Annual Report 2012

Transcription

Annual Report 2012

Annual Report 2012
Year Ended March 31, 2012
Creativity and Innovation
Company Profile
Continually Providing Innovative Healthcare and
Lifestyle Solutions
Consumer Products Business
The Consumer Products Business is the Group's mainstay
business involving the planning, research and development,
manufacturing and sales of proprietary products both in Japan and
overseas. The business entails seven categories and 150 brands.
Health Care Division
Discovering, creating and providing solutions that meet the
latent needs of our customers
The Kobayashi Pharmaceutical Group has produced a
series of “products that lead to new markets” which greatly
contribute to the health, comfort and convenience of people
and society, under the brand slogan of “You Make a Wish and
We Make it Happen.”
Moving forward, we will continue to display the spirit of
“Creativity and Innovation” in our work processes and develop
products from a customer-centric perspective. This, coupled
with our pursuit of manufacturing high quality products that
fulfill the high expectations of our customers, will enable the
Kobayashi Pharmaceutical Group to continue to create and
cultivate new markets.
Breakdown of Net Sales
Breathcare
Household Division
The Household Division supports new lifestyle
habits and is pushing ahead with the creation
and expansion of new markets through
development, production, and sales in four
categories including deodorizing air
fresheners, sanitary products, household
Ekitai Bluelet
sundries, and body warmers.
Okudake
Netsusama
Sheet
Mail Order Business
Consumer Products
Business
¥109.2 billion
Fiscal year ended
March 2012
Net Sales
Mail Order
Business
¥10.3 billion
Eyebon
Note: Intra-company transactions excluded.
Other
¥1.1 billion
Medical
Devices
Business
¥10.4 billion
The Health Care Division addresses the
need for improved quality of life through
development, production, and sales in three
categories including OTC pharmaceuticals,
oral hygiene products, and food products. In
recent years, the division has focused on new
product development using kampo medicines.
Health Care
Division
¥45.0 billion
The Mail Order Business involves
sales of products such as nutritional
supplements and skincare products
via telephone and the internet. The
business was established as a new
business segment in the fiscal year
ended March 31, 2011 because of
its growth to near ¥10 billion in net
sales.
Glucosamine
& Collagen Set
Aloe
Ikumo Eki
¥131.1 billion
Household
Division
¥64.1 billion
Medical Devices Business
The Medical Devices Business is
operated by Kobayashi Medical
Co., Ltd.1, an equity-method affiliate
that imports and sells medical
devices sourced overseas in Japan
and Medicon Inc.2, an equity-method
affiliate that imports and sells
medical devices sourced from US
firm C. R. Bard, Inc. in Japan.
Acu-Loc
1 80% of the shares in Kobayashi Medical Co., Ltd.,
were transferred to Mitsubishi Corporation on May
31, 2012.
2 A joint venture with US firm C. R. Bard, Inc.
Bard I.C.
Silver Foley Tray
1
KOBAYASHI Pharmaceutical Co., Ltd.
Annual Report 2012
Table of Contents
Company Profile .......................................................... 1
Kobayashi Pharmaceutical’s Business Model ........... 3
Financial Highlights ...................................................... 5
A Message to Our Shareholders and Investors ......... 7
Interview with the President ........................................ 9
Special Feature
Overseas Business ........................ 13
Business Overview
Net Sales / Operating Income
(¥ Billion)
150.0
100.0
112.6
110.9
115.5
112.4
110.7
50.0
18.0
2009
2008
Net Sales
16.5
15.9
0
2010
18.9
2011
18.3
2012
Overseas Business ................................................. 21
Mail Order Business .................................................. 22
Medical Devices Business ........................................ 23
Corporate Governance ................................................ 24
Directors, Corporate Auditors and Executive Officers ... 26
CSR Initiatives .............................................................. 27
Management’s Discussion and Analysis .................... 31
Operating Income
Overseas Business
The Overseas Business
sells body warmers and
cooling gel sheets in
over 20 countries
around the world.
Health Care Division ............................................... 17
Household Division ................................................ 19
Consolidated Financial Statements ............................ 37
Report of Independent Auditors ................................. 63
History .......................................................................... 64
Group Companies ........................................................ 65
Corporate Data / Investor Information ....................... 66
Nuan Bao Bao
KOOL
FEVER
Founded as a Wholesaler and Transformed into a
Developer as well as Manufacturer of Proprietary
Medicine
(¥ Billion)
15.0
10.0
5.0
10.3
9.8
8.8
7.6
6.2
0.3
0
– 0.4
–5.0
2008
Net Sales
– 0.4
2009
0.1
– 0.2
2010
2011
2012
Operating Income
Kobayashi Pharmaceutical was established in
1886 as a wholesaler of Western liquors,
cosmetics and general merchandise. Two
years later, the company launched its
Pharmaceuticals Division. In 1895, the
company established the Proprietary
Pharmaceutical Sales and Manufacturing
Division with the purpose of creating medicines
that would contribute to society’s overall health.
The division commenced the development
and manufacture of 10 proprietary
pharmaceuticals that included “Tamushichinki,”
a medicine for athlete’s foot.
This marked the beginning of Kobayashi
Pharmaceutical’s unwavering
ambition to continually meet the
challenge of developing
products that provide people
and society with comfort.
Founder
Chubei Kobayashi
(¥ Billion)
15.0
10.0
11.3
10.7
12.1
12.1
10.4
10 pharmaceuticals
released in 1894
5.0
0.1
0
–5.0
–0.4
2008
Net Sales
0.2
Originally founded as
Kobayashi Seidaido, an unlimited
partnership company
0.2
–0.5
2009
Operating Income
2010
2011
2012
Forward-looking Statements
Plans, strategies, beliefs and other statements concerning future business
operations of the Kobayashi Pharmaceutical Group included in this annual
report are forward-looking statements based not on historical facts but on
management’s assumptions and beliefs in light of information currently
available. These forward-looking statements include risks, known and
unknown, and uncertainties.
Actual management achievements and business results may therefore
differ significantly from forecasts in this annual report.
Annual Report 2012
2
Kobayashi Pharmaceutical’s Business Model
Continuing to Maintain a High Market Share and
High Profitability by Creating and
Expanding New Markets
Generating New Markets
First, we discover a niche
located between existing
market segments where we
see a clear latent need.
Market A
(old market)
Market B
(old market)
1
New
Market
Market C
(old market)
Market D
(old market)
Products that lead to
new market
1969
Bluelet
Next, we go about
developing “products that
lead to new markets” to
transform the dreams of our
customers into reality.
Market launch
Novel concept product
100%
Share
2
Expanding Markets
First, prominent markets
initially created by
Kobayashi Pharmaceutical
expand with the entrance of
various competitors.
In response to this, we
expand our existing product
lineup by releasing a new
novel product(s) that
outperforms competitors’
offerings and helps to
further expand demand.
A novel toilet bowl cleaner hung from the
tank of a flush-toilet. We released Bluelet
in anticipation of future demand during a
time when less than 30% of Japanese
households had a flush toilet.
The novelty of this product’s pleasant
fragrance and blue colored water helped it
to garner much attention.
1986
Competitor
product
Bluelet Okudake
Market launch
In order to eliminate the hassle of removing
the toilet tank lid to hang Bluelet, we
launched a novel product featuring the same
cleaning capabilities but in a package that
can simply be placed in the sink of the toilet
tank lid (a toilet design unique to Japan).
Bluelet Okudake instantly became an
essential item in every Japanese household.
Enhance convenience
and user experience
Competitor
product
1991
Bluelet Dobon
Competitor
product
Amid growing diversification in toilet
function and performance, Kobayashi
Pharmaceutical developed Bluelet Dobon,
a new addition to the successful Bluelet
franchise placed inside the toilet tank. A
colorless cleaner type was also added to
the lineup to broaden the range of
products on offer to customers.
Market launch
Expand selection
Competitor
product
3
Market Maturity
To increase market share
and activate mature
markets we introduce a
variety of products that offer
further value-added
features, helping to expand
and strengthen the brand.
3
Product that stimulates
consumer demand
Product that expands and
strengthens the brand
2001
Ekitai Bluelet Okudake
Competitor
product
Market launch
Competitor
product
Annual Report 2012
Further improve
the brand’s
lineup
We developed a novel liquid-type Bluelet
that cleans more effectively and with more
foaming action. The product lineup was
then expanded to include Bluelets
featuring bleach cleaning power as well as
Bluelets that come in a variety of different
exciting fragrances, enabling consumers
to customize their bathroom environment
to their liking.
Kobayashi Pharmaceutical’s “Idea Development”—Creating New Markets
1. Speed in Development (Concurrent Development)
Speed in development refers to the commercialization of products at
a faster pace by performing the normally sequential procedures of
product planning, research and development, trial production, quality
assurance, and production preparation in parallel. In addition, we are
also examining collaboration with other companies as well as M&A for
the necessary seeds of product development, including raw materials
and production systems.
2. Idea Meetings Involving Senior Management
Persons in charge of development in each category give a presentation
on ideas to senior management on a monthly basis. This is where
ideas are narrowed and decisions are made on whether a new idea
will proceed on to product development.
Kobayashi Pharmaceutical's Speed in Development
(Concurrent Development)
Conventional development process
Product
planning
Research and
development
Trial
production
Quality
assurance
Production
preparation
Commercialization
Kobayashi Pharmaceutical’s
development process
Shortened time frame
Product
planning
Research and
development
Commercialization
Trial production
3. Employee Proposal System
Quality assurance
This system allows any employee to make a proposal on new product
ideas and ideas for enhancing an existing product. First instituted in
1982, this system generates over 10,000 proposals each year.
Average time for
development around 13 months
Production preparation
(excluding OTC pharmaceuticals)
Some of our new products launched in the fiscal year ended March 2012
External medicine
for scars
Cold spray for the inside
of shoes
Medicated toothpaste for
customers bothered by
gingival recession
Attonon
Kutsu Cool
Tomarina
P17
P19
P17
Skin moisturizing cosmetics
Hifmid (Moisture Foundation)
Hifmid (Face powder)
P22
Nutritional supplement for
consumers looking to maintain
their healthy appearance for
long periods of time
Resveratrol
P22
Annual Report 2012
4
Financial Highlights
Net Sales
Operating Income / Operating Income
to Net Sales Ratio
(¥ Billion)
300.0
(¥ Billion)
20.0
228.8
18.5
15.8
15.0
200.0
125.6 129.1 130.8 131.1
100.0
(%)
10.0
5.0
0
12.6
17.0
13.2
14.2
14.7
8.1
0
2008
2009
2010
2011
2012
2008
Note 1
2009
2010
(¥ Billion)
12.0
15
9.0
10
6.0
5
3.0
0
0
2012
(%)
11.7 10.0
8.8
8.5
7.0
9.2
9.3
7.2
7.1
8.9
7.5
5.0
2.5
3.7
0
2008
2009
Net Income
Operating Income
Operating Income to Net Sales Ratio
2010
2011
2012
Net Income to Net Sales Ratio
Note 2. “Accounting Standards for Measurement of Inventories” has been applied since fiscal 2009. As a result, the valuation of
inventory and the valuation/disposal loss have been booked as cost of sales rather than as non-operating expenses and
extraordinary losses, which led to a decline in operating income.
2003
2004
For the Year
2005
2006
2007
Millions of yen
Net Sales
Cost of sales
Gross profit
Selling, General and Administrative Expenses
Operating Income
Income before Income Taxes and Minority Interests
Net Income
Cash Flows from Operating Activities
Free Cash Flows 1
Depreciation and Amortization
Capital Expenditures 2
Research and Development Costs
210,922
141,675
69,247
53,394
15,852
12,839
6,605
211,670
141,388
70,282
54,159
16,123
11,825
6,677
215,708
143,912
71,795
56,096
15,698
12,769
6,730
246,852
167,239
79,613
62,734
16,879
14,009
7,474
257,022
172,304
84,717
66,688
18,029
16,038
8,297
12,046
11,770
6,971
4,613
8,364
4,428
13,159
6,745
8,833
(2,970)
3,480
2,631
1,785
3,350
2,441
2,010
3,239
5,020
2,115
3,414
2,797
2,377
3,375
2,229
2,476
77,315
27,758
65,925
9,936
49,267
125,679
11,390
7,859
80,030
24,567
64,297
9,093
54,454
128,326
15,733
5,417
86,704
25,003
65,007
8,959
60,116
134,629
21,697
3,034
98,906
22,788
72,040
10,175
66,811
151,945
26,866
1,633
102,102
22,279
77,028
10,291
77,236
164,555
25,074
3,414
231.25
21.0
1,747.98
157.25
21.0
1,307.16
160.64
33.0
1,443.30
179.17
38.0
1,617.10
200.77
50.0
1,799.87
32.8
7.5
3.1
117.3
10.5
14.1
39.2
0.16
33.2
7.6
3.2
124.5
11.1
12.9
42.4
0.10
32.3
6.8
3.0
137.3
10.6
11.8
44.0
0.02
33.0
7.0
3.2
132.6
9.5
11.7
45.2
0.05
At Year-end
Millions of yen
Current Assets
Property, Plant and Equipment, Net
Current Liabilities
Long-term Liabilities
Total Net Assets 3
Total Assets
Working Capital 4
Interest-bearing Debt
Per Share Data
Yen
Net Income
Cash Dividends
Net Assets
Financial Ratios
%
Gross Profit to Net Sales Ratio
Operating Income to Net Sales Ratio
Net Income to Net Sales Ratio
Current Ratio
ROA
ROE
Equity Ratio
Debt-equity Ratio (times) 5
1 Free cash flows = Cash flows from operating activities + Cash flows from investing activities.
3 Total Net Assets in 2006 and preceding years does not include minority interests.
5 Debt-equity ratio: Interest-bearing debt at the fiscal year-end divided by Shareholders’ equity.
2011
20
Note 2
Note 1. The removal of the Wholesale Business from the scope
of consolidation in a stock swap in January 2008 resulted
in a significant drop in sales, however the impact on
income was minimal.
