KOKUYO CO., LTD. INTERIM FLASH REPORT (Consolidated basis)

Transcription

1 KOKUYO CO., LTD. INTERIM FLASH REPORT (Consolidated basis) Results for the interim period ended September 30, 2001 November 22, 2001 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 interim meeting of the Board of Directors: November 22, 2001 U.S. GAAP: Not adopted 1. Results for the interim period (April 1, 2001, to September 30, 2001) (1) Consolidated operating results Net sales Operating income Recurring income (% change from the previous (% change from the previous (% change from the previous interim period) interim period) interim period) Millions of yen Millions of yen Millions of yen Interim period 129,742 ( 2.5) 597 ( 88.2) 1,813 ( 68.3) Previous interim period 133,092 (7.5) 5,079 (20.1) 5,721 (45.0) Previous fiscal year 295,309 11,856 12,969 Net income (% change from the previous Net income Net income per interim period) per share share after dilution Millions of yen Yen Yen Interim period 683 ( 81.6) Previous interim period 3,704 (66.1) Previous fiscal year 7, Notes: (1) Equity in net income of affiliates: Interim period: 66 million Interim period in the previous fiscal year: 122 million Previous fiscal year: 332 million (2) Average number issued and outstanding during the year: Interim period: 129,269,862 shares Interim period in the previous fiscal year: 129,739,195 shares Previous fiscal year: 129,723,998 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 interim period. (2) Consolidated Financial data Total shareholders Shareholders Shareholders Total assets equity equity ratio equity per share Millions of yen Millions of yen % Yen Interim period 295, , , Previous interim period 305, , , Previous fiscal year 329, , , Note: Average number of shares issued and outstanding during the year: Interim period: 128,742,194 shares Interim period in the previous fiscal year: 129,739,195 shares Previous fiscal year: 129,742,199 shares

2 (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 Millions of yen Millions of yen Millions of yen Millions of yen Interim period 14,540 (7,761) (6,114) 30,139 Previous interim period 13,391 (6,906) (1,998) 33,762 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) (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: 0 Number of companies removed from consolidation: 0 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 results for the fiscal year (April 1, 2001, to March 31, 2002) Net sales Recurring income Net income Millions of yen Millions of yen Millions of yen Fiscal year 298,000 5,500 2,000 (Reference) Net income per share for the fiscal year is forecast to be on a consolidated basis.

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 in 2005 the Company will mark the 100th year since its establishment, Kokuyo has drawn up the 100 Year Vision, a statement of how it intends to fulfill its strategies in a way commensurate with a successful celebration of its 100th anniversary and 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 regular annual cash dividends of 15 per common share since In addition to this policy, we have paid additional dividends in certain periods to commemorate significant events, taking into account Company performance. For the interim term under review (ended September 30, 2001), with this policy in mind, we declared a cash dividend 7.50 per share. Concerning retained earnings, our policy is to prepare the funding that will allow the expansion of our systems to supply products on a stable basis and make use of these funds for strengthening our operational base and competitiveness, while working to expand our business activities and strengthen our management base. 3. Medium-to-Long-Term Management Strategy (1) Shareholder Value-Focused Management We will strive to enhance our capital efficiency and raise shareholder value by adopting the use of such business indicators as ROE and KVA (KOKUYO Value Added) and pursuing 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 furniture-related business, we will implement a greater-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. Management Performance 1. Performance for the Interim Period Conditions were severe in the Japanese economy during the interim period. Suffering the effects of the abrupt slowdown in the United States economy and weakness in the world s IT industries, capital investment in Japan entered a period of adjustment stemming from deteriorating corporate performance, and retail prices continued to fall amid an overall deflationary trend. Against this backdrop, the Kokuyo Group continued to develop and bring to market the kind of products sought by its customers and also worked to augment its line of environmental products, which comply with the Law on Promoting Green Purchasing. Furthermore, the Shibayama Plant (Shibayama, Yamatake County, Chiba Prefecture), our principal plant for construction materials, became the first plant in the industry to succeed in achieving a Zero Emission production system that generates no waste. In our Kaunet operations, which provide catalog sales of office products, we proactively implemented a number of customer-focused and environmentally compliant initiatives. We also issued our second catalog, which we promoted as a shopping mall that has everything you want and makes shopping fun and is designed to meet the complex needs of our customers. However, performance was adversely affected by the serious slump in the economy and the resulting decline in demand, and net sales for the interim period declined 2.5% compared with the same half of the

