WACOAL HOLDINGS Annual Report 2011

29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan

110826-TCY-AT3

Printed in Japan

REACHINGOUTWACOAL HOLDINGS Annual Report 2011

81

INVESTOR INFORMATIONAs of March 31, 2011

Ownership and distribution of shares

Stock listings

Tokyo, Osaka, NASDAQ
Fiscal year-end

Securities firms
1.42%

March 31
Securities code

3591

Individuals
and others
20.88%

Financial institutions
38.68%

Other Japanesecompanies
18.66%

Foreign institutions
and individuals
20.36%

Common stock

Issued: 143,378,085 shares
Outstanding: 141,198,346 shares
Trading unit

1,000 shares
Shareholder register agent
for common stock

Mitsubishi UFJ Trust andBanking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan
American depositary receipts

Major shareholders

Cusip No.: 930004205
Ratio (ADR:ORD): 1:5
Exchange: NASDAQ
Symbol: WACLY

The Bank of New York Mellon as depositary bank for depositary receipt holders* 11.27
4.88
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
4.73
Meiji Yasuda Life Insurance Company
4.67
Mika Noguchi
3.73
Nippon Life Insurance Company, Limited.
3.28
The Bank of Kyoto, Ltd.
2.72
The Dai-ichi Mutual Life Insurance Company
2.54
The Shiga Bank, Ltd.
2.30
Japan Trustee Services Bank, Ltd. (Trust Account)
2.12
Mitsubishi UFJ Trust and Banking Corporation

Depositary

The Bank of New York Mellon
101 Barclay Street,
New York, NY 10286, U.S.A.
Tel: 1-212-815-8161
U.S. toll free: 888-269-2377(888-BNY-ADRS)URL: http://www.adrbny.com%* Shares deposited to issue American Depositary Shares traded on the NASDAQ stock market.

Number of shareholders

10,301

Stock price / Trading volume
¥

2,000

CONTENTSOVERVIEW

2

DIRECTION

4

PERFORMANCE

6

STRATEGY FROM THE
MANAGEMENT

8A SUSTAINABLE WACOAL

20

20,000SOCIAL BUSINESS30

15,000CORPORATE GOVERNANCE

32

10,000

BOARD OF DIRECTORS ANDCORPORATE AUDITORS

36

FINANCIAL SECTION

37

CORPORATE DATA80INVESTOR INFORMATION

81

1,500

1,000

500
Thousandshares

5,000
0

02/4

03/1

04/1

05/1

06/1

07/1

08/1

09/1

10/1

11/1

Forward-Looking Statements: Statements contained in this annual report that are not historical facts are forward-looking statements, which reflect the Company’s plans and expectations.
These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, performance, or achievements to differ
materially from those anticipated in these statements.

Annual Report 2011

A STATEMENTFROM WACOAL GROUP
Koichi Tsukamoto established Wako Shoji as a company wholesaling Western-style dresses andaccessories for women in June 1946. The subsequent establishment of Wako Shoji Corp.
in November 1949 marked the birth of Wacoal. Since then, with “helping women to express theirbeauty” as its overriding management goal, Wacoal has contributed to the development of thewomen’s innerwear market in Japan. Today, based on a holding company system that encompasses
47 consolidated subsidiaries and nine affiliates, the Wacoal Group is building an even more robust
operational platform in Japan while growing sales aggressively in North America, Europe, and Asia.
As we developed as a company, it became clear that conveying our strong empathy with women
through our business activities would gain recognition from society of the worthwhile functions
we perform. Accordingly, Wacoal declared itself “a company empathetic to women” in 2001.
The Wacoal Group’s management philosophy not only calls for corporate growth but also sustainable
development with society based on the cultivation of mutual trust. Mindful of this philosophy,
we aim to incorporate empathy with women into all aspects of our business operations.
And, the phrase “a company empathetic to women” best expresses this ambition.
This is a report that combines a report on business results and business strategies for shareholders
and other investors with a report on the Wacoal Group’s corporate social responsibility (CSR) activities.
We have prepared the report in this new combined format because we want to further
understanding not only of the management strategies that will drive our growth as a company
but also our unique CSR activities aimed at building mutual trust with society.

THE WACOAL GROUPMANAGEMENT PHILOSOPHY

Wacoal has since our founding pursued the essence of“beauty” which transcends the ages, while always keeping
a close eye on the values and aesthetic sense of women.
Furthermore, in the course of conducting our business
we listen to the opinions of each individual customer andmodestly seek to transform ourselves, so as to build“a relationship of mutual trust” with each individual.
Wacoal is founded on this philosophy of mutual trust, and has
remained our Management Philosophy since our founding.
OUR MISSION

We will contribute to society by helping women to express
their beauty.
OUR VISIONOVERVIEW

We, the employees and management of Wacoal,
will maintain a refined corporate culture based on mutual
trust and will continually strive to make the Company
a global leader in the industry.
OUR VALUES

1. Create products loved by customers
2.	Develop new products that meet the needs of the times
3.	Conduct business in a fair manner with a forward focus
4. Build a better Wacoal through better human resources
5. Fear not failure and boast not of success

3

70.2%
Foundation garments
and lingerie

OUR PRODUCTS

We are engaged in manufacturing, wholesaling, and—for certain
products—retailing of women’s foundation garments and lingerie,nightwear, children’s underwear, outerwear and sportswear,
hosiery, and other textile products. Other operations include
restaurant businesses, cultural and service-related operations,and the construction of interiors for commercial premises.

5.2%
Nightwear
0.9%
Children’s underwear
10.5%
Outerwear and sportswear
1.0%
Hosiery
4.5%
Textile products
7.7%
Other

Share of net sales

Annual Report 2011

4

OUR BUSINESS FIELDS

At Wacoal, we see the “body” as having both a physical anda mental/spiritual side, and our intimate apparel and wellness
businesses, based on our core competences, offer threecorresponding forms of value: beauty, comfort, and health.
One of these core competences is the Human Science
Research we have built up over many years. Looking at thingsfrom the Human Science perspective enables us to discover
the new values our customers desire and transform them into
products. Having a clear sense of different people’s needs,
turning those insights into products and services that offer
new value, and delivering them to customers in the appropriate
space—this is the process through which we have managed
to create everything from new brands to new lifestyles.

The different business fields of “body design”

Body Fit

Comfort

Human
ScienceResearchIN

OUT(Core Competence)

HealthBeautyMind Fit

DIRECTIONWACOAL GROUP ORGANIZATION

Wacoal Corp.

Domestic Principal Subsidiaries, Joint Ventures

Shinyoung Wacoal Inc. (South Korea)

Overseas Principal Subsidiaries, Joint Ventures

Lecien Corp.
Peach John Co., Ltd.
Wacoal Holdings Corp.

Nanasai Co., Ltd.
House of Rose Co., Ltd.
Wacoal Career Service Corp.
Wacoal Service Co., Ltd.
Wacoal Distribution Corp.

WACOAL HOLDINGS5

WACOAL BY FIGURES
Year ended March 31, 2011

Sales by businesssegment1

Sales by sales channel(Wacoal Corp.)2

Sales by geographic
segment1

30.0%
Department stores
66.9%
Wacoal Business(Domestic)

37.1%
General merchandisingstores

12.1%
Wacoal Business(Overseas)

87.6%
Japan

11.0%
Specialty/retail stores

7.1%
Peach John

5.5%
Asia

21.9%
Internet sales andmail-order catalog sales
operations / SPA shops

13.9%
Other

1

6.9%
Americas and Europe

Percentage figures are calculated based on external customers sales	Figures are Wacoal Corp. business results

2

WACOAL’S OVERSEAS OPERATIONSFY2011

Wacoal Holdings
Equity Owned

Net Sales(¥ Million)

Wacoal International Corp. (U.S.A.)

100% ¥10,275

Wacoal China Co., Ltd.

100

5,182

EnglandFranceNetherlands

80

1,991

Wacoal France S.A.

100

1,127

Wacoal Singapore Pte. Ltd.

100

640

Philippine Wacoal Corp.

67

376

Thailand
Malaysia

25

14,078

Thai Wacoal Public Co., Ltd.

34

9,664

Taiwan Wacoal Co., Ltd.

50

10,138CanadaDalian, China

Wacoal Hong Kong Co., Ltd.

Shinyoung Wacoal Inc. (South Korea)

Shanghai,
China

Beijing, China
Guangzhou,
China
Hong Kong

Singapore
As of July 2011

South Korea

U.S.A.

TaiwanPhilippines
Vietnam

Dominican
Republic

Indonesia
Manufacturing / sales
Sales
Manufacturing

Annual Report 2011

6

FINANCIAL HIGHLIGHTS

Thousands of
U.S. Dollars*Millions of Yen (except per share amounts)
Years ended March 31, 2011, 2010 and 2009

2010

2011

Net sales
Operating income
Selling, general and administrative expenses¥165,726 ¥163,297 ¥172,276
4,255
3,810
10,12977,59278,392
77,399

Income before income taxes, equity in net income of affiliated companies,
and net (income) loss attributable to noncontrolling interests$2,002,489
51,414
937,554

1.5%
11.7%
-1.0%

3,739

3,123

7,627

45,179

19.7%

2,615
1.2%
1.5%
¥10,054(1,546)(4,899)

2,524
1.2%
1.5%
¥9,449(2,698)(5,438)

5,230
2.3%
3.0%
¥8,168(4,714)(7,448)31,597

3.6%

121,484(18,681)(59,195)

6.4%-42.7%-9.9%

Yen

U.S. Dollars*% change¥   18.53 ¥   17.86 ¥   36.75
20.00
20.00
25.00
1,185.44 1,215.52 1,181.00$ 0.22
0.24
14.32

3.4%

Net income attributable to Wacoal Holdings Corp.
Return on assets (ROA)
Return on equity (ROE)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Per share of common stock
Net income attributable to Wacoal Holdings Corp.
Cash dividends
Shareholders’ equity% change

2011 2011 vs 2010

2009

—
-2.5%

PERFORMANCE

Net sales¥ Billion

Operating income /Operating income margin

SG&A expenses /% of net sales¥ Billion / %¥ Billion / %Net income attributable
to Wacoal Holdings Corp. /Per share of net income
attributable to Wacoal
Holdings Corp.
¥ Billion / Yen

166.4 165.8 172.3 163.3 165.7

12.9

13.5

77.4
68.8

78.4

77.6

69.2

7.7

8.2
5.9
3.8
2.3

07

08

09

WACOAL HOLDINGS

10

11

07

9.0
63.2

10.1

08

09

10

4.3

41.4

41.8

44.9

48.0

5.0

46.8%

5.2
36.8

35.1

2.6%

11

07

08

09

10

11

07

08

09

2.5

2.6

17.9

18.5 yen

10

11

7

Thousands of
U.S. Dollars*% change

2011

2010

2009

2011

2011 vs 2010

¥ 90,496
34,423
26,981
215,345
166,967¥ 89,933
35,68324,317223,387
171,630¥ 90,619
31,94322,939213,486
165,873$1,093,475
415,938
326,015
2,602,042
2,017,484

0.6%
-3.5%
11.0%
-3.6%
-2.7%

March 31, 2011, 2010 and 2009

Total current assets
Total current liabilities
Cash and cash equivalents
Total assets
Total shareholders’ equity

Millions of Yen

Number of employee (Consolidated)
Wacoal Business (Domestic)
Wacoal Business (Overseas)
Peach John
Other
Total

People% change

7,241
6,974
422
1,346

7,453
6,277
467
1,417

7,471
6,206
463
336

-2.8%
11.1%
-9.6%
-5.0%

15,983

15,614

14,476

2.4%* The U.S. dollar amounts represent translations of Japanese yen solely for convenience at the rate of ¥82.76=$1.					ROA / ROE

Shareholders’ equity /Equity ratio%

Net cash provided byoperating activities /Cash and cash equivalents¥ Billion / %Total assets¥ Billion¥ Billion

4.8

193.3

165.9

3.7

171.6

167.0

27.0
22.9

24.3

250.3 241.6
213.5

223.4

215.3

10

11

19.8
2.6
2.1

07

28.0

185.1

08

3.0
14.2
2.3

09

1.5

ROE
1.5

1.2

ROA
1.2

10

11

77.2

76.6

77.7

07

08

09

76.8

77.5%

10

11

9.3

07

8.2

08

09

9.4

10.1

10

11

07

08

09

Annual Report 2011

Guided by a founding spirit that seeks to “contributeto society by helping women to express their beauty,”
the Wacoal Group will further heighten its overallcapabilities to establish a stronger global presence.

YOSHIKATA TSUKAMOTO
Representative Director
Wacoal Holdings Corp.

9

STRATEGYFROM THE MANAGEMENT
THE WACOAL GROUP—EMPATHY WITH WOMENFISCAL 2011 BUSINESS RESULTS REPORT

Based on a founding spirit and management philosophy
that call for it to “contribute to society by helping women to
express their beauty,” Wacoal has enhanced its enterprisevalue by creating products customers love and developing
products meeting the needs of the times.
Not only seeking beauty but also focused on enhancing
comfort and health, Wacoal Group’s Human Science ResearchCenter has conducted basic research on women’s physiques
for more than 40 years. Unmatched among competitors,
such unique capabilities enable the Wacoal Group to analyze
carefully what customers see as offering real value anddevelop appealing products suited to the times.
Also, the Human Science Research Center supports
Wacoal’s unique activities as a company empathetic towomen. The results of the center’s research benefit a rangeof businesses, including in the Remamma project, whichcaters to women that have undergone breast cancer operations; the Dublevé business, which provides semi-order-madeinnerwear; the Good Age business, which develops products
for seniors; and companies that apply business-based
approaches to address social issues. At the Wacoal Group,
we want to preserve our founding spirit and contribute tosociety at large as a company empathetic to women.

For fiscal 2011, ended March 31, 2011, the Wacoal Group
posted year-on-year increases of 1.5% in net sales, to¥165,726 million, 11.7% in operating income, to ¥4,255
million, and 3.6% in net income, to ¥2,615 million.
Our domestic business faced tough business conditions
as continuing slumps in the mainstay department stores
sales channel and among general merchandising stores andother retail formats affected its performance. In responseto these conditions, the Wacoal Group increased its earning
power by implementing structural reform focused on its
main operating company, Wacoal Corp, in accordancewith the new Medium-Term Management Plan that began
in April 2010. At the same time, we strengthened our growthpotential by actively developing overseas businesses with
an emphasis on China. The structural reform successfully
improved the earnings of Wacoal’s domestic business.
However, Peach John recognized an operating loss of roughly¥3 billion, partly due to the recognition of impairment
charges on other intangible assets. As a result, although
we achieved year-on-year growth in operating income,the size of the increase was disappointing.

AN OVERVIEW OF THE MEDIUM-TERM MANAGEMENT PLAN
PERIOD

April 2010–March 2013
TARGET CORPORATE PROFILEA stronger global presence for the
Wacoal Group
NUMERICAL TARGETS (FISCAL 2013)

Net sales of at least¥190 billion
Operating income of at least ¥8 billion

GROUP STRATEGIESOVER THE THREE YEARSTARGET CORPORATE PROFILEFOR FISCAL 2013

• Heighten the overall capabilities of the
Wacoal Group through promoting
collaboration among Group companies
to realize each company’s strengths• Secure and increase earnings
– Restructure operations focusing on
innerwear wholesale operations– Accelerate expansion in growing
business areas at home and abroad• Strengthen system for Groupwide
management• New revenue and earnings pillars
established alongside existing innerwear wholesale operations• Overseas operations such as those in
the U.S. and China support growth• Restructured innerwear wholesale
operations see profitability improve• System for Groupwide management
further developed and strengthened• Meeting CSR and compliancerequirements

Annual Report 2011

10

STRATEGYFROM THE MANAGEMENTPROGRESS UNDER THE MEDIUM-TERM
MANAGEMENT PLAN

We have completed the first year of the medium-term
management plan launched in April last year. Unfortunately,
judging based only on fiscal 2011 business results, there aremany issues we must address. On the other hand, we did
make concrete progress. In the remaining two years, we
intend to steadily resolve immediate problems while moving
toward achievement of our target corporate profile.
Benefiting from bringing forward the structural reforms andappropriate expenses control, Wacoal’s domestic businesssaw operating income recover ahead of targets. However,sales were down year on year, despite brisk sales of brassieres
thanks to promotional campaigns highlighting the results ofthe Human Science Research Center’s aging research. Lower
sales were partly attributable to the effect of the Great East
Japan Earthquake. As for the overseas businesses, while sales
were favorable by and large, operating income remained
unchanged year on year due to higher advance investment
in our business in China. Tasks going forward are to achievea recovery in the sales of Wacoal’s domestic business andmaintain the sales growth in overseas businesses while
generating earnings.
In other businesses, Lecien, which became a wholly owned
subsidiary last year, made progress in reforming its earnings
structure but did not realize operating income as planned.
This was partly due to the recognition of pension expenses
and other special factors. Also, Peach John had a significantly
negative impact on consolidated business results for fiscal
2011. As well as a drop of more than 10% in net sales, thesubsidiary recorded a substantial operating loss for the second year in a row. Amid efforts to grow the Wacoal Group’s
earnings, rebuilding Peach John’s business is the highest
priority task.
MEASURES AND STRATEGIES AIMED AT REALIZINGTHE MEDIUM-TERM MANAGEMENT PLAN

As the second year of our medium-term management plan,
the current fiscal year will see us overcome the abovementioned issues by accelerating a range of initiatives.
In a drive to strengthen the earning power of the domestic
Wacoal business centered on wholesale operations, we
intend to heighten our operational efficiency in the mainstay
department stores sales channel. While reducing inventory
per item, we will display a wider range of products with a viewto encouraging a higher rate of repeat purchases by offering
WACOAL HOLDINGS

customers a greater selection of products. Through evenmore precise product control, we intend to heighten inventory
turnover rates at stores. In conjunction with these efforts, wewill deploy sales personnel at stores appropriately in order toincrease the productivity of each sales person. Further, theGroup will continue initiatives to rationalize manufacturing
and distribution as well as reform business infrastructure.
In efforts to rebuild Peach John’s business, from the current
fiscal year we intend to move the company into the black rapidly by completely renewing its business management systemand drastically revising its previous strategies. In tandem withmeasures to turn around the sales of the subsidiary by changing its organization and revising product plans, we will advancereforms aimed at establishing a solid earnings structure.
As for Lecien, innerwear comprises about half of its products. Moreover, roughly 80% of its innerwear products are
low-margin OEM products. Therefore, aiming to add value,
Lecien is currently undertaking joint product developmentwith major chain stores as well as developing sales areas inconjunction with the Wacoal and Wing brand businesses.
In addition, we are realizing a variety of Group synergies.
For example, Lecien is using its expertise in the manufactureof low-priced products to advance operational collaborations
with Wacoal’s retail business and Peach John as well as introduce new brands. Overseas, we are considering using Lecien
to establish a system that will support manufacturing for ourbusiness in China. At present, Wacoal is mainly rolling out
products for China’s high-end market. However, we are planning to market low-priced and mid-priced brands. We believethat Lecien can build and operate a manufacturing systemthat will provide a stable supply of products at low cost.
Further, the Medium-Term Management Plan sets out
establishing a stronger global presence as a target corporate
profile for the Wacoal Group. In order to realize this, ourmost important management task is to expand overseas
businesses. The Wacoal Group took its first steps toward
becoming a major presence in markets worldwide byestablishing joint venture companies in Korea, Taiwan,
and Thailand in the early 1970s. Since then, 40 years havepassed. Now we have 30 operating companies overseas
including affiliates, which generate total local sales worth¥52 billion. Nevertheless, we have only progressed half
way toward establishing a stronger global presence for
the Wacoal Group. With its domestic market maturing,
the Wacoal Group has to expand its overseas businesses
further in order to maintain steady growth.

11

Accordingly, we are accelerating business expansion in
the United States and in China’s growing market. As well as
expanding our business within the United States, we are using
it as a base from which to enter such new markets as Canada,
Brazil, and Mexico. In China, our business remains at theadvance investment stage. For the time being, we will conduct advertising campaigns vigorously and expand our store
network in order to heighten the visibility of the Wacoal brandand secure market share in China. Although our business in
China recorded an operating loss for fiscal 2011, we expect it
to break even for the current fiscal year. And, from fiscal 2013
onward, we plan for it to contribute to the Group’s earnings.
STRENGTHENING THE GROUP’SOVERALL CAPABILITIESIn June 2011, I resigned as the representative director andpresident of Wacoal Corp. to become its representative
director and chairman. Hironobu Yasuhara became the representative director, president and corporate officer of Wacoal
Corp. Consequently, he will manage the Company as the top
executive responsible for the implementation of operations.
Until now, I have concurrently held the positions of representative director of our holding company, Wacoal Holdings
Corp., and president of our operating company, Wacoal Corp.
However, for some time I have felt that I should not hold these
positions simultaneously given the differing roles of the twocompanies. Although we are in the midst of carrying out
measures under the Medium-Term Management Plan, business results are on track for recovery. Therefore, we felt it
was an opportune moment to adjust the management system.
Closely involved with our business in China and our core
manufacturing operations for many years, Hironobu Yasuhara
has a wealth of experience. Also, given the trust he inspires
inside and outside the Group as an individual, we thought he
was an appropriate choice for the top management positionat Wacoal Corp. Under the new system, as the leader of theholding company I want to boost the role that I play in heightening the overall capabilities of the Wacoal Group.
With six years having elapsed since we established apure holding company, strengthening collaboration between
Wacoal and new Group members Peach John and Lecien
is becoming a pressing issue. Aiming to address this issue,
we have established the Group Strategy Meeting. By gathering the senior management teams of operating companies
around one table, this meeting will facilitate the sharing ofa variety of issues and tasks relating to product planning

through to manufacturing with the whole Group andintegrate efforts to solve such issues. This process willheighten the Wacoal Group’s overall capabilities and speed
up management decision making. In future, we hope toinclude overseas operating companies in these meetings.
AIMING TO GIVE THE WACOAL GROUPA STRONGER GLOBAL PRESENCE

Calling on us to “contribute to society by helping women to
express their beauty,” our management philosophy not only
applies to women in Japan but to women the world over.
The target of establishing a stronger global presence for the
Wacoal Group set out in the Medium-Term Management Plansummarizes our ambition to have women around the world
support and love our products. This does not simply meanthat we aim to sell our products in markets worldwide. Rather,our goal is to enrich women’s lives by manufacturing the kindof high-quality, high-value-added products that only we can.
I do not think we will have established a strong global
presence for Wacoal Group until, based on complete trustin our products, the women of the world recognize the realvalue of the Wacoal as a corporate brand. Looking still further
into the future, I want to extend the scope of our social
businesses, which we are currently operating in Japan andcertain other countries, to encompass regions worldwide.
Contributing to society and women’s quality of life throughits main business is one of Wacoal’s key social missions.
In closing, we would like to express our sincere sympathy
for the victims of the Great East Japan Earthquake on March
11, 2011, as well as our wishes for a rapid recovery. At the
Wacoal Group, we are committed to helping this recovery
by unstintingly providing assistance to the people affectedby the disaster and the affected areas.
As we take on an array of fresh challenges, I would like toask our shareholders, investors, and other stakeholders fortheir continued understanding and support.
August 2011

Yoshikata Tsukamoto
Representative Director
Annual Report 2011

12

STRATEGYFROM THE MANAGEMENTTURN AROUND BUSINESS RESULTS RAPIDLY,REALIZE OPERATING INCOME FOR CURRENTFISCAL YEAR

Targeting young women and young career women, PeachJohn has achieved rapid growth based on a unique businessmodel that combines mail-order catalog sales and store sales.
Regrettably, however, in the past few years the company’sbusiness results have been sluggish because products andmarketing have been unable to respond appropriately tomarket changes. In fiscal 2011, this trend continued in PeachJohn’s core domestic business as mainstay catalog, PJ, saw
orders slump, while directly managed stores were unable toput a brake on declining sales. Overseas, Peach John’s two
directly managed stores in Hong Kong performed solidly, andthe company opened stores in mainland China in 2010.
Nevertheless, the slumping domestic business impacted
Peach John’s business results significantly. As a result, net
sales decreased 11.4% year on year, to ¥11.7 billion. Also, thecompany recorded an operating loss of ¥3,024 million,
including the recognition of impairment charges on otherintangible assets of ¥1,772 million. We recognized this
impairment loss as the result of a reevaluation of PeachJohn’s fair value based on a business plan that we prepared
for the five years from fiscal 2012 and which takes into consideration the effect of the Great East Japan Earthquake.
This was the backdrop to my appointment as Peach John’s
Representative Director and Chairman and President in June
2011. Until now, I have been involved in Peach John’s businessfrom the standpoint of an executive of the holding company

WACOAL HOLDINGS

Wacoal Holdings Corp. Now, however, I will lead its operations directly. My mission is to steer the company out of thecrisis that two consecutive fiscal years of operating losses
has brought about, restore its earnings base, and return it toa growth track.
Already, we have revised the expansion-driven growthstrategy of the domestic business, and we are radicallyreforming the earnings structure of the company by rightsizing its organization. These efforts mainly involve
consolidating operating bases and implementing a special
voluntary retirement scheme. This restructuring aims toensure that we post operating income for fiscal 2012.
REGAINING EARNING POWER BY
STRENGTHENING PRODUCT APPEAL AND
EXPANDING OVERSEAS BUSINESSES

I believe a weakening of product appeal is the main reason
for the downturn in mail-order catalog sales, which represent
two-thirds of the revenues that the domestic business generates. Peach John’s current product lineup is not appealing
enough to attract the company’s principal target customers,
women in their 20s. Therefore, I want to fundamentally revise
our products and rebuild the Peach John brand. Specifically,
we will advance the creation of appealing products thatreflect current demand by keeping Peach John’s founder andformer president Mika Noguchi as the head of the productplanning division to direct on-site operations. At the sametime, we will capitalize on the talents of young designers
actively. We have already launched fresh brands targeting13

new markets. And, I am confident the benefits of these
initiatives will become apparent steadily.
Generating 32% of the revenues of the domestic business,
our network of directly managed stores comprises 23 stores,
as of February 28, 2011, centered on the Tokyo metropolitan
area. Over the coming fiscal year, we plan to open three
new stores while closing four unprofitable stores. We willbuild a profitable store network by assessing stringently the
profitability of each store and pursuing a rigorous scrap andbuild strategy.
Further, in Internet sales we have completely reformed
our web site in order to make it more convenient and thereby
grow sales. These initiatives are the first steps toward revitalizing Peach John. Going forward, we want to make sure that
we realize concrete benefits as a result of these changes.
Overseas, meanwhile, adding to our two Hong Kong
stores, we expanded our store network in mainland China
in fiscal 2011. We opened five stores in Shanghai and two
in Beijing, all of which are performing steadily. In the current
fiscal year, we plan to open another store in Shanghai anda further three in Beijing. In these activities, we will closely
monitor the profitability of individual stores. In China,
I want us to achieve rapid growth by quickly establishing
the business infrastructure to support such expansion of
the store network. However, Peach John’s core business isstill mail-order sales based on catalogs and the Internet.
Accordingly, we view these directly managed stores as“antenna shops” that will heighten the Peach John brand’sname recognition.

In this way, we will rebuild Peach John’s business byreforming its earnings structure in order to realize earnings.
Peach John is indispensable for the Wacoal Group’s growth.
As a brand popular with young women and young career
women, Peach John is enabling the Group to broaden its
customer base to include customers in their 20s. Moreover,Peach John’s products feature design types that the Wacoal
Group used to lack and which appeal to customers in Japanand overseas. To date, Peach John has built up a customer
base comprising approximately 2 million customers. In order
to meet the expectations of each of these customers who
have supported us, we want to move forward decisively withinitiatives to create products that have even more appeal andreinvigorate the Peach John brand.

Focusing on reenergizing the Peach John
brand, we will launch an all-out effort tostreamline our organization and develop
even more appealing products.

HIDEO KAWANAKA
Director and Vice President(Business Restructuring, Representative Director andChairman and President, Peach John)

Annual Report 2011

14

STRATEGYFROM THE MANAGEMENT

By tackling management tasks boldly,
we will progress toward a new growth stage.

