A New
Beginning toRefresh theWorld
Annual Report 2007
For the Year Ended March 31, 2007

Invest(March 31, 2

New Ideas for Comfortable Lifestyles
Fiscal year-

To reflect the growing broad-based nature of our business, we removed “kagaku ”(chemicals)

Shares issu

from our Japanese corporate name, giving birth to a renewed S.T. Corporation.

Listed exch
Shareholde

In commemorating the 60th anniversary our founding, we have committed ourselves to thecreation of “New Ideas for Comfortable Lifestyles.”In order to provide “comfort and excitement” to its customers, the S.T. Corporation doesn’t
bother with the unimaginative—it pursues only innovative projects.
With a new corporate name, a new commitment and a new approach,a New S.T. has started.

PRIMAR
Shaldan
T-ZONE
S.T. Corp
Nippon L
TCSB(M
Takashi S
Suzuki F
The Bank
Seiichi S
Akio Suz
CaleineRegistered
AuditorAnnual sha

STOCK
Stock Price (Ye
2,400

1,800

CONTENTS

C3

1

A Message from Management

2

Special Features —Efficiency, Growth, Teamwork—

8

Corporate Social Responsibility

9

Review of Operations

14

Management’s Discussion and Analysis

16

Six-Year Selected Financial Data (Unaudited)18

Financial Section

36

Corporate Information

37

Investor Information

S.T. CORPORATION ANNUAL REPORT 2007

1,200

600

0
04/6

A Message from Management

A New Beginning and New Leadership
On April 1, 2007, I took over a great responsibility, acceding toContinue to Be a Company “Doing things noother company in the world does”

the post of President and Chief Executive Officer, andS.T. Corporation will make ongoing efforts to be a company

Chairman of the Board—the first person from outside thethat accomplishes things that no other company in the worldfounding family to assume these positions. In order to survive

does. Taking over with S.T. Corporation’s outstanding tradi-the inexorable, sweeping changes taking place in today’s socie-tions in mind, I will commit myself to further business devel-ty, we must reorganize ourselves from a top-down approach toopment. A company needs to bring about innovation throughthat of a management team and an employee-led structure. We

intensive quality improvements of business operations andmust change into a teamwork-oriented company with rein-

products. The promotion of innovation then becomes a driving

forced front-line capabilities—a company that focuses on par-force of business growth, enabling the Company to realize

tial optimization rather than total optimization. In order to do

increased profits and a high earnings structure. I believe that

this, I set up three policies: (1) efficient management, (2) growth

the corporate brand eventually will be established by the trust

management and (3) teamwork management. And I accelerated

and favor of all of the stakeholders, including customers andthe implementation of these policies in order to carry out theshareholders. In order to be a company “Doing things no otherreform. Please refer to pages 2—7 for the policy details.

company in the world does,” S.T. Corporation will continue toFurthermore, we changed our Japanese corporate nametransform itself. With a 60-year history of advanced chemicalfrom S.T. Kagaku Kabushiki Gaisha (S.T. Chemical

technology, pride in the manufacture of good-quality prod-

Corporation) to S.T. Kabushiki Gaisha (S.T. Corporation) on

ucts, and a devoted corporate culture, S.T. Corporation will

August 1, 2007. On the back of the transition to the new busi-

grow freely and dynamically without being constrained byness structure on our 60th anniversary, we will continue tonormal convention.

offer flexible ideas—ideas that are not limited by “chemicals”—
under the new corporate name, while providing “comfort andexcitement” in the broader living domain. Through these

August 2007

means, we will outpace the intensifying competition.

Fiscal 2007 Strategies
In the fiscal year ending March 31, 2008, S.T. Corporation will

Kanzo Kobayashi

promote the following strategies, marking the year as one

President and Chief Executive Officer

where we establish a foundation for further growth. The

Chairman of the Board

strategies are: (1) reduce the number of products in the lineup
and focus on the core brands; (2) develop all-new, highly differentiated products with added value by cultivating new
applications and needs; (3) realize efficient marketing costs
through streamlined and effective marketing activities byinterlinking TV advertising and in-store promotions; and (4)enhance the presence of our products in the global market
through business operations at a joint venture established in
March 2007 in South Korea and the expansion of product lineups in the United States.

Special Features

1. Efficiency

Optimizing Our
Operations

2

S.T. CORPORATION ANNUAL REPORT 2007

Efficiency
Accelerated management, drastic change in management style and streamlined management assets in view of total optimization

In order to outpace its competition, the Company needs

environment, however, business may fall behind that ofto minimize overburden, unevenness and waste in busi-

competitors if it is based on a monthly schedule. Given

ness and enhance its operating efficiencies throughthis fact, the Company is thinking of changing its busi-

business improvement initiatives. In light of this, S.T.

ness scheduling to weekly operations, having all the

Corporation will promote management reform aiming toemployees manage their work on a 52-weeks-per-year

shift “from partial optimization to total optimization.”basis, just as the logistics industry does, with the aim

Total optimization means to set one objective for theof improving its corporate structure.
With these efforts, S.T. Corporation plans towhole company and focus employees’ awareness on one
thing in pursuit of bringing about synergistic effects.

achieve an operating income ratio of 10% or over.

Each division will act organically for the overall value
chain, including development, material procurement,
production, sales and advertising. It will also act for● From “partial optimization” to “total

optimization”

itself, optimizing management resources (including
human resources) and funds, and enhance management speed, with the aim of maximizing the outcome.

Development

To that end, the Company will set up company-wide
and cross-sectional objectives and a performance-based

Procurement

Advertisingevaluation system.
In addition to this approach, the Company will
strive to improve its business operations through thedevelopment of employees’ skills and the rationaliza-

ManufacturingSalestion of work. Business operations are usually scheduled
on a monthly basis. In today’s ever-changing operating●Selection and Focus＜ Focusing on Core Brands＞＜ Rationalization of Product Line＞

To achieve a ¥10billion brand

Lead the market
expansion

Shoshu Riki

Air Wash290

To win dominant share

Future core brand08

MushudaShoshu Plug

Number of S.T. Group products
Items

1,000
862
800

708

600
484
403

380

400

297

282

297

02

03

04

364
298

200

0

Fiscal year

98

99

00

01

05

06

07

TargetS.T. CORPORATION ANNUAL REPORT 20073

2. Growth

Creating New Markets

4

S.T. CORPORATION ANNUAL REPORT 2007

GrowthCreating products with innovative ideas, S.T. Corporation will expand the market andimprove its market share, while aggressively branching out overseas

Companies must make continuous efforts for growth.

enhance its market presence. Meanwhile, in the Asian

But development has its limits if a company pursues

region, the Company strives to cultivate markets by, foronly business efficiencies. Therefore, the establishment

example, making full-scale entry into the South Koreanof a business plan for future growth is important. S.T.

market, as well as developing new sales channels. As a

Corporation will engage in proposal-based management

starting point, the Company established Aekyung S.T.

to create ideas for new businesses with a concept thatjointly with Aekyung Industrial Co., Ltd., the second

goes beyond “chemicals.” With its unique and innova-

largest household goods company in South Korea, andtive dehumidifier and other product lineups, such as

ITOCHU Korea Ltd. in February 2007. The joint ven-

Dasshutan deodorizer, S.T. Corporation will createture got off to a favorable start when it commenced

product strategies to conduct marketing activities thatsales in April. With regard to new businesses andaim to create new markets for the next stage of growth.

alliances, S.T. Corporation will accept forthrightly any

The Company also continues to make efforts to develop

promising offers and endeavor to take up new chal-technologies for high-value-added products that will

lenges with careful consideration of risks.

enhance its profitability, expand the market andimprove the Company's market share.
Capitalizing on an overall corporate trend that is● Direction of growth strategies by business category
Global business development

Increasing market share (in Japan)

Market expansion (in Japan)

seeing companies from around the world expanding

Air care (deodorizers and air fresheners)

operations in Japan and, at the same time, Japanese

Cloth care (mothproofing agents)

companies branching out overseas, S.T. Corporation
will take active steps to deliver unique products to theinternational market and develop global operations. In

Humidity care (dehumidifiers)
Hand care (gloves)
Thermal care (chemical warmers)

the United States, the Company distributes dehumidiHome care (cleaners)

fiers and Dasshutan deodorizers at 3,330 branches ofS.T. Group Companies

U.S. major retailer Wal-Mart, enjoying robust sales. S.T.
Corporation will expand its product lineups in order to●Sales of dehumidifiers and deodorizer

at Wal-Mart

New businesses/business alliances●Establishment of Joint Venture

Aekyung S.T. in South Korea

In March 2006, S.T. Corporation commenced sales

In February 2007, S.T. Corporation jointly estab-of closet dehumidifiers (DryPet Skit) and closet

lished Aekyung S.T. with South Korea's second

deodorizers (Dasshutan) at approximately 3,300

largest household goods company, Aekyung

stores of the largest U.S. retailer, Wal-Mart Stores,

Industrial Co., Ltd., and ITOCHU Korea LTD.

Inc. Sales have been robust since the launch ofSales of deodorizers and air fresheners, as wellthese products.

as mothproofing agents, commenced in April the

The Company planssame year. S.T. Corporation will proactively

to expand its prod-

increase sales of S.T.-brand products in view of

uct lineups in thegrowing demand for deodorizers and air freshen-

U.S. market.

ers in South Korea.