5
18.6
19.2
Net Income / Net Income to Net Sales Ratio
Annual Report 2012
33.3
7.3
3.1
133.4
10.8
11.7
44.7
0.05
2 Capital expenditures as shown in Segment Information in the Notes to Consolidated Financial Statements .
4 Working capital: Current assets at the fiscal year-end minus Current liabilities.
Years ended March 31
Total Assets / Total Net Assets / Equity Ratio
77.1 76.3 84.6 91.3 101.8 (%)
(¥ Billion)
150.0 122.4 125.2 131.9 134.3 147.8 100
75
100.0
50.0
63.0
60.9
64.0
2008
2009
2010
68.8
67.9
0
Total Assets
2008
2011
Total Net Assets
50
Cash Dividends per Share / Payout Ratio
(Yen)
100
26.3
27.4
28.9
62
66
75
54
50
58
27.2
78
(%)
30.0
(%)
20
22.5
15
12.4
11.2
15.0
25
25
0
0
2008
Equity Ratio
2009
2010
Cash Dividends per Share
2010
2011
7.5
5
0
0
2012
2008
Payout Ratio
2011
ROE
2012
Millions of yen
13.3
14.3
10
10.9 11.5
2012
2009
26.9
ROE / ROA
2009
11.5
2010
10.6
2011
14.2
12.2
2012
ROA
% Change
2012
%
Thousands of U.S. dollars
228,826
147,638
81,187
62,611
18,576
15,800
8,504
125,693
57,013
68,679
52,861
15,818
16,270
8,853
129,184
57,295
71,889
54,848
17,041
14,553
9,250
130,824
56,184
74,640
56,019
18,621
13,178
9,336
131,167
54,636
76,531
57,233
19,298
19,822
11,726
0.3
(2.8)
2.5
2.2
3.6
50.4
25.6
1,595,900
664,753
931,147
696,350
234,797
241,173
142,669
12,192
5,767
12,849
11,467
15,319
10,618
13,168
4,789
17,250
14,321
31.0
199.0
209,880
174,243
3,765
2,895
2,813
4,214
3,468
3,361
4,257
3,562
3,962
4,155
2,347
4,069
3,232
2,213
4,386
(22.2)
(5.7)
7.8
39,324
26,925
53,364
66,069
15,236
37,940
7,286
77,182
122,409
28,128
726
73,172
17,618
39,834
9,011
76,364
125,210
33,337
645
85,209
14,779
39,025
8,344
84,603
131,972
46,184
1,708
88,837
14,156
34,525
8,488
91,343
134,356
54,312
26
102,538
13,628
37,791
8,221
101,879
147,891
64,747
5
15.4
(3.7)
9.5
(3.2)
11.5
10.1
19.2
(79.6)
205.62
54.0
1,863.24
215.89
58.0
1,861.14
225.88
62.0
2,061.79
227.98
66.0
2,226.42
286.36
78.0
2,484.08
25.6
18.2
11.6
35.5
8.1
3.7
174.1
10.9
11.2
63.0
0.01
54.6
12.6
7.0
183.7
12.4
11.5
60.9
0.01
57.1
14.2
7.1
257.3
14.3
10.6
67.9
0.0003
58.3
14.7
8.9
271.3
14.2
12.2
68.8
0.00005
Millions of yen
%
Yen
%
1,247,572
165,811
459,800
100,024
1,239,555
1,799,379
787,772
61
U.S. dollars
3.48
0.95
30.22
%
55.6
13.2
7.2
218.3
13.3
11.5
64.0
0.02
Annual Report 2012
6
A Message to Our Shareholders and Investors
As a development-based company, we will establish
a solid operating base and continue to enhance our
corporate value.
Now is the time to demonstrate the spirit
found in our management philosophy of
“Providing People and Society with Comfort”
In the fiscal year under review, Japan’s economic future remained one
of uncertainty due to the downturn in business activities and consumers’
conservative spending habits resulting from the Great East Japan
Earthquake that occurred on March 11, 2011 as well as the ensuing
nuclear accident at the Fukushima Daiichi Nuclear Power Plant and
power supply shortages.
We believe now is the time to put our management philosophy
Yutaka
Kobayashi
Kazumasa
Kobayashi
President and
Chief Operating Officer
Chairman and
Chief Executive Officer
7
of “providing people and society with comfort” into greater practice.
In the aftermath of these disasters, we focused all of our efforts on
restoring operations at Sendai Kobayashi Pharmaceutical Co., Ltd., a
manufacturing base of the Group damaged in the quake, as well as
strived to maintain a stable supply of our products by manufacturing
products at alternative production sites to make up for the shortage
from the Sendai location. As a result of the Group’s collective efforts,
our production system returned to pre-quake levels in June 2011. In
addition, we also strived to activate the market by providing products
and services that create new markets in awakening potential needs
in customers.
Annual Report 2012
As a result, net sales increased to ¥131,167 million, up 0.3% year
on year, while net income totaled ¥11,726 million, a 25.6% increase
over fiscal 2011, marking our fourteenth consecutive fiscal year of an
increase in net income.
Aspiring to further maximize corporate value
Under the slogan of “You Make a Wish and We Make it Happen,” the
Kobayashi Pharmaceutical Group is a development-based company
that creates new markets through the development of new products
that meet consumer needs. Our fundamental approach to developing
new products begins with needs (customers) rather than seeds
(technology). Over the years, the Group has grown by searching for
potential needs that even our customers themselves sometimes are
not aware of, and turning these into products. Our greatest strength
lies in the creation of a one-of-a-kind new market, also known as a
niche market, and the expansion of these markets.
At the same time, as the Group provides products and services,
it must not forget about advancements in quality. Once a product
does not live up to the customer’s expectations, the company may
lose the loyalty of that customer, which could result in that customer
avoiding the company’s other products in the future. To prevent this
scenario, we have established a corporate culture that is absolutely
devoted to quality under the credo that quality is the life of a
company, and have asked all employees to adopt a sense of
thorough persistence towards quality in their provision of products
and services. Accordingly, we strive to win customers’ trust and build
strong reputations for our products where customers will see the
Kobayashi brand itself as a seal of safety.
In order to achieve continued growth, it is essential to expand
the Overseas Business and the Mail Order Business. As such, we will
aggressively invest in these businesses in aiming to raise sales.
Through implementing the above measures, we hope to expand
our business globally and further elevate our corporate value.
Building upon “Jikko Ketsujitsu” and evolving
into a company capable of continuous growth
In order to take a major leap forward in our growth businesses,
namely the Overseas Business and the Mail Order Business, we have
continued to operate under the mantra “Jikko Ketsujitsu” following
efforts in the fiscal year ended March 31, 2012.
The concept of “Jikko Ketsujitsu” refers to the determination to
tenaciously produce and achieve results while remaining aware of our
goals and targets. This also embodies the continual implementation
of the Plan-Do-Check-Act (PDCA) cycle, which includes stringent
inspections and improvements. By building on this “Jikko Ketsujitsu”
process, we are committed to establishing a solid business structure
capable of continuous growth.
Under the basic policy of “Jikko Ketsujitsu,” we have developed
the following four pillars of management for the fiscal year ending
March 31, 2013.
1. Strengthen operating base
2. Invest in growth businesses
3. Foster a corporate culture of Jikko Ketsujitsu
4. Enhance the Kobayashi Pharmaceutical Group’s brand
Strengthening our operating base involves establishing a solid
operating framework through maximizing efforts in the development
of new products, which form the basis of business growth, and
enhancing existing brands, which form the foundation of our
business. In terms of investing in growth businesses, we will take a
proactive stance to invest in our growth businesses, which include
the Overseas Business as well as the Mail Order Business, to achieve
a giant leap forward. The corporate culture of Jikko Ketsujitsu
involves steadfast implementation of the PDCA cycle to reach all of
our goals in becoming a Group with true tenacity in producing and
achieving results. Enhancing the Kobayashi Pharmaceutical Group’s
brand entails thorough compliance from all employees and pursuit of
quality from a customer-centric standpoint and social contribution
activities, as part of our efforts to enhance our corporate value.
Thank you for your understanding and continued support of the
Kobayashi Pharmaceutical Group.
August 2012
Chairman and
President and
Annual Report 2012
8
Interview with the President
Overview of fiscal 2012 and Outlook for fiscal 2013
Yutaka Kobayashi
President and
Q
A
What were the results for the fiscal
year ended March 31, 2012?
We recorded our highest ever net income and
achieved an increase in income and sales,
despite a challenging operating environment.
In the fiscal year ended March 31, 2012, we achieved an increase in
income and sales, despite the ongoing difficult operating environment.
While our production site at Sendai Kobayashi Pharmaceutical
Co., Ltd., suffered damage in the Great East Japan Earthquake that
occurred on March 11, 2011, our production system returned to
pre-quake levels by June 2011. However, as a portion of the deodorizing
air fresheners produced by the company was subjected to a shipping
quota that restricted the amount shipped in one day, sales of
deodorizing air fresheners in the first half decreased by 6.6%
compared to the previous fiscal year. This also lowered our market
share. In order to recover from this downturn, we strengthened our
sales and promotional activities in the latter half of the fiscal year,
nearly regaining our pre-quake market share by the end of the fiscal
year under review. On the other hand, as a result of power supply
shortages and increased consumer awareness toward energy
conservation, sales of our heat relief remedies and body warmers
increased to ¥131,167 million, up 0.3% year on year. Operating
income also rose 3.6% over fiscal 2011 to ¥19,298 million, and net
income totaled ¥11,726 million, a 25.6% increase over fiscal 2011,
marking a record high and our fourteenth consecutive fiscal year of
an increase in net income.
In addition, we increased our dividend per share* for the
thirteenth consecutive fiscal year, to ¥78 per share, consisting of a
¥35 second quarter dividend and ¥43 year-end dividend.
* A 1:1.5 share split was executed in the fiscal year ended March 31, 2004.
9
We will focus on increasing
sales of our Overseas
and Mail Order businesses
in order to achieve
further growth.
Annual Report 2012
Q
A
How did each business segment perform?
Greater profits realized in our Mail Order and
Consumer Products businesses.
In our mainstay Consumer Products Business, comprised of the
Health Care and Household divisions, we saw significant growth in
the health care area including OTC pharmaceuticals and oral hygiene
products in Japan. In particular, sales of new products such as Attonon,
an external medicine for scars, and Tomarina, a medicated toothpaste
for customers bothered by gingival recession, grew steadily. In
addition, existing products also contributed to net sales, including
women’s health medicine Inochi No Haha A, and Shouyou, a medicated
toothpaste that helps prevent gingivitis and periodontitis. Furthermore,
as the need for energy conserving measures increases, heat relief
remedies such as Netsusama Sheet, a cooling gel sheet,
Natsusama Hinyari Gel Mat, a cooling gel mat, and Shirt Cool,
a long-lasting cool spray for clothes, as well as body warmers for
the winter have seen solid sales growth. While sales of body
warmers in the United States decreased due to a warm winter,
sales in China increased significantly as a result of focused
marketing activities aimed at enhancing the product’s visibility.
Moreover, sales of Netsusama Sheet and Ammeltz, an external
anti-inflammatory, increased in Hong Kong and the Southeast Asia
region. As a result, net sales for the Consumer Products Business
rose 1.5% year-on-year to ¥112,424 million for both domestic and
international markets. Of this, growth of net sales in the Overseas
Business rose 4.8% to ¥8,100 million. Due in part to aggressive
domestic marketing, including advertising and sales promotion
activities in the second half of the fiscal year, operating income
decreased 3.4% to ¥18,317 million.
The Mail Order Business, which entails the sale of nutritional
supplements and skin care products in Japan, saw its net sales
exceed the ¥10,000 million mark for the first time ever, achieving a
5.1% increase year-on-year to ¥10,381 million. On the other hand, as
a result of aggressive sales promotion activities involving mainly
advertising and direct mailing to gain new customers and prompt
existing customers to continue buying, operating income fell to ¥132
million, a 57.4% year-on-year decrease. However, we continued to
remain in the black since the fiscal year ended March 31, 2011.
In our Medical Devices Business, we decided to adopt a
selection-and-concentration approach to focus on areas related to
operating rooms and orthopedics, which are expected to grow in the
Japan market. In addition, as of July 31, 2011, the Kobayashi
Pharmaceutical Group sold 100% of its shares in eVent Medical, Inc.
of the United States, a company engaged in the production of artificial
ventilators, in a management buyout deal. As a result, eVent Medical,
Inc. is no longer a consolidated subsidiary. Due to this change, net
sales decreased 14.0% year-on-year to ¥10,476 million, but
operating income increased 16.0% to ¥292 million.
In addition, in order to reduce product disposal costs and the
return rate, we controlled volumes and carefully analyzed previous
results and sales forecasts for new products, seasonal products,
and exclusive products. As a result, product disposal costs were
reduced by ¥200 million to ¥1,800 million, while the product return rate
improved 0.1 percentage points over the previous fiscal year to 2.5%.
generate ideas from an entirely novel perspective at the idea meeting
involving each category’s brand manager, those from development,
research and development, and technical development, and the
executive team. This is because at meetings members only review
ideas separately for each existing category. In addition, as members
involved in product development departments are also responsible for
revamping and adding to existing products, we lacked a specialized
team focused on new product development.
Consequently, in April 2010 we created the New Product
Development Group within the Health Care Division. This organization
is not confined to the categories of OTC pharmaceuticals or oral
hygiene products, but is responsible solely for the development of new
health care products, including those in new categories. Following
this, as revolutionary ideas are gradually being generated within this
group, we also established the New Product Development Group
within the Household Division in April 2012.
Going forward, we will continue to develop new products that
will create new markets under this system in aiming to enhance our
new product contribution rate.
Q
A
Since Japan’s economic future remains uncertain and consumers
remain conservative in their spending habits or seek out low-priced
items, we expect a challenging environment to persist. From a global
standpoint, while the European debt crisis remains unpredictable, the
economy in China and the rest of Asia is expected to continue to grow.
Against this backdrop, the Kobayashi Pharmaceutical Group
will focus its efforts on developing new products with added value
that will provide joy to customers by uncovering their potential needs.
In addition, we will further reinforce our operating base by developing
and steadily implementing a marketing plan aimed at further growth
for our existing brands.
For the domestic market in particular, we will expand the
product lineup for heat relief remedies and body warmers in response
to growing awareness toward energy conservation. We will also step
up our interaction with customers such as through aggressive sales
promotion activities at storefronts.
Q
A
What measures will you take to enhance
the new product contribution rate?
