Financial Report Year Ended March 31, 2017

Transcription

1 Financial Report 2017 Year Ended March 31, 2017

2 TBK Group develops and manufactures important safety parts for medium-toheavy commercial and passenger vehicles, such as brakes, water pumps for engine cooling, oil pumps for lubrication, and a wide range of engine components and other products. Other engine components (16.6%) (for vehicles and construction eqp.) Other (5.4%) (Real estate lending and other) Brakes (42.5%) (For vehicles and construction eqp.) Engine components (Pumps) (42.5%) (for vehicles and construction eqp.) Brakes and related components Engine components (Pumps) Water Pumps Oil Pumps Energy-saving oil pumps Other engine components Camshafts Turbocharger bearing housings Cylinder heads/crankcases Other components Electromotive Pumps Retarders Re-generation type Retarders

3 Consolidated Financial Highlights TBK Co., Ltd. and Consolidated Subsidiaries For the years ended March 31, 2017, 2016 and 2015 Net Sales ( million) 47,058 47,086 46,640 Operating Income ( million) 2,934 Net Income (loss) attributable to owners of the parent ( million) 2,152 Total Assets ( million) 61,399 63,349 57,443 1,818 1, (82) Net Assets ( million) Cash dividends per share ( ) ROE (%) Equity ratio (%) 32,079 29,819 29, (0.3) Net sales by the region Japan ( million) Net sales by the region Asia ( million) Net sales by the region Americas ( million) 35,041 32,366 31,152 12,783 14,011 1,746 1,935 10,268 1,476 Contents Consolidated Financial Highlights 1 Message from the President 2 Corporate Governance System 4 Consolidated Financial Statements 6 Corporate Data 13 1

4 Message from the President Fiscal 2016 in Review In fiscal 2016, ended March 31, 2017, the business environment for the TBK Group (TBK Co., Ltd. and consolidated subsidiaries) was mixed. In Japan, total annual registrations of ordinary trucks (those with payload of four tons or more) increased 11.2% year on year, to 98,106 vehicles. In addition to solid renewal demand caused by reaction to investment restraint among truck users over many years, the sector benefited from replacement demand stemming from tightened regulations on exhaust gas emissions. Meanwhile, the truck manufacturing sector reported a sluggish overall performance, due mainly to weak demand in Southeast Asia, although exports to North America were healthy. In addition, the construction machinery and industrial machinery sectors continued performing weakly, despite signs of recovery in demand from resource-rich countries and emerging nations. By geographical region, in Japan the Group s automotive components business posted a 2.7% yearon-year decrease in sales, to 31,740 million, and a 22.6% increasing in operating income, to 1,346 million, and its real property leasing business reported a 36.2% decline in sales, to 343 million, and a 62.4% fall in operating income, to 83 million. Group companies in Asia (except Japan) recorded a 7.4% increase in combined sales, to 16,011 million, and a 12.5-fold jump in operating income, to 552 million. In North America, sales declined 23.6%, to 1,491 million, and operating income fell 69.6%, to 41 million. As a result, the TBK Group posted consolidated net sales of 46,640 million, down 0.9% from the previous year. While our performance was affected by weak sales in emerging nations and the loss of some commercial rights, we benefited from expansion of rights covering turbo engine parts and other products, centered on Thailand. Thanks to investments to streamline domestic production and costcutting efforts, operating income increased 35.2%, to 1,818 million, and ordinary income jumped 56.4%, to 1,799 million. The Group reported a loss attributable to owners of parent of 82 million, compared with profit attributable to owners of parent of 633 million in the previous fiscal year. This reflected various factors, including a gain on sale of a former factory site due to a reassessment of domestic business resources (extraordinary income), a loss on sales of fixed assets (extraordinary loss), receipt of Fukushima Industrial Restoration Corporate Relocation Subsidy (extraordinary income), and loss on reduction of fixed assets (extraordinary loss). 2