S.T. CORPORATION ANNUAL REPORT 20075

3. Teamwork

Taking Initiative andWorking Together

6

S.T. CORPORATION ANNUAL REPORT 2007

Teamwork
Raising the motivation of each employee, S.T. Corporation will develop as a company
with strong on-site capabilities under a “people-centered mindset”

In order to keep pace in today’s rapidly changing world,

bility to respond to change, in pursuit of becoming a

S.T. Corporation needs to transform its top-down man-speedy, strong company. Promoting the policies ofagement structure into a management team and an

Efficiency, Growth and Teamwork, S.T. Corporation will

employee-oriented organization. The two policies ofengage in four company-wide projects, as follows:

Efficiency and Growth described earlier are indispensable elements of business development. Aside from this,

1. SCM Project

any kind of work is preceded by people. Each employ-

Strive to act organically in the overall value chain,ee’s awareness will become a driving force of the

including development, material procurement, man-Company. Given this, S.T. Corporation is transforming

ufacturing, sales and advertising, while developing

itself into a teamwork-oriented company with strong onsite capabilities under a “people-centered mindset.”contact bases outside the Company
2. Marketing Innovation

Specifically, S.T. Corporation will reform its evalu-

Reform marketing activities tailored to the latest IT

ation systems, including that for the recruitment of spe-tools in order to increase sales representatives’ timecialist personnel, and implement an appropriate

for business negotiations, and improve proposal

performance-based evaluation system. In addition, theCompany will organize in-house systems for overseas
study with the aim of implementing personnel
exchanges and business skill improvements. It will also
hold cooperative meetings to break down communica-

capabilities by means of Point-of-Sale analysis
3. Business Planning Project
Establish growth strategies for existing as well as
new businesses
4. Internal Control Projecttion barriers between divisions. These systems will

Develop an internal control system corresponding toenable each employee to think freely, make flexible

the Japanese SOX Act and review overall businessdecisions and act effectively in diverse situations.

operations for strengthened and streamlined func-

Aiming to become a “light-footed” organization, S.T.

tions

Corporation will reinforce every single employee’s capa-●Interlinking TV advertising, in-store
promotions and field support activities●TV advertising with favorable public image
In 2006, S.T. Corporation ranked 38th*1 among 2000 Japanese companies in terms of TV advertising that produced a favorable publicInformation

ActionUtilization of field
information

Efficientsales
promotion
tools

image. In particular, an ad featuring an old-time Japanese daimyo
espousing the benefits of Shoshu Plug gathered great attention fromconsumers as well as the advertising industry. The totally unexpected,
peaceful approach used to explain the electric Shoshu Plug systems
within the context of a historical drama won a prize at the New YorkInterlinkingTVadvertisingwithfavorable
public image

Festivals*2, one of the world's three major advertising awards.
*1 “CM-Branding Top-50 Companies” ranking ofJapanese Best Advertiser 2006, sponsored by CM
Databank*2 Established in 1957, the New York Festivals holds
world-class media competitions, co-sponsored by theUnited Nations. In the New York Festivals TV & CINEMA category, 30 Japanese works won prizes.

S.T. CORPORATION ANNUAL REPORT 20077

Corporate Social Responsibility (CSR)

Providing relaxation and excitement to homes through its products and services, S.T.
Corporation targets growth with sustainable earnings. The Company also places top
management priority in satisfying all stakeholders, including shareholders, customers,clients, local communities and employees, while enhancing its corporate value.
Corporate GovernanceSocial Contribution Activities

In June 2005, S.T. Corporation converted itself into a company

With the aim of “Using resources efficiently and communicatingwith a committee-based corporate governance system, with thewith and contributing to local communities,” the S.T.

aim of further reinforcing the entire organization. Five of the

Corporation plants at Honjo, Saitama Prefecture, Iwaki,

eight members of the Board of Directors were outside directors

Fukushima Prefecture, and Kita-Kyushu, Fukuoka Prefecture,

as of June 15, 2007. Adopting a committee-based corporate

held bargain sales of products for the benefit of local residents

governance system, management supervisory functions andand donated part of the proceeds to the social welfare councils

business execution have been separated, and a large part of thein the three cities.

responsibility for business execution has been transferred to

The Company proactively supports cultural activities, suchexecutive officers. This has created an environment for steadyas musicals and stage plays, and the Company-sponsored cam-

improvement in management quality, rapid decision-making andpaign to stage musicals is now in its tenth year. In 2007, S.T.

flexible business execution at the Company. In addition, theCorporation plans to present the musical, Anne of Green Gables,

Company believes that the establishment of Nomination, Auditin eight major cities nationwide in its “Heartbeat of 20,000

and Compensation Committees with outside directors as majori-

People Tour.” The Company appointed singer Hitomi Shimatani

ty members is reinforcing the management supervisory func-

as the heroine, and costars were selected in auditions held

tions and management transparency.

throughout Japan. With a total of approximately 20,000 people,
including cast, staff and audience, S.T. Corporation will present

Progress in the Development of Internal Control
Systema “heart-throbbing” performance for all.

There are four divisions under the control of the chief executive
officer: corporate staff, marketing, sales and manufacturing.
Each division has a chief operating officer responsible for operations who delegates authority so that he can make responsible
decisions. At the same time, each division conducts mutual
supervision through the Executive Officer Meeting and the inhouse approval system. In addition to this, the Legal Affairs
Group properly supervises each division's compliance activities.
Furthermore, at an Executive Officer Meeting held on March 10,
2007, the Company resolved to appoint a compliance

The poster of the musical,
Anne of Green Gables

officer/information disclosure officer at every domestic subsidiary, in pursuit of developing the Group-wide compliancestructure.

8

S.T. CORPORATION ANNUAL REPORT 2007

CSR

Review ofOperations

S.T. CORPORATION ANNUAL REPORT 2007

9

At A Glance

Composition of net sales by business segment(year ended March 31,2007)

In the fiscal year ended March 31, 2007, the Air Care indus-

soaring crude oil prices, we succeeded in offsetting thetry faced intensified market competition due to theincrease through cost-reduction initiatives carried out by

increased participation of foreign-affiliated toiletry manu-

the purchasing and manufacturing divisions. As a result,facturers in the Japanese market, as well as new productS.T. Corporation was able to secure increased earnings,

releases carried out by competitors. Given these condi-

despite overall lowered revenues due to a 21.2% sales drop

tions, S.T. Corporation focused on its core brands—Shoshu

in the Thermal Care (disposable warmers) Group, reflect-

Riki, Shoshu Plug and Air Wash—in pursuit of expanded

ing a record-setting warm winter in 2006.

market share. In addition, although raw material pricesrose during the fiscal year under review on the back of

HOUSEHOLD ENVIRONMENT-RELATEDPRODUCTS

MOTHPROOFING AND
HYGIENE-RELATED PRODUCTS

9.1%

22.5%

Home care(other products)

Cloth care

S.T. Corporation offers a wide
variety of unique products,
including the Powers lineup ofcleaners.

5.9%
Humidity care(dehumidifiers)

60.3%

39.7%

7.2%
Hand care(gloves)

Our broad lineup of DryPet
dehumidifiers has continuously
led the market.

The Hand Care Group markets
the Family series of household
gloves that moisturize thehands.

45.3%

10.0%

Air care(deodorizers and air fresheners)

The Air Care Group, with such products as Air
Wash and Shoshu Riki, is a core business.

10(mothproofing agents)

The Cloth Care Group, with suchproducts as Mushuda and Neopara
Ace, is one of S.T. Corporation’s corebusinesses.

S.T. CORPORATION ANNUAL REPORT 2007

Thermal care(disposable warmers)

The Thermal Care Groupmarkets the Onpacks brand of
disposable warmers.

AIR CARE (Deodorizers and Air Fresheners)
Net Sales (millions of yen)
17,36003
18,50604
19,45705
20,35706
20,46107
0

Air Wash
Mist Plus

Air Washfor closets

Shoshu Riki

Shoshu Pot

Shoshu Plug

5,000

10,00015,00020,00025,000Dasshutan

The Air Care Group is one of S.T. Corporation’s core businesses,

increasing participation by overseas toiletry makers, as well as theand a field in which market growth is expected. The Company

launch of new products by other companies. Amid such circum-

offers a unique lineup of air care products, including the

stances, in February 2007, the Company introduced Air Wash Mist

megabrand Shoshu Riki; Air Wash, which leads the market expan-

Plus, a stand-type deodorant with a spray function, and Air Washsion of deodorizers and air fresheners through the concept offor Closet, with both products gaining recognition and new cus-“refreshing the air”; Shoshu Plug, which operates on battery power

tomers since the start of sales. Net sales remained essentiallyto deodorize even large, spacious rooms; and the gel-type Shoshu

unchanged from the previous fiscal year, edging up 0.5% toPot. During fiscal 2006, S.T. Corporation expanded its market¥20,461 million due to shrinking existing brands.

despite intensifying conditions in the air care market due to

Air care

CLOTH CARE (Mothproofing Agents)
Net Sales (millions of yen)
11,491

03
10,656

04
9,861

05
10,26906
10,18807
Mushuda(for walk-in
closets)

Mushuda(for drawers)

MushudaCover + deodorizing effectMushudaMatomete Cover

0

2,000

4,000

6,000

8,000

10,00012,000

Neopara Ace

The Cloth Care Group has formed an important part of S.T.

lifestyles and to capitalize on diversified cloth storage techniques,

Corporation’s long-standing business since the Company's founda-

and introduced products such as Mushuda for walk-in closets, andtion and is second only to the Air Care Group as a marketing priori-

Mushuda Bochu Cover and Mushuda Matomete Cover, both ofty. Mushuda and Neopara Ace, which are both trusted major

which are suitable for open storage. In this way, the Company

brands that “protect valuable clothing from insects,” enjoy a formi-

strives to cultivate new demand. Net sales edged down 0.8% com-

dable level of customer loyalty. In addition, the Company carried

pared with the previous fiscal year to ¥10,188 million.

out product development to meet the needs of people's changing

Cloth care
S.T. CORPORATION ANNUAL REPORT 2007

11

HUMIDITY CARE (Dehumidifiers)
Net Sales (millions of yen)
2,766

03
3,078

04
2,592

05

2,582

06
2,682

07
DryPet(for wardrobes)

DryPet with
Charcoal(for futon)

DryPet with
Charcoal(for shoe cabinets)

0

DryPet Compact

500

1,000

1,500

2,000

2,500

3,000

3,500

Binchotan DryPet

DryPet dehumidifier has constantly led the market since its

Binchotan DryPet boasts deodorant effects on top of its dehumidi-launch in 1981. Starting with stand-type dehumidifiers, thefying functions, with products available for shoes, bedding andCompany provides product lineups that meet a variety of needs,

shoe closets. In addition, DryPet with Charcoal for futon or bed-

including dehumidifier sheets for drawers and casings for clothes

ding can be placed under the futon or bedding and dried in theand wardrobes. In addition, the Company provides a lineup ofsun for reuse. Net sales rose 3.9% up, compared with the previ-high-performance Binchotan DryPet dehumidifiers that use a spe-ous fiscal year, to ¥2,682 million.

cial charcoal made from the Quercus phyllyraeoides oak.

