Professional Documents
Culture Documents
CONTENTS page 02Z MESSAGE FROM THE MANAGEMENT page 05Z FOCUS ON CORE COMPETENCIES TO DRIVE
GROWTH page 06Z A MORE POWERFUL BASE FOR EXSITING CORE BUSINESSES page 08Z A MORE EXPANSIVE
BASE FOR SPECIALTY BUSINESSES page 12Z RESEARCH AND DEVELOPMENT page 14Z RESPONSIBLE CARE
page 15Z CONSOLIDATED FIVE-YEAR SUMMARY page 16Z FINANCIAL REVIEW page 22Z CONSOLIDATED
BALANCE SHEETS page 24Z CONSOLIDATED STATEMENTS OF INCOME page 25Z CONSOLIDATED STATEMENTS
OF SHAREHOLDERS’ EQUITY page 26Z CONSOLIDATED STATEMENTS OF CASH FLOWS page 27Z NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS page 35Z REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON THE CONSOLIDATED FINANCIAL STATEMENTS page 36Z MAJOR SUBSIDIARIES AND AFFILIATES page 38Z
Thousands of
Millions of yen Change (%) U.S. dollars
2000 1999 2000/1999 2000
Net sales ¥224,110 ¥207,391 +8.1% $2,114,249
Operating income 15,438 13,977 +10.4 145,641
Income before income taxes 8,595 5,114 +68.1 81,083
Net income 4,917 1,508 +226.1 46,386
“Structural Reform for Renewed Growth” and “Group and Environmental Management.” In the
final year, we hope to reap the rewards of these efforts in the form of new growth. The fruits of
this drive will serve as a platform for the launch of the next three-year management program,
the first of the new century. The bolstering of group and environmental management will allow
us to drive through these reforms and spur further growth.
Significantly, these actions virtually complete intended reforms for subsidiaries and affiliates.
Regarding our financial position, we have now completed the large-scale program of
capital expenditure started in fiscal 1996. This program set out to reinforce our infrastructure and
expand operations in the specialty products sector. The task now at hand is to turn these invest-
ments into tangible results. One aim is to generate higher cash flows from operating activities
and direct this toward paring interest-bearing liabilities to ¥140.0 billion by the end of fiscal 2001.
In the third area of reform, business process reengineering, we are streamlining head office
functions as well as non-production and auxiliary divisions to create a leaner, more efficient head
office. Furthermore, we are currently retooling the Group’s information infrastructure to keep
pace with the IT revolution, and introducing a strategic human resources development system
to meet new needs arising from the increased emphasis on Group management.
4
GROUP MANAGEMENT
Our vision calls for a Tokuyama Group in which all businesses have a high degree of autonomy-
regardless of whether they are attached to the parent company or in separate companies. At
the same time, these businesses will fit seamlessly into an integrated whole, thereby allowing us
to drive synergies across the Group.
September 2000
Yuichi Miura
President
5
Focus on Core
Competencies
to Drive Growth
The Tokuyama Factory has a key role to play in strengthening core operations.
The Factory boasts both chemical and cement plants within the same site, a
infrastructure with integration of the material flow, Tokuyama enhances its signifi-
cant cost competitiveness.
Chlor-alkali and cement operations are the core material businesses the
feedstock or fuel. At the same time, distribution activities will be realigned to cre-
ate a leaner, more competitive business structure.
new growth and earnings in these two existing core businesses by implementing
the above-mentioned strategy.
7
duction of Factory’s polycrystalline silicon (and silica) is well integrated into the
Strategic SPs are growth SP fields that Tokuyama intends to pour resources into
moving forward. The technologies and products of such strategic SPs are not lim-
ited to the chemistry field but extend to a broad spectrum of realms ranging
from devices and systems to software. The company intends to narrow its focus
down to the most attractive opportunities in fields where it is strongest.
which are showing rapid growth in line with growth in information and communi-
cations fields. Another is medical diagnosis systems. Growth here is being pow-
ered by the provision of a comprehensive suite of services from systems to
software.
11
12
research and DEVELOPMENT
Tokuyama’s R&D activities are closely linked to the company’s efforts to achieve the goals
of its new three-year management program. In particular, specialty products businesses are
being given priority in R&D funding as Tokuyama concentrates on creating more distinctive
technologies. Another drive is stepping up the pace of research programs to cut lead times.
As part of this drive, a second research wing was completed at the Tsukuba Research Labo-
ratory in June 1999. This further supports the basic policy of centralizing R&D activities at the
company's two major research bases in Tokuyama and Tsukuba to increase speed and
maneuverability. Other members of the Tokuyama Group are conducting R&D activities to
meet concrete market needs using core technologies.
Two themes will play a central role in R&D
programs. One is environmental issues, which
will be given still greater consideration when
conducting a variety of activities. The other
is performing research from the stand-
point of the entire Tokuyama Group,
thereby maximizing potential returns on
R&D investments.
During fiscal 1999, consolidated
R&D expenditures were ¥8.1 billion, sup-
porting the activities of approximately
500 researchers. This figure includes ¥2.7
billion for basic research that is not allocated to the operating divisions. R&D highlights
and expenditures by operating segment are as follows.
Chemicals
To meet customers’ demands for cost-competitive processing, Tokuyama studied a variety
of compounding methods using its polypropylene resin. One result was a new product for
automotive applications. Research also targeted flame-retardant polypropylene, particu-
larly formulations that are weather resistant, with the aim of opening up new applications
in homebuilding materials. For a new type of film made of propylene ethylene rubber
(PER), a product that went on sale during fiscal 1999, research initiatives produced quality
refinements and a variety of new grades, leading to higher sales. Research in biaxially
oriented polypropylene (OPP) film continued to target the development of new specialty
grades. Additionally, Tokuyama transferred technology to subsidiary Tianjin Sunshine
Plastics Co., Ltd. in China. Overall, chemicals R&D expenditures totaled ¥2.1 billion.
13
Specialty Products
In polycrystalline silicon, the major theme was again improving production processes to
cut costs. Research also focused on the development of special grades of precipitated
and fumed silica, as well as new applications for functional silica powders. Aluminum
nitride continues to benefit from growth in the computer and communications sectors. In
response, R&D covered a broad range of products that employ this material, including
substrates with high thermal conductivity. At Figaro Engineering Inc., work continued on
the development of a compact and energy-efficient pulse-driven printed CO sensor.
In plastic lens materials, research focused on ways
to further improve materials with a medium
refractive index. One result was the introduction
of a photochromic lens that changes color
with unprecedented speed. In dental
materials, Tokuyama began sales of
a revolutionary new adhesive
that employs a new catalyst. At
A&T Corporation, development
work began on an automated
sample transportation system
using standardized modules. This
targets the rising degree of total
Left: Computer Chemistry Right: SHAPALTM (sintered plates of Aluminum nitride: SEM view)
waste materials and by-products as supplementary fuel and feedstocks in the manufacture
of cement. A plant completed in August 1999, for example, is recycling waste plastics as
fuels in cement production, and plans call for its processing capacity to be ramped up
moving forward. Tokuyama also uses waste such as plastics, used tires, coal ash and
sludge from external sources in its cement operations. In fiscal 1999, the company reused
1.54 million tons of waste from such sources.
Thousands of
Millions of yen U.S. dollars
2000 1999 1998 1997 1996 2000
Results of operations:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥224,110 ¥207,391 ¥227,440 ¥216,664 ¥197,241 $2,114,249
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,930 139,583 156,129 144,748 127,215 1,433,304
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,438 13,977 14,525 14,358 13,219 145,641
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,917 1,508 2,796 2,077 3,638 46,386
Financial position:
Property, plant and equipment . . . . . . . . . . . . . . . . . ¥166,368 ¥154,015 ¥136,545 ¥122,163 ¥108,409 $1,569,509
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,974 305,192 300,242 289,342 269,908 3,329,947
Long-term debt, less current portion . . . . . . . . . . . . . 126,697 103,304 88,696 80,796 65,612 1,195,250
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,011 209,432 205,165 195,615 176,691 2,292,565
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . 106,758 94,382 95,077 93,727 93,217 1,007,150
Ratios:
Return on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2% 0.7% 1.2% 1.0% 1.8% –
Return on equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 1.6 3.0 2.2 3.9 –
Return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 0.5 0.9 0.7 1.4 –
INCOME ANALYSIS
The Japanese economy in fiscal 1999, the year ended March 31, 2000, inched back on to a
recovery footing. This recovery was underpinned by improved fiscal and financial conditions in
Japan and increased exports to Asia, the U.S. and Europe. Even so, private-sector demand
remained flaccid and without a sustainable driving force.
Conditions in the Tokuyama Group’s main markets of Chemicals, Specialty products,
Cement, building materials and others were generally soft. On a positive note, industrial
production staged a recovery. However, domestic demand, particularly for consumer goods,
was sluggish in the absence of an engine to power growth.
In this climate, consolidated net sales for fiscal 1999 rose 8.1 percent from ¥207,391 million
to ¥224,110 million (US$2,114 million). This was due mainly to an increase in the number of
consolidated subsidiaries, notably Shin Dai-ichi Vinyl Corporation, a producer of polyvinyl
chloride that became a subsidiary in June 1999.
By segment, Chemicals sales climbed 15.5 percent to ¥104,812 million (US$989 million)
and sales in Cement, building materials and others rose 10.0 percent to ¥65,053 million (US$614
million). Sales in Specialty products, however, decreased 5.6 percent to ¥54,245 million (US$512
million).
The cost of sales increased 8.8 percent to ¥151,930 million (US$1,433 million), but gross
profit increased 6.4 percent to ¥72,180 million (US$681 million) from ¥67,808 million a year
earlier. The gross profit ratio was largely unchanged from the previous fiscal year at 32.2
percent. Selling, general and administrative expenses increased 5.4 percent to ¥56,742 million
(US$535 million). As a result of the foregoing, operating income increased 10.4 percent to
¥15,438 million (US$146 million). The ratio of operating income to net sales was 6.9 percent,
compared to 6.7 percent in fiscal 1998.
Research and development expenses were ¥8,108 million (US$76 million) and deprecia-
tion expenses were ¥19,810 million (US$187 million).
Other expenses decreased sharply by 22.8 percent year on year to ¥6,843 million (US$65
million) due mainly to lower restructuring charges related to affiliated companies and an
improvement in earnings of unconsolidated subsidiaries and affiliates which were accounted
17
for by the equity-method. These gains were offset partially by higher loss write-downs on
marketable and investment securities.
Income before income taxes was ¥8,595 million (US$81 million), up 68.1 percent, from
¥5,114 million in the previous fiscal year. Income taxes were ¥4,325 million (US$41 million). Net
income surged 226% to ¥4,917 million (US$46 million) from ¥1,508 million. Consequently, diluted
net income per share rose from ¥5.91 to ¥18.92 (US$0.178). The dividend per share was ¥6.00
(US$0.057).
SEGMENT INFORMATION
The Tokuyama Group is made up of the parent company, 50 subsidiaries and 55 affiliated
companies. For accounting purposes, 49 subsidiaries are consolidated and 17 affiliates are
accounted for by the equity method.
Chemicals
A total of 8 consolidated subsidiaries and 7 equity-method affiliates operate in this segment.
Net sales rose 15.5 percent year on year to ¥104,812 million (US$989 million), but operating
income declined 25.9 percent to ¥4,897 million (US$46 million). This segment accounted for 46.8
percent of consolidated net sales, an increase of 3.0 percentage points over the previous
fiscal year.
In chemicals operations, sales of soda ash and calcium chloride decreased, albeit
slightly, year on year. In soda ash, sodium silicate performed well, but this gain was negated by
soft demand for soda ash for glass manufacture due to the growing popularity of PET bottles.
Regarding calcium chloride, demand for use in snow melting agents was dampened by a
warm winter in Japan. In the chlor-alkali sector, where the main products are caustic soda,
propylene oxide and chlorinated organic solvents, prices retreated slightly. However, sales in
this sector increased due to recovery in industrial production and higher sales volumes of
propylene oxide for use as a feedstock in urethane. In polyvinyl chloride resins, the gap
between supply and demand closed in the domestic market due to the rapid recovery in
18
Asian economies. Negating this was a sharp rise in ethylene feedstock prices, reflecting crude
oil prices. Profitability in polyvinyl chloride resins thus could not be improved, despite efforts to
raise prices. In the organic chemicals business group, which includes industrial-use isopropyl
alcohol, the recovery in industrial production fueled growth in domestic sales for use in paints
and inks and to manufacturers of solvents and cleaning agents. Robust exports also helped to
drive up sales. On the price front, however, efforts to counter higher feedstock prices by raising
sales prices fell short of the mark.
In plastics operations, where the mainstay product is polypropylene, costs rose and sales
volumes declined making the operating environment extremely difficult. In this climate, the
company remained steadfast to its strategy of concentrating on high-profit products and ef-
forts were made to improve prices. Sales nevertheless fell.
In plastic film, biaxially oriented polypropylene (OPP) film saw a slight increase in sales
volumes. On the other hand, prices failed to improve, resulting in flat sales. Furthermore, in
microporous films, sales decreased due to soft prices, despite efforts to expand sales by open-
ing up new markets.
Specialty Products
This segment includes the operations of 13 consolidated subsidiaries and 4 equity-method affili-
ates. Segment sales for fiscal 1999 were ¥54,245 million (US$512 million), down 5.6 percent from
the previous year. Operating income decreased 2.2 percent to ¥8,274 million (US$78 million).
Segment sales accounted for 24.2 percent of consolidated net sales, a decrease of 3.5 per-
centage points over the previous year.
Regarding specialty chemicals, in fine chemicals products, plastic lens materials and
blood-vessel contrast medium performed strongly. However, agricultural chemicals sales were
lackluster. As a result, fine chemicals products sales decreased overall from the previous year.
In dental materials, new products were brought to market to spur sales. Nevertheless, sales
decreased slightly. In medical diagnosis systems, sales continued to grow due to another year
of strong demand for laboratory information systems and automated sample transportation
19
29.0 Chemicals
SALES COMPOSITION
46.8 << % >>
24.2
Specialty Products
systems. On April 1, 1999, medical diagnosis systems operations were consolidated in subsidiary
A&T Corporation.
In functional powder operations, demand for silica filler for industrial applications, includ-
ing as a filler in silicon rubber, was strong. This combined with the rapid economic recovery in
Asia to drive up functional powder sales.
In electronics materials operations, sales of polycrystalline silicon decreased from the
previous year as customers continued to reduce inventory levels. This was despite a rapid
recovery in the semiconductor industry, where polycrystalline silicon is a key material. In
aluminum nitride, meanwhile, shipments to semiconductor manufacturers turned upward, and
demand for optical storage media such as DVDs and CD-ROMs remained strong. These factors
led to higher sales. In high-purity solvents and other chemicals for the electronics industry, sales
volumes increased in both the domestic and Asian markets. However, sales in monetary terms
decreased due to a continuation of soft prices.
FINANCIAL POSITION
Total assets as of March 31, 2000 stood at ¥352,974 million (US$3,330 million), a 15.7 percent
increase over the previous year.
Current assets rose 28.3 percent to ¥151,850 million (US$1,433 million), mainly due to
increases in cash and cash equivalents and notes and accounts receivable. Current liabilities
increased 9.6 percent to ¥104,481 million (US$986 million). As a result, the current ratio improved
from 124.1 percent to 145.3 percent. Investments and long-term receivables decreased 0.5
percent to ¥29,719 million (US$280 million).
Net property, plant and equipment rose 8.0 percent to ¥166,368 million (US$1,570 million).
This mainly reflected extensions to Tokuyama’s power plant, expansion of polycrystalline silicon
and precipitated silica production capacities and expansion and streamlining of production
facilities for all chemicals products as well as the consolidation of Shin Dai-ichi Vinyl Corporation.
Total liabilities at the end of the year were ¥243,011 million (US$2,293 million), a 16.0
percent increase over the previous fiscal year end. This was primarily due to three issues of
unsecured bonds during the year totaling ¥20,000 million and the consolidation of Shin Dai-ichi
Vinyl Corporation.
Shareholders’ equity increased 13.1 percent from ¥94,382 million to ¥106,758 million
(US$1,007 million), mainly reflecting increased retained earnings. The equity ratio was 30.2
percent, compared to 30.9 percent a year earlier. Shareholders’ equity per share rose from
¥370.2 to ¥418.8.
21
CAPITAL EXPENDITURES
Capital expenditures decreased 35.4 percent to ¥20,235 million (US$191 million), mainly reflect-
ing the fact that the company is in the last stage of expansion of its own power plant. With the
aim of expanding operations and responding to environmental issues, the company is expand-
ing and streamlining production facilities, including ramping up polycrystalline silicon
production capacity.
CASH FLOWS
Net cash provided by operating activities was ¥30,248 million (US$285 million). The bulk of this
was accounted for by income before income taxes of ¥8,595 million (US$81 million) and depre-
ciation of ¥19,810 million (US$187 million).
Net cash used in investing activities was ¥22,215 million (US$210 million). The major cash
outflow was for expanding and streamlining production facilities.
Net cash provided by financing activities was ¥2,905 million (US$27 million). Cash was
provided by the procurement of funds from the issues of unsecured bonds and used chiefly for
the repayment of other debt.
As a result of the above, cash and cash equivalents net increased ¥10,833 million (US$102
million). Cash and cash equivalents at the end of the year were ¥42,256 million (US$399 million).
The company prepared a “Consolidated Statement of Cash Flows” for the first time in the
fiscal year ended March 31, 2000. Comparative figures for cash flows from operating, investing
and financing activities for the previous fiscal year are not available.
22
consolidated BALANCE SHEETS
Tokuyama Corporation and Consolidated Subsidiaries March 31, 2000 and 1999
Thousands of
Millions of yen U.S. dollars (Note 2)
ASSETS 2000 1999 2000
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 42,256 ¥ 28,266 $ 398,645
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 219 3,464
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,740 2,137 25,852
Marketable securities (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . 880 1,645 8,300
Receivables:
Trade notes and accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,508 61,355 674,600
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,340 2,933 31,512
Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . (1,996) (2,944) (18,827)
72,852 61,344 687,285
Other assets:
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,478 2,531 23,378
Deferred tax assets (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,099 – 10,373
Excess of investment cost over equity in net assets acquired . . 148 – 1,395
Foreign currency statements translation adjustments . . . . . . 1,312 457 12,382
5,037 2,988 47,528
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 352,974 ¥ 305,192 $ 3,329,947
Thousands of
Millions of yen U.S. dollars (Note 2)
LIABILITIES AND SHAREHOLDERS’ EQUITY 2000 1999 2000
Current liabilities:
Short-term bank loans (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 30,938 ¥ 33,425 $ 291,865
Current portion of long-term debt (Note 7) . . . . . . . . . . . . . . . 7,356 7,360 69,393
Notes and accounts payable:
Trade notes and accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,653 35,381 383,514
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,634 3,633 43,725
45,287 39,014 427,239
Accrued income taxes (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . 2,519 351 23,760
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,744 9,021 101,368
Guarantee deposits received from dealers . . . . . . . . . . . . . . 5,839 5,051 55,082
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,798 1,139 16,967
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,481 95,361 985,674
Long-term liabilities:
Long-term debt, less current portion (Note 7) . . . . . . . . . . . . . 126,697 103,304 1,195,250
Accrued retirement and severance benefits (Note 9) . . . . . 11,329 10,267 106,880
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 500 4,761
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 138,530 114,071 1,306,891
Thousands of
Millions of yen U.S. dollars (Note 2)
2000 1999 2000
Selling, general and administrative expenses (Note 11) . . . . . 56,742 53,831 535,304
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,438 13,977 145,641
Millions of yen
Shares of
common stock Common Additional Retained
(thousands) stock paid-in capital earnings
Thousands of
U.S. dollars
Millions of yen (Note 2)
2000 2000
Cash flows from operating activities:
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 8,595 $ 81,083
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,810 186,891
Increase in provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678 25,265
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (705) (6,651)
Gain on sale of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,573) (14,840)
Gain on sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (881) (8,308)
Equity in earnings of unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . (175) (1,651)
Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,227 39,877
Write-down of marketable and investment securities . . . . . . . . . . . . . . . . . . . . . . . 1,335 12,596
Loss on sale and disposal of property, plant and equipment . . . . . . . . . . . . . . . . . 136 1,286
Decrease in trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 6,920
Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,397) (13,180)
Increase in trade payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930 8,773
Payment for bonuses to directors and statutory auditors . . . . . . . . . . . . . . . . . . . . 58 547
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 908 8,564
Sub total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,680 327,172
Interest and dividend received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871 8,214
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,304) (40,608)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (999) (9,422)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,248 285,356
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . (105) (991)
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,833 102,194
Cash and cash equivalents at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . 28,266 266,662
Increase in cash and cash equivalents due to changes of
scope of consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,157 29,789
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 42,256 $ 398,645
Inventories:
Inventories are mainly stated at the lower of cost or market value, cost being determined by the moving average method.
structures, machinery and equipment, by the straight-line method for buildings at the rates based on the estimated useful
lives of assets prescribed by Japanese Income Tax Low. The range of the estimated useful lives is principally from 3 to 50
years for building and structures and from 2 to 20 years for machinery and equipment.
Significant renewals and betterments are capitalized. Maintenance expenses are charged to income as incurred.
Lease:
Finance leases other than those which are deemed to transfer ownership, are accounted for in the same manner as
operating lease in accordance with generally accepted accounting principles in Japan.
Income Taxes:
From this fiscal year, the Company and its consolidated domestic subsidiaries adopted the new accounting standard,
which recognizes tax effects of temporary differences between the carrying amounts of assets and liabilities for tax and
financial reporting. Under the new accounting standard, the provision for income taxes is computed based on the pretax
income included in the consolidated statement of income. The asset and 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 for financial reporting purposes and the amounts used for income tax purposes.
The amount of deferred income taxes attributable to the net tax effects of the temporary differences at April 1,
1999 is reflected as an adjustment to the retained earnings brought forward from the previous year. Prior years’ financial
statements have not been restated. The cumulative effect of adopting the new accounting standard is ¥4,562 million
(US$43,028 thousand), which is directly added to the retained earnings brought forward from March 31, 1999. The effect
for the year ended March 31, 2000 was to decrease net income by ¥1,084 million (US$10,229 thousand).
Market value:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,256 30,713
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,167 416,674
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,423 447,387
The difference between the above carrying amounts and the amounts shown in the accompanying balance
sheets principally consists of non-marketable securities.
6. Inventories
Inventories at March 31, 2000 and 1999 were as follows:
Thousands of
Millions of yen U.S. dollars
2000 1999 2000
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥17,653 ¥13,869 $166,541
Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,018 3,020 37,902
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,442 5,195 51,336
¥27,113 ¥22,084 $255,779
The aggregate annual maturities of long-term debt at March 31, 2000 are summarized as follows:
Thousands of
Millions of yen U.S. dollars
Year ending March 31
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 7,356 $ 69,393
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,496 174,493
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,521 240,762
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,777 205,445
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,093 123,516
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,810 451,034
¥134,053 $1,264,643
Assets pledged as collateral for certain loans and other liabilities at March 31, 2000 are summarized as follows:
Thousands of
Millions of yen U.S. dollars
Pledged Assets
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥31,549 $297,632
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396 3,736
¥31,945 $301,368
Additional information with respect to the Company’s convertible bonds outstanding at March 31, 2000 is as follows:
Convertible Convertible at
price any time up to
per share and including
2.2 percent convertible bonds in yen due September 30, 2003 . . . . . . . . . . . . . . . . . ¥827.80 September 29, 2003
Under the provisions of the issues, the conversion price is subject to adjustment in certain cases, which include the
payment of stock dividends and the free distribution of shares. If all the outstanding convertible bonds had been con-
verted at March 31, 2000, approximately 11,959 thousand additional shares of common stock would have been issued.
8. Income taxes
The Company and its consolidated domestic subsidiaries are subject to a number of income taxes that, in the aggregate,
indicate a statutory rate in Japan of approximately 41.5% for the year ended March 31, 2000. Consolidated overseas
subsidiaries are subject to income taxes of countries where they domicile.
The significant differences between the statutory tax rate and effective tax rate for consolidated financial state-
ment purposes for year ended March 31, 2000 was summarized as follows:
Significant components of the deferred tax assets and liabilities at March 31, 2000 were as follows:
Thousands of
Millions of yen U.S. dollars
Deferred tax assets:
Allowance for repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 2,115 $ 19,958
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,603 15,124
Accrued retirement and severance benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148 10,829
Loss carryforwards of consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,380 41,324
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,421 22,838
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,667 110,073
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,549) (42,914)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,118 67,159
10. Leases
Lease payments on finance lease contracts that do not transfer ownership for the year ended March 31, 2000 amounted
to ¥661 million (US$6,237 thousand). Lease payments corresponding to depreciation expenses for the year ended March
31, 2000, which was computed by straight-line method over a period up to the maturity of the relevant lease contracts
with no residual value, amounted to ¥661 million (US$6,237 thousand).
If the leases were capitalized, the cost of assets and accumulated depreciation at march 31, 2000 would be as follows:
Thousands of
Millions of yen U.S. dollars
2000 1999 2000
Machinery, equipment and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 413 ¥ 260 $ 3,899
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,992 2,858 28,229
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . (2,066) (1,398) (19,493)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,339 ¥ 1,720 $ 12,635
The future lease payments under the finance lease at March 31, 2000 were as follows:
Thousands of
Millions of yen U.S. dollars
2000 1999 2000
Due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 601 ¥ 594 $ 5,670
Due beyond one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 738 1,126 6,965
¥1,339 ¥1,720 $12,635
32
Business segment information for the years ended March 31, 2000 and 1999 were summarized as follows:
Millions of yen
Cement, building
Specialty materials Corporate or
2000 Chemicals products and others Total elimination Consolidated
1. Sales
Sales to customers . . . . . . . . . . . . . . . . ¥104,812 ¥54,245 ¥65,053 ¥224,110 ¥ – ¥224,110
Inter-segment sales/transfer . . . . . . . . 1,523 96 4,013 5,632 (5,632) –
Total sales . . . . . . . . . . . . . . . . . . . . ¥106,335 ¥54,341 ¥69,066 ¥229,742 ¥ (5,632) ¥224,110
Operating expense . . . . . . . . . . . . . . . 101,438 46,067 65,152 212,657 (3,985) 208,672
Operating income . . . . . . . . . . . . . . . . 4,897 8,274 3,914 17,085 (1,647) 15,438
2. Assets
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥123,207 ¥78,550 ¥81,788 ¥283,545 ¥69,429 ¥352,974
Depreciation . . . . . . . . . . . . . . . . . . . . . 9,708 4,917 4,441 19,066 744 19,810
Capital expenditures . . . . . . . . . . . . . . 3,335 10,719 4,802 18,856 1,379 20,235
Millions of yen
Cement, building
Specialty materials Corporate or
1999 Chemicals products and others Total elimination Consolidated
1. Sales
Sales to customers . . . . . . . . . . . . . . . . ¥90,761 ¥57,489 ¥59,141 ¥207,391 ¥ – ¥207,391
Inter-segment sales/transfer . . . . . . . . 2,092 115 3,722 5,929 (5,929) –
Total sales . . . . . . . . . . . . . . . . . . . . ¥92,853 ¥57,604 ¥62,863 ¥213,320 ¥ (5,929) ¥207,391
Operating expense . . . . . . . . . . . . . . . 86,244 49,141 62,305 197,690 (4,276) 193,414
Operating income . . . . . . . . . . . . . . . . 6,609 8,463 558 15,630 (1,653) 13,977
2. Assets
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥97,302 ¥78,090 ¥72,208 ¥247,600 ¥57,592 ¥305,192
Depreciation . . . . . . . . . . . . . . . . . . . . . 8,417 6,330 4,406 19,153 562 19,715
Capital expenditures . . . . . . . . . . . . . . 10,025 13,941 5,363 29,329 1,972 31,301
1. Sales
Sales to customers . . . . . . . . . . . . . . . . $ 988,798 $511,741 $613,710 $2,114,249 $ – $2,114,249
Inter-segment sales/transfer . . . . . . . . 14,366 910 37,859 53,135 (53,135) –
Total sales . . . . . . . . . . . . . . . . . . . . $1,003,164 $512,651 $651,569 $2,167,384 $ (53,135) $2,114,249
Operating expense . . . . . . . . . . . . . . . 956,965 434,598 614,637 2,006,200 (37,592) 1,968,608
Operating income . . . . . . . . . . . . . . . . 46,199 78,053 36,932 161,184 (15,543) 145,641
2. Assets
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,162,331 $741,036 $771,586 $2,674,953 $654,994 $3,329,947
Depreciation . . . . . . . . . . . . . . . . . . . . . 91,582 46,391 41,893 179,866 7,025 186,891
Capital expenditures . . . . . . . . . . . . . . 31,464 101,118 45,306 177,888 13,012 190,900
34
We have audited the accompanying consolidated balance sheets of Tokuyama Corporation and subsid-
iaries as of March 31, 2000 and 1999, and the related consolidated statements of income and shareholders’
equity for the years then ended and cash flows for only the 1999 fiscal year, all expressed in Japanese yen.
Our audits were made in accordance with auditing standards, procedures and practices generally ac-
cepted in Japan and, accordingly, included such tests of the accounting records and such other account-
ing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the consolidated
financial position of Tokuyama Corporation and subsidiaries at March 31, 2000 and 1999, and the consoli-
dated results of their operations for the years then ended and their cash flows for only the 1999 fiscal year,
in conformity with accounting principles and practices generally accepted in Japan applied on a consis-
tent basis, except for the change, with which we concur, in the method of depreciation, made in the
year ended March 31, 1999, as described in Note 4 of the notes to the consolidated financial statements.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2000 are presented solely for convenience. Our audits also included the translation of
Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on
the basis described in Note 2 to the consolidated financial statements.
Chemicals
•Shin Dai-ichi Vinyl Corporation 8,000 71 Production and sale of polyvinyl chloride
•Sun Arrow Chemical Co., Ltd. 30 100 Production and sale of vinyl chloride compounds
•Tokuyama Film Co., Ltd. 400 100 Production of plastic films
•Tomitec Co., Ltd. 100 60 Production of plastic formations and moisture
absorbing agents, as well as components for gas
sensors and office equipment
•Tianjin Sunshine Plastics Co., Ltd. RMB 132,885 53.75 Production and sale of plastic films
•Sun•Tox Co., Ltd. 100 70 Sale of plastic films
•another 2 consolidated subsidiaries
*Clariant Tokuyama Limited 1,000 40 Production and sale of layered silicate
*Nanbu Plastics Co., Ltd. 1,800 29.42 Production and sale of plastics
*Nishinihon Resicoat Co., Ltd. 50 50 Manufacture of metal parts and anti-rust surface
coating materials
*Tox Co., Ltd. 445 50 Production of plastic films
* another 3 equity-method subsidiaries/affiliates
** another 7 subsidiaries
Specialty Products
•Towa Giken Co., Ltd. 60 50 Production and sale of dental and medical
materials
•A&T Corporation 378 67.53 Production and sale of diagnosis reagents and
analyzers
•Figaro Engineering Inc. 48 100 Production and sale of sensor devices
•Unirex Co., Ltd. 12 100 Design and sale of printed circuit boards
•Pornpat Chemicals Co. Ltd. Baht 182,000 99.18 Production and sale of precipitated silica
•Taiwan Tokuyama Corporation NT$200,500 100 Production and sale of solvent for semiconductor
base materials
•Tokuyama Electronic Chemicals Pte. Ltd. S$2,000 100 Production of solvent for semiconductor base
materials
•Hantok Chemicals Co., Ltd. Won 4,500,000 60 Production and sale of developers for photolithog-
raphy
•Tokuyama Asia Pacific Pte. Ltd. S$800 100 Sale of Tokuyama Group products
•Figaro USA, Inc. US$200 60 Sale of sensor devices
•another 9 consolidated subsidiaries
*Tokuyama Toshiba Ceramics Co., Ltd. 1,600 30 Production and sale of quartz glass
*ASTOM Co., Ltd. 400 50 Production of ion exchange membranes
*Tianjin Figaro Electronic Co., Ltd. RMB23,671 40.70 Production and sale of sensor devices
* another 2 equity-method subsidiaries/affiliates
** another 6 subsidiaries
Capital
(¥ millions) Ownership
Company (local currencies in thousands) (%) Scope
main products
Printed in Japan