annual report 2012 - unicharm · first-mover advantage in disposable diapers for middle -class...
Post on 24-Jun-2020
2 Views
Preview:
TRANSCRIPT
Annual Report 2012 ~ Strategy and Progress ~
Year Ended March 31, 2012
1
We will continue to provide world-first, leading products and services that bring comfort, excitement and joy to people throughout the world.
In fiscal 2012, ended March 31, 2012, Unicharm reported consolidated net sales of ¥428.3 billion and operating income of ¥51.9 billion, record-high figures for the tenth and fifth consecutive fiscal years respectively. We continued to enjoy strong growth in China, Indonesia and other Asian markets where we have a sales presence, driving consolidated earnings. As a result, overseas sales accounted for a record 46.9% of consolidated net sales. Fiscal 2012 marked the first year of our current three-year Medium-Term Management Plan, which started in April 2011. Guided by this plan, we took a number of steps during the year to reinforce our business base for the next decade. In December 2011 we acquired The Hartz Mountain Corporation, which is the leading U.S. pet care brand in eight product categories, and in September 2011 we acquired Vietnamese company Diana Joint Stock Company, which is ranked second in the disposable baby diaper and feminine care product markets in Vietnam.
Takahisa Takahara President and CEO
Please give us an overview of Unicharm’s performance in fiscal 2012.
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Interview with the President
2
Please provide some more details about your long-term vision for Unicharm and the steps you are taking to achieve this vision.
The business fields where Unicharm is active have considerable growth potential. We forecast that the total market for our products will expand to ¥28 trillion in 2020, or 2.4 times larger than in 2008. By taking full advantage of these business opportunities, our goal is to capture the leading share in the global market by 2020. To achieve this, we plan to actively expand our sales areas and production capacity in the expanding markets of Asia and Middle East-North Africa (MENA) and accelerate our expansion into other markets. We also intend to reinforce our health care and pet care businesses in order to tap expanding demand in countries where societies are projected to age over the medium- and long-term. This will be a key step toward achieving our vision of becoming the leading company in the sector worldwide.
We plan to introduce our business model targeting middle-class consumers, which has already proved successful in China and Indonesia, into other parts of Asia and accelerate market share growth. At the same time, we will build new factories and close old ones in order to create an optimized low-cost distribution system that ensures reliable supplies of our products. In China, our most important market, we have expanded the sales area from coastal cities to regional inland cities. This push inland has been underpinned by our disposable baby diapers aimed at middleclass consumers, which we launched in 2010. In line with this sales area expansion, we opened a new factory in Tianjin in 2012. This became our fourth production site in China. We are also looking at the feasibility of supplying China from Vietnam using our Hanoi factory, which was part of the Diana acquisition in September 2011. In order to boost cost competitiveness in China along with increases in production capacity, we established a local site in 2012 to make nonwoven materials for use in disposable diapers, ensuring we have access to reliable supplies of diaper materials. In Indonesia, where Unicharm is the undisputed leader in the disposable baby diaper market, we plan to start up a new factory in 2013 in response to market growth. We will actively expand our production sites in Asia and boost their efficiency to ensure we are well-placed to capture business opportunities afforded by rising demand in the region.
What is the outlook for your key market of Asia?
Demand for disposable baby diapers is projected to expand in countries of the Greater Mekong area, such as Myanmar, Laos and Cambodia. We plan to strengthen our product distribution systems in Thailand and Vietnam to meet this demand and build an even stronger presence in the Asia region. We also expect demand to grow in the emerging markets of MENA and Latin America over the medium- and long-term. In response, we plan to open a new factory in Egypt in 2012 and reinforce our operating base to take advantage of business opportunities in those regions.
What is your outlook for other overseas markets?
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Interview with the President
3
Our health care business is seeing its market share rise in Japan as the population ages. We will work to strengthen our already dominant position in the domestic market by actively developing new sales channels and reinforcing our marketing structure. Demand for incontinence care products such as disposable adult diapers is also set to expand over the longer term in Asia. Against this backdrop, we plan to transfer our Japanese product development approach and care model to overseas markets. Unicharm is already well-known in the disposable baby diaper and feminine care product markets. However, we want to extend our reach and contribute to key areas associated with the unavoidable issue of societal aging. This also will include a long-term commitment to helping the elderly lead ordinary lives.
What role can Unicharm play in societies where birthrates are falling and populations are aging?
To succeed in highly competitive markets overseas, we need an organization that can make decisions quickly in response to changes in the operating environment. We also need highly talented people. In China, where the market continues to grow strongly and now accounts for over 10% of consolidated net sales, we have transferred some head office functions to a local holding company and dispatched a large team of experienced personnel from our head office in Japan. This has improved the speed and quality of local decision-making. We are also passing on Unicharm’s corporate DNA to local staff through personnel training programs. In the future, we plan to transfer this Chinese holding company model to other regions to drive further overseas expansion.
What kind of organization does Unicharm need in order to succeed on the global stage?
To boost earnings, Unicharm is reinforcing its financial structure and aggressively increasing business investment to drive continued growth, while at the same time maintaining a policy of stable and sustainable dividend growth. We also plan to continue implementing share buybacks. For fiscal 2012, we increased the dividend per share by ¥4.00 year on year to ¥32. This marks the tenth consecutive fiscal year of dividend hikes since fiscal 2002. Going forward, the Company will continue to work as one to actively extend Unicharm’s global reach and expand its business while striving to meet the expectations of all shareholders and investors.
Finally, please tell us about your stance on shareholder returns.
December 2012
Takahisa Takahara President and CEO
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Interview with the President
4
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Main Topics
Main Topics in 2012
5
The rate of market uptake for disposable baby diapers is rising rapidly in the Asia region on the back of economic growth. Growth remains strong in our main markets of China, Thailand and Indonesia. In fiscal 2012, ended March 31, 2012, sales in Asia increased 22.6% year on year to ¥145.2 billion, supporting steady growth in profits. In our most important market of China, sales rose 25.9% year on year. This growth reflected our move into regional inland cities, where demand is expanding, as well as continued demand in coastal cities, which have been our main market driver until now. Sales in China have risen at an average rate of more than 30% in the last five years and the market now accounts for over 10% of Unicharm's consolidated net sales. In Indonesia, where we have built a dominant market share, sales increased by more than 40% year on year. In other markets in Asia, we are steadily laying the foundations to support future growth. In Vietnam, which continues to see strong economic expansion, we acquired a local company called Diana Joint Stock Company in September 2011. Diana has the second largest market shares for disposable baby diapers and feminine care products in Vietnam. In India, which has a population of more than 1.1 billion, our share of the disposable baby diaper market continues to grow steadily after we began full-scale sales in 2009.
Our main markets continue to grow at a rapid pace
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress1
6
Demand for disposable diapers has been growing rapidly in China due to rising income levels. As a result, Unicharm's sales in the Chinese market have expanded at an average rate of more than 30% over the last five years. In fiscal 2012, sales in China accounted for more than 10% of consolidated net sales and the Chinese business is now driving Unicharm's growth. In addition to coastal cities, our sales are now growing in regional inland cities after the launch of disposable diapers aimed at middle-class consumers in 2010. We plan to increase our overall share in the Chinese market by capturing more business in each city, extending our distribution network to large and small retailers and reinforcing our online sales channel.
Demand for disposable baby diapers has been increasing rapidly in Indonesia amid population growth and rising incomes. Sales have risen more than 40% over the last two years, making it our fastest-growing overseas market. In Indonesia, we launched Mamy Poko Pants Standar disposable baby diapers for middle-class consumers in 2007. These diapers have proved to be very popular and we have built dominant market shares in feminine care products and in disposable baby diapers.
First-mover advantage in disposable diapers for middle-class consumers has helped us build a dominant market share in Indonesia
Stepping up growth with new products for middle-class consumers in China
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress1
7
To maintain Unicharm's strength in the Asia region, we are actively adding production capacity in areas where we expect demand to increase and closing aging factories to create an optimum manufacturing network. In China, currently our most important market, we started up a fourth factory in 2012 , allowing us to reliably and efficiently supply products to northern China. We are also pushing ahead with plans to open our first African factory in Egypt later in fiscal 2013 and start up our third factory in Indonesia in fiscal 2014. In Japan, we have decided to shut our Ozu factory in 2012 and shift production to other domestic sites. In Australia, we will close our aging disposable diaper manufacturing facilities in fiscal 2014 and switch to imports from neighboring countries to supply the market.
Opening new manufacturing sites and closing old ones
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress2
8
The price of disposable diapers continues to decline in Japan. At the same time, consumers are calling for even higher levels of quality. We have been working to revitalize the disposable baby diaper market in Japan by leveraging the strengths of our two brands—Moony, which offers premium levels of quality, and Mamy Poko, which offers an excellent balance between quality and price. In 2010, we launched a new product in our Moony range that incorporates a new type of soft, stretchy nonwoven fabric to give babies and infants the feel of wearing soft underwear. We followed this up in 2012 with another new Moony product featuring an entirely new type of nonwoven fabric. This material is soft on the skin like silk but is also highly absorbent. We added pants-type disposable diapers specifically designed for babies at the crawling stage to our Mamy Poko lineup in 2011. We also pushed down the cost of our diapers further in response to falling prices in the domestic disposable diaper market. These initiatives led to an increase in the baby care business's overall market share of 1.6 percentage points year on year in fiscal 2012.
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress3
9
In Japan, the target market for feminine care products continues to shrink, while diversifying lifestyles mean women are looking for increasingly diverse value and functions from sanitary napkin products. In an effort to boost profits, we have been rolling out new high value-added products centered on the growth trends of skin care, nighttime use and design. In the skin care category, we launched Sofy Hada Omoi sanitary napkins in 2007. These products incorporated a new type of surface material that is kind on the skin like nonwoven fabric but also has excellent absorbency like our existing mesh material. In 2011, we added a new product to our range called Sofy Hada Omoi Ultra Super Slim, which is fifty percent slimmer than existing products, followed by further products in 2012 specifically designed for lighter days. This has given us a wider range of products and helped revitalize the market. In the nighttime use category, we sell Sofy Super Sound Sleep Guard, which has proved very popular in the market. Responding to the needs of consumers, we have also added more sizes to our sanitary napkin range and launched a seasonal product called Sofy Super Sound Sleep Guard Suzuhada for hot summer weather. In the design-oriented segment, we have adopted stylish lace designs for the individual packaging and back sheets of our Center-in Compact Slim products, which are so small they do not look like conventional sanitary napkins. This range is aimed at the growing number of consumers who also focus on the design of the product, not just quality. Amid Japan's shrinking feminine care market, these initiatives supported an increase in the feminine care business's overall market share of 2.4 percentage points year on year in fiscal 2012.