Humidity care
HAND CARE (Gloves)
Net Sales (millions of yen)
3,166

03
3,460

04
3,166

05
3,174

06
3,256

07

Family Chamomile

Family Squalene

Family Thin
Medium Thick
PVC Gloves
PVC Gloves(fingertip-reinforced) (fingertip-reinforced)

Medium Thin
PVC Gloves(for scrubbing andwashing)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

The Family series of household gloves includes high-value-added

as well as fingertip-reinforced regular household gloves. With aproducts that not only protect the hands, but also soothe the skin.

variety of product lineups, S.T. Corporation is meeting the needs ofWashing chores are more enjoyable for customers using thetoday's customers. the Hand Care Group’s net sales increased

Company's wide-ranging product lineup, which comprises gloves

2.6% year on year to ¥3,256 million as new product sales grewwith squalene additives and gloves with chamomile extract in asmoothly.

special foam layer to prevent hands from becoming hot and sticky,

Hand care
12

S.T. CORPORATION ANNUAL REPORT 2007

HOME CARE (Cleaners and Other Products)
Net Sales (millions of yen)
3,279

03
3,666

04
4,159

05
3,998

06
4,103

07
0

Ultra Powers
Powers Brush
Washing Machine with Baking Soda
Tub Cleaner

Powers Brushwith Citric Acid

Kome-Touban

1,000

2,000

3,000

4,000

5,000

NexcareThe Home Care Group provides a range of unique products, includ-and oil repellant and Nexcare sanitary products jointly withing: Ultra Powers washing machine tub cleaner; Powers brush with

Sumitomo 3M, with both products gaining favorable support frombaking soda, a cleaner containing baking soda that cleanses off

customers. As a result, net sales rose 2.6% to ¥4,103 million inscorch, rust and grease just by using water; Zippers food-storage

the fiscal period under review.

bags; and Kome-touban, which protects uncooked rice from
insects. In addition, the Company introduced Scotchgard waterHome care
THERMAL CARE (Disposable Warmers)
Net Sales (millions of yen)
5,712

04
4,871

05
5,751

06
4,533

07
0

Haru-Onpacks

Haranai-Onpacks

Haru-Onpacks(for socks)

Onpacks(for shoes)

Thermo Thera

1,000

2,000

3,000

4,000

5,000

6,000

Since July 2003, the Thermal Care Group has been marketing dis-skin and eases back pain and stiff shoulders. Due to the unfavor-

posable warmers under the Onpacks brand manufactured byable effects of warm weather in the winter, net sales declined

Mycoal Co., Ltd. Now offered are chemical warmers with self-adhe-21.2% to ¥4,533 million.

sive patches for attachment to clothing and for the soles of socks.
During the fiscal year under review, S.T. Corporation launched
Thermo Thera gel sheet as a medical treatment that is mild to the

Thermal care
S.T. CORPORATION ANNUAL REPORT 200713

Management’s Discussion and Analysis

Management’s DiscNet Sales

Net Income

As of March 31, 2007, consolidated net sales edged

Net income jumped 76.9% year on year to ¥1,747 mil-down 2.0% compared with the previous fiscal year tolion. Income before income taxes and minority interests¥45,227 million.

totaled ¥3,039 million. The significant increase in net

The principal cause of this decline was a sales

income was due to the absence of ¥702 million in

decrease of ¥1,218 million, or 21.2%, from the previous

impairment loss on property, plant and equipment that

fiscal year in the Thermal Care Group. The Hand Care, Air

was recorded in the previous fiscal year.

Care, Humidity Care and Home Care groups enjoyed yearon-year revenue increases, while income in the Cloth
Care Group edged down from the previous fiscal year due

Financial Position

to the impact of spotty weather since last spring.

Total assets as of March 31, 2007 declined ¥4,075 million year on year to ¥33,830 million. This was the resultof a ¥3,812 million decrease in cash and time deposits,

Cost of Sales

marketable securities and investment securities due to

Cost of sales declined 3.2 percentage points to ¥25,252

treasury stock acquisition of ¥4,943 million. Total net

million, by implementing cost reduction activities in theassets stood at ¥24,649 million, reflecting a ¥3,679

manufacturing and purchase divisions to absorb inflation-

million increase in treasury stock, a deduction item inary pressures on material prices.

shareholders' equity due to the ¥1,164 million used forthe acquisition and retirement of treasury stock. As aresult, shareholders' equity fell ¥3,732 million and the

Operating Income

shareholders’ equity ratio was 71.3%.

Operating income grew 6.7% compared with the previous
fiscal year to ¥3,342 million. This resulted from cost-

14

reduction activities implemented and the Company’s

Capital Expenditures

efforts to streamline investments in promotion, including

Capital expenditures were ¥696 million. Investment in

mainly advertising costs, as well as more detailed cost

the Household Environment-Related Products Businesssavings.

segment made up 74.6% of the total.

S.T. CORPORATION ANNUAL REPORT 2007

scussion and Analysis
Cash Flows

Financial Indicators

Net cash provided by operating activities improved ¥682

Compared with the end of the previous fiscal year, ROE

million to ¥2,636 million. Principal components were a

improved 3.1 percentage points to 6.7%. ROA rose from

¥1,126 million increase in income before income taxes

9.1% to 10.1%. Shareholders' equity per share of com-and minority interests to ¥3,039 million, a ¥212 million

mon stock decreased from ¥966.43 to ¥935.19. The

decrease in inventories, and a ¥792 million decline inshareholders' equity ratio decreased from 73.5% totrade payables. Net cash provided by investing activities

71.3%, while the interest coverage ratio became 6,595.9

stood at ¥2,220 million, owing to the realization of mar-times, a decline from 14,432.9 times in the previous fis-ketable securities for the treasury stock acquisition. Net

cal year.

cash used in financing activities amounted to ¥5,561
million. Major components included ¥4,943 million fortreasury stock acquisition and ¥607 million of dividend
payment.
As a result, cash and cash equivalents as of March
31, 2007 stood at ¥8,112 million, a ¥691 million
decrease from the previous fiscal year-end.

Dividends
Given the net income and realization of share profit, theannual dividend, including the interim dividend paymentof ¥11 per share, will be ¥22 per share, as planned at
the beginning of the fiscal year under review. The payout
ratio on a non-consolidated basis was 45.04%.

S.T. CORPORATION ANNUAL REPORT 200715

Six-year selected financial data (unaudited)
S.T. CORPORATION and Subsidiaries
Years ended March 31

Millions of yen except per share data and financial rations

2002

2003

2004

2005

2006

2007

Net sales¥36,921¥ 38,066¥45,082¥44,109¥46,134¥45,227

Cost of sales

20,46919,707

24,97324,49026,08325,252Gross Profit

16,47918,351

20,07919,62720,024

19,984

Selling, general and administrative expenses

14,497

14,553

16,66015,87916,892

16,642

Operating income

1,983

3,798

3,419

3,748

3,133

3,342

Income (loss) before income taxes and minority interests

1,018

2,619

2,746

3,209

1,913

3,039

509

1,431

1,451

1,823

988

1,747

3,661

¥ 3,668¥ 3,769¥ 4,824¥ 4,647

FOR THE YEAR:

Net income
AT YEAR-END:
Inventories¥ 3,566¥

Property, plant and equipment-net

8,937

8,684

8,154

8,018

7,582

7,371

Current liabilities

5,147

6,928

7,887

7,910

7,973

7,494

Long-term liabilities

1,646

1,250

1,175

1,079

1,591

1,687

Total liabilities

6,794

8,178

9,062

8,989

9,564

9,181

Total net assets (Note 1)

25,606

26,04826,69327,44927,861

24,649Total assets

32,921

34,73236,26936,95937,90533,830OTHER SELECTED DATA:
Capital expenditures¥ 1,137

¥

733

¥

404

¥

880

¥

826

¥

696

R&D expenses

408

490

413

423

480

489

Free cash flow

1,650

4,486

3,005

2,909

1,868

1,715

Net income¥ 16.37¥ 46.53¥ 48.87

63.43¥ 34.35¥ 65.10

Shareholders’ equity

833.01

874.85924.33957.45966.43935.19

8.00

10.00

17.00

22.00

22.00

22.0

Gross Profit

44.6

48.2

44.6

44.5

43.5

44.2

Selling, general and administrative expenses

39.3

38.2

37.0

36.0

36.6

36.8

Operating income

5.4

10.0

7.6

8.5

6.8

7.4

Income (loss) before income taxes and minority interests

2.8

6.9

6.1

7.3

4.1

6.7

Net income

1.4

3.8

3.2

4.1

2.1

3.9

ROE (Note 2)

2.0

5.5

5.5

6.7

3.6

6.7

ROA (Note 3)

6.7

11.9

10.2

10.9

9.1

10.1

Equity Ratio (%)

77.8

75.0

73.6

74.3

73.5

71.3

PER SHARE DATA (¥):

Cash dividends¥

FINANCIAL RATIOS (%):
As a percent of net sales:

Notes: 1. The data previously presented as “Total shareholders’ equity” are shown as “Total net assets” based on a new accounting standard from this fiscal year.
2. ROE=Net income / Average total shareholders’ equity
3. ROA=(Operating income + Interest and dividends received + Purchase discount) / Average total assets

16

S.T. CORPORATION ANNUAL REPORT 2007

4,000

2,000

1,747

1,823

1,500
1,451

3,133

3,000

3,342

45,2273,419

40,0003,748

50,00046,134Net Income (millions of yen)

44,109Operating Income (millions of yen)

45,082Net Sales (millions of yen)

2,000

1,000

1,000

500

988

30,00020,00010,000

0

04

07

ROA /

30,000

12

05

06

07

ROE (%)

10.1

10

9.1

26,693

33,83030,00006

Total Net Assets (millions of yen)

37,90536,95936,26940,00005

10.9

Total Assets (millions of yen)

0

04

07

10.2

06

24,64905

27,861

04

27,4490

20,0008

6.7

6.7

20,0005.5

6
10,00010,000
3.6

4

0

0

04

05

06

07

2

04

05

06

07

04

05

06

07

S.T. CORPORATION ANNUAL REPORT 200717

Consolidated Balance Sheets
S.T.CORPORATION and consolidated subsidiaries
March 31, 2007 and 2006

Thousands of

ASSETS

Millions of yen

U.S. dollars (Note 2)

2007

2006

2007

¥ 8,135¥ 8,625$ 68,914

CURRENT ASSETS:
Cash and time deposits (Note 12)
Marketable securities (Note 4)

2,230

4,779

18,887

Trade notes and accounts receivable

4,451

4,552

37,704

Less—allowance for doubtful accounts

(15)

(19)

(123)

4,647

4,824

39,362

Deferred tax assets (Note 7)

386

370

3,268

Other current assets

455

474

3,857

20,28923,606

171,868

Inventories

Total current assets

INVESTMENTS AND OTHER ASSETS:
Investments in non-consolidated subsidiaries and affiliates

566

194

4,797

3,423

4,568

28,997Long-term loans

128

129

1,084

Deferred tax assets other than unrealized revaluation loss on land (Note 7)

205

48

1,741

Investment securities (Note 4)

Other assets

1,396

1,388

11,827

Less—allowance for doubtful accounts

(20)

(24)

(165)

Total investments and other assets

5,699

6,303

48,279PROPERTY, PLANT AND EQUIPMENT, AT COST (Notes 5 and 6):
Land

3,413

3,267

28,909Buildings and structures

6,163

6,131

52,205

Machinery, equipment and vehicles

7,012

7,121

59,394Tools, furniture and fixtures

3,291

3,310

27,881

Construction in progress
Less—accumulated depreciation
Property, plant and equipment, net

INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION
Total assets
See notes to consolidated financial statements.