4 previous fiscal year, to billion. Although the entire Kokuyo Group united in its efforts to secure profit by reducing costs, due to the decline in sales and increased expenses stemming from up-front investments in Kaunet, recurring profit fell 68.3%, to 1.8 billion, and net income for the interim period plummeted 81.6%, to 0.6 billion. The Company also focused on capital efficiency during the interim period, and bought back one million shares of its stock. Results by business segment were as follows: Stationery-Related Business Kokuyo worked to augment its lineup of Universal Design products, which incorporate the key concepts simplicity, amenity, and ease of use. We also introduced several new products and tools to support our customers intellectual operations, including Mimio, which enables the real-time inputting of whiteboard data into a PC, Digital Compatible Paper, which is the result of Anoto TM functionality, and Nepri, an on-demand printing service that was jointly developed with Intec Inc., Marubeni Corporation, and other partners. Although the market generally cooled off during the interim period due to decline in demand and more intense price competition, sales of plain paper copier paper and ink jet printer paper increased due to the spread of IT integration. Such recycling compliant products as the environment-friendly Eco Twin R tube file also produced strong sales. Kaunet also succeeded in surpassing its September 2001 target of obtaining registrations from 500,000 business offices. As a result, sales in the Stationery-Related Business rose 2.0% compared with the same period of the previous fiscal year, to 63.2 billion. Furniture-Related Business In July 2001, Kokuyo brought to market the AGATA office chair, which was awarded an if Design Award by Germany s International Forum Design GmbH (if), the global authority in furniture design. Featuring not only cutting-edge design, this product is also capable of conforming to a wide range of postures and human body sizes and shapes. AGATA has been highly praised and ranked among other chairs from the worldís foremost manufacturers at ORGATEC, the world s largest office furniture exhibition, which is held annually in Cologne, Germany, as well as by leading industry magazines and other publications. We also developed Flex Ceiling, a latticework ceiling that enables the simple, swift, and low-cost rearrangement of office layouts. The creation of new demand through the conversion to a greater-value-added proactive business approach as well as new demand stemming from the conversion to classroom desks and chairs that comply with the new JIS (Japan Industry Standards) contributed to sales during the interim period. However, overall sales were generally weak due to a decline in construction projects resulting from increased price competition, reduced public works spending, and diminished private sector capital investment, as well as substantial shrinkage in the market for chain franchise furniture that reflects a severe falloff in demand in comparison to the substantial demand seen in the second half of the previous fiscal year in anticipation of the enforcement of the Large-Scale Retail Stores Law. As a result, sales for the Furniture-Related Business declined 6.4%, compared with the same period of the previous fiscal year, to 66.5 billion. 2. Outlook for the Full Fiscal Year During the second half of the current fiscal year, the Japanese economy is expected to remain in severe condition as consumer spending remains weak, restraints on capital investment persist, and the effects of the September terrorist attacks on the United States cause greater uncertainty and unpredictability in the future state of the economy. Against this backdrop, on October 1, 2001, Kokuyo applied vertical integration measures to its organization by transferring certain sections of its business operations to specialized agents with the aim of strengthening its managerial structure in response to upheaval in Japanís rapidly changing retail infrastructure. We established three new subsidiaries, Kokuyo Kinki Sales Co., Ltd., Kokuyo Chugoku Sales, Co., Ltd., and Kokuyo Fukuoka Sales Co., Ltd., with which we will strive to expand sales. We will also work to create highly competitive products and enhance our sales and proposal abilities, as well as focus the allocation of managerial resources on Kaunet and other catalog sales operations, an area that holds great potential for future expansion. At the same time, we will make effort to reduce expenses, curtail running costs, and improve our asset efficiency, and ultimately raise our corporate value. For the full fiscal year, the Company predicts net sales of billion, recurring profit of 5.5 billion, and net income of 2.0 billion.

5 CONSOLIDATED BALANCE SHEETS Change from As of September As of September the previous 30, , 2000 interim period As of March 31, 2001 Percentage Percentage Percentage Millions of yen of total assets Millions of yen of total assets Millions of yen Millions of yen of total assets ASSETS Current assets: 133, , (13,459) 171, Cash on hand and in banks 9,113 11,951 (2,838) 10,487 Notes and accounts receivable 71,167 77,917 (6,750) 105,935 Marketable securities 21,025 21,811 (786) 18,980 Inventories 25,172 24, ,106 Deferred tax assets 925 1,014 (89) 1,529 Other 6,679 10,400 (3,721) 7,238 Allowance for doubtful accounts (474) (547) 73 (696) Fixed assets: 161, , , , Property, plant and equipment: 100,123 [33.9] 101,794 [33.3] (1,671) 102,205 [31.0] Buildings and structures 37,445 37,671 (226) 38,523 Machinery and equipment 7,770 8,330 (560) 8,096 Land 48,149 48,219 (70) 48,140 Other 6,757 7,572 (815) 7,445 Intangible fixed assets 4,099 [1.4] 1,965 [0.6] 2,134 3,516 [1.1] Investments and other assets: 57,728 [19.5] 55,117 [18.0] 2,611 52,201 [15.8] Investment securities 40,476 44,701 (4,225) 38,616 Long-term loans 2,363 2, ,622 Long-term prepaid expenses Deferred tax assets 7,651 2,207 5,444 4,915 Other 8,257 7,097 1,160 7,412 Allowance for doubtful accounts (1,652) (1,469) (183) (1,574) Total assets 295, , (10,385) 329,