Specialized team for new product development
established within the Health Care and
Household divisions.
As a market-creating, development-based company, the Kobayashi
Pharmaceutical Group is committed to constantly developing new
products under the brand slogan “You Make a Wish and We Make it
Happen.”
Unfortunately, however, the new product contribution rate (net
sales of new products as a percentage of total net sales) in this fiscal
year under review is the lowest we have ever seen at 5.1%. This is
due to the increase in total net sales of products, including existing
products, which caused a relative decrease in the new product
contribution rate. Furthermore, it is becoming more difficult to
Consolidated Earnings Trends
Fiscal year
Fiscal year
Fiscal year
ended
ended
ending
March 31, 2011 March 31, 2012 March 31, 2013
Actual
Actual
Forecast
(¥100 million)
100
(%)
5
1,311
1,320
4
Net Income
186
192
93
117
200
125
3.3
60
40
Operating
Income
New Product Contribution Rate
(%)
40
4.2
80
3.2
1,308
We will strengthen our operating base as
a development-based company and
expect to increase net income for the fifteenth
consecutive term.
Loss on Disposal / Rate of Goods Returned
(¥100 million)
Net Sales
What is the management environment in
the fiscal year ending on March 31, 2013
and what are your earnings forecasts?
2.6
2.5
42
26.7
3
18.0
20
29
20
18
2011
2012
1
0
0
2008
29.4 29.5
2
22
20
30
2009
Loss on Disposal
2010
Rate of Goods Returned
10
9.0
7.4
8.3
2009
2010
15.3
5.3
5.1
2011
2012
0
2008
First Year
First Four Years
Annual Report 2012
10
customers, conduct development and improve products to suit that
country or region’s needs, as well as implement locally-rooted sales
strategies. Furthermore, we aim to invest proactively in marketing
that will enhance the visibility of our products, such as through
television commercials, in order to increase sales.
In addressing growing demand in China, where the market is
expected to expand further, we established Hefei Kobayashi Daily
Products Co., Ltd. in Anhui Province in April 2012, with a new factory
under construction that is expected to be completed in September
2013. In addition, in January 2012, we completed the acquisition of
Grabber, Inc., a body warmer manufacturer in the United States that
has strong distribution ties with hunting and sporting goods specialty
stores. Following this, we aim to further increase our sales of body
warmers in the United States.
By steadily implementing the above plans, we aim to push our
net sales in the Overseas Business over the ¥20,000 million mark in
the fiscal year ending March 31, 2015.
Meanwhile, in the Japan market, we expect to see continued
growth by exploring new channels, such as our Mail Order Business.
The Group considers the Mail Order Business as another one of its
growth businesses and is striving to boost its sales.
In order to expand the Mail Order Business, it is imperative to
win over new customers as well as promote continued purchases of
our products among existing customers. With that in mind, starting in
fiscal 2013, we will shift our marketing focus from conventional
advertisements in newspapers and flyers to television commercials
and Internet ads. While our current customer base in the Mail Order
Business consists mainly of consumers over the age of 50, through
this shift, we can expect to see an expansion in our customer base.
Furthermore, we will proceed with the development and sales of
Category 3 OTC pharmaceuticals as a new product category, in
addition to stepping up the development of new products, focused
on nutritional supplements and skin care products. From there, we
Furthermore, we aim to enhance sales of products including
body warmers and Netsusama Sheet in Asia, which continues to see
robust economic growth. We will accurately identify the needs of
local customers to develop, improve, and actively promote products
that suit the needs of each local region or country.
Meanwhile, in the Medical Devices Business, as of May 31,
2012, 80% of Kobayashi Medical Co., Ltd.’s shares have been
transferred to Mitsubishi Corporation. As a result, this consolidated
subsidiary is now an affiliate accounted for by the equity method.
Following these initiatives, we expect our net sales for the next
fiscal year to rise 0.6% year-on-year to ¥132,000 million, operating
income to increase 3.6% to ¥20,000 million, and net income for the
fiscal year to increase 6.6% to ¥12,500 million, marking our fifteenth
consecutive term of an increase in net income.
We expect our dividend per share to remain the same as the
current fiscal year under review at ¥78 per share.
Q
A
What business will grow and what areas will
the Group focus on in terms of
investment allocation?
We are committed to expanding our operations
with proactive investments in our Overseas and
Mail Order businesses.
As it has already reached a mature stage, the Japan market will likely
not see dramatic growth going forward. As such, for many Japanese
companies, bringing their business to the world stage will be the key
to their future expansion.
The Kobayashi Pharmaceutical Group also places the Overseas
Business as one of its growth businesses. With a goal of reaching
the ¥20,000 million mark in net sales in our Overseas Business by
the fiscal year ending March 31, 2015, we are taking a proactive
stance in investment in order to increase our net sales.
As one of the strategies for our global expansion, we aim to
establish a global brand in each of the six categories that include
Heat, Cool, Wipe, Oral, Scent, and Medicine, in cultivating new
lifestyle trends in international markets.
Another strategy we will employ is to promote localization. We
perceive the growth of emerging markets, such as those in the
Southeast Asia region, as an immense business opportunity, and
have set up a framework within the Asia region by establishing local
subsidiaries in Malaysia in October 2011, in Taiwan in November
2011, and in Indonesia in April 2012. The staff at these local
subsidiaries can and will accurately identify the needs of local
Cash Dividends per Share / Payout Ratio
(¥)
100
26.3
26.9 27.4
28.9
27.2
78
80
(%)
30
18
60
40
12
40
20
6
20
0
0
54
58
66
Establish a global brand within each of the six categories
Promote localization
Aggressive M&A
Mail Order Business
Enhance advertisements using television and the web
Develop and release Category 3 OTC pharmaceuticals
Aggressive M&A
Overseas Business Net Sales
80
62
Overseas Business
Mail Order Business Net Sales
(¥100 million)
100
24
60
Management Plan for Overseas Business and Mail Order Business
(¥100 million)
120
78
62
65
81
65
100
88
80
60
98
103
76
62
40
0
2008
2009
2010
Cash Dividends per Share
11
2011
2012
Payout Ratio
Annual Report 2012
20
0
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
aim to create stories to associate with our products to further appeal
to customers.
In addition, we will take advantage of the inherent feature of the
Mail Order Business to communicate directly with consumers and
deepen our relationship of trust with customers. With that, we hope
to achieve net sales of over ¥20,000 million by the fiscal year ending
March 31, 2015.
Furthermore, we will also continue to enhance our capabilities
in the field of kampo (Chinese herbal medicines). In April 2012, the
Kampo Technical Development Department was established to
stabilize the supply of kampo and reduce costs by cultivating direct
procurement channels for raw ingredients and developing in-house
herbal extract distillation capabilities.
As for M&A aimed at accelerating our growth, we are looking to
take an aggressive approach, while conducting risk analysis and
validating the effectiveness of potential deals.
Q
A
What types of CSR initiatives are you taking?
We are striving to enhance our quality,
ties with the customer, and compliance.
In the fiscal year under review, we focused our CSR efforts on pursuing
quality, deepening ties with customers, and strengthening compliance.
As the pursuit of quality embodies the essence that quality is
the life of a company, we persistently strive to improve our product
quality from a customer-centric viewpoint. In particular, in recent
years demand is on the rise for so-called “easy to use and dispose of
products,” such as products with a universal design that is easy and
safe for all consumers to handle, and container designs that allow
easy separation during waste disposal. As such, in addition to the
quality of the product itself, we believe it is important to develop
products that will meet consumer needs throughout all stages of use,
from purchase to disposal. Furthermore, we have established a
Quality Assurance Policy which provides guidelines on quality that all
employees must follow. We will steadily implement this policy to
inspire ownership in our product quality in providing products and
services to our customers.
In our effort to deepen ties with customers, we held the 1 yen
no Omoi Campaign from June 1, 2011 to March 31, 2012 in support
of the earthquake recovery effort. In this campaign one yen will be
contributed to the Kobayashi Pharmaceutical Group Aoitori Fund for
every one of our products purchased. Thanks to the support and
cooperation of customers, the campaign collected a total of
¥290,564,930. This amount was then topped off with a contribution
from the Group for a total of ¥300 million, which was donated to ten
towns and cities affected by the disaster. In addition, employees
conducted volunteer activities as another one of our initiatives to
support the recovery effort. Volunteer events included cleaning of
restrooms in evacuation centers, hosting community fairs for children
in disaster-affected areas, and hosting of a Christmas party at local
nurseries and kindergartens. Through such efforts reflective of the
Kobayashi Pharmaceutical Group, we sent out our regards to people
in the area hoping to put a smile back on their face. As the
disaster-affected areas still require further assistance, we are
committed to continuing with these efforts going forward.
As for strengthening compliance, we aimed to increase
awareness of compliance among all Group employees through
regular compliance training for all executive officers and all
management level employees as well as monthly Compliance
e-Learning Sessions for all employees. In the fiscal year ended March
31, 2012, several Japanese companies faced management crises
due to scandals related to their corporate governance. At the
Kobayashi Pharmaceutical Group, each executive officer’s role is
clearly defined. As the President, my role is to carry out business
operations, while the chairman is to fulfill a supervisory role as a
management auditor. Furthermore, one outside director and two
outside auditors actively provide comments to the board of directors
and board of corporate auditors.
Going forward, we will continue to strive to gain the trust of our
stakeholders, which forms the basis for maximizing the Kobayashi
Pharmaceutical Group’s corporate value.
Q
A
Do you have a message for shareholders
and investors?
We will achieve future growth with management
that “thinks ten steps ahead.”
Time is now progressing so fast that we are using the word “super”
to describe the speed of things. We are in a time when “thinking one
step ahead” alone will not get you far. That is, we must have a
management that “thinks ten steps ahead” to constantly forecast
changes in market trends. With this new perspective, we will firmly
execute our plans and strategies and steadily achieve results with
tenacity in achieving future growth.
We look forward to your continued support of the Kobayashi
Pharmaceutical Group.
Annual Report 2012
12
Overseas Business
Special Feature
Offering Products to Overseas Consumers Delivering our
“You Make a Wish and We Make it Happen” Philosophy
For many Japanese companies overseas
markets represent the key to unlocking future
growth. The Kobayashi Pharmaceutical Group
has also positioned its Overseas Business as a
key growth business, and going forward, we
plan to aggressively invest in this business in
order to reach the target of ¥20,000 million in
net sales by the fiscal year ending March 31,
2015.
Growth in the Overseas Business – Important Issues Facing
Mid-term Growth Strategies
¥20,000
million
¥12,000 million
¥8,100 million
2012
2013
2014
(Forecast)
2015
(Target)
Netsusama Sheet TV
Commercials Aired Around
the World
China
Taiwan
United Kingdom
Hong Kong
In Hong Kong, we are airing TV commercials that market
the product as a heat relief remedy, in addition to its
primary use against fevers.
Malaysia and Singapore
In Malaysia, the same TV commercial is aired
in English, Mandarin Chinese, and Malay, while
in Singapore these commercials are aired in
English and Mandarin Chinese.
Thailand
Indonesia
13
Annual Report 2012
Tracing the History and Development of
Our Overseas Business
Growth Centered on the United States, China
and the United Kingdom
The Kobayashi Pharmaceutical Group’s Overseas Business can be
traced back to the 1970s when products were first exported to
Southeast Asia.
In 1998, we established subsidiaries in China and the United
States, which marked the full-fledged start of the Overseas Business.
The following year in 1999 we launched Shuang Hua Lei (Sawaday),
a toilet air freshener, in China, and Be KOOOL (Netsusama Sheet),
a cooling gel sheet, in the United States. Later we set up subsidiaries
in the United Kingdom, Hong Kong and Singapore as part of our
efforts to strengthen our sales structure in each region.
Body warmer products, which represent our core products
today, were released in the United States under the name Cura-Heat
in 2002, and in China as Nuan Bao Bao in 2003. Later in 2006 we
acquired HeatMax Co., Ltd., a major body warmer manufacturer
located in the United States, and began to significantly increase our
market share for body warmer products in the United States market.
Overseas Marketing Strategy
The Kobayashi Pharmaceutical Group has commercialized products
under the philosophy “You Make a Wish and We Make it Happen,” and
created new markets through sales promotion activities and
developing product names that easily convey the inherent value
found in each. In our Overseas Business, we carefully select
products sold in Japan that will fulfill the philosophy “You Make a
Wish and We Make it Happen” for consumers outside of Japan. We
then aptly convey the value of these products in a format that
captures the interest of consumers in each geographic location.
These process has formed our approach to cultivating new markets
around the world.
For example, in the United States body warmers were generally
used during the wintertime for outdoor activities such as hunting and
sports, but we recognized there was untapped demand for body
warmers to be used as a type of warm compress for shoulder and
lower back pain. As a result, we released Cura-Heat and helped
expand the market by appealing its uses in everyday life.
In contrast, body warmers represented an entirely new concept
in China. Yet, people around the world share the common desire to
warm up their body during cold weather. As a result, we launched a
body warmer product called Nuan Bao Bao in 2003. Our TV
commercial campaign reached many consumers and raised the
profile of our body warmer product immensely, which helped us to
establish an entirely new market for body warmers in China.
We also released a single sheet version of our popular
Netsusama Sheet, which is sold in six-sheet packs in Japan, to
markets in Southeast Asia under the name KOOL FEVER. The
product’s unique name and inexpensive single sheet format has
made it quite popular among consumers in the region.
Ratio of Sales by Region for Overseas Business
Ratio of Sales by Product Type for Overseas Business
Other
External
anti-inflammatory
19%
United Kingdom
6%
China
16%
Total for
Fiscal 2012
¥ 8,100
million
9%
United States
38%
Cooling gel
sheets
17%
Other
9%
Total for
Fiscal 2012
¥ 8,100
million
Body warmers
65%
Asia
21%
History of Our Overseas Business
December 1996 Launched sales of cooling gel sheet Toirotie (Netsusama Sheet) in
Hong Kong
September 1998 Established joint venture company Shanghai Kobayashi Friendship
Daily Chemicals Co., Ltd. in China
September 1998 Established Kobayashi Healthcare, Inc. in the United States
Launched sales of toilet air freshener Shuang Hua Lei (Sawaday)
January 1999
in China
Launched sales of cooling gel sheet Be KOOOL (Netsusama
January 1999
Sheet) in the United States
Launched sales of cooling gel sheet KOOL’n’SOOTHE
July 2001
(Netsusama Sheet) in the United Kingdom
Established Kobayashi Healthcare Europe, Ltd. in the United
August 2001
Kingdom
Established Kobayashi Pharmaceutical (Hong Kong) Co., Ltd. in
June 2002
Hong Kong
Launched sales of deodorizing air freshener Xiang Ju Yuan (Oheya
August 2002
no Shoshugen) in China
Launched sales of body warmer Cura-Heat in the United States
August 2002
December 2002 Made Shanghai Kobayashi Friendship Daily Chemicals Co., Ltd. a
wholly-owned subsidiary and changed its name to Shanghai
Kobayashi Daily Chemicals Co., Ltd.
