SAKATA INX CORPORATIONCONSOLIDATED BALANCE SHEETS
Years ended December 31, 2017 and 2016
Millions of yen
2017
ASSETS
Current assets:
Cash and deposits (Note 7) ··························································¥
Notes and accounts receivable - trade (Notes 6, 7 and 11):
Unconsolidated subsidiaries and affiliates ·····································
Other ················································································

10,002

2016

¥

9,297

2,546
42,55345,09918,637
613
2,244
(396)
76,1992,169
41,37043,53917,325
576
1,470
(491)
71,71631,90643,267
8,983
1,394
919
2,820
89,289(52,256)
37,03330,074
41,933
8,921
1,695
569
2,849
86,041(50,188)
35,853Long-term loans receivable ··························································
Deferred tax assets (Note 15)························································
Other ····················································································
Allowance for doubtful accounts ···················································
Total investments and other assets ··············································

14,504
14,70429,208
952
212
1,498
(464)
31,406

14,25912,864
27,123
985
193
1,584
(492)
29,393

Intangible assets:
Other ····················································································
Total intangible assets ·····························································
¥

852
852
145,490

1,050
1,050
138,012Inventories (Note 9) ··································································
Deferred tax assets (Note 15)························································
Other ····················································································
Allowance for doubtful accounts ···················································
Total current assets ································································

Property, plant and equipment (Notes 4 and 11):
Buildings and structures······························································
Machinery, equipment and vehicles ················································
Land ····················································································
Lease assets ············································································
Construction in progress ·····························································
Other ····················································································
Accumulated depreciation ···························································Net property, plant and equipment ··············································
Investments and other assets:
Investments in (Notes 5, 7, 8 and 11):
Unconsolidated subsidiaries and affiliates······································
Other ················································································

The accompanying notes are an integral part of these statements.

1¥

Millions of yen
2017
LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable - trade (Notes 6, 7 and 11):
Unconsolidated subsidiaries and affiliates ·································¥
Other ············································································
Short-term loans payable (Note 7, 10 and 11) ···································
Current portion of long-term loans payable (Notes 7, 10 and 11) ············
Lease obligations ····································································
Accrued expenses ···································································
Income taxes payable ·······························································
Provision for bonuses ·······························································
Other (Note 11) ······································································
Total current liabilities ··························································

029,332
29,332
5,343
4,189
214
3,623
994
647
3,626
47,968Non-current liabilities:
Long-term loans payable (Notes 7, 10 and 11) ··································
Lease obligations ····································································
Deferred tax liabilities (Note 15) ··················································Net defined benefit liability (Note 14) ············································
Asset retirement obligations ························································
Other (Note 11) ·······································································
Total non-current liabilities ·····················································
Total liabilities ···································································
¥

6,158
328
4,922
5,026
72
2,249
18,75566,723

2016

¥

¥

4
27,392
27,396
3,584
6,203
266
3,655
895
631
2,674
45,304

6,572
389
3,985
5,261
71
2,116
18,394
63,698Contingent liabilities (Note 16)
Net Assets (Note 24):
Shareholders’ equity
Capital stock:
Authorized – 144,000,000 shares
Issued – 62,601,161 shares ·····················································¥
Capital surplus ·······································································
Retained earnings ···································································
Treasury shares, at cost – 4,201,482 shares in December 2017 and
2,093,210 shares in December 2016 ··············
Total shareholders’ equity ·······················································
Accumulated other comprehensive income
Valuation difference on available-for-sale securities ···························
Deferred gains or losses on hedges ···············································
Foreign currency translation adjustment ·········································
Remeasurements of defined benefit plans ·······································
Total accumulated other comprehensive income ·····························
Non-controlling interests ···························································
Total net assets ····································································
¥

7,473
5,673
65,6387,473
5,673
59,053(4,046)74,738(643)
71,556

4,957
2(2,612)(1,435)912
3,117
78,767
145,490

4,027(1)(2,615)(1,605)(194)
2,952
74,314
138,012

The accompanying notes are an integral part of these statements.

2

¥

¥

SAKATA INX CORPORATIONCONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2017 and 2016

Net sales ······················································································
Cost of sales ·················································································
Selling, general and administrative expenses (Note 17) ····························
Operating income ···································································

Millions of yen
2017
2016
¥
157,303¥
151,199
120,371
113,774
28,35927,306
8,573
10,119Other income (expenses):
Interest and dividend income ···························································
Real estate rent ···········································································
Equity in earnings of affiliates ·························································
Interest expenses ·········································································
Foreign exchange gains and losses ····················································
Gain on sales of property, plant and equipment ······································
Gain on sales of investment securities·················································
Subsidy income ··········································································
Insurance income ········································································
Impairment loss (Note 18) ······························································
Loss on disaster ··········································································
Loss on sales of property, plant and equipment ······································
Loss on retirement of property, plant and equipment (Note 19) ···················
Loss on valuation of investment securities ···········································
Plant transfer expenses ··································································
Other, net ·················································································
Income before income taxes ······················································
Income taxes:
Current ····················································································
Deferred (Note 15) ······································································Net income ···················································································Net income attributable to non-controlling interests································Net income attributable to owners of parent ····································

¥

378
198
1,784
(247)
390
1,124
100
200
(175)
(70)
(0)
(72)
174
12,357

400
191
1,670
(263)
(323)
699
3
100
(236)
(32)
(118)
74
12,284

3,092
375
3,467

3,395
403
3,798

8,890
(506)
8,384

¥

8,486
(648)
7,838

¥
¥

129.5328.00

Yen
Net income per share of capital stock (Note 26) ········································Cash dividends per share applicable to the year (Note 26)·····························¥¥

The accompanying notes are an integral part of these statements.

3

142.7630.00

SAKATA INX CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2017 and 2016

Net income ·····················································································
Other comprehensive income (Note 20):
Valuation difference on available-for-sale securities ··································
Deferred gains or losses on hedges ······················································
Foreign currency translation adjustment ················································
Remeasurements of defined benefit plans, net of tax ··································
Share of other comprehensive income of affiliates accounted
for using equity method··································································
Total other comprehensive income ······················································
Comprehensive income ·····································································
Comprehensive income attributable to:
Owners of parent ···········································································
Non-controlling interests ··································································

Millions of yen
2017
2016
¥
¥
8,890
8,486

971
1
(247)
157

718
(1)
(1,468)
(950)

¥

174
1,056
9,946

¥

(403)
(2,104)
6,382

¥
¥

9,490
456

¥
¥

5,855
527

The accompanying notes are an integral part of these statements.

4

SAKATA INX CORPORATIONCONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
Year ended December 31, 2017
Millions of yen
Number ofshares ofcommon stock
Balance at the beginning of current period ························ 62,601,161

Capital stock

Capital surplus

¥

¥

7,473
-

-

-

-

(74)

-

(74)

Balance at the end of current period ································ 62,601,161

7,473

5,673

6,585
65,638(3,403)(4,046)

3,182
74,738

¥

¥

¥

Total
shareholders’equityTreasuryshares-Dividends of surplus (¥29.0 per share) ·····························Net income attributable to owners of parent ·······················
Purchase of treasury shares ··········································
Change of scope of consolidation inentities accounted for using equity method ······················Net changes of items other thanshareholders’ equity·············································
Total changes of items during the period ··························

5,673
-

Retainedearnings¥

59,053(1,725)
8,384
-

¥

¥

(643)
(3,403)¥¥71,556(1,725)
8,384(3,403)

Millions of yen
Valuationdifference on
available-forsale securities

Foreigncurrencytranslation
adjustment

Deferred
gains or losses
on hedges¥¥
Balance at the beginning of current period ························

4,027

Dividends of surplus (¥29.0 per share) ·····························Net income attributable to owners of parent ·······················
Purchase of treasury shares ··········································
Change of scope of consolidation inentities accounted for using equity method ······················Net changes of items other thanshareholders’ equity·············································
Total changes of items during the period ··························

-

-

-

(1,605)
-

-

-

-

930
930

3
3

3
3

Balance at the end of current period ································
¥

4,957

¥

(1)

