KOKUYO CO., LTD. CONSOLIDATED FLASH REPORT

Transcription

1 KOKUYO CO., LTD. CONSOLIDATED FLASH REPORT Results for the fiscal year ended March 31, 2002 May 10, 2002 Company name: Kokuyo Co., Ltd. Stock listings: Tokyo Stock Exchange (First Section), Osaka Securities Exchange (First Section), Nagoya Stock Exchange (First Section) Code number: 7984 Address of headquarters: 1-1, Oimazato-minami 6-chome, Higashinari-ku, Osaka , Japan For further information, please contact: Yoshiaki Yoshimoto Telephone: (06) Date of the meeting of the Board of Directors: May 10, 2002 U.S. GAAP: Not adopted 1. Results for the fiscal year (April 1, 2001, to March 31, 2002) (1) Consolidated operating results (Figures less than 1 million have been omitted.) Net sales Operating income Recurring income [% change from the previous year] [% change from the previous year] [% change from the previous year] Fiscal year 276,584 [(6.3)] 779 [(93.4)] 2,175 [(83.2)] Previous fiscal year 295,309 [5.3] 11,856 [(17.2)] 12,969 [(4.4)] Net income Net income Net income per Return on Recurring income- Recurring income- [% change from the previous year] per share share after dilution equity to-total capital ratio to-net sales ratio Yen Yen % % % Fiscal year (1,422) [ ] (11.05) (0.7) Previous fiscal year 7,192 [503.4] Notes: (1) Equity in net income of affiliates for the years ended March 31, million million (2) Avarage number of shares issued and outstanding during the year, ,677,491 shares ,723,998 shares (3) Changes in methods of accounting: No (4) Percentage figures under net sales, operating income, recurring income, and net income are changes from the previous fiscal year. (2) Financial data Total shareholders Shareholders Shareholders Total assets equity equity ratio equity per share % Yen Fiscal year 307, , , Previous fiscal year 329, , , Note: Total number of shares issued and outstanding at the end of the year, ,976,205 shares ,742,199 shares (3) Consolidated cash flows Cash flows from Cash flows from Cash flows from Cash and cash equivalents operating activities investing activities financing activities at the end of the year Fiscal year 11,292 (9,159) (12,612) 21,200 Previous fiscal year 8,776 (6,012) (4,149) 29,468 (4) Matters related to consolidated companies and companies accounted for using the equity method Number of consolidated subsidiaries: 14 Number of non-consolidated companies: 0 Number of affiliated companies: 2 (both of which are accounted for using the equity method)

2 (5) Changes in accounting methods Changes in the status of consolidated companies and companies accounted for using the equity method Consolidated companies: Number of companies newly consolidated: 3 Number of companies removed from consolidation: 3 Equity method: Number of companies newly accounted for using the equity method: 0 Number of companies removed from the equity method: 0 2. Forecast for the next fiscal year (April 1, 2002, to March 31, 2003) Recurring Net sales income Net income Interim period 140,000 1, Fiscal year 300,000 7,000 4,000 (Reference) Net income per share for the fiscal year is forecast to be on a consolidated basis. Note: The forecasts stated in this report are based on currently available information and suppositions made at the time of the release of this report concerning certain factors that have potential impact on earnings. Actual earnings may differ, in some cases substantially, from these forecasts. For cautionary items regarding the suppositions upon which earnings forecasts are based and the proper use of earning forecasts, please refer to the Outlook section of the appended documents. (See supplementary material Management Performance. )