5 Targeting Business Expansion The TBK Group continues emphasizing product development aimed at acquiring new commercial rights. To this end, we will introduce a new lightweight brake that helps users cut their costs, and we will strive to cultivate and expand sales rights for brakes, electric pumps, and other products in the commercial vehicle field. In addition, we are developing vehicle start-assist systems utilizing retarders and other regenerative technologies. We will continue working to expand our business in overseas markets earmarked for future growth. In Thailand, for example, subsidiary TBK Technology (Thailand) Co., Ltd., our new production base for brake friction materials, is engaged in production and sales activities in response to the growing local production operations of client companies. In China, identified as a medium-to-longterm growth market, we transformed TBK China Co., Ltd. into a consolidated subsidiary in order to enhance the efficiency of our operations in that nation. We also converted affiliate Changchun FAWSN TBK Co., Ltd. into an equity-method affiliate, due to its increasing influence on the Company s earnings. In addition, our subsidiaries in the United States and India are striving to expand their businesses especially in pump products and reinforce their income foundations. Outlook Looking ahead, the domestic truck manufacturing sector is expected to remain steady. We also anticipate continued medium- and long-term economic growth in Asia, despite some weakness in the short term. While we feel that market recovery in Southeast Asia will require more time, we will continue focusing on expanding sales and improving product efficiency in Japan and elsewhere in Asia. In these and other ways, we will work rigorously to reduce overall costs in an effort to improve our medium- and long-term results. For fiscal 2017, ending March 2018, we forecast consolidated net sales of 46.0 billion, operating income of 1.5 billion, and profit attributable to owners of parent of 1.0 billion. With respect to appropriation of profits, our basic policy is to continue paying stable dividends while building a stable long-term income foundation and establishing a sound financial position, in our ongoing quest to enhance corporate value. Takaaki Kishi President 3

6 Corporate Governance System Basic Approach At TBK, our basic approach to corporate governance places emphasis on expediting management decision-making and carrying out smooth execution of business operation activities, as well as ensuring transparency in decision-making and execution processes, and eliminating illegality via mutual checks and balances. Furthermore, we believe that in addition to providing for rapid, strategic decisionmaking and oversight by a board of directors that is well-acquainted with the vehicle components manufacturing industry and the management concerns of this company, a two-tier system consisting of oversight and auditing by an outside director and outside corporate auditors is an efficient way to ensure the trust of our shareholders and investors. As such, we have decided that the Company with Board of Corporate Auditors model is a suitable one for our company. With respect to the Corporate Governance Code formulated by the Tokyo Stock Exchange, TBK actively applies such items as are applicable in line with its stipulated principles, carries out increased strengthening of its corporate governance, and aims to realize sustainable growth and enhanced corporate Value. Shareholder s Meeting Appointment Appointment Appointment Report Board of Directors Management Monitoring Risk/Compliance Committee and Internal Audit Committee Operational Audit Office Cooperation Board of Corporate Auditors Management System Items Decision Board of Executive Officers Execution Management Management Meeting Cooperation Audit/Preventive measure Notify Audit Cooperation Report Indicate Audit Independent Auditors Divisions and Subsidiaries Compliance Structure In order to improve actual compliance effectiveness, TBK is reconfiguring its compliance promotion structure to enable company officers and all employees to act in accordance with laws, regulations, articles of incorporation and management principles. We are also moving forward with education and recommendations for punishment to address any violations committed by company officers or employees. 4