IKUO OTANIManaging Director(Overall Group Manager and General Manager of Corporate Planning)

FISCAL 2011 BUSINESS RESULTS ANDFISCAL 2012 FORECAST

In fiscal 2011, ended March 31, 2011, net sales rose 1.5% year
on year, to ¥165,726 million, because a year-on-year increase
in revenues from businesses in China and the United States
as well as the inclusion of the business results of Lecien
Corporation, which became a wholly owned subsidiary lastyear, in the consolidated business results for the full fiscal
year absorbed a year-on-year decrease in the net sales ofcore operating company Wacoal Corp.
In earnings, meanwhile, Wacoal Corp. achieved a 23.7%
year-on-year increase in operating income, to ¥5,620 million,
due to an improved profit margin resulting from structuralreforms that reduced costs and expenses. However, PeachJohn recorded an operating loss of ¥3,024 million, partly as aresult of recognizing impairment charges on other intangible
assets. Consequently, operating income was up 11.7% year
on year, to ¥4,255 million. Although we grew earnings, PeachJohn significantly affected consolidated business results, and,in the context of the targets set out in the medium-term
management plan, we do not feel earnings were high enough.
In fiscal 2012, ending March 31, 2012, challenging businessconditions seem likely to continue given the strength of concern over the effect of the Great East Japan Earthquake and apossible economic slowdown. Nevertheless, aiming to reachthe targets of the medium-term management plan, we will
increase sales by continuing to roll out products that offer
real value. We forecast year-on-year increases of 0.8% in

WACOAL HOLDINGS

net sales, to ¥167.0 billion, 52.8% in operating income, to¥6.5 billion, and 53.0% in net income attributable to shareholders of the Company, to ¥4.0 billion. This forecast
assumes currency exchange rates of ¥82 to the U.S. dollar
and ¥13 to the yuan. We anticipate a contribution to operating income of approximately¥4.0 billion from the combined
effect of the absence of the impairment charges on otherintangible assets of approximately ¥1.8 billion that PeachJohn recognized for fiscal 2011, a recovery in earnings, androughly ¥0.6 billion resulting from improved profit margins
due to structural reform.
RETURNS TO SHAREHOLDERS

Our basic policy for returns to shareholders is to increase
enterprise value by actively investing to increase earning
power, grow earnings per share, and pay stable dividends inlight of consolidated business results. With these targets in
mind, we intend to purchase treasury stock as appropriate,
improve capital efficiency, and provide returns to our shareholders. Since 2001, we have purchased treasury stock. In thefiscal year, we purchased approximately 600,000 shares oftreasury stock, bringing treasury stock purchased to a totalof approximately 22 million shares.
For fiscal 2011, we paid cash dividends of ¥20 per sharein accordance with plans. This resulted in a payout ratio of
107.9% for the fiscal year. For the current fiscal year, we plan
to pay cash dividends of ¥20 per share, too.

15

FUNDAMENTAL INVESTMENT STRATEGYFOR GROWTH

DEVELOPING PERSONNEL FOR THE NEXTGENERATION AS A KEY GROWTH STRATEGY

The Wacoal Group’s basic financial policy is to pursue flexible
capital measures based on a strong financial foundation andample cash flows. We use retained earnings for investment
aimed at developing new sales areas through our retail business, creating new points of contact with customers, andexpanding overseas businesses. In overseas initiatives, we
intend to select the best courses of action from among such
options as business collaborations with local companies and
M&A activities.
In addition, when we invest to participate in new businesses or establish operational and capital tie-ups, forpromising counterparties we will give due consideration to
M&A initiatives of the type that brought Peach John andLecien into our organization. However, for the time being,rather than aggressively investing in new businesses, we
intend to give priority to the sound development of these two
operating companies within our organization. In this way,while adhering to our medium-to-long management plan,we will make the positive investments needed to realize
sustainable growth.

Personnel are one of the Wacoal Group’s greatest assets.
Accordingly, we are building relationships of trust with personnel, creating workplace environments that enable all
employees to work vigorously and with a sense of fulfillment,
and developing systems for fostering personnel. At Wacoal
Corp., although many women work as beauty advisors, theyoccupy less than 5% of management positions. Therefore,
our goal is to foster more women managers. Aiming to create
self-reliant personnel that will contribute to its advancement,
the Company offers a range of personnel development programs to help ambitious, talented female employees advancetheir careers.
As our overseas businesses expand, another urgent task
is to foster personnel able to work worldwide. Also, our overseas bases are hiring a lot of local employees. Looking ahead,
we need to involve more such employees in management.
Further, as new members of the Wacoal Group, Peach Johnand Lecien have to foster management personnel able to perform based on a Groupwide viewpoint. Developing personnel
in preparation for the coming generation through such initiatives will make Wacoal’s growth base more robust than ever.

Annual Report 2011

16

STRATEGYFROM THE MANAGEMENTCONTINUING STRUCTURAL REFORM—RESTORINGTHE EARNING POWER OF WACOAL OPERATIONSSTRENGTHENING GROWTH BUSINESSES—ACCELERATING THE EXPANSION OF WACOAL’S EARNINGS

In 2011, after I became president of Wacoal Corp. in April, theordinary general shareholders’ meeting that was convened
on June 29 appointed me a director of Wacoal Holdings
Corp. Since joining the Company in 1975, I have been closely
involved with the core of Wacoal’s manufacturing operations,
gaining a variety of experience in the innerwear business.
Also, I helped develop our business in China, assuming thepost of president of Wacoal Beijing Wacoal Co., Ltd., in 1997,
which became Wacoal China Co., Ltd. During fiscal 2011,
as the executive responsible for the Wacoal brand, I devoted
my energies to advancing structural reform.
These structural reform initiatives addressed the pressing
need to rebuild domestic wholesale operations, which are
the Company’s earnings base. Rather than simply reducing
personnel and cutting expenses to realize near-term earnings, our efforts to improve the profitability of the mainstay
department stores channel sought to establish a structurethat will adapt flexibly to changing conditions and thereby
generate stable earnings over the long term. Specifically,
we took steps to increase inventory turnover rates at storesand improve the productivity of personnel. Thanks to these
efforts—even though domestic Wacoal operations saw net
sales slump, declining 2.7% year-on-year—operating income
was up 23.7%, and the profit margin improved significantly.
Aiming to restore earning power further, we intend to continue moving forward with an array of structural reforms.

For domestic Wacoal operations, we are concentrating
efforts on strengthening and expanding retail operations
as a second pillar of earnings after wholesale operations.
We reorganized former SPA operations to establish retail
operations. Under this new operational structure, we will
strengthen product lineups for high-volume markets andimplement strategic area control in order to realize businessformat deployment and product rollouts that can respondto changes among customers or retail channels. For example,
our directly managed store AMPHI, which targets womenin their 20s and has a network of 56 stores in Japan, as ofMarch 31, 2011, is growing steadily on brisk sales of affordable
brassieres. For fiscal 2011, former SPA operations posted net
sales of ¥7.5 billion. In fiscal 2012, however, the net sales
target for retail operations is¥9.2 billion.
Another promising business area is the Wellness
Business, which centers on the sports conditioning wear
CW-X. Celebrating the 20th anniversary of its launch thisyear, CW-X is a lineup of functional products developed
based on Wacoal’s unique human science research. It has
earned high acclaim from a range of different professional
athletes. Reflecting increasing awareness of these productsin the market and the success of aggressive sales promotion
campaigns, CW-X sales have grown steadily in recent years.
Also, our functional footwear business Success Walk is selling well. For working women, these shoes have become
popular by offering wearing comfort unattainable from

While continuing structural reform aimed
at growing earnings, we will develop an
even more robust position in the domestic
innerwear market.

HIRONOBU YASUHARA
Director(Representative Director, President and Corporate Officer Wacoal Corp.)

WACOAL HOLDINGS

17

ready-made shoes available in a wide range of sizes. For fiscal
2011, this product line generated revenues of ¥8.7 billion,
which we plan to raise to ¥9.8 billion in fiscal 2012.
In men’s innerwear operations, sales of Cross Walker, agrowth driver in recent years, have plateaued. Nevertheless,
Cross Walker has a strong market presence, with increasing
numbers of stores carrying it. This indicates the abundantscope for growing Cross Walker further by revising marketingof the product. By strengthening Internet sales, bringing tomarket new brands for seniors, and introducing new products
for sports use, we aim to increase revenues from men’s innerwear operations from fiscal 2011’s ¥3.3 billion to ¥3.8 billion
in the current fiscal year.
Meanwhile, in Wacoal’s overseas operations our priority
initiatives will be to strengthen brand development in the
United States while using it as a base from which to enter
new markets. In China, we will continue increasing store
openings and bolstering pricing strategies. Also, we intend
to invest actively in emerging countries and new markets.
DEVELOPING WACOAL’S DOMESTIC
WHOLESALE OPERATIONS—ESTABLISHINGAN UNASSAILABLE POSITIONAs the leader of Wacoal Corp., the core operating company
of Wacoal Holdings Corp., my mission is to ensure that wereach the targets of the medium-term management plan.
Women’s innerwear wholesale operations in Japan, theWacoal Group’s earnings base, are unlikely to see the market
expand given the ongoing structural reform of the retail

1975, March
1996, September
1997, April
2005, April
2006, June
2008, April
2010, April
2011, April

industry, the falling birthrate, and the ageing of the population. However, the powerful brand image that Wacoal has
cultivated over many years centered on department stores
will enable it to stake out an even larger market share.
Although profitability is improving as a result of structuralreform, in order to realize vigorous earnings growth, we haveto take measures to increase the top line at the same time.
To this end, we need to provide products that offer
customers real value and step up development of valueadded products that only we can create. In fiscal 2011, weapplied the findings of the Human Science Research Center’s
research into the physique changes that accompany aging tooffer products that give customers new ideas about the value
and functions innerwear can offer them. This approach is
attracting women’s interest very effectively, and we areseeing an upturn in store visits and customer feedback.
Through such initiatives, even amid tough conditions in
the retail industry as a whole, many avenues remain open to
us by which we can prevail against competitors and continue
growing. My role is to draw on my long experience of on-site
operations in order to unearth new business opportunities.
And, I firmly believe that Wacoal has such potential opportunities. By reassessing the domestic wholesale operations
from a variety of different viewpoints and taking on thechallenge of the new possibilities that this reveals, I am determined to establish an even more dominant market position
for the Wacoal brand.

Joins Wacoal Corp.
Vice President, Guangdong Wacoal Inc.
President, Beijing Wacoal Co., Ltd.
Corporate Officer, General Manager of Wing brand businessDirector and Standing Corporate Officer, Wacoal Corp., General Manager of Wing brand businessDirector and Senior Corporate Officer, Wacoal Corp., General Manager of Wing brand businessDirector and Senior Corporate Officer, Wacoal Corp., General Manager of Wacoal brand business
Representative Director, President and Corporate Officer, Wacoal Corp.

Annual Report 2011

18

STRATEGYFROM THE MANAGEMENT

We will step up the pace of overseas
business development in order to advancethe Wacoal Group’s growth.

TADASHI YAMAMOTO
Director(General Manager of International Operations)

MAKING OVERSEAS BUSINESSES THE WACOALGROUP’S GROWTH DRIVER

Strengthening overseas businesses is an important task that wemust accomplish in order to realize growth over the mediumto-long term. For our businesses in Japan, facing a mature
market that is unlikely to grow any further, we are concentrating on building a more robust earnings base. For overseas
businesses, however, our basic strategy is to strengthen andexpand our business base rapidly in growth markets.
At present, the Wacoal Group markets products in 40
countries, and its overseas sales*, including those of affiliates,
reached approximately ¥52 billion for fiscal 2011. Among ouroverseas businesses, we boast a particularly strong presence
in department stores in the United States, with the U.S. business posting net sales of more than ¥10.2 billion, or US$120
million, for fiscal 2011. In China, local-currency net sales grewin excess of 30% for fiscal 2011, reaching approximately 400
million yuan, or ¥5.1 billion. In addition, in Korea, Thailand,
Taiwan, Indonesia, Vietnam, the Philippines, and other countries, Wacoal has become established as a leading brand. In
Southeast Asia, fiscal 2011 saw net sales surpass ¥30 billion.
Under the current Medium-Term Management Plan, theWacoal Group aims to grow net sales in overseas markets toroughly ¥70 billion. To that end, our growth strategy going
forward will concentrate on expanding mainstay businesses
in the United States and China, as we enter new markets.
Specifically, we intend to use our U.S. subsidiary as a basefrom which to expand our presence in the markets of Canada,

WACOAL HOLDINGS

Brazil, and Mexico. At the same time, in Europe we will makeforays into Germany and Russia. In Southeast Asia, in countries where we have established a presence we will strengthen
measures aimed at heightening brand loyalty. In India, we are
currently considering marketing through an agency from2013, because the mid-to-high-end market remains small.
Looking at the consolidated business results of the overseas
business, net sales were up 6.1% year on year, to ¥20,052
million, while operating income edged down 0.7%, to ¥1,321
million. Although foreign currency translation affected yendenominated net sales due to yen appreciation, on a local
currency basis net sales were generally solid. As for earnings,
while the U.S. business posted growth of 20% thanks to cost
reductions, costs arising from new store openings and promotions affected the overall earnings of our business in China.
* This includes sales of affiliates and therefore differs from consolidated overseas net sales.

EXPANDING OVERSEAS BUSINESSES CENTERED ON
CHINA AND THE UNITED STATES

Promising continued stable economic growth, China isa market that Wacoal should tackle as the first priority of its
overseas strategy. At the moment, we are developing threebrands in China in order to cater to a broad base of customers. As well as the mainstay Wacoal brand, we are marketing
amphi for young women and the high-value-added brandSalute. In recent years, we have raised the profile of thesebrands by actively conducting advertising campaigns.
In conjunction with these efforts, we have shifted the focus

19

of store openings from coastal areas to regions further inland.
In China, Wacoal sells its products through four sales channels—department stores, specialty stores, sales agencies, anddirectly managed stores—which together account for roughly
650 sales areas. At the end of March 2011, approximately
444 department stores carried our products, and we plan toincrease this to 490 department stores over the coming year.
Also, Wacoal’s products are currently available at 120 sales
agency run stores. Plans call for expanding this network to
160 stores by the end of the current fiscal year. As a whole,
we expect the four sales channels to account for approximately 730 sales areas by the end of March next year.
Furthermore, we intend to train sales and other personnel
actively in order to strengthen our sales capabilities at stores.
The rapid increase in the number of sales areas has brought tolight some shortcomings in personnel training. We will rectify
these and do our utmost to ensure we are not incurring salesrelated opportunity loss due to lack of personnel training.
In product initiatives, the Group will take advantage of theChinese Human Science Research Center in order to increasedevelopment of products better suited to Chinese women.
China is huge, and Chinese women’s physiques differ fromregion to region. Painstaking product development thatreflects these regional differences is becoming important.
Also, we not only want to roll out products in the high-end
market, traditionally an area of strength, but also in highvolume markets for low-priced and mid-priced products.
Therefore, we plan to introduce new brands in collaboration

with subsidiary Lecien Corporation. Currently, we sell products
through third-party Internet shopping web sites. However, as ameasure to increase points of contact with customers, we plan
to establish our own web site for Internet shopping.
Through this raft of measures, we are targeting a 49%
year-on-year increase in the net sales of Wacoal China Co.,
Ltd., to ¥7.8 billion, or 620 million yuan, for the current fiscal
year. And, we aim to break even on an operating income basis.
For the U.S. business, our largest overseas business, we
aim to secure earnings and seek further growth. Having
firmly established its standing in the U.S. market, the mainstay Wacoal brand accounts for more than 90% of the salesof Wacoal America, Inc. We aim to grow sales by continuing
to bolster the development of products designed to cultivate
further brand loyalty among customers. Also, launched in
2009, our b.tempt’d by Wacoal brand is performing favorably. While the Wacoal brand emphasizes functionality, we
have taken a different approach for b.tempt’d by Wacoal by
fostering it as a sexy, fashionable brand. Although sales ofthis new brand are on a small scale at present, we expect it toplay a leading role in growing the earnings of the U.S. business going forward. In another initiative, in August 2010 weestablished a subsidiary, Wacoal Direct, tasked withstrengthening our Internet shopping web site.
For Wacoal International Corp. of the United States in thecurrent fiscal year, we project year-on-year increases of 2%
in net sales, to ¥10.5 billion, or US$130 million, and 11% inoperating income, to ¥1.1 billion, or US$14 million.

Annual Report 2011

20

A SUSTAINABLE WACOALThe Wacoal Group’s goal is to “contribute to society by helping women to express their beauty.” To this end,
we aim to be a company empathetic to women in every aspect of our operations, including research anddevelopment, production technology, and consultative sales. By earning the endorsement of women,
our products and services will win recognition of the valuable role they play in society. The phrase “empathy
with women” sums up the conviction and passion that motivate the Company’s business development initiatives.

THE BUSINESS PROCESS OF WACOAL AS A COMPANY EMPATHETIC TO WOMEN

Research andDevelopment

Production
Technology

The Starting Pointof Manufacturing

The Creation ofCustomer Satisfaction

Worldwide annual brassiere sales

39,000,000
Percentage of female employees

Number of manufacturing bases worldwide%

Number of beauty advisors worldwide

WACOAL HOLDINGS

21

Consultative
Sales

Supporting
Women

Wacoalhas worked hardof
since its founding to achieve our
The Dedication
business goals of “encouraging women to express their
Beauty Advisors to Each Customer
beauty,”WacoalDevelopment
has worked hard sinceThe
ofits founding to achieve ourbusiness goals of “encouraging women to express their
MutualTrust with Society
beauty,”Size combination of semi-order-made brassieres

Measurement data on women’s physiques (in Japan)

Countries where we have businesses

Number of sales
areas worldwide

Annual Report 2011

22

A SUSTAINABLE WACOALThe Starting Point of Manufacturing
All of our efforts to manufacture products befitting acompany empathetic to women begin with research anddevelopment. Leading our research and development is
Wacoal’s Human Science Research Center, an organizationthat gives the Wacoal Group a unique advantage. The
center’s task is to fulfill women’s wish to be beautiful by
conducting scientific research on women’s physiques anddeveloping technology based on its findings.

With this in mind and as a company empathetic towomen, Wacoal first and foremost sets out to develop brassieres suited to the body shape of each women, thereby
helping each women realize their wish to be beautiful. At theheart of this unique approach to manufacturing is Wacoal’s
Human Science Research Center.
WACOAL’S HUMAN SCIENCE RESEARCH CENTERCONDUCTING RESEARCH BASED ON DATA

39 MILLION BRASSIERESFROM 40,000 WOMENThe Wacoal Group sells 39 million brassieres in Japan andoverseas annually. Women across a very wide range of age
groups use our products in a variety of countries, giving us
considerable influence among women.
Although brassieres are only one product category, theperfectly fitting brassiere differs depending on the wearer’s
age and body shape. Even in the same brassiere size, theproduct facet that contributes to a beautiful appearance
varies depending on the age group of the wearer. Wearing
the wrong size of brassiere may stop it functioning properly
and can even place a burden on the body.

The Human Science Research Center conducts all of Wacoal’s
research and development on products as well as issuinginformation on these products. The most distinctive featureof the Human Science Research Center is that it has measured the physiques of approximately 1,000 women between
the ages of 4 and 69 every year since 1964 and as a result
has accumulated data on more than 40,000 women. Using
the Martin measurement method, we take 158 different
measurements of each subject. Also, we conduct researchon changes in the measurements of the same individual overtime. Women that were aged 20 when we began measuring
their body shape are now 65 years old.

Research anddevelopment¥ Million

Physique measurement at
Wacoal’s Human Science
Research Center

WACOAL HOLDINGS

714

07

766

768

778

08

09

10

815

11

23

In April 2010, as the culmination of data collected on
40,000 Japanese women over 45 years, the Human Science
Research Center announced the results of its research
themed on aging. Our announcement focused on changes inwomen’s body shapes with age and the laws of beauty. Our
approach to aging aims to support women as they become
older. We want to use the results of the Human Science
Research Center’s research on aging to inform customers
about the importance of familiarizing themselves with correct
information about how the body’s shape changes and wearing innerwear that is appropriate for their physique.
At present, the Human Science Research Center comprises
33 personnel, 22 of whom are female personnel, and sets
research targets every three years. Twice a year, the center’s
personnel hold research and development meetings andprovide updates on the progress of research to productdevelopment managers. These managers use this information to create products. For example, they may create asports brassiere in the Wellness Business. Our research anddevelopment is very much centered on customers. Throughits Companywide SQUASH system, Wacoal reflects feedback received from customers at stores nationwide in
product development.
CONDUCTING RESEARCH ON THE PHYSIQUES OF
CHINESE WOMENCHINESE HUMAN SCIENCE RESEARCH CENTER

In 2002, we established the Chinese Human Science ResearchCenter in Shanghai. Since then, the center has been measuring the physiques of Chinese women in northeast and south
China. At present, based on this data, we are marketingproducts designed to fit Chinese women.
All of the center’s seven researchers are Chinese women.
We believe that allowing local female researchers to measure
the physiques of Chinese women and deem what is beautiful
is paramount. Through measurements to date, these local
researchers have discovered that there are two types ofChinese women: those for whom innerwear in Japanesesizes fits and those with body shapes particular to Chinese
women. This has enabled us to develop products that better
fit Chinese women as a whole. Further, our researchers’
investigations have revealed that, unlike Japanese women,
Chinese women prefer a rounded bust. Accordingly, weare taking steps to provide innerwear that caters to such
local preferences.

ENHANCING THE QUALITY OF LIFE
OF BREAST CANCER PATIENTSDEVELOPING A NEW PARADIGM FOR TIE-UPS BETWEENCOMPANIES AND MEDICAL INSTITUTIONSThe Human Science Research Center and the Breast Cancer
Treatment and Reconstruction center of Okayama University
Hospital began joint research on the usefulness and safety of
innerwear following breast reconstruction from January
2010. Treating patients who have lost a breast due to cancer,
the hospital’s center conducts plastic surgery that restores
the breast to its original shape by using the patient’s tissue,
taken from such areas of the body as the abdomen. Japan has
50,000 breast cancer patients. Undergoing surgery thatcompletely removes a breast is not unusual. Thanks toadvances in technology, more women are undergoing breastreconstruction surgery. However, many have problems
selecting innerwear. After reconstructive surgery, some cannot use the innerwear used before surgery due to changes inthe shape of the breast or the body’s left and right side or
pain or scars.
This research’s story began when a nurse from Okayama
University Hospital visited a Dublevé store to discuss innerwear after breast reconstruction. As a business that uses
2,880 different sizes to provide semi-order-made innerwear
for different breast shapes, Dublevé has the potential to provide products for reconstructed breasts. At the time,
however, we did not have enough breast cancer expertise.
Therefore, mindful of our mission as a company promoting
Wacoal Breastcare Activities for breast cancer and otherbreast diseases, we sought to enhance the quality of life of
women that have undergone breast reconstruction by establishing a counseling room in the Breast Cancer Treatment andReconstruction center of Okayama University Hospital andbeginning research with the university on the cosmetic characteristics of innerwear used after breast reconstruction.
This research will focus on the importance of innerwear
selection after breast reconstruction. The Human Science
Research Center is measuring the physiques of 35 patients
who have undergone breast reconstruction and consented toparticipate in the project. Sharing a desire to improve thequality of life of women after reconstructive surgery, Wacoal
and Okayama University Hospital are creating a new paradigm for collaboration between companies and medical
institutions.

Annual Report 2011

24

A SUSTAINABLE WACOALThe Creation of Customer Satisfaction
As well as feeling great to wear, Wacoal’s products must
look appealing. To ensure customers are happy and earn
their trust, Wacoal painstakingly manufactures products
to exacting standards. This uncompromising approach toquality forms the bedrock of customer satisfaction.

to production technology accumulated over many years, arigorous inspection process underpins Wacoal’s quality. Our
uncompromising approach to manufacturing stems from ourdesire to support women’s beauty and confidence.
MORE THAN 150 TESTS AND CHECKSA THING OF BEAUTY COMPRISING
MORE THAN 40 PARTSINSPECTIONS BEFORE MASS PRODUCTION

One brassiere has more than 40 parts. Further, these partsaccount for approximately 25 different components andmaterials. Combining all of these parts creates a single
brassiere. Manufacturing brassieres involves a variety ofprocesses, from procuring raw materials through to stretching,cutting, sewing, inspecting, and shipping. Each of theseprocesses is the culmination of the unique expertise that
Wacoal has garnered, such as well-honed manufacturing
skills for adjusting machines in cutting and sewing processes
and a range of safety and quality checks. Each processincludes various quality inspections. Wacoal only offers
customers finished products that have passed all of these
inspections and the final inspection. Thus, in addition

To ensure the quality of our innerwear remains high, for eachproduct we conduct in excess of 150 tests and checks prior tostarting up full-scale manufacturing. Between the planningstage and the starting up of production for a product, we
examine and assess the functionality of materials throughwearing tests, experiments, durability tests, and prototypes.
During this period, we test and check member parts, semimanufactured products, and finished products based on their
particular function. Stringent multifaceted testing and checking that takes into account the quality customers seek inrelation to safety, durability, ease of use, wearability, andappearance, heightens overall product quality.

SUPPORT WACOAL’S QUALITY

Process of manufacturing brassieres→

Preparing raw materials

WACOAL HOLDINGS→

Stretching→

Cutting→

Sewing→Inspection

Shipping

25

20 PROCESSES TAKING A 20-PERSON TEAM
25 MINUTESADVANCED SEWING TECHNOLOGY IS THE SOURCE OF
MANUFACTURING QUALITY

Brassiere manufacturing processes are divided into operations
for materials, stretching, assembly, sewing, and inspection.
Sewing is done by hand because it requires the assembly of
more than 40 small parts of various shapes. Each brassieregoes through roughly 20 processes, which takes a single teamof 20 personnel about 25 minutes to complete. Each process
calls for meticulous attention to detail. Only technicianswith consummate skill are able to sew together parts into
an attractive shape without diverging one single millimeter.
A particularly challenging process is creating the roundness of a brassiere. If the number of stitches in a seam isout by even one stitch, the brassiere will be uncomfortable
to wear because it will not follow the body’s contours.
Therefore, Wacoal uses “sewing specifications and standards” written on one single sheet of paper as a manual for
sewing processes. This stipulates key sewing requirements
in great detail, covering such aspects as thread, needles,
seam allowance and overlap thread widths, and stitch size.
In addition to sewing specifications and standards that cover
every aspect of operations in minute detail, highly skilled
technicians who have developed their sewing techniques tothe level of craftsmanship use subtle adjustments in pressurein order to sew in conformity with requirements. In this way,
a combination of expertise garnered over many years andtalented personnel that have acquired outstanding skills
form the foundation of Wacoal’s production technology.

needles contact metal components. When a needle breaks
during sewing, all surrounding operations halt, and personnel
carefully search for the needle fragments. To ensure that
personnel have not overlooked a single millimeter of needle
fragment, we use a broken needle checking device. This
device enables us to assemble the fragments together andcompletely restore the needle to its original form. Further,to prevent such needle fragments from scattering, we haveinstalled sewing machines with plastic “broken needle antiscattering covers.” Moreover, as the final stage of ourthoroughgoing quality control, before shipping products
we inspect them using a metal detector.
UNIFORM MANUFACTURING WORLDWIDEMADE BY WACOALCurrently, we are disseminating the advanced production
technology and expertise developed in Japan to our overseas
manufacturing plants. Based on stringent uniform quality
standards, we rigorously use the same materials, execution,technology, and inspection in the manufacture of Wacoal
products around the world. For example, our plants in China
manufacture products using the same materials for the fabric,lace, and sewing thread as plants in Japan use. Uniformity
efforts do not end there. As in Japan, rules stipulate procedures and handling methods when sewing products, thenumber of stitches, and even the position of sewing machines.
Also, we enforce the Wacoal quality standards used in Japan.
This “made by Wacoal” approach seeks manufacturing that
adds value by achieving unmatched quality. Wacoal seeks
manufacturing based on exacting quality criteria because it
wants to create products that satisfy women the world over.

A FINAL INSPECTION COVERING 25 REQUIREMENTS
INITIATIVES AIMED AT MAINTAINING QUALITY

For brassieres, Wacoal’s final inspection of finished products
includes 25 different checks. Our inspection personnel
exhaustively check such points as whether there are too
many stitches and whether the sewing conforms withregulations. Only products that pass these strict inspections
are recognized as Wacoal products.
In these efforts, we pay particular attention to the problemof needles that break during the sewing process. In rarecases, needles break when technicians do fine sewing work,
especially when they sew together different fabrics or when

Left—The parts comprising one brassiere
Right—Sewing operations; Photographer: Shigetoshi Ogino

Annual Report 2011

26

A SUSTAINABLE WACOAL

Consultative sales lie at the heart of selling Wacoal
products. The role of consultative sales is to listen carefully
to each customer and offer them innerwear matching their
particular physique and taste. At Wacoal, female sales
personnel, called beauty advisors, perform this critical role.
QUALITY CONSULTATION THROUGHBEAUTY ADVISORS

As women age, their busts change in size, firmness, andshape. Therefore, fitting that takes into consideration not only
bust size but also shape and firmness is important in orderto maintain an attractive bust profile. Further, even if bust
size does not change, considering body shape changes that
accompany aging is necessary. By attending sincerely to thecustomer’s requests and doing their utmost based on dedication to each customer, beauty advisors help customers
choose innerwear that reflects their particular physique andtaste. In direct contact with customers, our beauty advisors
and the high-quality consultation services they provide
underpin our efforts to be a company empathetic to women.