Launched sales of body warmer Nuan Bao Bao in China
October 2003
Launched sales of body warmer Cura-Heat in the United Kingdom
January 2004
Launched sales of cooling gel sheet Bin Bao Tie (Netsusama
October 2005
Sheet) in China
November 2006 Made HeatMax, Inc., a body warmer manufacturer in the United
States, a consolidated subsidiary
Established Kobayashi Pharmaceutical (Singapore) Pte. Ltd. in
October 2009
Singapore
Launched sales of denture cleanser Taifuchin (Toughdent) in China
June 2010
Established Kobayashi Healthcare (Malaysia) Sdn. Bhd. in Malaysia
October 2011
November 2011 Established Kobayashi Pharmaceutical (Taiwan) Co., Ltd. in Taiwan
Made Grabber, Inc., a body warmer manufacturer in the United
January 2012
States, a consolidated subsidiary
Established Hefei Kobayashi Daily Products Co., Ltd. in China
April 2012
Established PT. Kobayashi Pharmaceutical Indonesia in Indonesia
April 2012
Annual Report 2012
14
Future our Overseas Business
– Strategic Targets and Measures
Aspiring to Reach ¥20,000 Million in Net Sales
by 2015
By the year 2050, Asia will account for more than half of the entire
world’s gross domestic product (GDP), ushering in the “century of
Asia.” This is why the Kobayashi Pharmaceutical Group recognizes
that expanding the presence of its Overseas Business in Asia and
capitalizing on robust economic growth taking place there will be keys
to its future growth.
In the fiscal year ended March 31, 2012, the Kobayashi
Pharmaceutical Group’s net sales from its Overseas Business stood at
¥8,100 million. Going forward, we will strive to expand our sales primarily
in the Asia region with the ultimate goal of reaching ¥20,000 million in
net sales by the fiscal year ending March 2015. In order to achieve
this ambitious target, we have established two key strategies that
consist of creating six global brands and promoting greater localization.
Nuan Bao Bao body warmers
sold in China
different markets will use this product differently. Some will use it to
cool the forehead during a fever, while others will use it to cool the
body during hot weather or to cool off a warm sensation felt by the
body or to treat light-headedness. We will aim to boost sales by
modifying products to suit the needs of each culture and customs and
by developing a main catch copy based on the needs of each market.
The Six Global Brands
Heat
Medicine
Used to heat cold
parts of the body
and treat physical
ailments
Pharmaceuticals
used to treat
physical
ailments
Cool
Used to cool
fevers and warm
sensations
Creating
Worldwide
Lifestyle Trends
in Six
Categories
Scent
Enriching one’s
daily life with
fragrances
Wipe
Oral
Single wipe
cleaning
power
Used to benefit
oral health
Promoting Localization
Cura-Heat body warmer sold
in the United Kingdom
Establishing Six Global Brands
We plan on establishing powerful global brands in the six categories of
Heat, Cool, Wipe, Oral, Scent and Medicine in order to offer products
to consumers around the world that deliver on the slogan of “You
Make a Wish and We Make it Happen.” These six brands consist of
body warmers for Heat, Netsusama Sheet for Cool, Megane Cleaner
Fukifuki, a wet tissue for cleaning eye glasses, for Wipe, Toughdent for
Oral, Sawaday for Scent, and Ammeltz, an external anti-inflammatory,
for Medicine. Each of these brands will enable us to help create new
lifestyle habits throughout the world.
The fundamental brand concept of each will be shared around
the world, while the main catch copy conveying how to use each
product will be developed based on the needs of each country and
region. This will enable us to more effectively communicate with our
customers locally.
For example, the fundamental brand concept for Netsusama
Sheet, or cooling, is the same around the world, but consumers in
15
Annual Report 2012
Localization is essential for correctly understanding the needs of
consumers in each country and region. We believe that by establishing
locally incorporated subsidiaries and pursuing a localized marketing
strategy led by staff of incorporated subsidiaries well versed in the market
we will be able to boost our sales in that particular country or region.
The Kobayashi Pharmaceutical Group has established new
locally incorporated subsidiaries in Malaysia, Taiwan and Indonesia
since October 2011 as part of its goal to expand sales in Asia. Until
now the United States accounted for about 40% of sales from our
Overseas Business, but going forward we will look to expand sales
in China and Asia so that these markets combined provide about
half of our Overseas Business sales by the fiscal year ending March
31, 2015.
In January 2012 we acquired Grabber, Inc., a body warmer
manufacturer in the United States, in order to further expand our
sales of body warmer products in the United States. Grabber
Be KOOOL sold in the United States
Continuing with an Aggressive Investment
Program for the Following 3 Years with a
Focus on Sales Growth
Over the next three years we will embark on an aggressive
investment program aimed at accelerating the growth of our
Overseas Business and achieving ¥20,000 million in net sales by the
fiscal year ending March 31, 2015. While ensuring profitability, we will
first focus on boosting sales and expanding our business presence
internationally.
Specifically, we will actively roll out TV commercials and sales
promotion activities in each country and region centered on our body
warmers which currently account for more than 60% of the sales in
our Overseas Business, and cooling gel sheet. Toirotie (Netsusama
Sheet) sold in Hong Kong also has shown demand exists for use as
a heat relief remedy, and we are actively airing TV commercials in
order to encourage this type of use more. Also, in Taiwan we have
begun a TV commercial campaign for body warmer Xiao Bai Tu in
order to boost sales in the market.
The Overseas Business represents one of the Kobayashi
Pharmaceutical Group’s growth businesses. Going forward, we will
continue to grow the business by offering products to consumers
around the world that deliver on the slogan of “You Make a Wish and
We Make it Happen” and continually provide people and society
with comfort.
Anmeiru sold
in Hong Kong
maintains strong sales channels with hunting and sports specialty
stores in the United States. On the other hand, HeatMax, Inc.,
acquired in 2006, also retains strong sales channels with general
mass market retailers. Going forward, we plan to leverage both
companies’ sales channels to grow our business presence in the
United States even further.
In April 2012, we established Hefei Kobayashi Daily Products
Co., Ltd. in China’s Anhui Province and began construction on a
new factory set to open in September 2013. This new factory will
manufacture body warmers, cooling gel sheets and deodorizing air
fresheners, among other products, which will be shipped to
China and Southeast Asia, where demand is expected to grow
going forward.
Ratio of Sales by Region for Overseas Business in
Fiscal 2015 (Target)
Other
United States
United Kingdom
Total for
Fiscal 2015
¥ 20,000
million
China /Asia
Sawaday, a deodorizing
air freshener sold
in China
48%
Kobayashi Pharmaceutical Group’s Overseas Subsidiaries
Sales Base
Manufacturing Base
Kobayashi Healthcare
Europe, Ltd.
New Site
United Kingdom
Grabber, Inc.
China
New Site
United States
HeatMax, Inc.
Kobayashi
Healthcare, LLC
Hefei Kobayashi Daily Products Co., Ltd.
New Site
(Hong Kong) Co., Ltd.
Shanghai Kobayashi Daily
Chemicals Co., Ltd.
New Site
(Taiwan) Co., Ltd.
Kobayashi Healthcare (Malaysia) Sdn. Bhd.
Asia
(Singapore) Pte., Ltd.
New Site
PT. Kobayashi Pharmaceutical Indonesia
Annual Report 2012
16
Business Overview
Health Care
Division
Health Care Division Net Sales
(¥100 million)
500
400
OTC Pharmaceuticals,
Oral Hygiene and Food Products
399
400
418
432
450
2008
2009
2010
2011
2012
300
200
With the aim of enhancing quality of life, we are focusing on
new product development that achieves our “You make a
wish and we make it happen” philosophy, including kampo
(Chinese herbal medicine).
100
0
*
*
Total of domestic and overseas sales for three categories including OTC
pharmaceuticals, oral hygiene and food products.
Intra-company transactions excluded.
Eyebon
Breathcare
An eye wash solution that
flushes out dirt and foreign
particles from the eye
An oral breath freshener capsule
that refreshes the breath from the
stomach
Shouyou
A medicated
toothpaste
containing
five types of
completely natural plant
extracts that help
prevent gingivitis and
periodontitis
Naicitol 85
A Chinese
herbal medicine
that promotes the breakdown
and metabolism of fat
Market Trends
Healthcare Market Expanding
with the Growing Importance of
Quality of Life
Consumers in Japan are growing more
aware of preventive medicine and
self-medication on the back of the
growing importance of quality of life as
well as government requirements for
specific health screening programs and
specific health guidance. As a result,
healthcare-related markets will grow
further going forward.
In particular, kampo (Chinese herbal
medicine), which has proven effective at
17
Annual Report 2012
preventing illness, represents one such
market that we expect will see solid
growth thanks to more health conscious
consumers and the need to curb medical
expenses.
Review for the Fiscal Year Ended
March 2012
Products Creating New Markets
and Core Products See Solid
Performance
Attonon, an external medicine for scars
released in March 2011, broke through
¥1 billion in sales after only eight months
thanks to the strong support it has
received from female consumers troubled
by blemishes. Tomarina, a medicated
toothpaste for customers bothered by
gingival recession launched in September
2011, has also seen strong sales,
contributing to our overall sales and profits.
By category, net sales of OTC
pharmaceuticals rose firmly 4.5% year
over year to ¥22,900 million, as sales of
core products Eyebon, women’s health
medicine Inochi no Haha A and kampo
medicine for obesity Bisrat Gold a rose
6.7%, 11.1% and 3.0%, respectively,
making a positive contribution to sales.
However, sales and the market share of
Naicitol, an OTC pharmaceutical for
Market Share (Kobayashi Pharmaceutical Research)
Obesity
alleviating
medicine
35.1%
Oral breath
freshener
Eye wash
62.1%
obesity, which has been on sale for six
years, declined. The market for obesity
related products has continued to see
growth amid rising consumer awareness
toward metabolic syndrome, but the
market shrunk temporarily due to
increasingly intense competition and
price reductions. Nevertheless, because
of needs for a greater sense of
effectiveness, we plan to continue with
marketing activities aimed at cultivating
new demand going forward.
Net sales of oral hygiene products
rose solidly 4.7% year on year to
¥16,200 million, underpinned by
heightened consumer awareness toward
oral health care in recent years. Among
these, sales of Toughdent, a denture
cleanser, and denture adhesive Tough
Grip grew significantly by 7.0% and
7.3%, respectively, while sales of
medicated toothpaste Shouyou and
interdental cleaning tool Ito Yoji also saw
solid growth at 3.7% and 6.7%,
respectively.
Net sales in the food segment where
we sell nutritional supplements and foods
for specified health uses predominantly
through the drug store channel increased
steadily 2.4% to ¥5,800 million.
As a result, overall net sales of this
division rose 4.3% year on year to
¥45,000 million.
inclination toward higher quality and
healthier lifestyles. In addition, there is
growing demand for products that
alleviate discomfort and problematic
symptoms not defined as any specific
illness. Attonon and Tomarina represent
proprietary products developed with
these needs in mind, and both have won
over many female consumers in Japan.
In order to respond to this demand,
we will continue to focus on new product
development that emphasizes our quality
made possible only by a pharmaceutical
company under an exceptionally
customer-focused vision that aspires to
enhance our customers’ quality of life.
Specifically, we will continue to focus on
identifying and commercializing kampo
that remain largely unknown.
Released in spring 2012, Cleansil is
a novel intestinal remedy that works to
normalize the digestive system using
medicinal carbon to absorb waste
matter1 and discharging this together
with the stool by means of four different
herb medicines. This product was
created to meet the needs of customers
wanting to improve the health of their
digestive system and help improve quality
of life.
Going forward, we will strive to
create new markets by proposing new
lifestyle trends and capturing the latent
needs of our customers.
Outlook for the Fiscal Year Ending
March 2013
1 Human waste including retained feces and
intestinal gas.
81.4%
New Products
Released in March 2011
Attonon
Attonon is an external medicine for scars that has
received strong support from many female
consumers that want to treat blemishes.
Tomarina
Released in
September 2011
Tomarina is a medicated toothpaste to meet the
needs of consumers bothered by gingival
recession. The toothpaste is a compound
featuring four medicinal ingredients, including an
ingredient that promotes blood circulation, a
tissue repairing ingredient, an anti-inflammatory
ingredient and an anti-bacterial ingredient.
Focusing Efforts on Kampo
Medicines and the Development of
Products that Create New Markets
Cleansil
The approaches of self-medication and
preventive medicine are widely practiced
today, and going forward we expect that
consumers will continue to increase their
The number of people in Japan troubled by intestinal
issues is on the rise due to lifestyle changes and a
shift to Western dietary habits. This is why we
decided to develop a novel intestinal remedy that
helps normalize the digestive system functions.
Released in March 2012
Annual Report 2012
18
Business Overview
Household
Division
Household Division Net Sales
(¥100 million)
800
600
Deodorizing Air Fresheners, Sanitary Products,
Household Sundries and Body Warmers
646
649
648
644
641
2008
2009
2010
2011
2012
400
In order to appeal to the discerning eye of consumers, we
will seek out exceptionally customer-focused ideas that will
enable us to develop products with an even greater added
value as well as focus on sales strategy planning and
marketing activities.
200
0
*
*
Total sales for the four categories of deodorizing air fresheners, sanitary products,
household sundries and body warmers in Japan and overseas.
Intra-company transactions excluded.