¥

Remeasurementsof defined benefit
plans

2

¥

(2,615)(2,612)¥¥

The accompanying notes are an integral part of these statements.
5

Total
accumulated
othercomprehensive
income¥(194)

Non-controllinginterests
¥

2,952

Total
net assets¥

74,314--(1,725)
8,384(3,403)

-

-

-

(74)

170
170

1,106
1,106

165
165

1,271
4,453

(1,435)

¥

912

¥

3,117

¥

78,767

SAKATA INX CORPORATIONCONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
Year ended December 31, 2016
Millions of yen
Number ofshares ofcommon stock
Balance at the beginning of current period ························ 62,601,161

Capital stock

Capital surplus

¥

¥

-

7,473
-

Balance at the end of current period ································ 62,601,161

7,473

Dividends of surplus (¥25.0 per share) ·····························Net income attributable to owners of parent ·······················
Purchase of treasury shares ··········································
Disposal of treasury shares ··········································Net changes of items other thanshareholders’ equity ·········································
Total changes of items during the period ··························

¥

¥

5,673
0
0
5,673

Retainedearnings¥¥

52,728(1,513)
7,838
6,325
59,053

Total
shareholders’equityTreasuryshares
¥

¥

(643)
(0)
0
(0)
(643)

¥

¥

65,231(1,513)
7,838
(0)
0
6,325
71,556

Millions of yen
Valuationdifference on
available-forsale securities¥
Balance at the beginning of current period ························
Dividends of surplus (¥25.0 per share) ·····························Net income attributable to owners of parent·······················
Purchase of treasury shares ··········································
Disposal of treasury shares ·········································Net changes of items other thanshareholders’ equity·············································
Total changes of items during the period ··························

3,281
-

Balance at the end of current period ································
¥

4,027

Foreigncurrencytranslation
adjustment

Deferred
gains or losses
on hedges
¥

746
746

0
-

¥

(1)
(1)
¥

(823)
-

¥

(1,792)(1,792)(1)¥(2,615)¥The accompanying notes are an integral part of these statements.
6

(668)
-

Total
accumulated
othercomprehensive
income
¥
1,790
-

(937)
(937)

(1,984)(1,984)Remeasurementsof defined benefit
plans(1,605)¥(194)

Non-controllinginterests
¥

2,599
-

Total
net assets
¥

353
353
¥

2,952

69,620(1,513)7,838(0)
0(1,631)
4,694¥

74,314

SAKATA INX CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2017 and 2016
Millions of yen
2017
Cash flows from operating activities:
Income before income taxes ······························································
Depreciation and amortization ······················································
Impairment loss ·······································································
Amortization of goodwill ····························································
Increase (decrease) in allowance for doubtful accounts ·························
Increase (decrease) in net defined benefit liability ·······························
Increase (decrease) in provision for bonuses······································
Interest and dividend income ·······················································
Interest expenses······································································
Equity in (earnings) losses of affiliates ············································
Loss (gain) on sales of property, plant and equipment ···························
Loss on retirement of property, plant and equipment ····························
Loss (gain) on sales of investment securities······································
Loss (gain) on valuation of investment securities ································
Subsidy income ·······································································
Insurance income ·····································································
Loss on disaster ·······································································
Plant transfer expenses·······························································
Decrease (increase) in notes and accounts receivable - trade ···················
Decrease (increase) in inventories ··················································
Increase (decrease) in notes and accounts payable ·······························
Other, net ··············································································
Subtotal ······································································
Interest and dividend income received ·············································
Interest expenses paid ································································
Proceeds from insurance income ···················································
Proceeds from subsidy income ·····················································
Income taxes paid ····································································Net cash provided by (used in) operating activities ·······································¥Cash flows from investing activities:
Purchase of property, plant and equipment ·············································
Proceeds from sales of property, plant and equipment ································
Purchase of investment securities ························································
Proceeds from sales of investment securities ···········································
Payment of loans receivable ······························································
Collection of loans receivable ····························································
Other, net ···················································································Net cash provided by (used in) investing activities ·······································

The accompanying notes are an integral part of these statements.

7

12,357
3,703
(145)
145
15
(378)
247
(1,784)70(1,124)
0
(100)
(200)
175
72
(1,609)(1,564)
1,923(264)
11,539
729
(249)
30
150
(2,997)9,202(3,809)
29
(224)
1,965
(48)
56
(707)
(2,738)2016¥

12,284
3,495
236
26
(2)
151
36
(400)
263
(1,670)
(667)
118
(3)
(100)
(160)
(450)
32
563
13,752
720
(260)
248
150
(2,913)
11,697(5,589)1,293(1,552)
15
(975)
48
32
(6,728)

Millions of yen
2017
2016
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable ··································
Proceeds from long-term loans payable ·················································
Repayment of long-term loans payable ·················································
Purchase of treasury shares ·······························································Cash dividends paid ·······································································
Dividends paid to non-controlling interests ············································
Other, net ···················································································Net cash provided by (used in) financing activities ·······································

1,738
3,877
(6,189)(3,403)(1,725)(292)(265)(6,259)

(548)
2,669
(3,674)(0)(1,513)(174)(312)(3,552)

Effect of exchange rate change on cash and cash equivalents ·······················

(151)

(9)

Net increase (decrease) in cash and cash equivalents ·································Cash and cash equivalents at beginning of period ·····································Cash and cash equivalents at end of period （Note 21） ······························

54
9,297
9,351

1,408
7,889
9,297

¥

The accompanying notes are an integral part of these statements.

8¥

SAKATA INX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.

Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of SAKATA INX CORPORATION (the“Company”) and its consolidated subsidiaries have been prepared in accordance with the provisions set forthin the Japanese Financial Instruments and Exchange Law and its related accounting regulations and in
conformity with generally accepted accounting principles in Japan (“Japanese GAAP”), which are different
in certain respects as to application and disclosure requirements from International Financial ReportingStandards (IFRS).
The accounts of the Company’s consolidated foreign subsidiaries are based on IFRS or generally
accepted accounting principles in the United States of America (U.S. GAAP). The accompanying
consolidated financial statements have been restructured and translated into English with some expanded
descriptions and the inclusion of consolidated statements of shareholders’ equity from the consolidated
financial statements of the Company prepared in accordance with Japanese GAAP and filed with theappropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments andExchange Law. Some supplementary information included in the statutory Japanese language consolidated
financial statements, but not required for fair presentation, is not presented in the accompanying consolidated
financial statements.
2.

Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company and its twenty-threesignificant subsidiaries (twenty-three in 2016). The principal subsidiaries of the Company were THE
INX GROUP LIMITED, INX International Ink Co. SAKATA INX (INDIA) PRIVATE LIMITED and
P.T. SAKATA INX INDONESIA. All significant intercompany transactions and accounts have been
eliminated.
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including
the portion attributable to non-controlling shareholders, are evaluated using the fair value at the time theCompany acquired control of the respective subsidiary. Differences between the cost of investments inconsolidated subsidiaries and the equity in the net assets at the date of acquisition are amortized over a
period that is within twenty years.
The equity method was applied to six affiliates (six in 2016). The principal affiliate of the Company
was SIIX Corporation.
The consolidated financial statements do not include the accounts of three unconsolidated subsidiaries(two in 2016), and the equity method was not applied to these subsidiaries because they were immaterial.
The principal unconsolidated subsidiary was Creative Industria e Comercio Ltda.
Securities
The Companies classify securities as (a) securities held for trading purposes (“trading securities”), (b)debt securities intended to be held to maturity (“held-to-maturity debt securities”), (c) equity securities
issued by subsidiaries and affiliated companies and (d) all other securities that are not classified in any of theabove categories (“available-for-sale securities”).
The Companies do not hold trading securities or held-to-maturity debt securities. Equity securities
issued by subsidiaries and affiliated companies accounted for by the equity method are stated at moving
average cost. Available-for-sale securities with available fair values are stated at fair value. Unrealized gains
and unrealized losses on these securities are reported, net of applicable income taxes, as a separate
component of shareholders’ equity. Realized gains and losses on the sales of such securities are computed
using moving average cost. Other securities with no available fair value are stated at moving average cost.

9Inventories
Inventories of the Company and its consolidated domestic subsidiaries are stated at cost based on themoving average method, in which the amount of inventories shown on the balance sheet are written down
based on any decrease in profitability.
Inventories of the consolidated foreign subsidiaries are stated principally at the lower of cost or
market, cost being determined by the first-in, first-out method.
Property, plant and equipment
Property, plant and equipment are carried at cost. The Company and its consolidated domestic
subsidiaries depreciate property, plant and equipment principally by the straight-line method over theestimated useful life of the asset.
The range of useful lives is summarized as follows:
Buildings and structures
Machinery, equipment and vehicles
Other

3 to 60 years
2 to 17 years
2 to 20 years

Intangible assets
Intangible assets consist of in-house software and other. The straight-line method is used to amortize
intangible assets. The amortization of in-house software is computed using the straight-line method based on
the estimated useful life of mainly five years.
Finance leases
Lease assets under finance lease transactions that do not transfer title of the lease assets are capitalized
and depreciated on a straight-line basis with the lease period used as the useful life and no residual value.
Finance lease transactions that did not transfer title of the lease assets and that commenced prior to
April 1, 2009 are accounted for as operating leases.
Allowance for doubtful accounts
The Company and its consolidated subsidiaries (the “Companies”) have adopted the policy ofproviding an allowance for doubtful accounts in an amount sufficient to cover possible losses on collection
mainly by estimating the uncollectible amounts of certain receivables and applying a percentage based oncollection experience to the remaining receivables.
Bonuses
The Company and certain consolidated subsidiaries provide for employees’ bonuses at the balance
sheet date based on the estimated amounts of projected bonus payments.
Retirement benefits
1. Method used to attribute estimated amounts of retirement benefits to periods
In calculating retirement benefit obligations, the method used to attribute the estimated amount of
retirement benefits to a period until the end of the consolidated fiscal year is mainly based on the benefit
formula basis.
2. Accounting methods for actuarial difference and prior service cost
Prior service cost is recognized mainly as current costs, and actuarial gains and losses are recognizedin expenses using the straight-line method over mainly 15 years, a period which reflects the average of theestimated remaining service years of employees, commencing with the current period.

10Translation of foreign currencies
Receivables and payables denominated in foreign currencies are translated into Japanese yen at
year-end rates. All revenues and expenses in foreign currencies are translated at the exchange rates
prevailing when such transactions are made. The resulting gains and losses are recognized in the statements
of income.
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at
year-end rates, except for equity, which is translated at historical rates. Differences arising from thetranslations are presented as “Foreign currency translation adjustment” and “Non-controlling interests” in net
assets. Income statement accounts of the consolidated foreign subsidiaries are translated at average annual
rates.
Derivatives and hedge accounting
The Companies state derivative financial instruments at fair value and recognize changes in the fairvalue as gain or loss unless the derivative financial instruments are used for hedging purposes.
If derivative financial instruments are used as hedges and meet certain hedging criteria, the Companies
defer recognition of gain or loss resulting from changes in the fair value of the derivative financial
instruments until the corresponding loss or gain on the hedged items is recognized. However, if forward
foreign exchange contracts are used as hedges and meet certain hedging criteria, the forward foreignexchange contracts and hedged items are accounted for at the forward foreign exchange contact rate. If
interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or
received under the interest rate swap contract is added to or deducted from the interest on the hedged assets
or liabilities for which the interest rate swap contracts were executed.
The following summarizes hedging derivative financial instruments used by the Companies and theitems hedged:
Hedging instruments
Forward foreign exchange contracts
Currency swap contracts
Interest rate swap contracts

Hedged items
Receivables and payables in foreign currency and others
Loans payable in foreign currency
Interest on loans payable in foreign currency and loans payable

The Companies use derivative financial instruments for hedging purposes to mitigate the risk offluctuation in foreign currency exchange rates and interest rates.
The Companies evaluate hedging effectiveness by confirming a correlation between the hedging
instruments and the hedged items. However, interest rate swap contracts that meet the requirements for
special treatment are omitted from an assessment of effectiveness.
Cash and cash equivalents
Cash on hand, readily available deposits and short-term highly liquid investments with maturities notexceeding three months at the time of purchase are considered to be cash and cash equivalents.
Research and development expenses
Research and development expenses are charged to income as incurred. Research and development
expenses for the year ended December 31, 2017 and 2016 were ¥3,219 million and ¥3,108 million,
respectively.

11

Income taxes
Income taxes comprise corporation tax, prefectural and municipal inhabitants taxes and enterprise tax.
The asset-liability approach is used to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for income tax purposes and operating loss and tax credit
carryforwards.
Consumption taxes
Consumption taxes are excluded from revenue and expense accounts.
Amounts per share(a) Net income per share of common stock
The Companies have adopted ASBJ Statement No. 2, “Accounting Standard for Earnings Per Share,”and Financial Accounting Standards Implementation Guidance No. 4, “Implementation Guidance for
Accounting Standard for Earnings Per Share.”(b) Cash dividends per share
Cash dividends per share presented in the statements of income represent the cash dividends declaredapplicable to the year, including dividends declared and paid after the end of the year.
Net assets
Under the Japanese Corporation Law (the “Law”) and regulations, the entire amount paid for new
shares is required to be designated as common stock. However, a company may, by a resolution of the Boardof Directors, designate an amount not exceeding one half of the price of the new shares as additional paid-in
capital, which is included in capital surplus.
The Law requires that an amount equal to 10% of dividends must be appropriated as additional paid-in
capital or legal earnings reserve until the total aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. However, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends. The maximum amount that theCompany can distribute as dividends is calculated based on the nonconsolidated financial statements of theCompany in accordance with the Law.
Reclassification
Certain reclassifications have been made to the consolidated financial statements for the year ended
December 31, 2016 to conform to the presentation for the year ended December 31, 2017.

3.

Additional Information
Application of ‘Revised Implementation Guidance on Recoverability of Deferred Tax Assets’
The Company and its domestic subsidiaries adopted ‘Revised Implementation Guidance on
Recoverability of Deferred Tax Assets’ (ASBJ Guidance No. 26, March 28, 2016) from the beginning of the
fiscal year ended Decembeｒ 31, 2017.
Impact of enactment of tax reform in the U.S.
In the U.S., the new tax reform act, "The Tax Cuts and Jobs Act of 2017," was enacted on December
22, 2017.
As a result, Net income attributable to owners of parent for the year ended December 31, 2017
decreased by ¥68 million.

12

4.

Deferred Capital Gains on Tangible Fixed Assets
Under certain conditions, such as the exchange of similar kinds of fixed assets, gains from insurance
claims and sales and purchases resulting from expropriation, Japanese tax laws permit companies to defer
gains arising from such transactions by reducing the cost of the assets acquired. Accordingly, deferred
capital gains from insurance claims were deducted from the cost of replacement properties, which amounted
to ¥41 million as of both December 31, 2017 and 2016.
5.

Securities Lent under Loan Agreements
Investment securities included securities lent of ¥636 million as of December 31, 2016.

6.

Effect of Bank Holiday
As financial institutions in Japan were closed on both December 31, 2017 and 2016, amounts thatwould have been settled on December 31 were collected or paid on the following business day. The amounts
actually settled on the first business day in January, 2017 and 2016 were as follows:
Millions of yen
2017
Notes and accounts receivable ····································································¥
935
Notes and accounts payable ·······································································
518

2016
¥

958
373

7.

Financial Instruments
1. Qualitative information on financial instruments(1) Policies for using financial instruments
The Companies have policies to limit fund management to the use of highly secure financial assets
such as short-term deposits and financing to the use of bank loans. Derivative transactions are used to
manage the risk of fluctuation in the interest rates of bank loans with variable interest rates. The Companies
do not use derivative transactions for speculation.
(2) Details of risk and risk management for financial instruments
Operating receivables such as “Notes and accounts receivable - trade” are exposed to customer credit
risk. To manage such risk, due dates and the balances of operating receivables by customer are monitored byreviewing overdue receivable reports. In addition, credit research is performed regularly on customers whose
accounts need attention.
Securities such as available-for-sale securities consist mainly of securities of parties with whom theCompanies have business relationships and are exposed to market fluctuations risk. To mange such risk, theCompanies monitor the fair value of the securities and the financial condition of the investees regularly toevaluate investment policy, taking the business relationships with the investees into consideration.
Operating payables such as “Notes and accounts payable - trade” are mostly due within one year.
Short-term loans payable are used as financing mainly for operating transactions, and long-term loans
payable and lease obligations on finance leases are used as financing mainly for capital expenditure.
Loans payable at variable interest rates are exposed to the risk of interest rate fluctuation. However,for some long-term loans payable, derivative transactions, namely interest rate swap contracts, are used as
hedging instruments to avoid interest rate risk and stabilize interest expense. Hedge effectiveness testing is
not conducted as the interest rate swap contracts meet certain hedging criteria.
The execution and management of derivative transactions are conducted under the Company’sderivative transaction management rules and regulations, and the counterparties to derivative financial
instruments are limited to high credit rating financial institutions to mitigate credit risk.
Operating payables and bank loans are exposed to liquidity risk, but the Companies manage the riskby preparing and reviewing respective monthly cash management plans.

13(3) Supplementary explanation for the fair value of financial instruments
The contract amounts for the derivative transactions under Note 12, “Derivative Transactions,” do notreflect the market risk of the derivative transactions themselves.
2. Fair values of financial instruments
Consolidated balance sheet amounts and fair values of financial instruments and any difference as ofDecember 31, 2017 and 2016 are set forth in the tables below.
Note that the following tables do not include fair values for financial instruments for which the fairvalue was extremely difficult to measure.
Millions of yen

Year ended December 31, 2017
Consolidatedbalance sheet
amount(1) Cash and deposits ································· ¥ 10,002(2) Notes and accounts receivable - trade··········
45,099(3) Investments:
Securities in affiliates ···························
12,728Available-for-sale securities ···················
13,261
Total assets ············································· ¥ 81,090(1) Notes and accounts payable - trade············· ¥ 29,332(2) Short-term loans payable ························
5,343(3) Long-term loans payable ························
10,347
Total liabilities ········································· ¥ 45,022
Derivative transactions (*) ···························
6

Fair value

Difference

¥

¥

¥
¥

¥

10,00245,09926,13813,261
94,50029,332
5,343
10,33245,007
6¥¥¥

13,41013,410(15)(15)-(*) Derivative assets and (liabilities) are on a net basis.
Millions of yen

Year ended December 31, 2016
Consolidatedbalance sheet
amount(1) Cash and deposits ································· ¥9,297(2) Notes and accounts receivable - trade··········
43,539(3) Investments:
Securities in affiliates ···························
11,463Available-for-sale securities ···················
12,672
Total assets ············································· ¥ 76,971(1) Notes and accounts payable - trade············· ¥ 27,396(2) Short-term loans payable ························
3,584(3) Long-term loans payable ························
12,775
Total liabilities ········································· ¥ 43,755
Derivative transactions (*) ···························
32

Fair value

Difference

¥

¥

¥
¥

¥

9,297
43,53921,327
12,672
86,83527,396
3,584
12,781
43,761
32

¥
¥

¥

9,864
9,864
6
6
-

(*) Derivative assets and (liabilities) are on a net basis.
Note 1: Determination of fair value of financial instruments, securities and derivative transactions
Assets(1) Cash and deposits and (2) Notes and accounts receivable - trade
The fair value approximates the carrying amount because of the short maturity of these instruments.

14(3) Investments
The fair value of securities is stated at the quoted market price. The fair value of investment trusts
approximates the carrying amount because of the short maturity.
Securities are classified as securities in affiliates or available-for-sale securities.
The consolidated balance sheet amount, acquisition cost and any difference for securities as ofDecember 31, 2017 and 2016 were as follows:
Millions of yen

Year ended December 31, 2017
Consolidatedbalance sheet
amountAcquisition cost(*)

Difference(1) Securities withconsolidated balance sheet amountexceeding acquisition cost ······················¥ 25,813¥
6,552¥
19,261(2) Other ·····································
Subtotal ··································
25,813
6,552
19,261(1) Securities withconsolidated balance sheet amountnot exceeding acquisition cost ············11(0)(2) Other ·····································
175
175
Subtotal ··································
176
176
(0)
Total ····················································¥ 25,989¥
6,728¥
19,261(*) Acquisition cost is the consolidated balance sheet amount after write-down.
The amount of write-down for the year ended December 31, 2017 was 0 million, and the amount ofsales was ¥1,965 million and the amount of gain on sales was ¥1,124 million.
Millions of yen

Year ended December 31, 2016
Consolidatedbalance sheet
amountAcquisition cost(*)

Difference(1) Securities withconsolidated balance sheet amountexceeding acquisition cost ······················¥ 23,927¥
7,330¥
16,597(2) Other ·····································
Subtotal ··································
23,927
7,330
16,597(1) Securities withconsolidated balance sheet amountnot exceeding acquisition cost ············
36
40
(4)
(2) Other ·····································
172
172
Subtotal ··································
208
212
(4)
Total ····················································¥ 24,135¥
7,542¥
16,593(*) Acquisition cost is the consolidated balance sheet amount after write-down.
The amount of sales for the year ended December 31, 2016 was ¥15 million and the amount of gain on
sales was ¥3 million.
Liabilities(1) Notes and accounts payable - trade and (2) Short-term loans payable
The fair value approximates the carrying amount because of the short maturity of these instruments.
(3) Long-term loans payable
The fair value of long-term loans payable is estimated by the present value of the total amount ofprincipal and interest discounted at the interest rate that would apply to similar new borrowings. For
variable interest rates, long-term loans payable which are hedged by interest rate swap contracts and meetcertain hedging criteria (See Note 13, “Derivative Transactions”), the principal and interest booked with aninterest rate swap as a unit is assessed by discounting at the estimated interest rate of similar borrowings.

15

Derivative transactions
Refer to the Note 12, “Derivative Transactions.”
Note 2: Financial instruments for which the fair value is extremely difficult to measure
Available-for-sale securities (non-listed equity securities) in the consolidated balance sheet amount of¥3,218 million as of December 31, 2017 and ¥2,988 million as of December 31, 2016 were not included
in “Assets (3) Investments” because they had no quoted market price, future cash flows were notestimable and the fair values were unavailable.
Note 3: Aggregate annual maturities of money claims and securities with maturities as of December 31, 2017and 2016 were as follows:Year ended
December 31, 2017

Millions of yen
2018

Cash and deposits ························¥ 10,002
Notes and accounts
receivable - trade ·······················
45,099Total ····································¥ 55,101

2019-2023

2024-2028

¥

-

¥

-

2029 and
thereafter
¥
-

¥

-

¥

-

¥

Year ended
December 31, 2016-

Millions of yen
2017

Cash and deposits ························¥
9,297
Notes and accounts
receivable - trade ·······················
43,539Total ····································¥ 52,836

2018-2022

2023-2027

¥

-

¥

-

2028 and
thereafter
¥
-

¥

-

¥

-

¥

-

Note 4: Aggregate annual maturities of long-term loans payable and lease obligations as of December 31, 2017and 2016 were as follows:Year ended
December 31, 2017

Millions of yen
2018Long-termloans payable ································
¥
4,189
¥

2019

2020

1,373

¥

Year ended
December 31, 2016

1,771

2022

2023 and
thereafter¥ 1,245¥2021

2022 and
thereafter

2021

¥

1,684

85

Millions of yen
2017Long-termloans payable ································
¥
6,203
¥

2018

2019

3,996

16

¥

1,175

2020

¥

750

¥

483

¥

168

8.

Securities
The following tables summarize the consolidated balance sheet amount, acquisition cost and fair valueof available-for sale securities as of December 31, 2017 and 2016. Available-for-sale securities (non-listed
equity securities) in the consolidated balance sheet amount of ¥192 million as of December 31, 2017 and¥192 million as of December 31, 2016 were not included because they had no quoted market price, thefuture cash flows were not estimable and the fair values were unavailable. Proceeds from the sale ofavailable-for-sale securities amounted to ¥1,965 million for the year ended December 31, 2017 and ¥15
million for the year ended December 31, 2016, and the related gains amounted to ¥1,124 million for the year
ended December 31, 2017 and ¥3 million for the year ended December 31, 2016.
When the fair value of securities at the fiscal year end is lower than acquisition cost by 50% or more,
the whole amount of such difference is recorded as impairment loss, in principle. When the fair value at the
fiscal year end is lower than acquisition cost by between 30% and 50%, impairment loss in an amountdeemed necessary is recorded after determining recoverability by considering quoted market pricetransactions during a certain past period, business performance and other factors.
The amount of available-for-sale securities impaired for the year ended December 31, 2017 was ¥0
million and no amount for the year ended December 31, 2016.
Millions of yen

Year ended December 31, 2017
Consolidatedbalance sheet
amountAcquisition cost(1) Securities withconsolidated balance sheet amountexceeding acquisition cost ·····················¥
13,085(2) Other ·····································
Subtotal ··································
13,085(1) Securities withconsolidated balance sheet amountnot exceeding acquisition cost ················
1(2) Other ·····································
175
Subtotal ··································
176
Total ··················································¥
13,261¥

Period ended December 31, 2016

Millions of yen
Consolidatedbalance sheet
amount(1) Securities withconsolidated balance sheet amountexceeding acquisition cost ·······················¥
12,464(2) Other ·····································
Subtotal ··································
12,464(1) Securities withconsolidated balance sheet amountnot exceeding acquisition cost ············
36(2) Other ·····································
172
Subtotal ··································
208
Total ····················································¥
12,672

17

¥

6,128
6,128

1
175
176
6,304

Difference¥¥

Acquisition cost

¥

¥

6,906
6,906

40
172
212
7,118

6,957
6,957

(0)
(0)
6,957

Difference

¥

¥

5,558
5,558

(4)
(4)
5,554

9.

Inventories
Inventories at December 31, 2017 and 2016 consisted of the following:
Millions of yen
2017
Merchandise and finished goods ···············································¥
Work-in-process ·································································
Raw materials and supplies ·····················································
¥

2016

9,898
1,097
7,642
18,637

¥

9,408
1,017
6,900
17,325¥

10.

Short-term Loans Payable and Long-term Loans Payable
Short-term loans payable at December 31, 2017 and 2016 consisted of short-term notes generally forone year bearing interest ranging from 0.23% to 9.28%.
Long-term loans payable at December 31, 2017 and 2016 consisted of the following:
Millions of yen
2017
Secured:Loans principally from banks at
1.23% - 5.95% maturing through 2023 ·······························¥
Unsecured:
Loans principally from banks at
0.20% - 7.40% maturing through 2024 ··································

2016

494

9,853
10,347Less amounts due within one year ··············································· 4,189
¥
6,158

¥

741

¥

12,034
12,775
6,203
6,572

The aggregate annual maturities of long-term loans payable at December 31, 2017 were as follows:Year ending December 31,

Millions of yen

2018································································································¥
4,189
2019································································································
1,374
2020································································································
1,771
2021································································································
1,684
2022 and thereafter ··············································································
1,329¥
10,347The Company has specific commitment lines with two banks to finance working capital as follows:
Specific commitment lines ···················································¥ 3,000 million
Used portion as of December 31, 2017 ·····································
¥
-

11.

Assets Pledged as Collateral
Assets pledged as collateral as of December 31, 2017 and 2016 were as follows:
Millions of yen
2017
Notes and accounts receivable - trade ····························································¥
8
Land ··································································································
173
Buildings and structures, net of accumulated depreciation ···········
1,132
Machinery, equipment and vehicles,
net of accumulated depreciation ································································
7
Investments in other ················································································
79¥ 1,399

18

2016
¥

¥

9
174
1,163
10
51
1,407

Liabilities secured by the above assets were as follows:
Millions of yen
2017

2016

Short-term loans payable···········································································¥
8
Current portion of long-term loans payable ·····················································
158
Notes and accounts payable - trade ·······························································
209
Other current liabilities ·············································································
3
Long-term loans payable ···········································································
420
Other noncurrent liabilities ········································································
4
¥
802

¥

¥

9
148
203
3
585
6
954

12. Finance Leases
1. Non-capitalized finance leases of the Companies at December 31, 2017 and 2016 were as follows:(As lessee)(1) Acquisition cost, accumulated depreciation and book value of leased properties, including interest:
Millions of yen
2017
Machinery, equipment and vehicles:
Acquisition cost ·····················································································¥
Accumulated depreciation ·········································································
Book value ···························································································
¥
-

2016
¥
¥

343
343
-

(2) Lease payments and equivalent depreciation amounts
Lease payments under the above leases for the year ended December 31, 2016 were ¥17 million.
(3) Depreciation method for lease equivalents
Accumulated depreciation of lease assets under non-capitalized finance lease transactions iscomputed using the straight-line method with the lease period used as the useful life and no residual
value.
2. Capitalized finance leases of the Companies at December 31, 2017 and 2016 were as follows:(As lessee)
Finance leases for which the ownership of the lease assets was not considered to be transferred to thelessee as of and for the year ended December 31, 2017 and 2016 were as follows:(1) Description of leased assets
Tangible fixed assets:
Mainly, the production facilities in the printing ink business (machinery and equipment) for
common purposes or each business.
(2) Depreciation method for leased assets
As described in Note 2, “Significant Accounting Policies - Finance leases.”19

13. Derivative Transactions
1. Derivative transactions to which hedge accounting has not been applied
Interest relatedYear ended December 31, 2017
Not applicableYear ended December 31, 2016

Category

Hedging
instruments

Transactions
except market
transactions

Interest rate swap contracts
Pay fixed,
Receive variable

Over 1 year

(Millions of yen)
Gain (loss)
Fair valueon(*)
evaluation¥¥

Contract amount

¥

29

-

(0)

¥

(0)

(*) The fair values of derivative transactions are determined at the quoted price obtained from therelevant financial institutions.
2. Derivative transactions to which hedge accounting has been applied
Currency relatedYear ended December 31, 2017
(Millions of yen)Hedge
accounting

Hedging
instruments

Hedgeditems

Hedgingtransactions

Currency swap contracts

Long-termloans payable

Contract amountOver 1 year
¥

89

¥

-

Fair value¥

6(*) The fair values of derivative transactions are determined at the quoted prices obtained from therelevant financial institutions.
Year ended December 31, 2016
(Millions of yen)Hedge
accounting

Hedging
instruments

Hedgeditems

Hedgingtransactions

Currency swap contracts

Long-termloans payable

Contract amountOver 1 year
¥

258

¥

86

Fair value¥

32(*) The fair values of derivative transactions are determined at the quoted prices obtained from therelevant financial institutions.

20

14.

Retirement Benefits
1. Outline of adopted retirement benefit plans
The Company and certain domestic consolidated subsidiaries provide funded non-contributory pension
plans, which include defined benefit pension plans and unfunded lump-sum payment plans. Certain foreign
consolidated subsidiaries provide defined contribution plans as well as defined benefit pension plans.
2. Defined benefit plans, including plans applying the simplified method(1) Movement in retirement benefit obligations
Millions of yen
2016
2017
Balance at the beginning of current period ·······················································¥
12,706¥
11,118Service cost (*) ····················································································
513
426
Interest cost ························································································
86
150
Actuarial loss (gain) ··············································································
103
1,436
Benefits paid ·······················································································
(480)
(436)
Other ································································································
19
12
Balance at the end of current period ·······························································¥
12,947¥
12,706(*) Service cost includes retirement benefit costs of consolidated subsidiaries applying the simplified
method.

(2) Movement in plan assets
Millions of yen
2017
Balance at the beginning of current period ·······················································
¥
7,445
¥
Expected return on plan assets ··································································
167
Actuarial loss (gain) ··············································································
144
Contributions paid by the employer ····························································
485
Benefits paid ·······················································································(331)
Other ································································································
11
Balance at the end of current period ·······························································
¥
7,921
¥

2016
7,219
226
(174)
469
(288)
(7)
7,445

(3) Reconciliation from retirement benefit obligations and plan assets to net defined benefit liability (asset)
Millions of yen
2017
Funded retirement benefit obligations ····························································
¥
8,386
¥
Plan assets ····························································································(7,921)
Total ································································································
465
Unfunded retirement benefit obligations ·························································
4,561
Total net liability (asset) for retirement benefits
at the end of current period ·····································································
¥
5,026
¥
Net defined benefit liability ········································································
5,026
Net defined benefit asset ············································································
Total net liability (asset) for retirement benefits
at the end of current period ·····································································
¥
5,026
¥

21

2016
8,324
(7,445)
879
4,382
5,261
5,261
5,261

(4) Retirement benefit costs
Millions of yen
2016
2017
Service cost (*) ····················································································
¥
513
¥
426
Interest cost ························································································
86150
Expected return on plan assets ··································································
(167)
(226)
Net actuarial loss amortization ··································································
182
291
Other ································································································
9
11
Total retirement benefit costs
¥
623
¥
652
for defined benefit plans ···································································(*) Service cost includes retirement benefit costs of consolidated subsidiaries applying simplified
method.

(5) Remeasurements of defined benefit plans
Millions of yen
2017
Actuarial gains and losses ·······································································
227
Total ·····························································································
¥
227
¥

2016
(1,310)(1,310)(6) Accumulated remeasurements of defined benefit plans
Millions of yen
2017
Actuarial gains and losses that are yet to be recognized ·····································
2,013
Total ·····························································································
¥
2,013
¥

2016
2,240
2,240

(7) Plan assets
2017

2016

(a) Plan assets comprise:
Bonds ····························································································
53.3 %
61.8 %
Equity securities ···············································································
11.5
14.5
Alternative Assets (*) ·········································································
22.6
14.3
Other ·····························································································
12.6
9.4
Total ···························································································
100.0 %
100.0 %(*) Alternative is investment mainly for multi-asset investment fund.
(b) Long-term expected rate of return
Current and expected plan assets portfolio and historical and expected returns on various categoriesof plan assets have been considered in determining the long-term expected rate of return.

(8) Actuarial assumptions
2017
The principal actuarial assumptions were as follows:
Discount rate ···················································································
Mainly 0.30%
Long-term expected rate of return ···························································
Mainly 2.00%
Expected rate of pay raises ···································································
Mainly 2.86%

2016
Mainly 0.30%
Mainly 3.00%
Mainly 2.86%

3. Defined contribution plan
Millions of yen
2017¥¥
Accrued contribution by consolidated subsidiaries ··········································
587

22

2016
853

15. Deferred Income Taxes
Significant components of the Companies’ deferred tax assets and liabilities as of December 31, 2017and 2016 were as follows:
Millions of yen
2016

2017
Deferred tax assets:
Allowance for doubtful accounts ······································
Provision for bonuses ···················································Net defined benefit liability ············································
Write-down of inventories ·············································
Intangible assets ·························································Tax loss carryovers ·····················································
Other ······································································
Subtotal ········································································
Valuation allowance ·····················································
Total deferred tax assets ·····················································
Deferred tax liabilities:
Valuation difference on available-for-sale securities ···············
Special reserves··························································
Reserve for special account for advanced depreciation of
non-current assets ·······················································
Retained earnings of subsidiaries and affiliated companies ·······
Other ······································································
Total deferred tax liabilities·················································Net deferred tax assets (liabilities) ·········································

¥

¥

196
177
1,897
101
127
740
807
4,045
(917)
3,128

¥

215
169
2,146
110
218
812
889
4,559
(958)
3,601

(2,116)(1,102)(1,684)(971)(3,092)(914)(7,224)(4,096)(114)(2,737)(1,311)(6,817)(3,216)¥

The reconciliation between the effective tax rate reflected in the consolidated financial statements andthe statutory tax rate for the years ended December 31, 2017 and 2016 is summarized as follows:

Statutory tax rate of the Company ·········································(Reconciliation)
Expenses not qualifying for deduction ································
Revenues not in gross revenue ·········································Tax credits ································································
Equity in earnings of affiliates ·········································
Elimination of dividend income ·······································
Valuation allowance ·····················································
Retained earnings of foreign subsidiaries ····························
Difference in the effective tax rates of foreign subsidiaries ········
Effect of changes in income tax rate ··································
Effect of enactment of tax reform in the U.S. ························
Other ······································································
Effective tax rate after adoption of tax effect accounting ···············

23

2017
30.8%

2016
33.0%

0.9
(2.7)
(2.6)
(4.4)
3.0
(0.2)
2.9
(1.0)
0.5
0.9
28.1%

1.4
(1.9)
(2.5)
(4.5)
2.4
0.4
3.1
(1.4)
(0.6)
1.5
30.9%

16. Contingent Liabilities
At December 31, 2017 and 2016, the Companies were contingently liable as follows:
Millions of yen
2017
2016
ETERNAL SAKATA INX CO., LTD. ·······································
¥
216
¥
267
215
233
Other ··············································································
Total ·············································································
¥
431
¥
500

The Company provides letters of awareness to banks for bank loans of unconsolidated subsidiaries andaffiliated companies, and the Company also provides guarantees of indebtedness for leases of unconsolidated
subsidiaries and affiliated companies. The guarantee obligations include amounts guaranteed by other parties,
and those amounts are excluded from the amounts stated above.
The amounts guaranteed by other parties were as follows:
Millions of yen
2016
2017
¥
13
¥
17

17.

Selling, General and Administrative Expenses
The main items of selling, general and administrative expenses for the year ended December 31, 2017and 2016 were as follows:
Millions of yen
Freightage and packing expenses ·············································
Salaries and allowances ························································
Depreciation ·····································································
Provision of allowance for doubtful accounts ·······························
Provision for bonuses ···························································
Retirement benefit expenses ···················································
Research and development expenses ·········································

18.

2017
¥ 4,783
9,195
861
328
355
674
3,219

2016
¥ 4,604
8,939
833
40
328
926
3,108

Impairment LossYear ended December 31, 2017
Not applicableYear ended December 31, 2016
Impairment loss recognized for the year ended December 31, 2016 was as follows:
Location

Purpose of use

TypeShiga, Japan

Manufacturing
equipment

MachineryAmount(Millions of yen)¥236

The business assets of the Companies are generally grouped based on business segments while theassets of a part of consolidated subsidiaries are grouped based on each company.
The assets above were treated as idle assets due to changes in market conditions and their full bookvalue was recognized as impairment loss since the original expected return from the investment became
unlikely.
The recoverable value of the assets was calculated based on value in use and was assessed as zero
because the assets were not expected to generate cash flow in the future.

2419. Loss on Retirement of Property, Plant and Equipment
The details of loss on retirement of property, plant and equipment for the years ended December 31,
2017 and 2016 were as follows:
Millions of yen
2017
Buildings and structures ························································
Machinery, equipment and vehicles ··········································
Other fixed assets ·······························································
Demolition and removal expenses ············································
Total ·············································································

¥

2016
20
2
0
48
70

¥

¥

¥

12
0
0
106
118

20.

Consolidated Statements of Comprehensive Income
The reclassification adjustment and the tax benefit concerning other comprehensive income for theyears ended December 31, 2017 and 2016 were as follows:
Millions of yen
2016

2017
Valuation difference on available-for-sale securities
Amount arising during the period ···································································¥
2,527
Reclassification adjustment included in net income ··············································(1,124)Pre-tax amount ·····················································································
1,403
Tax benefit ··························································································(432)
Valuation difference on available-for-sale securities ··········································
971
Deferred gains or losses on hedges
Amount arising during the period ······················································ 2
Pre-tax amount ·····················································································
2
Tax benefit ··························································································(1)
Deferred gains or losses on hedges ······························································
1
Foreign currency translation adjustment
Amount arising during the period ································································(247)
Remeasurements of defined benefit plans
Amount arising during the period ····················································· 35
Reclassification adjustment included in net income ···········································
193
Pre-tax amount ·····················································································
228
Tax benefit ··························································································(71)
Remeasurements of defined benefit plans ······················································
157
Share of other comprehensive income of affiliates
accounted for using equity method
Amount arising during the period ······················································166
Reclassification adjustment included in net income ··············································
8
Share of other comprehensive income of affiliates
accounted for using equity method ························································
174
Total other comprehensive income ·································································
¥
1,056

25

¥

932
(3)
929
(211)
718
(1)
(1)
0
(1)
(1,468)(1,501)191(1,310)
360
(950)

(401)
(2)

¥

(403)
(2,104)

21.

Supplementary Cash Flow Information
The reconciliation of cash and cash equivalents in the consolidated statements of cash flows and cash
and deposits in the consolidated balance sheets as of December 31, 2017 and 2016 were as follows:
Millions of yen
Cash and deposits ·······························································
Time deposits with original maturity of more than three months ·········Cash and cash equivalents ··················································

22.

2017
10,002
(651)
¥
9,351
¥

2016
9,297
¥
9,297
¥

Segment Information

1. Overview of reportable segments
The Companies’ reportable segments are components of the Companies for which separate financial
information is obtainable and which the Board of Directors and Management Committee regularly consider
in order to determine the allocation of business resources and evaluate business performance. The
Companies are engaged mainly in the manufacture and sale of printing inks. Multiple divisions of theCompany are engaged in the domestic market, and the foreign subsidiaries are engaged in their own
respective overseas markets, such as markets of Asia, North America and Europe.
Foreign subsidiaries that have independent management units establish their own comprehensive
strategies and develop business activities in their respective regions and surrounding areas. Besides the saleof printing inks, the Company purchases and sells graphic arts materials in the domestic market. In addition,
the Company purchases and sells printing equipment in the domestic market.
The digital & specialty products business such as inkjet ink, toner, pigment dispersion and others
developed through the basic technology of printing inks like pigment dispersion make up various
independent operational segments. The Companies focus on expanding the revenue base of the digital &specialty products business led by the Company.
Therefore, the Companies’ printing inks business, our core business, comprises the geographic
segments based on the production and sales structure. The Companies’ printing inks business consists of thefour reportable segments of “Printing inks and graphic arts materials (Japan),” “Printing inks (Asia),”“Printing inks (North America)” and “Printing inks (Europe).” Furthermore, the “Digital & Specialty
products” business, in which the Companies promote business expansion, constitutes another reportablesegment for a total of five reportable segments.

Reportable segment
Printing inks and graphic arts
materials (Japan)
Printing inks (Asia)
Printing inks (North America)
Printing inks (Europe)
Digital & Specialty products

Main products and merchandise
News paper printing ink, Commercial printing ink, Packaging ink,
Flexible packaging gravure ink, Print and plate making equipment andmaterials, Packaging equipment and supplies
News paper printing ink, Commercial printing ink,
Metal decorating ink, Packaging ink, Flexible packing gravure ink
Commercial ink, Metal decorating ink, Packaging ink,
Flexible packaging gravure ink
Commercial ink, Metal decorating ink, Packaging ink,
Flexible packaging gravure ink
Inkjet ink, Toner, Pigment dispersion for color filter,
Functional coating

2. Basis of measurement for reported segment sales, income or loss, assets and other items
The accounting policies of the reportable segments are essentially the same as those described in Note
2, “Significant Accounting Policies.”
Segment income or loss is stated on an operating income basis. Intersegment income and transfers are
based on the prevailing markets prices.

26

3. Information about reported segment sales, segment income or loss, segment assets and other items
Year ended
December 31, 2017

Millions of yen
Reportable Segment
Printing inks
andgraphic arts
materials(Japan)Printing
inks(Asia)

Printing
inks(NorthAmerica)

Printing
inks(Europe)

Digital &Specialty
products

Otherbusinesses
(*1)

Total

Total

Net sales to outside
customers¥54,960¥30,191¥42,218¥8,740¥11,241¥147,350¥9,953¥157,303Intersegment sales
and transfers

25

55

1,342

38

95

1,555

5,838

Total

54,98530,246

43,5608,778

11,336

148,905

Segment income¥2,253¥2,347¥1,830¥26¥1,140

Segment assets

41,00027,30823,544

9,014

Depreciation

1,221

551

837

-

-

2,138

704

Amortization of
goodwill

Increase in property,
plant and equipment
and intangible assets

Adjustments Consolidated
(*2)
(*3)

¥

-

¥157,303

7,393(7,393)-

15,791

164,696(7,393)

157,303¥7,596¥351¥7,947¥626¥8,573

10,295111,161

5,585

116,746

28,744145,490

239

722

3,570

133

3,703

-

3,703

-

-

-

-

-

-

-

-

1,096

179

652

4,769

51

4,820

-

4,820

(*1) The “Other businesses” category includes the chemical products business, color film developing and printing services and equipment for color
matching systems not shown in reportable segments.
(*2) Adjustments are as follows:
1. The adjustment of ¥626 million for segment income includes eliminations for intersegment transactions of ¥828 million and corporate expenses of¥(202) million that have not been allocated to any segment. Corporate expenses are mainly service fees to unconsolidated subsidiaries and affiliates.
2. The adjustment of ¥28,744 million for segment assets includes eliminations for intersegment transactions of ¥(2,349) million and corporate assets of¥31,093 million that have not been allocated to any segment. Corporate assets are mainly investment securities held for a common purpose.
(*3) Segment income is adjusted to be consistent with operating income shown on the consolidated statements of income.

27

Year ended
December 31, 2016

Millions of yen
Reportable Segment
Printing inks
andgraphic arts
materials(Japan)Printing
inks(Asia)

Printing
inks(NorthAmerica)

Printing
inks(Europe)

Digital &Specialty
products

Net sales to outside
customers¥55,091¥28,257¥40,586¥7,740Intersegment sales
and transfers

23

51

1,458

Total

55,11428,308Segment income¥2,516

Segment assets
Depreciation
Amortization of
goodwill

Increase in property,
plant and equipment
and intangible assets

Total

Total

Other
businesses(*1)¥10,068¥141,742¥9,457¥151,199

78

95

1,705

5,712

42,044

7,818

10,163

143,447¥3,170¥2,219¥219¥925

39,82925,26324,437

6,782

1,166

517

789

-

26

1,006

585

Adjustments Consolidated
(*2)
(*3)

¥

-

¥151,199

7,417(7,417)-

15,169158,616(7,417)

151,199¥9,049¥420¥9,469¥650¥10,119

9,998

106,309

4,783

111,092

26,920138,012

217

730

3,419

76

3,495

-

3,495

-

-

-

26

-

26

-

26

1,222

209

379

3,401

195

3,596

-

3,596

(*1) The “Other businesses” category includes the chemical products business, color film developing and printing services and equipment for color
matching systems not shown in reportable segments.
(*2) Adjustments are as follows:
1. The adjustment of ¥650 million for segment income includes eliminations for intersegment transactions of ¥839 million and corporate expenses of¥(189) million that have not been allocated to any segment. Corporate expenses are mainly service fees to unconsolidated subsidiaries and affiliates.
2. The adjustment of ¥26,920 million for segment assets includes eliminations for intersegment transactions of ¥(2,278) million and corporate assets of¥29,198 million that have not been allocated to any segment. Corporate assets are mainly investment securities held for a common purpose.
(*3) Segment income is adjusted to be consistent with operating income shown on the consolidated statements of income.

28

(Related Information)
Year ended December 31, 2017
1. Information about each product and service
Year ended
December 31, 2017

Millions of yen
Printing inks

Net sales to outside
customers¥

Graphic arts
materials

120,797 ¥Digital & Specialty
products

15,423 ¥Other

11,241 ¥Total

9,842 ¥

157,303

Other

Total

2. Information about geographic areas
Year ended
December 31, 2017

Millions of yen
Japan

Asia

America

EuropeNet sales¥

67,456 ¥32,912¥38,609 ¥

10,373¥

7,953 ¥

157,303

Property, plant andequipment¥

21,882 ¥5,279¥

7,139 ¥

2,721

¥

12 ¥

37,033

Note: Net sales are classified by country and region based on customer location.

3. Major customers
No information is available as there were no outside customers accounting for 10% or more of theCompanies’ total net sales.
(Loss on impairment of fixed assets by reportable segments)
Not applicable(Amortization and unamortized balance of goodwill)
Not applicable(Negative goodwill in other income by reportable segments)
Not applicable29

Year ended December 31, 2016
1. Information about each product and service
Year ended
December 31, 2016

Millions of yen
Graphic arts
materials

Printing inks
Net sales to outside
customers¥

115,806 ¥Digital & Specialty
products

15,953 ¥Other

10,068 ¥Total

9,372 ¥

151,199

Other

Total

2. Information about geographic areas
Year ended
December 31, 2016

Millions of yen
Japan

Asia

America

EuropeNet sales¥

67,004 ¥30,157¥

37,137 ¥

9,186¥

7,715 ¥

151,199

Property, plant andequipment¥

21,132 ¥5,219¥

6,920 ¥

2,565

¥

17 ¥

35,853

Note: Net sales are classified by country and region based on customer location.

3. Major customers
No information is available as there were no outside customers accounting for 10% or more of theCompanies’ total net sales.
(Loss on impairment of fixed assets by reportable segments)
Year ended
December 31, 2016

Millions of yen
Reportable Segment

Impairment
loss

Printing inks
andgraphic arts
materials(Japan)Printing
inks(Asia)

Printing
inks(NorthAmerica)

Printing
inks(Europe)

Digital &Specialty
products

Otherbusinesses

Adjustments

Consolidated

Total

¥

¥

¥

¥

¥ 236

¥ 236

¥

¥

¥ 236

-

-

-

-

-

-

(Amortization and unamortized balance of goodwill)
Year ended
December 31, 2016

Millions of yen
Reportable Segment
Printing inks
andgraphic arts
materials(Japan)Printing
inks(Asia)

Printing
inks(NorthAmerica)

Printing
inks(Europe)

Digital &Specialty
products

Otherbusinesses

Adjustments

Consolidated

Total

Amortization of
goodwill

¥

-

¥ 26

¥

-

¥

-

¥

-

¥ 26

¥

-

¥

-

¥ 26

Balance as ofDecember 31,
2016

¥

-

¥

¥

-

¥

-

¥

-

¥

¥

-

¥

-

¥

-

(Negative goodwill in other income by reportable segments)
Not applicable

30

-

-

23.

Related Party Transactions
Transactions with related parties for the years ended December 31, 2017 and 2016 were as follows:Year ended December 31, 2017

Attribute

Name

SHENZHEN
Affiliate SAKATA INX
CO., LTD.

Location

Shenzhen,
China

Capitalstock(Millionsof RMB)

2

Operationsoroccupation

Printing ink

Holding
equity(%)

Direct25.0

Relationship

Sales offinished
goods

Transaction
details

Sales offinished
goods

Transaction
amount(Millionsof yen)Account¥ 2,492

Notes andaccounts
receivable- tradeInvestments
and otherassets:Other

Balance atyear end(Millionsof yen)¥ 2,031¥249

Note 1: The trade terms of the above transactions were determined using the same methods as those for third-party transactions.
Note 2: The amount of ¥249 million was accounted for as allowance for doubtful accounts to cover possible losses on collection fromSHENZHEN SAKATA INX CO., LTD., and the amount of reversal of allowance for doubtful accounts for the year ended
December 31, 2017 was ¥64 million.

Year ended December 31, 2016
Attribute

Name

SHENZHEN
Affiliate SAKATA INX
CO., LTD.

Location

Shenzhen,
China

Capitalstock(Millionsof RMB)

2

Operationsoroccupation

Printing ink

Holding
equity(%)

Direct25.0

Relationship

Sales offinished
goods

Transaction
details

Sales offinished
goods

Transaction
amount(Millionsof yen)Account¥ 2,595

Notes andaccounts
receivable- tradeInvestments
and otherassets:Other

Balance atyear end(Millionsof yen)¥ 2,116¥

293

Note 1: The trade terms of the above transactions were determined using the same methods as those for third-party transactions.
Note 2: The amount of ¥293 million was accounted for as allowance for doubtful accounts to cover possible losses on collection fromSHENZHEN SAKATA INX CO., LTD., and the amount of provision of allowance for doubtful accounts for the year ended
December 31, 2016 was ¥10 million.

31

24.

Changes in Net Assets
1. Shares issued and treasury sharesYear ended December 31, 2017
Type

Number of shares
as of the beginningof current period

Increase in numberof shares
during the period

Decrease in numberof shares
during the period

62,601,161--

Number of shares
as of the end ofcurrent period

Shares issued:
Common stock

62,601,161

Treasury shares:
Common stock

2,093,210
2,108,272
4,201,482
Note: The increase in the number of treasury shares of 2,108,272 shares consists of the increase of 2,108,000 shares dueto the purchase based on the resolution at the Board of Directors and the increase of 272 shares due to the purchase of
fractional shares.
.

Year ended December 31, 2016
Type

Number of shares
as of the beginningof current period

Increase in numberof shares
during the period

Decrease in numberof shares
during the period

62,601,161--

Number of shares
as of the end ofcurrent period

Shares issued:
Common stock

62,601,161

Treasury shares:
Common stock

2,093,007
253
50
2,093,210
Note: The increase in the number of treasury shares was due to the purchase of fractional shares.
The decrease in the number of shares of treasury shares was to meet the demand for buying fractional shares.

2. Dividends
Dividends paid in the year ended December 31, 2017
Date of resolution
Annual meeting ofstockholders held on
March 29, 2017
Directors' meeting
held on
August 10, 2017

TypeofsharesAmount ofdividends(Millions of yen)

Cash dividends
per share(Yen)

Record date

Effective dateCommon
stock

¥

908

¥

15

December 31,
2016

March 30,
2017

Common
stock

¥

817

¥

14

June 30,2017

September 4,
2017

Record date

Effective date

Dividends paid in the year ended December 31, 2016
Date of resolution
Annual meeting ofstockholders held on
March 29, 2016
Directors' meeting
held on
August 10, 2016

TypeofsharesAmount ofdividends(Millions of yen)

Cash dividends
per share(Yen)

Common
stock

¥

726

¥

12

December 31,
2015

March 30,
2016

Common
stock

¥

787

¥

13

June 30,2016

September 2,
2016

32

Dividends with a record date attributable to the year ended December 31, 2017 but an effective dateafter December 31, 2017
Date of resolution

Typeofshares

Sourceofdividends

Annual meetingof stockholders
held onMarch 28, 2018

Commonstock

Retainedearnings

Amount ofCash dividends
dividends
per share(Millions of yen)
(Yen)
¥ 934

¥ 16

Record date

Effective
date

December 31,
2017

March 29,2018

Dividends with a record date attributable to the year ended December 31, 2016 but an effective dateafter December 31, 201625.

Date of resolution

Typeofshares

Sourceofdividends

Annual meetingof stockholders
held onMarch 29, 2017

Commonstock

Retainedearnings

Amount ofCash dividends
dividends
per share(Millions of yen)
(Yen)
¥ 908

¥ 15

Record date

Effective
date

December 31,
2016

March 30,
2017

Information on Significant Affiliates
A summary of the financial statements of SIIX Corporation, a significant affiliate, is as follows:
Summarized balance sheets as of December 31, 2017 and 2016
Millions of yen
2017

2016

Current assets ······························································¥
96,478¥82,164Non-current assets ························································¥
34,048¥27,531

Current liabilities··························································¥
56,550¥46,605

Non-current liabilities ····················································¥
16,367¥

11,516

Net assets ··································································¥
57,609¥51,574

Summarized statements of income for the years ended December 31, 2017 and 2016
Millions of yen
2017

2016

Net sales ····································································¥ 233,153¥

212,769

Income before income taxes ·············································¥
10,254¥

9,205

Net income attributable to owners of parent ··························
¥
7,093

¥

6,698

33

26.

Amounts Per Share
Yen
2017

2016

Net assets per share ······················································¥ 1,295.39¥

1,179.38

Dividends per share ······················································
¥
30.00

¥

28.00

Net income per share ····················································¥
142.76¥129.53Note 1: There were no dilutive securities.
Note 2: The calculation of net income per share was as follows:
2017

2016

Net income attributable to owners of parent(millions of yen) ·························································
¥
8,384

¥

7,838

Net income attributable to owners of parent ofcommon stock (millions of yen) ·······································
¥
8,384

¥

7,838

Average number of shares of common stockduring the fiscal year (thousands) ···································
58,72434

60,508