INNERWEAR SELECTION SPECIALISTSBEAUTY ADVISORS’ LISTENING SKILLS

Wacoal has 3,300* beauty advisors. At the sales areas ofbusiness partner department stores and specialty stores,
they form teams of several personnel, who sell innerwear byoffering customers consultative services. Wacoal’s beauty
advisors are innerwear professionals who help customers
find innerwear that fits well by advising them on measurement and suggesting products for them to try on. Before
working at stores, beauty advisors undergo rigorous training.
They must pass the Wacoal Bodyfit Examination and the
Nihon Body Fashion Association (NBF) standardized exam.
As well as acquiring measuring expertise, they must be familiar with the characteristics of product fabrics. A distinctive
feature of our beauty advisors is their skill in presenting acustomer’s bust shape.
A further skill beauty advisors need is the ability to listen
to customers. Customers visiting stores do not always fully
explain their needs and feelings. In fact customers that do so
are in the minority. Therefore, during customer consultation
sounding out the customer about their wishes is important.
When a beauty advisor shows a willingness to listen, customers have confidence in the advice they receive. As soon as
personnel join the Company, Wacoal conducts training
aimed at heightening the quality of customer consultation
through the development of such skills.
* A s of March 31, 2011, accounting for 70% of the employees of Wacoal Corp.

The Dedication of Beauty Advisors to Each Customer

WACOAL HOLDINGS27

A SOURCE OF CUSTOMER FEEDBACK
BEAUTY ADVISORS’ COMMUNICATION SKILLS

Feedback from customers is a treasure trove for Wacoal
as a company that has set out creating products loved bycustomers as a basic management policy. Standing on thefrontline of our on-site sales efforts, beauty advisors nationwide receive requests and criticisms from customers daily.
Beauty advisors perform an important role in communicating
this feedback to the Company. More than ten years ago,
Wacoal established BA (Beauty Advisors) Study Groups, aforum in which beauty advisors and product development
managers discuss customer feedback gathered at stores.
Their conclusions are then reflected in product development.

Given this situation, Wacoal should do whatever it can
to ease women’s discomfort through its beauty advisors.
Because we need to continue impressing upon customers
the importance of having products fitted by a professional,
beauty advisors will play an increasingly pivotal role as innerwear professional able to offer appropriate advice. As aleading innerwear manufacturer, we want to step up ourefforts to provide customers with appropriate information
and advice.

THE ROLE OF BEAUTY ADVISORSBEAUTY ADVISORS’ INCREASED IMPORTANCEIn April 2010, Wacoal’s Human Science Research Center
announced its findings on how the body ages and the importance for women of wearing brassieres appropriate for theirbodies. In April 2011, the center issued a white paper on physiques and innerwear based on 10,000 women, which
revealed Japanese women’s attitudes and facts in relation
to the body and innerwear. This survey showed that whileroughly 85% of women felt their brassieres were unsatisfactory, only 13.8% had their bust measured or tried on products
before purchasing them.

Annual Report 2011

28

A SUSTAINABLE WACOAL

Our efforts by no means end at selling products. We fulfill
our responsibility as a company empathetic to women byadvancing a range of social contribution activities related
to the well-being of women. In each of these initiatives,
we build relationships of trust with our customers—women
the world over. By promoting women’s beauty, health, andcomfort, our goal is to build mutual trust with society.
EMPATHY WITH WOMEN

At present, our society faces a variety of social and global
problems. As it tries to solve these problems, society expects
more from companies than ever before. For example, in the
medical field the risking of losing personnel due to cancer isa major problem. Regarding breast cancer, 1 in 16 Japanesewomen develop the disease. Helping resolve this problem
is an important task for Wacoal as a company empathetic
to women.
Wacoal’s mission is to “contribute to society by helping
women to express their beauty.” We want to accomplish thisin a tangible way by showing our empathy with women
through an array of activities for society. Our ambition is tohelp women around the world play active roles in society
with confidence. Wacoal’s activities to this end are not limited to in-house efforts. Based on mutual trust, our activities
involve various organizations, including business partners,
NPOs, and medical institutions.

The Development of Mutual Trust with Society

WACOAL HOLDINGS

PRE-TREATMENT TO POST-TREATMENTWACOAL BREASTCARE ACTIVITIES

Wacoal began the Breast Cancer Examination Support
Project in October 2009. Also, our Remamma project supports the restoration of an attractive figure after breast
cancer treatment or surgery (Please see page 30 for details.).
And, we promote pre-treatment Pink Ribbon Activities
focused on detecting breast cancer. Moreover, in order tostrengthen collaboration and coordination among these three
activities, we advance them as Wacoal Breastcare Activities.
The Remamma project and the Breast Cancer Examination
Support Project have established systems to enable collaboration with medical institutions. Also, as part of the Breast
Cancer Examination Support Project, Wacoal Corp. has purchased its very own mobile breast cancer examination unit,
named Aio, so that as many women as possible can readily
undergo breast cancer examination. Wacoal supports theexamination efforts of medical institutions by lending them
the unit.
With the aim of impressing upon as many people aspossible the importance of the early detection, early diagnosis,
and early treatment of breast cancer, we began Pink Ribbon
Activities in earnest from September 2002. Since then, as wellas increasing the percentage of our employees that receive
breast cancer examination, we have sponsored various initiatives and donated to public interest incorporated foundations.

29

In 2007, we launched a Pink Ribbon Fitting Campaign.
Based on the sales areas of department stores and innerwear
specialty stores nationwide, the campaign aims to heighten
awareness of breast cancer. Specifically, we donate ¥10
to the Japan Cancer Society for every brassiere customers
try on at stores. Through this campaign our goal is to raisecustomers’ awareness of their bodies and breast cancer.
In addition to Japan, we are promoting Pink Ribbon
Activities in the United States, China, Korea, Taiwan,
Thailand, Hong Kong, Singapore, the Philippines, Malaysia,
Indonesia, and Vietnam. We have been particularly active in
the United States, commencing initiatives there in 1999. In
the United States, we donate money to Pink Ribbon related
activities not only when customers try on brassieres but also
when they purchase them. Over 12 years, we have donatedmore than US$2.7 million.

A Wacoal survey revealed that 61% of women feel
reluctant to discard brassieres. Customers participatingin the campaign told us that it enabled them to discard something normally troublesome to throw away while contributing
to the environment. By collecting and recycling brassieres
with the cooperation of our department store business partners, we want to bring environmental problems to the noticeof our customers and work with them toward solutions.
Approximately 800 stores in Japan and 500 newly
participating directly managed stores and business partner
stores in Taiwan took part in the 2011 campaign. Between
2008 and 2011, we collected 44,000 bra recycle bags,
approximately 179,000 brassieres (estimated based on weight),
which were processed into approximately 18 tons of RPF.

PURSUING ENVIRONMENTAL ACTIVITIESWITH CUSTOMERSWACOAL BRASSIERE RECYCLING CAMPAIGN

As part of its environmental activities, Wacoal conducts a
Brassiere Recycling Campaign every year during the period
between Brassiere Day, on February 12, and Earth Day, on
April 22. In this campaign, customers put brassieres they nolonger need in specially designed collection bags and bringthem to stores. The collected brassieres are processed into
recycle as RPF (Refuse Paper & Plastic Fuel) for industrial use.

Left—My Bust Book, which we distributed at Pink Ribbon Fitting Campaign events
Right—Wacoal’s very own mobile breast cancer screening unit, Aio

Annual Report 2011

30

SOCIAL BUSINESS

Wacoal’s goal is to “contribute to society by helping women
to express their beauty.” Therefore, we create products thatenable women of all ages and with different proportions andbody shapes to be beautiful and comfortable.
Many women, however, cannot find ready-made innerwear
that fits. This can be due to body shape or breast cancer surgery. By helping solve the problems of such women, Wacoal’ssocial businesses aim to contribute to society at large.
Social businesses use business methods to tackle social
problems. As well as a having social and business facets, theyneed to be innovative and sustain their activities. In order toensure our social businesses continue, we think heightening
their business facets and establishing tie-ups with variousorganizations while extending their activities throughout
society is important.
HELPING RESTORE ATTRACTIVE BODYLINES
THE REMAMMA PROJECT

To reflect this project’s goal of giving women a bust once
again, the name Remamma combines “re,” meaning again,and “mamma” from the word mammary, which means breast.
Aiming to assist women that had undergone breast removal
surgery, we established the Social Welfare Section directly
under the control of the president in 1974 and began providing
specially made Remamma innerwear and pads.
Our Remamma products are for women that have had anentire breast removed as a result of surgery. Of course ourgreatest wish is to see advances in breast cancer treatment
eliminate the need for this type of project. However, the reality at present is that many women have problems withfinding innerwear after surgery. We believe giving all such
women access to Remamma products benefits society.
Across Japan, Wacoal has established six Remamma
Room stores that provide consultation services. And, at 10
locations nationwide we hold annual free consultation events
that enable customers to be measured and try products on.
Since we began holding them in 1993, more than 18,000
people have visited these events as of March 2010. In addition,

WACOAL HOLDINGS

we deliver Remamma product catalogs to approximately
1,800 hospitals. Also, we cater to women in remote areas
through mail-order catalog sales. Over the past 37 years,
in excess of 180,000 women have used Remamma products.
In recent years, we have held Remamma consultation eventsin Korea, Taiwan, Hong Kong, and Shanghai.
Going forward, aiming to increase awareness of Remamma,
among other initiatives, we intend to conduct Remamma
workshops for the nurses of medical institutions specializingin breast cancer.
EACH INDIVIDUAL’S VERGE’S LINE
DUBLEVÉ BUSINESSNormally, the brassieres we sell at stores are available inapproximately 90 sizes. Sometimes, however, even this rangeof sizes does not cater to all body shapes. To rectify thisproblem, we established Wacoal Dublevé as a brand ofsemi-order-made products in 1999. The Dublevé approach to
product design is to offer innerwear that perfectly fits eachwoman’s body shape at prices not much higher than those of
ready-made products. The greatest differentiating capabilityof Wacoal Dublevé is that its specialist consultants are able
to provide innerwear that fits each individual exactly by measuring the left and right verge’s line, the circumference of theunderside of bust, and then selecting appropriate innerwear
from among 2,880 sizes.
Moreover, Wacoal Dublevé’s unique abiltiy to offersemi-order-made products may prove useful for breast
cancer patients that have undergone breast reconstruction.
With this in mind, we have recently embarked upon joint
research on innerwear for women who have had breastreconstruction through an alliance with Okayama University
Hospital (Please see page 23 for details.). In this way, Wacoal
Dublevé will create new value as a social business while
increasing the innerwear options available to each woman.

31

SEEKING COMFORTABLE PRODUCTS
FOR THE BODY SHAPES OF SENIORSGOOD AGE BUSINESSIn Japan, there are require roughly 29 million senior citizens
aged 65 or older. While some nursing care, most senior citizens—although they may feel their bodies weakening as they
age—are active individuals leading independent lives. Further,more than half of women aged 65 or above are going out
more often. One of the chief complaints of such individuals
is the lack of apparel suited to their body shape and the
difficulty of buying apparel in the styles they prefer nearby.
Aiming to mitigate the wardrobe-related frustration of such
women aged 65 or above and cater to their desire to always
be beautiful, Wacoal started up the Good Age business in
2002. Emphasizing ergonomic design, this business hasdeveloped products with greater functionality and comfort.
For example, under the Rakuraku Partner brand, the businesshas designed products that are easy to put on and take off.
Also, based on the Human Science Research Center’s body
shape data, we have analyzed the body shapes of women
aged 60 or older and established propriety “comfort size”
standards that differ from the normal Japanese Industrial
Standard (JIS) sizes. These initiatives have enabled us to rollout a lineup of products that provide overall support foreveryday life. Designed to fit the body shapes of women aged
60 or older and ensure their comfort, this product range
includes everything from innerwear and nightwear through toouterwear.
Despite these initiatives, the Good Age business has not
yet gained sufficiently widespread name recognition. In order
to increase awareness of these products among active senior
women, we will further define and heighten the profile of theseniors market, which currently tends to lack differentiationfrom markets for nursing care and rehabilitation products.
Wacoal intends to strengthen this business and develop abrand that improves the quality of life of senior citizens.

Top—A Remamma brassiere, pad,and camisole
Center—A Dublevé sales area
Bottom—A Rakuraku Partner productAnnual Report 2011

32

CORPORATE GOVERNANCE
The overriding goal of the Wacoal Group’s corporate governance is
to continuously grow enterprise value by ensuring that management
is highly transparent, equitable, and objective with respect to all
stakeholders, including shareholders, other investors, and customers.

MANAGEMENT PHILOSOPHY ANDCORPORATE GOVERNANCE

The Wacoal Group’s management philosophy is based on
mutual trust. This is a value that the Wacoal Group aims tocarefully preserve in its relationships with shareholders, otherinvestors, and all other stakeholders with a vested interestin the Group. To that end, the Group will steadily build andstrengthen governance systems pursuant to laws and statutory regulations while working to ensure that every individualin the Group, from the management team through to employees, is aware of the social significance of the Wacoal Groupand adheres to good ethical conduct. We believe that properly functioning corporate governance based on mutual trust
is indispensable in order to achieve sustained growth andfurther increase enterprise value.
Regarding our progress in developing corporate governancesystems, in 2002 the Company introduced a corporate officer
system to clarify responsibility for operational implementation,
speed up decision making, and strengthen the monitoring
functions of the Board of Directors. In 2003, Wacoal established the Disclosure Committee in order to ensure theaccuracy of the financial and other information made available

to the public. Further, in 2005 we elected outside directors toensure management decisions are balanced and not madesolely by directors. Meanwhile, in October 2005 we transferred to a holding company system in order to realize a more
effective management system that enables strategic decision
making and optimal resource deployment for Group companies overall while clarifying responsibility and authority andallowing flexible operations at operating subsidiaries.
CORPORATE GOVERNANCE SYSTEMThe Group employs an auditor system of governance,with operational implementation and oversight undertakenby the Board of Directors and the Board of Corporate
Auditors. Comprising 8 directors, 3 of whom are outside
directors, and 5 corporate auditors, 3 of whom are outside
corporate auditors, the Board of Directors decides such
issues as important management policies and strategies anditems stipulated by statutory laws and regulations or theGroup’s articles of incorporation. Furthermore, the Groupfiles notifications with the Tokyo Stock Exchange for all of theabovementioned outside directors and outside corporate
auditors as “independent directors or auditors.”

GENERAL SHAREHOLDERS’ MEETINGGroup Management Meeting
5 Directors
2 Corporate Auditors
Quarterly Business Results Review Committee
8 Directors 5 Corporate Auditors
Representative of Each Company and Department

Board of Directors
5 Directors
3 Outside Directors
5 Corporate Auditors

Board of Corporate Auditors
2 Corporate Auditors
3 Outside Corporate Auditors
Board of Corporate Auditors’ Secretariat

Representative Director

Executive Compensation Advisory Committee

Disclosure Committee

Office of Corporate Auditors

Risk Management Committee

Operating Subsidiary

Compliance Committee

Operating Subsidiary

Corporate Ethics Committee

Operating Subsidiary

Corporate Ethics Hotline

Operating Subsidiary

Corporate governance structure
As of June 29, 2011

WACOAL HOLDINGS

Independent
Accountants

33

Five corporate auditors, 3 of whom are outside corporate
auditors, sit on the Board of Corporate Auditors, which
supervises and audits business management. Also, the Grouphas established the Office of Corporate Auditors, which
audits and monitors the appropriateness and efficiency of theoperational processes of Group companies.
Also, the Group has established the Group Management
Meeting, which comprises directors and corporate auditors.
The meeting considers Group management strategy andother important management issues and conducts priordeliberation of matters for consideration by the Board of
Directors. Including outside directors, the Executive
Compensation Advisory Committee develops proposals forthe appointment, promotion, and compensation of executives
and contributes to the realization of highly transparent andequitable business management.
DISCLOSURE POLICYThe Group has established the Disclosure Committee inorder to ensure the accuracy of financial and other information issued by the Group. This committee checks the
propriety of the Group’s internal controls and disclosure
based on Section 302 of the U.S. Sarbanes-Oxley Act withrespect to 20-F annual reports filed with the U.S. Securities
and Exchange Commission and other financial reports
submitted by the representative director and directors
responsible for financial matters. In addition, the committee
checks the accuracy of disclosed information. The representative director and the directors responsible for financial
matters prepare written oaths based on the reports thatthe committee has verified.

DETERMINATION OF DIVIDENDS
FROM RETAINED EARNINGSIn order to return profits to shareholders flexibly, the Group’s
articles of incorporation stipulate that resolutions of theBoard of Directors determine cash dividends from retained
earnings, unless otherwise stipulated by laws and statutory
regulations.
COMPENSATION OF EXECUTIVESFor the fiscal year under review, total compensation for
directors was ¥219 million, total compensation for corporate
auditors was ¥31 million, and total compensation for outside
directors and outside corporate auditors was ¥48 million.
In addition, the total compensation for directors includes
acquisition rights for the subscription of new shares of ¥37
million recognized in expenses. Further, one director, who
retired upon conclusion of the ordinary general shareholders’meeting convened on June 29, 2010, is included. Yoshitaka
Tsukamoto, the one executive that receives compensationof over ¥100 million on a consolidated basis, serves concurrently as a director of Wacoal Holdings Corp. and Wacoal
Corp. and receives total compensation of ¥160 million.
Attendance of Outside Directors at Meetings ofthe Board of Directors
April 2010–March 2011

Mamoru Ozaki
Morio Ikeda
Atsushi Horiba

Attended 14 from a total of 14
Attended 9 from a total of 10
Attended 9 from a total of 14

Attendance of Outside Corporate Auditors at Meetings ofthe Board of Directors and the Board of Corporate Auditors
April 2010–March 2011

LIMITED LIABILITY AGREEMENTS CONCLUDED
WITH OUTSIDE DIRECTORS ANDOUTSIDE CORPORATE AUDITORSIn order to enable the Group to include competent outside
directors and outside corporate auditors, the Group’s articles
of incorporation permit the Group to conclude agreementswith outside directors and outside corporate auditors limiting
their liability for damages in relation to the Group. Accordingly,
the Group concludes limited liability agreements with outside
directors and outside corporate auditors.
REQUIREMENTS FOR RESOLUTIONSELECTING DIRECTORSThe Group’s articles of incorporation stipulate that a resolution for the election of a director requires the attendance ofshareholders that can exercise voting rights and that own atleast one-third of voting rights as well as authorization basedon a majority of voting rights. Furthermore, cumulative votes
are not permitted.

Akira Katayanagi
Tomoharu Kuda
Yoko Takemura

Board of Directors

Board of Corporate Auditors

Attended 9
from a total of 10
Attended 14
from a total of 14
Attended 12
from a total of 14

Attended 9
from a total of 10
Attended 15
from a total of 15
Attended 13
from a total of 15

COMPLIANCE SYSTEM• In order to ensure that directors and employees adhere tolaws and statutory regulations and implement operations
based on sound societal norms, the Group has established
its own conduct and ethics code.
• Directors lead efforts to instill and ensure adherence togood corporate ethics throughout the Wacoal Group.
• Headed by the representative director and with theLegal and Compliance Department as its secretariat, theCorporate Ethics Committee develops compliance systems
and examines compliance issues that significantly affect
the Wacoal Group.
• The Group has established a system whereby employees
discovering potential compliance problems relating toviolations of the Group’s conduct and ethics code canreport these immediately to the Legal and Compliance

Annual Report 2011

34

Department. This system includes a corporate ethics
hotline for whistleblowers. Upon receiving such reports, theLegal and Compliance Department investigates the detailsof cases, consults with the division in charge, and decides
on the measures to prevent recurrence. The Legal andCompliance Department submits serious problems to the
Corporate Ethics Committee, which reports the results ofinvestigations to the Board of Directors and the Board of
Corporate Auditors.
• The Group’s conduct and ethics code, Corporate Ethics—
Wacoal’s Action Agenda, stipulates resolute refusal of
demands from antisocial forces. Further, conduct standards
for crisis management set out in the Group’s crisis management manual stipulate that the Group will not have any
relationship whatsoever with antisocial forces. Also, in orderto address gratuitous demands from antisocial forces, theGroup coordinates with outside specialist organizations andcollects and manages information about antisocial forces
and has established an internal system in this regard.

GROUP MANAGEMENT SYSTEMSOF THE WACOAL GROUPRISK MANAGEMENT SYSTEM

DEFENSIVE MEASURES AGAINST TAKEOVERS
THROUGH THE ACQUISITION OF A SUBSTANTIALSHAREHOLDING OF THE COMPANY• With the director responsible for risk management as its
chairperson, the Risk Management Committee manages
overall risks related to the Wacoal Group and develops andstrengthens risk management systems.
• Based on the approval of the Board of Directors, the Risk
Management Committee establishes risk management
regulations that form the basis of the risk management
system. Guided by these regulations, the Risk Management
Committee clarifies responsibility for respective risk
categories and builds systems for comprehensive risk
management of the entire Wacoal Group.
• The Risk Management Committee periodically reports to
the Board of Directors on the operational status of the risk
management system of Wacoal Holdings Corp. and theentire Wacoal Group.
PERFORMANCE OF DUTIES BY DIRECTORS• In order to heighten the appropriateness of directors’decision making, the Group’s directors include independent
outside directors.
• Directors establish medium-term management plans,
which directors and employees share and that apply laterally to the entire Group. Further, in accordance with theseplans, directors issue instructions to each division regarding
the establishment of medium-term and short-term policies
and business results targets.
• The business results of each Group company are analyzed
on a monthly basis and reported to the Board of Directors.
Also, directors check the business results and the progressof measures at meetings of the Quarterly Business Results
Review Committee held four times a year. If targets havenot been met, directors examine improvement measuresand revise targets if needed.

WACOAL HOLDINGS• The Group has established regulations and a basic policy
for the management of Group companies. The Group also
stipulates items that the Board of Directors must decideand items that must be reported to Wacoal Holdings Corp.
• Transactions between Group companies must be equitableand pursuant to laws and regulations, accounting principles,
and tax systems.
• The Office of Corporate Auditors conducts internal auditsof Group companies, which include audits of the status of
the construction and operation compliance systems andrisk management systems. Further, the Office of Corporate
Auditors reports the results of these audits to the Board of
Directors and the divisions with jurisdiction over respective
Group companies. At the same time, the Office of Corporate
Auditors ensures Group companies conduct operations
appropriately by providing them with directions and advice
on the construction of systems.

After the Group’s June 2006 ordinary general shareholders’meeting passed a resolution authorizing the adoption of abasic policy on measures against the acquisition of a substantial shareholding of the Group, the Board of Directors
decided upon specific countermeasures reflecting that basic
policy. Further, the June 2009 ordinary general shareholders’meeting renewed this policy. In principle, the Group does not
oppose the acquisition of large shareholdings that contributeto the enhancement of the enterprise value and shareholders’common interests. The Group’s defensive measures against
takeovers, or peacetime takeover defensive measures, include
providing advance warning that there are procedures prospective purchasers of the Group’s shares must follow andthat a gratis allocation of acquisition rights for the subscriptionof new shares with discriminatory treatment for the exerciseof such rights may be implemented. In addition, the Grouphas established the Independent Committee to ensure that
initiations of defensive measures against takeovers are basedon substantive, objective decisions and not based on arbitrary decisions by the Board of Directors. For further details,
please refer to the Group’s web site.
www.wacoalholdings.jp/ir_e/news.html

35

MESSAGES FROM AN OUTSIDE DIRECTOR AND
AN OUTSIDE CORPORATE AUDITOR

MAMORU OZAKI Outside Director

From the standpoint of an outside director, I examine
Wacoal’s business management mainly with respect
to how it functions as a corporate entity and how it
engages with society. Also, taking a macroeconomic
perspective, I analyze overseas affairs as well as theindicators that underpin Wacoal’s business management. I became an outside director of Wacoal Holdings
at the time of its establishment. My impression is that
the Company has upgraded its corporate governancesystem considerably since then. Going forward, theCompany’s efforts should not focus solely on upgrading the corporate governance system. Wacoal should
encourage each employee to approach corporate
governance with an attitude that seeks and adheresto the spirit of the articles of incorporation and otheraspects of the corporate governance system. This
may require constant effort, but it is something that
Wacoal must not neglect.
When preparing medium-term management plans,
the Company needs to be able to respond flexibly to

YOKO TAKEMURA Outside Corporate Auditor

I have been involved with Wacoal for more than 20
years as a corporation lawyer and an outside corporate auditor. During this period, we have faced many
issues. However, I think a distinctive feature of theCompany is that its business policies have always
reflected an objective appreciation of the other party’s
standpoint—Wacoal’s management team consistently
gives first priority to customers and business partners.
Aware that it is the leading manufacturer of women’s
innerwear, Wacoal takes care over its corporate image
and culture. While continuing to develop its business,
Wacoal has devoted considerable time and effort tobuilding a strong relationship with society.
Since adopting a pure holding company system,
Wacoal Holdings and its operating company Wacoal
Corp. have promoted younger employees to the position of directors. Therefore, in addition to the stablebusiness management Wacoal has enjoyed in recent
years, I am looking forward to seeing the kind of driveand energy that Wacoal had in its early days and during its growth period.

new economic conditions. While the effect of theGreat East Japan Earthquake remains unclear, it isextremely difficult to evaluate how well Wacoal is
responding to conditions in fiscal 2012. Wacoal has
to determine the economic and social implications forJapan of the earthquake and tsunami and the nuclear
power plant problem and respond flexibly and agilely.
Further, entering into overseas markets is critical to theCompany’s future growth. However, the uncertainty of
the global economic outlook means that being able togauge the global business climate quickly and takesteps accordingly is more important than ever.
The strength of Wacoal is the uniqueness of its
brand. Wacoal combines highly responsive, leadingedge research and development with the ability tobring products to market of a quality that never disappoints customers expectations. In other words,
Wacoal’s strength lies in an abiltiy to consistently
meet basic requirements as a matter of course.

A long-term economic downturn has weakened
consumer confidence and popularized inexpensive
products. Despite these conditions, customers’ trust
supports Wacoal’s products. For more than 60 years,
Wacoal has upheld a commitment to quality, andI think that Wacoal should continue conducting
business in a way that is responsive to customer
feedback and maintains trusting relationships withbusiness partners.
Meanwhile, even as the world around it changes,
I hope that Wacoal stays true to its basic corporate
philosophy. At the same time, however, it goes without
saying that the Company needs to respond appropriately to changing social conditions. Also, I think Wacoal
deserves credit for its social contribution activities.
The support Wacoal has provided since the Great
East Japan Earthquake is a good example of theimportance of continuing to make highly significant
social contributions.

Annual Report 2011

36

BOARD OF DIRECTORS AND CORPORATE AUDITORS
Wacoal Holdings Corp. and Subsidiaries
As of June 29, 2011

Representative Director

Yoshikata Tsukamoto
Representative Director and Chairman,
Wacoal Corp.

Director and Vice President

Outside Director

Hideo Kawanaka

Atsushi Horiba

Director and Vice Chairman, Wacoal
Corp.
Representative Director, Chairman andPresident, Peach John Co., Ltd.

Representative Director and Chairman
and President, HORIBA, Ltd.

Managing Director

Standing Corporate Auditor

Ikuo Otani

Yoshio Kawashima

DirectorStanding Corporate Auditor

Hironobu Yasuhara

MITSUO YAMAMOTO

Representative Director, President andCorporate Officer Wacoal Corp.

WACOAL HOLDINGS

Director

Outside Corporate Auditor

Tadashi Yamamoto

Akira Katayanagi

Director and Senior Corporate Officer,
Wacoal Corp., General Manager ofInternational Operations

Special Advisor, Mitsubishi UFJ NICOS
Co., Ltd.
Outside Statutory Auditor, Hyakujushi
Bank, Ltd.

Outside Director

Outside Corporate Auditor

Mamoru Ozaki

Tomoharu Kuda

Advisor, Yazaki Sogyo Corporation,
Outside Director, Fujikyuko Co., Ltd.,
Outside Director, Kikkoman Corporation

Certified Public Accountant

Outside Director

Outside Corporate Auditor

Morio Ikeda

Yoko Takemura

Adviser, Shiseido Company, Limited /Chairman of the Board of Trustees andChancellor of Toyo Eiwa Jogakuin /Chairman of Public Interest Corporation
Commission / Outside Director of Asahi
Kasei Corporation / Outside Director of
Isetan Mitsukoshi Holdings / Outside
Director of Tokyo Metropolitan
Television Broadcasting Corp.