Netsusama
Sheet
Oheya no
Shoshugen
Oheya no Shoshugen is a
large-capacity deodorizing air
freshener which is activated by
lifting the filter paper
Netsusama Sheet is a
cooling gel sheet that
contains cooling beads
Ekitai
Bluelet
Okudake
Kiribai Haru
Ekitai Bluelet Okudake is a
toilet bowl cleaner that is
placed in the toilet tank lid sink
Kiribai Haru is a
body warmer
applied to clothing
Market Trends
Significant Changes in Consumer
Values Seen Amid Push for Lower
Priced Daily Sundries
Consumer values are seeing major changes,
as evidenced by a stronger inclination to buy
consumables based on price as well as
select inexpensive items and only those that
are really needed. Private brands and
low-priced products have emerged out of
this trend.
On the other hand, items with simple
packaging and refillable products have
gained support out of concern for the
environment. Moreover, products that are
reputed to relieve the effects of hot or cold
19
Annual Report 2012
temperatures during the summer and
winter have been gaining attention as
consumers become more conscious of
energy conservation.
Review of the Fiscal Year Ended
March 2012
Sales of Heat Relief Remedies and
Body Warmers Strong Amid
Growing Demand for Electricity
Conservation Measures
In the fiscal year under review, the
Kobayashi Pharmaceutical Group
launched new products that create new
and expand existing markets. Among
these, we released Kutsu Cool, a spray
used to cool the inside of shoes, and
Shirt Cool Mild Mint, a long-lasting cool
spray for coating clothing that features
floral scents, as part of our efforts to
expand our lineup of heat relief remedies.
By category, net sales of deodorizing
air fresheners declined 3.3% year on
year to ¥29,700 million. This was
because we were forced to restrict the
daily shipment volume for some of our
deodorizing air fresheners for several
months due to damages incurred at
Sendai Kobayashi Pharmaceutical Co.,
Ltd. in the wake of the Great East Japan
Earthquake.
However, sales of sanitary products
were firm, rising 1.9% to ¥14,300 million,
Market Share (Kobayashi Pharmaceutical Research)
Deodorizing
cleaner
for toilets
Deodorizing
air
freshener
Cooling gel
sheet
76.0%
32.3%
50.4%
given heightened demand for electricity
conservation measures in the summer
and winter. The summer months saw
strong sales of heat relief remedies like
the Netsusama brand (up 6.2%),
including Netsusama Sheet, a cooling
gel sheet, and Netsusama Hinyari Gel
Mat, a cooling gel mat, while the winter
months also saw steady sales of body
warmers (up 4.4%). As such, sales from
both seasons made positive
contributions to overall sales and profits.
As a result, overall net sales of this
division declined slightly 0.5% to
¥64,100 million due to the impact of a
downturn in sales of deodorizing air
fresheners.
March 2013
Strengthening Development of
Products that Create New Markets
and Promoting Thorough Cost
Reduction Activities
As consumers’ mindsets deteriorate and
they have a stronger inclination toward
low-priced products, we will focus on
new product development, the
underlying source of growth in the
Household Division, in order to unearth
new demand and identify the latent
needs of consumers. In April 2012, we
established the New Product Development
Group within the Household Division’s
Marketing Department to create new
development themes that transcend
existing categories. Going forward, we
will quickly respond to changes in the
market to meet the needs of our
customers in real time.
For existing brands, we will engage
in proactive sales activities based on
marketing plans formulated for each
brand. Among these, for deodorizing air
fresheners, which account for a large
share of the Household Division’ s sales,
we will develop new products that
capture the needs of consumers and
align our long-standing brand names
with Shoshugen and Sawaday to
engage in more effective advertising
campaigns. This will help us raise the
visibility of our brands among
consumers. As part of this effort, in
spring 2012 we released Sawaday
Happy, a toilet air freshener with an
all-new fragrance, and Shoshugen
Aroma Pot, a deodorizing air freshener
with a genuine aromatherapy fragrance.
With demand for electricity
conservation measures set to continue,
we have released products that provide
new value, such as Head Cool, a
cooling spray for the head intended for
use in the summer, and in the process
enhanced our lineup of heat relief
remedies. We will also promote
thorough cost reduction activities in
order to accommodate demand for
low-priced daily sundries, given the
emergence of private brand products
and low-priced products.
Going forward, as a developmentbased company, we plan to create new
products with greater value that achieve
our philosophy of “You make a wish and
we make it happen,” and pursue
thorough cost reduction activities as
part of our efforts to boost sales and
secure profits.
New Products
Released in
March 2011
Released in
March 2012
Kutsu Cool and Head Cool
Kutsu Cool, a cooling spray for inside of shoes,
and Head Cool, a cooling spray for the head,
were released as part of our heat relief remedies.
Kutsu Cool uses a cooling ingredient sprayed on
the inside of shoes to provide a long-lasting cool
sensation because the ingredient is water-soluble
and activated whenever the feet perspire. Head
Cool offers a direct spray nozzle that can be
used as needed to cool the head, which is one
of the most sensitive body parts to heat, during
hot weather.
Sawaday Happy
Released in
March 2012
Sawaday Happy is a room deodorizing air freshener
that comes in four new fragrances: blackberry,
baby powder, French vanilla and fresh laundry.
Annual Report 2012
20
Business Overview
Overseas Business
Overseas Business Net Sales
(¥100 million)
100
We will define strategic brands and actively invest to
reach ¥20,000 million in net sales for the fiscal year ending
march 2015.
80
60
62
65
65
2008
2009
2010
78
81
2011
2012
40
20
0
Business Overview
Strengthening Sales with Clearly
Defined Strategic Brands
The Kobayashi Pharmaceutical Group’ s
Overseas Business first began with
exports to Southeast Asia in the 1970s.
In addition to our business in China, the
United States, the United Kingdom,
Hong Kong and Singapore, since
October 2011, we have established
locally incorporated subsidiaries in
Malaysia, Taiwan, and Indonesia as part
of an effort to expand our presence
overseas. Today, exports also continues
to occupy an important part of our
operations as we currently sell
Kobayashi Pharmaceutical branded
products in more than 20 countries
around the world.
The business has six clearly
defined strategic brands; namely, body
warmers, cooling gel sheet Netsusama
Sheet, glasses cleaning wet towelettes
Megane Cleaner FukiFuki, denture
cleanser Toughdent, toilet air freshener
Sawaday, and Ammeltz, an externalantiinflammatory. Each of these brands is
primarily promoted at our overseas
subsidiaries. Among these, body
warmers stand as our core product,
comprising more than 60% of net sales
in the Overseas Business.
March 2012
Proactively Undertaking M&A
and Marketing Activities Aimed
at Growing Sales
As a result of focusing our efforts toward
expanding sales of body warmers and
Netsusama Sheet, net sales of our
21
Annual Report 2012
Overseas Business grew 4.8% year over
year to ¥8,100 million. The segment
remained profitable, continuing on with
success seen in the previous fiscal year,
as operating income stood at ¥190
million after the amortization of goodwill.
In the United States, in which body
warmers account for nearly 90% of
sales, net sales decreased year on year
by 13.9% to ¥3,100 million, due in part
to the unusually warm winter weather.
Meanwhile, in January 2012, we
completed the acquisition of Grabber,
Inc., a U.S.-based body warmer
manufacturer that specializes in sales
to sporting equipment specialty
stores. Consequently, significant
growth in our body warmer sales is
also anticipated in the North America
market.
In Asian markets including China,
sales of Netsusama Sheet performed
solidly, with an increase of 26.9% year
over year to ¥2,900 million. In
particular, as a result of proactive
marketing activities, such as
advertising and sales promotions, body
warmer sales in China grew by 18.9%
year on year, reaching ¥1,000 million.
Outlook for the Fiscal Year
Ending March 2013
Promoting Localization and
Accelerating Investment Aimed
at Reaching Net Sales of ¥20,000
million in 2015
The Group aims to reach net sales of
¥20,000 million in the fiscal year
ending March 2015 by boosting sales
of its six strategic brands including
body warmers.
We will promote localization as a
means to expanding net sales. Each
country and region has their own
culture and lifestyle habits, and so
products in demand and the use of
these products is different for each
market. In order to precisely capture
local customer needs and implement
product development and sales
strategies that suit a particular country
or region, we will establish local
subsidiaries to more ahead with
business localization that cannot be
accomplished through exports alone.
While we have already invested in
television commercials in countries such as
China and Hong Kong, we will further
accelerate our marketing efforts through
advertisements and sales promotions in
order to boost product sales even further in
the United States and Asia, including the
Chinese market. In addition, we aim to
proactively seize investment opportunities,
including M&A and capital tie-ups with
local businesses.
We hope to expand our footprint
under the goal of increasing sales by
48.1% to ¥12,000 million in fiscal
2013 in order to reach the ¥20,000
million mark in the fiscal year ending
March 2015.
Mail Order Business
Leveraging our proprietary expertise and “quality made
possible only by a pharmaceutical company” to ensure
our dominance in the mail order market, which is faced
with more intense competition.
Mail Order Business Net Sales
(¥100 million)
120
100
88
80
98
103
76
62
60
40
20
0
2008
2009
2010
2011
2012
Market Trends
Competition Heating Up in the
Growing Mail Order Market
The mail order market has grown beyond
the size of the department store and
convenience store markets. Because of its
robust growth, however, competition has
grown more intense due to the nonstop
influx of newcomers to the market. In
addition, as a result of the widespread
penetration of smartphones and tablet
computers, mail order sales via mobile
phone sites and the Internet are also on
the rise.
Kobayashi Pharmaceutical has been
committed to developing its proprietary
expertise and expanding its business
presence since it began selling nutritional
supplements through the mail order sales
channel in 1999. With an emphasis on
“quality made possible only by a
pharmaceutical company,” today we sell
around 150 products in the Mail Order
Business, including nutritional
supplements, skincare products, and
hair-restorer products.
March 2012
Expanding Sales Through
Proactive Advertisements and
Sales Promotion Activities
In the fiscal year under review, new
products such as cosmetics Hifmid
(moisture foundation) were brought to
market, while sales of existing products
also rose, resulting in a 5.1% year on year
increase in net sales to ¥10,381 million.
We continued to maintain positive
operating income. However, due to our
continuous efforts in sales promotions
targeting both new and existing customers
through proactive advertisements and
dissemination of direct mail, operating
income decreased by 57.4% from the
previous fiscal year to ¥132 million.
New Products
March 2013
New Product Development and
Proactive Advertising Aimed at
Reaching the ¥20,000 Million
Mark in Sales in 2015
The Kobayashi Pharmaceutical Group’ s
primary customer base for mail order sales
is people aged 50 and older. Since this
consumer segment tends to be more
health-conscious, we will focus new
product development initiatives on
nutritional supplements and skincare
products. In addition, we will also release
Category 3 OTC pharmaceuticals, which
has emerged as a new category.
We aim to expand our customer base
and increase sales through television
commercial and advertising in new media
such as the internet, in addition to
conventional advertisements in
newspapers. Moreover, in response to
customer requests for making online
purchases available through mobile
phones in addition to computers, we
launched a mobile website in May 2012.
Going forward, we also plan to launch a
smartphone compatible website.
Emphasizing our “quality made
possible only by a pharmaceutical
company” and utilizing our Customer
Service Center, we aim to build a
relationship of trust with our customers to
further expand our Mail Order Business.
Our ultimate goal is to achieve net sales of
¥20,000 million in the fiscal year ending
March 2015.
Released in February 2012
Hifmid (Moisture Foundation)
Hifmid (Face powder)
Items have been added to the Hifmid series,
including a moisture foundation containing type II
natural ceramide, which gives a natural, smooth
finish, while moisturizing the skin, and face
powder that prevents foundation wear off.
Resveratrol
Released in
March 2012
Resveratrol is a nutritional supplement containing
resveratrol, a world renowned substance derived
from grape stems, in combination with
Peucedanum japonicum and astaxanthin. This
product is recommended for consumers that wish
to maintain their health and achieve longevity.
Annual Report 2012
22
Business Overview
The Medical Devices Business is operated by Kobayashi
Medical Co., Ltd.1, an equity-method affiliate that imports
and sells medical devices sourced overseas in Japan and
Medicon Inc.2, an equity-method affiliate that imports and
sells medical devices sourced from US firm C. R. Bard,
Inc. in Japan.
1 80% of the shares in Kobayashi Medical Co., Ltd., were
transferred to Mitsubishi Corporation on May 31, 2012.
2 A joint venture with US firm C. R. Bard, Inc.
Medical Devices Business Net Sales
(¥100 million)
150
120
107
As populations age around the world the
medical devices market continues to grow
in both developed and emerging nations.
In Japan, the national government has
established a new growth strategy called
the “Healthy Nation Strategy Through
Life-Innovation” and set up the Medical
Innovation Promotion Office within the
Cabinet Secretariat in January 2011 as
part of its focus on promoting medical
innovations through the commercialization
of cutting edge technologies in the fields
of medical devices, pharmaceuticals and
regenerative medicine.
As demand rises for the quick
detection of illnesses and reduced burden
on patients during diagnosis, the number
of mechatronics and electronics
manufacturing companies moving into the
market has increased, indicating that the
medical device industry is quickly
expanding its reach.
March 2012
121
121
104
90
60
30
0
2008
Market Trends
113
100% of its shares in eVent Medical, Inc.
of the United States in a management
buyout deal. As a result, eVent Medical
Inc. is no longer a consolidated subsidiary
of the Kobayashi Pharmaceutical Group.
As a result, net sales decreased
14.0% year on year to ¥10,476 million, but
operating income increased 16.0% to
¥292 million.
Major Products Distributed by
Kobayashi Medical Co., Ltd.
Acu-Loc
(Manufactured by
Acumed LLC)
Kobamed Acrofix
(Manufactured by
Kobayashi Medical
Co., Ltd.)
2009
2010
2011
2012
Notice
As of May 31, 2012, 80% of the shares
of our consolidated subsidiary,
Kobayashi Medical Co., Ltd., have been
transferred to Mitsubishi Corporation.
As a result, this consolidated subsidiary
is now an affiliate accounted for by the
equity method.
Major Products Distributed by
Medicon, Inc.
Bard I.C. Silver
Foley Tray
Bard Vascular Stent
(E-LUMINEXX)
Increased Profits Through a
Selection-and-Concentration
Approach Focused on Key Domains
Kobayashi Medical Co., Ltd. focused on
improving product quality based on the
corporate philosophy of “delivering safe
and secure medical devices to patients.”
