment securities to be recorded for the year ended March 31, 2017.

9 Land Revaluation
In accordance with the Land Revaluation Law (Proclamation No. 34 dated
March 31, 1998), land used for business activities was revalued at March
31, 2002. The revaluation difference, net of taxes, is stated as “Unrealized
revaluation loss on land, net of taxes” in net assets. Deferred tax liabilities
arising from this revaluation difference are presented separately fromdeferred tax liabilities for other temporary differences in the accompanying
consolidated balance sheets. The market value of the land as of March 31,2018 and 2017 decreased by ¥463 million (U.S.$4,356 thousand) and¥509 million, respectively, after the revaluation.

10 Pledged Assets
Pledged assets at March 31, 2018 and 2017 are summarized as follows:
thousands of
U.S. dollars

millions of yen

2018Time deposits

¥5

2017
¥4

2018
$ 43

Time deposits were pledged as collateral mainly for leased office space at March 31, 2018 and 2017.

14

Notes to Consolidated Financial Statements

11 Income Taxes
At March 31, 2018 and 2017, the tax effect of the temporary differences which gave rise to a significant portion of the deferred tax assets (excluding deferredtaxes on unrealized revaluation loss on land) was as follows:
thousands of
U.S. dollars

millions of yen

2017

2018
Deferred tax assets:
Accrued employees’ bonuses

2018

¥119

¥158

$1,119

Allowance for sales returns

39

34

371

Accrued business taxes

55

56

520

Loss on valuation of inventories

21

37

193

Net defined benefit liability

377

355

3,547

Accrued payable due to transfer to defined contribution pension plan

46

79

437

Provision for directors’ retirement and severance benefits

38

39

362

Provision for executive officers’ incentive plan

19

12

182

Write-downs of securities

65

54

610

Impairment loss

46

46

436

Other

145

142

1,367

Gross deferred tax assets

971

1,014

9,144

Valuation allowance

(119)

(154)

(1,121)

Total deferred tax assets

852

860

8,023

(110)

Deferred tax liabilities:
Deferred gain on sales of property

(12)

(12)

Net defined benefit asset

(10)

(32)

(92)

Undistributed earnings of controlled foreign companies

(61)

(73)

(579)

Unrealized holding gain on other securities, net of taxes(14,297)(1,519)(1,037)

Total deferred tax liabilities(1,602)(1,154)(15,078)

Net deferred tax liabilities¥(749)¥(294)$(7,054)

At March 31, 2018 and 2017, net deferred tax liabilities were included in the following items in the consolidated balance sheets.
thousands of
U.S. dollars

millions of yen

Current assets - deferred tax assets
Non-current assets - deferred tax assets
Non-current liabilities - deferred tax liabilities

2018

2017

2018

¥383
11

¥414
11

$3,602107(1,144)(718)(10,764)

A reconciliation of the statutory tax rates to the Company’s effective tax rates for the years ended March 31, 2018 and 2017 is summarized as follows:
2018
Japanese statutory tax rate
Permanent differences, such as entertainment expenses, etc.
Permanent differences, such as dividend income
Tax credit
Undistributed earnings of controlled foreign companies
Equity in loss of affiliates
Other
Effective tax rate15

31.00%
0.54(0.24)(2.87)(0.33)(0.08)
1.32
29.34%

2017
31.00%
0.72(0.30)(2.61)(0.86)(0.28)
1.62
29.29%

12 Employees’ Retirement and Severance Benefits
The Company and its consolidated subsidiaries have defined benefit plansfor payments of employees’ retirement (either funded or unfunded), theCompany and some consolidated subsidiaries have a defined contribution
pension plan.
The Group pays a pension or lump sum based on length of service andsalary in the defined benefit corporate pension plan.
In unfunded retirement benefit plans, the Company pays a lump sum
based on length of service and salary as a retirement benefit.
Some consolidated subsidiaries adopt the simplified method whichassumes retirement benefit obligation to be equal to the benefits payable if
all eligible employees voluntarily terminated their employment at fiscal year
end for the calculation of net defined benefit liability and retirement benefit
expenses.
Incidentally, effective from April 1, 2017, the Company transferred thedefined benefit portion of its pension plans for current employees to adefined contribution pension plan. In addition, some consolidated
subsidiary has introduced a defined contribution pension plan.