6 Change from As of September As of September the previous 30, , 2000 interim period As of March 31, 2001 Percentage of Percentage of Percentage of total liabilities total liabilities total liabilities and and and shareholders shareholders shareholders Millions of yen equity Millions of yen equity Millions of yen Millions of yen equity LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: 59,791 [20.2] 65,147 [21.3] (5,356) 88,778 [26.9] Notes and accounts payable 42,365 45,854 (3,489) 63,643 Short-term debt 4,446 6,099 (1,653) 6,498 Current portion of bonds with warrants Long-term prepaid expenses (118) 945 Accrued liabilities 4,140 4,304 (164) 4,183 Accrued corporation tax 1,906 2,671 (765) 4,428 Accrued expenses ,613 Allowance for bonuses 2,096 2,284 (188) 2,180 Other 2,807 2, ,706 Long-term liabilities: 38,472 [13.0] 39,001 [12.8] (529) 39,791 [12.1] Corporate bonds 10,000 10, ,000 Convertible bonds 578 (578) Long-term debt 2,747 3,027 (280) 3,839 Current portion of long-term loans 3,443 3, ,454 Deferred tax liabilities Reserve for retirement allowances 21,280 21, ,327 Provision for special retirement bonuses for directors 991 1,088 (97) 1,158 Total liabilities 98, , (5,884) 128, Minority interests in consolidated subsidiaries Shareholders equity: 196, , (4,667) 200, Capital stock 15,847 [5.4] 15,847 [5.2] 0 15,847 [4.8] Capital surplus 19,083 [6.5] 19,083 [6.2] 0 19,083 [5.8] Consolidated retained earnings 160,841 [54.4] 161,342 [52.7] (501) 162,742 [49.4] Evaluation difference on other securities 1,200 [0.4] 5,648 [1.8] (4,448) 3,169 [1.0] Translation adjustment (269) [ 0.1] (536) [ 0.1] 267 (401) [ 0.1] Treasury stock (0) [0.0] (14) [0.0] 14 (0) [0.0] Total liabilities and shareholders equity 295, , (10,385) 329,

7 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Interim period Interim period Change from ended September ended September the previous Year ended 30, , 2000 interim period March 31, 2001 Percentage Percentage Percentage Millions of yen of net sales Millions of yen of net sales Millions of yen Millions of yen of net sales RECURRING INCOME AND EXPENSES Net sales 129, , (3,350) 295, Cost of sales 90, , (2,758) 206, Gross profit 39, , (592) 88, Selling, general and administrative expenses 38, , ,890 77, Operating income , (4,482) 11, NONOPERATING INCOME AND EXPENSES Nonoperating income 1, , , Interest income (38) 491 Dividend income (36) 589 Investment profits accounted for by the equity method (56) 332 Other 1, ,796 Nonoperating expenses: (43) 2, Interest expenses (18) 620 Other (25) 1,475 Recurring income 1, , (3,908) 12, SPECIAL PROFITS AND LOSSES Special profits: (536) 3, Gain on sales of fixed assets 536 (536) 1,691 Gain on sales of investment securities 1,530 Special losses: (78) 3, Loss on sales of fixed assets 78 (78) 108 Loss on write-off of receivables 3,262 Income before income taxes 1, , (4,366) 12, Corporation tax, inhabitants taxes, and enterprise tax 1, , (262) 6, Tax effect of time differences (713) (0.5) (1,007) (908) (0.3) Loss on minority shareholders (107) (0.1) (31) (0.0) (76) Net income , (3,021) 7,

8 STATEMENTS OF CONSOLIDATED SURPLUS Interim period ended Interim period September 30, 2001 ended September 30, 2000 Year ended March 31, 2001 Millions of yen Millions of yen Millions of yen Consolidated surplus at the beginning of the period 162, , ,058 Increase of consolidated surplus: 70 Increase in surplus accompanying changes in the shareholding ratios 70 Total 2,655 1,420 3,508 Decrease of consolidated surplus: 1,297 1,297 2,270 Dividends Directors bonuses 1,112 Decrease in surplus accompanying increase in number of consolidated subsidiaries 1,297 Other Net income 683 3,704 7,192 Consolidated surplus at the end of the period 160, , ,742

9 CONSOLIDATED STATEMENTS OF CASH FLOWS Interim period ended Interim period September 30, 2001 ended September 30, 2000 Year ended March 31, 2001 Millions of yen Millions of yen Millions of yen Cash flows from operating activities: 14,540 13,391 8,776 Net income before income taxes 1,813 6,179 12,819 Depreciation 3,206 3,569 7,292 Amortization of consolidation adjustments (9) (7) (7) (Decrease) increase in allowance for doubtful receivables (144) (275) (186) Increase in provision for retirement benefits (82) Interest and dividends received (421) (494) (1,080) Interest paid Equity in undistributed earnings of an affiliate (66) (122) (332) Gain (loss) on sales of fixed assets (1,582) Gain on sales of investment securities (42) (1,530) Increase (decrease) in receivables 34,767 22,896 (4,601) Increase (decrease) in inventories 2,933 1,013 (1,922) Decrease (increase) in payables for procurement (21,278) (13,309) 4,203 Other (2,070) (2,037) 1,496 Subtotal 18,880 18,147 15,711 Interest and dividends received ,125 Interest paid (304) (328) (618) Corporate and other income taxes paid (4,472) (4,906) (7,440) Cash flows from investing activities: (7,761) (6,906) (6,012) Purchases of marketable securities (2,009) (2,421) (5,805) Proceeds from sales of marketable securities 1,334 1,285 3,153 Purchases of property, plant and equipment (6,485) (2,825) (2,981) Proceeds from disposal of property, plant and equipment 1, ,685 (Decrease) increase in short-term loans (152) (2,101) (83) Increase in long-term loans (539) (1,160) (1,617) Collection of long-term loans ,122 Other (2,049) (795) (2,485) Cash flows from financing activities: (6,114) (1,998) (4,149) (Decrease) increase in short-term loans (2,051) 94 (497) Increase in long-term debt Repayment of long-term debt (1,463) (918) (1,526) Payments for retirement of Company stock (1,297) Income from the sale of treasury stock Cash dividends paid (1,301) (1,301) (2,266) Difference on conversion of cash and cash equivalents Decrease in cash and cash equivalents 671 4,492 (1,346) Cash and cash equivalents at the beginning of the year 29,468 28,730 28,730 Increase in cash and cash equivalents accompanying increase in number of consolidated subsidiaries 540 2,084 Cash and cash equivalents at end of year 30,139 33,762 29,468 Note: Relationship between cash and cash equivalents at the end of the period and balance sheet items Millions of yen Cash and deposits 9,113 11,951 10,487 Marketable securities 21,025 21,811 18,980 Total 30,139 33,762 29,468

10 SEGMENT INFORMATION Interim period ended September 30, 2001 Millions of yen Eliminations Stationery Furniture and segment segment Total corporate Consolidated I. Net sales, operating income, and expenses (1) Sales to customers 63,224 66, , ,742 (2) Intra-company sales transfers ( ) Total 63,224 66, ,742 ( ) 129,742 Operating expenses 64,258 64, ,144 ( ) 129,144 Operating income (1,034) 1, ( ) 597 II. Assets, depreciation, and capital expenditures Assets 92, , ,951 98, ,562 Depreciation 1,387 1,541 2, ,206 Capital expenditures 2, ,868 2,868 Interim period ended September 30, 2000 Millions of yen Eliminations Stationery Furniture and segment segment Total corporate Consolidated I. Net sales, operating income, and expenses (1) Sales to customers 62,010 71, , ,092 (2) Intra-company sales transfers ( ) Total 62,010 71, ,092 ( ) 133,092 Operating expenses 57,775 70, ,013 ( ) 128,013 Operating income 4, ,079 ( ) 5,079 II. Assets, depreciation, and capital expenditures Assets 86, , , , ,947 Depreciation 1,417 1,925 3, ,569 Capital expenditures 671 1,484 2, ,333

11 Fiscal 2001 Year ended March 31, 2001 Millions of yen Eliminations Stationery Furniture and 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, , ,309 ( ) 295,309 Operating expenses 130, , ,453 ( ) 283,453 Operating income 7,781 4,075 11,856 ( ) 11,856 II. Assets, depreciation, and capital expenditures Assets 101, , ,273 93, ,504 Depreciation 2,872 3,887 6, ,292 Capital expenditures 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.