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress4
10
Since moving into the disposable adult diaper market in 1987, Unicharm has built dominant shares in both the moderate and light adult incontinence markets and led the industry in promoting wider use of adult incontinence products for nursing care. In 1988, we launched Lifree Incontinence Pads, the world's first product in the moderate adult incontinence category with interchangeable absorbent pads. This product ensured comfort and hygiene for those being cared, but also made diaper changing easier for carers and substantially reduced diaper costs. As a result, Lifree Incontinence Pads went on to become the de facto standard for incontinence care in Japan. In 1995, we introduced the concept of rehabilitation to the incontinence care field with the launch of Lifree Rehabili-Pants, which played an important role in encouraging care for the elderly that does not restrict them to bed. We were also quick to identify needs in the light incontinence care market, launching our first product in 1994. This market mainly comprises elderly people and women that have had children who find it hard to talk about their condition with others. The health care business continues to report strong sales growth in line with Japan's aging society. We expect the target market for our products to continue expanding. In fiscal 2013, we plan to boost capacity at our three domestic factories, strengthen our sales network and launch high value-added products to reinforce our already dominant position in the market.
Our health care business continues to grow strongly
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress5
11
In recent years, there has been an increase in the number of elderly leading active social lives through travel, shopping and other pastimes. To encourage wider use of our disposable adult diapers among this group, we realized we had to develop diapers that were less bulky and more like normal underwear. In September 2010, we launched Lifree Thin Type Pleasant Pants, which are around 50% thinner than our previous products and offer the same level of comfort as underwear. These diapers are proving popular with customers. We also expanded our adult incontinence care range in January 2012 with the launch of three new Lifree products aimed at people in nursing homes. These products, Lifree Protective Anshin Girdles, Lifree Anshin Fit Shorts and Lifree Anshin Fit Pads, which are designed to aid rehabilitation and give more control over incontinence , are now being sold to hospitals and nursing care facilities throughout Japan.
Japan has a higher proportion of elderly people than elsewhere, but many countries around the world are also expected to see a rapid increase in the number of elderly. The Asia region is currently aging at a faster rate than Japan and the region's elderly population is projected to more than double over the next two decades. Against this backdrop, we plan to leverage our strengths in the Japanese market to establish our Lifree brand and develop our Japanese care model across Asia.
Transferring our Japanese care model to other Asian markets
Expanding our product lineup to encourage wider use
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress5
12
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress5
13
The pet care market continues to expand worldwide. We estimate it will grow to be worth around ¥14 trillion in sales by 2020, comparable in size to the personal care market (retail sales basis). We forecast growth in advanced economies such as Japan, the U.S. and Europe, but also in emerging markets in Asia, particularly China, and in South America, where rising incomes and aging societies are likely to drive market expansion.
The pet care market is growing worldwide
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress6
14
In Japan, Unicharm has focused resources on four main trends in the Japanese pet market—caring for pets indoors, small-sized dogs, aging pets, and overweight pets. This has helped us secure the top domestic market shares in both the pet toiletry and pet food categories. With pets now living longer, there has been a rising number of cases of pet obesity and pet disorders such as diseases of the lower urinary tract. In response, we have enhanced our lineup of high value-added pet products to target a fifth trend—emphasis on pet health. We believe these products will also help us reinforce our leading position in the domestic market. In pet food products, we have enhanced our lineup with products tailored to different pet ages. These aged-based products contain the right balance of nutritional ingredients and calories for the changing bodies and appetites of aging dogs and cats. In pet toiletry products, we have continued to develop products using the technologies cultivated in our personal care business, resulting in a new market category of pet toilet products for small dogs. In February 2012, we acquired shares in Peparlet Co., Ltd., a leading manufacturer and distributor of paper cat litter. This share purchase will see Peparlet become part of the Unicharm Group, allowing us to reinforce our lineup of pet toiletry products and secure more reliable supplies of paper cat litter by transferring our expertise in manufacturing to this company.
Demand for pet food is growing in China, mainly among wealthy consumers in coastal cities. We began selling dried pet food for cats and dogs in Shanghai in 2010. As of the end of December 2011, we had secured roughly 14% of the dried dog food market and 25% of the dried cat food market in Shanghai. With pet ownership in China expected to rise, we forecast new demand of around ¥100 billion will emerge in the pet care market by 2020. We plan to use our sales network for disposable baby diapers and feminine care products to extend our sales reach to Beijing, Guangzhou and other major Chinese cities.
Japan: Building on our already dominant market share by focusing resources on five main trends
China: Extending our sales reach from coastal cities
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress6
15
In the U.S. pet care market, which accounts for roughly 40% of the global market, we acquired 51% of shares in The Hartz Mountain Corporation in December 2011. Hartz is the leading U.S. pet care brand in eight product categories. The U.S. pet care market is the world's largest, estimated to be worth around $30 billion. We forecast continued strong growth in the market of around 4–5% annually.
United States: Targeting significant expansion through synergies with Hartz
Pet ownership in the country is seeing similar trends to those we have identified in Japan, such as rising ownership of small-sized dogs and caring for pets indoors. Demand for premium pet food and indoor pet toiletry products is also growing. We see prospects for rapid expansion in our U.S. pet care business by combining Unicharm's technological and product development capabilities in pet toiletry products and pet food products, which have already proved popular with Japanese consumers, with Hartz's brand power and marketing expertise.
Annual Report 2012 Year Ended March 31, 2012 ~ Strategy and Progress ~ Progress6
16
Consolidated Balance SheetUnicharm Corporation and Subsidiaries March 31, 2012 and 2011
ASSETS 2012 2011Current Assets:
Cash and cash equivalents (Note 18) ¥ 75,926 ¥ 113,008 $ 925,928Marketable securities (Notes 3 and 18) 3,400 702 41,463Notes and accounts receivable (Notes 10 and 18):
Trade 50,405 46,038 614,693Allowance for doubtful accounts (87) (34) (1,057)
Inventories (Note 4) 33,661 22,393 410,501Deferred tax assets (Note 14) 12,751 11,453 155,499Other current assets 14,582 11,160 177,825
Total current assets 190,638 204,720 2,324,852
Property, Plant and Equipment:Land (Note 5) 11,905 11,686 145,188Buildings and structures 66,149 63,378 806,699Machinery and equipment 174,334 156,945 2,126,022Furniture and fixtures 10,350 7,417 126,221Leased assets 482 259 5,871Construction in progress 9,429 4,917 114,992
Total 272,649 244,602 3,324,993Accumulated depreciation (155,828) (146,212) (1,900,346)
Net property, plant and equipment 116,821 98,390 1,424,647
Millions of yen
Thousands of
U.S. dollars(Note 1)
2012
Investments and Other Assets:Investment securities (Notes 3 and 18) 14,143 12,888 172,477Investments in affiliates 157 140 1,910Goodwill 78,905 65,022 962,259Intangibles 18,636 2,380 227,268Deferred tax assets (Note 14) 45,147 53,108 550,569Prepaid pension cost (Note 8) 5,747 5,658 70,085Other assets 2,495 1,892 30,428Allowance for doubtful accounts (191) (182) (2,329)
Total investments and other assets 165,039 140,906 2,012,667Total ¥ 472,498 ¥ 444,016 $ 5,762,166
The accompanying notes are an integral part of these financial statements.
17
LIABILITIES AND NET ASSETS 2012 2011Current Liabilities:
Short-term bank loans (Notes 6 and 18) ¥ 5,439 ¥ 6,241 $ 66,332Current portion of long-term debt (Note 6) 2,828 2,131 34,488Notes and accounts payable (Notes 10 and 18):
Trade 45,779 37,991 558,275Others 29,742 28,423 362,708
Income taxes payable (Notes 14 and 18) 4,348 1,953 53,030Accrued expenses 16,779 11,748 204,620Provision for loss on disaster - 640 -Other current liabilities 1,447 1,016 17,644
Total current liabilities 106,362 90,143 1,297,097
Long-Term Liabilities:Convertible bonds (Notes 7 and 18) 80,585 80,643 982,746Long-term debt (Notes 6 and 18) 35,220 47,354 429,502Provision for retirement benefits (Note 8) 2,754 2,624 33,588Deferred tax liabilities (Note 14) 1,365 688 16,647Other long-term liabilities 3,005 2,931 36,642
Total long-term liabilities 122,929 134,240 1,499,125
Commitments and Contingent Liabilities (Notes 9 and 16):
NET ASSETS
2012Millions of yen
Thousands of
U.S. dollars
(Note 1)
NET ASSETSShareholders' equity (Note 20):
Common stock,authorized: 827,779,092 shares in 2012 and 2011issued: 206,944,773 shares in 2012 and 2011 15,993 15,993 195,032
Capital surplus 18,802 18,802 229,297Retained earnings 238,568 217,112 2,909,369Treasury stock—at cost, shares held: 22,697,728 in 2012 and 20,521,968 in 2011 (52,926) (43,925) (645,437)
Accumulated other comprehensive incomeNet unrealized gains on available-for-sale securities, net of tax (Note 3) 4,180 3,277 50,980Net deferred losses on derivatives under hedge accounting, (14) (13) (169) net of taxLand revaluation surplus, net of tax (Note 5) (157) (90) (1,919)Foreign currency translation adjustments (11,372) (9,221) (138,683)
Total 213,074 201,935 2,598,470Stock acquisition rights (Note 11) 959 289 11,688Minority interests 29,174 17,409 355,786
Total net assets 243,207 219,633 2,965,944Total ¥ 472,498 ¥ 444,016 $ 5,762,166
The accompanying notes are an integral part of these financial statements.
18
Consolidated Statement of IncomeUnicharm Corporation and Subsidiaries Years Ended March 31, 2012 and 2011
2012 2011Net Sales ¥ 428,391 ¥ 376,948 $ 5,224,282Cost of Sales 233,936 203,395 2,852,878
Gross profit 194,455 173,553 2,371,404Selling, General and Administrative Expenses (Notes 11, 12, 15 and 22) 142,554 126,992 1,738,468
Operating income 51,901 46,561 632,936Other Income (Expenses):
Interest and dividend income 1,014 868 12,360Foreign exchange loss (464) (1,267) (5,659)Interest expense (460) (310) (5,614)Sales discount (4,190) (3,296) (51,095)Gain on sale of property, plant, and equipment 8 1,012 99Gain on sale of investment securities 9 - 109Gain on sale of investments in affiliates - 1,214 -Reversal of allowance for doubtful account - 905 -Loss on disposal of property, plant, and equipment (1,335) (794) (16,278)Loss on write-down of investment securities (108) (355) (1,315)Loss on sale of investment securities - (313) -Effect of application of the accounting standard for asset - (72) - retirement obligations Loss on disaster (554) (1,084) (6,751)Business restructuring cost (617) - (7,519)Other—net 369 227 4,498
Other income (expenses)—net (6,328) (3,265) (77,165) Income Before Income Taxes and Minority Interests 45,573 43,296 555,771 Income Taxes (Note 14):
Current 7,835 65,648 95,547Refunded (284) (1,120) (3,455)Deferred 7,324 (58,266) 89,317
Total income taxes 14,875 6,262 181,409Net Income Before Minority Interests 30,698 37,034 374,362Minority Interests In Net Income 3,716 3,474 45,318Net Income ¥ 26,982 ¥ 33,560 $ 329,044
2012 2011 2012Per Share of Common Stock (Note 20):
Net income ¥ 144.95 ¥ 178.11 $ 1.77Diluted net income 130.05 168.42 1.59Cash dividends applicable to the year 32.00 56.00 0.39
The accompanying notes are an integral part of these financial statements.