At the same time, the Company moved
forward with a selection-and-concentration
approach to focus on orthopedic and
operating room-related products, which
are expected to see greater demand in the
Japan market.
In addition, as of July 31, 2011, the
Kobayashi Pharmaceutical Group sold
23
Annual Report 2012
System 5000™
(Manufactured by
Conmed Corporation)
Parker Flex-Tip™
Tracheal Tube
(Manufactured by
Parker Medical, Inc.)
Bard X-Port isp
(Groshong Catheter
Type)
Bard Mesh
(Light PerFix Plug)
Corporate Governance
Building Stakeholder Confidence Aimed at Maximizing
Corporate Value
The maximization of corporate value is a fundamental
management policy of the Kobayashi Pharmaceutical Group. In
executing this policy, it is of major importance to earn the trust of
our stakeholders, including shareholders and investors.
Therefore, we are committed to enhancing our corporate
governance through developing a system that ensures
transparent management practices and undertaking the
appropriate disclosure of information.
Ensuring Management Transparency
Monitoring Management From Multiple Viewpoints
The Kobayashi Pharmaceutical Group has adopted an executive officer
system to separate management from business operations, and implements
a wide range of measures in order to ensure transparency in management.
Group Officers Meeting
The Group Officers Meeting (GOM) consists of executive officers and
statutory auditors that meet twice monthly to review significant matters
relating to business operations. Advice is occasionally sought from
professionals such as corporate lawyers regarding matters relating to
material management challenges in order to enable appropriate and quick
decision making.
Board of Directors
We have selected outside directors since 2008 with the purpose of
strengthening the board of directors’ supervisory function. The board of
directors consists of six directors, including one outside director, and
constantly monitors the status of business operations by meeting monthly or
when necessary to determine important matters concerning the
management of the company and to check deliberations made at the GOM.
Board of directors meetings are also attended by all four corporate auditors,
including two outside auditors to ensure that Kobayashi Pharmaceutical
Group’s internal system of checks and balances is operating sufficiently.
Board of Corporate Auditors
Kobayashi Pharmaceutical has a board of corporate auditors, and has
appointed two outside auditors that do not maintain a capital or business
relationship with the Group as part of its four-member board of corporate
auditors to ensure management transparency. Statutory auditors attend
principal meetings, have access to required records, and conduct interviews
of operating divisions in order to monitor management to identify business
risk as early as possible.
Advisory Board
As a supporting arm to the board of directors and GOM, the Advisory
Board, consisting of external experts, outside directors, the Chairman, the
President and relevant directors, meets half-yearly. The Advisory Board
provides guidance on significant business issues and management policy,
which is in turn reflected in the daily management of the Group.
Compensation Advisory Committee
The Compensation Advisory Committee was established in order to ensure
the transparency of processes for determining director compensation. The
Committee consists of external experts, outside directors, the Chairman,
President and relevant directors.
Internal Control Committee
The Internal Control Committee consists of principal directors, which
deliberate primarily on basic issues relating to compliance and the
development of internal control systems. The committee also engages in the
monitoring of the internal control system and the formulation of basic policy
relating to internal controls.
“LA & LA” – Utilizing Employee Feedback
We actively provide opportunities referred to internally as “LA & LA” (Looking
Around & Listening Around) for employees to convey their views and
opinions directly to management to fulfill our commitment to developing an
organizational climate in which all employees can openly share their opinion.
Kobayashi Pharmaceutical believes this culture is a significant part of
corporate governance.
Information Disclosure
Pursuing Timely and Easy-to-Understand Disclosure
Kobayashi Pharmaceutical strives to provide timely disclosure of corporate
data and information in order for shareholders and investors to form an
accurate assessment of the company. Our corporate website is also
extensively used to disseminate the latest information, provide commentary
on business strategy and product lineups, and the timely disclosure of
important information related to financial filings.
Furthermore, the Aoitori Report, which is distributed to retail investors
twice a year, summarizes our business operations and various business
activities, indicating our commitment to disclose effective and useful information.
Corporate Governance Organization
Shareholders’ Meeting
Advice
Board of Corporate Auditors
Board of Directors
Compensation Advisory Committee
(External experts and Outside Directors)
Audit
Audit
Independent Auditors
Group Officers Meeting
Executive Officers
Internal Control Committee
Participation from External Lawyers
Advice
Audit
Lawyers and Other
Outside Specialists
Independent Auditors
Audit
Advisory Board
(External experts and Outside Directors)
Advice
Operating Divisions, etc.
Annual Report 2012
24
Internal Control Systems and Compliance
The Kobayashi Pharmaceutical Group is actively building internal
frameworks to adhere to relevant laws and regulations, such as
ensuring that appropriate financial statements are prepared and
that operations comply with stipulations of the Companies Act
and Financial Instrument and Exchange Act of Japan. In
addition, we conduct a variety of educational training programs
to ensure that all executive officers and employees comply with
laws and regulations as well as follow a strict code of corporate
conduct and ethics.
Internal Control System
Pursuing Best Practices in Operations and
Financial Statements and Developing
a System to Reduce Risk
In April 2003, Kobayashi Pharmaceutical established its Compliance
Committee as an organization under the direct control of the board of
directors that ensures group-wide compliance with laws and regulations.
Following this, in September 2003, we created and enacted our Basic Policy
on Corporate Behavior and the Executive Officer and Employee Code of
Conduct to improve corporate ethics and compliance awareness.
Starting in 2006, we launched the Basic Policy for Internal Control
System in order to ensure appropriate work processes required by the
Companies Act and other laws and regulations. Based on this basic policy,
we have established the necessary framework for internal controls, including
a review process for internal rules and regulations and the re-evaluation of
business and operational risk. In 2007, the Compliance Committee was
renamed the Internal Control Committee, and its scope of responsibility was
expanded to include the review of the effectiveness of internal controls,
including its role in ensuring that financial statements comply with the
Financial Instrument and Exchange Act of Japan.
The Internal Control Committee is run under the leadership of the
President, who acts as Chairperson, and consists of the four lower
organizations of the Committee on the Protection of Personal Information,
the Group Health and Safety Committee, the Pharmaceutical Subcommittee
and the Labor Subcommittee. In addition, the committee is supported by
external legal advisors who, by providing objective advice and
recommendations, contribute to enhancing the transparency and reducing
risk in the Company’s operations.
In the fiscal year ended March 31, 2012, challenges and measures
related to operational risk management were discussed in response to the
issues raised by the lower organizations.
* Basic Policy on Internal Control Systems
http://www.kobayashi.co.jp/corporate/governance/policy/index.html
Compliance
Raising Awareness Toward Compliance
Through Monthly e-Learning Sessions
Kobayashi Pharmaceutical holds various compliance education programs for
both employees and executive officers tailored to their job title.
During the fiscal year ended March 31, 2012, training programs led by
a lawyer were held for executive officers covering Japan’s Antimonopoly Act
and other topics, while management level employees participated in training
programs on general compliance matters, labor affairs, contract
management and insider trading. New employees took part in the usual
group training program to enhance their awareness of compliance.
In addition, we have held compliance tests over the intranet for all
25
Annual Report 2012
employees on average four times per year since the fiscal year ended March
31, 2010. For the fiscal year ended March 31, 2012, we implemented
monthly compliance testing called Compliance e-Learning Sessions for all
employees, including the President, starting in July 2011, in order to further
enhance all employees’ awareness of compliance. These tests are comprised
of a wide range of questions, covering subjects from fundamental compliance
matters to harassment and personal information. In October 2011 and all
subsequent months 100% of all employees took these tests. In the fiscal
year ending March 31, 2013, we will continue to hold monthly Compliance
e-Learning Sessions as part of our initiative to strengthen compliance.
The Employee Consulting Center
The Kobayashi Pharmaceutical Group
established the Employee Consulting Center in
January 2003 both internally and externally in a
law office as a special hotline for employees to
anonymously report compliance violations or
ask general questions on compliance issues.
Open to consultation via telephone and emails,
this service contributes to gaining an early
insight on matters and issues and resolving
problematic situations. We are currently working
to raise the visibility of this consulting center by
setting up a toll free number for employees and
other means such as posters. The hot line is
operated in full compliance with the
Whistle-blower Protection Act.
Poster for the Employee
Consulting Center
Risk Management Framework
Business management requires the identification and mitigation
of, as well as countermeasures against potential risks. As such,
the Kobayashi Pharmaceutical Group has categorized principal
business risks into 13 categories and established an action plan
to address these risks, with the execution of this action plan, in
turn, being audited.
Researching and Managing Business Risk
Defining and Implementing Action Plans
in 13 categories
In autumn 2007, the General Affairs Department took the lead in investigating
the current and potential risks that each department faces. The results of
this study were used to sort Group business risk management into 13
categories, with an action plan established to address each set of risks in
April 2008. Following this structure, the challenges and action plans in each
of the 13 categories are periodically reviewed to implement measures to
address management risks. We enacted the Business Risk Management
Rules, which stipulate methods for consolidating and handling risk
information. In addition, information on risk is also shared with independent
auditors, while external lawyers and other outside specialists provide advice
on risk management practices and systems, enabling us to respond properly
to a variety of business risks.
We will further strengthen the process for checking the progress of each
category of risks by working collaboratively with the Internal Audit Office.
Directors, Corporate Auditors and Executive Officers
As of June 28, 2012
Directors
Kazumasa Kobayashi
Yutaka Kobayashi
Chairman and
President and
Akihiro Kobayashi
Takashi Tsujino
Satoshi Yamane
Haruo Tsuji
Senior Executive Director
Senior General Manager
Product Business
Headquarters
Senior Executive Director
General Manager
Health Care Division
Product Business
Headquarters
Executive Director
Senior General Manager
Group Corporate Business
Headquarters
Outside Director
Corporate Advisor,
Sharp Corporation
Masahiro Hiraoka
Hiroshi Goto
Hiroshi Hayashi
Ryuji Sakai
Statutory Auditor
Statutory Auditor
Outside Auditor
Hayashi Certified
Tax Accountant Office
Outside Auditor
Partner, Nagashima, Ohno &
Tsunematsu
Susumu Horiuchi
Hiroshi Nomoto
Senior Executive Officer
General Manager
Sales Division
Product Business Headquarters
Senior Executive Officer
General Manager
Household Division
Hidetsugu Yamamoto
Kunio Moriya
Toshio Nanba
Tetsushi Nishioka
Executive Officer
General Manager
Business System Center
Group Corporate Business
Headquarters
Executive Officer
Deputy General Manager
Sales Division
Executive Officer
General Manager
Research and Development
Division
Executive Officer
General Manager
Manufacturing Division
Product Business
Headquarters
Kazuyuki Katsuki
Kenichiro Tanaka
Kazuhito Miyanishi
Executive Officer
General Manager
Quality Assurance Division
Executive Officer
General Manager of the Regional Area
Sales Division
Executive Officer
General Manager
International Division
Corporate
Auditors
Executive
Officers
1 The Company uses the executive officer system. Four directors—Yutaka Kobayashi, Akihiro Kobayashi, Takashi Tsujino, and Satoshi Yamane—each concurrently serve as executive officers.
Annual Report 2012
26
CSR Initiatives
We are focused on quality improvement, reduction of our
environmental impact, and social contribution activities.
Social Contribution Activities
Supporting the Great East Japan Earthquake Recovery Effort
Campaign
“1 yen no Omoi Campaign”
With the hope of helping the disaster-affected areas in their
recovery from the Great East Japan Earthquake, we held the 1
yen no Omoi Campaign from June 1, 2011 to March 31, 2012,
in which one yen was contributed to the Kobayashi
Pharmaceutical Group Aoitori Fund for every one of our
products purchased (including mail order sales).
Thanks to our customers’ kind support, the campaign
collected a total of ¥290,564,930. This amount was then
topped off with a contribution from the Group for a total of
¥300 million, which was donated to ten towns and cities most
affected by the disaster, including Ishinomaki City,
Rikuzentakata City, Otsuchi Town, Kesennuma City, Kamaishi
City, Higashimatsushima City, Minamisanriku Town, Onagawa
Town, Yamada Town, and Yamamoto Town, depending on the
severity of damages.
10 Towns and Cities Receiving Donations
Usage for the donations was discussed and determined
together with the local authorities based on two principles: the
money shall put liveliness back into the children and smiles on
their faces, and the money shall be used on something that
best addresses the needs of each location.
Through this support activity, we hope to contribute to
brightening the day for everyone in the disaster-affected areas.
The Kobayashi Pharmaceutical
Group Aoitori Fund was
established with the aim of
contributing to the development of
a more enriched society.
Donations from this campaign
were made through the fund.
Yamada Town ¥14,849,000 donated
Used for: Purchase of supplies for the reconstruction
of Funakoshi Elementary School
Otsuchi Town ¥29,408,000 donated
Used for: Reconstruction of nurseries and elementary schools
Kamaishi City ¥22,265,000 donated
Used for: Renovation of Heita Kindergarten
School food truck purchased
using the donations
Rikuzentakata City ¥36,790,000 donated
Used for: Purchase of five school food trucks and
supplies
Onagawa Town ¥17,628,000 donated
Kesennuma City ¥25,487,000 donated
Used for: Relocation and reconstruction of
Hajikami Nursery
Minamisanriku Town ¥20,168,000 donated
Used for: Reconstruction of nurseries and
elementary schools
Used for: Reconstruction of nurseries and
elementary schools
Presentation of list of
donations to Mayor of
Ishinomaki City (at left)
Higashimatsushima City ¥22,078,000 donated
Used for: Construction of temporary swimming pool
Ishinomaki City ¥98,795,000 donated
Used for: Purchase of play equipment for 23 nurseries
and kindergartens in the city
Yamamoto Town ¥12,532,000 donated
Used for: Purchase of musical instruments for
two junior high schools in the town
27
Annual Report 2012
The Kobayashi Pharmaceutical Group aims to maximize its corporate value from a long term perspective. To achieve
this, the Group believes the key lies in earning the trust of all stakeholders. In addition to ensuring the quality of our
products, we are also promoting the reduction of our environmental impact and social contribution activities.
Employee Volunteer Activities
A total of 130 Group employees conducted volunteer activities with the hope of helping to
bring some of the joy back into the lives of those affected by the earthquake disaster.