(1) Defined benefit plans
Adjustments of beginning and ending balance of retirement benefit obligations
thousands of
U.S. dollars

millions of yen

Balance at the beginning of the year
Service cost
Interest cost
Actuarial gain or loss
Payment of retirement benefits
Decrease due to transfer of retirement benefit obligation to defined contribution pension plan
Other
Balance at the end of the year

2018

2017

2018

¥1,318
68
10
10
(50)
—
6
¥1,362¥3,903
237
31
(9)
(220)
(2,623)(1)¥1,318$12,409
641
92
96
(473)
—
57
$12,823

Adjustments of beginning and ending balance of plan assets
thousands of
U.S. dollars

millions of yen

Balance at the beginning of the year
Expected return on plan assets
Actuarial loss
Employer’s contributions
Payment of retirement benefits
Decrease due to transfer of retirement benefit obligation to defined contribution pension plan
Balance at the end of the year

2018

2017

2018

¥220
2
(15)
—
(22)
(71)
¥114

¥2,606
52
(34)
154
(156)
(2,402)¥220$2,073
18
(141)
—
(206)
(669)
$1,075

Adjustments of ending balance of retirement benefit obligations and plan assets, and net defined benefit asset and liability on consolidated balance sheet
thousands of
U.S. dollars

millions of yen

Funded retirement benefit obligations
Plan assets
Unfunded retirement benefit obligations
Net defined benefit asset and liability on consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net defined benefit asset and liability on consolidated balance sheet

2018

2017

2018

¥105
(114)
(9)
1,257
1,248
1,257
(9)
¥1,248

¥117
(220)
(103)
1,201
1,098
1,201
(103)
¥1,098$991(1,075)(84)
11,832
11,748
11,832(84)$11,748

16

Notes to Consolidated Financial Statements

The following table summarizes the components of net retirement benefit expenses:
thousands of
U.S. dollars

millions of yen

2017

2018
Service cost
Interest cost on benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Extraordinary additional retirement payments
Net retirement benefit expenses
Profit or loss due to transfer of retirement benefit obligation to defined contribution pension plan (*)

¥68
10
(2)
30
35
140
¥—

2018

¥237
31
(52)
34
8
258
¥(19)

$641
92
(18)
278
326
1,320
$—

(*) It is recorded as special loss.

Remeasurements of defined benefit plans, before tax, in the consolidated statements of comprehensive income
thousands of
U.S. dollars

millions of yen

2017

2018
Actuarial gain (loss)
Adjustment due to transfer of retirement benefit obligation to defined contribution pension plan
Total

¥4
—
¥4

2018

¥9
(16)
¥(7)

$41
—
$41

Remeasurements of defined benefit plans, before tax, in the consolidated balance sheets
thousands of
U.S. dollars

millions of yen

2018
Unrecognized actuarial gain (loss)

¥32

2017

2018

¥37

$303

2018

2017

Plan assets(1) Plan assets
The fair value of plan assets, by major category, as a percentage of total plan assets is as follows:

General accounts
Total

100.0%
100.0%

100.0%
100.0%(2) Calculation method of expected long-term rate of return on plan assets
The expected return on assets has been estimated based on the anticipated allocation to each asset class and the expected long-term returns on assets
held in each category.
The assumptions used in the actuarial calculation
The main assumptions used in the actuarial calculation (presented as a weighted average) are as follows:
2018
Discount rate
Expected rate of return on plan assets

0.8%
1.3%

2017
0.8%
2.0%

(2) Other retirement benefits
Contributions to the defined contribution pension plans of the Company and its consolidated subsidiaries amounted to ¥128 million (U.S.$1,203 thousand) for
the year ended March 31, 2018.

17

13 Net Assets
The Corporation Law of Japan (the “Law”), which superseded most of theprovisions of the Commercial Code of Japan, went into effect on May 1,
2006. The Law provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve)
and retained earnings (other than the legal reserve) be transferred to thecapital reserve and the legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of the capital stock
account. Such distributions can be made at any time by resolution of theshareholders or by the Board of Directors if certain conditions are met.

Capital surplus and the legal reserve are not available for the distributionof dividends but may be used to reduce or eliminate a deficit or may betransferred to stated capital. At March 31, 2018, the legal reserve of theCompany included in retained earnings amounted to ¥550 million(U.S.$5,175 thousand).
The maximum amount which the Company can distribute as dividends
is calculated based on the non-consolidated financial statements of theCompany and in accordance with the Corporation Law of Japan.