Millions of yen
Yen
Thousands ofU.S. dollars
(Note 1)2012
U.S. dollars
19
Consolidated Statement of Comprehensive IncomeUnicharm Corporation and Subsidiaries Years Ended March 31, 2012 and 2011
2012Net Income Before Minority Interests ¥ 30,698 ¥ 37,034 $ 374,362
Other Comprehensive Income (Note 17):Net unrealized gains on available-for-sale securities, net of tax 903 476 11,021Net deferred losses on derivatives under hedge accounting, net of tax (8) (57) (100)Foreign currency translation adjustments (2,056) (5,032) (25,070)Total other comprehensive income (1,161) (4,613) (14,149)
Comprehensive Income 29,537 32,421 360,213
Total Comprehensive Income Attributable to:Shareholders of the Company ¥ 25,734 ¥ 30,258 $ 313,826Minority interests 3,803 2,163 46,387
The accompanying notes are an integral part of these financial statements.
Millions of yen2012 2011
Thousands ofU.S. dollars
(Note 1)
20
Consolidated Statement of Changes in Net AssetsUnicharm Corporation and Subsidiaries Years Ended March 31, 2012 and 2011
ThousandsOutstanding
number of Foreign
shares of Land currency
common Common Capital Retained Treasury revaluation translation Minority Total
stock stock surplus earnings stock surplus adjustments Total interests net assets
Balance, April 1, 2010 62,929,076 ¥15,993 ¥18,802 ¥188,697 ¥(36,330) ¥2,796 ¥9 ¥(618) ¥(5,460) ¥183,889 ¥0 ¥23,524 ¥207,413Net income - - - 33,560 - - - - - 33,560 - - 33,560Cash dividends, ¥77.00 per share - - - (4,845) - - - - - (4,845) - - (4,845)Purchase of treasury stock (14,469,453) - - - (7,595) - - - - (7,595) - - (7,595)Net change in the year - - - (300) - 481 (22) 528 (3,761) (3,074) 289 (6,115) (8,900)Stock split 137,963,182
Balance, April 1, 2011 186,422,805 ¥15,993 ¥18,802 ¥217,112 ¥(43,925) ¥3,277 ¥(13) ¥(90) ¥(9,221) ¥201,935 ¥289 ¥17,409 ¥219,633Net income - - - 26,982 - - - - - 26,982 - - 26,982Cash dividends, ¥30.00 per share - - - (5,593) - - - - - (5,593) - - (5,593)purchase of treasury stock (2,175,760) - - - (9,001) - - - - (9,001) - - (9,001)Land revaluation difference - - - 67 - - - - - 67 - - 67Net change in the year - - - - - 903 (1) (67) (2,151) (1,316) 670 11,765 11,119
Balance, March 31, 2012 184,247,045 ¥15,993 ¥18,802 ¥238,568 ¥(52,926) ¥4,180 ¥(14) ¥(157) ¥(11,372) ¥213,074 ¥959 ¥29,174 ¥243,207
Balance, April 1, 2011 $195,033 $229,297 $2,647,701 $(535,667) $39,959 $(163) $(1,092) $(112,450) $2,462,618 $3,521 $212,304 $2,678,443Net income - - 329,044 - - - - - 329,044 - - 329,044Cash dividends, $0.37 per share - - (68,203) - - - - - (68,203) - - (68,203)Purchase of treasury stock - - - (109,770) - - - - (109,770) - - (109,770)Land revaluation surplus - - 827 - - - - - 827 - - 827Net change in the year - - - - 11,021 (6) (827) (26,233) (16,045) 8,166 143,482 135,603
Balance, March 31, 2012 $195,033 $229,297 $2,909,369 $(645,437) $50,980 $(169) $(1,919) $(138,683) $2,598,471 $11,687 $355,786 $2,965,944
The accompanying notes are an integral part of these financial statements
Millions of yen
Thousands of U.S. dollars (Note 1)
Stock acquisitionrights
Net deferred gains(losses) on
derivatives underhedge accounting,
net of tax
Net unrealized gainson available-for-salesecurities, net of tax
21
Consolidated Statement of Cash FlowsUnicharm Corporation and Subsidiaries Years Ended March 31, 2012 and 2011
2012 2011Operating Activities:
Income before income taxes and minority interests ¥ 45,573 ¥ 43,296 $ 555,771Adjustments for:
Income taxes—paid (7,322) (79,288) (89,294)Income taxes—refunded 3,063 4,064 37,353Depreciation 13,257 14,620 161,671Amortization of goodwill 3,899 2,760 47,552Income in provision for retirement benefit 177 368 2,156Net loss on sales and revaluation of investment securities 99 669 1,207Net loss (gain) on disposals and sales of property, plant and equipmen 1,327 (217) 16,179Gain on sales of investments in affiliates - (1,214) -Increase in trade receivables (2,070) (5,630) (25,243)Increase in inventories (4,922) (2,875) (60,022)Increase in trade payables 3,989 4,650 48,644Increase in other current liabilities 6,520 762 79,511Other—net (4,019) 795 (49,012)
Total adjustments 13,998 (60,536) 170,702Net cash provided by (used in) operating activities 59,571 (17,240) 726,473
Investing Activities:Proceeds from sale and redemption of marketable securities 10,084 8,398 122,971Proceeds from sale of property, plant and equipment 866 1,702 10,564Payment for purchase of marketable securities (12,299) (7,600) (149,991)Payment for acquisition of a property, plant and equipment (26,137) (27,439) (318,747)Purchase of time deposits (6,300) (6,901) (76,830)Proceeds from withdrawal deposits 4,312 16,842 52,591Payment for purchase of investment securities (1,041) (77) (12,688)Payment for purchase of investments in affiliates (28,345) (63,692) (345,669)Proceeds from sales of investments in affiliates - 4,947 -Proceeds from sales and redemption of investment securities 258 4,784 3,151Increase in other assets (260) (491) (3,174)
Net cash used in investing activities (58,862) (69,527) (717,822)Forward \ 709 \ (86,767) $ 8,651Financing Activities:
(Decrease) increase in short-term bank loans (6,822) 1,489 (83,198)Proceeds from long-term debt - 70,000 -Repayments of long-term debt (13,831) (21,749) (168,668)Proceeds from issuance of convertible bonds - 80,673 -Cash dividends paid (5,585) (4,845) (68,108)Purchase of treasury stock (9,001) (7,595) (109,770)Cash dividends paid to minority shareholders (1,148) (1,182) (14,002)Paid-in capital from minority shareholders - 263 -Others (126) (82) (1,537)
Net cash (used in) provided by financing activities (36,513) 116,972 (445,283)
Foreign Currency Translation Adjustments on Cash and Cash Equivalents (1,278) (1,467) (15,585)
Net (Decrease) increase in Cash and Cash Equivalents (37,082) 28,738 (452,217)Cash and Cash Equivalents, Beginning of Year 113,008 84,270 1,378,145Cash and Cash Equivalents, End of Year ¥ 75,926 ¥ 113,008 $ 925,928
The accompanying notes are an integral part of these financial statements.
Millions of yen 2012
(Note 1)
U.S. dollars
Thousands of
22
Notes to Consolidated Financial Statements Unicharm Corporation and Subsidiaries Years Ended March 31, 2012 and 2011 1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications have been made to the consolidated financial statements issued domestically in order to
the 2011 consolidated financial statements to conform to the classifications used in 2012.
The consolidated financial statements are expressed in Japanese yen, the currency of the country in which Unicharm Corporation (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥82 to $1, the approximate rate of exchange at March 31, 2012. Such translations should not be construed as representation that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
present them in a form that is more familiar to readers outside Japan. In addition, certain reclassifications have been made in 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidation
The consolidated financial statements include the accounts of the Company and its 40 (31 in 2011) subsidiaries (together, the “Group”). A subsidiary is excluded from the scope of consolidation for the year ended March 31, 2012 as mentioned below.
Under the control or influence concept, those companies in
which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.
The changes to the consolidation scope at March 31, 2012,
compared with the scope applicable at March 31, 2011 are as follows:
Unicharm Brazil LTDA. and Unicharm (China) Co., Ltd., which were newly established, Diana Joint Stock Company with its subsidiary, the Hartz Mountain Corporation with its subsidiary, and Peparlet Co., Ltd. whose shares were newly acquired, are included in the consolidation scope at March 31, 2012.
In addition, Ac-eight Corporation, which was a consolidated subsidiary, was liquidated after the merger with Unicharm Kokko Nonwoven Co., Ltd., a consolidated subsidiary effective on January 17, 2012.
Hartz-B2E LLC is excluded from the scope of consolidation, because it is a small sized company and the effect on the accompanying consolidated financial statements would not be material in terms of total assets, net sales, or net income corresponding to the Company’s share and retained earnings corresponding to the Company’s share of the company.
During the fourth quarter ended March 31, 2012, the Company established Unicharm Nonwoven (Tianjin) Co., Ltd. and Unicharm Packaging Material (Tianjin) Co., Ltd., through its consolidated subsidiary, Unicharm China Co., Ltd. These companies are not included in the scope of consolidation for the
year ended March 31, 2012, because those companies were established in the fourth quarter and their fiscal closing date is December 31, which is different from the fiscal closing date of the Group.
Investment in two affiliates is accounted for by the equity
method. The reporting period of other consolidated subsidiaries and
equity method affiliates is the same as the Company’s reporting period. However, nineteen overseas subsidiaries and one domestic subsidiary close accounts on December 31, one domestic subsidiary close accounts on June 30 and one affiliate accounted for by the equity method close accounts on September 30. In the consolidated financial statements, therefore, the Company uses the financial statements of these subsidiaries as of December 31, and adjusts for material transactions that occurred during the three month period between December 31 and March 31. For other consolidated subsidiaries and an affiliate which close accounts, pro forma financial statements as of March 31 are used.
The difference between the cost of the Company’s investments in subsidiaries and affiliates accounted for by the equity method and its equity in the net assets at the respective dates of acquisition, goodwill or negative goodwill, is amortized over the effective investment period, calculated on an individual basis, using the straight-line method up to a maximum of 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated.
All assets and liabilities of the consolidated subsidiaries are measured at fair value as of the acquisition date.
23
b. Cash Equivalents Cash equivalents are short-term investments that are readily
convertible into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificates of deposit, commercial papers and bond funds, all of which mature or become due within three months of the date of acquisition. c. Inventories
Inventories held for sale in the ordinary course of business are measured at the lower of cost determined mainly by the average method, or net selling value, which is defined as the selling price less additionally estimated manufacturing costs and estimated direct selling expenses. The replacement cost may be used in place of the net selling value, if appropriate. d. Allowance for Doubtful Accounts
The allowance for doubtful accounts is determined based on the historical experiences of the Company and its subsidiaries as well as our best estimate of the amount of probable credit losses in the outstanding receivables. e. Marketable and Investment Securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity, are reported at amortized cost, and (2) available-for-sale securities, which are not classified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of net assets.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are adjusted to net realizable value through income. f. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its domestic subsidiaries is computed by the straight-line at rates based on the estimated useful lives of the assets.
The range of useful lives is principally from 2 to 60 years for buildings and structures, from 2 to 40 years for machinery and equipment and from 2 to 20 years for furniture and fixtures.
Capitalized lease assets are depreciated over their respective contract periods using the straight-line method assuming no residual value.
(Accounting change) Prior to April 1, 2011, depreciation of property, plant and
equipment, except for lease assets, was computed by the declining-balance method, while the straight-line method is applied to buildings acquired after April 1, 1998 and the property, plant and equipment of foreign subsidiaries. However, effective from April 1, 2011, the straight-line method has been applied to all property, plant and equipment.
This change aims to unify the Group’s accounting methods and reflect its profit and loss figures more correctly based on the actual business conditions.The change was triggered by developments in the Group’s capital expenditure environment. In
April 2011, the Group formulated its eighth medium-term management plan, “Blue Sky Plan,” and under this plan, the Group expects to increase its overseas capital expenditures in the efforts to capitalize on the acceleration of global business development.
As a result, in order to carry out more appropriate cost allocation, the Company judged that the actual business conditions would be reflected more correctly by changing the depreciation method of property, plant and equipment to the straight-line method, as property, plant and equipment of the Company and its domestic consolidated subsidiaries have been stably operated within the useful life and stable profits are expected from the products of the Group.
Due to this change, operating income and income before income taxes increased by ¥3,612 million ($44,047thousand), compared to the amount that would have been under the previous accounting method.
The effect of this change on the segments is explained in Note 24 “SEGMENT INFORMATION.” g. Software
Software is carried at cost less accumulated amortization, which is calculated using the straight-line method. The useful lives are principally 5 years. h. Long-lived Assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. i. Retirement and Pension Plans
The Company and certain consolidated subsidiaries have contributory funded defined benefit pension plans and unfunded retirement benefit plans for employees. Certain overseas consolidated subsidiaries have defined contribution pension plans.
The Company and certain consolidated subsidiaries account for the provision for retirement benefits based on projected benefit obligations and plan assets at the balance sheet date. j. Research and Development Costs
Research and development costs are charged to income as incurred. k. Leases
All finance leases are capitalized and related lease assets and lease obligations are recognized in the balance sheets.
24
l. Income Taxes The provision for income taxes is computed based on the
pretax income included in the consolidated statements 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 and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences. m. Foreign Currency Transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated income statement to the extent that they are not hedged by forward exchange contracts.
n. Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the exchange rates in effect as of the balance sheet date except for equity, which is translated at the historical rate.
Differences arising from such translation were presented as "Foreign currency translation adjustments" in a separate component of net assets.
Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rates prevailing during the year. o. Derivatives and Hedging Activities
The Group uses derivative financial instruments to manage its exposure to fluctuations in foreign exchange. Foreign exchange forward contracts and currency options are utilized by the Group to reduce foreign currency exchange risks. The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: (a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statements of income and (b) for derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.
The foreign currency forward contracts and currency options are utilized to hedge foreign currency exposures in procurement of raw materials from import purchases. Trade payables denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge accounting. Forward contracts applied for forecasted transactions are measured at fair value, and the unrealized gains/losses are deferred until the underlying transactions are completed. p. Per Share Information
Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period,
retroactively adjusted for stock splits. The weighted-average number of common shares used in the
computation was 186,144,881 shares for 2012, and 188,421,882 shares for 2011.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock (including subsidiaries’ common stock). Diluted net income per share of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year.
(Accounting change) On June 30, 2010, the Accounting Standards Board of Japan (“ASBJ”) issued revised ASBJ Statement No. 2, “Accounting Standard for Earnings per Share” and revised ASBJ Guidance No. 4, “Guidance on Accounting Standard for Earnings per Share.” The Company adopted this revised standard effective from the year ended March 31, 2012. In accordance with the revised accounting standard, the Company has changed the method of computing diluted net income per share and added the fair value of stock options which are related to the services provided to the Company in future to the amount supposed to be paid upon execution. There is no effect on previous fiscal year’s information. q. Provision for Bonuses
Provision for bonuses is stated at the estimated amount of the bonuses to be paid to employees based on their services provided for the fiscal year. r. Provision for Loss on Disaster
The provision for loss on disaster is stated at the amount considered to be appropriate based on estimation of expenses or losses for the restoration of plants and equipment damaged by the Great East Japan Earthquake. s. Adoption of Accounting Standard for Accounting Changes and Error Corrections On December 4, 2009, the ASBJ issued ASBJ Statement No. 24 “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24 “Guidance on Accounting Standard for Accounting Changes and Error Corrections.” The new accounting standard has defined the accounting treatment for retrospective applications to past financial statements when changes in accounting policies, changes in presentations and corrections of prior period errors are made as well as the treatment for changes in accounting estimates. Effective April 1, 2011, the Company adopted this new accounting standard.
25
3. MARKETABLE AND INVESTMENT SECURITIES
Marketable and investment securities at March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Current: Government and corporate bonds ¥900 ¥702 $10,975 Negotiable certificates of deposit 2,500 - 30,488 Non-current: Marketable equity securities ¥11,487 ¥9,457 $140,090 Government and corporate bonds 2,428 2,203 29,604 Trust fund investments and other 228 1,228 2,783 Total ¥14,143 ¥12,888 $172,477 The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2012 and 2011 were as follows: Millions of yen
March 31, 2012 Cost Unrealized
gains Unrealized
losses Fair
value Securities classified as: Available-for-sale: Equity securities ¥4,401 ¥6,124 ¥53 ¥10,472 Debt securities and other 20,008 16 - 20,024 Held-to-maturity 3,327 - 183 3,144
Total ¥27,736 ¥6,140 ¥236 ¥33,640 Millions of yen
March 31, 2011 Cost Unrealized
gains Unrealized
losses Fair
value Securities classified as: Available-for-sale: Equity securities ¥4,752 ¥5,144 ¥440 ¥9,456 Debt securities and other 1,000 - 13 987 Held-to-maturity 2,905 2 181 2,726
Total ¥8,657 ¥5,146 ¥634 ¥13,169 Thousands of U.S. dollars
March 31, 2012 Cost Unrealized
gains Unrealized
losses Fair
value Securities classified as: Available-for-sale: Equity securities $53,670 $74,683 $652 $127,701 Debt securities and other 244,000 198 - 244,198 Held-to-maturity 40,579 - 2,234 38,345
Total $338,249 $74,881 $2,886 $410,244
26
Available-for-sale securities and held-to-maturity securities whose fair value is not readily determinable as of March 31, 2012 and 2011 were as follows: Carrying Amount
Millions of yen
Thousands of U.S. dollars
2012 2011 2012 Available-for-sale: Equity securities ¥ 385 ¥ 366 $ 4,693 Debt securities and other - 15 - Held-to-maturity (Commercial paper) 400 400 4,878 Total ¥ 785 ¥ 781 $ 9,571
Proceeds from sales of available-for-sale securities for the years ended March 31, 2012 and 2011 were ¥38 million ($464 thousand) and ¥3,906 million, respectively. Gross realized gains and losses on these sales, as determined by the moving-average cost, were ¥9 million ($109 thousand) and ¥0 million ($1
thousand) respectively for the year ended March 31, 2012. Gross realized gains and losses on these sales, as determined the moving average cost, were ¥213 million and ¥525 million, respectively, for the year ended March 31, 2011.
The carrying amounts of debt securities by contractual maturities for securities classified as available-for-sale and held-to-maturity at March 31, 2012 and 2011 were as follows:
Millions of yen Thousands of
U.S. dollars
March 31, 2012 Available-
for-sale Held-to maturity
Available- for-sale
Held-to maturity
Due in one year or less ¥- ¥900 $- $ 10,975 Due after one year through five years - - - - Due after five years through ten years - 1,427 - 17,408 Due after ten years - 1,000 - 12,195 Total ¥- ¥3,327 $- $ 40,578 Millions of yen
March 31, 2011 Available-
for-sale Held-to maturity
Due in one year or less ¥- ¥905 Due after one year through five years - - Due after five years through ten years - 1,000 Due after ten years - 1,000 Total ¥- ¥2,905 4. INVENTORIES
Inventories at March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Merchandise and finished products ¥ 18,068 ¥ 11,724 $220,335 Work in process 682 359 8,322 Raw materials 13,502 9,202 164,656 Supplies 1,409 1,108 17,188 Total ¥ 33,661 ¥ 22,393 $410,501
27
5. LAND REVALUATION
Under the “Act on Revaluation of Land,” promulgated on March 31, 1998 and revised on March 31, 1999 and 2001, the Company elected a one-time revaluation of its own-use land to real estate appraisal value as of March 31, 2001.
The resulting “land revaluation difference” represents unrealized appreciation of land and is stated, net of income taxes,
as a component of net assets. There is no effect on the consolidated statements of income.
As of March 31, 2012 and 2011, the carrying amount of the land, net of the above one-time revaluation exceeded the market value by ¥267 million ($3,256 thousand) and ¥434 million, respectively.
6. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2012 and 2011 consisted of notes to banks and bank overdrafts. Short-term loans were made under general security agreements with banks. Loans from banks
and municipal corporations are due serially to 2015 with interest rates ranging from 0.4% to 13.5% in 2012 and 0.4% to 1.4% at March 31, 2011, respectively.
Long-term debt at March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Loans from banks and municipal corporations, due serially to 2015 with interest rates ranging from 0.4% to 13.5% in 2012 and from 0.4% to 1.4% in 2011 ¥38,047 ¥49,485 $463,989 Obligations under finance leases 310 167 3,779
Total 38,357 49,652 467,768 Less current portion (2,945) (2,221) (35,919) Long-term debt, less current portion ¥35,412 ¥47,431 $431,849
Annual maturities of long-term debt, excluding finance leases (see Note 16), at March 31, 2012 were as follows:
Years Ending March 31 Millions of yen Thousands of
U.S. dollars 2013 ¥2,828 $34,488 2014 2,219 27,063 2015 2,000 24,390 2016 31,000 378,048 2017 and thereafter - - Total ¥38,047 $463,989
28
7. CONVERTIBLE BONDS
The Company has issued the bonds as follows:
Millions of yen Thousands of
U.S. dollars Issuance
date Interest rate Security Maturity
date 2012 2011 2012
Convertible bonds due in 2013
September 24, 2010
- Unsecured September 10, 2013
¥34,585 ¥34,643 $421,771
Convertible bonds due in 2015
September 24, 2010
- Unsecured September 10, 2015
46,000 46,000 560,975
Total - - - ¥80,585 ¥80,643 $982,746 (Note 1) The details of convertible bonds issued are as follows: Bonds and notes Convertible bonds due in 2013 Convertible bonds due in 2015 Type of stock Common stock Common stock Issue price of acquisition rights
No cost No cost
Issue price of stock ¥3,883.3 ¥3,883.3 Number of stocks subject to acquisition rights
8,884,196 11,845,595
Total amount of issue ¥34,672,500,000 ¥46,000,000,000 Total amount of stock acquisition rights exercised
-
-
Percentage of stock acquisition right granted
100.0
100.0
Exercisable period October 8, 2010 – September 10, 2013
(at local time where the request for exercise will be received)
October 8, 2010 – September 10, 2015
(at local time where the request for exercise will be received)
* Exercise of a stock acquisition right causes the corresponding bond to be cancelled in lieu of a cash payment of purchase of shares, and the amount of the convertible bonds with stock acquisition rights is the same as the amount of issuance.
(Note 2) Repayment schedule of convertible bond:
Millions of yen
March 31, 2012
Due in one year or less
Due after one year through two years
Due after two years through three years
Due after three years through four years
Due after four years through five years
- ¥34,585 - ¥46,000 -
Thousands of U.S. dollars
March 31, 2012
Due in one year or less
Due after one year through two years
Due after two years through three years
Due after three years through four years
Due after four years through five years
- $421,771 - $560,975 -
29
8. RETIREMENT AND PENSION PLANS
The Company and domestic subsidiaries have severance payment plans for employees, directors and corporate auditors.
Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance payment from the Company or
from certain subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specific ages prior to the mandatory retirement age.
The provision for employees’ retirement benefits at March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Projected benefit obligation ¥35,340 ¥30,693 $430,980 Fair value of plan assets (27,288) (25,376) (332,785) Unrecognized actuarial loss (10,890) (8,177) (132,807) Unrecognized prior service cost (155) (174) (1,885) Prepaid pension cost 5,747 5,658 70,085
Provision for retirement benefits ¥2,754 ¥2,624 $33,588
The components of net periodic benefit cost for the years ended March 31, 2012 and 2011 were as follows:
Millions of yen
Thousands of U.S. dollars
2012 2011 2012 Service cost ¥1,633 ¥1,674 $19,912 Interest cost 614 538 7,486 Expected return on plan assets (600) (583) (7,318) Recognized actuarial loss 1,109 1,216 13,523 Amortization of prior service cost 21 17 263
Net periodic benefit cost ¥2,777 ¥2,862 $33,866
Assumptions used for the years ended March 31, 2012 and 2011 were set forth as follows: 2012 2011 Discount rate* 1.4% 2.0% Expected rate of return on plan assets 3.0% 3.0% Amortization period of actuarial gain/loss 10 years 10 years Amortization period of prior service cost 5 years 5 years Amortization method of projected benefit obligation The straight-line method The straight-line method *As a result of reviewing the appropriateness of the discount rate, it turned out that the movement of the discount rate has a significant impact on the Projected benefit obligation. Therefore, the discount rate as at March 31, 2012 has been changed to 1.4%, while the discount rate as at April 1, 2011 was 2.0%. 9. CONTINGENT LIABILITIES
Contingent liabilities at March 31, 2012 and 2011 were as follows:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Guarantee for borrowings of a company other than consolidated subsidiaries from the financial institutions: Co-operative Clean Plaza
¥ 3
¥ 9
$35
30
10. NOTES RECEIVABLE AND PAYABLE March 31, 2012 falls on a bank holiday. The following notes receivable and payable matured on that date were accounted for as if they were settled on that date:
Millions of yen Thousands of U.S. dollars
Notes receivable ¥214 $2,613 Notes payable 423 5,155 11. STOCK OPTIONS
The Company recognized and allocated share-based compensation costs for the years ended March 31, 2012 and 2011 was as follows:
Millions of yen
Thousands of U.S. dollars
2012 2011 2012 Cost of sales ¥217 ¥90 $2,644 Selling, general and administrative expenses 424 199 5,171
Total ¥641 ¥289 7,815
The stock options at March 31, 2012 were as follows: Unicharm Corporation
Meeting date
Persons granted
Number of options granted
Date of grant
Conditions for vesting
Service period
Exercisable period
September 16, 2010 (2010 Stock Option)
9 company’s directors 1 subsidiaries’ director 1,651 company’s employees 1,397 subsidiaries’ employees
Common stock 2,594,700 shares (*1)
November 1, 2010 (*2) (*3)
From November 1, 2010 to September 30, 2012
From October 1, 2012 to September 30, 2016
(*1)The number of stock options is converted into the number of shares. (*2) The market price of the Company’s common stock at the time of stock option exercise must be at least ¥4,800 (In the event that it becomes necessary to adjust this
value, the adjustment shall be conducted in a uniform and predetermined manner). (*3) A Stock option rights holder must, at the time of the stock option exercise, hold a position within Unicharm or its affiliates as a director or employee. However,
Unicharm’s Board of Directors may approve the exercise of stock options by directors who have resigned due to the expiration of one’s term or employees who have retired due to reaching the mandatory retirement age.
The activities of the stock option during the year ended March 31, 2012 were as follows:
Unicharm Corporation
2010 Stock Option
(Shares) Non-vested April 1, 2011—Outstanding 2,589,300 Granted - Forfeited 28,200 March 31, 2012—Outstanding 2,561,100 Vested April 1, 2011—Outstanding - Exercised - Forfeited -
March 31, 2012—Outstanding - Exercise price ¥3,287 ($40) Average stock price at exercise - Fair value price at grant date ¥51,300
($626)
31
12. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31, 2012 and 2011 consisted of the following:
Millions of yen
Thousands of U.S. dollars
2012 2011 2012 Sales promotion ¥57,409 ¥49,778 $700,109 Advertising 13,705 12,628 167,139 Shipping and storage expenses 21,468 19,711 261,799 Employees’ salaries 13,807 12,129 168,380 Depreciation and amortization 1,464 1,373 17,856 Other 34,701 31,373 423,185 Total ¥142,554 ¥126,992 $1,738,468
13. GAIN ON SALE OR LOSS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
Gain on sale of property, plant and equipment for the years ended March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Gain on sale of property, plant and equipment Buildings and structures ¥- ¥959 $- Machinery and equipments 8 41 94 Others 0 12 5 Loss on disposal of property, plant and equipment for the years ended March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Loss on removal of property, plant and equipment Buildings and structures ¥64 ¥19 $786 Machinery and equipments 753 722 9,177 Removal costs 43 16 521 Others 59 21 725 Loss on sale of property, plant and equipment Buildings and structures 30 2 370 Machinery and equipments 3 8 33 Others 383 6 4,666
32
14. INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes, which, in the aggregate, resulted in a normal effective statutory tax rate of approximately
40.7% for the years ended March 31, 2012 and 2011. Foreign subsidiaries are subject to income taxes of the countries in which they operate.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at March 31, 2012 and 2011,
were as follows:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Deferred tax assets: Accrued bonuses ¥1,288 ¥1,329 $15,711 Valuation loss on inventory 345 207 4,207 Accrued sales promotion expense 1,947 2,024 23,744 Undeductible account payable 814 936 9,923
Devaluation of securities 388 440 4,733 Pension and severance costs 2,139 2,445 26,087
Tax-deductible goodwill 28,998 43,779 353,629 Tax loss carryforwards 35,166 32,858 428,854
Other 2,356 1,467 28,735 Less valuation allowance (8,612) (16,384) (105,021) Total 64,829 69,101 790,602 Deferred tax liabilities: Net unrealized gain on available-for-sale securities 1,906 1,755 23,250 Undistributed earnings of subsidiaries 680 572 8,294 Prepaid pension cost 2,085 2,394 25,422 Valuation difference due to application of purchase method 1,310 - 15,971 Depreciation of overseas subsidiaries 1,446 - 17,639 Other 926 507 11,295 Total 8,353 5,228 101,871 Deferred tax assets—current ¥12,751 ¥11,453 $155,499 Deferred tax assets— non-current ¥45,147 ¥53,108 $550,569 Deferred tax liabilities―current (57) - (690) Deferred tax liabilities—non-current ¥(1,365) ¥(688) $(16,647)
33
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statements of income for the years ended March 31, 2012 and 2011 was as follows:
2012 2011
Normal effective statutory tax rate 40.7 % 40.7 % Amortization of goodwill 2.7 2.6 Lower income tax rates applicable to income in certain foreign countries (10.3 ) (9.9 ) Dividends 0.1 0.5 Valuation allowance (14.8 ) 38.2 Income tax – refunded (0.7 ) (2.7 ) Effects of the merger - (57.0 ) Sale of investment in an affiliate - 1.2 Corporate income tax credit 0.5 - Effects of corporate income tax rate changes 12.7 - Other 1.7 0.8 Actual effective tax rate 32.6 % 14.4 %
On December 2, 2011, the “Act for Partial Revision to the Income Tax Act, etc. for the Purpose of Creating a Taxation System
Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing
Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No. 117 of
2011) were promulgated. Consequently, the corporate tax rate will be reduced and a special recovery tax will be imposed. In accordance
with this tax reform, the effective statutory tax rate, which is used to measure deferred tax assets and deferred tax liabilities, has been
reduced from 40.7% to 38.01% for temporary differences that are expected to be eliminated during the period from April 1, 2012 through
March 31, 2015 and 35.64% for temporary differences that are expected to be eliminated on or after April 1, 2015. As a result, net
deferred tax assets (the amount after deducting deferred tax liabilities) decreased by ¥5,275 million ($64,329thousand) and income taxes –
deferred increased by ¥5,546 million ($67,634thousand).
In addition, as the tax loss carryforwards to be used will be limited to 80% of taxable income before deducting tax loss carryforwards
from the fiscal year beginning on or after April 1, 2012, deferred tax assets decreased by ¥7,392 million ($90,146thousand) and income
taxes -deferred increased by the same amount.
34
15. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥4,734 million ($57,727 thousand) and ¥4,954 million for the years ended March 31, 2012 and 2011, respectively. 16. LEASES
Obligations under non-cancellable leases accounted for as operating leases subsequent to March 31, 2012 and 2011 were as follows:
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Due within one year ¥ 524 ¥ 2 $ 6,386 Due after one year 1,981 3 24,159 Total ¥2,505 ¥ 5 $ 30,545 17. OTHER COMPREHENSIVE INCOME The components of other comprehensive income for the year ended March 31, 2012 were as follows:
Millions of yen Thousands of U.S. dollars
Net unrealized gains on available-for-sale securities:
Gain arising during the year ¥ 1,477 $ 18,013
Reclassification adjustment to net income (13) (161)
Amount before income tax effect 1,464 17,852
Income tax effect (561) (6,831)
Net unrealized gains on available-for-sale securities 903 11,021
Net deferred gains (losses) on derivatives under hedge accounting:
Loss arising during the year (21) (254)
Reclassification adjustment to net income 6 73
Amount before income tax effect (15) (181)
Income tax effect 7 81
Net deferred gains (losses) on derivatives under hedge accounting (8) (100)
Foreign currency translation adjustments:
Loss arising during the year (2,056) (25,070)
Amount before income tax effect (2,056) (25,070)
Foreign currency translation adjustments (2,056) (25,070)
Total other comprehensive loss ¥(1,161) $(14,149)
35
18. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES 1. Disclosure on Financial Instruments (1) Policy for financial instruments
With respect to fund management, cash surpluses, if any, are invested in low risk financial assets. The Company determines which way to fund through reviewing financial conditions and market circumstances and, based on these, puts them into practice. Derivatives are used, not for speculative purposes, but to avoid the market risk of fluctuation in foreign exchange rates associated with receivables and payables denominated in foreign currencies.
(2) Nature and risk of financial instruments and risk management system Receivables such as trade notes and trade accounts are exposed to customer credit risk. With regard to such risk the sales
administration department monitors major customers periodically and controls the collection dues and outstanding balances per customer in order to identify doubtful receivables resulting from deterioration of customers' financial positions at an early stage.
Furthermore trade receivables denominated in foreign currency due from overseas subsidiaries are exposed to currency risk. The Company hedges the position, net of payables, using foreign exchange forward contracts, if necessary.
Investment securities held by the Company and certain consolidated subsidiaries, which consist of equity securities held for the purpose of business or capital alliances and debt securities classified as available-for-sale securities, are exposed to the market risk due to fluctuation in market prices.
With regard to the equity securities held for the purpose of business alliance, fair values are periodically reported at the board meetings. The Company limits the debt securities included in investment securities to the highly rated bonds in accordance with the Company's fund management policy; therefore, the credit risk associated with those securities is limited.
Payables—notes payable, accounts payable trade and accrued income taxes—mostly have payment due dates within one year. A portion of the trade payables denominated in foreign currencies that is stemmed from importing of raw materials is exposed to foreign currency exchange risk, while it is hedged through using forward foreign currency contracts when necessary. Long-term debt and Convertible bonds are taken out principally for the purpose of investment and facilitation of funds. Debt with variable interest rates is exposed to interest rate fluctuation risk. The Group manages its liquidity risk by holding adequate volumes of liquid assets along with adequate financial planning made by Accounting Control & Finance Division based on reports from relevant departments.
Derivative contracts employed by the Company and certain consolidated subsidiaries are foreign exchange forward contracts for the purpose of hedging the market risk due to fluctuation in foreign exchange rates associated with the trade receivables and payables denominated in foreign currencies. The derivative transactions are executed and controlled in accordance with the internal rule and used for hedging actual transactions. For hedging instruments, hedged items, hedge method and hedge effectiveness of hedge accounting, please see Note 19 “DERIVATIVES.”
(3) Supplementary explanation about fair value of financial instruments
Where no market price information is available, management uses certain assumptions to determine the fair value of those financial instruments. Accordingly, the value of these instruments would vary if different assumptions were used. Note that contract amounts of derivatives presented in Note 19 “DERIVATIVES” do not represent volume of underlying market risk of the derivative transactions.
36
2. Fair Value of Financial Instruments Carrying amounts and fair values of financial instruments and their net differences as of March 31, 2012 and 2011 were as follows: Note that the following table does not include fair values for financial instruments for which the fair value is difficult to determine.
Millions of yen
March 31, 2012 Carrying amount Fair value Difference
Cash and cash equivalents ¥75,926 ¥75,926 ¥ - Notes and accounts receivable 50,405 Allowance for doubtful accounts (*1) (87) 50,318 50,318 - Deposit 7,539 7,539 - Marketable and investment securities 17,315 17,132 (183)
Total assets ¥151,098 ¥150,915 ¥(183)
Short-term bank loans ¥ 5,439 ¥ 5,439 ¥ - Current portion of long-term debt 2,828 2,828 - Notes and accounts payable: Trade 45,779 45,779 -
Others 29,742 29,742 - Income taxes payable 4,348 4,348 - Convertible bonds 80,585 95,666 (15,081) Long-term debt 35,220 35,220 -
Total liabilities ¥203,941 ¥219,022 ¥(15,081)
Derivative transactions (*2) Hedge accounting is not applied ¥ (2) ¥ (2) ¥ - Hedge accounting is applied (19) (19) -
Total derivative transactions ¥ (21) ¥ (21) ¥ -
Millions of yen
March 31, 2011 Carrying amount Fair value Difference
Cash and cash equivalents ¥113,008 ¥113,008 ¥ - Notes and accounts receivable 46,038 Allowance for doubtful accounts (*1) (34) 46,004 46,004 - Deposit 5,562 5,562 - Marketable and investment securities 13,348 13,169 (179)
Total assets ¥177,922 ¥177,743 ¥(179)
Short-term bank loans ¥ 6,241 ¥ 6,241 - Current portion of long-term debt 2,131 2,131 - Notes and accounts payable: Trade 37,991 37,991 -
Others 28,423 28,423 - Income taxes payable 1,953 1,953 - Convertible bonds 80,643 84,470 3,827 Long-term debt 47,354 47,234 (120)
Total liabilities ¥204,736 ¥208,443 ¥3,707
Derivative transactions (*2) Hedge accounting is not applied ¥16 ¥16 ¥ - Hedge accounting is applied (36) (36) -
Total derivative transactions ¥(20) ¥(20) ¥ -
37
Thousands of U.S. dollars
March 31, 2012 Carrying amount Fair value Difference
Cash and cash equivalents $925,928 $925,928 $ - Notes and accounts receivable 614,693 Allowance for doubtful accounts (*1) (1,057) 613,636 613,636 Deposit 91,942 91,942 - Marketable and investment securities 211,156 208,922 (2,234)
Total assets $1,842,662 $1,840,428 $(2,234)
Short-term bank loans $66,332 $66,332 $ - Current portion of long-term debt 34,488 34,488 - Notes and accounts payable: Trade 558,275 558,275 -
Others 362,708 362,708 - Income taxes payable 53,030 53,030 - Convertible bonds 982,746 1,166,661 (183,915) Long-term debt 429,502 429,502 -
Total liabilities $2,487,081 $2,670,996 $(183,915)
Derivative transactions (*2) Hedge accounting is not applied $(23) $(23) $ - Hedge accounting is applied (230) (230) -
Total derivative transactions $(253) $(253) $ - (*1) Allowance for doubtful accounts corresponding to notes and accounts receivable is deducted. (*2) Receivables and payables arising from derivative transactions are shown in net amount. (Note 1) Calculation method of the fair value of financial instruments and securities and derivative transactions Asset:
“Cash and cash equivalents” and "Notes and accounts receivable” The carrying amount is presented as the fair value since these balances are routinely settled in the short term, and as such the fair value
is considered to approximate the carrying value. “Marketable and investment securities” The fair values of equity securities are estimated based on quoted market prices for these instruments, and the fair values of debt
securities are determined based on the prices obtained from the financial institutions with which they are transacted. For further information, please see Note 3 "MARKETABLE AND INVESTMENT SECURITIES."
Liabilities:
“Short-term bank loans,” “Notes and accounts payable” and “Income taxes payable” The carrying amount is presented as the fair value since these balances are routinely settled in the short term, and as such the fair value
is considered to approximate the carrying value.
“Convertible bonds” The fair value of bonds issued by the Company is measured at the quoted market price.
“Long-term debt” The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be
applied if similar new loans were entered into. However, the fair value of long-term debt with variable rates is based on the book value, since the variable rates are renewed periodically, so the carrying amounts approximate the fair value.
38
Derivative transactions: Please see Note 19 “DERIVATIVES.”
(Note 2) Carrying amounts of financial instruments for which fair value cannot be reliably measured were as follows:
Millions of yen Thousands of
U.S. dollars
2012 2011 2012
Unlisted equity securities ¥385 ¥366 $4,693 Investment in partnerships - 15 -
Total ¥385 ¥381 $4,693 These items are not included in above “Marketable and investment securities” since no market price is available and it is extremely
difficult to identify the fair value. (Note 3) Repayment schedule of monetary receivables and securities with contractual maturities is as follows: Millions of yen
March 31, 2012
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Cash and cash equivalents ¥75,926 ¥- ¥- ¥- Notes and accounts receivable 50,405 - - - Marketable and investment securities:
Held-to-maturity debt securities: Commercial paper 400 - - - Debt securities 500 - 1,427 1,000 Total ¥127,231 ¥- ¥1,427 ¥1,000
Thousands of U.S. dollars
March 31, 2012
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Cash and cash equivalents $925,928 $- $- $- Notes and accounts receivable 614,693 - - - Marketable and investment securities:
Held-to-maturity debt securities: Commercial paper 4,878 - - - Debt securities 6,097 - 17,408 12,195 Total $1,551,596 $- $17,408 $12,195
Millions of yen
March 31, 2011
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Cash and cash equivalents ¥113,008 ¥- ¥- ¥- Notes and accounts receivable 46,038 - - - Marketable and investment securities:
Held-to-maturity debt securities: Commercial paper 400 - - - Debt securities 505 - 1,000 1,000 Total ¥159,951 ¥- ¥1,000 ¥1,000
39
19. DERIVATIVES
The Group enters into foreign exchange forward contracts and currency options to hedge foreign exchange risk associated with certain assets and liabilities denominated in foreign currencies.
Most derivative transactions are entered into to hedge foreign currency exposures incorporated with its business. Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets or liabilities. The Group does not hold or issue derivatives for trading purposes.
It is also the Group’s policy to use derivatives only for the
purpose of mitigating market risks associated with investment securities.
Because the counterparties to these derivatives are limited to major international financial institutions, the Group does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the authorization and credit limit amounts.
Contract amounts, fair values, and gains and losses on derivative transactions were as follows:
a. Derivatives to which hedge accounting is not applied: Millions of yen Thousands of U.S. dollars
2012 2012
Contract amount
Fair
value
Unrealized gain/loss
Contract amount
Fair
value
Unrealized
gain
Foreign exchange forward contracts—
(Exchange-traded) Selling USD
¥150
¥0
¥0
$1,837
$7
$7
(Exchange-traded) Buying USD
615
(2)
(2)
7,497
(30)
(30)
Total ¥765 ¥(2) ¥(2) $9,334 $(23) $(23) Millions of yen
2011
Contract amount
Fair
value
Unrealized gain/loss
Foreign exchange forward contracts—
(Over the counter transactions) Buying USD
¥354
¥15
¥15
(Over the counter transactions) Buying EURO
1,198
2
2
(Exchange-traded) Buying USD
71
0
0
(Exchange-traded) Selling USD
500
(1)
(1)
(Exchange-traded) Selling Yen
3
0
0
Total ¥2,126 ¥16 ¥16 The fair value is determined based on the prices presented from the financial institutions with which derivatives are transacted.