7 Risk Management System In order to implement our risk management system, we have established a set of risk management and compliance rules. Risk and compliance committee meetings and subcommittee meetings are held regularly once per quarter, with discussions that include reports from subsidiaries, which are conveyed periodically to the board of directors so that appropriate measures and follow-up verification are carried out. Internal Auditing and Auditing by Corporate Auditors Internal auditing at TBK is carried out primarily by the Business Operation Auditing Office, and with regard to the legality, effectiveness, efficiency and other concerns of the operations of each division and at domestic and foreign subsidiaries, audits are performed that include measures for product quality and the environment. Concerning legality, in view of our social responsibility as a publicly listed company, we are also paying special attention to the Subcontract Act, the Antimonopoly Act and other laws. Auditing by corporate auditors is carried out by all the corporate auditors (outside corporate auditors), who convene each month for the meeting of the board of corporate auditors, and attend and convey opinions at the meeting of the board of directors as well. Standing corporate auditors in particular are responsible for performing audits of the Executive Operations Division, including subsidiary operations, and do so by attending and conveying their opinions at executive officer meetings and all other committee meetings. Outside Directors and Outside Corporate Auditors In order to oversee the directors performance of duties and enhance the functioning of the board of directors from an independent standpoint, TBK has appointed two (2) outside directors and three (3) outside corporate auditors. The criteria for their appointment are based on rules concerning independence set forth by the Stock Exchange. Outside directors Hiroshi Takahashi and Masayuki Yamazaki, on the basis of their broad knowledge and insight, and their wealth of experience and achievement in corporate management at banks and industrial firms, have been selected to oversee the directors performance of duties from an independent standpoint. There is no relationship of vested interest between the outside directors and TBK at this time. Outside corporate auditor and standing corporate auditor Keisuke Fukumoto, on the basis of his experience handling internal auditing duties at life insurance companies, his broad knowledge of and insight into corporate governance and his preservation of independence, has been selected to oversee the directors performance of duties with a fair and objective standpoint. Concurrently, Mr. Fukumoto holds the post of part-time corporate auditor for Group companies TSK, TBR, TBK Sales and TBK Tosho. Outside corporate auditor Mitsunori Matsumoto, on the basis of his experience in corporate management and his broad knowledge and insight, as well as his prior two-year track record as an outside corporate auditor for TBK, has been judged capable of auditing the directors performance of duties with a fair and objective standpoint. Outside corporate auditor Keiichi Otsuka, on the basis of his high level of expertise with finance and accounting as a certified public accountant, and his wealth of experience in accounting auditing, has been judged capable of auditing the directors performance of duties with a fair and objective standpoint. 5

8 Consolidated Balance Sheets TBK Co., Ltd. and Consolidated Subsidiaries As of March 31, 2017 and 2016 Millions of yen Thousands of U.S. dollars (Note) ASSETS Current Assets: Cash on hand and at bank... 5,722 2,398 $ 51,002 Notes and accounts receivable... 11,963 11, ,631 Inventory assets... 4,082 3,851 36,384 Corporate tax receivable Deferred tax assets ,797 Other... 1,921 1,478 17,122 Reserve for possible loan losses... (4) (5) (35) Total current assets... 24,145 20,211 $215,215 Property, Plant and Equipment: Tangible Fixed Assets: Buildings and structures... 7,250 10,584 $ 64,622 Machinery and equipment... 11,942 11, ,444 Land... 4,301 11,841 38,336 Construction in progress... 2,978 3,363 26,544 Other... 1,199 1,113 10,687 27,691 37, ,822 Intangible Fixed Assets: Software ,807 Other , ,895 Investment and Other Assets: Investment securities... 3,575 3,438 31,865 Investment in capital ,478 Long-term loans ,968 Deferred tax assets ,986 Other ,042 Allowance for possible loan losses... (12) (13) (106) Reserve for possible investment losses... (131) 5,188 4,751 46,242 Total property, plant and equipment... 33,298 43, ,800 Total Assets... 57,443 63,349 $512,015 Note: U.S. dollars amounts are translated, for convenience only, at U.S.$1= , the rate prevailing on March 31,

9 Millions of yen Thousands of U.S. dollars (Note) LIABILITIES AND NET ASSETS Current Liabilities: Notes and accounts payable... 6,400 6,599 $ 57,046 Short-term debt... 6,396 6,379 57,010 Lease obligations ,456 Accrued income taxes... 1, ,865 Accrued bonuses to employees ,881 Accrued bonuses to board of directors Provision for product warranties Notes payable equipment ,055 Other... 1,667 1,848 14,858 Total current liabilities... 18,065 17, ,021 Non-Current Liabilities: Long-term debt... 5,719 6,987 50,976 Lease obligations ,128 Deffered tax liabilities ,964 Deferred tax liabilities on revaluation of land , Net defined benefit liability... 2,801 2,891 24,966 Other , Total non-current liabilities... 9,527 16,346 84,918 Total liabilities... 27,592 33, ,939 Net Assets: Shareholders' equity: Common stock... 4,617 4,617 41,153 Capital surplus ,308 Retained earnings... 22,873 18, ,877 Treasury stock, at cost... (36) (36) (320) 27,713 22, ,018 Revaluation adjustment: Valuation difference on available-for-sale securities... 1, ,375 Revaluation reserve for land , Foreign currency translation adjustment ,551 Remeasurements of defined benefit plans... (389) (505) (3,467) 1,622 6,221 14,457 Minority interests ,590 Total net assets... 29,851 29, ,075 Total liabilities and net assets... 57,443 63,349 $512,015 7