3 Management Policy 1. Basic Management Policies Kokuyo has set the goal of Contributing to Society through Its Products and conducts its operations in line with this objective. As the Company will mark the 100th year since its establishment in 2005, Kokuyo has drawn up the 100 Year Vision, a statement of how it intends to fulfill its strategies in a way commensurate with a celebration of its 100th anniversary and continue to pursue customer-oriented business practices. Under the fundamental theme, Always Innovating For Your Knowledge, we will strive to be a company that delivers inspiration, efficiency, and amenity by constantly leading the evolution of our customers knowledge while at the same time evolving ourselves and devoting our efforts to increasing shareholder value. 2. Basic Policy for the Distribution of Profit Our basic policy for the distribution of profit is to maintain stable dividends, and, accordingly, we have paid a regular annual cash dividend of 15 per common share since In addition to this policy, we have paid additional dividends for certain periods to commemorate significant events, taking into account Company performance. For the fiscal year under review (ended March 31, 2002), with this policy in mind, we declared a cash dividend of 15 per share. Concerning retained earnings, our policy is to secure the funding that will allow us to expand our systems and thereby supply products on a stable basis. In particular, we use this funding for strengthening our operational base and competitiveness while working to expand our business activities. 3. Philosophy and Policy Regarding Reducing the Number of Shares in the Company s Investment Unit Kokuyo believes that by decreasing the size of its stock investment unit will prove effective in attracting a greater number of individual investors, thus stimulating the flow of shares. At its May 10, 2002, meeting of the Company's Board of Directors, it was decided that, effective August 1, 2002, the number of shares of the Company per unit will be lowered from 1,000 shares to 100 shares. 4. Medium-to-Long-Term Management Strategy (1) Shareholder Value Focused Management We will strive to enhance capital efficiency and raise shareholder value by adopting the use of such business indicators as ROE and EVA and exercising selectivity and concentration with regard to managerial resources, including the withdrawal from and reorganization of certain businesses. (2) Returning to Our Roots as a Manufacturer To thoroughly implement a customer-oriented business philosophy, rather than a manufacturer-oriented one, we will strengthen and upgrade our marketing and R&D functions. In the stationery-related business we will work to further promote Internet business operations and enhance utility, while providing products and services that meet the complex needs of our customers. In the furniturerelated business, we will implement a higher-value-added proactive business approach by strengthening our ability to provide not only office concepts, but facility management encompassing office operations and management. (3) New Businesses In other businesses, we will fuse our existing technologies with new IT technologies. From the resulting new foundation, we will seek out and solidify new businesses without being bound by the scope of our existing business operations.

4 Management Performance Term Overview 1. Business Conditions Conditions in the Japanese economy were extremely severe during the fiscal year ended March 31, Owing to the overall downturn in the global economy due to the terrorist attacks on the United States as well as weak demand from IT sectors, the economy took a sudden turn for the worse, and selling prices continued to deteriorate due to an overall deflationary trend as well as measures by private corporations and other organizations to curb capital investment and reduce expenditures. Against this backdrop, the Kokuyo Group continued to develop the kind of goods sought by its customers, and provided stylish and sophisticated products, with 23 of its products winning Good Design Awards, making Kokuyo the leader in its industry and sixth nationwide in terms of awards won. Also, to adapt to the drastic changes in distribution frameworks, we must strengthen our operational structure and become a comprehensive supplier capable of meeting our customers every office need. As a step toward accomplishing this goal, the Company engaged in the vertical integration of its own sales functions as a manufacturer with its exclusive agents in the western Japan region and established three sales and distribution subsidiaries. Meanwhile, in our Kaunet operations, which were launched in January 2001 to provide office supply catalog order sales services, we published the third version of our catalog featuring a larger selection of environment-friendly products and worked to enhance customer amenity through such measures as expanding the geographic range of same-day-delivery service and offering a wider variety of payment options. We also introduced a number of logistical cost reductions, and aggressively continued to establish a firm foundation for the business. The number of registered customers continued to grow steadily and in March 2002 exceeded the 700,000 mark. Kokuyo also made efforts to elevate customer services in ( at office ) operations which provide catalog business support for retail branches by upgrading its Internet features and digital catalogs as well as augmenting its logistics functions through same-daydelivery and other initiatives. Although the Company strove to raise earnings and fulfill its initial targets for the term by aggressively implementing these and other measures, due to the substantial effects of declining demand and other factors, net sales fell 6.3% compared with the previous term, to billion. On the profit side, the Kokuyo Group was united its efforts to improve its gross profit margin ratio by curtailing expenditures and cutting costs as well as implement profit centered sales initiatives. However, due to such factors as up-front investments in Kaunet, recurring profit plummeted 83.2%, to 2.1 billion. Furthermore, the Company recorded 1.5 billion in the amortization of consolidation adjustments account from the new consolidation of subsidiaries and 1.3 billion in appraisal losses on marketable securities. Consequently, the Company recorded a net loss for the term of 1.4 billion. 2. Business Segment Results Information Stationery-Related Business In IT products, Kokuyo introduced a compact, lightweight multimedia projector, optimized in an A5 size fo office-based visual presentations. We also augmented our Mimio product, which enables the real-time inputting of whiteboard data into a PC, by introducing Mimio Japanese language recognition software, which recognizes handwritten Japanese text. Kokuyo worked to augment its lineup of Universal Design products, which incorporate the key concepts simplicity, amenity, and ease of use. During the term, we added a number of products to the lineup to meet the diverse needs of our customers, including Flat File, Clear Book, Punch, and Stapler. On the sales side, the trend toward lower prices persisted due to increasingly severe competition, and weakness and conservative buying trends continued to characterize consumer spending. However, sales proceeded favorably for Kaunet and sales of plain paper copier paper and ink jet printer paper were also firm, and we were able to maintain the previous fiscal year s level of net sales. As a result, sales in the Stationery-Related Business rose 0.3% compared with the previous fiscal year, to billion.

5 Furniture-Related Business During the term under review, Kokuyo strove to bring several new products to market and to create other appealing new products, including the AGATA office chair which was awarded Germany s if Design Award and the new Inthesis panel system, which is designed to meet the needs of such unique office layouts as those in overseas affiliated firms and venture enterprises. Other new products include Kybos, a type of aluminum frame that enables such functions as cable laying without the installation of either dropped ceilings or OA floors, and Flex Ceiling, a latticework ceiling that enables the simple, swift, and low-cost rearrangement of office layouts. The Company also held the 2001 Kokuyo Fair at its Tokyo Showroom and Shinagawa Office, also located in Tokyo. At this fair, Kokyo illustrated the new efforts of the Kokuyo Distribution Group and demonstrated the benefits of its highly competitive office spaces and new products that are perfectly in tune with the concept of Knowledge Work. On the sales side, demand stemming from the conversion to classroom desks and chairs that comply with the new JIS (Japan Industry Standards) remained firm. However, new building construction declined due to falling public works spending and private sector investment. Consequently customers remained reluctant to purchase new furniture items, and sales were weak overall. As a result, sales for the Furniture-Related Business declined 12.2%, compared with the previous fiscal year, to billion. 3. Cash Flows Cash generated by operating activities increased 28.7% compared with the previous fiscal year, to 11.2 billion, due primarily to reductions in depreciation and amortization expenses, bills and accounts receivable, and inventories, which offset the net loss before income taxes and minority interest of 0.3 billion. Cash used in investing activities declined 52.3%, to 9.1 billion due to software development expenses, equipment outlays, and the acquisition of investment securities of affiliates and other companies. Cash used in financing activities increased 204.0%, to 12.6 billion due to such factors as the reduction of interest bearing debt and the acquisition of treasury stock. As a result, cash and cash equivalents for the term, including increases due to the new consolidation of subsidiaries declined 8.2 billion, or 28.1 %, to 21.2 billion. Outlook With no immediate end in sight to the instability of the Japanese economy, the business environment surrounding the Kokuyo Group is expected to remain severe. However, with large numbers of office buildings continuing to be offered in the greater Tokyo area, large-scale office furniture demand can still be expected. Against this backdrop, Kokuyo will strive to achieve the earliest possible recovery in its earnings. It will initiate radical revisions to its business structure, enhance its creation of highly competitive products, bolster its sales and proposal abilities, augment is Internet business through Kaunet and other operations, increase overseas procurement, implement thorough cost reductions, restructure its logistics systems, and reduce overall operating expenses. For the fiscal year ending March 31, 2003, the Company forecasts net sales of billion, recurring profit of 7.0 billion, and net income of 4.0 billion.