40
b. Derivatives to which hedge accounting is applied: At March 31, 2012 Millions of yen
Hedge accounting method Type of derivatives Major hedged item
Contract amount
Contract amount due
after one year Fair value Deffered hedging accounting method Foreign exchange
forward contracts: Selling CAD
Accounts payable ¥338 ¥ - ¥4
Deffered hedging accounting method Foreign exchange forward contracts: Buying Yen
Accounts payable 90 - (1)
Deffered hedging accounting method Currency option contracts: Buying USD
Accounts payable 263 - 4
Deffered hedging accounting method Currency option contracts: Buying EUR
Accounts payable 990 - (26)
Total ¥1,681 ¥ - ¥(19) At March 31, 2011 Millions of yen
Hedge accounting method Type of derivatives Major hedged item
Contract amount
Contract amount due
after one year Fair value Hedge items are translated using the forward contract rates
Foreign exchange forward contracts: Buying USD
Accounts payable ¥168 ¥ - ¥(13)
Deffered hedging accounting method Foreign exchange forward contracts: Buying Yen
Accounts payable 118 - 2
Deffered hedging accounting method Currency option contracts: Buying EURO
Accounts payable 365 - (15)
Deffered hedging accounting method Currency option contracts: Buying USD
Accounts payable 325 - (10)
Total ¥976 ¥ - ¥(36) At March 31, 2012 Thousands of U.S. dollars
Hedge accounting method Type of derivatives Major hedged item
Contract amount
Contract amount due
after one year Fair value Deffered hedging accounting method Foreign exchange
forward contracts: Selling CAD
Accounts payable $4,120 $ - $46
Deffered hedging accounting method Foreign exchange forward contracts: Buying Yen
Accounts payable 1,096 - (17)
Deffered hedging accounting method Currency option contracts: Buying USD
Accounts payable 3,207 - 51
Deffered hedging accounting method Currency option contracts: Buying EUR
Accounts payable 12,081 - (310)
Total $20,504 $ - $(230) The fair value is determined based on the prices presented from the financial institutions with which derivatives are transacted.
41
20. PER SHARE INFORMATION a. Basis for the computation of net asset per share at March 31, 2012 and 2011 was as follows:
Millions of yen
Thousands of
shares
Yen
U.S. dollars
At March31, 2012
Net asset
Number of shares
of common stock
Asset per share
Net asset ¥243,207 206,945
Stock acquisition rights
Minority interests
Number of treasury stock
Net asset attributable to common stock
959
29,174
-
213,074
-
-
22,698
184,247
¥1,156
$14.10
Millions of yen
Thousands of
shares
Yen
At March31, 2011
Net asset
Number of shares
of common stock
Asset per share
Net asset ¥219,633 206,945
Stock acquisition rights
Minority interests
Number of treasury stock
Net asset attributable to common stock
289
17,409
-
201,935
-
-
20,522
186,423
¥1,083
b. A reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2012 and
2011 was as follows:
Millions of yen Thousands
of shares Yen U.S. dollars
Year Ended March 31, 2012 Net income Weighted-average
shares EPS Basic EPS—Net income available to common shareholders ¥26,982 186,145 ¥144.95 $1.77 Effect of dilutive securities—Adjustment of warrants of company (58) 20,884 Diluted EPS—Net income for computation ¥26,924 207,029 ¥130.05 $1.59
Millions of yen Thousands
of shares Yen
Year Ended March 31, 2011 Net income Weighted-average
shares EPS Basic EPS—Net income available to common shareholders ¥33,560 188,422 ¥178.11 Effect of dilutive securities—Adjustment of warrants of company (17) 10,734 Diluted EPS—Net income for computation ¥33,543 199,156 ¥168.42
42
21. SUBSEQUENT EVENTS a. Appropriations of Retained Earnings
The following appropriations of retained earnings at March 31, 2012 were approved at the Board of Directors of the Company meeting held on May 31, 2012:
Millions of yen Thousands of
U.S. dollars Year-end cash dividends, ¥16 ($0.20) per share ¥2,948 $35,951 b. Establishment of a significant subsidiary The Company received approval and authorization to establish Unicharm Consumer Products (Jiangsu) Co., Ltd. in Yangzhou, Jiangsu Province, China, and established it as follows: (1) Objectives
The Company currently has factories in Shanghai and Tianjin, and as demand is expected to expand in the inland areas going forward, the Company has decided to establish Unicharm Consumer Products (Jiangsu) Co., Ltd. in Yangzhou, Jiangsu Province in order to build a stable supply system.
(2) Profile of the New Company Corporate name: Unicharm Consumer Products (Jiangsu) Co., Ltd. Address: Annex of Development Building, 108 Weiyang Road, Yangzhou, China Representative: Kennosuke Nakano Business Operations: Manufacturing and sales of disposable diapers, sanitary products and the like Paid-in Capital: $30 million Ownership: Unicharm China Co., Ltd. (100%) Date of Establishment: July 12, 2012
(3) Future Outlook The impact on consolidated financial results for the fiscal year ending March 31, 2013 is expected to be minimal.
22. RELATED PARTY TRANSACTIONS (1) Transactions of the Company with related parties for the years ended March 31, 2012 and 2011 were as follows: a. Takahara Kosan K.K.
Takahara Kosan K.K. is directly owned 20.0% share by Mr. Takahisa Takahara, President and Chief Executive Officer of the Company, 1.0% by Mr. Keiichiro Takahara, Founder &Director of the Board of the Company, 44.5% directly owned by their close relatives, and another 34.5% indirectly owned by their close relatives.
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Insurance premium ¥40 ¥40 $484 Prepaid expenses 0 0 5 b. Unitec Corporation
Unitec Corporation is directly owned 0.7% share by Mr. Takahisa Takahara, 1.5% by Mr. Keiichiro Takahara’s close relatives, and another 97.8% indirectly owned by Mr. Keiichiro Takahara’s close relatives.
Millions of yen
Thousands of U.S. dollars
2012 2011 2012 Rental expenses ¥11 ¥11 $137
43
(2) Transactions of the consolidated subsidiaries of the Company with related parties for the year ended March 31, 2012 and 2011 were as follows:
a. Takahara Kosan K.K.
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Rental expenses ¥119 ¥69 $1,451 b. Unitec Corporation
Millions of yen Thousands of
U.S. dollars 2012 2011 2012 Rental expenses ¥- ¥50 $-
44
23. BUSINESS COMBINATION For the year ended March 31, 2012 Business combination through acquisition: Diana Joint Stock Company (1) Overview of business combination
1) Name and operations of acquired company Name of acquired company: Diana Joint Stock Company (“Diana”) Operations: Manufacturing and distribution of feminine care products, baby diapers, adult diapers, tissues,
etc. 2) Main reason for business combination
To enhance our presence in the Vietnamese market by fusing Diana’s business base, i.e. its diverse experience in marketing activities and sales capabilities in Vietnam, with the Uni-Charm Group’s technological strength, i.e. its manufacturing and development capabilities and lean production system.
3) Business combination date September 26, 2011 (share acquisition date) September 30, 2011 (deemed acquisition date)
4) Legal form of business combination Acquisition of shares for cash
5) Name of company after business combination Unchanged
6) Percentage of voting rights acquired 95.0%
7) Basis of determination of acquiring company Acquisition of shares for cash by Uni-Charm (Thailand), which is a subsidiary of the Company. (2) Business term of the acquired company included in the consolidated statement of income for the year ended March 31, 2012 is from
October 1, 2011 through December 31, 2011 (3) Acquisition cost for the acquired company and breakdown thereof are as follows:
Millions of yen Thousands of
U.S. dollars Consideration for acquisition: Fair value of common stock of Diana acquired on the business combination date
¥14,563
$177,604
Costs directly incurred in the acquisition: Advisory service fees, etc. 330 4,023 Acquisition cost ¥14,893 $181,627 (4) Amount of goodwill incurred, reasons and amortization method
1) Amount of goodwill: ¥13,377 million ($163,135thousand)
2) Reason for goodwill: The extra earning potential expected to be delivered through the future development of the business.
3) Amortization method: Straight-line method over 20 years
(5) Assets acquired and liabilities assumed on the business combination date and their major breakdowns:
Millions of yen Thousands of
U.S. dollars Current assets ¥1,891 $23,060 Fixed assets 2,629 32,062 Total assets ¥4,520 $55,122 Current liabilities ¥2,374 $28,956 Long-term liabilities 550 6,701 Total liabilities ¥2,924 $35,657
45
(6) Estimated effects on the consolidated statement of income for the year ended March 31, 2012 as if the business combination were completed on April 1, 2011 and its calculation method are as follows:
Millions of yen Thousands of
U.S. dollars Net sales ¥4,438 $54,125 Operating income (104) (1,266) Income before income taxes and minority interests (51) (623) Net income (111) (1,359) Net income per share (0.60) (0.01)
Estimated effects are based on the differences between net sales and profit or loss information computed as if the business combination were completed on April 1, 2011 and net sales and profit or loss information included in the consolidated financial statements of the acquired company.
46
Business combination through acquisition: The Hartz Mountain Corporation (1) Overview of business combination
1) Name and operations of acquired company Name of acquired company: The Hartz Mountain Corporation Operations: Manufacturing and sales of pet care products
2) Main reason for business combination To quickly expand pet care business in the United States of America by fusing Hartz’s business foundation, i.e. its diverse experience in marketing activities and sales capabilities in the United States of America with the Uni-Charm Group’s technological strength, product development capabilities and lean production system in the pet care business.
3) Business combination date October 1, 2011 (deemed acquisition date) December 30, 2011 (share acquisition date)
4) Legal form of business combination Acquisition of shares for cash
5) Name of company after business combination Unchanged
6) Percentage of voting rights acquired 51.0%
7) Basis of determination of acquiring company Acquisition of shares for cash by the Company (2) Business term of the acquired company included in the consolidated statement of income for the year ended March 31, 2012 is from
October 1, 2011 through March 31, 2012. (3) Acquisition cost for the acquired company and breakdown thereof are as follows:
Millions of yen Thousands of
U.S. dollars Consideration for acquisition: Fair value of common stock of Hartz acquired on the business combination date ¥13,176 $160,691 Costs directly incurred in the acquisition: Advisory service fees, etc. 97 1,185 Acquisition cost ¥13,273 $161,876
(4) Amount of goodwill incurred, reasons and amortization method
1) Amount of goodwill: ¥3,879 million ($47,303thousand)
2) Reason for goodwill: The extra earning potential expected to be delivered through the future development of the business.
3) Amortization method: Straight-line method over 20 years
(5) Assets acquired and liabilities assumed on the business combination date and their major breakdowns:
Millions of yen Thousands of
U.S. dollars Current assets ¥10,079 $122,912 Fixed assets 20,710 252,566 Total assets ¥30,789 $375,478 Current liabilities ¥9,454 115,294 Long-term liabilities 2,914 35,530 Total liabilities ¥12,368 $150,824
In the allocation of acquisition costs, main items other than goodwill, that have been allocated to intangible fixed assets are trade mark of ¥8,125 million ($99,084 thousand) and customer-related intangible assets of ¥7,128 million ($ 86,932thousand). Amortization periods for these assets are individually set based on their useful lives.