18

S.T. CORPORATION ANNUAL REPORT 2007

6

2

48

(12,513)(12,248)(106,001)

7,371

7,582

62,437

471

415

3,987

¥ 33,830¥ 37,905$ 286,572

Thousands of

LIABILITIES AND NET ASSETS

Millions of yen

U.S. dollars (Note 2)

2006

2007

2007

CURRENT LIABILITIES:
Short-term bank loans (Note 6)

—

¥

36

—

Trade payables¥ 3,960

4,774$ 33,546

Other payables

1,931

1,957

16,361

Income taxes payable (Note 7)

718

417

6,079

Consumption taxes payable

110

18

934

Accrued expenses

546

524

4,623

Allowance for sales returns

169

177

1,427

Other current liabilities

61

69

514

7,494

7,973

63,484

1,207

1,115

10,228

Directors’ retirement and severance benefits

97

95

823

Deferred tax liabilities—unrealized revaluation profit on land (Note 5)

381

381

3,226

Total current liabilities

LONG-TERM LIABILITIES:
Employees’ retirement and severance benefits (Note 8)

Other long-term liabilities
Total long-term liabilities

1

11

1,687

1,591

14,287

7,066

7,066

59,852CONTINGENT LIABILITIES (Note 14)

NET ASSETS (Note 9):
Shareholders’ equity:
Common stock:
Authorized—96,817,000 shares in 2007 and 2006
Issued and outstanding—29,500,000 shares in 2007
and 30,346,851 shares in 2006
Capital surplus

7,068

7,068

59,871Retained earnings

15,12015,174

128,084

Treasury stock, at cost

(5,153)(1,474)(43,648)

24,101

27,833204,159

Unrealized holding gain on other securities, net of taxes

811

873

6,872

Unrealized revaluation loss on land, net of taxes (Note 5)

(549)

(549)

(4,650)Translation adjustments

(243)

(297)

(2,056)

20

27

167

8

—

65

521

480

4,410

Total net assets

24,64928,341

208,800

Total liabilities and net assets¥33,830¥37,905$286,572

Total shareholders’ equity
Valuation, translation adjustments and other:

Total valuation, translation adjustments and other
Subscription rights
Minority interests in consolidated subsidiaries

See notes to consolidated financial statements.

S.T. CORPORATION ANNUAL REPORT 200719

Consolidated Statements of Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2007 and 2006

Thousands ofMillions of yen

U.S. dollars (Note 2)

2007

2006

2007

NET SALES¥45,227¥46,134$383,120

COST OF SALES

25,252

26,083

213,907

19,976

20,051

169,213

9

(27)

74

19,98420,024

169,287

16,642

16,892140,974

3,342

3,133

28,313

86

55

731

Gross profit before reversal of (allowance for) sales returns
Reversal of (allowance for) sales returns
Gross profit
Selling, general and administrative expenses (Note 11)
Operating income

OTHER INCOME (EXPENSES):Interest and dividends received
Interest expense

(0)

(0)

(3)

Cash purchase discounts

199

223

1,690

Cash sales discounts

(844)

(871)

(7,148)Gain on sales of securities, net

0

44

1

Equity in income (loss) of affiliates

36

(29)

305

Write-down of securities

—

(1)

—

Impairment loss on fixed assets (Note 16)

—

(702)

—

Other, net

219

63

1,856

(303)

(1,219)(2,569)

3,039

1,913

25,744Current

1,266

1,084

10,727

Deferred

(32)

(135)

(274)

1,234

949

10,453

Income before income taxes and minority interests

INCOME TAXES (Note 7):

MINORITY INTERESTS
Net income
See notes to consolidated financial statements.

20

S.T. CORPORATION ANNUAL REPORT 2007

58
¥ 1,747

¥

(23)

493

988

$ 14,798

Consolidated Statements of Changes in Net Assets
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2007 and 2006

Millions of yen

BALANCE AT MARCH 31, 2006
Cash dividends paid
Cash dividends paid by distribution of retained earnings
Bonuses to directors and corporate auditors by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Net changes in items other than those in shareholders’ equity
BALANCE AT MARCH 31, 2007

Number ofshares ofcommonstock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

30,347¥7,066¥7,068¥15,174
(317)
(290)
(1)
1,747

¥(1,474)(29)(1,164)(4,943)100
1,164¥27,833
(317)
(290)
(1)
1,747
(4,943)
71—¥15,120¥(5,153)¥24,101

Total
valuationstranslation
adjustments
and other

Subscription
rightsMinority
interests inconsolidated
subsidiaries

Total
net assets(847)
29,500¥7,066

Total
shareholders’equity¥7,068Millions of yen

BALANCE AT MARCH 31, 2006
Cash dividends paid
Cash dividends paid by distribution of retained earnings
Bonuses to directors and corporate auditors by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Net changes in items other than those in shareholders’ equity
BALANCE AT MARCH 31, 2007

Unrealized
holding gainon othersecurities,
net of taxes

Unrealized
revaluation
loss on land,
net of taxes(Note 5)

Translation
adjustments¥873¥(549)¥(297)

¥27

—

¥480

(61)
¥811

—
¥(549)

54¥(243)

(7)
¥20

¥ 8
¥ 8

40
¥521

¥28,341
(317)
(290)
(1)
1,747
(4,943)71—
40¥24,649

Thousands of U.S. dollars (Note 2)

BALANCE AT MARCH 31, 2006
Cash dividends paid
Cash dividends paid by distribution of retained earnings
Bonuses to directors and corporate auditors by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Net changes in items other than those in shareholders’ equity
BALANCE AT MARCH 31, 2007

Number ofshares ofcommonstock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

30,347$59,852$59,871$128,540(2,686)(2,458)(5)
14,7980(247)(9,859)$(12,487)(41,868)849
9,859$235,776(2,686)(2,458)(5)
14,798(41,868)
603—$128,084$(43,648)$204,159

Total
net assets(847)
29,500$59,852$59,871

Total
shareholders’equityThousands of U.S. dollars (Note 2)

BALANCE AT MARCH 31, 2006
Cash dividends paid
Cash dividends paid by distribution of retained earnings
Bonuses to directors and corporate auditors by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Net changes in items other than those in shareholders’ equity
BALANCE AT MARCH 31, 2007

Unrealized
holding gainon othersecurities,
net of taxes

Unrealized
revaluation
loss on land,
net of taxes(Note 5)

Translation
adjustments

Totalvaluationstranslation
adjustments
and other

Subscription
rightsMinority
interests inconsolidated
subsidiaries$7,392$(4,650)$(2,512)$ 230—$4,068(519)$6,872—$(4,650)456$(2,056)

(63)
$ 167

$ 65
$ 65

342
$4,410$240,075(2,686)(2,458)(5)
14,798(41,868)
603—
343$208,800

Total
shareholders’equityMillions of yen

BALANCE AT MARCH 31, 2005
Cash dividends paid
Cash dividends paid by distribution of retained earnings
Bonuses to directors and corporate auditors by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Unrealized revaluation loss on land
Net changes in items other than those in shareholders’ equity
BALANCE AT MARCH 31, 2006

Number ofshares ofcommonstock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

30,347¥7,066¥7,068¥14,891
(344)
(317)
(1)
988

¥(1,627)(36)(7)
30,347¥7,066

Unrealized
holding gainon othersecurities,
net of taxes

Unrealized
revaluation
loss on land,
net of taxes(Note 5)

¥519

354
¥873

¥7,068¥15,174(3)
156¥27,397
(344)
(317)
(1)
988
(3)
120
(7)

¥(1,474)¥27,833

Translation
adjustments

Totalvaluationstranslation
adjustments
and other

Minority
interests inconsolidated
subsidiaries

Total
net assets¥(108)¥(359)

¥ 52

¥521

(441)
¥(549)

62¥(297)

(25)
¥ 27

(40)
¥480

Millions of yen

BALANCE AT MARCH 31, 2005
Cash dividends paid
Cash dividends paid by distribution of retained earnings
Bonuses to directors and corporate auditors by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Unrealized revaluation loss on land
Net changes in items other than those in shareholders’ equity
BALANCE AT MARCH 31, 2006

¥27,970
(344)
(317)
(1)
988
(3)
120
(7)
(65)
¥28,341

See notes to consolidated financial statements.