Support at Evacuation Centers and Temporary Housing
One of the problems facing evacuation centers was the
deteriorating conditions of public restrooms.
Kobayashi Pharmaceutical, which sells toilet deodorizing
air fresheners, together with the NPO Japan Toilet Labo
helped clean restrooms in all 21 evacuation centers in
Higashimatsushima City in July 2011. To provide an improved
level of comfort, the teams cleaned not only the toilets and
floors, but also windows, walls, and ventilation fans.
In addition, in November 2011, we delivered daily
necessity sets containing products from the Kobayashi
Pharmaceutical Group and blankets to approximately 1,000
temporary housing units in five locations in Ishinomaki City.
Contents of daily necessity sets
Restroom cleaning
(21 locations,
Higashimatsushima City)
Delivering daily necessity sets
(5 locations, Ishinomaki City)
Nursery Support Project
In July 2011, we donated a temporary swimming pool to the
Yamotohigashi Nursery Center in Higashimatsushima City as
well as hosted the Minna de Asobo! Netsusama Community
Fair event. Around 1,100 visitors including children and their
guardians participated in the event, and enjoyed games such
as yo-yo fishing and ring toss.
In December 2011, we hosted Minna de Issho ni
Netsusama Christmas Party at 14 nurseries and kindergartens
in Ishinomaki City. During the event, our employees dressed
up as Santa Claus to give out presents, and conducted
activities such as make-your-own original air freshener and a
kairo fishing game.
Donation of temporary swimming pool
(Yamotohigashi Nursery Center in
Higashimatsushima City)
Minna de Asobo! Netsusama Community Fair
(Higashimatsushima City)
Minna de Issho ni Netsusama Christmas Party
(14 locations, Ishinomaki City)
Annual Report 2012
28
CSR Initiatives
Improving Quality
Quality Assurance Policy Established to
Ensure Safe and Secure Quality
The Kobayashi Pharmaceutical Group believes the most important aspect of
product development is ensuring safe and secure quality. We established the
Quality Assurance Department in June 2010 as an organization directly
headed by the President in order to strengthen our quality assurance
framework. Under this framework, each and every employee is fully aware
that “Quality is the life of a company” and strives to maintain and improve
product quality in every way possible.
Our stakeholders are becoming increasingly more conscious of product
quality. In November 2011, the Group established a Quality Assurance Policy
as a guideline on quality that all employees must adhere to in their provision
of products and services. In order to become a company that customers
trust, we are promoting a company culture that has zero tolerance for leniency
in terms of quality. All employees follow this policy in their daily operations.
Further Quality Improvements from a
Customer-centric Standpoint
Many decisions are made throughout the life cycle of product manufacturing,
including development, production, and launch. If any one of these decisions
is not made appropriately, than the adequacy of the final decision and
product quality cannot be guaranteed. In order to launch a product, our
employees need to rally together to pass on the right message about quality.
In other words, every employee has to recognize that they are responsible
for the final quality of a product. In order to promote a widespread
understanding of this principle and properly implement the Quality
Assurance Policy, we also established Quality Assurance Management Rules
and Quality Assurance Implementation Rules to clearly define the
responsibilities and authority of each office and position.
Together with each
Hierarchy of Rules Concerning
and every employee, who is
Quality Assurance
fully aware that “Quality is
the life of a company” and
committed to the steadfast
pursuit of quality, the
Management
Philosophy
Group
Brand Charter
Group will continue with its
Quality Assurance
dedication to improve quality
Policy
from a customer-centric
standpoint.
Quality Assurance
Management Rules
Quality Assurance
Implementation Rules
Acknowledging Customer Concerns in Quality
Improvement of Products and Services
After releasing a product, customer inquiries and suggestions are received
and compiled at our customer service center. As customer inquiries and
suggestions have grown more complex and advanced in recent years, we
have developed a system in which our customer service representatives call
our customers back in order to spend more time discussing their feedback
and concerns. Our response to customer feedback overlaps with the
emotions of each individual customer. This is because true understanding is
made possible only after recognizing each individual situation and emotion
rather than simply understanding the usage scenario, which in turn greatly
improves our services and product quality.
Customer inquiries and suggestions are also forwarded to our
development and manufacturing divisions, where they are reflected in product
improvements and new product development. During trial production of an
improved product, we carefully verify if customer expectations are met.
Furthermore, after the improved product is released, we continually analyze
customer feedback to ascertain whether the improvement was adequate or
whether additional modifications are necessary.
Annual Number of Inquiries Received at the Customer Service
Center
(Inquiries)
80,000
70,000
60,000
50,000
2008
2009
2010
2011
2012
Ratio of Inquiries by Category
(The fiscal year ended March 31, 2012)
Discontinued Products and Others
7%
OTC Pharmaceuticals
Deodorizing Air Fresheners
32%
7%
Household Sundries and
Cleaning Products
11%
Sanitary Products and
Skin Care products
Food and
Oral Hygiene Products
15%
25%
Kobayashi Pharmaceutical Group’s Quality Assurance Policy
Everyone at Kobayashi Pharmaceutical Group is committed to improving product and service quality under the mantra “quality is the life of a company”
in providing people and society with comfort.
1. Quality from a customer-centric standpoint
We value our ties to the customer, and are committed to listening to
the voice of customers and pursuing quality from a
customer-centric standpoint.
2. Pursuit of truly tangible quality
We pursue “You Make a Wish and We Make it Happen” in
developing quality products with a focus on customer satisfaction
and continuous loyalty in our products.
29
Annual Report 2012
3. Provision of safe and secure products and information
We will carefully monitor changes in society in order to provide
products that are safe to use by our customers and information that
is easy to understand to ensure our customers’ peace of mind.
4. Corporate activities that fulfill customer trust
We will comply with relevant laws and regulations, implement business
activities in a fair and transparent manner, and fulfill our accountability
to society in order to ensure the trust of our customers.
Initiatives to Reduce Environmental Impact
Developing Packaging that Helps Reduce
Our Environmental Impact
As our stakeholders are becoming more conscious of the environment, we
need to exercise a number of considerations during the development stage
of our products.
In particular, we direct our efforts on reducing the environmental
impact caused by containers and packaging, which play an integral role in
conveying product information at the time of use as well as protecting the
product during shipment. The Kobayashi Pharmaceutical Group is actively
promoting the 3Rs (reduce, reuse, recycle) through the development of
containers and packaging that meet our requirements using the minimum
amount of materials possible and recycled materials.
Focus on Cutting CO2 and Waste Emissions
For the fiscal year ended March 31, 2012, CO2 emissions from all manufacturing
divisions totaled 13,903 tons, or 98.9% compared to the previous fiscal year.
This represents a 158-ton year-on-year decrease, due to lowered production
volume at some factories following the Great East Japan Earthquake.
In addition, recycling volume totaled 4,200 tons, reaching a recycling
rate of 99.8%, marking the third consecutive year in which we achieved our
goal of zero waste emissions.
In the future, we will switch from thermal recycling, which recovers and
reuses the energy generated during waste incineration, to material recycling,
which involves collection of waste materials generated from used products
or production processes to be reused as raw material or ingredients for new
products.
CO2 Emissions (Manufacturing Division)
(t-CO2)
15,000
12,000
13,127
13,888
13,689
14,061
13,903
2008
2009
2010
2011
2012
99.8
99.8
99.8
3,660
3,756
9,000
6,000
3,000
0
Recycling Volume and Rate
(t)
5,000
99.8
85.5
4,000
3,023
3,000
2,000
(%)
100
80
4,200
2,059
60
40
1,000
20
0
0
2008
Recycling Volume
2009
2010
2011
2012
Recycling Rate
Case Example
Reducing CO2 Emissions by Improving the Outer
Packing for Replacement for Ekitai Bluelet Okudake
Improving the Packaging for Shirt Cool while
Reducing Waste
The outer packing once used to ship Replacement for Ekitai Bluelet
Okudake from our factories contained six products per box and had
excess space between each product. We decided to stack products inside
the box, which doubled the capacity to 12 products. This also helped reduce
the use of cardboard and cut our CO2 emissions by 36%. At the same time,
we were also able to improve the efficiency of our shipments. However,
simply stacking products atop one another resulted in instability. We made a
slit in the cardboard to be used as a stopper, which made it possible for the
entire outer packing to be used when displaying the product on store shelves.
This outer packing was named the Replacement for Ekitai Bluelet
Okudake Stack and Separate Pack and received the Director of General,
Manufacturing Industries Bureau, Ministry of Economy, Trade and Industry
Award as part of the Japan Star Award in the Japan Packaging Contest
2011 organized by the Japan Packaging Institute. This packaging also
won a WorldStar Award at the WorldStar Competition hosted by the
World Packaging Organization to evaluate packaging technologies from
around the world. Thus, our eco-friendly packaging technologies have
received recognition not only in Japan, but internationally as well.
One of the immediate environmental problems facing our customers is the
issue of garbage disposal. In recent years, public awareness about the
problems of bulky containers and packaging has also been growing, partly
because more local authorities have begun to charge a fee for garbage
disposal. In particular, so-called blister packages, or plastic cups, have been
criticized for generating extra waste as well as being uncompressible and
bulky, despite their superior quality as a protective layer and design.
The Kobayashi Pharmaceutical Group recently improved the
packaging for Shirt Cool, a product that used the largest blister pack among
all of our products, in order to address customer demand for cutting down
on waste while still taking advantage of the current design. The new design
changes from a plastic blister pack to a cylindrical plastic film mounted to a
cardboard backing. Consequently, the amount of plastic resin used was
reduced by 90%, while the volume of waste generated when disposing of
the packaging was reduced by 95%.
Improved Packaging for Shirt Cool Series
Replacement for Ekitai Bluelet Okudake Stack and Separate Pack
Annual Report 2012
30
Management’s Discussion and Analysis
Enhancing Corporate Value by Delivering Trust and
Satisfaction to All Stakeholders
The Kobayashi Pharmaceutical Group follows a management policy that
defines the company’s mission as “providing people and society with comfort”
through continuous “Creativity and Innovation.” Based on this policy,
the Group discovers, creates and provides products that our customers
didn’t even realize could improve their health, comfort and happiness.
This endeavor is summed up in our brand slogan, “You Make a Wish and
We Make it Happen,” which is the core focus of our business activities.
We find ourselves in a period in which the speed of change has
accelerated and competition has grown more intense. As such, the
source of the Group’s growth is to constantly pursue “Something
New, Something Different,” and continue to develop new products
and services that fulfill the needs of our customers. At the same
time, we are also constantly revamping and developing our existing
brands to meet the needs of our customers now.
We stand committed to enhancing corporate value and achieving
greater satisfaction from all of our stakeholders by capturing a solid
sense of trust in all of our products and services where the Kobayashi
Pharmaceutical brand stands as a testament to satisfaction.
Scope of Consolidation and Application of the Equity Method
In the fiscal year ended March 31, 2012, the Kobayashi
Pharmaceutical Group had 27 consolidated subsidiaries (12 in Japan
and 15 overseas), and one affiliate in Japan accounted for by the
equity method.
By reportable segment, the Group has 19 consolidated
subsidiaries in Consumer Products, 2 consolidated subsidiaries and
1 equity-method affiliate in Medical Devices, and 6 consolidated
subsidiaries in Other Business.
Overview of Consolidated Business Results
During the fiscal year ended March 31, 2012, the global economy saw
stagnation due to financial concerns in Europe and major flooding that
occurred in Thailand, while Japan’s economy witnessed a downturn in
corporate activities and changes in consumer mindsets following the
Great East Japan Earthquake that struck on March 11, 2011 as well as
the sharp appreciation of the yen. Japan also faced power supply
shortages following the accident at the Fukushima Daiichi Nuclear
Power Plant, which led to further uncertainty toward the future.
Amidst these conditions, the Kobayashi Pharmaceutical Group
focused even greater effort on “providing people and society with
comfort,” which stands as a pillar of its management philosophy. These
efforts included fully committing ourselves to restoring operations at
manufacturing base Sendai Kobayashi Pharmaceutical Co., Ltd.,
which was damaged in the quake, and shifting production of products
Gross Profit / Gross Profit to Net Sales
(%)
100
68,679
71,888
74,640
76,531
60,000
54.6
55.6
58.3
57.1
35.5
20,000
0
2008
Gross Profit
2009
2010
2011
80
40
10,000
20
5,000
0
0
42.5
40,000
54,847
42.8
56,019
43.6
57,233
20,000
0
SG&A Expenses
31
2010
2011
SG&A Expenses to Net Sales
Annual Report 2012
14.7
(%)
15
17,041
18,621
19,298
12
9
6
8.1
3
0
2008
50
2009
2010
2011
2012
Operating Income to Net Sales
(Millions of yen)
15,000
40
12,000
30
9,000
20
2009
14.2
13.2
Net Income / Net Income per Share
27.4
2008
15,818
Operating Income
80,000
52,861
18,576
2012
(%)
42.1
20,000
15,000
SG&A Expenses / SG&A Expenses to Net Sales
62,611
(Millions of yen)
25,000
60
Gross Profit to Net Sales
(Millions of yen)
100,000
60,000
The Consumer Products Business saw solid performance from new
product releases, health care products, and cold and heat relief
remedies thanks to greater demand for energy conservation, while
the Mail Order Business also grew significantly.
As a result, net sales for this fiscal year rose 0.3% year-on-year
to ¥131,167 million.
12.6
81,187
40,000
Net Sales
Operating Income / Operating Income to Net Sales
(Millions of yen)
100,000
80,000
made at Sendai Kobayashi Pharmaceutical to other alternative sites to
ensure a stable supply was provided to the market.
In addition, we also strived to revitalize the market by identifying
our customers’ latent needs through continued efforts to deliver
services and products that create new markets.
(Yen)
500
11,726
8,504
8,853
9,250
3,000
0
0
300
286.36
6,000
10
9,336
205.62
215.89
2008
2009
2012
Net Income
225.88
400
227.98
200
100
0
2010
Net Income per Share
2011
2012
Gross Profit and Operating Income
Cost of sales decreased 2.8% year on year to ¥54,636 million in
fiscal 2012, but gross profit (after provisions for returned products)
increased 2.5% year on year to ¥76,531 million. Selling, general
and administrative expenses rose 2.2% over the previous fiscal year
to ¥57,233 million due to an increase in advertising and sales
promotions. As a result, operating income increased 3.6%
year-over-year to ¥19,298 million.