Partner at Miyake Imai Ikeda law firm,
Lawyer

FINANCIAL SECTION
ELEVEN-YEAR FINANCIAL SUMMARY

38

MANAGEMENT’S DISCUSSION
AND ANALYSIS

40

CONSOLIDATED BALANCE SHEETS

46

CONSOLIDATED STATEMENTS OF INCOME 48
CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME (LOSS)

49

CONSOLIDATED STATEMENTS OF EQUITY 49
CONSOLIDATED STATEMENTS OF
CASH FLOWS

50

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

51

MANAGEMENT’S REPORT ON INTERNALCONTROL OVER FINANCIAL REPORTING77

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

78

38

ELEVEN-YEAR FINANCIAL SUMMARY
Wacoal Holdings Corp. and Subsidiaries

Years ended March 31 (millions of yen, except per share amounts)

2011

2010

2009

¥165,726
81,89549.4%
77,592
46.8%
105
107

¥163,297
79,95349.0%
78,39248.0%
25
23¥172,276
84,68649.2%
77,399
44.9%
33
29

4,255
(563)
47

3,810
(733)
46

10,129(2,701)
199

3,739
1,992
2,615

3,123
1,574
2,524

7,627
3,213
5,230

1.2%
1.5%

1.2%
1.5%

2.3%
3.0%

Net cash provided by operating activities
Net cash (used in) provided by investing activities
Net cash (used in) provided by financing activities

10,054(1,546)(4,899)9,449(2,698)(5,438)

8,168(4,714)(7,448)Depreciation and amortization
Capital expenditures

4,678
2,662

4,807
3,998

4,546
2,362

Per share of common stock (in yen)
Net income attributable to Wacoal Holdings Corp.
Cash dividends
Shareholders’ equity¥18.5320.00
1,185¥ 17.86
20.00
1,216

¥36.7525.00
1,181¥ 90,496
34,423
26,98149,745215,345
6,401
166,967¥ 89,933
35,68324,317
51,820223,387
8,129
171,630¥ 90,619
31,94322,93949,039213,486
5,302
165,873

For the year
Net sales
Cost of sales% of net sales
Selling, general and administrative expenses% of net sales
Loss (gain) on sale or disposal of property, plant and equipment
Impairment charges on property, plant and equipment
Government subsidy
Special retirement related expenses
Operating income
Other income and expenses, net
Net interest income
Income before income taxes, equity in net income of affiliated companies,
and net (income) loss attributable to noncontrolling interests
Income taxes
Net income attributable to Wacoal Holdings Corp.
Return on assets
Return on equity

At year-end
Total current assets
Total current liabilities
Cash and cash equivalents
Net property, plant and equipment
Total assets
Short-term bank loans and long-term debt, including current portion
Total shareholders’ equity

WACOAL HOLDINGS

39

2008

2007

2006

2005

2004

2003

2002

2001

¥165,761
83,12750.1%
69,245
41.8%
(184)
33

¥166,410
84,65850.9%
68,83141.4%
25¥164,122
84,322
51.4%
69,720
42.5%
612
614

¥160,968
84,041
52.2%
72,12844.8%
133¥163,155
84,63851.9%
72,472
44.4%
455
2,574

¥163,709
85,30652.1%
70,440
43.0%
143
556

¥162,829
86,56753.2%
68,33642.0%
740¥162,023
87,49354.0%
64,83140.0%
75(7,100)13,540588
225

12,896
861
163

7,521
1,333
1,976
157

14,353
5,853
4,966

13,920
6,502
9,029

3,466
1,459
2,821

12,079
5,800
6,790

4,532
2,520
2,902

4,604
2,487
2,898

7,613
3,785
4,983

20,129
9,058
10,889

2.1%
2.6%

3.7%
4.8%

1.2%
1.6%

3.0%
3.9%

1.3%
1.8%

1.3%
1.8%

2.2%
2.9%

4.6%
6.3%

14,2253,590(9,400)9,339(1,185)(8,404)719(2,069)(3,428)2,045(5,528)
296

5,201
1,328
(6,138)

7,858(9,839)(6,006)

8,653(9,412)(5,472)

11,480(13,686)(6,478)

3,908
1,211

3,735
2,536

3,433
6,456

3,312
5,418

3,081
2,338

2,971
2,104

3,533
2,484

3,265
1,182

¥35.1425.00
1,291¥63.1822.00
1,375¥19.6020.00
1,296¥47.1720.00
1,221¥19.8515.00
1,186¥19.4813.50
1,097¥33.2213.50
1,128¥71.1716.50
1,142¥ 98,845
36,01028,04351,548
241,619
5,701
185,113¥ 92,915
34,86819,81652,782
250,266
5,984
193,278¥110,773
35,52519,89353,501
242,296
6,458
186,475¥120,300
34,97024,19551,826226,196
6,911
175,746¥123,045
33,89927,44349,932
224,803
4,450
170,758¥124,486
33,57627,24654,171
218,105
6,301
160,839¥127,390
37,09535,38157,291
223,985
8,079
168,205¥129,508
41,44941,196
58,644232,262
8,865
172,558

11,766
206
107

3,016
1,404
112

7,264
(2,800)
140

7,186
310
117

9,624
10,44362

Annual Report 2011

40

MANAGEMENT’S DISCUSSION AND ANALYSIS
Wacoal Holdings Corp. and Subsidiaries
Years ended March 31, 2011, 2010 and 2009

Financial information contained in this section is based on the
consolidated financial statements included in this annual report,
which have been prepared in accordance with generally accepted
accounting principles in the United States (U.S. GAAP). The
Wacoal Group consists of 1 holding company (the Company), 47
consolidated subsidiaries and 9 equity-method affiliates.
The Wacoal Group is engaged in the manufacturing, wholesaling, and — for certain products — retailing of women’s foundation
garments and lingerie, nightwear, children’s underwear, outerwear
and sportswear, hosiery and other textile products. Other operations include restaurant businesses, cultural and service-related
operations, and the construction of interiors for commercial
premises.

Share of net sales

OVERVIEW
We are the leading designer, manufacturer and marketer ofwomen’s intimate apparel in Japan, with the largest share of theJapanese market for foundation garments and lingerie. We also
sell our foundation garments and lingerie products in several
overseas markets. Sales of foundation garments (primarily brassieres and girdles) and lingerie (primarily slips, bra-slips andwomen’s briefs) accounted for approximately 70.2% of ourconsolidated net sales for fiscal 2011. Our outerwear and sportswear product category has been the most successful of our
product categories over the last three fiscal years, as net sales
grew consistently from ¥15,498 million for fiscal 2009, or 9.0% of
our total net sales, to ¥17,400 million for fiscal 2011, or 10.5% of
our total net sales. We also design, manufacture and sell nightwear, children’s underwear, hosiery and other apparel and textile
products, and engage in several business lines that are complementary to our core apparel business.

For fiscal 2011, approximately 86% of the net sales of Wacoal
Corp. (the net sales of which account for approximately 63% of
our consolidated net sales) were apparel sales made on a wholesale basis to department stores, general merchandisers and othergeneral retailers, and approximately 12% were apparel sales madethrough our own specialty retail stores, catalog sales and theInternet. Sales from our other businesses (which include restaurant businesses, cultural products and other services) comprised
the remaining 2% of Wacoal Corp.’s net sales for fiscal 2011.
Over the past five fiscal years, fluctuations in our sales havetypically reflected changes in unit volume, as average unit prices
have generally remained stable during this period. Because of thedemographic trends and downward price pressure in Japan, mostof the gains we have made in net sales in recent years have comefrom our overseas markets. We therefore expect to continue toexpand our overseas businesses in the near to medium term.

REVENUES
We principally generate revenues from sales of innerwear (consisting of foundation garments and lingerie, nightwear and children’s underwear), outerwear and sportswear, hosiery, textile
products and other products.
The following table sets forth information with respect to ournet sales by category of products for fiscal 2011, 2010 and 2009:

COST OF SALES
Our cost of sales arises principally from material and manufacturing costs related to the production of our apparel products. In thelast couple of fiscal years, we successfully kept our cost of sales
below the fiscal 2009 level through our cost reduction efforts
involving raw material, manufacturing and inventory management.
We plan to continue with such cost reduction efforts for the nearto medium term.

2011

Hoisiery
1.0%

Textile products
4.5%
Other
7.7%

Outwear andsportswear
10.5%

Foundation
garments
and lingerie
70.2%

Children’s
underwear
0.9%
Nightwear
5.2%

Net sales (and percentage) by product category
Millions of Yen

2010

2011

2009

Innerwear
Foundation Garments and LingerieNightwear
Children’s Underwear¥116,285
8,725
1,476

70.2%
5.2
0.9

¥116,068
9,438
1,608

71.0%

¥123,368

71.6%

5.8
1.0

11,019
1,950

6.4
1.1

Total Innerwear
Outerwear and Sportswear
Hosiery
Textile Products
Other¥126,486
17,4001,666
7,498
12,676

76.3%
10.5
1.0
4.5
7.7

¥127,114
17,241
1,701
7,462
9,779

77.8%
10.6
1.0
4.6
6.0

¥136,337
15,498
1,657
6,270
12,514

79.1%
9.0
1.0
3.6
7.3

Total

¥165,726

100.0%¥163,297

100.0%¥172,276

100.0%WACOAL HOLDINGS41

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Our selling, general and administrative expenses principallyconsist of employee compensation and benefit expenses andpromotional expenses, such as advertising costs. Other selling,
general and administrative expenses include shipment costs,
payment fees (including outsourcing payments) and rental
payments for our specialty retail stores. Our selling, general andadministrative expenses do not include any impairment charges onlong-lived assets or any gains or losses on the sale or disposal ofproperty, plant and equipment. In recent years, our selling, generaland administrative expenses have been affected by two countervailing factors: reduction in labor costs and increases in marketing
efforts, particularly in our overseas markets. We expect these two
factors to continue to offset each other in varying degrees for thenear to medium term.
INCOME TAX EXPENSES
Our income tax expenses depend on our taxable income, taxable
temporary differences and applicable statutory tax rates. Our
effective tax rate depends on a range of factors, including applicable statutory tax rates, permanently non-deductible expenses,
unrecognized tax benefits, any valuation allowance with respect
to tax loss carryforwards and tax exemptions. Our effective tax
rate was 53.3% for 2011, 50.4% for fiscal 2010 and 42.1% forfiscal 2009.
KEY INDUSTRY TRENDS
We believe that the following have been key trends in our industry
during the last three fiscal years:• Consumer spending in Japan has been stagnant in the aftermathof the worldwide financial crisis triggered by the Lehman shock in
September 2008 that has led to a rapid deterioration in the
global economy. Although there were signs of economic recovery
in fiscal 2011, the women’s apparel industry in Japan in particular
has continued to perform poorly due to the continued presenceof cost-conscious consumers, whose spending habits have beenfurther adversely affected by the major earthquake and tsunamithat struck Northeast Japan in March 2011.
• The number of department stores, one of our key distribution
channels, and retail sales through department stores declined
due to the deterioration in consumption caused by the worsening
economy. General merchandising stores faced not only
decreases in the numbers of new branch openings due tostagnant consumption levels, but also reductions in store sizes
and increases in store closings, as well as reductions in retailsales. At the same time however, sales at direct sales outlets andon the Internet have steadily risen.
• Due to adverse changes in consumer behavior and the retailindustry coupled with factors such as a decline in the female
population (as disclosed by a Japanese Government researchorganization), the market for women’s innerwear garments inJapan shrank, and the prices of innerwear declined in terms ofboth overall prices and average price per item. The numbers of
innerwear items purchased and owned per person also decreased
according to a third-party private research organization.
• Specialty apparel, outerwear fashion and other manufacturers
entered the innerwear market. These manufacturers offer theirproducts by focusing on new elements, such as fashionability,
lifestyle and price, rather than function and quality. Because theeconomic downturn has led consumers to become more priceconscious, these new manufacturers and others have achieved agreater market share.
• These manufacturers and other competitors strengthened theircost reduction efforts by, for example, sourcing fabric and producing garments in China and other lower-cost countries. Sales inJapan of lower-priced women’s innerwear garments manufactured
in these countries increased, leading to an intensification of pricecompetition in our industry. The recent development and tendency of general merchandisers producing their own low-priced“private brand” merchandise accelerated these trends.
• Although catalog marketing has made little progress, new sales
strategies such as e-commerce and television marketing have led
to more diversified sales channels and exposure to new customer
groups.
We have taken steps to address these key industry trends, inseeking to build on the core strengths of our market position andbrand awareness with Japanese consumers. We continue to seek
to sell higher-end products to reach consumers seeking high-quality
innerwear garments and to mitigate the adverse impact on sales
and margins from lower-priced garments. We have taken steps toreduce our cost structure, such as producing more products inlower-cost countries such as China and Vietnam, consolidating
and modernizing our product distribution centers and expanding
our early retirement program. We are also seeking to expand sales
in overseas markets—in particular China, the United States andEurope, as well as in the ASEAN region, where we launched oursorci age brand—and increase sales through our own specialty
retail stores, our catalog operations and the Internet. We also areresearching expansion into emerging economies such as India andother new markets such as Russia and Canada. Pursuant to our
CAP 21 strategic plan, we intend to extend our innerwear productofferings into the mid-price range and include more fashionable
offerings in our product mix to help us reach a broader customer
base. We believe that Peach John and Lecien will help us toadvance these goals. We will continue to implement these steps
and evaluate other strategies to address challenges and opportunities in the industry going forward.

Annual Report 2011

42

RESULTS OF OPERATIONS—FISCAL 2011 COMPARED TO FISCAL 2010
NET SALES
Consolidated net sales increased 1.5% from ¥163,297 million forfiscal 2010 to ¥165,726 million for fiscal 2011, despite the challenging conditions in the women’s apparel market and changes in
consumer spending habits in Japan.
Wacoal Brand
Innerwear—Overall domestic sales of brassieres, our main
product, for fiscal 2011 were above the sales for fiscal 2010. Thiswas mainly due to the impact of campaigns we conducted during
fiscal 2011. Our Ribbon Bra, a product that we launched in January2010 as part of our campaign brassiere LALAN series and which
gained strong support from our consumers for its functionality anddesign, continued to perform strongly. We also continued ourBody Aging promotion based on the findings of our Human
Science Research Center, which we believe has led to an improvement in sales of brassieres overall. On the other hand, sales of ourseasonal undergarments in general were below the results fromfiscal 2010 due to products sold by our competitors. Additionally,
we launched new products in our new Style Science functional
underwear series in each of the four seasons in fiscal 2010, with anemphasis on the Cross-Walker brand, but the sales of these new
products for fiscal 2011 were below the sales of this series for fiscal
2010 due to the overflow of products with similar functionality.
Domestic net sales of our core Wacoal brand products
changed as follows, as compared to net sales for fiscal 2010.
• Core Brassieres: Net sales of most of our core brassieres showedstrong performance, with an increase in net sales of 11.5%.
• Seasonal Undergarments: Net sales of these garments decreasedby 19.3% as compared to net sales for fiscal 2010.
• Girdles: Style Science functional underwear series showed weak
performance and net sales of girdles decreased by 27.3% ascompared to net sales for fiscal 2010.
As a result of the above, domestic net sales of our core Wacoal
brand business were below our results for fiscal 2010.
Outside Japan, our net sales grew compared to fiscal 2010.
b.tempte’d by Wacoal and our new lower-priced brassiere andfunctional bottom products marketed in the United States performed strongly. While these sales increased in dollar amounts,
they decreased in Japanese yen amounts due to the strength of
the Japanese yen against the dollar. Sales of our core Wacoal
brand products in China grew.
Outerwear—Sales of our functional undergarment product,
Sugo-I, were slightly below sales for fiscal 2010 due to a downturnin demand and the influence of other companies’ products. Fiscal
2011 sales of Gra-P, our value-added brand targeting seniorconsumers, exceeded the sales for fiscal 2010.
Thus, the overall sales for fiscal 2011 of our Wacoal brandproducts decreased as compared to sales for fiscal 2010 due tothe poor performance of some products.
Wing Brand
In our Wing brand business, although sales of some of our campaign brassieres continued as planned and in-store sales weresteady, our other brassiere and Style Science products performed
poorly. For example, although our S-Style bra performed well in
stores, it performed poorly overall. Sales of our Wing brandundergarments were lower than fiscal 2010 sales due to increased

WACOAL HOLDINGS

competition from private-label brands sold by specialty clothing
stores and general merchandisers and by our clients’ inventory
adjustments. The overall sales of our men’s innerwear products,
which achieved continued growth during fiscal 2011, exceededfiscal 2010 sales. Among our men’s innerwear products, while thesales of products targeted at senior consumers and new products
were strong, our core Style Science products struggled leading toan overall decrease in net sales. Thus, the overall sales of our Wing
brand business fell below fiscal 2010 sales due primarily to thepoor performance of our core women’s products, which more thanoffset any increased sales of our men’s innerwear products.
Net sales of our core Wing brand products changed as follows,
as compared to net sales for fiscal 2010.
• In-store Sales of Brassieres: In-store net sales of brassieres wassteady with an increase of 10.0% as compared to net sales forfiscal 2010.
• Undergarments: Net sales of undergarments decreased by
14.0% as compared to net sales for fiscal 2010.
• Girdles: Net sales of girdles showed poor performance witha decrease of 16.0% as compared to net sales for fiscal 2010.
• Men’s Innerwear: Net sales of our men’s innerwear products
decreased by 12.0% as compared to net sales for fiscal 2010.
Due to the above, net sales of our Wing brand business were
below the results from fiscal 2010 by 5.9% as compared to net
sales for fiscal 2010.
Other Brands
Wellness Products—In our wellness business, sports-related
products performed strongly primarily because of an increase inhealth-conscious consumers. These products include our sports
tights in our conditioning wear product, CW-X sports, and ourfunctional wear for golf and running, Jyuryu. With the aim offurthering the brand recognition of our CW-X line, we opened our
first retail store in January 2010 and have since opened 2 more
new stores. Due to the successful openings of these stores, andthe popularity of our products, sales of our CW-X line for fiscal
2011 increased as compared to sales for fiscal 2010. Similarly, ourleggings and footwear products performed well. Sales of our body
styling wear, Style Cover, and our highly fashionable and functional
business footwear, Success Walk, increased as compared to sales
for fiscal 2010. As a result of the foregoing, net sales of ourwellness products exceeded net sales for fiscal 2010 by 7.0%.
Lecien Products—Net sales of Lecien’s innerwear and clothing
products for fiscal 2011 were below its sales for fiscal 2010 due tothe severe conditions of general merchandisers and increased
competition by leading bulk retailers, despite our ongoing efforts
to restructure our poorly performing businesses.
Luxury Products—Sales of our luxury products remained substantially the same compared to such sales for fiscal 2010.
Specialty Retail Business
AMPHI—In our specialty retail store business, sales of our reasonably-priced brassiere products from our direct retail store, AMPHI,
showed a very strong performance and net sales attributable tosuch products increased 8.3% as compared to net sales for fiscal
2010. As a result, AMPHI performed well and sales for fiscal 2011
exceeded sales for fiscal 2010.
Wacoal Factory—Net sales for fiscal 2011 from our Wacoal
Factory Store, which is located in outlet malls, exceeded net sales
for fiscal 2010 by 1.5%.

43

Une Nana Cool—Although net sales from our existing stores were
below the results from fiscal 2010, new store openings helped net
sales to exceed the results from fiscal 2010. Net sales increased by
1.1% as compared to net sales for fiscal 2010.
Peach John—Although we made efforts to improve net sales
through Peach John’s retail stores by continuing to develop
products sold only at those retail stores and by holding advertising
campaigns, net sales for fiscal 2011 declined as compared to net
sales for fiscal 2010 primarily due to weakening catalogue sales
and lower in-store sales. The decrease in the number of PeachJohn retail stores from 27, as of March 31, 2010, to 23, as of March
31, 2011, also contributed to the decrease in net sales. In 2012, we
intend to move or close four stores and open three new branch
stores in areas that we believe will be more popular. Although wehave changed our business strategy away from relying on catalogue sales, the results of this change have yet to be seen in
relation to Peach John.
As a result of the foregoing, overall sales of our specialty retailstore business for fiscal 2011 increased as compared to sales forfiscal 2010. We are currently focused on improvement of profitability of our specialty retail business, and as part of these efforts,
we have been reorganizing our shop brands to consolidate theminto AMPHI as the “master shop brand” from fiscal 2010 as well as
moving away from catalogue sales and focusing more resourceson our more profitable stores.
Catalogue and Online Sales BusinessIn our Wacoal brand catalog sales business, although the numberof purchasers of our core catalog sales remained broadly the same
between fiscal 2011 and fiscal 2010, the average amount spent per
customer was lower, and as a result, sales for fiscal 2011 fell below
fiscal 2010 sales. Peach John mail-order sales from our seasonal
catalogs for fiscal 2011 were all below the sales for fiscal 2010 due
to a fall in Peach John catalog orders. Because when we issued oursummer catalogues in early summer it was still cool and when we
issued our fall catalogues it was still warm, our sales were depressed
due to the mismatch in the weather and the items in our catalogues. In contrast to our catalog business, the number of purchasers at our Wacoal Web Store and sales increased for fiscal 2011,even though the average amount spent per customer remainedlargely unchanged as compared to the average amount for fiscal
2010. The growth in our online business was mainly a result of our
expanded product categories and an active Internet advertising
campaign, which we plan to continue in fiscal 2012. As a result, theoverall sales from our catalog and online sales business remainedlargely the same for fiscal 2011 as compared to sales for fiscal 2010.
Other Businesses
Fiscal 2011 net sales attributable to our mannequin and fixture
rental business, as well as interior design and remodeling business,
which we conduct through our subsidiary Nanasai, increased dueto the opening of new department stores and the remodeling ofother stores especially in the Kansai region of Japan, which
accounted for an increase in rentals and sales.
COST OF SALES
Our cost of sales increased 2.4% from ¥79,953 million for fiscal
2010 to ¥81,895 million for fiscal 2011, primarily due to theconsolidation of Lecien into our accounts for the entire fiscal 2011,
as compared to eight months for fiscal 2010. Cost of sales as apercentage of net sales increased 0.4%, from 49.0% for fiscal
2010 to 49.4% for fiscal 2011. The slight increase in the cost of
sales as a percentage of net sales is primarily due to increased
sales from our consolidated subsidiaries in Japan, which havehigher costs as a percentage of net sales, despite Wacoal Corp’s
efforts to improve inventory management by achieving fewer
returned goods and fewer losses from inventory write-downs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Our selling, general and administrative expenses decreased 1.0%
from ¥78,392 million for fiscal 2010 to ¥77,592 million for fiscal
2011. The selling, general and administrative expenses as a percentage of net sales decreased 1.2% from 48.0% for fiscal 2010
to 46.8% for fiscal 2011. This decrease was primarily due to adecrease of ¥747 million in net periodic benefit costs in addition
to our cost-cutting efforts including labor costs.
IMPAIRMENT OF GOODWILL AND OTHERINTANGIBLE ASSETS
When Peach John became our wholly owned subsidiary in fiscal
2008, we recognized Peach John’s trademark, catalog customer
relationships and goodwill as intangible fixed assets. At the end of
fiscal 2011, however, we evaluated these assets and recognized an
impairment loss of ¥936 million in respect of catalog customer
relationships and trademark and ¥836 million in respect of goodwill.
Our impairment loss therefore increased by ¥749 million from an
impairment loss of ¥1,023 million that we recognized with respect
to customer relationships in fiscal 2010.
OPERATING MARGIN
Our operating margin (i.e., operating income as a percentage ofnet sales) increased to 2.6% for fiscal 2011, as compared to 2.3%
for fiscal 2010. This increase was largely due to our cost-cutting
efforts, despite the decreased sales from our existing businesses
and recognition of impairment loss from Peach John.
TOTAL OTHER LOSS, NET
Total other loss, net, decreased ¥171 million from ¥687 million forfiscal 2010 to ¥516 million for fiscal 2011. This decrease wasprimarily due to an increase of ¥367 million in gain on the sale or
exchange of marketable securities and investments as comparedto fiscal 2010.
NET INCOME ATTRIBUTABLE TO WACOALHOLDINGS CORP.
Net income attributable to Wacoal Holdings Corp. for fiscal 2011was ¥2,615 million, an increase of ¥91 million compared to ¥2,524
million for fiscal 2010. This increase was primarily due to a decreasein our selling, general and administrative expenses as a result of
successful cost-cutting efforts, in addition to a slight increase in
our net sales; these factors more than offset an increase in cost of
sales. Our current income taxes increased for fiscal 2011 and were
only partially offset by our deferred income taxes. The effective tax
rate increased from 50.4% in fiscal 2010 to 53.3% in fiscal 2011
primarily due to an increase in our change in valuation allowance,
which more than offset the impact of our impairment losses on
goodwill and decreases in permanently non-deductible expenses
and certain other taxable items.

Annual Report 2011

44

LIQUIDITY AND CAPITAL RESOURCES
Our current policy is to fund our cash needs from cash flows fromoperations, which allow us to secure working capital, make capital
investments and pay dividends without relying on substantial
borrowings or other financing from outside of our group companies. Our borrowing requirements are not affected by seasonality.
We believe that our working capital is adequate for our present
requirements and for our business operations in the short tomedium term. Thus, we do not believe that our business is substantially dependent on these facilities.
As of March 31, 2011 we had credit facilities at financial institutions totaling ¥28,841 million, a large majority of which was for
short-term, yen-denominated borrowings with variable interest
rates. In general, all of our credit facilities have automaticallyrenewed terms, and we are not aware of any issues with respect toany of our lenders that could cause these facilities to become
unavailable.
Of this total credit, ¥13,900 million is available to Wacoal
Holdings and our main subsidiary Wacoal Corp., but we have notdrawn down from this credit line in recent years and have nocurrent plans to use them in the near future. The remainder of thecredit is available for Lecien, Nanasai and our other subsidiaries,
which had been drawn down for working capital purposes a totalof ¥6,401 million as of March 31, 2011, including borrowings by
Wacoal Servicing Co. Ltd. of ¥3,464 million and borrowing by
Nanasai of ¥2,200 million. Because our policy is to fund cashneeds from our cash flows from operations, we do not expect thisbalance to increase significantly over the short to medium term.
Even if any of our subsidiaries loses access to funds from our credit
facilities, we believe that it is possible for other companies in ourgroup to provide any necessary funds. We are not aware of any
restrictions on the transfers of funds from a subsidiary to a parent
company in the form of a cash dividend, loan or cash advance.
Additionally, we maintain the majority of our cash and cash
equivalent assets in Japanese yen, and generally refrain from using
financial products for hedging purposes.

consisted mainly of cash received from customers and cash outflows
are mainly payments for production costs, selling, general andadministrative expenses, and income taxes.
Net Cash Used in Investing Activities—Net cash used in investing
activities decreased by ¥1,152 million from ¥2,698 million for fiscal
2010 to ¥1,546 million for fiscal 2011. This decrease was primarily
due to a decrease in our purchases of marketable securities, tangible
and intangible properties and investments, as well as an increasein our sales of investments, which collectively more than offset a
significant decrease in gains from disposition of marketable securities.
Net Cash Used in Financing Activities—Net cash used in financing
activities decreased by ¥539 million from ¥5,438 million for fiscal
2010 to ¥4,899 million for fiscal 2011. This decrease was primarily
due to reduced cash distributions, reduction in repurchases, reduced
repayment of long-term obligations and a new loan, which collectively
more than offset a significant repayment of short-term loans.

CASH FLOWSCash Provided by Operating Activities—Net cash provided byoperating activities increased by ¥605 million from ¥9,449 million
for fiscal 2010 to ¥10,054 million for fiscal 2011. This was primarily
due to substantial progress achieved in cost-reduction efforts andto a decrease in inventory combined with an increase in cash flows
due to increased sales. Cash inflows from operating activities

CAPITAL EXPENDITURES
Capital expenditures were ¥2,662 million for fiscal 2011 (including¥624 million for rebuilding and relocation of some of our properties),¥3,998 million for fiscal 2010 and ¥2,362 million for fiscal 2009.
These expenditures were primarily for the repair of office facilitiesof our domestic subsidiaries and the expansion of our specialty retailstore network. Payments to acquire intangible assets were ¥671
million in 2011, ¥1,755 million for fiscal 2010 and ¥1,846 million forfiscal 2009. These payments primarily comprised of payments for
information technology-related investments.
For fiscal 2011 we spent ¥624 million for office maintenanceand repair, and we expect to spend ¥517 million in fiscal 2012.
Although we currently do not have any concrete plans, we expect
to continue to make expenditures for the expansion of our specialty retail store network (including costs for the developmentof new stores and the closure of underperforming stores) andfor maintenance, to meet applicable legal requirements and to
facilitate the manufacture of new products with new designs andspecifications. Furthermore, we intend to evaluate and pursue
opportunities for acquisitions, investments and other strategictransactions that we believe will help us achieve our businessobjectives, including extending our product offerings in Japanand in overseas markets and strengthening our capabilities in theInternet, catalog and other marketing channels. We expect to fundthese capital expenditures and other expenditures through our
cash from operations, existing cash reserves and other available
sources of liquidity.

SG&A expenses

Capital expenditures¥ Billion

Net cash provided byoperating activities¥ Billion¥ Billion

78.4 78.4
77.6 77.6
77.4 77.4
69.2 69.2
68.8 68.8

4.0
14.2 14.2

9.3 9.3
46.8%
46.8%
48.0 48.0
44.9 44.9
41.4 41.4
41.8 41.8

9.4 9.410.1 10.1
8.2 8.2

2.5

2.7

2.4

1.2

07 0708 0809 09 10 10 11 1107 0708 0809 09 10
Ratio of SG&A expenses to total net sales (%)

WACOAL HOLDINGS

10 11

11

07

08

09

10

11

45

In fiscal 2009, we sold plants and other property in connection
with the liquidation of our subsidiary Tokai Wacoal Sewing Corp
with a book value of ¥59 million. In fiscal 2011, we sold our
Karasuyama Corporate Housing with a book value of ¥75 million
and our Ikuta Corporate Housing with a book value of ¥152 million.
CASH DIVIDENDS
On May 13, 2011, our board of directors approved a fiscal year-end
dividend of ¥100 per five shares of common stock to our shareholders on record as of March 31, 2011, and dividends in a total
amount of ¥2,816 million were paid on June 6, 2011. Our current
policy is to pay cash dividends once a year, and we seek to pay
stable cash dividends based on our consideration of numerous
factors, including our ability to improve our enterprise value
through investments using retained earnings, ability to improve
our net income per share and results of operations.
SHARE REPURCHASESWe repurchased 36,084 shares of common stock during fiscal
2011 from shareholders who held shares constituting less than
one unit and requested that such shares be repurchased. On
November 26, 2010, our board of directors approved resolutions
to repurchase up to 550 thousand shares of common stock up toa total purchase amount of ¥614 million. Pursuant to this board of
directors resolution, we had repurchased 550 thousand shares ofcommon stock for a total purchase price of ¥614 million as ofNovember 29, 2010.

We also began applying new sales methods at that time. From1995 to 1998 we participated in a project led by the Ministryof International Trade and Industry (presently the Ministry of
Economy, Trade and Industry) enriching the basic study of sensory
comfort and conducting research based on reactions to threefactors: pressure, heat and touch. Based on this research, we arefocused on developing new products that are not only comfortable
for the wearer but have a positive physiological effect. In 2000,
we conducted an analysis on the physiological changes associatedwith aging throughout a 25 year period from the teenage years to
the 40s. We named the principles of these changes SPIRAL Aging.
Our research and development activities for fiscal 2011 havebeen very fruitful as we have been able to succeed in producing
new products by improving and building on our existing products.
For example, we have announced our long-term aging research
results on “body aging (physiological changes associated withaging),” which were well received by consumers. We have also
proposed aging-conscious products and new products from our
Style Science series.
The cost of research and development for fiscal 2011 was approximately ¥815 million, compared to ¥778 million for fiscal 2010 and¥768 million for fiscal 2009. We expect to maintain a similar level ofresearch and development expenditures for fiscal 2012.

RESEARCH AND DEVELOPMENT, PATENTS AND
LICENSES, ETC.
For more than 40 years, since the establishment of our Human
Science Research Center, we have aimed to achieve harmony
between the human body and clothing. In particular, we haveconducted research into women’s body in order to accurately
understand the Japanese woman’s physique. In order to accurately
understand the Japanese woman’s physique, we have developed
such things as a silhouette analysis system and a three-dimensional measuring system. However, we are also working on aneven more advanced measurement of sensory comfort. Our
research and development activities focus on addressing the
proportional, physiological and mental aspects of garment design.
One of our most important research results was the Golden
Canon, which we announced in 1995, and which provides a set ofindicators that characterize the beautiful Japanese woman’s body.

Annual Report 2011

46

CONSOLIDATED BALANCE SHEETS
Wacoal Holdings Corp. and Subsidiaries

Thousands ofMillions of Yen U.S. Dollars (Note 2)
March 31, 2011 and 2010

2011

2010

2011

¥ 26,981
698
27,6794,819¥ 24,317
24,3176,529$   326,015
8,434
334,449
58,229500
20,371(1,549)30,956
5,134
2,586
90,496469
21,116(1,972)
32,1034,595
2,776
89,933

6,042
246,145(18,717)374,045
62,03531,247
1,093,475

Property, Plant and Equipment:
Land (Notes 9, 17 and 20)
Buildings and building improvements (Notes 9, 11, 17 and 20)
Machinery and equipment
Construction in progress			 Total
Accumulated depreciation
			 Net property, plant and equipment

21,77460,322
14,023
93
96,212(46,467)
49,74522,012
61,585
14,773103
98,473(46,653)
51,820263,097
728,879
169,442
1,124
1,162,542(561,467)
601,075

Other Assets:
Investments in affiliated companies (Note 6)
Investments (Notes 3, 9, 19 and 20)
Goodwill (Notes 7, 8 and 20)
Other intangible assets (Notes 7, 8 and 20)
Prepaid pension expense (Note 12)
Deferred income taxes (Note 16)
Other
			 Total other assets

14,702
32,672
10,367
10,325
158
879
6,001
75,104

14,76935,828
11,203
12,351
263
935
6,285
81,634

177,646394,780
125,266
124,759
1,909
10,621
72,511
907,492¥215,345¥223,387$2,602,042

ASSETS
Current Assets:
Cash and cash equivalents
Time deposits
			 Total
Marketable securities (Notes 3, 19 and 20)
Notes and accounts receivable:
		 Trade notes		 Trade accounts (Note 17)
		 Allowance for returns and doubtful receivables (Note 4)Inventories (Note 5)
Deferred income taxes (Note 16)
Other current assets (Notes 17, 19 and 20)
			 Total current assets

Total
See notes to consolidated financial statements.

WACOAL HOLDINGS

47

Thousands ofMillions of Yen U.S. Dollars (Note 2)
March 31, 2011 and 2010

LIABILITIES AND EQUITYCurrent Liabilities:
Short-term bank loans (Note 9)
Notes and accounts payable:
		 Trade notes		 Trade accounts (Note 17)
		 Other payables
Accrued payroll and bonuses
Income taxes payable (Note 16)
Current portion of long-term debt (Notes 9 and 19)
Other current liabilities (Notes 12, 16, 19 and 20)
			 Total current liabilities
Long-term Liabilities:
Long-term debt (Notes 9 and 19)
Liability for termination and retirement benefits (Note 12)
Deferred income taxes (Note 16)
Other long-term liabilities (Notes 11, 12 and 16)
			 Total long-term liabilities

2011

2010

2011

¥   6,117¥   7,941$   73,913

1,623
10,507
5,700
6,201
1,870
70
2,335
34,423

2,174
9,161
5,975
5,927
2,105
108
2,292
35,683

19,611
126,957
68,87474,92822,595846
28,214415,938

214
2,200
7,441
2,200
12,055

80
2,269
9,380
2,422
14,151

2,586
26,58389,91026,583
145,662

Commitments and Contingencies (Notes 9 and 10)
EQUITY
Wacoal Holdings Corp. Shareholders’ Equity (Notes 13 and 22):
Common stock, no par value—		authorized, 500,000,000 shares in 2011 and 2010;
issued 143,378,085 shares in 2011 and 2010
Additional paid-in capital (Note 14)
Retained earnings
Accumulated other comprehensive loss (Note 15):
		 Foreign currency translation adjustments
		 Unrealized gain on securities
		 Pension liability adjustments (Note 12)
			 Total accumulated other comprehensive loss
Less treasury stock at cost—2,529,607 shares and 2,179,739 shares in 2011 and 2010
			 Total Wacoal Holdings Corp. shareholders’ equity

13,26029,401
136,946

13,26029,366
137,155

160,222355,256
1,654,737(10,344)2,596(2,002)(9,750)(2,890)166,967(7,505)
3,669(1,783)(5,619)(2,532)
171,630(124,989)
31,368(24,190)(117,811)(34,920)2,017,484

Noncontrolling Interests
			 Total equity

1,900
168,867

1,923
173,553

22,9582,040,442

Total¥215,345¥223,387$2,602,042

Annual Report 2011

48

CONSOLIDATED STATEMENTS OF INCOME
Wacoal Holdings Corp. and Subsidiaries

Thousands ofMillions of Yen U.S. Dollars (Note 2)
Years Ended March 31, 2011, 2010 and 2009

Net Sales (Note 17)
Operating Costs and Expenses:
Cost of sales (Notes 12 and 17)
Selling, general and administrative (Notes 1, 7, 12, 14 and 17)
Impairment charges on property, plant and equipment (Note 20)
Impairment charges on goodwill (Notes 8 and 20)
Impairment charges on other intangible assets (Notes 8 and 20)
Loss on sale or disposal of property, plant and equipment—net
		 Total operating costs and expenses
Operating Income
Other Income (Expenses):
Interest income
Interest expense
Dividend income
Gain on sale or exchange of marketable securities andinvestments —net (Note 3)
Impairment charges on marketable securities andinvestments (Note 3)
Other—net (Notes 1 and 20)
		 Total other loss—net
Income Before Income Taxes, Equity in Net Income of AffiliatedCompanies, and Net (Income) Loss Attributable to Noncontrolling
Interests (Note 16)
Income Taxes (Note 16):
Current
Deferred		 Total income taxes
Income Before Equity in Net Income of Affiliated Companies, and Net
Income Attributable to Noncontrolling Interests
Equity in Net Income of Affiliated Companies (Note 6)
Net IncomeNet (Income) Loss Attributable to Noncontrolling Interests
Net Income Attributable to Wacoal Holdings Corp.

2011

2010

2009

2011

¥165,726¥163,297¥172,276$2,002,489

81,89577,592
107
836
936
105
161,471
4,255

79,95378,392
23
71
1,023
25
159,487
3,810

84,686
77,39929

33
162,147
10,129989,548937,554
1,293
10,101
11,3101,269
1,951,075
51,414

135
(88)
643

144
(98)
619

274
(75)
677

1,631
(1,063)
7,769

374

7

19

4,519

(1,585)5(516)(1,460)101(687)(3,550)153(2,502)(19,152)
61(6,235)

3,739

3,123

7,627

45,1793,463(1,471)
1,992

3,161
(1,587)
1,574

2,717
496
3,213

41,844(17,774)
24,070

1,747
990
2,737
(122)
¥   2,615

1,549
907
2,456
68
¥   2,524

4,414
893
5,307
(77)
¥   5,230

21,109
11,96333,072(1,475)$   31,597

2011

2010

2009

2011

¥18.53¥18.51¥17.86¥17.85¥36.75¥36.74

$0.22
$0.22

¥92.64¥92.56¥89.28¥89.24¥183.74¥183.72

$1.12
$1.12

Yen U.S. Dollars (Note 2)
Years Ended March 31, 2011, 2010 and 2009Net Income Attributable to Wacoal Holdings Corp.
Per Share (Note 18):
Basic
DilutedNet Income Attributable to Wacoal Holdings Corp.
Per American Depositary Receipt (5 Shares of Common Stock) (Note 18):
Basic
DilutedSee notes to consolidated financial statements.

WACOAL HOLDINGS

49

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
Wacoal Holdings Corp. and Subsidiaries

Thousands ofMillions of Yen U.S. Dollars (Note 2)
Years Ended March 31, 2011, 2010 and 2009

Net Income
Other Comprehensive (Loss) Income, Net of Tax (Note 15):
Foreign currency translation adjustments
Unrealized (losses) gains on securities
Pension liability adjustments
Other Comprehensive (Loss) Income
Comprehensive (Loss) IncomeComprehensive (Loss) Income Attributable to Noncontrolling InterestsComprehensive (Loss) Income Attributable to Wacoal Holdings Corp.

2011

2010

2009

2011

¥ 2,737¥2,456¥  5,307$ 33,072(2,915)(1,072)(219)(4,206)(1,469)(47)¥(1,516)

795
3,351
1,600
5,746
8,202
49
¥8,251(8,710)(4,978)(3,897)(17,585)(12,278)
105¥(12,173)(35,223)(12,953)(2,646)(50,822)(17,750)(568)$(18,318)

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF EQUITY
Wacoal Holdings Corp. and Subsidiaries
Millions of Yen

Years Ended March 31, 2011, 2010 and 2009

Shares of
Outstanding
CommonAdditional
Stock Common
Paid-in(Thousands)
Stock
CapitalBALANCE, APRIL 1, 2008
Net income
Other comprehensive lossCash dividends paid to Wacoal Holdings Corp. shareholders,¥125 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Share-based compensation granted (Note 14)
Purchase of common shares of the Company’s subsidiary
BALANCE, MARCH 31, 2009
Net income
Other comprehensive incomeCash dividends paid to Wacoal Holdings Corp. shareholders,¥125 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Sale of treasury stock
Share-based compensation granted and exercised (Note 14)
Purchase and sales of common shares of the Company’s
subsidiaries
Distribution of treasury stock to acquire a subsidiary (Note 7)
BALANCE, MARCH 31, 2010
Net income
Other comprehensive lossCash dividends paid to Wacoal Holdings Corp. shareholders,¥100 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Sale of treasury stock
Share-based compensation granted (Note 14)

143,342 ¥13,260

BALANCE, MARCH 31, 2011

140,848 ¥13,260¥29,262

Retained
Earnings¥136,589
5,230

Accumulated
Other
Comprehensive
Income (Loss)¥ 6,057

Total Wacoal
Holdings
Corp.
Treasury Shareholders’ Noncontrolling
Stock
EquityInterests¥   (55)(17,403)(3,584)¥185,113
5,230(17,403)¥2,35177(182)(3,584)(83)(2,891)(3,537)(3,537)54(3,592)

165,873
2,524
5,727

54
140,451

13,26029,316138,235
2,524(11,346)
5,727(3,511)

(69)
2,094
(68)
19

(3,511)(76)(1,372)11
450(1,540)13
5(1,540)
13
55

2,582
(2,532)

2,489
171,630
2,615(4,131)(46)
2,104
141,198

13,26029,366(93)
137,155
2,615(5,619)(4,131)(2,824)

1,923
122
(75)

(2,824)
(70)

(586)
236

(15)
50
¥29,401(655)
297¥136,946¥ (9,750)¥(2,890)

(655)
282
50
¥166,967¥1,900Total Equity¥187,464
5,307(17,585)(3,584)(83)(3,537)54(69)
167,9672,456
5,746(3,511)(76)(1,540)
13
55
(46)
2,489
173,553
2,737(4,206)(2,824)
(70)
(655)
282
50
¥168,867

Thousands of U.S. Dollars (Note 2)

Years Ended March 31, 2011

BALANCE, MARCH 31, 2010
Net income
Other comprehensive lossCash dividends paid to Wacoal Holdings Corp. shareholders,$1 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Sale of treasury stock
Share-based compensation granted (Note 14)
BALANCE, MARCH 31, 2011

CommonStock

Additional
Paid-in
CapitalRetained
Earnings$160,222 $354,833 $1,657,263
31,597

Accumulated
Other
Comprehensive
Income (Loss)

Total Wacoal
Holdings
Corp.
Treasury Shareholders’ Noncontrolling
Stock
EquityInterests$ (67,896) $(30,594)(49,915)(34,123)

Total Equity$2,073,828
31,597(49,915)$23,236 $2,097,064
1,475
33,072(907)(50,822)(34,123)(34,123)(846)(7,915)
3,408
604$22,958 $2,040,442
(846)

(181)
604
$160,222 $355,256 $1,654,737(7,915)
3,589$(117,811) $(34,920)(7,915)
3,408
604$2,017,484

See notes to consolidated financial statements.

Annual Report 2011

50

CONSOLIDATED STATEMENTS OF CASH FLOWS
Wacoal Holdings Corp. and Subsidiaries

Thousands ofMillions of Yen U.S. Dollars (Note 2)
Years Ended March 31, 2011, 2010 and 2009

Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
		 Depreciation and amortization
		 Share-based compensation (Note 14)
		 Provision for returns and doubtful receivables—net
		 Deferred income taxes
		 Loss on sale or disposal of property, plant and equipment—net
		 Impairment charges on property, plant and equipment (Note 20)
		 Impairment charges on goodwill (Notes 8 and 20)
		 Impairment charges on other intangible assets (Notes 8 and 20)
		 Gain on sale or exchange of marketable securities and investments—net (Note 3)
		 Impairment charges on marketable securities and investments (Note 3)
		 Equity in net income of affiliated companies, less dividends
		 Changes in assets and liabilities:
			 Decrease in notes and accounts receivable
			 Decrease (increase) in inventories
			 Decrease in other current assets
			 Increase (decrease) in notes and accounts payable			 (Decrease) increase in liability for termination and retirement benefits(Decrease) increase in accrued expenses, income taxes payable and othercurrent liabilities
		 Other			 Net cash provided by operating activities
Investing Activities:
Increase in time deposits—net
Proceeds from sales and redemption of marketable securities
Payments to acquire marketable securities
Proceeds from sales of property, plant and equipment
Capital expenditures
Payments to acquire intangible assets (Note 8)
Proceeds from sales of investments
Payments to acquire investments
Cash balances of subsidiary acquired through share exchanges (Note 7)
Other
			 Net cash used in investing activities
Financing Activities:
Decrease in short-term bank loans—net
Proceeds from issuance of long-term debt
Repayments of long-term debt
Repurchase of treasury stock
Sale of treasury stock
Dividends paid on common stock			 Net cash used in financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year

2011

2010

2009

2011

¥ 2,737¥ 2,456¥ 5,307$ 33,072

4,678
50
(378)
(1,471)
105
107
836
936
(374)
1,585
(566)

4,807
55
(360)
(1,587)
25
23
71
1,023
(7)
1,460
(492)

4,546
54
(725)
496
33
29

(19)
3,550
(296)

56,525604(4,567)(17,774)
1,269
1,293
10,101
11,310(4,519)19,152(6,839)

421
420
125
1,007
(315)

1,794
806
331
(2,525)439

2,109(2,494)105
841(1,209)

5,087
5,075
1,510
12,168(3,806)(166)
317
10,054

996
134
9,449

(3,550)
(609)
8,168

(2,006)
3,829
121,484

12,131(7,846)468(3,998)(1,755)5(2,019)362(46)(2,698)

7,124(5,439)159(2,362)(1,846)30(1,871)(8,821)39,306(15,539)
6,646(32,165)(8,108)
11,938(11,781)(509)(4,714)(157)(18,681)			Additional Cash Flow Information:
Cash paid for:		 Interest
		 Income taxes
Noncash investing activities:
		 Fair value of certain marketable securities received in exchange for othermarketable securities with a carrying value of ¥5 million in 2010
		 Acquisition of marketable securities by assuming payment obligation
		 Acquisition of subsidiary through share exchange (Note 7)
See notes to consolidated financial statements.

WACOAL HOLDINGS

(730)
3,253
(1,286)550(2,662)
(671)
988
(975)
(13)
(1,546)(1,798)
200
(104)
(655)
282
(2,824)(4,899)(945)
2,664
24,317¥26,981

(442)

(279)

(350)
(1,148)13(3,511)(5,438)65
1,378
22,939¥24,317(48)(3,537)(3,584)(7,448)(1,110)(5,104)28,043¥22,939(21,725)
2,417(1,257)(7,914)
3,407(34,123)(59,195)(11,419)
32,189293,826$326,015¥   91
3,627¥   982,078¥   75
7,268$ 1,100
43,826¥   11¥    9¥  200$ 2,417
2,489

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wacoal Holdings Corp. and Subsidiaries

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Financial Statements—Wacoal Holdings Corp. (the“Company”) and subsidiaries are predominantly engaged in one
industry, the manufacture and sale of apparel, including foundation
garments, lingerie, nightwear and outerwear in Japan, the UnitedStates of America, Europe and certain Asian countries.
The accompanying consolidated financial statements, statedin Japanese yen, have been prepared on the basis of accounting
principles generally accepted in the United States of America.
Consolidation—The consolidated financial statements include theaccounts of the Company and its majority-owned subsidiaries(collectively, the “Companies”). All intercompany transactions andbalances are eliminated.
Foreign subsidiaries of the Company have a fiscal year ending
December 31. Two domestic subsidiaries have a fiscal year ending
February 28. The accounts of those subsidiaries are included in the
Company’s consolidated financial statements based on thesubsidiaries’ fiscal year. There were no material intervening events
that occurred with respect to these subsidiaries.
On August 17, 2009, the Company acquired the outstanding
common shares of Lecien Corp. (“Lecien”) with a fiscal year ended
March 31, 2010. Lecien’s results of operations were included in the
Company’s consolidated statements of income for the year ended
March 31, 2010 from August 1, 2009.
Investments in affiliated companies where the Company’sownership is 20% to 50% are accounted for using the equity method.
Significant influence is generally deemed to exist if the Companies
have an ownership interest in the voting stock of the investee ofbetween 20% to 50%, although other factors are considered indetermining whether the equity method of accounting is appropriate.
Use of Estimates—The preparation of financial statements inconformity with accounting principles generally accepted in the
United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents—Cash and cash equivalents include alltime deposits and certificates of deposit (all of which are interestbearing) with original maturities of three months or less.
Foreign Currency Translation—Assets and liabilities of foreignsubsidiaries have been translated to Japanese yen at period-end
exchange rates and income and expenses have been translated using
average exchange rates for the period. Translation adjustments
resulting from the process of translating financial statements, net oftax, are included in other comprehensive income (loss), a separate
component of equity. Exchange gains and losses resulting fromforeign currency transactions and the conversion of monetary assets
and liabilities denominated in foreign currencies are included in otherincome (expenses) in the consolidated statements of income.

Foreign currency translation losses for the year ended March
31, 2011 were ¥142 million ($1,716 thousand). Foreign currencytranslation gains for the years ended March 31, 2010 and 2009were ¥43 million and ¥35 million, respectively. They have been
included in other—net of other income (expenses).
Marketable Securities and Investments—The Companies classify
their marketable securities and investments as either trading oravailable-for-sale. Trading securities are bought and held principally for the purpose of selling them in the near term. Trading
securities are recorded at fair value and unrealized holding gains
and losses on trading securities are included in earnings.
Available-for-sale securities are carried at fair value with a corresponding recognition of unrealized holding gains or losses (net oftax) in other comprehensive (loss) income, a separate componentof equity, until realized. Equity securities that do not have readily
determinable fair values are recorded at cost. Gains and losses onsales of investments are computed based on cost determinedusing the average cost method.
If a decline in the fair value of marketable securities andinvestments is determined to be other-than-temporary, an impairment charge is recorded in the consolidated statements of income.
The Companies periodically determine whether a decline in thefair value of marketable securities and investments is deemed tobe other than temporary based on criteria that include the durationof the market decline, the extent to which cost exceeds market
value, the financial position and business outlook of the issuer andthe intent and ability of the Companies to retain the impaired
marketable securities and investments for a sufficient period oftime for anticipated recovery in market value.
Allowance for Sales Returns—Allowance for sales returns isestimated based on historical products returns experience, sales
movements, and the overall retail industry situation.
Allowance for Doubtful Receivables—Allowance for doubtful
notes and receivables is estimated based on historical collection
experience and additional information including current economic
conditions and creditworthiness of each applicable customer.
Inventories—Inventories are stated at the lower of cost or market,
cost being determined on the first-in, first-out method for raw
materials and the average cost method for work in process andfinished products. Cost includes net prices paid for materials
purchased, production labor cost, factory overhead and charges
for customs duties.
Property, Plant and Equipment—Property, plant and equipment
is stated at cost less accumulated depreciation and impairment
losses. Depreciation of property, plant and equipment is computedby the declining-balance method, except for buildings acquired on
or after April 1, 1998, which are depreciated using the straight-line
method, based upon the estimated useful lives of the assets. The
estimated useful lives are as follows:
Buildings and building improvements:	5 – 50 years(Mainly 38 years)
Machinery and equipment:	2 – 20 years(Mainly 5 years)

Annual Report 2011

52

Depreciation expenses for the years ended March 31, 2011,2010 and 2009 are ¥2,828 million ($34,171 thousand), ¥3,016
million and ¥3,050 million, respectively.
Impairment of Long-Lived Assets—The carrying values of longlived assets, held and used by the Companies, are evaluated for
impairment whenever there is an event or change in circumstancesthat indicates that such assets have been impaired or that thecarrying amounts of such assets might not be recoverable. The
carrying amount of a long-lived asset is not recoverable if it
exceeds the sum of the undiscounted cash flows expected to result
from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at thedate it is tested for recoverability, whether in use or under development. The impairment loss is measured as the amount by which
the carrying amount of a long lived asset exceeds its fair value.
Goodwill and Other Intangible Assets—Goodwill represents theexcess of the purchase price over the related underlying tangible
and intangible net asset values of business acquired.
Goodwill and other intangible assets with indefinite useful lives aretested for impairment annually, or more frequently if conditions
indicate an earlier review is necessary. The goodwill is allocated to thereporting unit in which the business that created the goodwill resides.
To test for goodwill impairment, the carrying value of each reporting
unit is compared with its fair value. If the carrying value of the goodwill is considered impaired, a loss is recognized based on the amountby which the carrying value exceeds the fair value of the asset.
To test for other intangible assets with indefinite useful lives,the carrying value of an intangible asset is compared with its fairvalue. If the carrying value of the other intangible assets withindefinite useful lives is considered impaired, a loss is recognizedbased on the amount by which the carrying value exceeds the fairvalue of the asset.
Other intangible assets with estimable useful lives consist
primarily of customer relationship and software and are amortizedover their estimated useful lives using the straight-line method.
The estimated useful lives are as follows:
Customer relationship: 7 years
Software:5 years
Asset Retirement Obligations—The Companies have obligations
arising from contractual commitments to remove leasehold improvements from leased facilities and return the property to a specified
condition when the lease terminates. The Companies recognize
asset retirement obligations at the inception of a lease. The asset
retirement obligation is measured with an expected present value
technique based on historical experience and recorded in otherlong-term liabilities in the consolidated balance sheets and is subsequently adjusted for changes in estimated disposal costs. The
difference between the gross expected future cash flow and its
present value is accreted over the life of the related lease, which isdetermined using best estimate because the Companies’ lease
contracts generally have automatic renewal articles. The associatedestimated asset retirement costs are capitalized as part of thecarrying amount of the long-lived asset and depreciated over its
useful life.
Termination and Retirement Plans—Termination and retirement
benefits are accounted for in accordance with the guidance forretirement benefits. The Companies amortize net actuarial gains
and losses and prior service cost over the average employees’
remaining service period by a declining-balance method and by astraight-line method, respectively. Provisions for termination and

WACOAL HOLDINGS

retirement benefits include those for directors and corporate
auditors of the Companies.
The Companies do not recognize a gain or loss on settlement of
the pension obligation when the cost of all settlements in a year isless than or equal to the sum of the service cost and interest cost
components of net periodic pension cost for the plan for the year.
Leases—Certain non-cancelable leases are classified as capitalleases and the leased assets are included as part of property, plantand equipment. Other leases are classified as operating leases andare not capitalized. The payments on such leases are recorded as
expense. The rental expense under operating leases is recognizedon a straight-line basis.
Treasury Stock—The Companies account for treasury stock under
the cost method and include treasury stock as a component ofequity.
Acquisitions—The Company accounts for acquisitions using theacquisition method in accordance with the guidance for businesscombinations. The Company allocates the purchase price to theassets acquired and liabilities assumed based on the estimated fairvalues at the date of acquisition, including intangible assets thatcan be identified and named. The purchase price in excess of thefair value of the net assets and liability is recorded as goodwill.
Revenue Recognition—The Companies recognize revenue on sales
to retailers, mail order catalog sales and internet sales when (1)persuasive evidence of an arrangement exists, (2) delivery has
occurred resulting in transfer of title and risk of loss, (3) the sales
price is fixed or determinable, and (4) collectability is reasonably
assured. As for consignment sales, the Companies recognize
revenue when the products are sold to the ultimate customer. The
Companies recognize revenue on direct retailing sales at theCompanies’ directly managed retail stores at the point of sale tothe customer.
Shipping and Handling Costs—Shipping and handling fees billed tocustomers are classified in net sales. Shipping and handling costs
are expensed as incurred. Shipping and handling costs for theyears ended March 31, 2011, 2010 and 2009 were ¥5,698 million($68,850 thousand), ¥5,324 million and ¥4,895 million, respectively, and have been included in selling, general and administrative
expenses.
Advertising Expenses—Advertising costs are expensed as
incurred. Advertising expenses for the years ended March 31, 2011,2010 and 2009 were ¥12,003 million ($145,034 thousand),¥11,643 million and ¥13,624 million, respectively, and have been
included in selling, general and administrative expenses.
Research and Development Costs—Research and development
costs are expensed as incurred. Research and development costs
for the years ended March 31, 2011, 2010 and 2009 were ¥815
million ($9,848 thousand), ¥778 million and ¥768 million,
respectively, and have been included in selling, general andadministrative expenses.
Income Taxes—The provision for income taxes is determined
under the asset and liability method in accordance with theguidance for income taxes. Under this method, deferred tax assets
and liabilities are determined for temporary differences between
the financial statement and tax bases of assets and liabilities andtax loss carry forwards at presently enacted tax rates. A valuation
allowance is recorded when it is more likely than not that some
portion or all of the deferred tax assets will not be realized in the
future.