S.T. CORPORATION ANNUAL REPORT 200721

Consolidated Statements of Cash Flows
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2007 and 2006

Thousands ofMillions of yen

2007

2006

2007

¥ 3,039¥ 1,913$ 25,744

837
—
41
(1)
(0)
(9)
91
2
(9)
(86)
0
(47)
(36)

873
702
67
(1)
(42)
1
110
18
27
(55)
0
(23)
29

7092
—
345
(7)
(1)
(75)
771
16
(74)
(731)
3
(396)
(305)

111
212
(792)
138
3,493
112
(0)
(968)
2,636

344
(1,027)
385
37
3,359
51
(0)
(1,456)
1,954

940
1799
(6707)
1173
29,586945(3)(8,196)22,333

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in time deposits (more than 3 months)
Refund of time deposits (more than 3 months)
Purchases of marketable securities
Proceeds from sales of marketable securities
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 provided by (used in) investing activities

(0)
—
(629)
4,552
(598)
1
(1,096)
110
(120)
2,220

(0)
300
(1,005)
1,828
(777)
10
(2,462)104(229)(2,230)(0)—(5,327)38,558(5,065)9(9,282)935(1,018)18,810CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank loan
Repayments of bank loans and current portion of long-term debt
Purchases of treasury stock
Proceeds from sales of treasury stock
Payments of dividends
Payments of dividends to minority shareholders
Net cash used in financing activities—(37)(4,943)
71
(607)
(46)
(5,561)

36
(3)
(3)
120
(661)
(60)
(571)

—
(309)
(41,868)603(5,144)(390)(47,109)

Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 12)

14
(691)
8,802
¥ 8,112

17
(831)
9,633
¥ 8,802117(5,849)74,565$ 68,716

CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization
Impairment loss on fixed assets
Loss on sales of property, plant and equipment
Gain on sales and valuation of marketable securities
Gain on sales and valuation of investment securities(Decrease) increase in allowance for doubtful receivables
Increase in employees’ retirement and severance benefits
Increase in directors’ retirement and severance benefits(Decrease) increase in allowance for sales returns
Interest and dividends received
Interest expense
Foreign exchange gain
Equity in (income) loss of affiliates
Changes in operating assets and liabilities:
Receivables
Inventories
Payables and accrued expenses
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

See notes to consolidated financial statements.

22

U.S. dollars (Note 2)

S.T. CORPORATION ANNUAL REPORT 2007

Notes to Consolidated Financial Statements
S.T.CORPORATION and Consolidated Subsidiaries
March 31, 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Basis of presentation(e) Marketable securities and investment securities
Other securities with determinable market value are carried atmarket value with any changes in unrealized holding gain or loss,

S.T.CORPORATION (the “Company”) and its domestic subsidiaries

net of the related deferred income tax assets or liabilities, included

maintain their books of account in conformity with accounting

in net assets. Other securities without determinable market value are

principles generally accepted in Japan, and its overseas sub-stated at cost determined principally by the moving-average method

sidiaries maintain their books of account in conformity with thoseand the cost of other securities sold is principally computed basedof their countries of domicile. The accompanying consolidated finan-on the moving-average method. During the years ended Marchcial statements have been prepared in accordance with accounting

31, 2007 and 2006, the Company and its consolidated subsidiaries

principles generally accepted in Japan, which are different in certain

did not have any trading securities.

respects as to the application and disclosure requirements of(f) Inventories

International Financial Reporting Standards, and are compiled fromInventories of the Company and its domestic subsidiaries are statedthe consolidated financial statements prepared by the Company

at cost determined by the average-cost method and those ofas required by the Securities and Exchange Law of Japan.

overseas subsidiaries are stated at the lower of cost or market, cost

In preparing the accompanying consolidated financial state-being determined by the average cost method.

ments, certain reclassifications have been made to the consolidated
financial statements issued domestically for readers outside Japan.

(g) Property, plant and equipment and depreciation

Furthermore, the notes to the consolidated financial statements

Property, plant and equipment are stated at cost. Depreciation ofinclude information which is not required under accounting

property, plant and equipment of the Company and its domestic

principles generally accepted in Japan but is presented herein as

subsidiaries, except for buildings (excluding structures attached toadditional information.

the buildings) acquired on or after April 1, 1998, is computed by the
declining-balance method in conformity with the Corporation Tax(b) Principles of consolidation and accounting for investments in

Law of Japan. Depreciation of property and equipment of overseas

unconsolidated subsidiaries and affiliates

subsidiaries and buildings (excluding structures attached to the

The accompanying consolidated financial statements for thebuildings) acquired on or after April 1, 1998 of the Company andyears ended March 31, 2007 and 2006 include the accounts of thedomestic subsidiaries is computed by the straight-line method.

Company and its six significant subsidiaries. All significant

The estimated useful lives of the major depreciable assets areinter-company balances and transactions have been eliminated inas follows:

consolidation.

Buildings and structures

3 to 56 years

Machinery, equipment and vehicles

2 to 17 years

Tools, furniture and fixtures

2 to 20 years

The equity method is applied to investments in significant
affiliates in accordance with accounting principles generally
accepted in Japan.

(h) Intangible assets and long-term prepaid expenses(c) Accounting period

Intangible assets and long-term prepaid expenses are amortized

The accounting period of the Company begins on April 1 and ends

by the straight-line method. Cost of software purchased for internal

on March 31 of the following year. The two overseas subsidiaries

use is amortized by the straight-line method over 5 years, the useful

have fiscal years ending on December 31. The necessary adjustments

life applicable to commercially available software.

for significant transactions, if any, during the intervening period
are made on consolidation.

(i) Allowance for doubtful receivables
The Company and its domestic subsidiaries provide allowances for(d) Translation of foreign currency transactions and financial

estimated losses on bad debts at the amounts calculated based onstatements

past experience with receivables other than doubtful receivables

Monetary assets and liabilities denominated in foreign currencies

and amounts estimated specifically for each doubtful receivable.

are translated into yen at the rates of exchange in effect at theOverseas subsidiaries provide allowances for doubtful receivables

balance sheet date and the accounts of the overseas consolidated

principally based on estimated uncollectable amounts.

subsidiaries, except for the components of net assets excluding
minority interests (shareholders’ equity in 2006) , are translated(j) Allowance for sales returns

into yen at the rates of exchange in effect at the balance sheet

The allowance for sales returns is generally provided for losses on

date. Foreign exchange gains and losses are credited or charged tosales returns subsequent to the balance sheet date at an amountincome and translation adjustments are included in net assets.

equivalent to that calculated based on sales in conformity with the
Corporation Tax Law of Japan.
The allowance for sales returns of certain products is estimatedbased on the actual percentage of returns in prior years.

S.T. CORPORATION ANNUAL REPORT 200723

(k) Employees’ retirement and severance benefits

addition, effective the year ended March 31, 2007, the Company is

Accrued retirement and severance benefits are provided based onrequired to prepare consolidated statements of changes in net

the estimated retirement and severance benefit obligation and theassets instead of consolidated statements of shareholders’ equity. In

pension fund assets.

this connection, the financial statements for the year ended March

Actuarial gains and losses, and past service cost are amortizedusing the straight-line method over a period of 5 years, which iswithin the estimated average remaining service years of theeligible employees.
In addition, one overseas subsidiary provides an allowance for31, 2006 have been reclassified to conform to the presentation of
the financial statements for the year ended March 31, 2007.
Certain prior-year amounts have also been reclassified toconform to the 2007 presentation. These changes had no impact
on previously reported results of operations or net assets.

payments of employees’ retirement and severance benefits at
100% of the voluntary termination payments.
(l) Directors’ retirement and severance benefits

2. BASIS OF TRANSLATIONThe Company has accrued directors’ retirement and severance

The consolidated financial statements presented herein are

benefits at the amount which would be required to be paid if all

expressed in yen and, solely for the convenience of the reader,directors resigned from their positions and left the Company as ofhave been translated into U.S. dollars at ¥118.05=U.S.$1.00, thethe balance sheet date in accordance with its internal regulations.

approximate exchange rate prevailing on the Tokyo Foreign(m) Leases
Finance leases, except for those which transfer ownership of theleased property to the lessee, are accounted for as operating leases.

Exchange Market on March 31, 2007. This translation should not
be construed as a representation that the amounts shown could
have been, or could in the future be, converted into U.S. dollars atthat or any other rate.

(n) Consumption taxes
Consumption taxes imposed on the Company’s and its subsidiaries’ sales to customers are withheld by the Company and its
subsidiaries at the time of sale and subsequently paid to thegovernment. Consumption taxes withheld upon sale are notincluded in net sales in the accompanying consolidated statements of income, but are recorded as a liability, “consumption
taxes payable.” Consumption taxes paid by the Company and its
subsidiaries on purchases of goods and services from outside thegroup are also not included in costs or expenses in the accompanying consolidated statements of income, but are offset against
consumption taxes payable. The net balance is reflected asconsumption taxes payable in the accompanying consolidatedbalance sheets at March 31, 2007 and 2006.
(o) Valuation of assets and liabilities of consolidated subsidiaries
Assets and liabilities of the consolidated subsidiaries acquired
before April 1, 1999 have been valued at cost. It is the Company’s
policy to value assets and liabilities of subsidiaries acquired on orafter April 1, 1999 at fair value when the Company obtains control
over such subsidiaries; however, the Company has not acquired
any subsidiaries since April 1, 1999.
(p) Cash and cash equivalents—Presentation of net assets in the balance sheet
Effective the fiscal year ended March 31, 2007, the Company has
adopted “Accounting Standard for Presentation of Net Assets in
the Balance Sheet” (Accounting Standards Board of Japan (ASBJ)
Statement No.5 issued on December 9, 2005) and “Guidance on
Accounting Standard for Presentation of Net Assets in the Balance
Sheet” (ASBJ Guidance No.8 issued on December 9, 2005).
Total shareholders’ equity under the previous method of presentation amounted to ¥24,121 million (U.S.$204,326 thousand) as ofMarch 31, 2007.
—Impairment of fixed assets
Effective the year ended March 31, 2006, the Company andconsolidated subsidiaries adopted an accounting standard for the
impairment of fixed assets which requires that tangible andintangible fixed assets be carried at cost less depreciation, and bereviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not berecoverable. Companies would be required to recognize an
impairment loss in their statement of income if certain indicators

Cash and cash equivalents in the accompanying consolidatedof asset impairment exist and if the book value of an asset exceeds

statements of cash flows consist of cash on hand, demand

the undiscounted sum of future cash flows of the asset. The standard

deposits and liquid short-term investments with a maturity ofstates that impairment losses should be measured as the excess of

three months or less from their respective dates of acquisition.

the book value over the higher of (1) the fair market value of the(q) Reclassifications
Effective the year ended March 31, 2007, the Company has adopted
a new accounting standard for the presentation of net assets inthe balance sheet and the related implementation guidance. In

24

3. ADOPTION OF NEW ACCOUNTING STANDARDS

S.T. CORPORATION ANNUAL REPORT 2007

asset, net of disposition costs and (2) the present value of future
cash flows arising from ongoing utilization of the asset and fromits disposal after use. The standard covers land, factories, buildings
and other forms of property, plant and equipment as well asintangible assets. Fixed assets will be grouped at the lowest level

more from the book value or if the issuers of the non-marketablefor which there is identifiable cash flows that are independent of

securities went bankrupt or were substantially bankrupt.

cash flows from other groups of assets.

Sales of other securities for the years ended March 31, 2007

The effect of the adoption of this standard was to increase

and 2006 are summarized as follows:

operating income by ¥65 million and decrease income before
income taxes and minority interests by ¥637 million compared

Thousands of
U.S. dollars

Millions of yen

with the amounts which would have been recorded under the

2007

2006

2007

¥6,853¥2,732$ 58,048

Aggregate gain

0

45

1

Aggregate loss

—

2

—

previous method. The effect on business segment information ofProceeds received

the Company and its consolidated subsidiaries is described in
Note 16, Segment Information.
The impairment loss on fixed assets has been deducted directlyfrom the carrying amounts of the respective assets in the consolidatedbalance sheet at March 31, 2006.

The redemption schedule of other securities with maturity
dates at March 31, 2007 and 2006 is summarized as follows:

4. MARKETABLE SECURITIES AND

Thousands of
U.S. dollars

Millions of yen

INVESTMENT SECURITIES

2007

2006

2007

¥2,182¥2,950$ 18,485

More than 1 year andwithin 5 years

400

1,828

3,388

More than 5 years andwithin 10 years

105

100

888

More than 10 years

—

—

—

One year or less

The cost and related aggregate market value of other securities
with a determinable market value at March 31, 2007 and 2006 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

Cost

¥3,795¥5,406$ 32,146

Market value

5,047

6,860

42,757

Total unrealized gain

1,280

1,482

10,839In accordance with the Land Revaluation Law (Proclamation No. 34

Total unrealized loss

27

28

228

dated March 31, 1998), land used for business activities was revalued

5. LAND REVALUATIONat March 31, 2002. The book value before revaluation was ¥3,332

The Company recognized impairment losses on securities at

million and the book value after revaluation was ¥3,153 million

the difference between market value and book value if the market

and the difference, net of taxes, is stated as “unrealized revaluation

value had declined by 30% or more from the book value.

loss on land, net of taxes” in net assets. Deferred tax assets andImpairment losses on securities for the years ended March 31,

liabilities arising from this revaluation are presented separately from2007 and 2006 were nil and ¥1 million, respectively.

deferred tax assets and liabilities for other temporary differences

Securities at March 31, 2007 and 2006 excluded from the abovetable are summarized at their respective book value as follows:in the accompanying consolidated balance sheets. The market
value of the land as of March 31, 2007 and 2006 decreased by ¥454
million (U.S.$3,849 thousand) and ¥380 million, respectively, afterThousands of
U.S. dollars

Millions of yen

2007

2006

the revaluation.

2007

6. SHORT-TERM BANK LOANS

Other securities:
Unlisted investment trust
certificates within
the closed period

—

¥ 462

—

MMF

—

1,170

—

CP

¥500

700

$ 4,232

Foreign securities

47

96

402

Unlisted stocks

58

58

493

Short-term loans from banks at an average interest rate of 1.9%
amounted to ¥36 million at March 31, 2006.
Assets pledged as collateral for the above short-term bankloans at March 31, 2006 are presented below:
Millions of yen

Buildings and structures¥

94

The Company recognized impairment losses on non-

Land

123

marketable securities if the net book value declined by 50% or

Total

¥ 217

S.T. CORPORATION ANNUAL REPORT 200725

7. INCOME TAXESAt March 31, 2007 and 2006, the tax effect of the temporary differences which gave rise to a significant portion of the deferred tax assets(excluding deferred taxes on unrealized revaluation loss on land) was as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

Accrued employees’ bonuses

¥ 157

¥ 157

$ 1,333

Allowance for sales returns

68

71

572

Accrued business taxes

62

41

522

CURRENT ASSETS:

Unrealized holding loss on other securities, net of taxes
Other
Total current deferred tax assets

1

0

8

103

102

873

390

371

3,308

CURRENT LIABILITIES:Deferred gain on sales of property

(0)

(0)

(4)

Other

(4)

—

(36)

Total current deferred tax liabilities

(5)

(0)

(40)

Net current deferred tax assets

386

370

3,268

Allowance for employees’ retirement and severance benefits

476

440

4,033

Allowance for directors’ retirement and severance benefits

39

38

329

Write-downs of securities

74

78

630

Impairment loss

207

233

1,756

NON-CURRENT ASSETS:

5

15

46

Gross non-current deferred tax assets

Other

802

804

6,794

Valuation allowance

(135)

(140)

(1,141)

Total non-current deferred tax assets

667

664

5,652

Deferred gain on sales of property

(19)

(20)

(165)

Unrealized holding gain on other securities, net of taxes

(442)

—

(582)

NON-CURRENT LIABILITIES:

Other

26

(15)

(3,747)—

Total non-current deferred tax liabilities

(462)

(617)

(3,912)

Net non-current deferred tax assets

¥ 205

¥ 48

$ 1,741

S.T. CORPORATION ANNUAL REPORT 2007

A reconciliation of the statutory tax rate to the Company’s

The following table summarizes the components of net

effective tax rate for the year ended March 31, 2006 is summarized

retirement benefit expenses for the years ended March 31, 2007

as follows:

and 2006:
2006

Japanese statutory tax rate

40.00%

Permanent differences such as entertainment
expenses, etc.

1.94

Permanent differences such as dividend income(1.36)

Inhabitants’ per capita taxes, etc.

1.10Service cost

Valuation allowance

7.31

Other

0.60

Effective tax rate

49.59%

No reconciliation has been presented for the year ended
March 31, 2007 as the difference between the statutory tax rate
and the effective tax rate was less than 5%.

8. EMPLOYEES’ RETIREMENT AND SEVERANCE BENEFITS

2007

2006

2007

¥148

¥157

$ 1,256

Interest cost on benefit
obligation

52

53

441

Expected return on plan assets

(30)

(28)

(255)

Amortization of actuarial loss

83

131

704

Amortization of past service
cost

3

(22)

24

Extraordinary additional
retirement payments

16

—

135

Net retirement benefit
expenses

¥272

¥291

$ 2,305

The assumptions used in determining the pension benefit
obligation are presented below:

The Company and its domestic subsidiaries have defined benefit
plans covering substantially all of their employees which are

Thousands of
U.S. dollars

Millions of yen

2007

2006

Straight-line
methodStraight-line
methodthese plans, employees are entitled to lump-sum or pension

Method of periodic
allocation of estimatedretirement benefits

retirement or severance benefits determined by points accumulated

Discount rate

2.0%

2.0%

monthly based on the employees’ contributions, length of service

Expected rate of returnon plan assets

2.0%

2.0%

partially funded through a qualified funded pension plan. Underand the conditions under which termination occurs. In addition,
the Company and its domestic subsidiaries pay meritorious service
awards to employees in excess of the prescribed formula, which
are charged to income as paid as it is not practicable to computethe liability for such future payments since the amounts varydepending on the circumstances.

The new Corporation Law of Japan (the “Law”), which superseded
most of the provisions of the Commercial Code of Japan, went

The following table summarizes the funded status andamounts recognized in the accompanying consolidated balance
sheets at March 31, 2007 and 2006:

into effect on May 1, 2006. The Law provides that an amountequal to 10% of the amount to be disbursed as distributions ofcapital surplus (other than the capital reserve) and retained earnings

Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

¥(2,898)¥(2,817)$(24,552)

Plan assets

1,712

1,600

14,500Unfunded benefit obligation(1,187)(1,217)(10,052)

Retirement and severance
benefit obligation

9. NET ASSETS(other than the legal reserve) be transferred to the capital reserveand the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the capital stock
account. Such distributions can be made at any time by resolution

Unrecognized actuarial(gain) loss

(24)

96

(203)

Unrecognized past service
cost

3

6

27

Accrued benefit obligation¥(1,207)¥(1,115)$(10,228)of the shareholders, or by the Board of Directors if certain conditions
are met.
Capital surplus and the legal reserve are not available for the
distribution of dividends but may be used to reduce or eliminate a
deficit or may be transferred to stated capital. At March 31, 2007,
the legal reserve of the Company included in retained earnings
amounted to ¥550 million (U.S.$4,658 thousand).
The accompanying consolidated financial statements do notinclude any provision for cash dividends of ¥11.00 (U.S.$0.09) per
share totaling ¥284 million (U.S.$2,403 thousand) which were
declared by the Company in May 2006.

S.T. CORPORATION ANNUAL REPORT 2007

27

The maximum amount which the Company can distribute as
dividends is calculated based on the non-consolidated financial

The basis for calculation of total net assets per share as ofMarch 31, 2007 and 2006 was as follows:statements of the Company and in accordance with theCommercial Code of Japan.

Thousands of
U.S. dollars

Millions of yen

2007

2006

¥24,649—$208,800

528

—

4,475

(U.S.$7.92) and ¥966.43, respectively. Net income per share for

Subscription rights

8

—

65

the years ended March 31, 2007 and 2006 was ¥65.10 (U.S.$0.55)

Minority interests
in consolidated
subsidiaries

521

—

4,410

Amounts attributable
to shareholders ofcommon stock

24,121—

204,326

26—

26

10. AMOUNTS PER SHARE

Total net assets per share:
Total net assets

Net assets per share as of March 31, 2007 and 2006 were ¥935.19

and ¥34.35, respectively.
Diluted net income per share for the years ended March 31,
2007 and 2006 was ¥64.92 (U.S.$0.55) and ¥34.16, respectively.
The basis for calculation of basic net income per share anddiluted net income per share for the years ended March 31, 2007
and 2006 was as follows:

2006

2007

¥1,747¥988$ 14,798

Amount not attributable
to shareholders ofcommon stock:

Amount attributable toshareholders ofcommon stock
Weighted-average
number of shares
outstanding(millions of shares)

Shares resulting inan anti-dilutive effect(millions of shares)

Major expenses included in selling, general and administrative
expenses for the years ended March 31, 2007 and 2006 wereas follows:
Thousands of
U.S. dollars

Millions of yen

—

1,747

27

—

988

29

2007

2006

2007

Sales promotion expenses¥4,061¥3,846$ 34,397

Advertising costs

3,300

3,938

27,957

Salaries

1,635

1,580

13,853

Shipment and storage
expenses

1,581

1,641

13,393

Provision for employees’
retirement andseverance benefits

235

230

1,990

0

Provision for directors’
retirement andseverance benefits

16

18

138

—

Provision for doubtful
accounts

—

0

—

—

14,798—

Diluted net income per share:
Increase in number ofshares outstanding

Number of shares
outstanding at year end(millions of shares)

11. MAJOR EXPENSES

2007
Basic net income per share:

Directors’ bonuses byappropriation ofretained earnings

Deductions:Thousands of
U.S. dollars

Millions of yen

Net income

2007

0

—

0

—

Research and development expenses included in general andadministrative expenses and cost of sales for the years ended
March 31, 2007 and 2006 amounted to ¥489 million (U.S.$4,141
thousand) and ¥480 million, respectively.

28

S.T. CORPORATION ANNUAL REPORT 2007

12. CASH AND CASH EQUIVALENTS(3) Lease payments and pro-forma depreciation charges for theyears ended March 31, 2007 and 2006 were ¥57 million

A reconciliation of cash and cash equivalents at March 31, 2007

(U.S.$482 thousand) and ¥54 million, respectively.

and 2006 to cash and time deposits in the accompanying(4) Depreciation is computed by the straight-line method over the

consolidated balance sheets is as follows:

respective lease terms assuming a nil residual value.
Thousands of
U.S. dollars

Millions of yen

2007

2006

2007

Cash and time deposits¥8,135¥8,625$ 68,914

Time deposits witha maturity in excessof three months

(523)

(523)

(4,430)Marketable securities
with a maturity in excessof three months

500

700

4,232

Cash and cash equivalents¥8,112¥8,802$ 68,716

Operating leases
Future minimum lease payments subsequent to March 31, 2007
and 2006 were as follows:
Thousands of
U.S. dollars

Millions of yen

Payable in one year or less
Payable after one year
Total

2007

2006

2007

¥1

¥1

$ 9

0

1

4

¥1

¥2

$12

Deposits pledged as collateral mainly for leased office space at
March 31, 2007 and 2006 amounted to ¥23 million (U.S.$193
thousand) and ¥23 million, respectively.

14. COMMITMENTS AND CONTINGENT LIABILITIESAt March 31, 2007 and 2006, trade notes discounted with banks inthe ordinary course of business amounted to ¥87 million

13. LEASES(U.S.$735 thousand) and ¥96 million, respectively.

Finance leases, except for those which transfer ownership of theleased property to the lessee, are accounted for as operating leases,
and the assets and the related liability are not included in the

15. DERIVATIVESThe Company has entered into forward foreign exchange contracts

balance sheets.

to reduce its exposure to the risk of future adverse fluctuation in(1) A summary of the pro-forma amounts (inclusive of the related

foreign exchange rates related to its trade receivables and payables

interest) of acquisition cost, accumulated depreciation and net

and loans denominated in foreign currencies. It is the Company’sbook value at March 31, 2007 and 2006, primarily relating to tools,

policy not to enter into any speculative derivatives transactions

furniture and fixtures held under finance leases, is as follows:

and its subsidiaries and associated companies do not enter into
any forward foreign exchange contracts.

Millions of yen

Acquisition cost
Accumulated depreciation
Net book value

Thousands of
U.S. dollars

2007

2006

2007

¥220

¥199

$ 1,864

64

110

543

¥156

¥ 89

$ 1,321(2) Future minimum lease payments, inclusive of the related interest,
subsequent to March 31, 2007 and 2006 are summarized as follows:

Millions of yen

Payable in one year or lessThousands of
U.S. dollars

2007

2006

2007

¥ 52

¥ 34

$ 441

Payable after one year

104

55

880

Total

¥156

¥ 89

$ 1,321

Unrealized gain or loss on a hedging instrument is deferred until
the Company recognizes gain or loss on the underlying hedged
item. Assets or liabilities hedged by forward foreign exchange
contracts are translated at the forward exchange contract rates.
As the Company enters into such contracts only with domestic
banks with high credit ratings, the Company does not anticipate
any risk of non-performance by these counter parties.
In addition, the execution of, and control over, derivatives
transactions are carried out by the Administrative Division inaccordance with internal control regulations which limit thenature of the transactions and individuals authorized to be incharge of such transactions.

S.T. CORPORATION ANNUAL REPORT 200729

16. IMPAIRMENT LOSS ON FIXED ASSETSThe Company and the consolidated subsidiaries group their
fixed assets considering classifications of management accounting,and recognized impairment losses on fixed assets.

For the year ended March 31, 2006, the Company and the

As a result of a decline in land prices, the carrying value of theconsolidated subsidiaries recognized ¥702 million of impairment

above idle assets has been reduced to their respective recoverable

losses on fixed assets which consisted of the following:amounts, and the aggregate amount deducted (¥166 million) was
Location

Description

Classification

The old
Idle asset
Fukushimafactory(Fukushima Pref.)Land

The old
Kyushu factory(Fukuoka Pref.)Idle asset

Land

Family Glove(Taiwan)Idle asset

Head office(Tokyo)Long-term
Other asset
prepaid expensesof royalty on
sales rights ofThermal Care

Millions of
yen

¥

5

Thousands of
U.S. dollars$

recorded as an impairment loss. As a result of a further decline in
the marketing environment of Thermal Care, the Company does40

not anticipate a recovery; therefore, the carrying value of theabove long-term prepaid expenses has been reduced to nil, andthe related deducted amount (¥536 million) was recorded as an

865

impairment loss.
The recoverable amounts utilized in the above calculations were

Land

154

1,302

536

4,543

measured at the higher of net selling price or value in use. In thecase where net selling prices were used as recoverable amounts,
the related assets were valued based on appraisal valuations ormunicipal property tax bases. In the case where value in use wasused as recoverable amounts, the full amounts of the carrying
value of the related assets were reduced, and, therefore, theCompany did not estimate the applicable discount rates.

17. SEGMENT INFORMATIONThe Company and its consolidated subsidiaries operate in two business segments and business segment information for the years ended
March 31, 2007 and 2006 is summarized as follows:Year ended March 31, 2007
Millions of yen
Mothproofing
andhygiene-related
products

Householdenvironmentrelated
products

Total¥17,980¥27,248——

17,98027,248Eliminations
or corporate
assetsConsolidated¥45,227—¥45,227———

45,227—45,227

1. Sales(1) Sales to third parties(2) Intra-group sales and transfers
Net sales
2. Operating expenses

16,06225,82341,885—41,885

Operating income¥ 1,917¥ 1,425¥ 3,342—¥ 3,342¥ 8,808¥12,594¥21,402¥12,428¥33,830

3. Total assets, depreciation and capital expenditures:(1) Total assets

30(2) Depreciation

¥

317

¥

520

¥

837

—

¥

837

(3) Capital expenditures

¥

177

¥

519

¥

696

—

¥

696

S.T. CORPORATION ANNUAL REPORT 2007

Year ended March 31, 2006
Millions of yen
Mothproofing
andhygiene-related
products

Householdenvironmentrelated
products

Total¥19,195¥26,939——

19,19526,939Eliminations
or corporate
assetsConsolidated¥46,134—¥46,134———

46,134—

46,134

1. Sales(1) Sales to third parties(2) Intra-group sales and transfers
Net sales
2. Operating expenses

16,97626,02643,001—

43,001

Operating income¥ 2,219¥¥ 3,133—¥ 3,133¥16,568913

3. Total assets, depreciation, impairment loss and capital expenditures:(1) Total assets¥ 8,726¥12,611¥21,337(2) Depreciation

¥

230

¥

642

¥

873

—

¥

¥37,905873(3) Impairment loss

¥

695

¥

7

¥

702

—

¥

702

(4) Capital expenditures

¥

148

¥

678

¥

826

—

¥

826

Year ended March 31, 2007
Thousands of U.S. dollars
Mothproofing
andhygiene-related
products

Householdenvironmentrelated
products

Total$152,305$230,815

Eliminations
or corporate
assetsConsolidated$383,120—$383,120

1. Sales(1) Sales to third parties(2) Intra-group sales and transfers
Net sales

—

—

—

—

—

152,305

230,815

383,120—

383,120

2. Operating expenses

136,063

218,744354,807—354,807

Operating income$ 16,242$ 12,071$ 28,313—$ 28,313(1) Total assets$ 74,609$106,688$181,297$105,275$286,572(2) Depreciation

$

2,684

$

4,408

$

7,092

—

$

7,092

(3) Capital expenditures

$

1,498

$

4,400

$

5,898

—

$

5,898

3. Total assets, depreciation and capital expenditures:

The business segments are classified according to the nature of the Company’s products and their markets. Major products in the mothproofing and hygiene-related products segment are Cloth Care, Hand Care and Thermal Care and those in the household environment-related
products segment are Air Care, Humidity Care, and Home Care.
(Year ended March 31, 2006)
Effective April 1, 2005, the Company and consolidated subsidiaries adopted an accounting standard for the impairment of fixed assets(“Opinion Concerning Establishment of Accounting Standard for Impairment of Fixed Assets”) issued by the Business Accounting Council on
August 9, 2002) and the implementation guidance for the accounting standard for impairment of fixed assets (Financial Accounting Standard
Implementation Guidance No.6 issued by the Accounting Standards Board of Japan on October 31, 2003) which require that tangible andintangible fixed assets be carried at cost less depreciation, and be reviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable.
The effect of the adoption of this accounting standard was to decrease operating expenses by ¥65 million and to increase operating
income by the same amount in the mothproofing and hygiene-related products segment compared with the amounts which would have beenrecorded under the previous method.
Geographical segment information and overseas sales are not presented as net sales and total assets in Japan exceeded 90% of the totals
in both segments and as overseas sales were less than 10% of consolidated net sales for the years ended March 31, 2007 and 2006.