10 Consolidated Statements of Income TBK Co., Ltd. and Consolidated Subsidiaries For the years ended March 31, 2017 and 2016 Millions of yen Thousands of U.S. dollars (Note) Net sales... 46,640 47,086 $415,723 Cost of sales... 40,649 41, ,322 Gross profit... 5,991 5,360 53,400 Selling, general and administrative expenses... 4,172 4,015 37,186 Operating income... 1,818 1,345 16,204 Other income (expenses): Interest income (expenses)... (298) (239) (2,656) Dividend income Provision of allowance for investment loss... (39) Foreign exchange gains (losses) (64) 115 Equity in earnings of affiliates ,274 Gain (loss) on sale and disposal of property, plant and equipment, net... (4,667) (66) (41,599) Subsidy income... 1,514 13,494 Gain from forfeiture of lease agreement... 2,001 17,835 Loss on retirement of non-current assets... (1,217) (10,847) Loss on revaluation of investment in securities... (27) (240) Others, net Total... (2,416) (261) (21,534) Income before income taxes and minority interests... (597) 1,084 (5,321) Income taxes: Deferred... (2,335) 112 (20,812) Current... Prior... 1, ,981 (541) 489 (4,822) Net income... Net income (loss) attributable to non-controlling interests... (55) (38) (490) 231 Net income attributable to owners of the parent... (82) 633 $ (730) 8

11 Consolidated Statements of Comprehensive Income TBK Co., Ltd. and Consolidated Subsidiaries For the years ended March 31, 2017 and 2016 Thousands of Millions of yen U.S. dollars (Note) Net income... (55) 595 $ (490) Other comprehensive income (loss): Net unrealized holding gain on securities (588) 3,761 Difference in revaluation of land Translation adjustments... (39) (911) (347) Remeasurements of defined benefit plans (302) 1,025 Share of other comprehensive income (loss) of affiliates by equity method... (61) (543) 436 (1,678) 3,886 Comprehensive income (1,083) $ 3,396 Comprehensive income attributable to shareholders of the Company (942) $ 3,199 Comprehensive loss attributable to minority interests (141) 187 9

12 Consolidated Statements of Changes in Equity TBK Co., Ltd. and Consolidated Subsidiaries For the years ended March 31, 2017 and 2016 Millions of yen Shareholders' equity Total Retained Trearusy stock, shareholders' Common stock Capital surplus earnings at cost equity Balance at April 1, , ,183 (35) 23,015 Changes during the year: Cash dividends (469) (469) Net income Purchases of treasury stock (0) (0) Change of scope of consolidation (219) (219) Purchase of shares of consolidated subsidiaries Net changes in items other than shareholders' equity Total changes during the year 10 (55) (0) (45) Balance at March 31, , ,128 (36) 22,969 Changes during the year: Cash dividends (469) (469) Net income (82) (82) Purchases of treasury stock (0) (0) Disposal of treasury stock (0) 0 0 Change of scope of consolidation (0) (6) (7) Change in the scope of application of the equity method Purchase of shares of consolidated subsidiaries (1) (1) Disposition of land revaluation difference 5,273 5,273 Net changes in items other than shareholders' equity Total changes during the year (1) 4,745 (0) 4,743 Balance at March 31, , ,873 (36) 27,713 Millions of yen Accumulated other comprehensive income (loss) Net Remeasurements Total accumulated unrealized of defined other holding gain Revaluation Translation benefit plans, comprehensive Minority Total net on securities adjustment adjustments net of taxes income, net interests assets Balance at April 1, ,330 5,262 1,412 (208) 7,797 1,266 32,079 Changes during the year: Cash dividends (469) Net income 633 Purchases of treasury stock (0) Change of scope of consolidation (219) Purchase of shares of consolidated subsidiaries 10 Net changes in items other than shareholders' equity (588) 123 (813) (296) (1,575) (639) (2,214) Total changes during the year (588) 123 (813) (296) (1,575) (639) (2,260) Balance at March 31, , (505) 6, ,819 Changes during the year: Cash dividends (469) Net income (82) Purchases of treasury stock (0) Disposal of treasury stock 0 Change of scope of consolidation (3) Change in the scope of application of the equity method Purchase of shares of consolidated subsidiaries (125) (126) Disposition of land revaluation difference 5,273 Net changes in items other than shareholders' equity 422 (5,273) (95) 115 (4,831) 12 (4,819) Total changes during the year 422 (5,273) (4,599) (111) 32 Balance at March 31, , (389) 1, ,851 10