6 CONSOLIDATED BALANCE SHEETS As of March 31, 2002 and 2001 ASSETS (Figures less than 1 million have been omitted.) Change from the As of March 31, 2002 As of March 31, 2001 previous year Percentage Percentage of total assets of total assets Current assets: 146, , (24,983) Cash on hand and in banks 14,975 10,487 4,488 Notes and accounts receivable 92, ,935 (13,128) Marketable securities 6,224 18,980 (12,756) Inventories 24,914 28,106 (3,192) Deferred tax assets 1,483 1,529 (46) Other current assets 6,809 7,238 (429) Allowance for doubtful accounts (616) (696) 80 Fixed assets: 160, , ,488 Property, plant and equipment: 98,521 [32.1] 102,205 [31.0] (3,684) Buildings and structures 37,495 38,523 (1,028) Machinery and equipment 7,124 8,096 (972) Land 49,703 48,140 1,563 Other fixed assets 4,198 7,445 (3,247) Intangible fixed assets 7,133 [2.3] 3,516 [1.1] 3,617 Investments and other assets: 54,756 [17.8] 52,201 [15.8] 2,555 Investment securities 34,933 38,616 (3,683) Long-term loans 2,342 2,622 (280) Deferred tax assets 10,298 4,915 5,383 Other investments and assets 9,163 7,621 1,542 Allowance for doubtful accounts (1,980) (1,574) (406) Total assets 307, , (22,495)

7 (Figures less than 1 million have been omitted.) Change from the As of March 31, 2002 As of March 31, 2001 previous year Percentage of Percentage of total liabilities total liabilities and shareholders and shareholders equity equity LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: 75,737 [24.7] 88,778 [26.9] (13,041) Notes and accounts payable 56,247 63,643 (7,396) Short-term debt 5,756 6,498 (742) Current portion of bonds with warrants 578 (578) Long-term prepaid expenses 1, Accrued liabilities 3,350 4,183 (833) Accrued corporation tax 1,511 2,613 (1,102) Accrued expenses 2,730 4,428 (1,698) Allowance for bonuses 1,951 2,180 (229) Other current liabilities 3,041 3,706 (665) Long-term liabilities: 40,187 [13.1] 39,791 [12.1] 396 Corporate bonds 10,000 10,000 Long-term debt 3,649 3,839 (190) Current portion of long-term loans 3,517 3, Reserve for retirement allowances 21,889 21, Provision for special retirement bonuses for directors 1,074 1,158 (84) Deferred tax liabilities Total liabilities 115, , (12,645) Minority interests in consolidated subsidiaries SHAREHOLDERS EQUITY Capital stock 15,847 [5.2] 15,847 [4.8] Capital surplus 19,083 [6.2] 19,083 [5.8] Consolidated retained earnings 157,232 [51.2] 162,742 [49.4] (5,510) Evaluation difference on other securities 170 [0.1] 3,169 [0.9] (2,999) Translation adjustment (170) [(0.1)] (401) [(0.1)] 231 Treasury stock (1,799) [(0.6)] (0) [(0.0)] (1,798) Parent company stocks held by subsidiaries (90) [(0.0)] (90) Total shareholders equity 190, , (10,168) Total liabilities and shareholders equity 307, , (22,495)

8 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Years ended March 31, 2002 and 2001 (Figures less than 1 million have been omitted.) Change from the Year ended March 31, 2002 Year ended March 31, 2001 previous year Percentage Percentage of net sales of net sales Net sales 276, , (18,725) Cost of sales 192, , (13,428) Gross profit 83, , (5,298) Selling, general and administrative expenses 82, , ,778 Operating income , (11,077) Nonoperating income: 3, , Interest income (107) Dividend income (122) Investment profits accounted for by the equity method (240) Other 2,696 1, Nonoperating expenses: 2, , Interest expenses (19) Other 1,644 1, Recurring income 2, , (10,794) Special profits: , (2,685) Gain on sales of fixed assets 536 1,691 (1,155) Gain on sales of investment securities 1,530 (1,530) Special losses: 3, , (264) Loss on sales of fixed assets Loss on write-off of receivables 3,262 (3,262) Valuation losses on investment securities 1,380 1,380 Amortization of consolidation adjustments 1,561 1,561 Income before income taxes (395) (0.1) 12, (13,214) Corporation tax, inhabitants taxes, and enterprise tax 4,592 6,505 (1,913) Tax effect of time differences (3,214) (908) (2,306) Minority interests in loss of consolidated subsidiaries (351) (351) Income from minority interests 30 (30) Net income (1,422) (0.5) 7, (8,614)

9 STATEMENTS OF CONSOLIDATED SURPLUS Years ended March 31, 2002 and 2001 (Figures less than 1 million have been omitted.) Year ended March 31, 2002 Year ended March 31, 2001 Consolidated surplus at the beginning of the period 162, ,058 Increase of consolidated surplus: 70 Increase in retained earnings due to changes in shareholding ratio 70 Decrease of consolidated surplus: 4,158 3,508 Dividends 2,262 2,270 Directors bonuses Decrease in surplus accompanying increase in number of consolidated subsidiaries 537 1,112 Gain from retirement of Company stock 1,297 Other decrease 61 Net income (1,422) 7,192 Consolidated surplus at the end of the period 157, ,742

10 CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended March 31, 2002 and 2001 Year ended March 31, 2002 Year ended March 31, 2001 Cash flows from operating activities: 11,292 8,776 Net income before income taxes (395) 12,819 Depreciation 6,871 7,292 Amortization of consolidation adjustments 1,552 (7) Increase in allowance for doubtful receivables 290 (186) Decrease in provision for retirement benefits (20,595) Increase in provision for retirement benefits ,118 Interest and dividends received (851) (1,080) Interest paid Equity in undistributed earnings of an affiliate (92) (332) Gain (loss) on sales of fixed assets (371) (1,582) Gain on sales of investment securities (42) (1,530) Valuation losses on investment securities 1,380 Decrease in receivables 14,419 (4,601) Decrease in inventories 3,925 (1,922) Decrease in payables for procurement (9,370) 4,203 Other (1,156) 1,496 Subtotal 17,321 15,711 Interest and dividends received 875 1,125 Interest paid (611) (618) Corporate and other income taxes paid (6,293) (7,440) Cash flows from investing activities: (9,159) (6,012) Purchases of property, plant and equipment (2,274) (5,805) Proceeds from disposal of property, plant and equipment 2,864 3,153 Purchases of investment securities (7,585) (2,981) Proceeds from sales of investment securities 2,559 2,685 Increase in short-term loans (net) (1,360) (83) Increase in long-term loans (1,247) (1,617) Collection of long-term loans 1,534 1,122 Other (3,649) (2,485) Cash flows from financing activities: (12,612) (4,149) Addition to and repayment of short-term borrowings (3,838) (497) Repayment for redemption of convertible bonds (578) Increase in long-term debt 100 Repayment of long-term debt (2,877) (1,526) Payments for retirement of Company stock (3,096) Income from the sale of treasury stock Cash dividends paid (2,262) (2,266) Difference on conversion of cash and cash equivalents Decrease in cash and cash equivalents (10,409) (1,346) Cash and cash equivalents at the beginning of the year 29,468 28,730 Increase in cash and cash equivalents accompanying increase in number of consolidated subsidiaries 2,141 2,084 Cash and cash equivalents at end of year 21,200 29,468 Note: Relationship between cash and cash equivalents at the end of the year and balance sheet items Year ended March 31, 2002 Year ended March 31, 2001 Cash and deposits 14,975 10,487 Marketable securities 6,224 18,980 Total 21,200 29,468 Stocks and other securities with risk of price fluctuations Cash and cash equivalents 21,200 29,468

11 SEGMENT INFORMATION Years ended March 31, 2002 and 2001 (Figures less than 1 million have been omitted.) Fiscal 2002 Fiscal 2001 Year ended March 31, 2001 Year ended March 31, 2000 Eliminations E l i m i n a t i o n s Stationery Furniture and Stationery Furniture and segment segment Total corporate Consolidated segment segment Total corporate Consolidated I. Net sales, operating income, and expenses (1) Sales to customers 138, , , , , , , ,309 (2) Intra-company sales transfers ( ) ( ) Total 138, , ,584 ( ) 276, , , ,309 ( ) 295,309 Operating expenses 139, , ,805 ( ) 275, , , ,453 ( ) 283,453 Operating income (1,185) 1, ( ) 779 7,781 4,075 11,856 ( ) 11,856 II. Assets, depreciation, and capital expenditures Assets 109, , ,614 85, , , , ,273 93, ,504 Depreciation 3,109 3,288 6, ,871 2,872 3,887 6, ,292 Capital expenditures 3,521 1,882 5, ,725 3,769 3,771 7, ,932 Note: Method of defining business segments Products and services of similar types and characteristics are grouped into business segments.