53

The Companies assess their income tax positions and record
tax benefits for all years subject to examination based upon theirevaluation of the facts, circumstances and information available asof the end of fiscal year. For those tax positions only where there isgreater than 50 percent likelihood that the tax position will besustained, the Companies record the largest amount of tax benefit
that may potentially be realized upon ultimate settlement with ataxing authority that has full knowledge of all relevant information.
Share-Based Compensation—Share-based compensation is
accounted for in accordance with the guidance for stock compensation. The Company measures share-based compensation cost at
the grant date, based on the fair value of the award and recognizes
the cost over the requisite service period, which is the vesting
period. The fair value of the award is estimated using the BlackScholes option-pricing model.
Derivatives—Derivative instruments, including certain derivative
instruments embedded in other contracts, are accounted for inaccordance with the guidance for derivatives and hedging.
Because such derivative instruments are not designated as ahedge, changes in the fair value are recorded in earnings.
Reclassifications—Certain reclassifications have been made to theprior years’ financial statements to conform to the current year’s
presentation.
Recent Accounting Pronouncements:
Fair Value Measurements—In January 2010, the FASB issued
additional disclosure requirements for fair value measurements.
According to the guidance, the fair value hierarchy disclosures areto be further disaggregated by class of assets and liabilities. A
class is often a subset of assets or liabilities within a line item inthe consolidated balance sheets. The guidance also requires
additional disclosure about significant transfers between Levels 1
and 2 of the fair value hierarchy, and separate disclosures aboutpurchase, sales, issuance and settlements relating to Level 3
measurement. This guidance was effective for interim and annual
reporting periods beginning after December 15, 2009 except for
the requirement regarding the Level 3 activity which is effective forfiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years. These amendments do not havean impact on the consolidated financial position, result of operations or cash flows as this guidance relates only to additional
disclosures.

In May 2011, the FASB issued the new guidance for fair value
measurements. The guidance changes the wording used todescribe requirements for measuring fair value and for disclosing
information about fair value measurements in order to improveconsistency between U.S. GAAP and International Financial
Reporting Standards. Also, some amendments change a particularprinciple or requirement for measuring fair value or for disclosing
information about fair value measurements, which leads to an
expansion of the disclosure requirements. This guidance is effective during interim and annual periods beginning after December
15, 2011. The Companies are currently evaluating the potential
impact, if any, of the adoption of this guidance.
Disclosures about the Credit Quality of Financing Receivables andthe Allowance for Credit Losses—In July 2010, the FASB issued
additional disclosure requirements for financing receivables andallowance for credit losses. This guidance requires enhanced
disclosures regarding the quality of the credit risk inherent in theentity’s financing receivables, how that credit risk is assessed in
calculating the allowance for credit losses, changes in suchallowance and the reasons for those changes. It also requires
disclosures relating to the accounting policies for financing receivables and allowance for credit losses. The Companies adopted thisguidance from the interim period ending after December 15, 2010.
Since this guidance related only to additional disclosures, it did nothave an impact on the Companies’ consolidated financial position,
result of operations, or cash flows.
Presentation of Comprehensive Income—In June 2011, the FASB
issued revised guidance for the presentation of Comprehensive
Income. This guidance requires displaying adjustments for items
that are reclassified from other comprehensive income to net
income in the statement in which the components of net income
and the components of other comprehensive income are presented. This guidance does not change the items that must bereported in other comprehensive income, nor does it affect thecalculation or reporting of earnings per share. This guidance iseffective for fiscal years, and interim periods within those years,
beginning after December 15, 2011. This amendment does nothave an impact on the consolidated financial position, result of
operations or cash flows as this guidance relates only to thepresentation of comprehensive income.

2. TRANSLATION INTO U.S. DOLLAR STATEMENTS
The financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar amounts are included solely for convenience of readers outside of Japan and have been
made at the rate of ¥82.76 to $1, the noon buying rate for yen in New York City as of March 31, 2011. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at the above or any other rate.

Annual Report 2011

54

3. MARKETABLE SECURITIES AND INVESTMENTS
Available-for-Sale Securities—The fair value of debt and marketable equity securities classified as available-for-sale is based on quoted
market prices as of March 31, 2011 and 2010. The cost, gross unrealized gain and loss and the fair value of available-for-sale securities bymajor security type were as follows:
Millions of Yen
2011

Current:
National debt securities
Corporate debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

Cost

Gross Unrealized Gain

Gross Unrealized Loss

Fair Value¥   5101,300
2,657¥ 4,467¥    3
4
117¥  124

¥ 27
2
¥ 29

¥   5131,277
2,772¥ 4,562¥22,165¥7,488¥516¥29,137

Cost

Gross Unrealized Gain

Gross Unrealized Loss

¥ 1,160
1,885
100
3,229
¥ 6,374¥   1012
0176¥  198¥23,841¥9,415

Millions of Yen
2010

Current:
National debt securities
Corporate debt securities
Bank debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

¥ 42
1
¥ 43
¥604

Fair Value¥ 1,170
1,855
100
3,404
¥ 6,529¥32,652
Thousands of U.S. Dollars

2011

Current:
National debt securities
Corporate debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

Cost

Gross Unrealized Gain

Gross Unrealized Loss

Fair Value$   6,163
15,70832,105$ 53,976$    3648
1,413$ 1,497$  32624$  350$   6,199
15,43033,494$ 55,123$267,823$90,478$6,235$352,066

There were no available-for-sale securities which have been in a continuous unrealized loss position for more than 12 months as of March
31, 2011 and 2010. Gross unrealized holding losses and fair values of available-for-sale securities, all of which have been in a continuous
unrealized loss position for less than 12 months as of March 31, 2011 and 2010, were as follows:
Millions of Yen
2011

Current:
Corporate debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

Thousands of U.S. Dollars

Fair Value

Gross Unrealized Loss

Fair Value

Gross Unrealized Loss¥  6739¥  682

¥ 27
2
¥ 29

$ 8,132109$ 8,241$  32624$  350¥6,009¥516$72,608$6,235
Millions of Yen

2010

Current:
Corporate debt securities
Mutual fund		 Total
Noncurrent:
Equity securities

WACOAL HOLDINGS

Fair Value

Gross Unrealized Loss¥  64344¥  687

¥ 42
1
¥ 43

¥3,867¥604

55

The unrealized losses on available-for-sale securities werecaused primarily by a general decline in stock prices in Japan as ofthe end of the fiscal year. The Companies periodically determine
whether a decline in the fair value of available-for-sale securities isdeemed to be other than temporary based on criteria that includes
the duration of market decline, the extent to which cost exceeds
market value, the financial position and business outlook of theissuer and the intent and ability of the Companies to retain the

impaired available-for-sale securities for sufficient period of time
for anticipated recovery in market value as described in Note 1.
No available-for-sale securities were identified that meet theCompanies’ criterion for recognition of an impairment loss onavailable-for-sale securities in unrealized loss position presented
above. Therefore, the Companies do not believe the unrealized
losses represent an other-than-temporary impairment as of March
31, 2011 and 2010.

Future maturities of debt securities and mutual fund classified as available-for-sale excluding mutual fund without fixed maturities as ofMarch 31, 2011 were as follows:
Millions of Yen

Due within one year
Due after one year through five years
Due after five years through ten years
Total

Proceeds from sales of available-for-sale securities were¥1,602 million ($19,357 thousand), ¥795 million and ¥304 million
for the years ended March 31, 2011, 2010 and 2009, respectively.
The gross realized gains on the sales of available-for-sale securities for the years ended March 31, 2011, 2010 and 2009 were¥354 million ($4,277 thousand), ¥4 million and ¥0 million,
respectively. The gross realized losses on the sales of availablefor-sale securities for the years ended March 31, 2011 and 2010
were ¥37 million ($447 thousand) and ¥3 million, respectively. No
realized losses were recorded for the year ended March 31, 2009.
During the years ended March 31, 2010 and 2009, theCompanies exchanged certain equity securities for other marketable securities. The Companies recorded the newly received
securities at fair value and recognized a gain of ¥6 million and ¥2
million in the years ended March 31, 2010 and 2009, respectively.
There was no such exchange of marketable securities for the year
ended March 31, 2011.
The amount of impairment charges the Companies recognizedon available-for-sale securities in which declines in fair value areother-than-temporary are ¥1,366 million ($16,506 thousand),¥1,445 million and ¥3,547 million in the years ended March 31,
2011, 2010 and 2009, respectively.
Trading Securities—The Company’s subsidiary in the UnitedStates of America has trading securities consisting of mutual
funds, which are recorded as marketable securities at the fair valueof ¥257 million ($3,105 thousand) as of March 31, 2011. There
were no trading securities recorded in marketable securities as ofThousands of U.S. Dollars

Cost

Fair Value

Cost

Fair Value¥1,0981,504
700¥3,302¥1,105
1,535
682¥3,322$13,268
18,1738,458$39,899$13,351
18,548
8,241$40,140

March 31, 2010. The Company recorded a gain of ¥39 million($471 thousand) which is included in other - net of other income(expense) for the year ended March 31, 2011 that relates to trading
securities still held as of March 31, 2011.
The Company’s subsidiary in the United States of America
adopted a non-qualified deferred compensation plan and trust
agreement. Investments consist of several mutual funds, which arerecorded as investments at the fair market value of ¥92 million($1,112 thousand) and ¥91 million as of March 31, 2011 and 2010,
respectively. The Company recorded gains of ¥13 million ($157
thousand) and ¥30 million which are included in other-net of asother income for the years ended March 31, 2011 and 2010,
respectively that relates to trading securities still held as of March
31, 2011 and 2010, respectively, and ¥23 million of trading loss asother expense for the year ended March 31, 2009 that relates to
trading securities still held as of March 31, 2009.
Cost-Method Securities—Investments in non-marketable equity
securities for which there are no readily determinable fair values
were accounted for using the cost method and aggregated ¥3,443
million ($41,602 thousand) and ¥3,085 million as of March 31,
2011 and 2010, respectively. Investments in non-marketable equity
securities are reviewed annually or upon the occurrence of anevent for other-than-temporary impairment. The Companies
recognized impairment charges on investments in non-marketable
equity securities of ¥219 million ($2,646 thousand), ¥15 millionand ¥3 million in the years ended March 31, 2011, 2010 and 2009,
respectively.

Annual Report 2011

56

4. VALUATION AND QUALIFYING ACCOUNTS
Information related to the Companies’ allowance for doubtful receivables was as follows:
Millions of Yen

Balance at beginning of year
Increase due to change in scope of consolidation (Note 7)
Charged to costs and expenses
Balances written-off / reversed
Balance at end of year

Thousands of
U.S. Dollars

2011

2010

2009

2011

¥116

¥ 82
28
38
(32)
¥116

¥77

$1,401

13
(8)
¥82

157
(362)
$1,196

Millions of Yen

Thousands of
U.S. Dollars

13
(30)
¥ 99

Information related to the Companies’ allowance for returns was as follows:

Balance at beginning of year
Increase due to change in scope of consolidation (Note 7)
Charged to costs and expenses
Balances utilized
Balance at end of year

2011

2010

2009

2011

¥ 1,856¥ 2,19715
1,856(2,212)¥ 1,856¥ 3,068$ 22,426

2,197(3,068)¥ 2,197

17,521(22,426)$ 17,521

Millions of Yen

Thousands of
U.S. Dollars

1,450(1,856)¥ 1,450

5. INVENTORIESThe components of inventories as of March 31, 2011 and 2010 were as follows:

Finished products
Work in process
Raw materials
Total

6. INVESTMENTS IN AFFILIATED COMPANIESInvestments are accounted for using the equity method of
accounting if the investment provides the Companies the ability to
exercise significant influence, but not control, over an investee.
Significant influence is generally deemed to exist if the Companies
have an ownership interest in the voting stock of the investee ofbetween 20% to 50%, although other factors are considered in

2011

2010

2011

¥26,576
3,300
1,080¥30,956¥27,752
3,263
1,088¥32,103$321,121
39,874
13,050$374,045

determining whether the equity method of accounting is appropriate. The Companies record investments in equity method investees meeting these characteristics as “Investments in affiliatedcompanies.” Under the equity method, the Companies record their
proportionate share of an affiliated companies’ income or loss
based on the most recently available financial statements.

The Companies’ investments in affiliated companies and percentage of ownership as of March 31, 2011 and 2010 include, among others,
the following companies:
Percentage of Ownership (%)
Name of Investee

Thai Wacoal Public Company Limited
Shinyoung Wacoal Inc.
Indonesia Wacoal Co., Ltd.
Taiwan Wacoal Co., Ltd.
House of Rose Co., Ltd.

2011

2010

34
25
42
50
20

34
25
42
50
20

Aggregate values of carrying amounts and fair values of investments in affiliated companies which have quoted market price as of March
31, 2011 and 2010 were as follows:
Millions of Yen

Carrying amount
Aggregate value of quoted market price

WACOAL HOLDINGS

Thousands of
U.S. Dollars

2011

2010

2011

¥8,766
7,735¥8,814
7,768$105,921
93,463

57

The following tables represent the affiliated companies’ summarized information from the balance sheets as of March 31, 2011 and 2010,and statements of operations for the years ended March 31, 2011, 2010 and 2009.
Millions of Yen

Current assets
Noncurrent assets
Total
Current liabilities
Long-term liabilities
EquityTotal

Net sales
Gross profit
Income before income taxes
Net income

Thousands of
U.S. Dollars

2011

2010

2011

¥31,148
28,646¥59,794¥ 7,569
6,373
45,852¥59,794¥30,303
29,221¥59,524¥ 7,165
6,143
46,216¥59,524$376,366
346,133$722,499$ 91,457
77,006554,036$722,499

Millions of Yen

Thousands of
U.S. Dollars

2011

2010

2009

2011

¥50,833
27,196
3,947
3,039¥49,130
25,9483,730
2,777¥57,488
30,3883,630
2,832$614,222
328,61347,692
36,721Dividends received from the affiliated companies were ¥424 million ($5,123 thousand), ¥415 million and ¥597 million during the years
ended March 31, 2011, 2010 and 2009, respectively.
Retained earnings include net undistributed earnings of affiliated companies in the amount of ¥14,910 million ($180,159 thousand) and¥14,369 million as of March 31, 2011 and 2010, respectively.

7. ACQUISITIONS
Lecien—On August 17, 2009, the Company acquired all theoutstanding common shares of Lecien which primarily manufactures and sells innerwear, lace, handicrafts and tapestries, throughshare exchange. This aimed to expand its business field. This
enables the Company to maintain the growth of its innerwear
business in the domestic market by making its presence known in
the new market and developing new and different products, sales
methods and channels, as well as pricing strategies.
This transaction was accounted for as an acquisition. Lecien’s
results of operations were included in the Company’s consolidated
statements of income for the year ended March 31, 2010 from
August 1, 2009. Lecien’s results of operations and change infinancial position between August 1, 2009 and August 17, 2009were not significant.
The purchase cost of the acquisition was ¥2,489 million, which
was the fair value of the shares distributed to the shareholders ofLecien. As consideration for the acquisition, the Company distributed 2,104,063 shares of treasury stock to the shareholders ofLecien. Those shares were valued at ¥1,183 per share which was
the stock price on the acquisition date of August 17, 2009.
The purchase price of Lecien’s shares was allocated based upon
the estimated fair value of the identifiable assets acquired andliabilities assumed. As a result of the allocation of basis of investment in Lecien, the Company recognized goodwill of ¥71 million.
Lecien’s net sales and net loss included in the Company’s
consolidated statement of income for the year ended March 31,
2010 were ¥8,751 million and ¥245 million, respectively.
The costs of the business combinations were ¥121 million,
which were included in selling, general and administrative.
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.

Millions of Yen

2010

Cash
Trade notes and receivable
Other current assets
Property, plant, and equipment
Investments
Goodwill
Other intangible assets
Other assets
Total assets acquired
Current liabilities
Long-term liabilities
Total liabilities assumed
Noncontrolling interests
Net assets acquired¥  362
3,381
1,841
2,164
1,101
71
144
798
9,862
5,725
1,602
7,327
46
¥2,489Unaudited Pro Forma Results
Unaudited pro forma financial information was presented below as
if the acquisition of Lecien occurred at the beginning of the 2009
and fiscal year.
Millions of Yen

Pro forma sales
Pro forma operating incomePro forma net income attributable to
Wacoal Holdings Corp.

2010

2009

¥167,621
3,272¥188,374
10,115

1,864

4,970
Millions of Yen

Pro forma net income attributableto Wacoal Holdings Corp. per share:
Basic
Diluted

2010

2009

¥13.1913.18¥34.92
34.92

Annual Report 2011

58

8. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill—The changes in the carrying amount of goodwill for the years ended March 31, 2011 and 2010 were as follows:
Peach John Segment

2011

Balance at beginning of year:
Goodwill
Accumulated impairment losses
		 Total
Impairment losses
		 Total
Balance at end of year:
Goodwill
Accumulated impairment losses
		 Total

Millions of Yen

Thousands of
U.S. Dollars¥11,203$135,367

11,203(836)(836)

135,367(10,101)(10,101)

11,203(836)¥10,367

135,367(10,101)$125,266
Millions of Yen

2010
Peach John Segment

Balance at beginning of year:
Goodwill
Accumulated impairment losses
		 Total
Goodwill acquired during year
Impairment losses
		 Total
Balance at end of year:
Goodwill
Accumulated impairment losses
		 Total

Other Segment¥11,203

Total¥11,203

11,203¥71(71)

11,20371(71)

11,203

11,203¥11,203¥11,203

During the year ended March 31, 2011, the Company recorded an impairment charges on goodwill of ¥836 million ($10,101 thousand) in
Peach John Segment. See Note 20 for further information.
During the year ended March 31, 2010, goodwill of Other segment was recorded from acquired business of Lecien as further described in
Note 7. Lecien segment was tested for impairment in the fourth quarter, after the annual forecasting process. The Company identified adecline in fair value of Lecien and recognized an impairment loss of ¥71 million, which was included in impairment charges on goodwill in the
Other segment. See Note 20 for further information.

WACOAL HOLDINGS

59

Other Intangible Assets—The components of acquired intangible assets excluding goodwill as of March 31, 2011 and 2010 were as follows:
2011
Millions of Yen

Year Ended March 31

Amortized intangible assets:
Customer relationship
Software
Other
		 Total
Unamortized intangible assets:
Trademark
Other
		 TotalThousands of U.S. Dollars

Gross Carrying
AmountAccumulated
Amortization andImpairment Loss

Gross Carrying
AmountAccumulated
Amortization andImpairment Loss

¥ 3,361
7,517
1,294¥12,172¥2,6363,655
413¥6,704$ 40,611
90,82915,636$147,076$31,851
44,164
4,989$81,004¥ 5,316100¥ 5,416¥  559$ 64,234
1,208$ 65,442$ 6,755¥  559$ 6,755

2010
Millions of Yen

Year Ended March 31

Amortized intangible assets:
Customer relationship
Software
Other
		 Total
Unamortized intangible assets:
Trademark
Other
		 Total

Gross Carrying
AmountAccumulated
Amortization andImpairment Loss

¥ 3,361
7,486
1,326
12,173¥1,983
2,851
404¥5,2385,316100¥ 5,416

Other intangible assets acquired during the year ended March 31, 2011 totaled ¥671 million ($8,108 thousand) which primarily consist of
software of ¥646 million ($7,806 thousand) with estimated useful life of 5 years.

Annual Report 2011

60

During the year ended March 31, 2011, the Company recorded
an impairment charge on other intangible assets of ¥377 million($4,555 thousand) and ¥559 million ($6,755 thousand), for thecustomer relationship and trademark, respectively, in Peach John
Segment. See Note 20 for further information.
During the year ended March 31, 2010, the Company recorded
an impairment charge on other intangible assets of ¥1,023 million
for customer relationship in Peach John Segment. See Note 20 for
further information.
Aggregate amortization expenses for the years ended March
31, 2011, 2010 and 2009 related to other intangible assets andfuture estimated amortization expense as of March 31, 2011, 2010
and 2009 were as follows:
Millions of Yen

Thousands of
U.S. Dollars

2011

2011

Year Ended March 31

Millions of Yen

2010
Year Ended March 31

Aggregate amortization expense
		 2010¥1,791

Year Ending March 31

Estimated amortization expense
		 2011
		 2012
		 2013
		 2014
		 2015
Total

1,468
1,413
1,231
999
747
¥5,858Millions of Yen

2009
Year Ended March 31

Aggregate amortization expense
		 2011¥1,850$22,354

Year Ending March 31

Aggregate amortization expense
		 2009¥1,496

Year Ending March 31

Estimated amortization expense
		 2012
		 2013
		 2014
		 2015
		 2016
Total

1,463
1,237
991
597
134
¥4,422

17,678
14,947
11,974
7,214
1,619$53,432

Estimated amortization expense
		 2010
		 2011
		 2012
		 2013
		 2014
Total

1,570
1,541
1,441
1,251
967
¥6,7709. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans as of March 31, 2011 and 2010 consisted of
the following:

Long-term debt as of March 31, 2011 and 2010 are summarized
below. The interest rates and maturities are for loans as of March
31, 2011.

Millions of Thousands of
Yen
U.S. Dollars

Millions of Thousands of
Yen
U.S. Dollars

Collateralized bank loans
Unsecured bank loans
Total

2011

2010

2011

¥  5005,617¥6,117¥3,3504,591¥7,941$ 6,042
67,871$73,913

The weighted-average annual interest rates on short-term bankloans as of March 31, 2011 and 2010 were 0.8% and 1.3%, respectively.
Unused lines of credit for short-term financing as of March 31,
2011 and 2010, aggregated ¥22,579 million ($272,825 thousand)and ¥21,401 million, respectively. Companies compensate banks
for these facilities in the form of commitment fees, which were notmaterial during the years ended March 31, 2011 and 2010.

Collateralized bank loans, withfloating interest at 2.0%,
maturing through 2013
Unsecured bank loans, with
fixed interest at 1.8%, maturing
through 2014
Capital lease obligation
Total
Less current portionLong-term debt, less current
portion

2011

2010

2011

¥ 76

¥ 137

$  918

200
8
284
(70)

51
188
(108)

2,417
97
3,432
(846)

¥214

¥  80

$2,586

The annual maturities of long-term debt as of March 31, 2011were as follows:Year Ending March 31

2012
2013
2014
Total

WACOAL HOLDINGS

Millions of Thousands of
Yen
U.S. Dollars

¥ 70
14
200
¥284

$  846169
2,417$3,432

61

A subsidiary has pledged assets as security for loans. As of
March 31, 2011 and 2010, assets pledged as collateral for bankloans were as follows:
Millions of Thousands of
Yen
U.S. Dollars

Land
Buildings
Investments
Total

2011

2010

2011

¥  803460¥1,015412
977¥2,404$ 9,703
5,558¥1,263As of March 31, 2010, investments pledged includes ¥280
million of shares of the Company which are presented as treasury
stock on the consolidated balance sheet.
As is customary in Japan, both short-term and long-term loans
are made under general agreements which provide that security
and guarantees for future and present indebtedness will be given
upon request of the bank and the bank has the right to offset cash
deposits against obligations that have become due or, in the eventof default, against all obligations due to the bank.

$15,261

10. LEASESThe Companies lease most of their store premises, some of their distribution centers, and certain equipment. Most leases have automatic
renewal provisions and allow the Companies to extend the lease term beyond the initial base period, subject to the terms agreed at lease
inception. Future minimum rental commitments on operating leases having remaining non-cancerable lease term in excess of one year arepresented below:
Year Ending March 31

2012
2013
2014
2015
2016
Thereafter
Total

Millions of Yen

Thousands of
U.S. Dollars¥  819
727
241
213
205
645
¥2,850$  9,896
8,784
2,912
2,574
2,477
7,794
$34,437

Rental expenses were ¥5,147 million ($62,192 thousand), ¥5,252 million and ¥4,800 million for the years ended March 31, 2011, 2010
and 2009, respectively.

11. ASSET RETIREMENT OBLIGATIONSThe Companies recorded the fair value of asset retirement obligations in order to recognize legal obligations associated with the removal ofleasehold improvements from leased facilities and return of the property to a specified condition when the lease terminates.
A reconciliation of the beginning and ending aggregate carrying amount of the asset retirement obligation was as follows:
Millions of Yen

Balance at beginning of year
Increase due to change in scope of consolidation (Note 7)
Accretion expense
Liabilities incurred
Liabilities settled
Changes due to translation of foreign currencies
Balance at end of year

12. TERMINATION AND RETIREMENT PLANS
Employee Retirement Plans—The Companies sponsor termination
and retirement benefit plans that cover substantially all employees. Benefits are based on the employee’s years of service, position and performance. If the termination is involuntary or caused
by death, the employee is usually entitled to greater payments
than in the case of voluntary termination.
The Companies have a contributory defined retirement benefit
plan, several partially funded plans administered by independent

Thousands of
U.S. Dollars

2011

2010

2011

¥ 594

¥443
97
11
66
(22)
(1)
¥594

$ 7,177

20
231
(177)
(5)
¥ 663

242
2,791
(2,139)(60)$ 8,011trustees and several unfunded termination plans administered by
the Companies. Benefits under the contributory defined retirement
benefit plan are usually paid in a lump sum at the earlier of termination or retirement, although periodic payments are available
under certain conditions. Benefits under the other termination andretirement benefit plan are paid either as lump-sum payments orperiodic payments under certain conditions. The benefits areusually paid as a lump-sum payment, if the employee resigns
before the mandatory retirement age.

Annual Report 2011

62

Contributory Defined Retirement Benefit Plan—The following provides a reconciliation of benefit obligations, plan assets and funded statusof the plans:

Change in benefit obligations:Benefit obligations at beginning of year
Service cost
Interest cost
Participants’ contributions
Actuarial (gain) loss
Benefits paid from plan assets
Settlement paid from plan assets
Settlement paid by the Companies
Increase due to change in scope of consolidation (Note 7)
Benefit obligations at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Participants’ contributions
Benefit payments
Settlement payments
Fair value of plan assets at end of year
Funded status at end of year

Millions of Yen

Thousands of
U.S. Dollars

2011

2010

2011

¥33,454
833
712
71
(593)
(708)
(926)
(118)

$404,229
10,065
8,603
858(7,165)(8,555)(11,189)(1,426)32,725¥32,946
916
764
73
181
(607)
(767)
(129)
77
33,454¥31,743
(768)
1,566
71
(708)
(926)
30,978¥ (1,747)¥29,069
2,461
1,515
72
(607)
(767)
31,743¥ (1,711)$383,555(9,280)18,922858(8,555)(11,189)374,311$ (21,109)

Millions of Yen

Thousands of
U.S. Dollars

395,420

Amounts recognized in the consolidated balance sheets as of March 31, 2011 and 2010 consist of:Prepaid pension expense
Accrued expenses
Liability for termination and retirement benefits

2011

2010

2011

¥   158(90)(1,815)¥(1,747)¥   263(82)(1,892)¥(1,711)$  1,909(1,087)(21,931)$(21,109)

Millions of Yen

Thousands of
U.S. Dollars

Amounts recognized in accumulated other comprehensive loss as of March 31, 2011 and 2010 were as follows:

Actuarial loss
Prior service benefit

2011

2010

2011

¥(6,874)
3,497¥(3,377)¥(7,196)
4,189¥(3,007)$(83,060)
42,255$(40,805)

Millions of Yen

Thousands of
U.S. Dollars

The accumulated benefit obligation for all defined benefit plans as of March 31, 2011 and 2010 were as follows:

Accumulated benefit obligation

WACOAL HOLDINGS

2011

2010

2011

¥32,272¥32,727$389,947

63

The projected benefit obligations and the fair value of the plan assets for the Company’s pension plans with projected benefit obligations
in excess of plan assets, and the accumulated benefit obligations and the fair value of the plan assets for the Company’s pension plans withaccumulated benefit obligations in excess of plan assets were as follows:

Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations
Fair value of plan assets
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligations
Fair value of plan assets

Millions of Yen

Thousands of
U.S. Dollars

2011

2010

2011

¥2,505600¥2,505531$30,268
7,250

2,505
600

2,505
531

30,2687,250

Net periodic benefit costs for the Companies’ plans consisted of the following for the years ended March 31, 2011, 2010 and 2009:
Millions of Yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service benefit

Thousands of
U.S. Dollars

2011

2010

2009

2011

¥  833
712
(758)
1,255
(691)
¥1,351¥  916
764
(705)
1,814
(691)
¥2,098¥  812
751
(774)
919
(691)
¥1,017$10,065
8,603(9,159)15,165(8,349)$16,325

The unrecognized net actuarial loss and prior service benefit are being amortized over 12 years (the average remaining service life ofactive participants) using the declining-balance method and the straight-line method, respectively.
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended March 31,
2011, 2010 and 2009 were as follows:
Millions of Yen

Current year actuarial (loss) gain
Amortization of actuarial loss
Amortization of prior service benefit

Thousands of
U.S. Dollars

2011

2010

2009

2011

¥ (933)1,255(691)¥ (369)¥1,575
1,814(691)¥2,698¥(6,800)
919(691)¥(6,572)$(11,274)
15,165(8,349)$ (4,458)

Annual Report 2011

64

The estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic benefit cost overthe next year are summarized as follows:
Millions of Thousands of
Yen
U.S. Dollars

Actuarial loss
Prior service benefit

2011

2011

¥1,203(691)$14,536(8,349)The Companies use a March 31 measurement date for theirplans. The weighted-average assumptions used as of March 31, in
computing the benefit obligations shown above were as follows:
Discount rate
Rate of increase in future compensation

2011

2010

2.4%
0.0%

2.3%
0.0%

The weighted-average assumptions used as of March 31, in
computing the net periodic benefit cost shown above were as
follows:
Discount rateRate of increase in futurecompensationExpected long-term rate of
return on plan assets

2011

2010

2009

2.3%

2.5%

2.5%

0.0%

0.0%

0.0%

2.5%

2.5%

2.5%

The Company’s wholly owned subsidiary, Wacoal Corp.’sapproach to establishing the discount rate is based upon long term
Japanese government bond rates and corporate bond indices. The
discount rate assumption is based upon the effective yields as ofMarch 31, 2011 on the Japanese government bonds whose maturity dates would be the same as timing of the expected future
benefit payments, adjusted for an incremental yield of approximately 25 basis points that is achieved by selecting corporate
bonds whose credit characteristics satisfy the quality requirements but whose yields are slightly higher than the yields on
Japanese government bonds. For other plans, similar indices andmethods are used.
The expected long-term rate of return on plan assets is derived
proportionally from return assumptions determined for each of the
major asset classes. The return expectations for each of the asset

WACOAL HOLDINGS

classes are based largely on assumptions about economic growthand inflation, which are supported by long-term historical data.
The estimated long-term rate of return is based on an asset
allocation of equity securities of 33.0%, debt securities of 48.0%,
life insurance company general accounts of 17.0% and short-term
financing of 2.0%.
The Companies’ investment strategy is to maintain actual asset
weightings within a preset range of target allocations. The
Companies’ investments are broadly diversified, typically consisting primarily of equity and debt securities. The Companies believethese ranges represent an appropriate risk profile for the planned
benefit payments of the plans based on the timing of the estimatedbenefit payment.
The asset allocation as of March 31, 2011 and 2010 was asfollows:
Equity securities
Debt securities
Life insurance company general accounts
Short-term financing

2011

2010

37.1%
40.9%
16.1%
5.9%

41.0%
41.9%
13.9%
3.2%

The target allocation percentages are reviewed and approvedby the Pension Committee. The actual allocations for 2011 and2010 are different from the target allocation percentages primarily
because Wacoal Corp. maintained additional equity securities as
the separate plan asset which was contributed to the plan basedon an agreement between Wacoal Corp. and employees and are
not governed by the Pension Committee. As such, the actual
allocation percentage of equity securities to the total plan assets ishigher than the target allocation, and similarly, the actual allocation for the other types of assets are lower than the target
allocation.
The following table presents the Companies’ plan assets using
the fair value hierarchy as of March 31, 2011. The fair value hierarchy has three levels based on the reliability of the inputs used todetermine fair value. Level 1 refers to fair values determined basedon quoted prices in active markets for identical assets. Level 2
refers to fair values estimated using significant other observable
inputs, and Level 3 includes fair values estimated using significant
unobservable inputs.

65

Millions of Yen

2011

Equity securities:
Japanese companies
Foreign companies
Pooled funds (a)Debt securities:
Japanese government bonds
Japanese municipal bonds
Japanese corporate bonds
Foreign government bonds
Pooled funds (b)Life insurance company general accounts
Other types of investments:
Equity long / short hedge funds (c)Short-term financing
		 Total

Level 1

Level 2

Level 3

¥5,693865

Total¥ 5,693
865
3,405¥ 3,405
1,921

9,924
4,974

1,921
5
118
708
9,924
4,974

¥9,187

1,529
1,836¥21,791

1,529
1,836
¥30,978

Level 1

Level 2

5
118
708

Millions of Yen

2010

Equity securities:
Japanese companies
Foreign companies
Pooled funds (a)Debt securities:
Japanese government bonds
Japanese municipal bonds
Japanese corporate bonds
Foreign government bonds
Pooled funds (b)Life insurance company general accounts
Other types of investments:
Equity long / short hedge funds (c)Short-term financing
		 Total

Level 3

¥6,112
829

Total¥ 6,112829
4,476¥ 4,476
1,705

10,742
4,406

1,705
17
177
660
10,742
4,406¥9,306

1,592
1,027¥22,437

1,592
1,027
¥31,743

Level 1

Level 2

17
177
660

Thousands of U.S. Dollars

2011

Equity securities:
Japanese companies
Foreign companies
Pooled funds (a)Debt securities:
Japanese government bonds
Japanese municipal bonds
Japanese corporate bonds
Foreign government bonds
Pooled funds (b)Life insurance company general accounts
Other types of investments:
Equity long / short hedge funds (c)Short-term financing
		 Total$ 68,789
10,452$ 41,143
23,212

Total$ 68,789
10,452
41,143

119,91360,101

23,212
60
1,426
8,555
119,91360,101

18,47522,185$263,303

18,47522,185$374,311

60
1,426
8,555

$111,008

Level 3(a)	T his class includes common stock of approximately 73% Japanese companies and 27% foreign companies as of March 31, 2011, and those percentages were 75% and 25%, respectively,
as of March 31, 2010.
(b)	T his class includes approximately 46% of Japanese government bonds, 2% of Japanese municipal bonds, 38% of foreign government bonds, and 14% of corporate bonds as of March 31,
2011, and those percentages were 48%, 2%, 37%, and 13%, respectively, as of March 31, 2010.
(c)	T his class includes hedge funds that invest both long and short in approximately 51% of Japanese common stocks and 49% of foreign common stocks as of March 31, 2011, and thosepercentages were 51% and 49%, respectively, as of March 31, 2010.

Annual Report 2011

66

Equity securities and debt securities presented in Level 1 areprimarily valued using a market approach on the quoted market
prices of identical instruments. Municipal bonds and corporate
bonds presented in Level 2 are primarily valued using quoted
prices for identical instruments in markets that are not active.
Pooled funds in equity securities or debt securities and equity
long/short hedge funds which are categorized in Level 2 are valuedby the sponsor of the fund primarily based on quoted prices inboth active and inactive market for identical instruments which
comprise funds. Life insurance company general accounts is thecontracts with the insurance companies with guaranteed rate of
return and capital, and those value are based on addition oforiginal value and return.
The general funding policy of the funded plans is to contributeamounts computed in accordance with actuarial methods
accepted by Japanese tax law. The Companies expect to contribute ¥1,838 million ($22,209 thousand) to their plans in the year
ending March 31, 2012.
The following benefit payments, which reflect expected futureservice, as appropriate, are expected to be paid:
Year Ended March 31

Millions of Thousands of
Yen
U.S. Dollars

2012
2013
2014
2015
2016
Thereafter¥ 1,978 $ 23,900
1,772
21,411
1,852
22,378
1,964
23,731
2,029
24,517
10,935 132,129

Multiemployer Plan—Some subsidiaries participate in multiemployer plans. The aggregated amount of the contribution to theplans were ¥56 million ($677 thousand) and ¥42 million for theyears ended March 31, 2011 and 2010, respectively. There was nocost recognized for the year ended March 31, 2009 as theCompanies did not have a multiemployer plan during the year
ended March 31, 2009. As it is probable that certain subsidiaries
will withdraw from the plan, the Companies assessed the probability and recognized the estimated withdrawal liability of ¥774
million ($9,352 thousand) as of March 31, 2011.

13. EQUITY
Japanese companies are subject to the Companies Act of Japan(the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are
summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend
upon resolution at the shareholders meeting. For companies thatmeet certain criteria, the Board of Directors may declare dividends(except for dividends in kind) at any time during the fiscal year if
the company has prescribed so in its articles of incorporation. The
Company meets all the above criteria. The Board of Directors ofcompanies with board committees (an appointment committee,
compensation committee and audit committee) can also do so
because such companies with board committees already, by
nature, meet the criteria under the Companies Act, even thoughsuch companies have an audit committee instead of the Board of
Corporate Auditors.

WACOAL HOLDINGSDefined Contribution Plan—A subsidiary has a defined contribution plan. The amounts of cost recognized for its contribution to
the plan were ¥28 million ($338 thousand) and ¥20 million for theyears ended March 31, 2011 and 2010, respectively. There was nocost recognized for the year ended March 31, 2009 as theCompanies did not have a defined contribution plan during theyear ended March 31, 2009.
Employee Early Retirement Program—The Companies provide
additional benefits to employees that elect to participate in the
Companies’ early retirement program. Retirement benefits of¥348 million ($4,205 thousand), ¥361 million and ¥157 million
were paid in addition to normal benefits and charged to selling,
general and administrative for the years ended March 31, 2011,2010 and 2009, respectively.
Termination Plan for Directors and Corporate Auditors—The
Company had and certain subsidiaries have termination plans for
directors and corporate auditors. Payment of termination benefits
to directors and corporate auditors is made in a lump-sum upon
termination and requires the approval of the shareholders before
payment. In June 2005, the Company rescinded its termination
plan for directors and corporate auditors upon the approval of its
shareholders. The amount of benefit for each individual was fixed
as of June 29, 2005 and will remain frozen until the retirement ofeach respective director and corporate auditor. The outstanding
liabilities were ¥317 million ($3,830 thousand) as of March 31,
2011, ¥339 million as of March 31, 2010 and 2009, and wererecorded in other long-term liabilities. Subsidiaries still maintainplans for their directors and corporate auditors. In accordance withthe guidance for determination of vested benefit obligation for adefined benefit pension plan, the subsidiaries recorded a liability
for termination benefits for directors and corporate auditors at theamount that would be needed if all directors and corporate
auditors were to resign at each balance sheet date. The liabilities
for termination benefits for directors and corporate auditors as ofMarch 31, 2011 and 2010 were ¥385 million ($4,652 thousand)and ¥377 million, respectively, and were included in liability for
termination and retirement benefits.

The Companies Act permits companies to distribute dividendsin-kind (non-cash assets) to shareholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporation of
the company so stipulate. The Companies Act provides certain
limitations on the amounts available for dividends or the purchaseof treasury stock. The limitation is defined as the amount available
for distribution to the shareholders, but the amount of net assets
after dividends must be maintained at no less than ¥3 million.
(b)	Increases/decreases and transfer of common stock, reserveand surplus
The Companies Act requires that an amount equal to 10% of
dividends must be appropriated as a legal reserve (a component ofretained earnings) or as additional paid-in capital (a component of
capital surplus) depending on the equity account charged upon
the payment of such dividends until the total of aggregate amountof legal reserve and additional paid-in capital equals 25% of thecommon stock. Under the Companies Act, the total amount of

67

additional paid-in capital and legal reserve may be reversed
without limitation. The Companies Act also provides that common
stock, legal reserve, additional paid-in capital, other capital surplus
and retained earnings can be transferred among the accounts
under certain conditions upon resolution of the shareholders.

(c) Treasury stock
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolution of
the Board of Directors. The amount of treasury stock purchased
cannot exceed the amount available for distribution to the shareholders which is determined by specific formula.

14. SHARE-BASED COMPENSATIONThe Company adopted an annual stock option plan in the year
ended March 31, 2009. Under the stock option plan, the Company
granted shares of its common stock to directors of the Company
excluding outside directors and directors of the Company’s wholly
owned subsidiary, Wacoal Corp., in the years ended March 31,
2011, 2010 and 2009. The Company believes that such awards
better align the interests of its directors with those of its shareholders, by sharing both risk and return from fluctuations in stock prices
and giving motivation to enhance its corporate value. The compensation cost is measured at fair value on the grant date. Options vest
over one year in proportion to the service months of directors, andare exercisable from the day after the date of retirement up to (i)twenty years from the grant date or (ii) five years from the day after
the date of retirement, whichever is earlier.
The fair value of the options is estimated by using the BlackScholes option-pricing model with following assumptions.

Expected dividend yield is based on the actual payout ofdividend in the last fiscal year and the closing price of theCompany’s common stock on the grant date. Expected volatility isbased on the historical volatility of the Company’s share over themost recent period commensurate with the expected term of theCompany’s stock options. Risk-free interest rate is based on theJapanese government bonds yield curve in effect at the time of
grant for a period commensurate with the expected term of theCompany’s share options. Expected term of options granted isbased on the average remaining service period of directors,
assuming that those who are granted options will render service
until the stated retirement date and they will exercise options
immediately after their retirement.
Expected dividends
Expected volatility
Risk-free interest rate
Expected term

2011

2010

2009

1.7%
31.5%
0.2%
3.6 years

2.1%
30.6%
0.5%
4.0 years

2.0%
24.7%
1.0%
4.8 years

A summary of option activity under the Plan as of March 31, 2011, and changes for the year ended March 31, 2011, were as follows:
Yen

SharesOutstanding as of April 1, 2010
GrantedExercised
Forfeited or expired
Outstanding as of March 31, 2011
Exercisable as of March 31, 2011

U.S. Dollars

Years

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual Term

102,000
46,000

¥1
1

$0.01
0.01

148,000
15,000

1
1

0.01
0.01

17.0 years
4.0

Millions of Yen

Thousands of
U.S. Dollars

Aggregate Intrinsic Value

¥155
16

$1,873193

The total intrinsic value of options exercised was ¥5 million for the year ended March 31, 2010. There were no options exercised for theyears ended March 31, 2011 and 2009.
Total compensation costs recognized for the years ended March 31, 2011, 2010 and 2009 were ¥50 million ($604 thousand), ¥55
million and ¥54 million, respectively. The total recognized tax benefits related thereto for the years ended March 31, 2011, 2010 and 2009were ¥20 million ($242 thousand), ¥22 million and ¥22 million, respectively.
The weighted-average grant date fair values of options granted for the years ended March 31, 2011, 2010 and 2009 were ¥1,081 ($13),¥1,084 and ¥1,137, respectively.
As of March 31, 2011, there were ¥9 million ($109 thousand) of total unrecognized compensation cost related to nonvested share-based
compensation arrangements granted under the Plan. That cost is expected to be recognized over three months.

Annual Report 2011

68

15. OTHER COMPREHENSIVE (LOSS) INCOME
The changes in the components of accumulated other comprehensive income (loss) including amounts attributable to noncontrollinginterests were as follows:
Millions of Yen

2010

2011

Foreign currency translation adjustments
Unrealized (loss) gain on securities:
Amount arising during the year
Reclassification adjustments
		 Net unrealized (loss) gain
Pension liability adjustment:
Amount arising during the year
Reclassification adjustment
		 Net unrealized (loss) gain
Other comprehensive (loss) income

2009

Pre-Tax
AmountTax(Expense)
CreditNet
Amount¥(3,003)¥   88¥(2,915)¥  870¥   (75)¥  795 ¥ (9,402)¥  692 ¥ (8,710)(2,843)
1,014(1,829)

1,170
(413)
757

(1,673)601(1,072)

4,319
1,293
5,612

(1,735)(526)(2,261)

2,584
767
3,351

4,030
(744)
3,286

(933)
564
(369)
¥(5,201)

380
(230)
150
¥ 995

(553)
334
(219)
¥(4,206)

1,575
1,123
2,698
¥9,180(641)(457)(1,098)¥(3,434)934(6,800)
666
228
1,600
(6,572)¥5,746 ¥(24,238)

Pre-Tax
Amount Tax Expense Net Amount

Pre-Tax
Amount(10,092)
1,828(8,264)Tax(Expense)
CreditNet
Amount(6,062)
1,084(4,978)2,768(4,032)
(93)
135
2,675
(3,897)¥6,653 ¥(17,585)

Thousands of U.S. Dollars

2011
Pre-Tax
AmountForeign currency translation adjustments
Unrealized loss on securities:
Amount arising during the year
Reclassification adjustments
		 Net unrealized loss
Pension liability adjustment:
Amount arising during the year
Reclassification adjustment
		 Net unrealized (loss) gain
Other comprehensive loss

Tax
(Expense)
Credit$(36,286) $ 1,063 $(35,223)(34,352)
12,252(22,100)

14,137(4,990)9,147Millions of Thousands of
Yen
U.S. Dollars

2011

2010

¥ 9,097(5,358)¥ 3,739¥ 9,445(6,322)¥ 3,123

2009

2011

¥12,553 $109,920(4,926) (64,741)¥ 7,627 $ 45,179

Domestic and foreign components of income taxes expenseconsist of:Millions of Thousands of
Yen
U.S. Dollars

Current:
Japan
Foreign
Deferred:Japan
Foreign
Total income taxes
WACOAL HOLDINGS(20,215)
7,262(12,953)(11,274)
4,592(6,682)
6,816(2,780)4,036(4,458)1,812(2,646)$(62,844) $12,022 $(50,822)

16. INCOME TAXES
Domestic and foreign components of income before income taxes,
equity in net income of affiliated companies, and net (income) loss
attributable to noncontrolling interests were summarized as follows:Japan
Foreign
Total

Net
Amount

2011

2010

2009

2011

¥ 2,882581
3,463¥ 2,851
310
3,161¥2,214503
2,717$ 34,824
7,020
41,844(1,398)(73)(1,471)¥ 1,992(1,726)
139(1,587)¥ 1,574522(16,892)
(26)
(882)
496
(17,774)¥3,213 $ 24,070

Income taxes in Japan applicable to the Companies, imposedby the national, prefectural and municipal governments, in theaggregate resulted in normal effective statutory tax rates ofapproximately 40.7% for the years ended March 31, 2011, 2010
and 2009. Foreign subsidiaries are subject to income taxes of thecountries in which they operate.
The Companies are subject to a number of different taxes
based on income. The effective income tax rates differed from thenormal statutory rates for the following reasons for the years
ended March 31, 2011, 2010 and 2009:
Normal Japanese statutory rates
Increase (decrease) in taxes
resulting from:Permanently non-deductible
expenses
Change in valuation allowanceUndistributed earnings ofassociated companiesDifferences in foreignsubsidiaries’ tax rate
Tax exemption
Unrecognized tax benefits
Impairment losses on goodwill
Other—net
Effective tax rates

2011

2010

2009

40.7%

40.7%

40.7%

10.3
18.2

13.0
(7.9)

5.8
4.1

3.1

2.6

(2.1)

(4.4)
(0.8)
3.1
(12.9)
(4.0)
53.3%

(5.4)
(1.1)
6.5

(3.4)
(0.3)
(1.0)

2.0
50.4%

(1.7)
42.1%

69

The approximate effect of temporary differences and tax loss carryforwards that gave rise to deferred tax balances as of March 31, 2011
and 2010 were as follows:
Millions of Yen
DeferredTax
AssetsSales returns
Allowance for doubtful receivables
Accruals not currently deductible
Inventory valuation
Accrued bonuses
Impairment charges on marketable securities and investments
Advanced depreciation on property, plant and equipment
Undistributed earnings of associated companies
Net unrealized gain on marketable securities and investments
Net realized gain on exchange of investments
Capitalized supplies
Enterprise taxes
Accrued vacation
Asset retirement obligation
Pension expense
Tangible fixed assets
Tax loss carryforwards
Intangible assets
Investment in subsidiaries
Other temporary differences
Total
Valuation allowance
Total

DeferredTax
Liabilities

DeferredTax
AssetsDeferredTax
Assets¥ 1,712
1,852
3,762
2,187

$ 20,288
22,30535,08923,200

205
173
832
238
1,351
1,442
3,185

232
190
763
268
1,484
1,624
4,053
2,233
1,042
160
11,784¥11,784

DeferredTax
Liabilities$   6,646
604
4,024
21,943
16,216
18,620¥ 1,679
1,846
2,904
1,920

540
478
15,264(4,910)¥10,354

2011

DeferredTax
Liabilities¥   783
333
298
1,583
1,166
1,571

¥   550
50
333
1,816
1,342
1,541

Thousands of U.S. Dollars

2010

2011

2,803
2,296
9,219
3,238
17,931
19,623
48,973540
138
13,838(3,452)¥10,386

2,726
1,878
119
14,236¥14,236

26,982
6,525
12,591
5,776
1,933
184,437
142,388(59,328)$125,109 $142,388

The valuation allowance increased by ¥1,458 million ($17,617 thousand) and ¥1,809 million for the years ended March 31, 2011 and2010, respectively.
As a result of changing the Companies’ legal structure, the Companies reversed certain of valuation allowance for the year ended March
31, 2010. Accordingly, the Companies utilized ¥721 million of tax loss carryforwards, and recognized the tax benefits of ¥293 million for theyear ended March 31, 2010.
As of March 31, 2011, certain subsidiaries had loss carryforwards which are available to offset future taxable income of such
subsidiaries expiring as follows:Year Carryforward Expires

Millions of Thousands of
Yen
U.S. Dollars

2012
2013
2014
2015
2016
2017
2018
Thereafter
Total¥   181 $   2,187
730
8,821
989
11,950
564
6,815
1,097
13,2552,736
33,0593,015
36,431
941
11,370¥10,253 $123,888

There was no portion of undistributed earnings of foreignsubsidiaries and foreign corporate joint ventures which weredeemed to be permanently invested as of March 31, 2011 and 2010.
A reconciliation of beginning and ending amount of unrecognized tax benefits was as follows:

Millions of Thousands of
Yen
U.S. Dollars

Balance at beginning ofyearAdditions based on tax
positions related to thecurrent yearAdditions for tax
positions of prior years
Reductions for tax
positions of prior years
Settlements with tax
authorities
Balance at end of year

2011

2010

2009

2011

¥ 321

¥106

¥ 420

$ 3,879

58

232

20

701

50
(191)

(41)

¥ 188

(26)
¥321

(2,308)
(334)
¥ 106

$ 2,272

Total amount of unrecognized tax benefits that, if recognized,
would affect the effective tax rate is ¥188 million ($2,272 thousand)and ¥321 million as of March 31, 2011 and 2010, respectively.

Annual Report 2011

70

Based on each of the items of which the Company is aware asof March 31, 2011, no significant changes to the unrecognized tax
benefits are expected within the next twelve months.
The Companies recognize interest and penalties accrued
related to unrecognized tax benefits in income taxes in the consolidated statements of income. Total amounts of interest and penalties recognized in the consolidated statements of income for theyears ended March 31, 2011, 2010 and 2009 were not material.

The Companies file income tax returns in Japan and various
foreign tax jurisdictions. In Japan the Companies are no longer
subject to regular income tax examinations by the tax authorities
for years before 2009 with few exceptions. For other countries,
the Companies are no longer subject to regular income tax examinations by the tax authorities for years before 2006 with few
exceptions. In the year ended March 31, 2009, the transfer pricing
examination of certain domestic subsidiaries’ 2002 to 2007 fiscal
year and certain the U.S. subsidiaries’ 2003 and 2004 fiscal year
was completed.

17. RELATED PARTY TRANSACTIONSThe Companies purchase merchandise from numerous suppliers
throughout the world, including certain affiliated companies of theCompanies. The Companies purchased merchandise from affiliatedcompanies in the amount of ¥1,131 million ($13,666 thousand),¥1,209 million and ¥1,674 million in the fiscal years ended March
31, 2011, 2010 and 2009, respectively. The accounts payable toaffiliated companies were ¥0 million ($4 thousand) and ¥15 million
as of March 31, 2011 and 2010, respectively.
The Companies also sell supplies, materials and products tocertain affiliated companies. Aggregate sales to affiliated companies were ¥537 million ($6,489 thousand), ¥354 million and ¥958
million in fiscal years ended March 31, 2011, 2010 and 2009. The
accounts receivable from affiliated companies were ¥91 million($1,100 thousand) and ¥60 million as of March 31, 2011 and 2010,
respectively.

The Companies earn royalties from the use of the Wacoal Brandby certain affiliated companies. The amount of royalty revenue
earned was ¥201 million ($2,429 thousand), ¥199 million and¥206 million in the fiscal years ended March 31, 2011, 2010 and2009, respectively. Other accounts receivables from affiliatedcompanies, which are categorized in other current assets in the
consolidated balance sheets, were ¥158 million ($1,909 thousand)and ¥163 million as of March 31, 2011 and 2010, respectively.
Transaction between the Company and President’s Immediate
Family—During the year ended March 31, 2010, the Company
purchased the building and land which were owned by the president’s immediate family to use as a Company’s memorial house forthe price based on a certification of real estate appraisal. The building
and land included in the consolidated balance sheet as of March 31,
2010 were ¥35 million and ¥539 million, respectively. There were nosuch transactions during the year ended March 31, 2011.

18. E ARNINGS PER SHARE AND AMERICANDEPOSITARY RECEIPT
Basic net income attributable to Wacoal Holdings Corp. per sharehas been computed by dividing net income attributable to Wacoal
Holdings Corp. by the weighted-average number of common stock
outstanding during each year. Diluted net income attributable to
Wacoal Holdings Corp. per share assumes the dilution that could
occur if share-based option to issue common stock were exercised.
The computation of earnings per American Depositary Receipt(“ADR”), each ADR representing 5 shares of common stock, isbased on the weighted-average number of common shares outstanding. The weighted-average number of common stock outstanding used in the computations of basic net income attributable
to Wacoal Holdings Corp. per share was 141,145,190 shares for
2011, 141,353,141 shares for 2010 and 142,316,921 shares for 2009.
The weighted-average number of diluted common stock outstanding used in the computations of diluted net income attributable to
Wacoal Holdings Corp. per share was 141,260,186 shares,
141,423,315 shares and 142,336,296 shares for 2011, 2010 and2009, respectively.

19. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Fair Value of Financial Instruments
The carrying amounts and fair values of financial instruments as of March 31, 2011 and 2010 were as follows:
Millions of Yen

2011

Thousands of U.S. Dollars

Carrying Amount

Fair Value

Carrying Amount

Fair Value¥ 4,819
29,22924¥34,072¥ 4,819
29,22924¥34,072$ 58,229
353,178290$411,697$ 58,229
353,178290$411,697¥ (49)(276)¥(325)¥ (49)(276)¥(325)$  (592)(3,335)$(3,927)$  (592)(3,335)$(3,927)

Assets:Marketable securities (Notes 3 and 20)
Investments (Notes 3 and 20)
Foreign exchange contracts (Note 20)
		 Total assets
Liabilities:
Foreign exchange contracts (Note 20)
Long-term debt including current portion
		 Total liabilities

WACOAL HOLDINGS

71

Millions of Yen

2010

Assets:Marketable securities (Notes 3 and 20)
Investments (Notes 3 and 20)
Foreign exchange contracts (Note 20)
		 Total assets
Liabilities:
Foreign exchange contracts (Note 20)
Long-term debt including current portion
		 Total liabilities

Carrying Amount

Fair Value¥ 6,529
32,743
61¥39,333¥ 6,529
32,743
61¥39,333¥ (78)(137)¥(215)¥ (78)(137)¥(215)

The carrying amounts of all other financial instruments approximate their estimated fair values.
Foreign Exchange Contracts—The Companies are exposed toforeign currency exchange risks on the transactions denominated inforeign currencies relating to its ongoing business operations. Suchrisks are primarily managed by using foreign currency exchange
contracts. The Companies measure forward currency exchange
contracts at the fair value since they are not designated as a hedge.
Long-Term Debt—The fair values for long-term debt are estimatedby discounted cash flow analysis, using rates currently available forsimilar types of borrowings with similar terms and remaining
maturities.
Limitations—Fair value estimates are made at a specific point in
time, based on relevant market information and information about

the financial instrument. These estimates are subjective in natureand involve uncertainties and matters of significant judgment andtherefore cannot be determined with precision. Changes inassumptions could significantly affect the estimates.
Concentration of Credit Risk—The Companies’ business consists
primarily of sales of women’s intimate apparel to a large number ofdiverse customers in the Japanese retail industry, which include
well established department stores, general merchandise storesand other general retailers and specialty stores. No single customer constitutes 10.0% or more of the total sales, although thegeneral retail customers that are consolidated companies in the
Aeon Group collectively accounted for approximately 10.0%,
10.4% and 9.8% of the total sales in fiscal years ended March 31,
2011, 2010 and 2009, respectively.

20. FAIR VALUE MEASUREMENTS
The guidance for fair value measurements defines fair value as theprice that would be received to sell an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market
participants at the measurement date. The guidance establishes athree-level fair value hierarchy that prioritizes the inputs used tomeasure fair value as follows:

Level 1—Inputs are quoted prices in active markets for identicalassets or liabilities.
Level 2—Inputs are quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable, and inputs
that are derived principally from or corroborated byobservable market data by correlation or other means.
Level 3—Inputs are unobservable.

Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2011 and 2010 were as follows:
Millions of Yen

2011

Assets:Marketable securities:
		 Government bonds
		 Municipal bonds
		 Corporate bonds
		 Mutual funds
			 Total marketable securities
Investments:
		 Listed shares
		 Mutual funds
			 Total investments
Derivative instruments:
		 Foreign exchange contracts
			 Total assets
Liabilities:
Derivative instruments:
		 Foreign exchange contracts

Level 1

Level 2¥   503257
760¥   10
1,277
2,772
4,059

29,13792
29,229¥29,989

Level 3

Total¥   503
10
1,277
3,029
4,819
29,13792
29,22924¥4,08324¥34,072

¥(49)

¥(49)
Annual Report 2011

72

Millions of Yen

2010

Assets:Marketable securities:
		 Government bonds
		 Municipal bonds
		 Corporate bonds
		 Bank debt securities
		 Mutual funds
			 Total marketable securities
Investments:
		 Listed shares
Derivative instruments:
		 Foreign exchange contracts
			 Total assets
Liabilities:
Derivative instruments:
		 Foreign exchange contracts

Level 1

Level 2

Level 3

¥ 1,160

1,160¥ 1,160
10
1,855
100
3,404
6,529

¥   10
1,855
100
3,404
5,369

32,743¥33,903

Total

32,743
61¥5,43061¥39,333

¥(78)

¥(78)
Thousands of U.S. Dollars

2011

Assets:Marketable securities:
		 Government bonds
		 Municipal bonds
		 Corporate bonds
		 Mutual funds
			 Total marketable securities
Investments:
		 Listed shares
		 Mutual funds
			 Total investments
Derivative instruments:
		 Foreign exchange contracts
			 Total assets
Liabilities:
Derivative instruments:
Foreign exchange contracts

Marketable securities and investments presented in Level 1 arevalued using an unadjusted quoted market price in active markets
with sufficient volume and frequency of transactions. Bonds
presented in Level 2 are valued by the financial institution using
quoted market price for identical instruments in markets that are
not active, and mutual funds presented in Level 2 are valued by thefinancial institution based on quoted prices in both active andinactive market for identical instruments which comprise funds.
As presented in Note 3, the Companies recorded impairment
charges on marketable securities and investments if a decline infair value of marketable securities and investments is determined
to be other than temporary.
Derivative instruments are comprised of foreign currency
exchange contracts. Financial instruments presented in Level 2 arevalued using quotes obtained from third parties.

WACOAL HOLDINGS

Level 1

Level 2$   6,078

3,106
9,184

$   121
15,43033,49449,045352,066
1,112
353,178$362,362

Level 3Total$   6,078
121
15,43036,60058,229352,066
1,112
353,178290$49,335

290$411,697$(592)$(592)

The changes in the fair value of the foreign currency exchange
contracts are recorded in earnings, since the foreign currency
exchange contracts are not designate as a hedge. The Companies
recognized a loss of ¥8 million ($97 thousand), gains of ¥103
million and ¥62 million in other - net of other income (expenses) inthe years ended March 31, 2011, 2010 and 2009, respectively.
The Companies recorded the derivative instruments as othercurrent assets and other current liabilities in the consolidatedbalance sheets at fair value of ¥24 million ($290 thousand) and¥49 million ($592 thousand), respectively as of March 31, 2011.
The derivative instruments are presented as other current assets
and other current liabilities in the consolidated balance sheets atfair value of ¥61 million and ¥78 million as of March 31, 2010.

73

Assets Measured at Fair Value on a Nonrecurring Basis
Assets measured at fair value on a nonrecurring basis as of March 31, 2011 and 2010 were as follows:
Millions of Yen

2011

Level 1

Level 2

Buildings and building improvements
Investments:
Unlisted shares
Goodwill (Note 8)
Trademark (Note 8)
Customer relationship (Note 8)

Level 3

Total

Total Losses¥  (107)¥    17
10,3674,757
725¥    17
10,367
4,757
725

(219)
(836)
(559)
(377)
¥(2,098)

Level 3

Total

Total Losses¥    616¥    6
16

1,378

1,378

¥    (4)(19)(71)(1,023)¥(1,117)

Level 3

Total

Millions of Yen

2010

Level 1

Level 2Land
Buildings and building improvements
Goodwill (Note 8)
Customer relationship (Note 8)

Thousands of U.S. Dollars

2011

Buildings and building improvements
Investments:
Unlisted shares
Goodwill (Note 8)
Trademark (Note 8)
Customer relationship (Note 8)

Buildings and building improvements held and used with acarrying amount of ¥107 million ($1,293 thousand) were written
down to their fair value of zero, because the Company decided toabandon an office building. An impairment charge of ¥107 million($1,293 thousand) was included in earrings for the year ended
March 31, 2011 in Wacoal Business (Domestic) Segment.
Certain unlisted securities with a carrying amount of ¥236
million ($2,852 thousand) were written down to their fair value of¥17 million ($205 thousand) in connection with the decline in fairvalue, which was mainly caused by a downturn of investees’
business operations. Impairment charges of ¥219 million ($2,646
thousand) were included in earrings for the year ended March 31,
2011. These unlisted securities presented in Level 3 are valued
based on the net assets value of the investees adjusted using cash
flows and other factors that would impact the fair value.
As of the end of March 31, 2011, goodwill with a carrying amountof ¥11,203 million ($135,367 thousand) is written down to its
implied fair value of ¥10,367 million ($125,266 thousand), resulting
in an impairment charge of ¥836 million ($10,101 thousand), whichis included in earnings for the year ended March 31, 2011. As of theend of March 31, 2010, goodwill with a carrying amount of ¥71
million was written down to its implied fair value of zero, resulting in
an impairment charge of ¥71 million, which was included in earnings for the year ended March 31, 2010. To measure the fair valuesof the reporting units, the Company used the expected present
value of future cash flows and incorporated relevant unobservable
inputs, such as management’s internal assumptions about future
cash flows and appropriately risk-adjusted discount rates, whichreflected the management’s estimate of assumptions that market

Level 1

Level 2

Total Losses$ (1,293)$    205
125,266
57,4808,760$    205
125,266
57,4808,760(2,646)(10,101)(6,755)(4,555)$(25,350)

participants would use in pricing the asset in a current transaction
as of the measurement date.
Trademark with a carrying amount of ¥5,316 million ($64,234
thousand) as of March 31, 2011, was written down to its fair of¥4,757 million ($57,479 thousand), resulting in recognition of an
impairment charge of ¥559 million ($6,755 thousand) for the year
ended March 31, 2011. The impairment arose due to the decline inits fair value, which was mainly caused by a downturn in consumption because of the general market condition. To measure the fairvalue of the trademark, the Company utilizes the relief-fromroyalty-method and incorporates relevant unobservable inputs,
such as management’s internal assumptions about future cash
flows, the rate of royalty, and appropriately risk-adjusted discountrate, which reflected the management’s estimate of assumptions
that market participants would use in pricing the asset in a current
transaction as of the measurement date. Future cash flows are
based on the management’s cash flow projections for the future
five years, and after five these years, future cash flows was estimated using the perpetuity growth rate of zero %. The management’s cash flow projections were developed using estimates for
expected future revenue growth rates, profit margins and working
capital levels of the reporting units. The rate of royalty used for thevaluation was based on the actual royalty ratio used in transactions. The risk-adjusted discount rate represents a weighted
average cost of capital (WACC) adjusted for inherent risk spread.
There was no impairment loss recognized related to thetrademark for the years ended March 31, 2010 and 2009.
Customer relationship with a carrying amount of ¥1,102 million($13,316 thousand) as of March 31, 2011 and ¥2,401 million as ofAnnual Report 2011

74

March 31, 2010 were written down to its fair of ¥725 million($8,760 thousand), resulting in recognition of impairment chargesof ¥377 million ($4,555 thousand) for the year ended March 31,
2011, and ¥1,378 million, resulting in recognition of impairment
charges of ¥1,023 million for the year ended March 31, 2010. The
impairments recorded for these years arose due to the decline inits fair value, which was mainly caused by a downturn in consumption because of the general market condition. To measure the fairvalue of the customer relationship, the Company uses the excess
earnings method and incorporates relevant unobservable inputs,
such as management’s internal assumptions about future cash
flows, the percentage of orders that the Company expects toreceive from the customers existed at the point of acquisition andappropriately risk-adjusted discount rate, which reflected the
management’s estimate of assumptions that market participants
would use in pricing the asset in a current transaction as of themeasurement date. The future cash flows are projected in thesame way as described in the trademark. The percentage of ordersthat the Company expects to receive from the customers existed
at the point of acquisition was estimated based on the historical
trend of the percentage of sales to the pre-acquisition customers.
Risk-adjusted discount rate representing a WACC was determinedusing the Capital Asset Pricing Model.
There was no impairment loss recognized for the customer
relationship for the year ended March 31, 2009.

21. SEGMENT INFORMATION
Operating Segment Information
The Companies have three reportable segments: “Wacoal business(domestic),” “Wacoal business (overseas),” and “Peach John,”
which are based on their location and brands. These segments
represent components of the Companies for which separate
financial information is available and for which operating profit(loss) is reviewed regularly by the management in deciding how toallocate the Companies’ resources and in assessing their performance. The accounting policies used for these reportable segments
are the same as those described in the summary of significant
accounting policies in Note 1.

“Wacoal business (domestic)” segment primarily produces andsells innerwear (consisting of foundation, lingerie, nightwear andchildren’s innerwear), outerwear, sportswear and hosiery. “Wacoal
business (overseas)” segment produces and sells innerwear(consisting of foundation, lingerie, nightwear and children’s innerwear), outerwear, sportswear and hosiery. “Peach John” segment
produces and sells innerwear (consisting of foundation, lingerie,nightwear and children’s innerwear), outerwear, and other textilerelated products, which are sold with “Peach John” brand.

Information about operating results and assets for each segment as of and for the years ended March 31, 2011, 2010 and 2009 was as follows:
Millions of Yen

2011

Net sales:
External customers
Intersegment
		 Total
Operating cost and expenses:
Operating cost and expenses
Amortization on other intangible assets (Note 8)
Impairment charges on goodwill (Note 20)
Impairment charges on other intangible assets (Note 20)
		 Total
Operating profit (loss)
Total assets

WACOAL HOLDINGS

WacoalBusiness(Domestic)

WacoalBusiness(Overseas)

Peach John

Other

Elimination¥110,856
2,134
112,990¥20,052
6,121
26,173¥11,71176
11,787¥23,107
4,588
27,695¥(12,919)(12,919)

107,370

24,852

27,357(12,919)

107,370
5,620
202,054

24,852
1,321
26,78812,763276
836
936
14,811(3,024)
21,45327,357338
20,910(12,919)

Consolidated¥165,726(55,860)

165,726
159,423276
836
936
161,471
4,255
215,345

75

Millions of Yen

2010

Net sales:
External customers
Intersegment
		 Total
Operating cost and expenses:
Operating cost and expenses
Amortization on other intangible assets (Note 8)
Impairment charges on goodwill (Note 20)
Impairment charges on other intangible assets (Note 20)
		 Total
Operating profit (loss)
Total assets

WacoalBusiness(Domestic)

WacoalBusiness(Overseas)

Peach John

Other

Elimination¥113,929
1,793
115,722¥18,8996,226
25,125¥13,224
7
13,231¥17,245
3,204
20,449¥(11,230)(11,230)

111,180

23,795

13,053
480

21,115(11,230)¥163,297

71
1,023
14,556(1,325)24,803

21,186(737)
20,535

Consolidated

111,180
4,542
205,136

23,795
1,330
26,632(11,230)

WacoalBusiness(Domestic)

WacoalBusiness(Overseas)

Peach John

Other

Elimination¥124,228
1,765
125,993¥22,323
6,148
28,471¥14,893
5
14,898¥10,832
2,943
13,775¥(10,861)(10,861)

118,523

26,903

13,587(10,861)

118,523
7,470
198,590

26,903
1,568
25,406

13,515480
13,995903
27,03013,587
188
13,751(10,861)

WacoalBusiness(Domestic)

WacoalBusiness(Overseas)

Peach John

Other

Elimination$1,339,487
25,786
1,365,273$242,291
73,961
316,252$141,506
918
142,424$279,205
55,437
334,642$(156,102)(156,102)

1,297,366

300,290

330,558(156,102)

1,297,366
67,9072,441,445

300,290
15,962
323,683

154,217
3,335
10,101
11,310178,963(36,539)259,219

330,558
4,084
252,658(156,102)(53,719)

163,297
157,913
480
71
1,023
159,487
3,810
223,387
Millions of Yen

2009

Net sales:
External customers
Intersegment
		 Total
Operating cost and expenses:
Operating cost and expenses
Amortization on other intangible assets (Note 8)
		 Total
Operating profit (loss)
Total assets

Consolidated¥172,276(51,291)

172,276
161,667480
162,147
10,129213,486

Thousands of U.S. Dollars

2011

Net sales:
External customers
Intersegment
		 Total
Operating cost and expenses:
Operating cost and expenses
Amortization on other intangible assets (Note 8)
Impairment charges on goodwill (Note 20)
Impairment charges on other intangible assets (Note 20)
		 Total
Operating profit (loss)
Total assets

Consolidated$2,002,489(674,963)

2,002,489
1,926,329
3,335
10,101
11,3101,951,075
51,4142,602,042

The Companies account for intersegment sales and transfers at cost plus a markup. Operating profit (loss) represents net sales less operating costs and expenses. Amortization and impairment charges on other intangible assets only represent amortization and impairment charges
on customer relationships or trademark related to the acquisition of Peach John, and do not include any other intangibles such as software.

Annual Report 2011

76

Products and Service Information
Information by products and services for the years ended March 31, 2011, 2010 and 2009 was as follows:

Innerwear:
Foundation and lingerieNightwear
Children’s underwear
		 Sub total
Outerwear / Sportswear
Hosiery
Other textile goods and related products
Others		 Total

Millions of Yen

Thousands of
U.S. Dollars

2011

2010

2009

2011

¥116,285
8,725
1,476
126,486¥ 17,400
1,666
7,498
12,676¥165,726¥116,068
9,438
1,608
127,114¥ 17,241
1,701
7,462
9,779
¥163,297¥123,368
11,0191,950
136,337¥ 15,498
1,657
6,270
12,514¥172,276$1,405,087
105,425
17,835
1,528,347$  210,247
20,13090,599153,166$2,002,489

Geographic Information
Information by major geographic area as of and for the years ended March 31, 2011, 2010 and 2009 was as follows:

Net sales:
Japan
Asia
Americas and Europe
		 Consolidated
Long-lived assets:
Japan
Asia
Americas and Europe
		 Consolidated

Millions of Yen

Thousands of
U.S. Dollars

2011

2010

2009

2011

¥145,136
9,155
11,435
165,726¥144,048
7,885
11,364
163,297¥149,927
7,573
14,776172,276$1,753,697
110,621138,171
2,002,489¥ 45,820
2,344
1,581
¥ 49,745¥ 47,392
2,527
1,901
¥ 51,820¥ 45,221
1,827
1,991
¥ 49,039$  553,649
28,323
19,103$  601,075

Net sales are attributed to countries or areas based on the location of sellers.
Countries or areas are classified according to geographical proximity. Long-lived assets represent property, plant and equipment.
22. SUBSEQUENT EVENTSOn May 13, 2011, the Board of Directors resolved to pay a cash dividend of ¥100 ($1) per 5 shares of common stock to holders of record asof March 31, 2011 (aggregate amount of ¥2,817 million ($34,038 thousand)).

WACOAL HOLDINGS

77

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Wacoal Holdings Corp. is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The company’s internal control over financial reportingis a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our boardof directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes
those policies and procedures that:• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of theassets of the company;• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made onlyin accordance with authorizations of management and directors of the company; and• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of thecompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projectionsof any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Wacoal Holdings Corp’s management assessed the effectiveness of internal control over financial reporting as of March 31, 2011.
In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control—Integrated Framework (the COSO criteria).
Based on its assessment, management concluded that, as of March 31, 2011, Wacoal Holdings Corp’s internal control over financial
reporting was effective based on the COSO criteria.
Wacoal Holdings Corp’s independent registered public accounting firm, Deloitte Touche Tohmatsu LLC, has issued an attestation
report on the effectiveness of our internal control over financial reporting as of March 31, 2011.

Yoshikata Tsukamoto
President and Representative Director

Ikuo Otani
Director and General Manager of Corporate Planning
June 29, 2011

Annual Report 2011

78

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte Touche Tohmatsu LLC
Shijokarasuma FT Square
20, Naginataboko-cho
Karasuma-higashiiru, Shijo-doriShimogyo-ku, Kyoto 600-8008
Japan
Tel: +81 (75) 222 0181
Fax: +81 (75) 231 2703
www.deloitte.com/jp
To the Board of Directors and Stockholders of Wacoal Holdings Corp.
Kyoto, Japan
We have audited the accompanying consolidated balance sheets of Wacoal Holdings Corp. and subsidiaries (the “Companies”) as of March 31, 2011
and 2010, and the related consolidated statements of income, comprehensive (loss) income, equity, and cash flows for each of the three years in the
period ended March 31, 2011, which are all expressed in Japanese yen. These financial statements are the responsibility of the Companies’ management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform 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, such consolidated financial statements present fairly, in all material respects, the financial position of Wacoal Holdings Corp. andsubsidiaries as of March 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended March
31, 2011, in conformity with accounting principles generally accepted in the United States of America.
Our audits also comprehended the translation of the Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made in conformity with the basis stated in Note 2. The translation of the financial statement amounts into U.S. dollars has been made solely forconvenience of readers outside of Japan.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companies’ internal
control over financial reporting as of March 31, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission and our report dated June 29, 2011 expressed an unqualified opinion on the Companies’
internal control over financial reporting.

June 29, 2011

WACOAL HOLDINGS79

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte Touche Tohmatsu LLC
Shijokarasuma FT Square
20, Naginataboko-cho
Karasuma-higashiiru, Shijo-doriShimogyo-ku, Kyoto 600-8008
Japan
Tel: +81 (75) 222 0181
Fax: +81 (75) 231 2703
www.deloitte.com/jp
To the Board of Directors and Stockholders of Wacoal Holdings Corp.
Kyoto, Japan
We have audited the internal control over financial reporting of Wacoal Holdings Corp. and subsidiaries (the “Companies”) as of March 31, 2011, basedon criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The
Companies’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Companies’ internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that amaterial weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive andprincipal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and proceduresthat (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management overrideof controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of theeffectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Companies maintained, in all material respects, effective internal control over financial reporting as of March 31, 2011, based on thecriteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended March 31, 2011 of the Companies and our report dated June 29, 2011 expressed an unqualified opinion on thosefinancial statements.

June 29, 2011

Annual Report 2011

80

CORPORATE DATA
As of March 31, 2011

Head office

Overseas joint ventures

29, Nakajima-cho, Kisshoin,
Minami-ku, Kyoto 601-8530, Japan
Tel: (075) 682-5111 Fax: (075) 661-5603

Wacoal Holdings Equity Owned%

Shinyoung Wacoal Inc. (South Korea)
Thai Wacoal Public Co., Ltd.
Taiwan Wacoal Co., Ltd.
Indonesia Wacoal Co., Ltd.
Wacoal Malaysia Sdn. Bhd.
Shanghai Yadie Fashion Co., Ltd.

25
34
50
42
50
20

Websitewww.wacoalholdings.jp/index_e.html
Date of foundation

June 15, 1946
Date of establishment
November 1, 1949

International network

Shareholders’ equity

136 Madison Avenue,
New York, NY 10016, U.S.A.
Tel: 1-212-532-6100

Wacoal America, Inc.

¥166,967 million
Number of employees (consolidated)

Wacoal France S.A.

15,983
Domestic principal subsidiaries
Wacoal Holdings Equity Owned

Wacoal Corp.
Peach John Co., Ltd.
LECIEN Corporation
Une nana cool Corp.
Kyushu Wacoal
Manufacturing Corp.
Niigata Wacoal Sewing Corp.
Fukuoka Wacoal Sewing Corp.
Miyazaki Wacoal Sewing Corp.
Hokuriku Wacoal Sewing Corp.
Torica Inc.
Nanasai Co., Ltd.
Wacoal Distribution Corp.

Vietnam Wacoal Corp.

%

100
100
100
100
100
100
100
100
100
57
82
100

7/11 Rue des Gazometres,
93218 Saint-Denis La Plaine Cedex,
FranceTel: 33-1-5593-0310
Wacoal (UK) Limited

4th Floor, Hardy House,
16-18 Beak Street,
London WIF 9RD,
United Kingdom
Tel: 44-207-439-6190
Wacoal Singapore Pte. Ltd.

215 Henderson Road,#01-08 Henderson Industrial Park,
Singapore 159554
Tel: 65-6270-2887
Wacoal Hong Kong Co., Ltd.

Domestic principal joint ventures
Wacoal Holdings Equity Owned%

House of Rose Co., Ltd.

20

8th Floor, EGL Tower,
No. 83 Hung To Road, Kwun Tong,
Kowloon, Hong Kong
Tel: 852-2811-3202%

Wacoal International Hong Kong Co., Ltd.

Overseas principal subsidiaries
Wacoal Holdings Equity Owned

Wacoal International Corp. (U.S.A.)
Wacoal America, Inc.
Wacoal France S.A.
Wacoal (UK) Limited
Wacoal Singapore Pte. Ltd.
Wacoal Hong Kong Co., Ltd.
Wacoal International
Hong Kong Co., Ltd.
Wacoal China Co., Ltd.
Guangdong Wacoal Inc.
Dalian Wacoal Co., Ltd.
Vietnam Wacoal Corp.
Wacoal Dominicana Corp.
Philippine Wacoal Corp.
Wacoal Sports Science Corp.
Wacoal (Shanghai) Human Science
R&D Co., Ltd.

100
100
100
100
100
80
100
100
100
100
100
100
67
100
100

8th Floor, EGL Tower,
No. 83 Hung To Road, Kwun Tong,
Kowloon, Hong Kong
Tel: 852-2561-9191
Wacoal China Co., Ltd.

Jia 16 Tongji North Road,
Beijing Economic & Technological
Development Area,
Beijing 100176, P. R. C.
Tel: 86-10-6787-2185
Guangdong Wacoal Inc.

Huahai Industrial District,
Xinhua Town, Huadu Qu,
Guangzhou City,
Guangdong, P. R. C.
Tel: 86-20-8686-1170
Dalian Wacoal Co., Ltd.

No.6 Fu An Street, Economic &Technical Development Zone, Dalian,
Liaoning 116600, P. R. C.
Tel: 86-411-8733-7722

WACOAL HOLDINGS

110 Amata Road,
Amata Modern Industrial Park,
Long Binh Ward, Bien Hoa City,
Dong Nai Province,
Socialist Republic of Vietnam
Tel: 84-61-3936770
Wacoal Dominicana Corp.

Las Americas Industrial Free Zone,
KM22, Autopista Las Americas,
Santo Domingo, Dominican Republic
Tel: 1-809-549-1090
Philippine Wacoal Corp.

3rd Floor, 6788 Ayala Avenue,
Oleden Square, Makati City 1226,
Philippines
Tel: 63-2-893-7432
Shinyoung Wacoal Inc.

345-54, Gasan-Dong Geumcheon Gu,
Seoul 153-023, Korea
Tel: 82-2-818-5120
Thai Wacoal Public Co., Ltd.

930/1 Soi Pradoo 1,
Sathupradith Bangkholaem,
Bangkok, Thailand
Tel: 66-2-289-3100
Taiwan Wacoal Co., Ltd.

15, Jingkwo Road, Taoyuan,
Taiwan, R.O.C.
Tel: 886-3-326-9369
Indonesia Wacoal Co., Ltd.

Jl. Tarikolot Rt.01/Rk.001 No. 59,
Citeureup-Bogor 16810, Indonesia
Tel: 62-21-560-0715
Wacoal Malaysia Sdn. Bhd.

5th Floor, Plaza Hamodal,
Lot 15, Jalan 13/2 (Section 13),46200 Petaling Jaya,
Selangor, Malaysia
Tel: 60-3-7960-8308
Wacoal Sports Science Corp.

136 Madison Avenue,
New York, NY 10016, U.S.A.
Tel: 1-212-743-9849
Wacoal (Shanghai) Human Science
R&D Co., Ltd.

5th Floor, Jiangnan Zaochuan Bldg.,
No.600 Lu Ban Road, Lu Wan District,
Shanghai 200023, P. R. C.
Tel: 86-21-6390-7448

81

INVESTOR INFORMATIONAs of March 31, 2011

Ownership and distribution of shares

Stock listings

Tokyo, Osaka, NASDAQ
Fiscal year-end

Securities firms
1.42%

March 31
Securities code

3591

Individuals
and others
20.88%

Financial institutions
38.68%

Other Japanesecompanies
18.66%

Foreign institutions
and individuals
20.36%

Common stock

Issued: 143,378,085 shares
Outstanding: 141,198,346 shares
Trading unit

1,000 shares
Shareholder register agent
for common stock

Mitsubishi UFJ Trust andBanking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan
American depositary receipts

Major shareholders

Cusip No.: 930004205
Ratio (ADR:ORD): 1:5
Exchange: NASDAQ
Symbol: WACLY

The Bank of New York Mellon as depositary bank for depositary receipt holders* 11.27
4.88
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
4.73
Meiji Yasuda Life Insurance Company
4.67
Mika Noguchi
3.73
Nippon Life Insurance Company, Limited.
3.28
The Bank of Kyoto, Ltd.
2.72
The Dai-ichi Mutual Life Insurance Company
2.54
The Shiga Bank, Ltd.
2.30
Japan Trustee Services Bank, Ltd. (Trust Account)
2.12
Mitsubishi UFJ Trust and Banking Corporation

Depositary

The Bank of New York Mellon
101 Barclay Street,
New York, NY 10286, U.S.A.
Tel: 1-212-815-8161
U.S. toll free: 888-269-2377(888-BNY-ADRS)URL: http://www.adrbny.com%* Shares deposited to issue American Depositary Shares traded on the NASDAQ stock market.

Number of shareholders

10,301

Stock price / Trading volume
¥

2,000

CONTENTSOVERVIEW

2

DIRECTION

4

PERFORMANCE

6

STRATEGY FROM THE
MANAGEMENT

8A SUSTAINABLE WACOAL

20

20,000SOCIAL BUSINESS30

15,000CORPORATE GOVERNANCE

32

10,000

BOARD OF DIRECTORS ANDCORPORATE AUDITORS

36

FINANCIAL SECTION

37

CORPORATE DATA80INVESTOR INFORMATION

81

1,500

1,000

500
Thousandshares

5,000
0

02/4

03/1

04/1

05/1

06/1

07/1

08/1

09/1

10/1

11/1

Forward-Looking Statements: Statements contained in this annual report that are not historical facts are forward-looking statements, which reflect the Company’s plans and expectations.
These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, performance, or achievements to differ
materially from those anticipated in these statements.

Annual Report 2011

WACOAL HOLDINGS Annual Report 2011

29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan

110826-TCY-AT3

Printed in Japan

REACHINGOUTWACOAL HOLDINGS Annual Report 2011