Defining Cutting Edge

Defining
Cutting Edge
Annual Report 2009
Fiscal year ended December 31, 2009
Edge
g
n
i
t
t
Cu
ducts
e
o
r
h
t
p
e
n
t
o
e
to crea
oducts
r
s
e
P
v
:
i
e
r
n. To b
r
t
o
u
s
i
t
t
p
a
a
e
u
v
F
Gro
imply
nno
s
i
o
t
y
e
o
u
g
n
k
d
t
o
e
t mus
ttingThe K
c
u
u
c
d
ve one
e
o
a
r
r
h
u
p
t
o
a
a
s
ust al
that fe
edge,”
m
g
cted
t
n
e
u
i
f
t
b
r
t
,
e
u
t
p
c
n
“
xcelle
s been
truly
e
a
h
d
On the
t
n
.
a
e
u
c
o
h
t
r
n
a
a
c
ti
d eleg
be alln
cteris
a
a
r
e
a
c
h
of the
n
c
e
l
l
w
l
e
a
e
f
i
c
c
a
x
spe
y
ht of e
rough
g
h
i
t
ated b
e
p
e
h
i
r
l
c
e
f
h
n
n
t
a
to
ve bee
a
, you c
h
e
g
t
a
a
p
h
next
ucts t
d
o
r
p
t
hi
many
ophy.
s
o
l
i
h
this p
apler.
ree St
F
e
l
p
a
t
tive S
more.
r
o
nnova
i
f
’s
t
o
r
y
Koku
e inse
h
using
t
d
f
e
o
h
c
a
3
tt
was a
page
e
e
nsert
i
S
s
i
h
T
Products
on the
Cutting Edge
Annual Report 2009
01
Products
on the
Cutting Edge
Campus
Notebook
Dotted Ruled Lines Series
This innovative notebook was
developed through research of the
notebooks used by students who
passed the entrance examinations
at the prestigious University of
Tokyo. Evenly spaced dots on the
ruled lines make it easy to space
characters and write neatly. To be
considered a “hit,” a product must
normally sell 1 million units per
year, but the Campus Notebook
Dotted Ruled Lines Series has sold
an overwhelming 20 million units,
actually growing the overall notebook market, which had been on a
downturn. The notebook captured
sixth place on magazine Nikkei
Trendy’s hit ranking.
Notebook Market (Sales in Japan)
(Excl. Exercise Notebooks)
¥57.2
billion
¥47.9
billion
2000
2005
Cutting
Edge Value
Dots on the ruled lines make it
easy to write evenly and neatly.
2009
AIROFIT
AIROFIT scissors feature proprietary Kokuyo blades structurally designed to
prevent adhesive from sticking to them. Thanks to the introduction of the
product at major convenience store chains and other measures, sales are
five times as high as standard scissors.
Cutting
Edge Value
Blades do not become sticky
even when cutting tape or
other adhesive materials.
Cutting
Edge Value
Allows users to fasten multiple sheets without using
staples, and also functions
as a two-hole punch.
Staple-Free
Stapler
The Staple-Free Stapler lets users fasten together up to 10 sheets of standard copy paper without using a staple. This represents the highest number
in the industry. By eliminating the need for metal staples, the product not
only conserves resources, but also eliminates the need to remove staples
before disposing of documents. In the first four months after its release,
orders have been roughly four times as high as sales targets.
meetima XVD
Communication System
Using XVD high-compression
technology, meetima XVD
enables transmission of highdefinition video using 1Mbps
bandwidth, viewable via a standard optical Internet connection.
The result is a videoconferencing system that enables
communication that feels
truly face-to-face.
Cutting
Edge Value
Enables transmission of highdefinition video over an Internet connection.
Cutting
Edge Value
Roller-type adhesive dispenser
cuts tape cleanly.
DOTLINER
Series
The adhesive on this dispenser
comes in individual dots instead of
a single continuous tape. This
makes it easy to end application
exactly where you want it, with no
messy edges or uneven cutting.
Over 20 million DOTLINER units
have been sold since the product
was launched in 2005, and it now
holds the No. 1 share in the adhesive tape market.
Adhesive Tape Share
13%
2005
Kokuyo
36%
2009
Cautionary Statement With Respect to Forward-looking Statements
This annual report contains statements about Kokuyo’s future business plans and strategies as well as estimates. Statements regarding the Company’s
projected business results are not based on historical facts and are subject to various risks and uncertainties. These risks and uncertainties relate to
economic conditions in Kokuyo’s business environment, particularly the state of private-sector and public-sector capital investment, competitive pricing
pressures in the marketplace, and Kokuyo’s ability to continue designing and developing products that will be accepted in markets. However, it should be
noted that elements affecting performance are not limited to the previously mentioned factors.
Profil
e
Estab
lished
in 190
exper
5, Kok
ience
uyo Co
in sta
., Ltd.
tioner
now h
y and
as ove
furnit
constr
r 100
ure pr
uction
years
oducts
of
o
f
,
office
d
e
distri
s
ign an
and st
bution
d
ore in
and st
terior
affing
s, and
The co
s
e
rvices
mpany
.
has bu
as a c
Station
ilt up
ompre
er y
its ope
hensiv
servic
ration
e
o
f
f
ice su
es pro
s
p
v
p
i
der un
lies an
wide,
p
d
and fo
aralle
concei
led wo
cused
vable
o
r
n
l
drespon
need,
school
holdin
ding t
wheth
o
, or at
g com
every
er in t
pany s
work.
he hom
collec
t
I
r
n
u
e
2
c
tive st
, at
004, K
ture, e
rength
okuyo
nablin
scope
s
s
g
h
more f
it to e
ifted t
of ope
ully a
xert t
oa
ration
nd agg
he Gro
s to C
Lookin
ressiv
up’s
hina a
g ahea
ely ex
nd els
d, Kok
friend
p
e
a
w
n
uyo is
here o
d its
ly com
versea
strivi
pany,
tives s
n
s
a
g
.
cceler
to bec
uch as
ating
ome a
elimin
v
o
Eco-X
uniqu
l
u
n
a
t
a
t
ing pr
e ecory env
mark.
o
i
At the
ducts
ronme
vibran
t
n
s
h
tal ini
ame ti
at bea
t and
tiame, it
r the p
sustai
an inn
s
r
e
o
n
e
p
a
k
r
b
s
i
etary
le com
to be a
ovativ
pany w
e spir
uniqu
i
t
i
t
and a
h
e busi
ness a
pproa
ch.
Furnitu
re
Kokuy
Kokuyo o’s Origi
’s
n
produc original Eco al Eco-X
-X
ts in its
M
genera “non-eco” ma ark
l catalo
g with th rk. Kokuyo in
tend
e Eco-X
mark a s to identify
nd pha
a
se them ll non-environ
m
out by
the end entally friend
ly
of 201
0.
02
Annual Report 2009
Contents Stakeholders
e to
04 Messag
l Highlights
05 Financia
ons
of Operati
10 Review
Initiatives
uyo’s CSR
k
o
K
3
1
ance
te Govern
16 Corpora
e Kuroda
f Directors
Shonosuk
s
tu
ri
e
17 Board o
m
ir man E
ory of Cha
18 In Mem
/12
r AR 2009
r Summary
Analysis fo
d
n
a
20 Six-yea
n
io
s
cus
ment’s Dis
21 Manage
heets
Balance S
solidated
n
o
C
erations
8
2
ents of Op
m
te
ets
ta
S
d
date
in Net Ass
f Changes
30 Consoli
o
ts
n
e
m
te
dated Sta
s
Cash Flow
31 Consoli
ments of
te
ta
S
d
te
da
tements
32 Consoli
ancial Sta
in
F
d
te
a
d
Consoli
33 Notes to
port
ditors’ Re
endent Au
p
e
d
In
52
te Data
55 Corpora
Universal Design
Ruler
This ruler’s 5 millimeter griding and wave-shaped marking make
measuring as easy as looking. This is just one of many comfortable, easy-to-use products that Kokuyo offers customers.
R&D
Kokuyo conducts technological development and research into
advanced working styles in order to provide valuable products
and services that are in tune with changing times and meet
customer needs.
Environmental Efforts
Furniture made from thinned wood
This furniture is made from thinned wood culled from
Kokuyo’s Yui no Mori corporate forest. Kokuyo
focuses on eco-conscious business activities,
including making all our products eco-friendly.
Annual Report 2009
03
Message to Stakeholders
Amid the current severe environment, Kokuyo is
working to change the very flow of its business, from a
manufacturer-initiated model to a customer-initiated
business. At the same time, we are working to develop
products that feature cutting-edge innovation to
transform our management structure so that we can
consistently achieve higher revenues and profits.