13 Thousands of U.S. dollars Shareholders' equity Total Retained Trearusy stock, shareholders' Common stock Capital surplus earnings at cost equity Balance at April 1, 2016 $41,153 $2,317 $161,583 $(320) $204,733 Changes during the year: Cash dividends (4,180) (4,180) Net income (730) (730) Purchases of treasury stock (0) (0) Disposal of treasury stock (0) 0 0 Change of scope of consolidation (0) (53) (62) Change in the scope of application of the equity method Change of scope of affiliates accounted for using equity method Purchase of shares of consolidated subsidiaries Disposition of land revaluation difference 47,000 47,000 Net changes in items other than shareholders' equity Total changes during the year (8) 42,294 (0) 42,294 Balance at March 31, 2017 $41,153 $2,308 $203,877 $(2,994) $247,018 Thousands of U.S. dollars Accumulated other comprehensive income (loss) Net Remeasurements Total accumulated unrealized of defined other holding gain Revaluation Translation benefit plans, comprehensive Minority Total net on securities adjustment adjustments net of taxes income, net interests assets Balance at April 1, 2016 $6,604 $47,998 $5,330 $(4,501) $55,450 $5,588 $265,790 Changes during the year: Cash dividends (4,180) Net income (730) Purchases of treasury stock (0) Disposal of treasury stock 0 Change of scope of consolidation (26) Change in the scope of application of the equity method 2,317 2,050 2,050 Purchase of shares of consolidated subsidiaries (1,114) (1,114) Change of scope of affiliates accounted for using equity method 2,050 2,050 2,317 Disposition of land revaluation difference 47,000 Net changes in items other than shareholders' equity 3,761 (47,000) (846) 1,025 (43,060) 106 (42,953) Total changes during the year 3,761 (47,000) 1,212 1,025 (40,992) (989) 285 Balance at March 31, 2017 $10,375 $998 $6,551 $(3,467) $14,457 $4,590 $266,075 11