S.T. CORPORATION ANNUAL REPORT 200731

18. NOTE TO CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS

19. STOCK OPTION PLANS
At March 31, 2007, the Company had stock option plans, which

Shares in issue and outstanding and treasury stock at March 31,

were approved at the annual general meetings of the shareholders

2007 were as follows:

and by the Board of Directors. Details of these stock option plans

Number of shares in issue and outstanding:Common stock

are summarized as follows:

29,500 thousand

Number of shares held in treasury:
Common stock

3,707 thousand

Date ofapproval

Number ofshares granted

Eligible participants

Exercisable period

June 27, 2000

350,000

6 directors and4 employees(all executive officers)

July 1, 2002–
June 30, 2007

June 15, 2001

140,000

1 director and23 employees(including
1 executive officer)

July 1, 2003–
June 30, 2008

June 14, 2002

225,000

1 director and
43 employees

July 1, 2004–
June 30, 2009

June 13, 2003

155,000

1 director and
25 employees

July 1, 2005–
June 30, 2010

June 15, 2004

130,000

4 officers and
9 employees

July 1, 2006–
June 30, 2011

June 14, 2005

160,000

3 officers and23 employees

July 1, 2007–
June 30, 2012

June 14, 2006

75,0003 officers and4 employees

July 1, 2008–
June 30, 2013

June 15, 2007

140,000

Subscription rights at March 31, 2007 were as follows:
Subscription rights for stock options ¥8 million (U.S.$65
thousand)Dividends from retained earnings at March 31, 2007 wereas follows:
Total amountof dividends(Millions of yen)

Dividend
per share(Yen)

Board ofdirectors’
meeting held on
May 12, 2006

317

11

Board ofdirectors’
meeting held on
October 26, 2006

290

Resolution

Scheduledresolution

Total amountof dividends(millions of yen)

Board ofdirectors’
meeting
held onMay 14, 2007

284

11

Source ofdividends

Retainedearnings

Record date

March 31,2006

Effective dateJune 15,2006

September 30, December 8,
2006
2006

Dividend
per share
(yen)

11

Record date

March 31,2007

Effective dateJune 18,
2007

Officers andAug 1, 2009–
employees
July 31, 2014
(the Board of Directors
will approvea resolution designating
the eligible officers
and employees)

The option price per share was determined on the date theoptions 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, statutory
auditors or employees of the Company or its subsidiaries.
Cost related to the 2007 stock option plan amounting to ¥8
million (U.S.$65 thousand), was included in selling, general andadministrative expenses.

32

S.T. CORPORATION ANNUAL REPORT 2007

Contents of stock options
2001

2002

2003

2004

2005

2006

2007

Grantees

6 directors and4 employees(all executive
officers)

1 director and23 employees(including
1 executive
officer)

1 director and
43 employees

1director and
25 employees

4 directors and
9 employees

3 directors and23 employees

3 directors and4 employeesType of stock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Number ofshares granted

350,000

140,000

225,000

155,000

130,000

160,000

75,000Grant date

December 1,
2000

October 11,
2001

August 1,
2002

August 1,
2003

August 4,
2004

August 4,
2005

August 1,
2006

Condition forexercise

Working from Working from Working from Working from Working from Working from
December 1,
October 11,
August 1,
August 1,
August 4,
August 4,
2000 to June 30, 2001 to June 30, 2002 to June 30, 2003 to June 30, 2004 to June 30, 2005 to June 30,
2002
2003
2004
2005
2006
2007

Working
periodFrom
October 11,
August 1,
August 1,
August 4,
August 4,
August 1,
December 1,
2001 to June 30, 2002 to June 30, 2003 to June 30, 2004 to June 30, 2005 to June 30, 2006 to June 30,
2000 to June 30, 2003
2004
2005
2006
2007
2008
2002

Exercisable
periodWithin 5 years Within 5 years Within 5 years Within 5 years Within 5 years Within 5 years Within 5 years
after the vesting after the vesting after the vesting after the vesting after the vesting after the vesting after the vestingdate (thosedate (thosedate (thosedate (thosedate (thosedate (thosedate (thoseretiring after
retiring after
retiring after
retiring after
retiring after
retiring after
retiring after
the vesting
the vesting
the vesting
the vesting
the vesting
the vesting
the vestingdate cannot
date cannot
date cannot
date cannot
date cannot
date cannot
date cannot
exercise their
exercise their
exercise their
exercise their
exercise their
exercise their
exercise theirstock options) stock options) stock options) stock options) stock options) stock options) stock options)

Working from
August 1,
2006 to June 30,
2008

Stock option activities during the year ended March 31, 2007 were as follows:
Number of shares
2001

2002

2003

2004

2005

2006

2007

Non-vested
outstandingat beginningof year

—

—

—

—

130,000

160,000—

Granted during
the year

—

—

—

—

—

—

75,000Forfeited
during the year

—

—

—

—

—

—

—

Vestedduring the year

—

—

—

—

130,000——

Outstandingat end of year

—

—

—

—

—

160,000

75,000

Vestedoutstandingat beginningof year13,00010,00052,00085,000———

Vestedduring the year

—

—

—

—

130,000——

Exercisedduring the year

13,0005,000

21,00028,00015,000——Forfeited
during the year

—

—

—

—

5,000

—

—

Outstandingat end of year

—

5,000

31,00057,000110,000——

S.T. CORPORATION ANNUAL REPORT 200733

Price of stock options
Yen

U.S. dollars

2001

2002

2003

2004

2005

2006

2007

2007

Exercise price

¥ 698

¥ 669

¥ 636

¥ 867

¥1,405¥1,628¥1,727$ 15

Weighted-average
market price¥1,615¥1,711¥1,668¥1,707¥1,555

—

—

—

—

—

—

—

—

—

¥ 292

$ 2

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. The fair value per
option for options granted during the year ended March 31, 2007 was estimated based on the following assumptions:
2007
Volatility

25.9%

Option term

4 years and 5 months

Expected dividend (per stock)¥22 (U.S.$0.19)

Risk free interest rate

1.30%

Volatility was determined based on the actual stock price over the past 4 years and 5 months.
The option term was estimated under the assumption that the options would be exercised in the middle of the exercisable period because
of insufficient data.
Expected dividend (per stock) was based on the dividend amount applicable to the 2006 fiscal year.
Risk free interest rate was based on government bonds whose terms corresponded with the terms of the above options.
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 thenumber of stock options which will be forfeited in the future.

34

S.T. CORPORATION ANNUAL REPORT 2007

Report of Independent Auditors

The Board of Directors
S.T.CORPORATION
We have audited the accompanying consolidated balance sheets of S.T.CORPORATION and consolidated subsidiaries as of March 31,
2007 and 2006, and the related consolidated statements of income, changes in net assets, and cash flows for the years then ended, allexpressed in yen. These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of S.T.
CORPORATION and consolidated subsidiaries at March 31, 2007 and 2006, and the consolidated results of their operations and their
cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.
Supplemental Information
As described in Note 3, effective the year ended March 31, 2006, S.T.CORPORATION and consolidated subsidiaries adopted a new
accounting standard for the impairment of fixed assets.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2007 arepresented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 2.

June 15, 2007

S.T. CORPORATION ANNUAL REPORT 200735

Corporate Information(June 15, 2007)

BOARD OF DIRECTORS AND CORPORATE EXECUTIVE OFFICERS (June 15, 2007)
Takashi Suzuki

Hiroyuki Kokado

The chairman of the board, member of nomination committee

Outside director, member of audit committee

Yasushi Kajiwara

Teruyuki Maehara

Outside director, member of nomination, audit and compensation committees

Outside director, member of audit committee

Masanori Noro

Kanzo Kobayashi

Outside director, member of nomination and compensation committees

Director, member of nomination committee

Motohiko Kogo

Hirohide Shimada

Outside director, member of nomination and audit committee

Director, member of compensation committee

EXECUTIVE OFFICERS
Kanzo Kobayashi

Takahiko Kato

Representative Executive Officer

Executive Officer

President, Chief Executive Officer

Tokyo branch general manager

Noriaki Kageura

Masami Kitahara

Managing Executive Officer

Executive Officer

Senior general manager of corporate sales headquarters

In charge of marketing

Hirohide Shimada

Takashi Suzuki

Senior Managing Executive Officer

Executive Officer

In charge of corporate staff and international businessIn charge of group strategy

Masakazu Kinoto
Executive Officer
Osaka branch general manager

CORPORATE DATAGROUP COMPANIESCompany name

S.T.CORPORATION

Consolidated Subsidiaries

Headquarters

4-10, Shimo-ochiai, 1-Chome, Shinjuku-ku,
Tokyo 161-8540, Japan

Establishment

August 31, 1948

Paid-in capital¥7,065,500,000

Employees

602 (Consolidated)
356 (Non-Consolidated)

Contact

Hirohide Shimada, Corporate Planning GroupE-mailir@st-c.co.jp

Tel+81-3-5906-0734

Fax+81-3-5906-0742

S.T. Trading Co., Ltd.
Sales of hand gloves, industrial paper wipes, lubricant spray and others

S.T. Auto Co., Ltd.
Sales of car chemical care products

S.T. Mycoal Co., Ltd.
Sales support and marketing of Mycoal disposable warmers

S.T. Business Support Co., Ltd.
Temporary staffing and contract work for S.T.CORPORATION

Family Glove (Thailand) Co., Ltd.
Manufacture and sale of hand gloves

Family Glove (Taiwan) Co., Ltd.
Manufacture and sale of hand gloves

36

S.T. CORPORATION ANNUAL REPORT 2007

Investor Information(March 31, 2007)

les

ls)

e

t

Fiscal year-end

March 31

Shares issued and outstanding

29,500,000

Listed exchangeTokyo Stock Exchange, First Section

Shareholders

8,041

PRIMARY SHAREHOLDERS(Thousands of shares)(% of total)

4,674
3,947
3,707
1,671
884
816
780
681
582
485
433

15.8
13.4
12.6
5.7
3.0
2.8
2.6
2.3
2.0
1.6
1.5

Shaldan Co., Ltd.
T-ZONE Capital Corporation
S.T. Corporation
Nippon Life Insurance Company
TCSB(Mizuho Bank)
Takashi Suzuki
Suzuki Family
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Seiichi Suzuki
Akio Suzuki
CaleineIndividuals

28.87%

Other Japanese institutions

40.55%

Financial institutions

17.56%

Non-Japanese institutions

0.45%

Treasury stock

12.57%

Registered transfer agent

Mizuho Trust & Banking Co., Ltd.

AuditorErnst & Young Shin Nihon

Annual shareholder’s meeting

Middle of June each year (June 15, 2007)

STOCK CHART
Stock Price (Yen)
2,400

Nikkei 225 (Yen)
24,0001,800

18,0001,200

12,000600

6,000
1,000,000
0004/6 7

8

9

10

11

12 05/1 2

3

4

5

6

7

8

9

10

11

12 06/1 2

3

4

5

6

7

8

9

10

11

12 07/1 2

3

4

5

0

6

S.T. CORPORATION ANNUAL REPORT 2007

37

A
Be
R
4-10, Shimo-ochiai 1-chome, Shinjuku-ku, Tokyo 161-8540 Japan
http://www.st-c.co.jp/

W
Annua
For the Yea

Printed in Japan