Akihiro Kuroda
President
Reflections on
Fiscal 2009
Fiscal 2009 (the fiscal year ended December 31, 2009) came and went in the midst of a
recession, with no signs of recovery in sight for the Japanese economy, which remained sluggish as it was pounded by the waves of the worldwide recession. Although the first true
change in Japan’s political administration since the end of World War Two brought a sense of
hope for reform, the future remained unclear.
In the stationery industry, past recessions have seen many corporate customers quickly
target office products and other consumables for economizing measures in order to raise
cost-consciousness among employees. There is no question that this year we faced difficult
circumstances, but I believe the drop in demand was not so great as could have been
expected. Office furniture, in contrast, faced extremely harsh conditions. This was because
much of the demand that was being generated by the financial industry evaporated after the
Lehman Shock, while many other corporate clients exercised thorough restraint in capital
investments. Other reasons for the dropoff included price competition spurred by the ongoing
imbalance between supply and demand in a deflation economy.
As a result, net sales were down 18.2% to ¥266.7 billion. Although we reduced SG&A
expenses by ¥13.3 billion through a rigorous review of costs, including cutting back on partner employees, reducing compensation and wages, and cutting back on overtime, these measures were insufficient to cover the decline in net sales, resulting in operating income of ¥0.5
billion, 89.2% lower than the previous fiscal year. Net income was ¥0.5 billion, however, bringing us back into the black for the first time in three years.
04
Annual Report 2009
Strategies for
Fiscal 2010
Overall Strategy
We anticipate that market conditions in fiscal 2010 will prove just as difficult as in fiscal
2009. In order to pull through in this climate, we will implement a wide variety of measures
and proceed with reforms to strengthen our management structure so that we can ensure
consistent growth in both revenues and profits.
First of all, we will change the very flow of business from a manufacturer-initiated model
to a customer-initiated business. This will include adjustments to our organization, ways of
working, and methods of evaluating employees. In
Market Development
addition, we will work to ensure our business types
Securing profits
unaffected by
economic cycles
(Billions of yen)
and formats are those for which sales are not subject
Portion of Sales Not Subject to
Economic Cycles
Education, medicine,
government offices,
high-value-added products
to the fluctuations of the economy. Although privatesector office demand remains low, industries such as
rail, electric power and food products are performing
¥271.1
billion
¥270.0
billion
30.0
70.0
Portion of Sales Subject to
Economic Cycles
steadily, and the market for medical, education, and
public-sector clients is essentially on a par with the
previous year. We intend to boost our sales to these
sectors and shift to a structure that will be able to
2003
withstand even a second or third Lehman Shock.
2010
2012
Financial Highlights
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Fiscal years ended December 31, 2008 and 2009
Thousands of
U.S. dollars
Millions of yen
For the year:
Net sales
Operating income
Net income (loss)
Return on equity (%)
At year-end:
Total assets
Net assets
2009
2008
2009
¥266,726
579
595
0.4
¥326,120
5,354
(11,991)
(7.1)
$2,896,048
6,287
6,460
252,053
158,074
266,419
159,820
2,736,732
1,716,330
Yen
U.S. dollars
Per share data:
Basic net income (loss) per share
Cash dividends per share applicable to the year
¥
5.03
¥ (101.36)
15.00
15.00
$
0.05
0.16
Note: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥92.10 = U.S.$1.00, the approximate exchange rate
prevailing on December 31, 2009.
Annual Report 2009
05
Meanwhile, we have no choice but to engage in price competition. Demand is down, but
there has been no drop on the supply side, and on top of that we are said to be in a deflationary cycle. By bringing to market growth products, including products that feature cutting-edge
innovation, we can remove ourselves from unproductive price-slashing. Last year several such
cutting-edge products, including notebooks and scissors, were major hits, and we are confident that if we can provide a clear added value to our products, customers will support us and
buy them.
Over the past five to six years, we have conducted investments in overseas businesses
and M&As. Unfortunately, we have not achieved a return on our investment in some of these
projects. We will work to generate a return at an early date, and make decisions as soon as
possible on withdrawing from projects where we cannot anticipate recovering our investment.
Furniture Business
Demand in the Japanese furniture business has dropped off by 30%, and we believe that we
must move forward on the assumption that demand will not recover to its previous level. Going
forward, the number of people working will decrease and office vacancy rates will rise, and in
tandem companies will come to expect proportionately greater output from each employee. As
these expectations rise, so will investment per employee, including investment in office environments, facilities, and equipment. We see this shift as an opportunity for Kokuyo.
In order to capitalize on this opportunity, we will change our ways of doing things, the
mechanisms of our business, production formats at factories, sales methods—everything. For
example, up to now with our ordering system, when customers placed an order we would set
aside inventory, and accept the order because we had inventory. In future, we will build a
system that enables us to respond more quickly and flexibly to customer needs. If we have
information from the sales divisions as to when orders are likely to come in, we can start
production while we wait, and based on
Building a Customer-Oriented Value Chain
the time required let customers know how
and when we need to receive an order so
In the Past
In the Future
Customer
as to be able to meet the delivery dead-
Customer
line. By adjusting production to meet this
schedule, we can turn what used to be a
Estimated
production
matter of months into a matter or weeks.
Order
Despite the current severe business conditions, we are investing ¥3.7 billion in
Inventory
Inventory
available
Order
revamping our core system to make it
more efficient.
Inventory
not available
Production
Delivery
We will also change the way we sell
Production
Delivery
things. In the past, we have distributed
furniture through a number of different
channels, including dealers, direct sales,
06
Annual Report 2009
and public-sector tenders. Going forward, we will integrate these channels. We will
target customers who are not susceptible to economic fluctuations, and ensure
that our distribution system is aimed at these customers. The point is that even if
our sales force learns about higher quality expectations and needs of customers, if
the manufacturers that transform these expectations and needs into products do
not change, the added value will not be apparent. We will move quickly to integrate
sales and manufacturing so that we can steadily capture customer needs with a
system that provides cutting-edge value across the business.
Stationery Business
In order for Kokuyo to grow, we must increase sales of growth products
DOTLINER
(new products and high-value-added products) and boost our profit
margins. We will therefore concentrate our product development on
items and materials that feature cutting-edge value. To truly stand out,
over
20 million sold
a product must not simply be all-around excellent, but must also have
one special characteristic that has been per fected. One recent example of such cutting-edge value is the DOTLINER, which has sold over
20 million units since we launched it in 2005. Then there is the
Campus Notebook Dotted Ruled Lines Series—to be considered a
“hit” in this industry, a product must normally sell 1 million units per
year, but the Campus Notebook Dotted Ruled Lines Series had sales
of over 20 million units in a single year. Even in this environment, sales of these products
continue to grow.
Campus Notebook
Dotted Ruled Lines Series
20
over
million
sold in fiscal 2009
Last year, as often as time permitted, I participated in stationery
product development meetings. I went to these meetings to debate the
meaning of cutting-edge value. During a meeting, I might say, “That product has no cutting-edge value,” and employees would tell me, “No, Mr.
Kuroda, it does! It has this function too, and together with the main
function it provides added value.” My response was, “There are just too
many functions here, and none of them stands out. We can get rid of
the whole thing. Make one of the functions truly cutting-edge, and then
I’ll approve.” We went through this over and over, and now all employees
are starting to truly understand the concept and apply it to their work.
Moving forward, Kokuyo will not be making products that are merely all-around slightly
better. Instead, for each product we will design one truly outstanding feature that only Kokuyo
can offer. For adhesive tape, the selling point will be that there is no residue. Our scissor
blades will be able to cut adhesives without getting stuck. In this way, our product development will focus on a single cutting-edge feature for each product.
Annual Report 2009
07
We will also strengthen the business-to-consumer field. Last year we
acquired the Japanese sales rights for The Conran Shop products. Our
goal is to cultivate development capabilities within Kokuyo that will allow
us to create the kind of business-to-consumer products that are featured
in Conran Shop stores. We are eager to learn about the types of cuttingedge value that The Conran Shop customers appreciate, and to use the
know-how of The Conran Shop to add cutting-edge value to our own products.
Overseas Business Development
In overseas business development, we will focus our efforts on stationery
sales in the Asian region. First, we will sell notebooks produced at our Vietnam factory in both China and Vietnam. We will be able to be competitive with other products
being sold locally in terms of price. Last year we sold over 400,000 units in the region, and
this year we are targeting sales of 6 million units in Vietnam and 4 million units in China.
Three years from now, we aim to have a 15% market share in Vietnam and a 20% share in
China. Vietnamese students are particularly diligent in their studies, purchasing twice as many
notebooks as Japanese students, and our campaigns at local universities have received quite
a response, with large numbers of people attending. Going forward, we will move into India
and other areas of the Asian region, and later on to other BRIC countries, and Africa.
In China we are developing the office space construction and office supply mail order
businesses, but we have not yet reached our targets. Our businesses have been directed
mainly at Japanese companies operating in China, but with the recession the number of companies moving into China has declined precipitously,
Notebook Production
at Overseas Bases
and the office space construction business is struggling severely. The Easy buy office supply mail order
business has not been able to raise sales or profit
substantially, even as the Chinese economy becomes
the first world economy to recover. This has been partly
due to a number of reasons not related to economic
Vietnam
conditions. We are aiming to achieve profitability as
quickly as possible in both these businesses, by turning attention in the office space construction business
Plans for Expanding
Notebook Production
to local Chinese corporations, and by revising the business model with an eye to potentially withdrawing from
the office supply mail order business within the year.
Russia
China
Africa
India
The Environment
Vietnam
Kokuyo strives to be an environmental innovator, applySouth America
ing original ideas and ingenuity in a variety of initiatives
to address environmental issues.
08
Annual Report 2009
Review of Operations
t
Stationery Segmen
ations included
exceed customer expect
ook Dotted
teb
No
the popular Campus
annual
had
ich
Ruled Lines Series, wh
eloped
dev
ts,
uni
sales of over 20 million
ion, down
bill
3.7
¥15
to
used by
ted
oks
oun
notebo
Net sales am
through research of the
ng income
rati
ope
r,
eve
How
r.
ce
the entran examina9.0% year on yea
students who passed
year
2%
10.
up
,
ion
bill
9
¥4.
s University of Tokyo; the
was recorded at
tions at the prestigiou
a
ndout-Keeper Version,
on year.
Campus Notebook Ha
ook
teb
ssic Campus No
larger version of the cla
ns
io
it
nd
Co
t
to insert standardke
ugh
ar
M
with pages large eno
e
fac
to
es
continu
in class without needThe stationery market
sized handouts received
it
lim
ies
pan
com
ons as
T scissors, an
severe business conditi
ing to trim them; AIROFI
amid the ecoes
abl
sum
con
of
se
sign scissor with blades
their purcha
ingenious Universal De
n intensifies in
itio
pet
com
and
ion
ky even when cutting
nomic recess
that do not become stic
ss.
ine
bus
r
rde
il-o
ma
materials; the Staplethe office supply
tape or other adhesive
ws users to fasten
Free Stapler, which allo
t
en
pm
lo
t using staples; and the
Product Deve
multiple sheets withou
and
dem
te
ula
stim
to
ght
which provides all the
The Kokuyo Group sou
“Will & Testament kit,”
nch
lau
the
h
wit
re
sha
producing a last will
and expand its market
necessary stationery for
products. These
of a variety of original
ing paper, an envelope,
and testament, includ
ts that
high-value-added produc
and an instruction guide.
al
Results for the Fisc ,
31
r
be
Period to Decem
2009
kit
“Will & Testament” instruction
s an illustrated
This popular kit include
drafting
the points necessary for
guide that explains all
nt.
ame
test
a last will and
Order
Office Supply Mail
Business
ss,
il order busine
In the office supply ma
ed solid sales, striving
Kaunet Co., Ltd. achiev
reducing prices and
to stimulate demand by
original products.
adding to the lineup of
lining just 0.4% to
Net sales were firm, dec
¥45.1 billion.
Campus Notebook
rsion
Handout-Keeper Ve
students to
notebook enable
The large pages of this
books
in class into their note
insert handouts received
.
them
trim
to
without needing
Share of Total Net Sales
Net Sales
Operating Income
(Millions of yen)
(Millions of yen)
(09/12)
168,903
153,656
4,423
4,872
127,168
57.6%
1,733
07/12
08/12
09/12
07/12
08/12
09/12
Note: Kokuyo changed its fiscal year-end from March 31 to December 31, effective from fiscal 2008. For the fiscal year ended December
31, 2007, the accounting term for the Company was 9 months.
10
Annual Report 2009
Share of Total Net Sales
Net Sales
Operating Income (Loss)
(Millions of yen)
(Millions of yen)
(09/12)
1,506
138,216
107,945
99,179
–231
37.2%
–3,613
07/12
08/12
09/12
07/12
08/12
09/12
Note: Kokuyo changed its fiscal year-end from March 31 to December 31, effective from fiscal 2008. For the fiscal year ended December 31,
2007, the accounting term for the Company was 9 months.
Furniture Segment
Results for the Fisc
al
Period to December
31,
2009
Net sales were down 28
.2% to ¥99.2 billion
for an operating loss of
¥3.6 billion.
Market Conditions
Demand fell sharply as
conditions remained
result of heavy restraint
in corporate capital exp
enditure due to the
economic recession.
extremely severe as a
LiveOffice
Following the renovation
Shinagawa, founded in
of the Eco LiveOffice
2008, the Kokuyo
Group re-inaugurated the
LiveOffice in
Kasumigaseki, a next-ge
neration model office
that promotes corporate
innovations and
changing work styles,
as Resonance Field 3.0
.
It also opened the Kyu
shu LiveOffice. The new
LiveOffice proposes sol
utions for reducing
environmental burden,
boosting worker produc
tivity, and reducing off
ice expenses. Innovations include initiatives
to reduce CO2
emissions, as well as
the Office Darts II
system, which enables
employees to choose
where to sit efficiently
based on the type and
quantity of work they hav
e.
Kokuyo launched new
products designed
to enhance worker and
organizational creativity
and suppor t reduction
s in fixed-costs, such as
office space consolida
tion. The new offerings
included the Worklink
work station, which
reduces the per-worke
r desk footprint by as
much as 40% compared
to traditional rectangular desks, and the ACT
INA swivel desk chair,
with a built-in tray und
er the seat for documents and small items
that makes it easy to
implement a free-seatin
g office layout.
ACTINA
A swivel desk chair with
built-in storage, ACTINA
has
a wide range of uses,
from free-seating offic
e
layouts to conference
rooms.
Worklink
This innovative office furn
iture stimulates commun
ication by
enabling efficient offic
e layouts while also redu
cing the per-worker
desk footprint.
Annual Report 2009
11
Store Fixtures
Segment
Results for the
Period to DecemFiscal
ber 31,
2009
Service Enhan
cemen
Net sales were do
wn 26.9% to ¥13.
9 billion
for an operating
loss of ¥0.7 billio
n.
Market Condit
ions
As a result of res
traint in capital inv
estment
in the retail secto
r and store cons
olidations
and closings, bo
th due to the econ
omic
recession, the ma
rket contracted an
d demand
was stagnant.
t
The Company str
engthened its en
vironmental
solutions by introd
ucing product sh
elves
using newly deve
loped LED lighting
that can
reduce ener gy co
nsumption by 50
% over
conventional lighti
ng, and also worke
d to
enhance ser vice
of ferings that do
no
t
rely on
customers’ open
ing new store loc
ations,
including proposin
g sales promotio
n activities
to vitalize retail sto
res.
Concentration
and
Selection
The Group worked
to improve profita
bility, including by withdrawing
from low-margin pro
jects.
LED Lighting
System
This lighting system
successfully con
ser ves energy wh
illumination for pro
ile providing bright
duct displays.
Share of Total Net Sales
Net Sales
Operating Income (Loss)
(Millions of yen)
(Millions of yen)
(09/12)
5.2%
17,711
19,001
13,891
–100
–575
–680
07/12
08/12
09/12
07/12
08/12
09/12
Note: Kokuyo changed its fiscal year-end from March 31 to December 31, effective from fiscal 2008. For the fiscal year ended December 31,
2007, the accounting term for the Company was 9 months.
12
Annual Report 2009
Kokuyo’s CSR Initiatives
For the Kokuyo Group, corporate social responsibility
(CSR) means being accountable to and trusted by society.
Kokuyo aims to embrace its responsibility to society and
retain public trust by contributing to the realization of a
sustainable society through its business activities and
social contribution activities.
Corporate Philosophy
“Contributing to Society Through
the Provision of Superior Products”
Since its founding, the Kokuyo Group has aspired to
support social and economic development through the
Management Credo
“Serving all customer needs”
Corporate Philosophy
“Contributing to society through
the provision of superior products”
provision of products that people use on a daily basis.
In the years to come our aim will be the same: to provide products that delight millions of customers
Kokuyo Group CSR Charter
through the uncompromising pursuit of ease of use
and ready availability of products that people use without a second thought.
Kokuyo Corporate Ethics Code
Socially Responsible
Management
Basic Policy on CSR
The standard that informs and imbues the Kokuyo
development of society and the Group, and conducts
Group’s CSR activities is the corporate philosophy of
its activities based on these guidelines. The Company
“contributing to society through the provision of supe-
has also established the Kokuyo Corporate Ethics
rior products.” This philosophy derives from the Kokuyo
Code, a guideline for day-to-day actions of employees
Management Credo, which codifies the concept of
who interact with stakeholders.
“Serving all customer needs” and the attitude of self-
Since 2008, Kokuyo has designated the two
reliance advocated by Kokuyo founder Zentaro Kuroda.
themes of preventing global warming and promoting
In keeping with this standard, in 2004 Kokuyo
eco-friendly products as priority measures in its CSR
established the Kokuyo Group CSR Charter with the
activities. The Company is working to combine busi-
aim of building and improving relationships with our
ness strategies with CSR activities by, for example,
various stakeholders as a good corporate citizen. In
launching the Eco-X mark, which identifies all non-
the Charter, Kokuyo sets forth specific action guide-
environmentally friendly products, and striving to
lines for each of five areas of focus (customers, local
eliminate such products from its lineup. In this
communities, environmental protection, business
manner, Kokuyo is stepping up efforts to fulfill its
activities, and human rights) to achieve the sustained
social responsibilities.
Annual Report 2009
13
Environment
burdensome air conditioning, reducing power at night
and reducing the number of elevators in operation.
Global Warming Prevention
Measures
*A visualization system calculates the volume of CO2 emissions in a plant
or office based on the actual energy consumption.
In fiscal 2009, the KOKUYO Group achieved a
Eco LiveOffice
Shinagawa
4,746-ton reduction in the volume of CO2 emissions
compared to the previous year, for a total of 23,742
tons. We estimate that a 1,462-ton reduction resulted
from operational improvements, a 245-ton reduction
from facilities improvements, and a 3,039-ton reduction from decreased production volume and merging
and streamlining of facilities.
Last year, Kokuyo reduced emissions at the
Shibayama Plant, which has installed a visualization
system*, by 222 tons merely through operational
improvements such as reducing the standby energy at
night and on holidays, and introducing operating-time
rules for equipment.
Office emissions were down 679 tons year on
Resonance Field 3.0.
year. In addition, we continued to promote such programs as Cool Biz and No Overtime Day, and the two
environmentally friendly offices, Eco LiveOffice
Providing Eco-Products
Shinagawa and Resonance Field 3.0.
Two years have passed since Kokuyo started identify-
At the Shinagawa office, we kept tabs on energy
ing products that are not environmentally friendly at
consumption using a visualization system, and reduced
any stage of the lifecycle with the Eco-X mark in its
emissions by 132 tons through such measures as
general catalog, and then phasing them out. In the
reviewing the operating times of environmentally
year under review, the percentage of furniture products
displaying the mark achieved its target. However, the
percentage of stationery products did not meet the
CO2 Emissions
(Tons of CO2)
target despite ongoing specification changes for each
31,220
product, including the proactive use of recyclable
28,780 28,337 29,311 28,488
materials and compact packaging. This was because
23,742
the number of products identified to be phased out
was greater than expected and the planned measures
were not executed.
Although we failed to achieve this target in fiscal
2009, as initially planned we will work to ensure that
90
05
06
07
08
09
Uses CO2 Emissions Index from Version 1.5 of the Corporate Greenhouse
Gas Emissions Volume Calculation Guidelines (Ministry of the Environment)
14
Annual Report 2009
there are no Eco-X marked products in Kokuyo’s 2011
catalogs and that all products listed in these catalogs
are environmentally friendly.
Contributions to Society
Status of Inclusion in SRI Indices
Investors are growing increasingly interested in
In order to remain a good corporate citizen that enjoys
socially responsible investment (SRI), which involves
the trust of local communities, the Kokuyo Group con-
investing in companies that are actively engaged in
ducts a wide range of social contribution activities
measures to protect the environment, offer
based on its corporate philosophy of “Contributing to
expanded employment opportunities and otherwise
society by providing superior products.” The Group’s
contribute to society. In recognition of its engage-
operating companies carry out their independent activ-
ment in these areas, the Kokuyo Group has been
ities. In fiscal 2009, the Group was involved in envi-
selected for inclusion in the prestigious Ethibel Sus-
ronmental activities together with local communities
tainability Indexes run by Ethibel, one of the top SRI
and in utilizing product characteristics to conduct a
consultants in Europe and North America. The
total of 267 social contribution activities, including
Kokuyo Group has also earned inclusion in other
special classes featuring visiting lecturers, as well as
highly respected SRI indices including FTSE4Good,
plant and showroom tours.
managed and calculated by UK-based FTSE
International Ltd.
Collaborating with special-needs
schools to conduct summer internships
for disabled persons.
Ethibel Sustainability Indexes
(Sweden)
FTSE4Good
(UK)
Contributing to environmental education at junior high schools at EcoProducts 2008.
Annual Report 2009
15
Corporate Governance
Internal Control System
The Kokuyo Group decided the basic policy for its inter-
The Kokuyo Group places great emphasis on corpo-
nal control system at a meeting of the Board of Direc-
rate governance based on the core values of transpar-
tors held in May 2006.
This basic policy establishes a framework for the
ency, speed, and fairness, and is reinforcing working
systems to uphold these values. While clarifying oper-
Group’s internal control system, including document-
ating authority and responsibilities under the holding
handling rules governing the storing and safekeeping of
company system, we are also making efforts to
information related to the duties executed by directors,
strengthen overall supervisory functions and enhance
and the establishment of ethical standards based on
corporate governance. The Group’s management
the Kokuyo Corporate Ethics Code.
Furthermore, with the enforcement of the Financial
framework, basic structure, and essential points on
Group operations under the new system are stipu-
Instruments and Exchange Act, in January 2009
lated in the Kokuyo Group Governance Principles,
Kokuyo established a cross-organization J-SOX Commit-
established in line with the introduction of a holding
tee with the goal of actively maintaining and strength-
company system in October 2004.
ening internal controls with a focus on ensuring the
reliability of financial reporting.
In addition, we have an auditing system in place,
and each of the six members of the Board of Directors
Compliance and Risk
Management
(no outside directors) is appointed to a term of only
one year to allow flexible response to changes in the
business environment. There are four statutory auditors (including two external auditors) and two employ-
The Kokuyo Group has established a Risk and Compli-
ees are engaged as full-time auditing staff. Four
ance Committee to lead compliance promotion efforts.
lawyers on an advisory contract provide legal advice as
In April 2008, the positioning of the Risk and Compli-
the need arises. We are also strengthening our system
ance Committee changed when the President of the
of internal auditing through improved cooperation
Kokuyo Group took the helm of the committee and the
between the holding company and Group operating
Group worked to speed up responses to crisis issues
companies, and sharing issues in auditing.
and enhance preventive measures. In addition, Kokuyo
cooperates with the Risk and Compliance
Kokuyo Group Governance System
Committee at each operating company to
prevent risks from materializing and to
General Meeting of Shareholders
Appointment and dismissal
Board of Directors
Coordination
Report
operating company visualizes the current
Report
Appointment, dismissal
and supervision
risk situation using a “risk map,” identifies
key risks to be managed on an annual
President
J-Sox Committee
Risk and Compliance Committee
Group Management
Conference
Inquiry
Report
Coordination
Accounting
audit
Diversity Promotion Committee
Central Workplace Safety
and Hygiene Committee
Internal auditing
Control
Group operating companies
Annual Report 2009
Instructions
Environmental Committee
Response
Head office divisions
(for business execution)
16
Board of Auditors
Auditing
respond quickly in such an event. Each
Appointment and dismissal
Management Audit
Division
Coordination
Internal auditing
Internal auditing system
Independent auditor
Holding company (Group parent company)
Appointment and dismissal
basis, and works to reduce risk.
In fiscal 2009, Kokuyo responded to
the risk of improper environmental labeling,
including that of the Kokuyo Group’s own
Eco-X mark, and the Group worked to eliminate the risk. Also, Kokuyo established the
Disaster Response Division and the NewStrain Influenza Response Division.
From fiscal 2008 to 2009, a number of cases of
Kokuyo also holds regular training sessions to raise
misconduct were discovered in the Kokuyo Group.
awareness about compliance and ensure continued
These included improper acts committed by some
adherence to laws and regulations. In fiscal 2009, Kokuyo
employees, a violation of the Antimonopoly Law with
conducted mandatory compliance training at each level of
respect to tendering and audits from the Japan Fair
the company, including introductory training for new
Trade Commission in relation to tendering. Kokuyo
employees and training for new managers. In addition to
recognizes these facts as a serious management
level-based training, Kokuyo implemented initiatives to
issue, and will work to eradicate all improper acts and
raise awareness about risk by holding compliance discus-
implement thorough compliance. To do this, in fiscal
sion training using simulated examples at each operating
2009 a team of outside experts has been conducting
company and to invigorate workplace communication.
a fact-finding compliance investigation of all Group
Each employee of the Kokuyo Group is making every
employees, with the aim of changing the Kokuyo
effort to regain the public’s trust by sincerely and thor-
corporate culture at its roots.
oughly carrying out compliance initiatives.
For more details concerning Kokuyo’s CSR activities, please see: http://www.kokuyo.co.jp/english/csr/index.html
Improper Procurement of Quality Performance Assessment for Free Access Floor Materials
On March 12, 2010, it was announced that the quality perfor-
The Kokuyo Group has seriously reflected on this miscon-
mance assessment for some free access floor (generally
duct and is taking steps to ensure that it will not reoccur. We
called “OA floor”) building materials had been improperly
have strictly reprimanded the personnel involved and are
procured from the Public Buildings Association, and these
preparing to reform and rebuild our organization such that a
materials had been sold for 8 1/4 years as conforming to the
rigorous system will be in place to prevent any reoccurrence.
Public Buildings Association or Japan Access Floor
We sincerely apologize to our customers, shareholders and
Association (JAFA) standards.
other concerned parties for the trouble we have caused.
This misconduct came to light when a team of outside
experts conducted a fact-finding compliance investigation of
all Kokuyo Group employees.
* The manufacture and sale of these materials was terminated completely in
July 2008. Since August 2008, Kokuyo Furniture Co., Ltd. has been only
selling products that conform both to the quality performance assessment
of the Public Buildings Association and to JAFA standards. Therefore, there
are currently no problems concerning these products. As regards the
non-conforming products already sold, recent tests have confirmed that
they pose no risk of causing serious accidents and are safe.
Board of Directors
(As of March 30, 2010)
Directors
Akihiro Kuroda
Yasuhiro Kuroda
Toshifumi Okubo
Takuya Morikawa
Yoshiaki Yoshimoto
Hidekuni Kuroda
President
Vice-President
Executive Director
Director
Director
Director
Statutory Auditors
Outside Auditors
Akihiro Kondo
Yoichi Kotani
Yoshio Terada
Naoshige Nakada
Annual Report 2009
17
In Memory of Chairman Emeritus
Shonosuke Kuroda
On December 23, 2009, we bade farewell to Chairman Emeritus Shonosuke Kuroda.
Shonosuke Kuroda maintained the account ledger, invoice and writing paper business pioneered by Kokuyo
founder Zentaro Kuroda, and launched the office furniture business, establishing Kokuyo’s current position as a
general office supplies manufacturer.
During his tenure, the manufacture of paper products shifted from hand-production to automated machine
manufacturing. Shonosuke applied these same methods to office furniture, and established automated production systems for metal products. He also built up storage facilities and a logistics information network to enable
the Company to cope with the intense demand at the end of each fiscal year. Through these efforts, he successfully created a system by which Kokuyo can simultaneously deliver over 100,000 items anytime, anywhere.
In recognition of his extensive work in supporting Japan’s high economic growth through office supplies, he
was appointed president of Kokuyo in 1960. At that time, the Company’ sales amounted to ¥4.5 billion; by the
time he was appointed Chairman in 1985, that figure had grown to ¥163.9 billion.
For 37 years, he served as Director of the All-Japan Paper Manufacturers’ Association, and played a key role
in numerous other industry organizations, including the Osaka Chamber of Commerce and Industry, the Kansai
Economic Federation, and the Osaka Paper Manufacturers’ Association. Throughout his career, he worked hard
for the development of industry and the local Kansai region.
In the last years of his life, he continued to pass on his management philosophy to the next generation,
reminding Kokuyo Group employees whenever he spoke with them of the founding spirit of Kokuyo: “Our work
may be troublesome and complicated, but through it we bring unique value to the world.”
18
Annual Report 2009
The Life of Shonosuke Kuroda
Born
Died
June 25, 1916
December 23, 2009 (age 94)
Education
March
January
1940 Graduated from Keio Secondary School.
1960
Accomplishments at Kokuyo
February 1942 Manchuria Kokuyo Printing and Paper
Manufacturing Company established,
Shonosuke Kuroda appointed
President.
April
1949 Appointed Vice President of Kuroda
Kokkodo Co., Ltd.
August
1961
October
1956 Visited Europe to research production
equipment.
January
1960 Appointed President and Representative Director of Kuroda Kokkodo.
May
1960 Began sales of filing cabinets as the
basis for the office furniture business.
June
1961 Company name changed to Kokuyo
Co., Ltd. Shonosuke Kuroda remained
President and Representative Director
of the renamed company.
August
1961 Construction of the Yao Plant, the
world’s largest paper manufacturing
plant, completed.
November 1969 Completion of current head office
buildings in Osaka’s Higashinari Ward.
March
1971 Kokuyo listed on the second section of
both the Tokyo and Osaka stock
exchanges.
February 1972 Kokuyo listed on the first section of both
the Tokyo and Osaka stock exchanges.
August
1974 Sales and inventory management
system for wholesalers began
operation.
November 1979 New company building in Tokyo
completed.
November
1969
December 1982 Large showroom opened in Tokyo.
March
December 1985 Appointed Chairman of Kokuyo
Co., Ltd.
1971
June
1986 Ordering via leased line begins for
retailers.
March
2009 Named Chairman Emeritus of Kokuyo
Co., Ltd.
Annual Report 2009
19
Six-year Summary
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
The years ended March 31, 2005, 2006 and 2007; and the years ended December 31, 2007, 2008 and 2009
Thousands of
U.S. dollars
Millions of yen
2009.12
2008.12
2007.12
2007.3
2006.3
2005.3
2009.12
¥266,726
¥326,120
¥252,824
¥339,559
¥303,959
¥283,519
$2,896,048
180,260
221,574
175,512
228,959
202,879
187,008
1,957,220
932,541
For the year:
Net sales
Cost of sales
Selling, general and
administrative expenses
85,887
99,192
75,910
99,237
86,975
84,352
Operating income
579
5,354
1,402
11,363
14,105
12,159
6,287
Net income (loss)
595
(11,991)
(5,326)
5,622
4,145
5,207
6,460
Capital expenditure
3,479
4,988
7,733
4,999
6,042
6,431
37,774
Depreciation and amortization
6,334
6,488
4,430
6,057
6,082
6,220
68,773
Net cash and cash equivalents provided
by operating activities
13,737
16,153
3,286
7,936
11,488
10,168
149,153
Net cash and cash equivalents used
in (provided by) investing activities
(1,930)
(1,012)
(11,333)
2,389
(17,217)
(20,778)
(20,955)
Net cash and cash equivalents provided
by (used in) financing activities
(4,746)
(12,343)
7,349
(5,272)
2,059
7,075
(51,531)
At year-end:
Total assets
252,053
266,419
301,187
320,033
314,573
291,651
2,736,732
49,483
50,755
44,584
56,120
50,733
58,486
537,275
Working capital
Property, plant and equipment, net
78,050
79,534
81,195
79,349
89,733
94,778
847,449
Total liabilities
93,979
106,599
120,780
130,125
121,051
104,268
1,020,402
39,244
41,448
52,069
42,958
36,491
26,770
413,463
158,074
159,820
180,407
189,908
193,522
187,378
1,716,330
Interest-bearing debt
Total net assets
599
741
1,225
1,235
1,678
340
6,504
157,475
159,079
179,182
188,673
191,844
187,038
1,709,826
Minority interests
Net assets
Yen
U.S. dollars
Per share data:
Basic net income (loss)
Diluted net income
Cash dividends applicable to the year
Net assets
¥
5.03
–
¥ (101.36) ¥ (45.02) ¥
–
46.94
–
–
¥
33.82
31.80
¥
41.88
$ 0.05
–
–
15.00
15.00
11.25
15.00
15.00
18.50
0.16
1,331.30
1,344.82
1,514.64
1,594.79
1,587.49
1,522.17
14.45
%
Ratios:
Ratio of operating income to net sales
0.2%
3.3%
4.6%
4.3%
Return on sales
0.2
(3.7)
(2.1)
1.7
1.4
1.8
Return on equity
0.4
(7.1)
(2.9)
3.0
2.2
2.8
Return on assets
0.2
1.6%
(4.2)
0.6%
1.8
1.4
1.8
Equity ratio
62.5
59.7
59.5
(1.7)
59.0
61.0
64.1
Debt-to-equity ratio
24.9
26.1
29.1
22.8
19.0
14.3
128,742
128,742
Thousands of shares
Common stock:
Number of shares issued
128,742
128,742
128,742
128,742
Notes 1: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥92.10=U.S.$1.00, the approximate exchange rate prevailing at December 31, 2009.
2: Due to the change in Kokuyo’s fiscal year-end, the period ended December 31, 2007 was an irregular nine-month period.
20
Annual Report 2009
Management’s Discussion and Analysis
for AR 2009/12
Overview
stationery, 57.6%, furniture, 37.2%, and store fixtures, 5.2%. Because the decline in profitability of the
In running its operations, the Kokuyo Group remains
stationery segment compared to the furniture seg-
steadfast to its basic management principle of “con-
ment was small, the contribution of the stationery
tributing to society through the provision of superior
segment rose 5% and the furniture segment fell 5%
products.” Under the management vision of “Always
year on year.
Innovating For Your Knowledge,” the Group constantly
The Group’s brand message highlights “Inspiration,
Cost of Sales and Cost of Sales
Ratio, Gross Profit and Gross
Profit Ratio
Efficiency, and Amenity” as the types of added value
Cost of sales amounted to ¥180.3 billion, with a cost
that Kokuyo aims to continue delivering to assist
of sales ratio of 67.6%. Gross profit was ¥86.5
users in their “knowledge work.”
billion, and the gross profit ratio was 32.4%. The
works to innovate in response to changes in society
to ensure that its activities play a useful social role.
As of December 31, 2009, the Kokuyo Group
Group took measures to boost the gross profit ratio
consisted of the holding company (Kokuyo Co., Ltd.),
by reducing costs and expanding offerings of high
49 subsidiaries, and 18 affiliates. Of these, 24 com-
value-added products and services.
panies were consolidated subsidiaries and 2 were
affiliates accounted for by the equity method.
During the period under review (from January 1,
SG&A Expenses
Selling, general and administrative (SG&A) expenses
2009 to December 31, 2009), the Japanese econ-
amounted to ¥85.9 billion, down ¥13.3 billion year
omy showed signs of improvement in some quarters,
on year, with an SG&A expenses ratio of 32.2%. The
but restraint in capital expenditure, sluggish personal
major contributing factor was a thorough revision
consumption, and other factors meant that these
of expenses.
trends stopped short of a full-fledged recovery, and
overall conditions remained severe.
Under this operating environment, the Kokuyo
Research and Development
Expenses
Group aimed to develop a lean corporate structure
Research and development expenses for the fiscal
capable of securing earnings under any economic
year amounted to ¥1.6 billion, comprising ¥1.1 billion
conditions by reviewing its business structure and
for the stationery segment, ¥0.4 billion for the
thoroughly implementing measures to cut costs. At
furniture segment, and ¥0.1 billion for the store
the same time, Kokuyo worked to enhance its prod-
fixtures segment.
ucts and services as high-value-added products that
customers ask for by name.
Operating Income and Operating
Income Ratio
Net Sales
Operating income totaled ¥0.6 billion. This was
Consolidated net sales for the year under review
largely due to factors such as the substantial effect
amounted to ¥266.7 billion, due in part to a
of lower gross profit caused by the decrease in net
decrease in demand resulting from the economic
sales, despite measures to reduce SG&A expenses.
recession. The breakdown by segment is as follows:
The operating income ratio was 0.2%.
Annual Report 2009
21
By Segment
Extraordinary Income (Loss)
During the fiscal year under review, the Group
recorded extraordinary gains of ¥3.0 billion, including
Stationery Segment
¥2.3 billion in gains on sales of property, plant and
The value of the Japanese stationery market is esti-
equipment, net. The Group also recorded an extraor-
mated at around ¥1 trillion*1. The stationery seg-
dinary loss of ¥1.6 billion, including ¥0.9 billion loss
ment continues to face severe business conditions
on valuation of investments in securities and a ¥0.3
as companies limit their purchase of consumables
billion loss on allowance for doubtful accounts.
amid the economic recession and competition intensifies in the office supply mail-order area. Amid this
Net Income
environment, the Kokuyo Group, as the only compre-
The Company posted net income of ¥0.6 billion for
hensive manufacturer of stationery goods in Japan,
the fiscal year under review. The reasons for this
holds the leading market share of approximately 11%.
include ¥3.0 billion in extraordinary gains offset by
Under these conditions, the Kokuyo Group sought
to stimulate demand and expand its market share
¥1.6 billion in extraordinary loss.
with the launch of a variety of original products.
Capital Expenditure
These high-value-added products that exceed cus-
Capital expenditure amounted to ¥3.5 billion.
tomer expectations included the popular Campus
Notebook Dotted Ruled Lines Series, which had
annual sales of over 20 million units, developed
through research of the notebooks used by students
who passed the entrance examinations at the prestigious University of Tokyo; the Campus Notebook
Handout-Keeper Version, a larger version of the classic Campus Notebook with pages large enough to
Due to the change in Kokuyo’s fiscal year-end, the period ended December 31, 2007 was an irregular nine-month period.
Net Sales
400,000
Ratio of Gross Profit to
Net Sales and SG&A
Expenses to Net Sales
(Millions of yen)
40
(%)
25,000
32.4
300,000
266,726
10
100,000
06/3 07/3 07/12 08/12 09/12
Stationery Segment
Furniture Segment
Store Fixtures Segment
22
Annual Report 2009
32.2
(Millions of yen, %)
5
20,000
4
15,000
3
10,000
2
20
200,000
0
30
Operating Income and
Ratio of Operating
Income to Net Sales
0
1
5,000
06/3 07/3 07/12 08/12 09/12
Ratio of Gross Profit to Net Sales
Ratio of SG&A Expenses to Net Sales
0
0.2
579
06/3 07/3 07/12 08/12 09/12
Operating Income
(Left Scale)
Ratio of Operating Income to Net Sales
(Right Scale)
0
insert standard-sized handouts received in class
supply mail order business worked to expand its
without needing to trim them; AIROFIT scissors, an
share through a low-price strategy, and to expand its
ingenious Universal Design scissor with blades that
customer base through a mail order service targeting
do not become sticky even when cutting tape or other
individual consumers and a gift catalog sales service.
adhesive materials; the Staple-Free Stapler, which
Consequently, the stationery segment posted net
allows users to fasten multiple sheets without using
sales of ¥153.7 billion and operating income of
staples; and the “Will & Testament” kit, which pro-
¥4.9 billion.
vides all the necessary stationary for producing a last
will and testament, including paper, an envelope, and
*1 Kokuyo’s own estimate based on industrial and commercial data, and
Kokuyo Group research.
an instruction guide.
In order to strengthen the business-to-consumer
field, Kokuyo established the trystrams line of luxury
The total Japanese office furniture market (including
stationery, releasing new products created in collabo-
office furniture, building materials, and services) is
ration with well-known designers and overseas
worth around ¥600 billion annually*2, about ¥300
brands. In addition, the Group acquired The Conran
billion of which was conventionally said to come
Shop, which sells a selection of sophisticated and
from office furniture sales. Because the market for
highly practical home and office products, with a view
office furniture is highly correlated to trends in the
to providing a physical store setting where customers
economic climate, however, it is believed to have
can connect with the design messages that these
contracted by approximately 30% to around ¥200
products convey about the world.
billion as a result of the major economic recession
In the office supply mail order business, Kaunet
hold the leading market position, with a 17% share,
by reducing prices and adding to the lineup of original
which it has captured by leveraging its nationwide
products. In Shanghai and Beijing, the Easy buy office
sales network.
(Millions of yen, Yen)
ROE
80
40
4,000
0
595 5.03
–40
–8,000
–80
06/3 07/3 07/12 08/12 09/12
Net Income (Loss)
(Left Scale)
Basic Net Income (Loss) per Share
(Right Scale)
8
–120
Capital Expenditure
and Depreciation and
Amortization
(%)
8,000
(Millions of yen)
6,334
4
0
–4,000
–12,000
following the Lehman Shock. Kokuyo is estimated to
achieved strong sales, striving to stimulate demand
Net Income (Loss) and
Basic Net Income (Loss)
per Share
8,000
Furniture Segment
6,000
0.4
0
4,000
–4
2,000
–8
06/3 07/3 07/12 08/12 09/12
0
3,479
06/3 07/3 07/12 08/12 09/12
Capital Expenditure
Depreciation and Amortization
Annual Report 2009
23
Business conditions in the furniture segment
Store Fixtures Segment
remained harsh during the fiscal year under review,
The ¥170-billion Japanese store fixtures market is
due in part to substantially decreased capital expen-
strongly affected by the number of new retail store
ditures as a result of the economic slowdown.
openings. Due to the economic slowdown during the
Under these conditions, following the renovation
fiscal year under review, there were few new openings
of the Eco LiveOffice Shinagawa, founded in 2008,
of retail stores, and it is believed that the market
the Kokuyo Group re-inaugurated the LiveOffice in
contracted. The Kokuyo Group is estimated to have an
Kasumigaseki, a next-generation model office that
8% share of this market, placing it third in Japan.*3
promotes corporate innovations and changing work
Demand was stagnant amid restraint in retailers’
styles, as Resonance Field 3.0. It also opened the
capital expenditure resulting from the economic
Kyushu LiveOffice. The new LiveOffice proposes solu-
slowdown, as major customers postponed the open-
tions for reducing environmental burden, boosting
ing of new stores. Nevertheless, the Kokuyo Group
worker productivity, and reducing office expenses.
conducted active marketing of store fixtures,
Innovations include initiatives to reduce CO2 emis-
secured new customers, and proposed storefront
sions, as well as the Office Darts II system, which
promotional fixtures.
enables employees to choose where to sit efficiently
based on the type and quantity of work they have.
We also launched new products designed to
enhance worker and organizational creativity and
support reductions in fixed-costs, such as office
As a result, net sales in the store fixtures segment amounted to ¥13.9 billion, with the decrease in
sales resulting in an operating loss of ¥0.7 billion.
*3 Kokuyo’s own estimate based on industrial and commercial data, and
Kokuyo Group research.
space consolidation. The new offerings included the
Worklink work station, which reduces the per-worker
desk footprint by as much as 40% compared to tradi-
Liquidity and
Capital Resources
tional rectangular desks, and the ACTINA swivel desk
ments and small items that makes it easy to imple-
1) Fund Procurement Policy and
Liquidity Management
ment a free-seating office layout.
Kokuyo’s capital structure policy centers on the use
chair, with a built-in tray under the seat for docu-
In the Chinese market, meanwhile, Kokuyo
worked to bring in new customers by strengthening
sales activities targeting local Chinese companies
of retained earnings but calls for the flexible use of
direct and indirect financing as necessary.
Kokuyo has been assigned a long-term credit
and European and U.S. companies in China, as well
rating of A- and a short-term credit rating of a-1 by
as Japanese companies that are major customers of
Rating and Investment Information, Inc. of Japan.
Kokuyo in China.
Kokuyo intends to fund future business expansion
However, as a result of the significant drop in
from internal resources.
demand, net sales in the furniture segment
amounted to ¥99.2 billion, with an operating loss of
¥3.6 billion.
*2 Kokuyo’s own estimate based on industrial and commercial data, and
Kokuyo Group research. The ¥600-billion office furniture market
breakdown comprises roughly ¥200 billion for office furniture, ¥150
billion for building materials and ¥250 billion for planning and services.
24
Annual Report 2009
2) Assets, Liabilities, and Total
Net Assets
Total assets as of December 31, 2009 amounted to
¥252.1 billion, a decrease of ¥14.4 billion from
December 31, 2008.
Of the total, current assets accounted for ¥106.7
3) Cash Flow Analysis
billion, a decrease of ¥11.7 billion. The main factor in
Net cash and cash equivalents provided by operating
this decline was an ¥11.0 billion decrease in trade
activities amounted to ¥13.7 billion, reflecting inflows
notes and accounts receivable. Fixed assets
of income before income taxes and minority interests
decreased ¥2.7 billion to ¥145.3 billion. This was
of ¥2.5 billion, depreciation and amortization
primarily due to a decline of ¥1.5 billion in property,
expenses of ¥6.3 billion, and revenue of ¥6.1 billion
plant and equipment, net, and a decline of ¥1.1
due to decrease in inventories.
billion in intangible fixed assets.
Net cash and cash equivalents used in investing
Liabilities decreased ¥12.6 billion from the previ-
activities totaled ¥1.9 billion. This was mainly due to
ous fiscal year-end to ¥94.0 billion. Of the total, cur-
¥3.5 billion in capital expenditure and ¥3.0 billion in
rent liabilities amounted to ¥57.3 billion, a decrease
proceeds from sales of property, plant and equipment.
of ¥10.4 billion. This was mainly due to a decrease
of ¥7.6 billion in trade notes and accounts payable.
Long-term liabilities decreased by ¥2.2 billion to
¥36.7 billion.
As a result of the above, free cash flow from operating and investing activities was ¥11.8 billion.
Net cash and cash equivalents used in financing
activities amounted to ¥4.7 billion. This primarily
Total shareholders’ equity declined ¥1.2 billion to
reflected ¥11.7 billion for the redemption of bonds
¥157.2 billion. Kokuyo holds ¥14.3 billion in trea-
with stock acquisition rights, ¥10.2 billion in pro-
sury stock, at cost. Total net assets, comprising
ceeds from long-term debt, and outgoings of ¥1.8
shareholders’ equity, valuation and translation
billion for the payment of cash dividends.
adjustments, and minority interests, amounted to
¥158.1 billion.
As a result, cash and cash equivalents at
December 31, 2009 amounted to ¥23.9 billion, an
The current ratio was 186.4%, up 11.4 percentage
points from the previous fiscal year-end, and the ratio
increase of ¥7.1 billion from the previous fiscal
year-end.
of interest-bearing debt to net assets was 24.9%. As
these figures attest, Kokuyo continues to have a
robust financial foundation and adequate liquidity.
Total Assets and ROA
400,000
(Millions of yen, %)
Total Net Assets and
Equity Ratio
3
300,000
(Millions of yen, %)
Cash Flows
75
20,000
(Millions of yen)
62.5
252,053
200,000
240,000
60
180,000
45
15,000
1.5
0.2
0
158,074
120,000
13,737
10,000
30
–4,746
0
60,000
15
0
0
5,000
–1,930
–400,000
06/3 07/3 07/12 08/12 09/12
Total Assets
(Left Scale)
ROA
(Right Scale)
–4.5
06/3 07/3 07/12 08/12 09/12
Total Net Assets
(Left Scale)
Equity Ratio
(Right Scale)
0
06/3 07/3 07/12 08/12 09/12
Net Cash and Cash Equivalents Provided
by Operating Activities
Net Cash and Cash Equivalents Used
in (Provided by) Investing Activities
Net Cash and Cash Equivalents Provided
by (Used in) Financing Activities
Annual Report 2009
25
4) Dividends
Business Risks
Kokuyo advocates shareholder-centric management,
goal of achieving a dividend payout ratio of 20% or
The Economic Situation and
Business Climate in Japan
higher, taking into account consolidated operating
Nearly all of the Kokuyo Group’s revenues are derived
results as well as the longstanding policy of paying a
from markets within Japan. Consequently, changes in
stable dividend.
the Japanese business climate may have an impact
and is implementing a dividend policy based on the
Based on this policy, in the fiscal year under
on operating results.
review we paid a cash dividend of ¥15 per share,
comprising an interim dividend of ¥7.5 and a year-end
Increases in Raw Material Prices
dividend of ¥7.5. Dividends per share for the next
The main raw materials used by the Kokuyo Group
fiscal period are scheduled to be ¥15 per share, also
include base paper, plastics and steel products. The
comprising an interim dividend of ¥7.5 and a year-end
Kokuyo Group purchases its raw materials from man-
dividend of ¥7.5.
ufacturers in Japan and overseas. Therefore, there is
With regard to retained earnings, going forward
a risk that higher raw materials prices resulting from
we will engage in investments to further strengthen
sharp increases in crude oil prices, rapidly increasing
our management standing and enhance future corpo-
demand in China, and other factors could affect the
rate value.
Group’s operating results.
Outlook
Development of New Products
In its development of products and services the
Going forward, the Japanese economy is expected to
Kokuyo Group aims to create new products, services
see continued stagnation in capital expenditure and
and businesses in both established and new busi-
individual consumption. As a result, the business
ness domains. However, it is not always possible to
environment surrounding the Kokuyo Group is
accurately predict which new products and technolo-
expected to remain severe.
gies will be popular in their markets. If sales of such
Amid this environment, the Kokuyo Group will shift
products are unsuccessful, there is a possibility that
its focus, aiming to become a “company that solves
future growth and profitability may decline, with a
customers’ problems” by providing products and
negative impact on operating results.
services that exceed customer expectations, and
thereby build a corporate group that can weather
Information Systems
even challenging economic conditions.
Businesses such as the Kokuyo Group’s office supply
Moreover, as an environmental innovator within
the industry, we will aim to eliminate by fiscal 2010
works linking computer systems. However, there is a
all products designated by the Eco-X mark, and
risk that a natural disaster or other unforeseen event
enhance our line-up of eco-friendly products. We will
could cause the networks to cease functioning,
also take steps to reduce office CO2 emissions, while
making it impossible to process product orders.
at the same time developing products and solutions
to enhance the creativity and productivity of office
workers. Through such measures, the Kokuyo Group
will offer customers unique support for addressing
environmental issues.
26
mail order business depend on communications net-
Annual Report 2009
computer system could be infiltrated by unauthorized
Fluctuations in Foreign Exchange
Levels
means, and information on the website altered or
Some of the Kokuyo Group’s exports and imports of
important data fraudulently obtained. Infection by a
products and imports of raw materials are denomi-
computer virus could also lead to the loss of impor-
nated in foreign currencies. The Kokuyo Group also
tant data. If such a situation occurs, there is a risk of
owns foreign currency-denominated assets. Conse-
a negative impact on operating results.
quently, large fluctuations in foreign exchange mar-
In addition, there is a risk that Kokuyo’s internal
kets could impact operating results and other items
Protection of
Personal Information
in the financial statements.
Kokuyo takes all possible measures in the management of personal information, but there is a risk that
Fluctuations in the Value of
Marketable Securities
information could leak due to unforeseen circum-
The Kokuyo Group holds securities for investment
stances. If such a situation occurs it could result in a
purposes. However, there is a risk that a downturn in
decline in the Group’s brand value and give rise to
the securities markets could result in revaluation
significant financial liability.
losses being incurred for such securities.
Natural Disasters
Environmental Regulations
In the event of a natural disaster such as an earth-
The Kokuyo Group is subject to a number of statutory
quake or typhoon, there is a risk that the Kokuyo
environmental regulations with regard to the various
Group’s production, retail and logistics bases could
types of waste generated during production pro-
sustain heavy damage.
cesses and emissions of such into the atmosphere
and water. The Group has historically undertaken a
Product Liability
range of activities aimed at environmental preserva-
There is a risk that defects could occur in the prod-
tion, including compliance with such statutory envi-
ucts or services provided by the Kokuyo Group. In the
ronmental regulations. However, should additional
event of product liability compensation, product
obligations for compliance with environmental laws
recalls or other similar situations arising, a decline in
and contribution to environmental reform give rise to
the Group’s brand equity and significant financial
additional expenses, such expenses could have an
liability could result.
impact on operating results.
Significant Changes in Overseas
Economies
The Kokuyo Group sells, manufactures and procures
certain products internationally, particularly in Asia.
There is a risk that changes in the political, economic
or social situation in any of these regions or changes
in local regulations could have a detrimental impact
on operating results.
Annual Report 2009
27
Consolidated Balance Sheets
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Fiscal years ended December 31, 2009 and 2008
28
Annual Report 2009
Annual Report 2009
29
Consolidated Statements of Operations
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Fiscal years ended December 31, 2009 and 2008
30
Annual Report 2009
Consolidated Statements of Changes in Net Assets
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Fiscal years ended December 31, 2009 and 2008
Annual Report 2009
31
Consolidated Statements of Cash Flows
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Fiscal years ended December 31, 2009 and 2008
32
Annual Report 2009
Notes to Consolidated Financial Statements
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Fiscal years ended December 31, 2009 and 2008
Annual Report 2009
33
34
Annual Report 2009
Annual Report 2009
35
36
Annual Report 2009
Annual Report 2009
37
38
Annual Report 2009
Annual Report 2009
39
40
Annual Report 2009
Annual Report 2009
41
42
Annual Report 2009
Annual Report 2009
43
44
Annual Report 2009
Annual Report 2009
45
46
Annual Report 2009
Annual Report 2009
47
48
Annual Report 2009
Annual Report 2009
49
50
Annual Report 2009
Annual Report 2009
51
Independent Auditors’ Report
52
Annual Report 2009
Overview of 12 Main Operating Companies
Kokuyo S&T Co., Ltd.
Manufactures and purchases a variety of products
Kokuyo Engineering &
Technology Co., Ltd.
including paper products, stationer y and PC-related
Handles the full range of needs arising from office
products, and sells to volume retailers and conve-
moves and building renovations on behalf of office
nience stores.
occupants or building owners. Offers a one-stop
source of comprehensive engineering ser vices,
Kokuyo Furniture Co., Ltd.
including removals work and interior construction.
Manufactures, purchases and sells desks, chairs,
Kaunet Co., Ltd.
office equipment-related floor fittings, partitions, furniture for schools and for seniors and SOHO furniture.
Conducts office supply mail order targeting busi-
Provides a full range of workplace design consulta-
nesses. Also undertakes conventional sales of
tion ser vices covering corporate offices, public facili-
office supplies, etc., as well as offering a range of
ties, educational institutions, welfare facilities and
office-related ser vices.
research facilities. Also offers planning, project
management, construction, procurement and facility
Kokuyo Marketing Co., Ltd.
management ser vices.
Comprehensive suppliers that handle the full range
of office-related needs. Kokuyo Marketing Co., Ltd.
Kokuyo Store Creation Co., Ltd.
Manufactures, purchases and sells store fixtures.
Kokuyo International Co., Ltd.
Manufactures, purchases and sells Kokuyo products
overseas.
was formed by integrating seven existing distribution
affiliates.
Kokuyo Trading (Shanghai)
Co., Ltd.
Kokuyo Interior Technology
(Shanghai) Co., Ltd.
Provide a range of China-based ser vices including
Kokuyo Supply Logistics Co., Ltd.
Kokuyo Logitem Co., Ltd.
Provide a full range of logistics and office relocation
ser vices to companies inside and outside the
Kokuyo Group.
office furniture sales and consulting, as well as
project management, construction, procurement and
facility management.
Kokuyo Commerce (Shanghai)
Co., Ltd.
Operates an office supply mail order business in
China (Shanghai and Beijing).
Annual Report 2009
53
Consolidated Subsidiaries
(As of July 1, 2010)
Kokuyo S&T Co., Ltd.
Kokuyo Supply Logistics Co., Ltd.
Kokuyo Furniture Co., Ltd.*1
Kokuyo Engineering & Technology Co., Ltd.
Kokuyo Store Creation Co., Ltd.
Kokuyo Business Service Co., Ltd.
Kokuyo MVP Co., Ltd.
Kokuyo Finance Co., Ltd.
Kokuyo Product Shiga Co., Ltd.
Kokuyo Trading (Shanghai) Co., Ltd.
Kokuyo (Malaysia) Sdn. Bhd.
Kokuyo Office Service (Shanghai) Co., Ltd.
Kokuyo Vietnam Co., Ltd.
Kokuyo Interior Technology (Shanghai) Co., Ltd.
Kokuyo Marketing Co., Ltd.*2
Kokuyo Commerce (Shanghai) Co., Ltd.
Kaunet Co., Ltd.
Kokuyo International Asia Co., Ltd.
Kokuyo International Co., Ltd.
Forest Co., Ltd.
Kokuyo Logitem Co., Ltd.
Actus Co., Ltd.
*1 On July 1, 2010, Kokuyo Furniture Co., Ltd. and Kokuyo Office System Co., Ltd. merged. Kokuyo Furniture Co., Ltd.
is the surviving entity.
*2 On May 1, 2010 Kokuyo Marketing Co., Ltd., Kokuyo Chugoku Sales Co., Ltd. and Kokuyo Kyushu Sales Co., Ltd.
merged. Kokuyo Marketing Co., Ltd. is the surviving entity.
Overseas Network
(As of December 31, 2009)
U.K., China, Thailand, Malaysia, Vietnam, India
54
Annual Report 2009
Corporate Data
(As of December 31, 2009)
Head Office
1-1, Oimazato-minami 6-chome,
Number of
Employees
Number of
Shareholders
Higashinari-ku, Osaka 537-8686,
175 (parent company only)
27,249
Japan
5,147 (on a consolidated basis)
Stock Exchange
Listings
Telephone: +81-6-6976-1221
Established
Total Number of
Shares Authorized
October 1905
398,000,000
Paid-in Capital
Total Number of
Shares Issued
The Sumitomo Trust &
128,742,463
5-33, Kitahama 4-chome,
Tokyo, Osaka, Nagoya
Transfer Agent
¥15,847 million
Banking Co., Ltd.
Chuo-ku, Osaka 540-8639, Japan
Stock Price Movement and Total Trading Volume
(Stock price: yen)
900
600
300
0
(Trading volume: millions)
8
6
4
2
Jan.
2009
Feb.
March
Please feel free to email or
telephone our Investor Relations
Section:
Apr.
May
June
July
Aug.
Kokuyo Co., Ltd.
Investor Relations Sect., General Finance
& Accounting Dept.
1-1, Oimazato-minami 6-chome,
Higashinari-ku, Osaka 537-8686, Japan
Telephone: +81-6-6973-9333
Facsimile: +81-6-6973-9363
Sept.
Oct.
Nov.
Dec.
0
e-mail: [email protected]
URL: http://www.kokuyo.co.jp/english/
Annual Report 2009
55
Kokuyo Co., Ltd. Annual Report 2009
Fiscal year ended December 31, 2009
201006A01TP
2010-096
Printed in Japan