14 Consolidated Statements of Cash Flows TBK Co., Ltd. and Consolidated Subsidiaries For the years ended March 31, 2017 and 2016 Millions of yen Thousands of U.S. dollars (Note) Cash flows from operating activities: Income before income taxes... (597) 1,084 $ (5,321) Adjustment: Depreciation... 3,853 3,541 34,343 Increase (decrease) in allowance for employee bonuses (13) 1,158 Increase (decrease) in allowance for board of director bonuses... (50) Increase (decrease) in provision of reserve for producct warranties... (125) (1,114) Decrease in net defined benefit liability (301) 258 Interest and dividend income... (97) (115) (864) Interest expenses ,905 Equity in earnings of affiliates... (143) (1,274) Loss (gain) on sales of property, plant and equipment... 4, ,590 Loss on disposal of property, plant and equipment Loss on retirement of non-current assets... 1,217 10,847 Gain from forfeiture of lease agreement... (2,001) (17,835) Subsidy income... (1,514) (13,494) Loss on revaluation of investment in securities Changes in assets and liabilities: (Increase) in receivables... (100) (487) (891) (Increase) decrease in inventories... (226) (160) (2,014) Increase (decrease) in notes and accounts payable... (223) 334 (1,987) (Increase) in consumption taxes receivable (Decrease) in consumption taxes payable (351) 410 (Decrease) in account payable (6) 926 Others, net ,918 Sub-total... 6,138 4,267 54,710 Interest and dividend received Interest paid... (287) (211) (2,558) Income tax paid... (39) (635) (347) Net cash provided by operating activities... 5,908 3,535 52,660 Cash flows from investing activities: Payment for purchases of property, plant and equipment... (5,234) (7,123) (46,652) Proceeds from sales of property, plant and equipment... 6, ,489 Payment for purchases of intangible assets... (160) (33) (1,426) Payment for perchase of investments in securities... (97) (530) (864) Payment by loans... (71) (1,092) (632) Proceeds from collection of loans Payment for refunding of the long-term security deposits... (150) (180) (1,337) Payment for forfeiture of lease agreement... (1,034) (9,216) Others, net Net cash used in investing activities... (663) (8,236) (5,909) Cash flows from financing activities: Increase (decrease) in short-term loans, net... (204) 2,191 (1,818) Increase in long-term loans, net... (1,202) 2,993 (10,713) Cash dividend paid to non-controlling subsidiaries... (9) (174) (80) Payments from changes in ownership interests in subsidiaries that do not result in changes in scope of consolidation... (126) (302) (1,123) Payment of dividend... (469) (468) (4,180) Others, net... (368) (154) (3,280) Net cash provided by (used in) financing activities... (2,378) 4,083 (21,196) Effect of exchange rate changes on cash and cash equivalents... (29) (104) (258) Net increase (decrease) in cash and cash equivalents... 2,836 (722) 25,278 Cash and cash equivalents at beginning of the year... 2,398 3,043 21,374 Increase (decrease) in cash and cash equivalents resulting from change of scope of consolidation ,331 Cash and cash equivalents at end of year... 5,720 2,398 $ 50,984 12

15 Corporate Data Corporate Information (As of March 31, 2017) TBK Co., Ltd. Head Office , Minami Naruse, Machida, Tokyo , Japan TEL: FAX: Paid in Capital: 4,617 million Number of authorized shares: 76,000,000 shares Number of shares issued: 29,424,635 shares Share units: 100 shares Number of shareholders: 13,891 Stock Listing: Tokyo Stock Exchange Fukushima No. 1 Plant Fukushima No. 2 Plant Fukushima No. 3 Plant Tokachi Proving Ground Group Companies: Tokyo Seiko Co., Ltd. (Japan) TBR Co., Ltd. (Japan) TBK Sales Co., Ltd. (Japan) TBK America, Inc. (U.S.A.) TBKK (Thailand) Co., Ltd. (Thailand) TBK Technology (Thailand) Co., Ltd. Full Win Developments Ltd. (Hong Kong) Qiaotou TBK Co., Ltd. (China) TBK China Co., Ltd. (China) Chang an TBK Co., Ltd. (China) Changchun TBK SHILI Auto Parts Co., Ltd. (China) TBK India Private Ltd. (India) Major Shareholders (As of March 31, 2017) Isuzu Motors Limited 2, BBH for Fidelity Puritan TR: Fidelity SR Intrinsic Opportunities Fund Intrinsic Opportunity Fund 1, Asahi Mutual Life Insurance Company 1, Sumitomo Mitsui Banking Corporation 1, The Bank of Yokohama, Ltd. 1, Mitsubishi Heavy Industries Engine & Turbocharger, Ltd. 1, BBH for Fidelity Low-Priced Stock Fund (Principal All Sector Subportfolio) The Master Trust Bank of Japan, Ltd.(Trust Account) CBNY DFA INTL SMALL CAP VALUE PORTFOLIO Japan Trustee Services Bank, Ltd.(Trust Account) *percentage of held is calculated exclusive of 97,369 treasury stocks. Number of shares held (thousands) Percentage of shares held (%) Type of Shareholders (As of March 31, 2017) Treasury Stock 0.33 % Financial Institutions % Individuals and Others % Domestic Institutional Investors % Foreign Institutional Investors % 13

16 TBK Co., Ltd , Minami Naruse, Machida, Tokyo , Japan URL: