THK Company Limited
29 November 2004
November 18, 2004
Consolidated Financial Review for the Six Months
Ended Sep. 30, 2004
Company Name: THK CO., LTD
Head Office: Tokyo Japan (Tel: +81-3-5434-0300)
URL: http://www.thk.com/
Stock exchange listing: Tokyo Stock Exchange 1st Section
Code number: 6481
President and CEO: Akihiro Teramachi
Director/General Manager of Corporate Strategy Department: Kotaro Yoshihara
Date of the board meeting: November 18, 2004
Application of U.S. GAAP: None
1. Consolidated Financial Highlights (Unaudited)
Note: All figures are rounded down to nearest million yen.
(1) Operating result
Net sales Operating income Ordinary income
Millions % Millions % Millions %
Six months of of of
Ended Sep.30, 2004 yen yen yen
Six Months 37.5 137.8
Ended Sep.30, 2003 76,868 15,329 16,542 171.7
23.4 267.5
55,924 6,447 6,088 303.6
Year Ended Mar.31, 2004 119,253 16,231 15,892
Net income Net income Fully
per share diluted
net income
per share
Millions % Yen Yen
Six months of yen
Ended Sep.30, 2004 248.9 87.88 78.62
Six Months 10,388
Ended Sep.30, 2003 1,074.3 25.19 21.98
2,977
Year Ended Mar.31, 2004 8,853 72.27 63.69
Notes:
1. Profit/loss on equity
method :Six Months
ended Sep.30, 2004:
Six Months ended
Sep.30, 2003:
Year ended Mar.31,
2004:284million yen
40million yen
301million yen
2. Average number of shares of common stock (consolidated) issued:
Six Months ended Sep.30, 2004: 118,212,020 shares.
Six Months ended Sep.30, 2003: 118,223,451shares.
Year ended Mar.31, 2004: 118,090,965 shares.
3. Change of accounting policy: None
4. Percentages for net sales, operating income, ordinary and net income indicated changes from the
previous term.
(2) Financial position
Total assets Shareholders' Equity ratio Shareholders'
equity equity per
share
Millions of yen Millions of yen % Yen
Six months
Ended Sep.30, 2004 205,848 118,190 57.4 999.83
Six months
Ended Sep.30, 2003 177,956 105,299 59.2 892.26
Year ended Mar.31, 2004 191,105 109,181 57.1 923.35
Note: Number of shares of common stock (consolidated) issued as of
Six months ended Sep.30, 2004: 118,210,676 shares
Six months ended Sep.30, 2003: 118,013,568 shares
Year ended Mar.31, 2004: 118,190,473 shares
(3)Consolidated cash flow position
Cash flow from Cash flow from Cash flow from Cash and cash equivalents at
operating activities Investing activities financing activities the end of the period
Millions of yen Millions of yen Millions of yen Millions of yen
Six months
Ended Sep.30, 8,028 (3,000) (890) 61,249
2004
Six months 5,995 (2,651) (25,911) 50,129
Ended Sep.30,
2003
Year ended 15,735 (3,681) (27,132) 57,037
Mar.31, 2004
(4) Scope of consolidation and application of equity method
Consolidated 14 companies
subsidiaries:
Unconsolidated subsidiaries using the equity method: 0 company
Affiliates using the equity method: 2 companies
(5) Changes in scope of consolidation and application of equity method
Consolidated companies:Additions: 0 companyDeletion:
0company
Companies using the equity method: Additions: 0 Deletion:
company 0company
2. Corporate estimates for the year ending March 31, 2005(4/1/04/-3/31/05)
Net sales Operating income Ordinary income Net income
Year ending Mar.31, 2005 Millions of yen Millions of yen Millions of yen Millions of yen
143,000 25,400 26,700 16,500
For reference: Estimate of net income per share for the year ending March 31, 2005: 137.77 Yen
(By forecast average number of shares of common stock year of period)
Status of the Corporate Group
The company's business group consists of twenty-two subsidiaries and four affiliated companies, which engage in the
manufacture and distribution of the subcomponents of equipment and machinery, centering on linear motion systems, ball
screws, and spherical joints.
These products are manufactured by the company itself, as well as by THK Niigata Co., Ltd. and Daito Seiki Co., Ltd., in
Japan, and by THK Manufacturing of America, Inc., THK Manufacturing of Europe S.A.S., PGM Ballscrews Ltd., PGM
Ballscrews Ireland Ltd., and Samick LMS Co., Ltd. in foreign countries.
The company sells these products through its own distribution channels, Talk System Co., Ltd., and Daito Seiki Co.,
Ltd., in Japan, and using its own sales channels, THK America, Inc., THK Europe B.V., THK GmbH, THK FRANCE S.A.S. THK
TAIWAN CO., LTD, and Samick LMS Co., Ltd., in foreign countries.
A diagram of the main THK Group companies is as follows:
Customers
Products Products Products
Sales Subsidiaries Products Manufacturing & Sales Affilited
(Consolodated) Subsidiaries(Consolidated) Companies
Talk System Co., LTD THK Manufacturing (Accounted for by
THK America, Inc. of America, Inc. equity method)
THK Europe B.V. THK Neturen America, L.L.C. Daito Seiki Co.,
THK GmbH Samick
THK Manufacturing Ltd.(*3) LMS
THK FRANCE S.A.S. of Europe S.A.S. Co.,
Products Products THK TAIWAN CO., LTD. PGM Ballscrews Ltd.(*1) Ltd.
PGM Ballscrews
Ireland Ltd.
Products Parts Product Assembly For Product
Parts machinery parts
production
THK Co., Ltd.
Product Products Parts Products
Parts
Other Subsidiaries Manufacturing Subsidiaries
(Consolidated) (Consolidated)
Beldex Corporation THK Niigata Co., Ltd.(*2)
(*1) PGM Ballscrews Ltd., a consolidated subsidiary as shown above, ceased business activities on July 1, 2004, and has
begun liquidation on August 31, 2004.
(*2) THK Niigata Co., Ltd., a consolidated subsidiary, used to be THK Yasuda Co., Ltd. The name was changed on July 1,
2004.
(*3) Daito Seiki Co., Ltd., an affiliated company, will become a wholly-owned subsidiary effective on November 1, 2004,
by stock swap.
Management Policy
(1) Basic Management Policies
The company is a creativity and development-oriented enterprise that is well known as a world-leading maker of the
Linear Motion Guide, and whose innovative technologies contribute to society. Supported by untiring
research-and-development efforts, such contributions are the company's operating base.
The company has constantly worked toward technological innovation (it holds 942 domestic and 909 overseas patents
and patents pending), and will continue to keep its basic posture as a creativity and development-oriented
enterprise. Based on its commitment to providing innovative products to the world, and to generate new trends that
contribute toward an affluent society, the company aims to expand its business base and to eventually increase its
enterprise value by aggressively cultivating new markets and areas, helped by its technologies and products.
(2) Basic Profit Sharing Policies
The company's basic profit-sharing policy is to continue to pay stable dividends to its shareholders. The company
believes that it is also important to appropriate earnings that correspond to actual earnings results, in an attempt
to enhance its retained earnings and financial strength.
The company will effectively use its retained earnings to reinvest in production equipment and facilities, and in
information systems, responding to the future needs of R&D activities and of the globalization of its industry.
(3) Consideration and Policies on Deduction of Investment Units
The company changed the number of shares constituting one trade unit from 1000 to 100, in accordance with a
resolution adopted at the regular shareholders meeting held in June 1991.
The company will continue to make effort to implement flexible policy as needed, toward expanding the shareholder
base and enhancing the market liquidity of its stocks.
(4) Targeted Management Indexes
To maximize shareholders' interest, the company considers return-on-equity to be the most important management
index; it has set a goal of 10-percent ROE. The company places the greatest emphasis on profitability, to improve
ROE, and therefore has also targeted a 20-percent operating profit ratio.
(5) Medium-term Management Strategy
The company's unique Linear Motion Guide technology is an unrivaled new mechanism. This product has received much
recognition and a high share in the Japanese market. There is greater potential overseas demand for Linear Motion
Guide, due to their lower rate of use than in Japan.
The company will aggressively cultivate overseas markets by supplying high-quality products, centering on Linear
Motion Guide. To this end, it will strengthen its overseas sales system and focus on establishing a global
manufacturing structure that can rapidly respond to local demand, based on the concept that production should be
conducted as near as possible to the market of final demand. In this way, it aims to increase its overseas sales
ratio to 50 percent (from the current 27.2 percent) over the long-term.
The company will make great efforts to expand its business by increasing it presence in global markets, and by
cultivating new products, and will aggressively pursue improved profitability and financial strength. In this way,
it will attempt to increase the enterprise's value.
(6) Issues to Be Acted Upon
The company produces and distributes subcomponents for equipment and machinery, including the Linear Motion Guide,
ball screws, and other items. The main users of these products are manufacturers of industrial machinery, such as
machine tools and semiconductor manufacturing devices. The company's earnings results are significantly influenced
by trends in its clients' industries private sector capital investment and production.
To mitigate fluctuations of business results, the company plans to expand its user base by accelerating overseas
development and new business areas.
The company's overseas marketing regions are Europe, America, and Asia. To choose the best production spots, the
company will expand its sales by reinforcing its cost competency, and by making appeals for its high-level
technologies to users by increasing production nearer to their locations.
The company will also work toward gaining new business areas and markets, including electromechanics, housing, and
automobile industries.
(7) Basic Policy of Corporate Governance
To maximize shareholders' interest, the company aims for fair management by enhancing transparency to shareholders.
The Board of Directors is composed of 15 members, none of whom are from outside the company. To segregate the
management monitoring function from the business execution function, as is required of the Board of Directors, and
to make the Board of Directors more efficient, the company has established as a supreme decision-making body a
management meeting consisting mainly of executive directors.
This management meeting invites certain responsible directors, as needed, to collect necessary information from
them, and solicits objective opinions from such third parties as lawyers and accountants as well. Opinions of the
meeting are put together after discussion. Based on such information and opinions, the meeting's members exchange
views and assemble proposals for the Board of Directors to discuss and to make final decisions for the company.
The company has also established the Internal Audit Office, to monitor the correctness of daily operations, and the
appropriateness and efficiency of the management of the company and its affiliates at home and abroad. It is also
working to strengthen the supervisory functions of the Corporate Auditors Meeting, which is composed of four
auditors. The auditors of all group companies in Japan hold regular meetings to exchange information on auditing
practices.
The company will continue considering important the study of the pros and cons of introducing a committee system
into its management structure, but will continue reforming the management structure and system within the current
framework of the Board of Directors and Corporate Auditors Meeting.
The company will continue to work to demonstrate complete compliance with laws, rules, and regulations, and to
increase accountability to respond to the trust of shareholders and investors.
Business Performance and Financial Standings
I. Business Performance
(1)Summary of Business Performance for the Current Consolidated Interim Fiscal Year
The Japanese economy showed steady recovery during the six months that ended on September 30, 2004, because capital
investment increased with improvements in corporate earnings and the recovery of consumer spending, although there
were some factors weighing on the economy, such as the sharp rise in crude oil prices. US consumer spending remained
on the upswing, helped by an improved labor market, and the European economy also saw a mild recovery. The expansion
of the Chinese economy activated capital investment in some parts of Asia, while the overseas economy generally
continued to be strong.
Under these circumstances, the company improved the development and rollout of new products, focusing on expanding
overseas production capacity, and made domestic productivity improvements in an effort to accommodate increased
demand. The company also worked to enhance its sales capabilities by aggressively promoting TAP-1 activities (THK
Advantage Program 1), to increase the skills of salespeople in Europe and the US, where the company is trying to
expand sales. Driven by these improvement efforts, and helped by a positive external environment (such as an increase
in machinery demand in China, increasing capital investment in the automobile industry, and expansion of the digital
home appliance market), sales to main users of our products (makers of machine tools, general machinery, and
electronics) continued to be strong during the current interim fiscal year.
Consolidated net sales for the six months ended September 30, 2004, were Y76,868 million, marking an increase of Y
20,944 million (or 37.5 percent) since the previous interim fiscal year. The sales-cost ratio improved by 4.2
percent, to 62.8 percent, from the 67.0 percent of the previous interim fiscal period, helped by a rise in capacity
utilization (due to production increases and increased worker skills in overseas plants) and by a sharp rise in
capacity utilization in domestic plants. With the successful suppression of increases in sales and administrative
expenses, and despite soaring sales results, operating income marked Y15,329 million, up Y8,881 million (or 137.8
percent) since the previous interim fiscal year. Ordinary income was Y16,542 million, up Y10,453 million (or 171.7
percent) since the previous interim fiscal year, due to foreign exchange profit and an increase in gains on
investment using the equity method. Net income was Y10,388 million, an increase of Y7,411 (or 248.9 percent) since
the previous interim fiscal year.
Summary of Consolidated Business Performance (Millions of Yen)
Six months ended Sep 30, 2003 Six months ended Sep 30, 2004
Amount % Inc/Dec (%) from Amount % Inc/Dec (%) from
2002 (interim) 2003 (interim)
Net sales 55,924 100.0 23.4 76,868 100.0 37.5
Operating 6,447 11.5 267.5 15,329 19.9 137.8
income
Ordinary income 6,088 10.8 303.6 16,542 21.5 171.7
Net income 2,977 5.3 1,074.3 10,388 13.5 248.9
Reference: Summary of Non-consolidated Business Performance (Millions of Yen)
Six months ended Sep 30, 2003 Six months ended Sep 30, 2004
Amount % Inc/Dec (%) from Amount % Inc/Dec (%) from
2002 (interim) 2003 (interim)
Net sales 44,895 100.0 25.7 63,770 100.0 42.0
Operating income 6,938 15.4 155.5 13,684 21.5 97.2
Ordinary income 6,833 15.2 144.4 14,747 23.1 115.8
Net income 3,801 8.5 149.7 8,885 13.9 133.8
(2) Segment Information for the Current Consolidated Interim Fiscal Year
Geographic segment information is as follows.
Japan:
Sales to machine tool and industrial robot makers continued to be firm, due to the
recovery in capital investment, and sales to the electronics sector (including
semiconductor and liquid crystal display makers) also remained strong, due to the
expansion of the digital home appliance market. Net sales amounted to Y69,231 million, an
increase of Y20,146 million (or 41.0 percent) since the previous interim fiscal year.
Operating income was Y14,364 million, up Y7,404 million (or 106.4 percent) since the
previous interim fiscal year.
America:
Sales to automobile makers, semiconductor manufacturing device makers, and medical
equipment makers continued to be firm. Net sales increased by Y1,076 million (or 21.3
percent) since the previous interim fiscal year, to Y6,129 million, although the yen was
stronger against the US dollar than it was in the previous interim period. Operating
income rose by Y770 million since the previous interim fiscal year, to Y694 million,
thanks to improvements in the capacity utilization and productivity of THK Manufacturing
of America, Inc.
Europe:
Sales to machine tool makers and semiconductor manufacturing device makers continued to
be strong. Net sales increased by Y1,372 million (or 20.5 percent) since the previous
interim fiscal year, to Y8,068 million. This is attributed to the increased adoption rate
of the company's products and the successful cultivation of new clients. Operating income
was Y446 million, an increase of Y832 million since the previous interim fiscal year, due
to the improvement in capacity utilization and productivity of THK Manufacturing of
Europe S.A.S. as in the case of the US manufacturing subsidiary.
Asia and Other Regions:
Sales to machine tools makers and the electronics industries were strong, driven by the
expanded Chinese market. Net sales were Y1,646 million, an increase of Y483 million since
the previous interim fiscal year. Operating income fell by Y4 million since the previous
interim fiscal year, to Y30 million, due to decreased profitability brought on by the
strong yen and the weak Taiwan dollar, and to the rise in sales and administrative
expenses caused by the expense of system development to improve business efficiency.
Note: The net sales above are those to external customers.
(3)Profit-sharing for the Six Months Ended September 30, 2004
The company decided to pay an interim fiscal year-end dividend of Y7.50 per share.
II.Financial Standings
(1) Analysis of Balance Sheets
Total assets for the six months ended September 30, 2004, were Y205,848 million, an increase of Y14,743 million from the
previous consolidated fiscal year-end. This is mainly because current assets increased by Y13,936 million from the
previous fiscal year-end, attributed to a gain in accounts receivable, which was caused by increased sales. Liabilities
also increased by Y5,684 million from the previous fiscal year-end, to Y87,250 million. This is due mainly to an
increase in accounts payable, which was caused by rising materials purchases, reflecting increased sales.
Shareholders equity rose by Y9,008 million from the previous fiscal year-end, to Y118,190 million, attributed mainly to
an increase in net profit for the six months ended September 30, 2004.
(2) Analysis of Statements of Cash Flows
Cash Flows from Operating Activities:
'Income before income taxes and others' for the current interim fiscal year increased by Y10,093 million from
the previous consolidated interim fiscal year, to Y15,973 million, and depreciation expenses amounted to Y2,719
million. As a result of tax payments, increases or decreases of working capital related current assets and
liabilities-such as accounts receivable, inventories, accounts payable, and others, -net cash provided by
operating activities amounted to Y8,028 million, an increase of Y2,032 million since the previous interim fiscal
year.
Cash Flows from Investing Activities:
Net cash used in investment activities was Y3,000 million, an increase of Y349 million since the previous
interim fiscal year, due to the purchases of fixed assets including the new Gifu Plant building.
Cash Flows from Financing Activities:
Net cash used in financing activities was Y890 million, due to dividends payment although decreased by Y 25,021
million since the previous interim fiscal year.
As a result, the outstanding balance of cash and cash equivalents increased over that of the previous interim
fiscal year by Y4,212 million during the current interim fiscal year, to Y61,249 million.
(3) Analysis of Cash Flow Indices
FY2002 FY2002 FY2003 FY 2003 FY2004
(interim) (interim) (interim)
Equity ratio (%) 55.8 53.0 59.2 57.1 57.4
Equity ratio on mark-to-market basis 98.5 70.2 127.5 127.1 106.4
(%)
Debt redemption years (years) 5.6 3.9 6.4 2.4 4.7
Interest coverage ratio (multiples) 20.4 18.0 21.2 31.9 99.4
Equity Ratio: Shareholders equity as of fiscal year-end / Total assets as of fiscal year-end
Equity Ratio on a Mark-to-market Basis: Market capitalization of stocks as of fiscal year-end / Total assets as of
fiscal year-end
Debt Redemption Years: Interest-bearing debts as of fiscal year-end / Net cash flows provided by operating activities
Interest Coverage Ratio: Net cash flows provided by operating activities / interest payable
• These are all calculated using consolidated financial data.
• Market capitalization of stocks is calculated by multiplying the total number of stocks issued, by a closing stock
price as of fiscal year-end.
• Corporate bonds with non-interest-bearing warrants and bills discounted are included in interest-bearing debts.
III. Earnings Projections
(1)General Earnings Projections for the Fiscal Year Ending March 31, 2005
The future economic environment surrounding the THK Group will continue to be hard to forecast, since economic
recovery will probably falter due to destabilizing factors weighing down corporate earnings, such as sharply rising
crude oil and raw-materials prices, and widely fluctuating foreign exchange rates. The group will build a stronger
operating base by capitalizing on its tetra-lateral production and distribution systems covering Japan, North
America, Europe, and Asia-Pacific, focusing on the achievement of three goals: 1) formulation and promotion of
global strategies; 2) continued expansion in newly developing markets; and 3) creation of systems sensitive to
demand fluctuations.
Consolidated Earnings Projections for the Fiscal Year Ending March 31, 2005 (Millions of Yen)
Consolidated Non-consolidated
Amount % Inc/Dec from Amount % Inc/Dec from
Fiscal 2004 (%) Fiscal 2004 (%)
Net sales 143,000 100.0 19.9 117,000 100.0 19.7
Operating 25,400 17.8 56.5 22,700 19.4 40.2
income
Ordinary income 26,700 18.7 68.0 23,600 20.2 46.6
Net income 16,500 11.5 92.2 14,000 12.0 58.5
Annual average foreign exchange rate of Y108.50 per US$1 and Y134.20 per €1 is used to calculate earnings
projections for the fiscal year ending March 31, 2005.
(2) Dividend Projection for the Full Fiscal Year Ending March 31, 2005
The THK Group marked all-time-high business earnings in the first half of fiscal 2004, and it also expects strong
earnings results for the full fiscal year. Accordingly, the company plans to pay Y18.00 per share, up Y3.00 from
the previous period, as dividends for the full fiscal year ending March 31, 2005, in appreciation for shareholders'
support.
For the interim dividend, however, the company plans to pay Y7.50 per share, instead of Y9.00, up Y1.50 from the
previous interim period, because it should comply with the provisions concerning interim dividend payments
specified in the stock swap agreement entered into with Daito Seiki Company Limited on July 26, 2004.
Meanwhile, the company intends to pay Y10.50 per share, up Y3.00 from the previous fiscal year, as the fiscal
year-end dividend, although this is subject to the resolution of an ordinary general shareholders' meeting
scheduled for June 2005.
Consolidated Balance Sheets
(Millions of Yen)
As of September 30, 2003 As of September 30, 2004 As of March 31, 2004
Amount % Amount % Amount %
Assets
Current assets:
Cash on hand and in banks 50,082 60,959 56,550
Notes and accounts 40,389 55,485 46,285
receivable-trade
Short-term investments in
securities 77 290 516
Inventories 23,415 22,899 23,108
Deferred tax assets 2,578 2,853 2,667
Short-term loans 205 193 173
Other 1,734 2,232 1,722
Less: Allowance for doubtful
accounts (362) (270) (317)
Total current assets 118,119 66.4 144,643 70.3 130,706 68.4
Fixed assets:
Tangible fixed assets
Buildings and structures 15,388 14,515 14,946
Machinery, Equipment and 14,660 15,723 15,593
vehicles
Land 10,218 10,165 10,168
Construction in progress 1,350 1,947 726
Other 1,496 1,581 1,546
Total tangible fixed assets 43,113 24.2 43,934 21.3 42,982 22.5
Intangible fixed assets 1,715 1.0 1,245 0.6 1,482 0.8
Investment and other
Long-term investments in 8,379 8,488 8,134
securities
Deferred tax assets 1,666 1,350 1,474
Other 5,402 6,610 6,750
Less: Allowance for doubtful (440) (424) (425)
accounts
Total investments and other 15,008 8.4 16,024 7.8 15,933 8.3
Total fixed assets 59,837 33.6 61,204 29.7 60,398 31.6
Total assets 177,956 100.0 205,848 100.0 191,105 100.0
(Millions of Yen)
As of September 30, 2003 As of September 30, 2004 As of March 31, 2004
Amount % Amount % Amount %
Liabilities
Current liabilities:
Notes and accounts payable-trade 20,206 29,106 24,219
Short-term debt 99 - -
Current portion of long-term 243 - -
debt
Corporate income taxes payable 3,074 5,873 6,482
and other
Allowance for bonuses 1,298 1,839 1,433
Other 6,251 9,127 8,182
Total current liabilities 31,174 17.5 45,947 22.3 40,318 21.1
Long-term liabilities:
Bonds 15,000 15,000 15,000
Bonds with stock acquisition 23,000 23,000 23,000
rights
Allowance for retirement and 1,507 1,688 1,631
severance benefits
Allowance for directors' 1,254 1,345 1,315
and auditors' retirement
benefits
Other 395 269 300
Total long-term liabilities 41,158 23.1 41,303 20.1 41,247 21.6
Total liabilities 72,333 40.6 87,250 42.4 81,565 42.7
Minority interests
Minority interests 324 0.2 407 0.2 357 0.2
Shareholders' equity
Common stock 23,106 12.9 23,106 11.2 23,106 12.0
Capital reserve 30,962 17.4 30,962 15.0 30,962 16.2
Earned surplus 51,118 28.7 65,288 31.7 55,836 29.2
Valuation adjustment for marketable
securities 333 0.2 631 0.3 721 0.4
Foreign currency translation 1,550 0.9 (468) (0.2) (120) (0.0)
adjustment
Treasury stock (1,771) (0.9) (1,329) (0.6) (1,324) (0.7)
Total shareholders' equity 105,299 59.2 118,190 57.4 109,181 57.1
Total liabilities, minority 177,956 100.0 205,848 100.0 191,105 100.0
interests, and Shareholders'
equity
Consolidated Statements of Income
(Millions of Yen)
Six months ended September Six months ended September Year ended March
30, 2003 30, 2004 31, 2004
Amount % Amount % Amount %
Net sales 55,924 100.0 76,868 100.0 119,253 100.0
Cost of sales 37,443 67.0 48,249 62.8 77,932 65.4
Gross profit 18,481 33.0 28,619 37.2 41,321 34.6
Sales, general, and
administrative expenses
Packaging and transportation 829 1,111 2,073
Advertising and promotions 364 343 710
Provision for doubtful accounts - 0 33
Salaries and allowances 4,053 4,138 8,732
Provision for employee bonuses 460 679 516
Retirement expenses 73 82 148
Provision for directors' bonuses 60 29 121
Rental expenses 832 864 1,694
Depreciation and amortization 292 346 603
Research and development 1,154 1,287 2,520
Other 3,911 12,033 21.5 4,408 13,290 17.3 7,935 25,090 21.0
Operating income 6,447 11.5 15,329 19.9 16,231 13.6
Non-operating income
Interest income 61 117 121
Dividend income 14 20 26
Foreign exchange gain - 516 -
Equity in earnings of 40 284 301
unconsolidated subsidiaries
and affiliates
Rental income 78 93 159
Other 229 424 0.7 349 1,381 1.8 461 1,070 0.9
Non-operating expenses
Interest expenses 283 80 493
Payment costs 20 46 65
Foreign exchange loss 294 - 580
Other 185 783 1.4 41 168 0.2 271 1,409 1.2
Ordinary income 6,088 10.8 16,542 21.5 15,892 13.3
(Millions of Yen)
Six months ended September Six months ended September Year ended March
30, 2003 30, 2004 31, 2004
Amount % Amount % Amount %
Extraordinary gain
Gain on sales of property, 4 22 33
plant and equipment
Gain on sales of investment 35 - 35
securities
Reversal of allowance for 5 45 0.1 - 22 0.0 - 68 0.1
doubtful accounts
Extraordinary loss
Loss on sales /disposals of 137 46 320
property, plant and equipment
Loss from investment securities 99 - -
revaluation
Loss on liquidation of - - 99
subsidiary company
Loss on arrangement of - 545 -
subsidiary company
Other 17 254 0.4 - 591 0.7 19 439 0.4
Income before income taxes 5,879 10.5 15,973 20.8 15,520 13.0
Income taxes - current 3,132 5,605 7,265
Income taxes - deferred (244) 2,887 5.2 (54) 5,551 7.3 (338) 6,926 5.8
Minority interest income of 14 0.0 32 10 0.0
consolidated subsidiaries
Net income 2,977 5.3 10,388 13.5 8,583 7.2
Consolidated Statements of Retained Earnings
(Millions of Yen)
Six months ended Six months ended Year ended
September 30, 2003 September 30, 2004 March 31, 2004
Capital surplus
Consolidated capital surplus at 30,962 30,962 30,962
beginning of the period
Consolidated capital surplus at 30,962 30,962 30,962
end of the period
Earned surplus
Consolidated earned surplus at 48,686 55,836 48,686
beginning of the period
Increase in earned surplus
Net Income 2,977 10,388 8,583
Increase from accounting for 378 3,356 - 10,388 378 8,962
investment in an affiliate by the
equity method
Decrease in earned surplus
Dividends 895 887 1,782
Bonuses to directors 30 50 30
(bonuses to auditors) (4) 925 (7) 937 (4) 1,812
Consolidated earned surplus at end 51,118 65,288 55,836
of the period
Consolidated Statements of Cash Flows
(Millions of Yen)
Six months Six months Year ended
ended ended March 31,
Sep. 30, 2003 Sep. 30, 2004 2004
Cash flows from operating activities:
Income before income tax and minority interests 5,879 15,973 15,520
Depreciation and amortization 2,646 2,719 5,566
Loss on sales or disposal of property, plant and
equipment 132 23 287
Loss on liquidation of subsidiary company - - 99
Loss on arrangement of subsidiary company - 545 -
Increase (decrease) in provisions 66 445 338
Interest and dividend income (75) (138) (147)
Interest expense 283 80 493
Foreign exchange gain (loss) 21 (296) 108
Equity in earnings of unconsolidated subsidiaries and
affiliates (40) (284) (301)
Increase (decrease) in notes and accounts receivable (5,058) (9,231) (11,293)
Increase (decrease) in inventories 710 181 395
Increase (decrease) in notes and accounts payable 2,920 4,921 7,337
Other 455 (657) 78
Subtotal 7,942 14,281 18,484
Interest and dividend received 118 200 192
Interest paid (337) (80) (495)
Income taxes paid (1,727) (6,373) (2,446)
Net cash provided by operating activities 5,995 8,028 15,735
Cash flows from investing activities:
Increase in time deposits due over three months - 30 -
Proceeds from sales of short-term investments in
securities 919 - 907
Payments for purchases of property, plant and equipment (2,500) (2,663) (5,105)
Proceeds from sales of property, plant and equipment 61 93 81
Payments for purchases of long-term investment
securities (293) (466) 309
Proceeds from sales of long-term investment securities 244 2 1,793
Payments for loans (1,180) (400) (1,183)
Collection of loans 98 403 135
Net cash provided by investing activities (2,651) (3,000) (3,681)
Cash flows from financing activities:
Increase (decrease) in short-term debt (3,210) - (3,303)
Repayments of long-term debt (3,354) - (3,598)
Redemption of bonds (17,344) - (17,334)
Cash dividend (895) (885) (1,784)
Other (1,106) (5) (1,111)
Net cash provided by financing activities (25,911) (890) (27,132)
Effect of exchange rate change on cash and cash
equivalents 162 74 (418)
Net increase in cash and cash equivalents (22,404) 4,212 (15,496)
Cash and cash equivalents at beginning of the period 72,533 57,037 72,533
Cash and cash equivalents at end of the period 50,129 61,249 57,037
Basis for Preparing Interim Consolidated Financial Statements
1. Scope of Consolidation
(1) Number of consolidated subsidiaries: 14
Talk System Co., Ltd.; Beldex Corporation; THK Niigata Co., Ltd.; THK Holdings of America, L.L.C.; THK America,
Inc.; THK Manufacturing of America, Inc.; THK Neturen America, L.L.C.; THK Europe B.V.; THK GmbH; THK
Manufacturing of Europe S.A.S.; THK FRANCE S.A.S.; PGM Ballscrews Ltd.; PGM Ballscrews Ireland Ltd.; THK Taiwan
Co., Ltd.
(2) Main unconsolidated subsidiaries:
Dalian THK Co., Ltd. Nippon Slide Co., Ltd.
(3) Reasons for excluding unconsolidated subsidiaries from the consolidation:
The unconsolidated subsidiaries are small, and their total assets, sales, net incomes (corresponding to equity
portion), and retained earnings (corresponding to equity portion), have no material effect on the company's
interim consolidated financial statements.
2. Use of the Equity Method
(1) Number of affiliated companies accounted for using the equity method: 2
Daito Seiki Co., Ltd. Samick LMS Co., Ltd.
(2) Names of main unconsolidated subsidiaries and affiliated companies not accounted for using the equity method:
Dalian THK Co., Ltd. Nippon Slide Co., Ltd.
(3) Reason for excluding unconsolidated subsidiaries from those subject to the equity method:
Net income (corresponding to equity portion) and retained earnings (corresponding to equity portion) of these
subsidiaries have no material effect on the company's interim consolidated statements, and they are of no
importance as a whole, even though they are not accounted for using the equity method.
3. Fiscal Years of consolidated subsidiaries
The following consolidated subsidiaries' interim fiscal year-ends are on June 30.
THK Holdings of America, L.L.C.; THK America, Inc.; THK Manufacturing of America, Inc.; THK Neturen America,L.L.C.;
THK Europe B.V.; THK GmbH; THK Manufacturing of Europe S.A.S.; THK France S.A.S.; PGM Ballscrews Ltd.; PGM Ballscrews
Ireland Ltd.; THK Taiwan Co., Ltd.
Adjustments have been made for significant transactions between subsidiaries' interim fiscal year-ends and September
30.
4. Summary of Significant Accounting Policies
(1) Evaluation of significant assets
Other securities:
i. Securities
Marketable Securities: Stated at market value at the interim fiscal year-end (valuation gains and losses are
included in shareholders' equity, net of taxes, and costs of sales are calculated using the moving-average
method).
Non-marketable Securities: Stated at costs determined using the moving-average method.
ii. Inventories
Company name Asset Evaluation Method Evaluation Standard
THK Co., Ltd. Mainly weighted average method Cost method
Talk System Co., Ltd. Mainly weighted average method Cost method
Beldex Corporation Mainly actual cost method Cost method
THK Niigata Co., Ltd. Mainly weighted average method Cost method
THK America, Inc. First-in-first-out method Lower of cost or market
THK Manufacturing of America, First-in-first-out method Lower of cost or market
Inc.
THK Neturen America, L.L.C. First-in-first-out method Lower of cost or market
THK Europe B.V. Moving average method Lower of cost or market
THK Manufacturing of Europe Mainly weighted average method Cost method
S.A.S.
THK France S.A.S. Moving average method Lower of cost or market
THK GmbH Moving average method Lower of cost or market
PGM Ballscrews Ltd. First-in-first-out method Lower of cost or market
PGM Ballscrews Ireland Ltd. First-in-first-out method Lower of cost or market
THK Taiwan Co., Ltd. Moving average method Lower of cost or market
(2) Method of depreciation and amortization
i.Tangible Fixed Assets The tangible fixed assets of the company and its domestic
subsidiaries are depreciated using the declining-balance method, and
those of overseas consolidated subsidiaries are depreciated using
either the straight-line method or the accelerated depreciation
method, depending on their local accounting standards. The amount of
depreciation for buildings (excluding fixtures to buildings)
acquired on and after April 1, 1998, by the company and its domestic
subsidiaries is estimated using the straight-line method.
The useful lives of main properties are as follows:
Buildings and structures.......................... 5-50 years
Machinery, equipment, and vehicles................ 4-10 years
ii.Intangible Fixed Assets The straight-line method is used by the company and its consolidated
subsidiaries. Software costs for their internal use are amortized
using the straight-line method over their estimated useful lives (5
years).
The intangible fixed assets of overseas consolidated subsidiaries
are amortized using the declining-balance method, based on their
local accounting standards.
(3) Accounting for major lease transactions
Finance lease transactions, excluding those in which the ownership of the leased properties is transferred to the
lessee, are accounted for in the same manner as operating leases.
(4) Accounting standards for major allowances
i. Allowance for doubtful To prepare for possible losses caused by irrecoverable money claims
accounts at the fiscal year-end, the company and its subsidiaries provide
allowances as follows:
For general credit claims, allowance is provided for the amount
calculated based on the past credit loss experience, and for
specifically doubtful credit claims, allowance is provided for the
estimated uncollectible amount based on the collectibility
assessment for individual credit claims.
Overseas consolidated subsidiaries provide allowances for the
amounts they deem necessary, considering the collectibility of
specific doubtful credit claims.
ii. Allowance for bonuses Allowance for employee bonuses is provided in provisions for payment
of bonuses to employees in the amount of estimated bonuses, which
are attributable to the current interim consolidated fiscal year.
iii. Allowance for employees' Allowance for employee retirement benefits is provided in provision
retirement benefits for payment of retirement benefits to employees in the amount deemed
accrued at the end of the current interim consolidated fiscal year,
based on the projected retirement benefit obligation and fair value
of plan assets at this fiscal year end.
Unrecognized net actuarial difference is amortized using the
straight-line method over a number of years (usually 10 years)
within the employees' average remaining employment period,
commencing from the next fiscal year in which they arise (stated as
either income or expense in the statement of income).
iv. Allowance for directors' and Allowance is provided for the amount the company would have to pay
auditors' retirement at the end of the interim fiscal year, which is estimated in
benefits accordance with internal regulations. The system for paying
retirement benefits to directors and auditors, however, was
abolished in June 2004, so the outstanding balance of this allowance
represents an estimated amount for payment to the directors and
auditors currently holding offices under the previous system.
(5) Hedge accounting
i. Method of hedge accounting Currency swap transactions meet the requirement of allocation
treatment, and are accounted for accordingly.
ii. Hedging instruments and hedged Hedging instrument Currency Hedged items
items swap transaction Foreign currency denominated
money claims
iii.Hedging policy The company uses currency related hedge accounting for the
purpose of fixing cash flows related to the collection of
principal and interest on loans.
iv. Assessment method for the The company omits the assessment of the effectiveness of hedges
effectiveness of hedges for currency swap transactions, because the significant terms
and conditions for such transactions and for hedged assets are
identical, and are assumed beforehand to offset exchange rate
risks and cash flow fluctuations continuously from the time
hedging is initiated.
(6) Other significant items to prepare interim consolidated financial statements
Consumption taxes Consumption taxes are excluded from the transaction amounts.
5. Scope of Funds Stated in the Interim Consolidated Statements of Cash Flows
The funds (cash and cash equivalents) stated in the interim consolidated statements of cash flows are composed of
cash on hand, bank deposits that can be withdrawn on demand, and short-term investments with original maturities of
up to three months that are exposed to minor value fluctuation risk.
Additional Information
Since the company has used a size-based corporate tax system since the beginning of the current interim fiscal
period, sales and general administrative expenses increased by Y157 million, and operating income, ordinary income,
and net income before taxes each decreased by Y157 million.
Notes
Interim Consolidated Balance Sheets (Millions of Yen)
FY2003 FY2004 FY2003
Interim Interim
Accumulated depreciation and amortization of 66,136 69,861 67,862
tangible fixed assets
Liabilities for guarantee 300 214 263
Interim Consolidated Statements of Cash Flow
Relationships of outstanding balance of cash and cash equivalents as of the end of the interim period and the amounts of
account items stated in the interim consolidated balance sheets.
(Millions of Yen)
FY2003 FY2004 FY2003
Interim Interim
Cash on hand and deposits with banks 50,082 60,959 56,550
Securities 77 290 516
Total: 50,159 61,249 57,067
Time deposits (term exceeding three months) (30) - (30)
Cash and Cash Equivalents: 50,129 61,249 57,037
Lease Transactions
Data on lease transactions is omitted, because they have been disclosed via EDINET for the fiscal half-year ended
September 30, 2004.
Segment Information
1. Business Segment Information
Net sales and operating income of machinery subcomponent departments exceed 90 percent of the consolidated
net sales of all segments, and of the total operating income of segments that generated operating income,
and so segment information by business category is omitted.
2. Geographic Segment Information
For the six monthsending ended September 30, 2003 (Millions of Yen)
Japan America Europe Asia and Total (Elimination) Consolidated
others
Net Sales:
To customers 43,107 5,021 6,632 1,163 55,924 - 55,924
Inter-segment 5,976 31 63 - 6,071 (6,071) -
Total: 49,084 5,052 6,695 1,163 61,996 (6,071) 55,924
Operating expenses 42,124 5,129 7,081 1,128 55,463 (5,986) 49,476
Operating Income (loss): 6,959 (76) (385) 34 6,532 (85) 6,447
For the six monthsending ended September 30, 2004 (Millions of Yen)
Japan America Europe Asia and Total (Elimination) Consolidated
others
Net Sales:
To customers 61,133 6,105 7,982 1,646 76,868 - 76,868
Inter-segment 8,097 23 85 - 8,206 (8,206) -
Total: 69,231 6,129 8,068 1,646 85,075 (8,206) 76,868
Operating expenses 54,866 5,434 7,621 1,616 69,539 (8,000) 61,539
Operating Income (loss): 14,364 694 446 30 15,535 (206) 15,329
For the year ending ended March 31, 2004 (Millions of Yen)
Japan America Europe Asia and Total (Elimination) Consolidated
others
Net Sales:
To customers 93,771 10,341 12,742 2,399 119,253 - 119,253
Inter-segment 12,654 53 117 - 12,824 (12,824) -
Total: 106,425 10,394 12,859 2,399 132,078 (12,824) 119,253
Operating expenses 89,727 10,608 13,665 2,347 116,348 (13,326) 103,022
Operating Income (loss): 16,698 (214) (805) 51 15,729 501 16,231
Note:
• Classification of countries and regions is based on geographical proximity.
• Main countries and areas belonging to each classification are as follows.
America: United States of America and other countries
Europe: Germany, UK, Netherlands, and other countries
Asia and others: South Korea, Taiwan and other countries
3. Overseas Sales
For the six months ending ended September 30, 2003 (Millions of Yen)
America Europe Asia and others Total
Overseas sales 5,073 6,630 4,857 16,562
Consolidated net sales 55,924
Overseas sales as a percentage of 9.1% 11.8% 8.7% 29.6%
consolidated net sales
For the six months ending endedSeptember 30, 2004 (Millions of Yen)
America Europe Asia and others Total
Overseas sales 6,159 7,963 6,811 20,934
Consolidated net sales 76,868
Overseas sales as a percentage of 8.0% 10.3% 8.9% 27.2%
consolidated net sales
For the year ending ended March 31, 2004 (Millions of Yen)
America Europe Asia and others Total
Overseas sales 10,436 12,739 10,734 33,910
Consolidated net sales 119,253
Overseas sales as a percentage of 8.7% 10.7% 9.0% 28.4%
consolidated net sales
Note:
• Classification of countries and regions is based on geographical proximity.
• Main countries and areas belonging to each classification are as follows.
America: United States of America and other countries
Europe: Germany, UK, Netherlands, and other countries
Asia and others: South Korea, Taiwan and other countries
• Overseas sales are sales booked in foreign countries or in regions other than Japan, by the company and
its consolidated subsidiaries.
Securities
1. Marketable Securities
(Millions of Yen)
As of September 30, 2003 As of September 30, 2004 As of March 31, 2004
Acquisition Book Difference Acquisition Book Difference Acquisition Book Difference
cost value cost value cost value
Equities 2,399 2,750 351 2,384 3,406 1,022 2,360 3,542 1,182
Others 15 18 2 7 8 1 9 11 1
Total: 2,414 2,769 354 2,391 3,415 1,023 2,370 3,554 1,183
Note: In addition to the above, differences between acquisition costs and book values in the group's equity portion
in investment partnership are included under 'Valuation adjustment for marketable securities' on the balance sheets.
Such differences are Y26 million for the six months ending ended September 30, 2003, Y38 million for the six months
ending ended September 30, 2004, and Y27 million for the fiscal year ending ended March 31, 2004, all of which are
nets of tax effect amounts.
When an issue's market value of the equities stated in the table above falls by 50 percent or more below its
acquisition cost, the company makes it a rule to write them down. For securities whose market values are 30 percent
or more, or more than 50 percent below their acquisition costs, the company judges whether to write them down by
assessing issuers' financial conditions as of their latest fiscal year-ends, and their earnings results for the last
two fiscal years, and by comparing each issue's acquisition cost with its average month-end closing price for the
last 24 months.
2. Breakdown of Main Non-marketable Securities
(Millions of Yen)
As of Sept 30, 2003 As of Sept 30, 2004 As of March 31, 2004
Book value Book value Book value
Other securities 175 157 175
Unlisted equities (non-OTC) 1,500 - -
Unlisted foreign bonds 77 290 516
Unlisted foreign investment trust
Significant Subsequent Events
For the six months ending ended September 30, 2003:
There were no corresponding events.
For the six months ending ended September 30, 2004:
Stock swap with Daito Seiki Co., Ltd.
The company's board of directors resolved at a meeting on July 26, 2004, to make Daito Seiki Company Limited a
wholly-owned subsidiary, by applying a stock-swap scheme in accordance with Article 358, paragraph 1, of the
Commercial Code, for the purpose of consolidating management resources and enhancing investment efficiency within the
THK Group. This stock swap was approved by an extraordinary general shareholders' meeting of Daito Seiki Company
Limited on September 24, 2004, and executed on November 1, 2004.
With this stock swap, two-tenths of one common share of the company was allocated to one share of Daito Seiki Company
Limited. To implement this stock swap, the company allocated and delivered 1,000,000 treasury shares and issued new
554,508 shares.
For the year endedending March 31, 2004:
There were no corresponding events.
November 18, 2004
Non-Consolidated Financial Review for the Six Months
Ended September 30, 2004
Company Name: THK CO., LTD.
Head Office: Tokyo Japan (Tel: +81-3-5434-0300)
URL: http://www.thk.com/
Stock exchange listing: Tokyo Stock Exchange 1st Section
Code number: 6481
President and CEO: Akihiro Teramachi
Director/General Manager of Corporate Strategy Department: Kotaro Yoshihara
Date of the board meeting: November 18, 2004
Interim cash dividends: Yes
Application of Unit stock system: Yes(1 unit 100 shares)
1. Consolidated Financial Highlights (Unaudited)
Note: All figures are rounded down to the nearest million yen.
(1) Operating result
Net sales Operating income Ordinary income
Millions % Millions % Millions %
Six months of of of
Ended Sep.30, 2004 yen yen yen
Six Months 63,770 42.0 13,684 97.2 14,747 115.8
Ended Sep.30, 2003 44,895 25.7 6,938 155.5 6,833 144.4
Year Ended Mar.31, 2004 97,740 16,186 16,099
Net income Net income
per share
Millions of % Yen
Six months yen
Ended Sep.30, 2004 8,885 133.8 75.08
Six Months
Ended Sep.30, 2003 3,801 149.7 32.06
Year Ended Mar.31, 2004 8,831 74.18
Notes:
1. Change of accounting policy: None
2. Average number of shares of common stock issued (non-consolidated)
Six Months ended Sep.30, 2004: 118,345,420 shares.
Six Months ended Sep.30, 2003: 118,558,752 shares.
Year ended Mar.31, 2004: 118,387,267 shares.
3. Regarding net sales, operating income, ordinary income and net income, percent indications show
percentage changes from the same period of the previous year.
(2) Cash dividends
Annual Dividends per share
Interim Full year
Yen Yen
Six months
Ended Sep.30, 2004 7.50 -
Six Months
Ended Sep.30, 2003 7.50 -
Year Ended Mar.31, 2004 - 15.00
(3) Financial position
Total assets Total shareholders' Equity ratio Shareholder's equity
equity per share
Millions of yen Millions of yen % Yen
Six months
Ended Sep.30, 2004 195,663 113,615 58.1 960.04
Six Months
Ended Sep.30, 2003 167,630 101,127 60.3 854.48
Year Ended Mar.31, 2004 181,983 105,760 58.1 893.23
Notes:
1. Net number of shares issued and outstanding at the end of the fiscal year (non-consolidated)
Six months ended Sep.30, 2004: 118,344,076 shares
Six months ended Sep.30, 2003: 118,348,869 shares.
Year ended Mar.31, 2004: 118,346,697 shares.
2. The number of treasury stock as of :
Six months ended Sep.30, 2004: 1,018,942 shares.
Six months ended Sep.30, 2003: 1,014,149 shares.
Year ended Mar.31, 2004: 1,016,321 shares.
2. Projections of Non-Consolidated Results for the Fiscal Year ending March 31, 2005
Net sales Operating Ordinary Net income Annual cash dividends
income Income per share
Million of Million of Million of Million of Yen
yen yen yen yen
F.Y. end
Year ending Mar.31, 2005 117,000 22,700 23,600 14,00010.518
For reference: Estimate of net income per share for the year ending March 31, 2005: 116.77 Yen
(By forecast average number of shares of common stock year of period)
*Forward-Looking Statements:
This release contains forward-looking statements that are based on management's estimates, assumptions and projections
at the time of release. Some factors, which include, but are not limited to, the risks and uncertainty associated with
the worldwide economy, competitive activity and currency fluctuation, could cause actual results to differ materially
from expectations.
Note to the Financial Information:
This is summarized and translated financial information that the Company posted to the Tokyo Stock Exchange in
accordance with their rules that governs the disclosure of financial information.
The Company maintains an Internet website at www.thk.co.jp. The Company makes available free of charge on the website
its financial information in Japanese language. Those information translated in English language will be disclosed as
soon as reasonably practicable after disclosing materials in Japanese language.
Non-Consolidated Balance Sheets
(Millions of Yen)
As of September 30, As of September 30, As of March 31, 2004
2003 2004
Amount % Amount % Amount %
Assets
Current assets:
Cash on hand and in banks 43,386 52,413 49,298
Notes receivable-trade 15,297 20,387 17,100
Accounts receivable-trade 21,613 33,199 26,865
Inventories 13,749 14,674 14,250
Deferred tax assets 1,327 1,714 1,670
Short-term loans 6,840 7,389 7,491
Other 1,104 1,446 1,420
Less: Allowance for doubtful
accounts (131) (93) (134)
Total current assets 103,188 61.6 131,132 67.0 117,963 64.8
Fixed assets:
Tangible fixed assets
Buildings and structures 8,836 8,597 8,848
Machinery and equipment 10,834 11,443 11,238
Land 9,104 9,094 9,094
Other 1,876 2,736 1,609
Total Tangible fixed assets 30,652 18.2 31,871 16.3 30,790 16.9
Intangible fixed assets 1,603 1.0 1,125 0.6 1,357 0.8
Investments and others
Long-term investments in securities 4,389 3,564 3,721
Investments in shares of subsidiary
and affiliated company 12,058 12,530 12,069
Investments in subsidiary and 6,720 7,777 7,777
affiliated company
Deferred tax assets 1,626 1,307 1,430
Other 7,789 6,731 7,568
Less: Allowance for doubtful
accounts (397) (376) (696)
Total investments and others 32,186 19.2 31,534 16.1 31,871 17.5
Total fixed assets 64,442 38.4 64,531 33.0 64,019 35.2
Total assets 167,630 100.0 195,663 100.0 181,983 100.0
(Millions of Yen)
As of September 30, 2003 As of September 30, 2004 As of March 31, 2004
Amount % Amount % Amount %
Liabilities
Current liabilities:
Notes payable-trade 4,205 5,859 5,176
Accounts payable-trade 12,490 20,560 15,937
Accounts payable-other 1,035 1,451 1,209
Accrued expenses 3,149 4,095 3,833
Corporate income taxes payable and 3,006 5,654 6,307
other
Accrued bonuses 1,219 1,737 1,346
Notes payable-equipment and other 376 1,478 942
Other 405 365 721
Total current liabilities 25,888 15.5 41,204 21.0 35,476 19.5
Long-term liabilities:
Bonds 15,000 15,000 15,000
Bonds with stock acquisition rights 23,000 23,000 23,000
Allowance for retirement and
severance 1,355 1,495 1,428
Benefits
Allowance for director's and
auditor's retirement benefits 1,254 1,345 1,315
Other 4 3 3
Total long-term liabilities 40,615 24.2 40,843 20.9 40,747 22.4
Total liabilities 66,503 39.7 82,048 41.9 76,223 41.9
Shareholders' equity
Common stock 23,106 13.8 23,106 11.8 23,106 12.7
Additional paid-in capital
Capital reserve 30,962 30,962 30,962
Total additional paid-in capital 30,962 18.5 30,962 15.9 30,962 17.0
Surplus
Earned reserves 1,958 1,958 1,958
Other reserves 40,523 47,661 40,523
Unappropriated retained earnings 5,480 10,443 9,623
Total surplus 47,963 28.6 60,053 30.7 52,105 28.6
Valuation adjustment for marketable
securities 223 0.1 630 0.3 718 0.4
Treasury stock (1,127) 0.7 (1,137) 0.6 (1,132) 0.6
Total shareholder's equity 101,127 60.3 113,615 58.1 105,760 58.1
Total liabilities and shareholder's
equity 167,630 100.0 195,663 100.0 181,983 100.0
Non-Consolidated Statements of Income
(Millions of Yen)
Six months ended Sep.30, 2004 Six months ended Sep.30, 2003 Year ended March 31, 2004
Amount % Amount % Amount %
Net sales 44,895 100.0 63,770 100.0 97,740 100.0
Cost of sales 30,606 68.2 41,473 65.0 65,770 67.3
Gross profit 14,288 31.8 22,297 35.0 31,970 32.7
Selling, general and 7,349 16.4 8,612 13.5 15,784 16.1
administrative expenses
Operating income 6,938 15.4 13,684 21.5 16,186 16.6
Non-operating income
Interest income 81 88 183
Dividend income 56 84 67
Foreign exchange gain - 603 -
Other 294 433 1.0 443 1,219 1.9 631 882 0.9
Non-operating expenses
Interest expenses 9 0 9
Bond interest 118 80 197
Foreign exchange loss 246 - 518
Other 163 538 1.2 76 156 0.3 243 969 1.0
Ordinary income 6,833 15.2 14,747 23.1 16,099 16.5
Extraordinary gain
Gain on sales of
property plant,
and equipment 0 18 58
Reversal of allowance for
doubtful accounts 25 26 -
Other 35 61 0.2 - 44 0.1 35 94 0.1
Extraordinary loss
Loss on disposals of
property, plant and
equipment 112 40 195
Valuation loss on
investment in
subsidiary company 99 - -
Loss on liquidation of
subsidiary company - - 99
Loss on forgiveness of
subsidiary company debt - - 563
Loss on arrangement of
subsidiary company - 473 -
Other 17 229 0.6 - 513 0.8 19 877 0.9
Income before income taxes 6,665 14.8 14,278 22.4 15,316 15.7
Income taxes - current 3,023 5,253 7,130
Income taxes - deferred (159) 2,864 6.3 139 5,393 8.5 (645) 6,484 6.7
Net income 3,801 8.5 8,885 13.9 8,831 9.0
Unappropriated retained earnings 1,679 1,547 1,679
brought forward
Interim dividend - - 887
Unappropriated retained earnings 5,480 10,433 9,623
Basis for Preparing Interim Non-Consolidated Financial Statements
1. Evaluation of Assets
(1) Securities
i. Stocks of subsidiaries and Stated at costs determined using the moving-average method.
affiliated companies
ii. Other securities
Marketable securities: Stated at the market value at the interim fiscal year-end
(valuation gains/losses are included in shareholders' equity; net
of taxes and sales costs are calculated using the moving-average
method).
Non-marketable securities: Stated at costs determined using the moving-average method.
(2) Inventories
i. Products/Finished goods Stated at cost determined using the weighted-average method.
ii. Merchandise Stated at cost determined using the first-in-first-out method.
iii. Raw materials Stated at cost determined using weighted-average method.
iv. Goods in process Stated at cost determined using weighted-average method.
v. Supplies Stated at cost determined using the last-purchase-cost method.
2. Depreciation and Amortization
(1)Tangible Fixed Assets: Depreciated using the declining-balance method.
Note that the amount of depreciation for buildings (excluding
fixtures to buildings) acquired by the company on and after April
1, 1998, is estimated using the straight-line method.
The useful lives of main properties are as follows:
Buildings and structures..................5-50 years
Machinery and equipment.....................10 years
Vehicles and delivery equipment........... 4-6 years
Tools/furniture and furnishings...........2-10 years
(2)Intangible Fixed Assets: Amortized using the straight-line method.
Note that software costs for internal use are amortized using the
straight-line method over the internally estimated useful lives (5
years).
(3)Long-term Prepaid Expenses: Amortized using the straight-line method.
3. Accounting Standards for Providing Allowances
(1) Allowance for Doubtful accounts: To prepare for possible losses caused by irrecoverable money claims
at the fiscal year-end, the company provides allowances as follows:
For general credit claims, an allowance is provided for the amount
calculated based on past credit-loss experience. For specifically
doubtful credit claims, an allowance is provided for the estimated
uncollectible amount based on the collectibility assessment for
each such credit claim.
(2) Allowance for Bonuses: Allowance for employee bonuses is provided in the provision for
payment of bonuses to employees, and in the amount of estimated
bonuses, which are attributable to the current interim consolidated
fiscal year.
(3) Allowance for Employees' Allowance for employee retirement benefits is provided in the
Retirement Benefits: provision for payment of retirement benefits to employees, and in
the amount deemed to have been accrued at the end of the current
interim consolidated fiscal year, based on the projected retirement
benefits obligation and the fair value of plan assets at this
fiscal year-end.
The unrecognized net actuarial difference is amortized using the
straight-line method over a number of years (usually 10 years)
within an employee's average remaining employment period,
commencing from the next fiscal year in which they arise (stated as
either income or expenses in the statement of income).
(4) Allowance for Directors' and An allowance is provided for the amount the company would have to
Auditors' Retirement Benefits: pay at the end of the interim fiscal year, which is estimated in
accordance with internal regulations. The system for paying
retirement benefits to directors and auditors, however, was
abolished in June 2004, so the outstanding balance of this
allowance represents an estimated amount for payment to the
directors and auditors currently holding offices under the previous
system.
4. Accounting of Lease Transactions
Excluding those in which the ownership of the leased properties is transferred to the lessee, finance lease
transactions are accounted for in the same manner as operating leases.
5. Hedge Accounting
(1) Hedge Accounting Method: Currency swap transactions meet the requirement of allocation
treatment and are accounted for accordingly.
(2) Hedging Instruments and Hedged Hedging Instrument Hedged Items
Items: Currency swap transaction Foreign currency denominated
money claims
(3) Hedging Policy: The company uses currency-related hedge accounting for the purpose
of fixing cash flows related to the collection of principal and
interest on loans.
(4) Assessment Method for the The company omits assessment of the effectiveness of hedges for
Effectiveness of Hedges: currency swap transactions, since the significant terms and
conditions for such transactions and for hedged assets are
identical, and assumed beforehand to offset exchange rate risks and
cash flow fluctuations from the time the hedging is initiated.
6. Other Significant Items to Prepare for Interim Financial Statements
(1)Consumption Taxes: Consumption taxes are excluded from the transaction amounts. Net
amount of suspense paid for consumption taxes on purchases and
suspense received for consumption taxes on sales is included under
'Others' for current liabilities.
(2)Treatment of Reserves: Taxes payable and corporate tax adjustment for the current interim
period are calculated under the premise that entries of provisions
and reversals will be made to reserve accounts for special
depreciation in accordance with profit appropriation scheduled for
the current fiscal year.
Additional Information
Since the company has used a size-based corporate tax system since the beginning of the current interim fiscal
period, sales and general administrative expenses increased by Y152 million, and operating income, ordinary
income, and net income before taxes each decreased by Y152 million.
Notes
NON-CONSOLIDATED BALANCE SHEETS (Millions of Yen)
As of Sept 30, 2003 As of Sept 30, 2004 As of March 31, 2004
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1. Accumulated depreciation on tangible fixed assets 60,067 63,048 61,636
2. Advanced depreciation by national subsidy 150 150 150
3. Liabilities on guarantees and others
Liabilities on guarantees 1,911 1,735 1,891
Committed guarantees and others 200 - -
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NON-Consolidated statements of income (Millions of Yen)
FY2003 (Interim) FY2004 (Interim) FY2004
------------------------------------------------------------------------------------------------------------------------
1. Depreciation of fixed assets
Tangible assets 1,719 1,783 3,693
Intangible assets 264 262 526
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LEASE TRANSACTIONS:
Details are omitted because they are disclosed by EDINET.
SECURITIES:
Marketable stocks of subsidiaries and affiliated companies.
As of September 30, 2003 (Millions of Yen)
Book value Market Value Difference
-----------------------------------------------------------------------------------------------------------------------
Stocks of affiliated companies 1,374 2,284 909
As of September 30, 2003 (Millions of Yen)
Book value Market Value Difference
-----------------------------------------------------------------------------------------------------------------------
Stocks of affiliated companies 1,770 3,490 1,719
As of March 31, 2004 (Millions of Yen)
Book value Market Value Difference
-----------------------------------------------------------------------------------------------------------------------
Stocks of affiliated companies 1,374 2,776 1,402
This information is provided by RNS
The company news service from the London Stock Exchange