14 Amounts per Share
Net assets per share as of March 31, 2018 and 2017 were ¥1,285.01(U.S.$12.10) and ¥1,148.41, respectively. Basic earnings per share for theyears ended March 31, 2018 and 2017 was ¥109.58 (U.S.$1.03) and¥83.57, respectively.
Diluted earnings per share for the years ended March 31, 2018 and2017 was ¥108.85 (U.S.$1.02) and ¥83.17, respectively.

The basis for the calculation of basic earnings per share and diluted earnings per share for the years ended March 31, 2018 and 2017 was as follows:
thousands of
U.S. dollars

millions of yen

Basic earnings per share:
Profit attributable to owners of parent
Amount not attributable to shareholders of common stock
Amount attributable to shareholders of common stock
Weighted-average number of shares outstanding(millions of shares)
Diluted earnings per share:
Adjustments to profit attributable to owners of parent
Increase in number of shares outstanding(millions of shares)(Subscription rights to shares)
Shares having an anti-dilutive effect(millions of shares)

2018

2017

2018

¥ 2,410—2,410¥ 1,817—
1,817$ 22,682—
22,682

22

22

—

—

—

—

0
(0)

0
(0)

—
—

—

—

—

The basis for calculation of total net assets per share as of March 31, 2018 and 2017 was as follows:
thousands of
U.S. dollars

millions of yen

Total net assets per share:
Total net assets
Deductions:
Subscription rights
Non-controlling interests
Amounts attributable to shareholders of common stock
Number of shares outstanding at year end(millions of shares)

2018

2017

2018

¥ 29,022671
19
652
28,351¥ 25,812
689
46
642
25,124$ 273,172
6,314
182
6,132
266,858

22

22

—

18

Notes to Consolidated Financial Statements

15 Major Expenses
Major expenses included in selling, general and administrative expenses for the years ended March 31, 2018 and 2017 were as follows:
thousands of
U.S. dollars

millions of yen

Sales promotion expenses
Advertising costs
Salaries
Shipment and storage expenses
Provision for employees’ retirement and severance benefits
Provision for executive officers’ incentive plan
Provision of allowance for doubtful accounts

2018¥ 3,494
2,896
2,241
1,507
218
25
0

2017
¥ 3,096
2,618
2,145
1,350
210
23
—

2018
$ 32,892
27,25521,092
14,1852,051
234
5Research and development expenses included in general and administrative expenses and cost of sales for the years ended March 31, 2018 and 2017
amounted to ¥596 million (U.S.$5,612 thousand) and ¥611 million, respectively.

16 Cash and Time Deposits
A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows to cash and time deposits in the accompanying
consolidated balance sheets at March 31, 2018 and 2017 is as follows:
thousands of
U.S. dollars

millions of yen

Cash and time deposits
Time deposits with a maturity in excess of three months
Other current assets (*)
Cash and cash equivalents

2018¥11,910(56)
12¥11,8662017¥11,439(52)
9¥11,396

2018$112,101(530)
117$111,689(*) These represent the Company’s contributions of funds to a bank in order to establish the “Board Benefit Trust (BBT)” and “Employee Stock Ownership Plan (ESOP) Trust.”

17 Leases(Finance leases)
Leased assets included in property, plant and equipment are buildings and structures, machinery, equipment and vehicles, tools, furniture and fixtures in thedaily necessities segment. Leased assets included in intangible assets are software.
(Operating leases)
The Company and its consolidated subsidiaries had no significant operating leases at March 31, 2018 and 2017.

19

18 Segment Information(1) Summary of Reporting Segments
Segment information for the years ended March 31, 2018 and 2017 isomitted as the Group operates as a single segment.

(3)	‌Information on the amounts of sales, income, and other items byreportable segments
Information on the amounts of sales and other items for the years ended
March 31, 2018 and 2017 is omitted as the Group operates as a single
segment.

(2)	‌Calculation method of sales, profits or losses, and other items byreportable segment
Information on the calculation method is omitted as the Group operates asa single segment.
(4) Related Information(a) Information by products and services

millions of yen
Year ended March 31, 2018

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties¥20,479¥9,323¥6,435¥5,569¥6,821¥48,627

Year ended March 31, 2017

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties¥19,640¥8,938¥5,728¥5,290¥6,361¥45,958

Year ended March 31, 2018

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties$192,757$87,757$60,569$52,421$64,201$457,705

millions of yen

thousands of U.S. dollars(b) Information by geographical segment(Sales)Geographical segment information is not presented as overseas sales
were less than 10% of consolidated net sales for the years ended
March 31, 2018 and 2017.

(Property, plant and equipment)
Geographical segment information is not presented as the amount ofproperty, plant and equipment in Japan exceeded 90% of the total ofproperty, plant and equipment at March 31, 2018 and 2017.

(c) Information by major customers
Sales

PALTAC CORPORATION
ARATA CORPORATION

thousands of
U.S. dollars

millions of Yen

Customers

2018

2017

2018

¥17,741¥10,074¥16,292¥9,628$166,989$94,823

Related segment

Daily necessities
Daily necessities

19 Related Party Transactions(Years ended March 31, 2018 and 2017)
Not applicable

20 Inventory Valuation Loss Included in Cost of Sales
Inventory valuation loss write-downs below cost to net selling value are included in cost of sales and amounted to ¥151 million (U.S.$1,424 thousand) and¥301 million for the years ended March 31, 2018 and 2017, respectively.

20

Notes to Consolidated Financial Statements

21 Note to Consolidated Statements of Changes in Net Assets
Shares in issue and outstanding and treasury stock at March 31, 2018 and 2017 were as follows:(Year ended March 31, 2018)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock

23,000 thousand
937 thousand

Note: Details of the change in the number of shares of treasury stock are as follows:
Increase due to purchase of shares less than standard unit:
Decrease due to the exercise of stock options:
Decrease due to issuance of treasury shares by the stock benefit trust (BBT):

0 thousand
184 thousand
2 thousand

The common stock owned by the Trust (217 thousand shares) is included in the number of shares held intreasury stock.

23,000 thousand
1,123 thousand

Note: Details of the change in the number of shares of treasury stock are as follows:
Increase due to purchase of shares less than standard unit:
Decrease due to the exercise of stock options:0 thousand
178 thousand

The common stock owned by the Trust (220 thousand shares) is included in the number of shares held intreasury stock.

Subscription rights at March 31, 2018 were as follows:
Subscription rights for stock options¥19 million (U.S.$182 thousand)

Subscription rights at March 31, 2017 were as follows:
Subscription rights for stock options

Dividends paid from retained earnings for the year ended March 31,2018 were as follows:

Dividends paid from retained earnings for the year ended March 31,2017 were as follows:

Total amount ofdividends(millions of yen)

Dividends
per share(yen)

Board of directors’
meeting held on
May 22, 2017

¥ 265

¥ 12

Board of directors’
meeting held on
October 30, 2017

289

13

Resolution

Resolution

Board of directors’
meeting held on
May 21, 2018

Total amount ofdividends(millions of yen)

¥ 401

Source ofdividends

Retainedearnings

Dividends
per share(yen)

Board of directors’
meeting held on
May 16, 2016

¥ 241

¥ 11

Board of directors’
meeting held on
October 27, 2016

263

12

Effective date

Resolution

March 31,2017

May 31,2017

September 30, December 8,
2017
2017

Dividends
per share
(yen)

¥ 18

Total amount ofdividends(millions of yen)

Record date

Dividends for which the record date was in the year ended March 31,2018 and the effective date is in the year ending March 31, 2019 were as
follows:

21(Year ended March 31, 2017)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock¥46 million

Record date

Effective date

March 31,2016

May 31,2016

September 30, December 2,
2016
2016

Dividends for which the record date was in the year ended March 31,2017 and the effective date was in the year ended March 31, 2018 wereas follows:

Record date

Effective date

Resolution

March 31,2018

June 5,
2018

Board of directors’
meeting held on
May 22, 2017

Total amount ofdividends(millions of yen)

¥ 265

Source ofdividends

Retainedearnings

Dividends
per share
(yen)

¥ 12

Record date

Effective date

March 31,2017

May 31,2017

22 Stock Option Plans
At March 31, 2018, the Company had stock option plans, which were approved at the annual general meetings of the shareholders and by the Board of
Directors. Details of these stock option plans are summarized as follows:
Date of approval

Number of shares granted

Eligible participants

Exercisable period

June 18, 2010
June 17, 2011

155,000
35,000

4 officers and 17 employees
7 employees

Aug 3, 2012 – Aug 2, 2017
Aug 2, 2013 – Aug 1, 2018

June 15, 2012

130,000

3 officers and 8 employees

Aug 2, 2014 – Aug 1, 2019

June 14, 2013

130,000

2 officers and 10 employees

Aug 2, 2015 – Aug 1, 2020

June 17, 2014

175,000

6 officers and 11 employees

Aug 2, 2016 – Aug 1, 2021

The option price per share was determined on the date the options were granted based on an established formula for determining option prices. The
options are exercisable during the above periods provided that the recipients are still directors, officers or employees of the Company or its subsidiaries.
Description of stock options

GranteesType of stock
Number of stock
options granted (*)
Grant dateCondition for exercise
Working period
Exercisable period

2011
4 officers and
17 employees
Common stock
155,0002012
7 employees
Common stock2013
3 officers and
8 employees
Common stock2014
2 officers and
10 employees
Common stock2015
6 officers and
11 employees
Common stock

35,000130,000

130,000

175,000

August 2, 2010

August 1, 2011

August 1, 2012

August 1, 2013

August 1, 2014

Working from
August 2, 2010
to August 2, 2012
August 2, 2010
to August 2, 2012
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 1, 2011
to August 1, 2013
August 1, 2011
to August 1, 2013
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 1, 2012
to August 1, 2014
August 1, 2012
to August 1, 2014
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 1, 2013
to August 1, 2015
August 1, 2013
to August 1, 2015
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)

Working from
August 1, 2014
to August 1, 2016
August 1, 2014
to August 1, 2016
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise theirstock options)(*) Number of stock options in the column “Number of stock options granted” has been converted into the equivalent numbers of shares.

22Notes to Consolidated Financial Statements

Stock option activity during the year ended March 31, 2018 was as follows:
Number of shares

Non-vested Outstanding at beginning of year
Granted during the year
Forfeited during the year
Vested during the year
Outstanding at end of year
Vested Outstanding at beginning of year
Vested during the year
Exercised during the year
Forfeited during the year
Outstanding at end of year

2011

2012

2013

2014

2015

—
—
—
—
—
44,000—44,000
—
—

—
—
—
—
—
27,000—24,000
—
3,000

—
—
—
—
—
48,000—42,000
—
6,000

—
—
—
—
—
110,000—
40,000—70,000—————133,000—
34,000—99,0002011¥1,049
2,492
¥178

2012
¥976
2,396
¥194

2013
¥946
2,484
¥153

2014
¥1,066
2,456
¥117

2015
¥1,059
2,674¥97

Price of stock options
yen

Exercise price
Weighted-average market price
Fair value per option on grant date

The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option pricing model.
Method of estimating exercised stock options
The Company estimated the number of exercised stock options based on the actual number of forfeitures because it is difficult to estimate the number ofstock options which will be forfeited in the future.

23

Report of Independent Auditors24

Five-Year Financial Summary
S.T. CORPORATION and consolidated subsidiaries
Years ended March 31

thousands of
U.S. dollars(except per sharedata and ratios)

millions of yen(except per share data and ratios)

2018

2017

2016

2015

2014

2018

For the Year:¥48,627¥45,958¥44,661¥48,263¥46,993$457,705

Cost of sales

28,552

27,47327,29428,23526,980268,747

Selling, general and administrative expenses

16,594

15,63015,025

18,216

17,881

156,195

Operating income

3,481

2,854

2,342

1,813

2,131

32,763

Profit before income taxes

3,478

2,751

1,703

1,536

1,637

32,741

Profit attributable to owners of parent

2,410

1,817

912

892

1,234

22,682

Capital expenditures

Net sales

1,822

608

1,758

1,486

942

17,140Depreciation and amortization

970

997

1,128

844

894

9,130

R&D expenses

596

611

536

513

564

5,610

Cash flows from operating activities

2,660

5,150

2,481

2,137

2,110

25,042

Cash flows from investing activities(1,826)

(622)

(624)

(1,768)514(17,186)

Free cash flow

835

4,529

1,857

369

2,624

7,856

Cash flows from financing activities

(428)

(640)

(876)

(614)

(465)

(4,024)¥24,119¥22,467¥19,708¥20,221¥18,956$227,022

8,931

8,001

8,659

8,110

7,555

84,061At Year-End:Total current assets
Property, plant and equipment, net
Total assets

42,45038,45834,92433,78532,370399,566

Total current liabilities

10,241

9,666

8,781

9,008

8,966

96,397

Total long-term liabilities

3,187

2,980

2,648

2,176

2,318

29,997

Total net assets

29,02225,812

23,496

22,60021,087273,172

Cash and cash equivalents

11,866

11,396

7,552

6,585

6,728

111,689

Number of shares issued (thousand shares)

23,00023,00023,00023,00023,000Treasury stock (thousand shares)

937

1,123

1,301

1,149

1,147

Number of employees

952

890

860

859

760

Per Share (yen and U.S. dollars):¥109.58¥83.57¥42.01¥40.83¥56.74

Dividends

31.00

24.00

22.00

22.00

22.00

0.29

Net assets

1,285.01

1,148.41

1,049.58

1,001.84

936.06

12.10

2,286

1,809

1,114

1,021

999

21.52

Operating income margin

7.2

6.2

5.2

3.8

4.5

Profit before income taxes/net sales

7.2

6.0

3.8

3.2

3.5

Return on sales

5.0

4.0

2.0

1.8

2.6

ROA

6.0

5.0

2.7

2.7

4.0

ROE

9.0

7.6

4.1

4.2

6.1

Equity ratio

66.8

65.3

65.2

64.8

63.2

Profit attributable to owners of parent

Common stock price$1.03

Ratios (%):

25

Notes: 1. U.S. dollar amounts are translated from yen for convenience only, at the rate of ¥106.24 = U.S.$1.00, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2018.
2. ‌As a result of new accounting standards being applied effective from the fiscal year ended March 31, 2017, the figures for fiscal years 2016, 2017 and 2018 reflect those changes. The figures for fiscal years 2014 and 2015 areas originally presented without retroactive application.
3. The common stock prices listed are as of the end of the fiscal year ended in March.
4. ROA = Profit attributable to owners of parent divided by average total assets for the fiscal year.
5. ROE = Profit attributable to owners of parent divided by average total equity (total net assets minus subscription rights less non-controlling interests in consolidated subsidiaries) for the fiscal year.

Investor Information
As of March 31, 2018

Group Companies

Corporate Data
Company name

S.T. CORPORATION

Headquarters

4-10, Shimo-ochiai 1-chome,

S.T. TRADING CO., LTD.

Shinjuku-ku, Tokyo 161-8540,

S.T. BUSINESS SUPPORT CO., LTD

Japan
S.T. MYCOAL CO., LTD.

Establishment

August 31, 1948

Common stock¥7,065,500,000

Fiscal year-end

March 31

Shares issued and outstanding

23,000,000

Listed stock exchangeTokyo Stock Exchange,

S.T. (THAILAND) CO., LTD.
FAMILY GLOVE CO., LTD. (TAIWAN)

First Section
S.T. KOREA CORPORATION (SOUTH KOREA)

Shareholders

14,504

Registered transfer agent

Mizuho Trust & Banking Co., Ltd.

Accounting auditors

Ernst & Young ShinNihon LLC

Annual shareholders’ meeting

Middle of June each year

Employees

952 (consolidated)

JAPAN AROMA LABORATORY CO., LTD.
SHALDAN (THAILAND) CO., LTD.

425 (non-consolidated)
Contact

Kouichi Yoshizawa,
Public Relations Department

E-mailir@st-c.co.jp

Telephone+81-3-3367-6115

Facsimile+81-3-3367-6320

Major Shareholders
Thousands of shares% of total

Shaldan Co., Ltd.

5,587

25.1

Nippon Life Insurance Company

1,336

6.0

TCSB (Mizuho Bank)

884

4.0

Takashi Suzuki

673

3.0

Japan Trustee Services Bank, Ltd. (Trust Account)

644

2.9

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

604

2.7

FUMAKILLA LIMITED

541

2.4

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

524

2.4

Kanichi Suzuki

500

2.2

Takako Suzuki

477

2.1

Individuals, etc. .......................... 33.9%
Other Japanese corporations ..... 33.9%
Financial institutions .................. 24.3%
Non-Japanese institutions .......... 7.2%
Securities fi rms ............................0.7%

Note: ‌The Company holds treasury stock of 719 thousand shares as of March 31, 2018; however, it is excluded
from the list of major shareholders shown above.

Stock Chart
Stock price (yen)Nikkei 225 (yen)3,500

25,0002,800

20,0002,100

15,0001,400

10,000700

Trading volume (shares) 5,000
2,500,000

015/6 78

9 10 11 12 16/1 2

3

4

5

6

7

8

9 10 11 12 17/1 2

3

4

5

6

7

8

9 10 11 12 18/1 2

3

4

5

6

0

26

4-10, Shimo-ochiai 1-chome, Shinjuku-ku, Tokyo 161-8540, Japan
http://www.st-c.co.jp/english/company/ index.html
Printed in Japan, August 2018