47
(6) Estimated effects on the consolidated statement of income for the year ended March 31, 2012 as if the business combination were completed on April 1, 2011 and its calculation method are as follows:
Millions of yen Thousands of
U.S. dollars Net sales ¥11,926 $145,435 Operating income 405 4,934 Income before income taxes and minority interests 343 4,188 Net income 82 1,004 Net income per share 0.44 0.01
Estimated effects are based on the differences between net sales and profit or loss information computed as if the business combination were completed on April 1, 2011 and net sales and profit or loss information included in the consolidated financial statements of the acquired company. Please note that this note has not been audited.
48
Merger of Unicharm PetCare Corporation For the year ended March 31, 2011 (1) Overview of business combination The Company resolved at the meeting of its Board of Directors held on April 30, 2010, to merge Unicharm PetCare Corporation (“Unicharm PetCare”) through tender offer (“The Tender Offer”) into the Company. In addition, the merger was approved at the 50th Annual Shareholders’ Meeting Unicharm held on June 24, 2010. Based on the resolution, the Company successfully completed The Tender Offer in compliance with the Financial Instruments and Exchange Law for the period from May 6, 2010 to June 16, 2010. The Company, as the merging company, executed the merger of had been executed the merger agreement at a meeting of its Board of Directors held on April 30, 2010. The Company, as the surviving company, completed the merger of Unicharm PetCare, as the merged company, effective September 1, 2010.
I. Purpose of the merger The Company aimed to be more strongly positioned in the domestic market and to enhance the prospective overseas business of both companies by enhancing managerial flexibility, optimizing managerial resources including human resources of both companies, expanding the business through cooperative strategic investments, and achieving a more rapid synergy effect. In order to achieve these goals, the Company reached the conclusion that both Companies should operate their businesses as one entity.
II. Summary information of the merger
1) Schedule Effective date of the merger: September 1, 2010 Payment date of the consideration for the merger: October 29, 2010
2) Scheme The merger was executed by absorption method. Unicharm PetCare was dissolved effective September 1, 2010.
3) Consideration The Company paid in cash ¥3,825 per share (a total of ¥2,848 million for 744,651 shares) to the shareholders of Unicharm PetCare registered or recorded in the final list of shareholders (excluding both companies) just before the merger was effective. Since the merger consideration consists of cash, the Company neither issued new shares nor allocated treasury stock.
4) Description of the merged company (as of March 31, 2010) Name: Unicharm PetCare Corporation Location: 3-5-27, Mita, Minato-ku, Tokyo Representative: President & CEO Gumpei Futagami Business: Production and sales of pet food and pet toiletry products Common stock: ¥2,371 million Founded: October 6, 1979 Number of the shares issued: 29,360,000 Fiscal year end date: March 31
(2) Accounting treatment The merger was accounted for transaction under common control in accordance with ASBJ Statement No.21 “Accounting Standard for Business Combinations” issued on December 26, 2008 and ASBJ Guidance No.10 “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” issued on December 26, 2008. The goodwill derived from The Tender Offer is ¥51,675 million. The goodwill derived from the merger is ¥3,841 million.
49
24. SEGMENT INFORMATION 1. Overview of reportable segments
The Group’s reportable segments are components for which separate financial information is available, and whose operating results are reviewed regularly by the Board of Directors in order to determine allocation of management resources and assess segment performance.
The Group’s reportable segments consist of Personal care business, Pet care business, and Other business. Each business segment operates its own business with the comprehensive strategies including Japan and overseas business by segments.
Therefore, the Personal care business, the Pet care business and Other business constitute the Company’s reportable segments.
The Personal care business manufactures and sells baby care products, feminine care products, health care products and clean-and-fresh products. The Pet care business manufactures and sells pet food products and pet toiletry products. The Other businesses manufacture and sell industrial materials.
2. Methods of measurement for the amounts of sales, profit (loss), assets, and other items for each reportable segment
The accounting policies for the reportable segments are basically the same as policies described in “Summary of Significant
Accounting Policies.” Intersegment sales and transfer prices are mainly based on current market price. 3. Information about sales, profit (loss), assets, liabilities and other items is as follows. Millions of yen 2012 Reportable segment
Personal care
Pet care
Others
Total Eliminations or
Corporate
Consolidated Sales to customers ¥362,885 ¥59,558 ¥5,948 ¥428,391 ¥- ¥428,391 Intersegment sales - - 21 21 (21) -
Total sales ¥362,885 ¥59,558 ¥5,969 ¥428,412 ¥ (21) ¥428,391 Segment profit (Operating profit) ¥48,215 ¥3,173 ¥487 ¥51,875 ¥26 ¥51,901 Segment assets ¥332,205 ¥96,878 ¥25,147 ¥454,230 ¥18,268 ¥472,498 Other: Depreciation ¥11,920 ¥1,213 ¥124 ¥13,257 ¥- ¥13,257
Amortization of goodwill 833 3,066 - 3,899 - 3,899 Increase in tangible fixed assets and intangible fixed assets
42,588 26,785 126 69,499 - 69,499
Millions of yen 2011 Reportable segment
Personal care
Pet care
Others
Total Eliminations or
Corporate
Consolidated Sales to customers ¥322,994 ¥47,767 ¥6,187 ¥376,948 ¥- ¥376,948 Intersegment sales - - 22 22 (22) -
Total sales ¥322,994 ¥47,767 ¥6,209 ¥376,970 ¥ (22) ¥376,948 Segment profit (Operating profit) ¥40,130 ¥6,139 ¥269 ¥46,538 ¥23 ¥46,561 Segment assets ¥276,028 ¥66,837 ¥23,108 ¥365,973 ¥78,043 ¥444,016 Other: Depreciation ¥13,742 ¥656 ¥222 ¥14,620 ¥- ¥14,620
Amortization of goodwill 710 2,050 2,760 - 2,760 Increase in tangible fixed assets and intangible fixed assets
26,487 56,084 85 82,656 - 82,656
50
Thousands of U.S. Dollars 2012 Reportable segment
Personal care
Pet care
Others
Total Eliminations or
Corporate
Consolidated Sales to customers $4,425,432 $726,311 $72,539 $5,224,282 $- $5,224,282 Intersegment sales - - 254 254 (254) -
Total sales $4,425,432 $726,311 $72,793 $5,224,536 $ (254) $5,224,282 Segment profit (Operating profit) $587,983 $38,700 $5,944 $632,627 $309 $632,936 Segment assets $4,051,284 $1,181,442 $306,662 $5,539,388 $222,778 $5,762,166 Other: Depreciation $145,369 $14,787 $1,515 $161,671 $- $161,671
Amortization of goodwill 10,166 37,386 - 47,552 - 47,552 Increase in tangible fixed assets and intangible fixed assets
519,367 326,648 1,530 847,545 - 847,545
Notes: 1. Corporate assets included in “Eliminations or Corporate” amount to ¥55,591 million ($677,939thousand) and ¥99,136 million for the year ended
March 31, 2012 and 2011, respectively. Such assets consist of cash and cash equivalents, marketable securities and investment securities held by the Company.
2. Prior to April 1, 2011, depreciation of property, plant and equipment, except for lease assets, was computed by the declining-balance method, while the straight-line method is applied to buildings acquired after April 1, 1998 and the property, plant and equipment of foreign subsidiaries. However, effective from April 1, 2011, the straight-line method has been applied to all property, plant and equipment. The effect of this change was to increase operating profit for the year ended March 31, 2012 of “Personal care,” “Pet care” and “Other” by ¥3,261 million ($39,773thousand), ¥286 million ($3,493 thousand) and ¥64million ($780thousand), respectively.
3. On January 17, 2012, Unicharm Kokko Nonwoven Co., Ltd., which is a consolidated subsidiary of the Company, implemented the absorption-type merger with Ac-eight Corporation. As a result, “Sales,” “Profit,” “Assets” and “Other,” which were previously included in the “Other” segment, are included in “Personal care” for the fiscal year ended March 31, 2012. Accordingly, the information about sales, profit or loss, assets and liabilities and other items for the fiscal year ended March 31, 2011 are restated.
(Related Information) 1. Information on Products and Services
Information on products and services is omitted since the similar information is disclosed in above segment information.
2. Geographical Information (1) Sales
Millions of yen 2012
Japan China Others Total ¥229,083 ¥56,346 ¥142,962 ¥428,391
Millions of yen 2011
Japan China Others Total ¥217,299 ¥44,741 ¥114,908 ¥376,948
Thousands of U.S. dollars 2012
Japan China Others Total $2,793,699 $687,140 $1,743,443 $5,224,282
Note: Sales are devided to each country on areas based on the customer's location.
51
(2) Tangible fixed assets Millions of yen
2012 Japan China Others Total
¥40,766 ¥25,337 ¥50,718 ¥116,821
Millions of yen 2011
Japan China Others Total ¥40,008 ¥18,764 ¥39,618 ¥98,390
Thousands of U.S. dollars
2012 Japan China Others Total
$497,146 $308,993 $618,508 $1,424,647 3. Information about Major Customers
Information about major customers is omitted, since there is no particular customer to whom sales exceeds 10% of the total sales recorded in the consolidated statements of income.
(Information about impairment loss on fixed assets by reportable segment) There was no significant impairment loss to be reported for the years ended March 31, 2012 and 2011. (Information about amortization and unamortized balance of goodwill by reportable segment) Millions of yen 2012 Reportable segment
Personal care
Pet care
Others
Total Eliminations or
Corporate
Consolidated Amortization ¥833 ¥3,066 ¥- ¥3,899 ¥- ¥3,899 Unamortized balance at end of the year 24,274 54,631 - 78,905 - 78,905
Millions of yen 2011 Reportable segment
Personal care
Pet care
Others
Total Eliminations or
Corporate
Consolidated Amortization ¥710 ¥2,050 ¥- ¥2,760 ¥- ¥2,760 Unamortized balance at end of the year 11,556 53,466 - 65,022 - 65,022
Thousands of U.S. dollars 2012 Reportable segment
Personal care
Pet care
Others
Total Eliminations or
Corporate
Consolidated Amortization $10,166 $37,386 $- $47,552 $- $47,552 Unamortized balance at end of the year 296,026 666,233 - 962,259 - 962,259
Note: Unicharm Kokko Nonwoven Co., Ltd., which is a consolidated subsidiary of the Company, implemented the absorption-type merger with Ac-eight Corporation, which is also a consolidated subsidiary of the Company. As a result, “Goodwill” and “Amortization of goodwill” for Ac-eight Corporation, which were previously included in the “Other” segment, are included in “Personal care” for the fiscal year ended March 31, 2012. Accordingly, the information about amortization and unamortized balance of goodwill by reportable segment for the year ended March 31, 2011 are restated based on the amounts reflecting the change.
(Information about gain on negative goodwill by reportable segment) There was no applicable matter for the years ended March 31, 2012 and 2011.
52
53
54
top related