The gross profit to net sales ratio improved 1.2 percentage
points from the previous fiscal year’s 57.1% to 58.3%, and the
selling, general and administrative expenses to net sales ratio
improved by 0.8 percentage points, from 42.8% to 43.6%, while
the operating income to net sales ratio improved 0.5 percentage
points from 14.2% to 14.7%.
Income before Income Taxes and Minority Interests and
Net Income
We recorded ¥5,143 million in losses on the devaluation of
investments in securities in the previous fiscal year. In the fiscal
year ended March 31, 2012, equity in earnings of affiliates rose
6.5% year on year to ¥408 million due to an increase in profits
from Medion, Inc., an affiliate accounted for by the equity method.
Moreover, a ¥641 million loss was posted on the sale of shares of
an affiliate.
As a result, net income before income taxes and minority
interests rose 50.4% over the previous year to ¥19,822 million. Net
income increased 25.6% to ¥11,726 million.
Net income per share grew 25.6% from ¥227.98 in the previous
fiscal year to 286.36.
Summary of Reportable Segments
The Kobayashi Pharmaceutical Group classifies its business activities
into four segments: Consumer Products, Mail Order, Medical Devices
and Other Business.
Net sales by segment include inter-group sales and transfers,
which amounted to ¥8,286 million in fiscal 2011 and ¥8,368 million in
fiscal 2012.
Net Sales and Operating Income (Loss) by Segment
Net Sales
Sales to third parties
Inter-group sales and transfers
Total
Mail Order Business
Wholesale Business
Total
Other Business
Total
Operating Income (Loss)
Mail Order Business
Wholesale Business
Other Business
(Millions of yen)
2008
2009
2010
2011
2012
84,707
26,213
110,920
112,594
26
112,620
115,478
37
115,515
107,657
3,136
110,793
109,203
3,221
112,424
—
—
—
9,872
10,381
131,602
359
131,962
—
—
—
—
—
—
—
—
—
—
—
—
10,728
11,325
12,111
12,184
10,476
1,788
6,306
8,094
1,773
5,507
7,281
1,595
5,485
7,080
1,111
5,150
6,261
1,107
5,147
6,254
2008
18,005
—
(131)
(418)
431
2009
15,910
—
—
(554)
473
2010
16,507
—
—
143
400
2011
18,966
311
—
251
171
2012
18,317
132
—
292
554
(Millions of yen)
Annual Report 2012
32
In the fiscal year under review, we launched a total of 17 new products
in this segment in order to create new markets and expand existing
markets. Several of these recorded solid sales and made a particular
positive contribution to our earnings, including Attonon, an external
medicine for scars, and Tomarina, a medicated toothpaste for
consumers bothered by gingival recession.
Existing products such as OTC pharmaceuticals Eyebon (an eye
wash) and Inochi No Haha A (a medicine for women’s health) as well
as oral care product Shouyou (a medicated toothpaste that prevents
gingivitis and periodontitis) also grew steadily and contributed to earnings.
In addition, given growing demand for measures to conserve electricity,
heat relief remedies saw robust sales during the summer, including
cooling gel sheet Netsusama Sheet, cooling gel mat Netsusama
Hinyari Gel Mat, and Shirt Cool, a long-lasting cool spray for coating
clothing. During the winter months body warmers recorded firm sales,
as sales from both seasons helped boost overall net sales.
On the other hand, damage incurred by Sendai Kobayashi
Pharmaceutical Co., Ltd. in the Great East Japan Earthquake caused
us to implement shipment quotas to restrict the daily shipment volume
of certain deodorizing air fresheners manufactured there, which
caused sales of deodorizing air fresheners to fall. Furthermore, we
actively implemented marketing activities such as sales promotions
and advertisements.
As a result, net sales for the Consumer Products Business rose
1.5% year-on-year to ¥112,424 million, while operating income
declined 3.4% year-on-year to ¥18,317 million.
Net Sales by Category
2011
Changes
2012
Sales
(Millions of yen)
% of Total Sales
OTC pharmaceuticals
21,941
19.8
22,929
20.4
987
4.5
Oral hygiene products
15,510
14.0
16,234
14.5
723
4.7
Sanitary products
14,042
12.7
14,309
12.7
267
1.9
Deodorizing air fresheners
30,733
27.8
29,720
26.4
(1,012)
(3.3)
Household sundries
4,791
4.3
4,585
4.1
(206)
(4.3)
Food products
8,881
8.0
9,101
8.1
219
2.5
Body warmers
14,890
13.4
15,543
13.8
653
4.4
110,793
100
112,424
100.0
1,631
1.5
Total
Sales
(Millions of yen) % of Total Sales
Sales
(Millions of yen)
Changes
(%)
Trends in Number of Profitable and Unprofitable Brands
We thoroughly followed our own strict market launch standards for
new products, taking measures such as conducting test marketing to
improve our hit ratio.
In addition, we have tightened profitability control for existing
brands while withdrawing brands which failed to become profitable.
(Number)
100
89
80
Unprofitable brands
62
49
2008
89
2009
95
2010
94
2011
96
2012
98
80
62
49
50
48
98
96
94
80
60
Profitable brands
95
50
48
40
20
0
2008
Profitable Brands
We refer to the percentage of net sales accounted for by new products
as the new product contribution rate. We have established the target to
achieve a new product contribution rate of greater than 10% in the initial
year, and a new product contribution rate of greater than 35% for
products released within the previous four years. In the fiscal year
under review we launched 17 new products, with new products in their
first year accounting for 5.1% of net sales, while new products released
during the previous four years accounted for 15.3% of net sales.
2009
2010
2011
2012
Unprofitable Brands
(%)
30
29.4
29.5
26.7
25
18.0
20
15.3
15
(%)
First year
2008
9.0
2009
7.4
2010
8.3
2011
5.3
2012
5.1
First Four years
29.4
29.5
26.7
18.0
15.3
10
Annual Report 2012
7.4
8.3
2009
2010
5
5.3
5.1
2011
2012
0
2008
First Year
33
9.0
First Four Years
Mail Order Business
This segment engages in mail order sales of nutritional supplements
and skincare products. In the fiscal year under review, we strived to
cultivate new customers and promote regular purchases from our
existing customers by implementing sales promotion activities
focused on direct mail and proactive advertisements.
As a result, net sales for this segment increased 5.1% year on
year to ¥10,381 million, while operating income declined 57.4% to
¥132 million.
The Medical Devices Business followed a selection-and-concentration
approach with a focus on the anticipated growth fields of orthopedics
and operation room-related products. In addition, all of the U.S.-based
eVent Medical Inc.’s stock was transferred in a management buyout
deal executed on July 31, 2011.
As a result, net sales in this segment fell 14.0% year-on-year
to ¥10,476 million, but operating income rose 16.0% over the
previous fiscal year to ¥292 million.
Net Sales by Category
2011
2012
Changes
Sales
Sales
(Millions of yen) % of Total Sales (Millions of yen) % of Total Sales
Changes
(%)
10,213
83.8
8,965
85.6
(1,247)
(12.2)
915
7.5
427
4.1
(487)
(53.3)
1,055
8.7
1,083
10.3
27
2.6
12,184
100.0
10,476
100.0
eVent Medical Inc.
Others
Total
Sales
(Millions of yen)
(1,707)
(14.0)
Other Business
Businesses in this segment, which includes activities such as
transportation, the manufacture and distribution of synthetic resin
containers, insurance agency operations, real estate management,
and advertising planning and production, support the three segments
above. Although each affiliated company conducts business on a
financially independent basis, one of the objectives is to contribute to
the profit of the above three segments. Therefore, the Group revised
the delivery price of the materials and services provided by companies
in this segment as required.
As a result, this segment recorded net sales of ¥6,254 million,
down 0.1% year-on-year, and operating income of ¥554 million, up
223.9%.
Analysis of Financial Position
Assets
Total assets were ¥147,891 million as of the end of this fiscal year, an
increase of 10.1% compared with the end of the previous fiscal year.
Current assets increased 15.4% year over year to total
¥102,538 million. The main reason for this was an increase in
cash and time deposits of ¥10,873 million and a rise in trade
notes and accounts receivable of ¥2,234 million.
Property, plant and equipment, net, decreased 3.7% over
the previous fiscal year to ¥13,628 million. This was primarily due
to a decrease in leased assets (on a net basis) of ¥357 million.
Investments and other assets increased 1.2% over the
previous fiscal year to ¥31,725 million. This was primarily attributable
to an increase in investment securities of ¥1,880 million.
Liabilities
improved 14.0 percentage points to 271.3%.
Long-term liabilities declined 3.2% to ¥8,221 million.
Interest-bearing Debt
(Millions of yen)
2,000
1,708
1,500
1,000
726
500
645
0
2008
2009
2010
26
5
2011
2012
Total liabilities as of the end of this fiscal year were ¥46,012 million,
up 7.0% from the end of the previous fiscal year.
Current liabilities increased 9.5% to ¥37,791 million. The main
factors for this increase included a ¥1,811 million increase in other
accounts payable from a rise in advertising expenses and a ¥2,320
million rise in accrued income tax. As a result, the current ratio
Annual Report 2012
34
Net Assets
Net assets including minority interests at the end of the fiscal year
under review rose 11.5% year over year to ¥101,879 million. The
primary reason for this increase was an increase in retained
earnings of ¥8,942 million as well as an increase in the unrealized
holding gain on securities of ¥1,508 million.
As a result, the equity ratio rose 0.9 percentage points from
67.9% to 68.8%. Return on equity (ROE) rose 1.6 percentage
points compared to the previous fiscal year end, from 10.6% to
12.2%. Return on assets (ROA) declined 0.1 percentage point from
14.3% to 14.2%.
ROE
ROA
(%)
(%)
15
12
11.2
11.5
11.5
10.6
15
12.2
12
9
9
6
6
3
3
10.9
12.4
13.3
2009
2010
14.3
14.2
2011
2012
0
0
2008
2010
2009
2011
2012
2008
Cash Flow Analysis
Cash Flows from Operating Activities
Cash Flows from Financing Activities
Net cash provided by operating activities was ¥17,250 million, a
31.0% increase compared with the previous fiscal year. The main
factors were ¥19,822 million in income before income taxes and
minority interests, ¥3,232 million in depreciation and amortization,
¥2,060 million increase in trade notes and accounts receivable,
¥1,019 million increase in inventories, ¥1,036 million in interest and
dividends received, and ¥4,762 million in income tax paid.
Net cash used in financing activities totaled ¥3,292 million, down
36.1% year-on-year. This was primarily due to ¥2,784 million in
dividends paid.
As a result, cash and cash equivalents as of March 31, 2012
totaled ¥42,836 million, an increase of ¥10,873 million from the end
of the previous fiscal year.
Cash Flows from Investing Activities
(Millions of yen)
50,000
Cash and Cash Equivalents at End of Year
Net cash used in investing activities totaled ¥2,929 million, down
65.0% year on year. Major factors affecting this cash flow were
¥39,990 million in the purchases of securities, ¥41,000 million in
proceeds from sales and redemption of securities, ¥1,748 million in
payments for the purchases of property, plant and equipment, and
¥1,249 million in purchases of investments in securities.
42,836
40,000
30,000
20,000
32,624
31,963
2010
2011
23,813
17,164
10,000
0
2008
Cash Flows
2012
Amount
(Millions of yen)
2011
Amount
(Millions of yen)
Cash flows from operating activities
2009
13,168
2012
Changes
Amount
(Millions of yen)
Change
(%)
17,250
4,082
31.0
(65.0)
Cash flows from investing activities
(8,379)
(2,929)
5,450
Free cash flows*
4,789
14,321
9,531
Cash flows from financing activities
(5,154)
(3,292)
1,862
(36.1)
42,836
10,873
34.0
Cash and cash equivalents at end of the year
31,963
199.0
* Free cash flow: Cash flows from operating activities + Cash flows from investing activities
R&D Expenses
R&D Expenses
We believe that R&D underpins new product development, which is
one of the core strengths of the Kobayashi Pharmaceutical Group.
In the fiscal year under review, the Consumer Products
Business developed 17 new products, while the Mail Order
Business developed four.
Consequently, R&D costs increased 7.8% over the previous
fiscal year to ¥4,386 million.
(Millions of yen)
5,000
4,000
3,000
2,813
3,361
3,962
4,069
2010
2011
4,386
2,000
1,000
0
2008
35
Annual Report 2012
2009
2012
Risk Factors
(1) Highly Competitive Business Environment
The Kobayashi Pharmaceutical Group aims to differentiate itself
from rival companies by developing new products and services that
satisfy customer needs. This is crucial as the Group’s main
products target retail consumers. However, we are susceptible to
intensifying price-based competition triggered by the launch of
competing products by rivals. In response, we may have to increase
development costs for new products, or advertising and sales
promotion expenses to stimulate demand. These and other factors
could affect the Group’s operating results and financial position.
(2) Highly Susceptible to Sales of New Products
The Group pursues aggressive product development activities as
part of its strategy for spurring growth and launching new products
every year in the spring and fall. However, delays in developing or
bringing new products to market, sales of competing products, and
other factors may have an impact on sales of the Group’s new
products, which could in turn affect the Group’s operating results
and financial position.
(3) Risk Concerning Inability to Reap Anticipated Benefits of
Mergers and Alliances
While enhancing product lineups through mergers and acquisitions
(M&A) and business alliances, the Group is also striving to expand
its sales regions in pursuit of a broader range of new markets both
in Japan and overseas. However, these M&As and alliances are
subject to uncertainties. The Group may be unable to reap the
anticipated benefits of M&As and alliances or may be forced to
change its business strategies due to unforeseen post-merger or
alliance events. This could affect the Group’s operating results and
financial position.
(7) Impact of Inclement Weather
Sales of some of the Group’s products, such as body warmers, hay
fever-related products, and cold remedies, are highly susceptible to
and prone to be impacted by seasonal factors such as
temperatures and airborne pollen counts. Trends in sales of these
products could therefore affect the Group’s operating results and
financial position.
(8) Impact from Natural Disasters
The Group’s manufacturing bases are located throughout Japan. As
such, if a natural disaster such as an earthquake or a large typhoon
should strike an area or areas in which these bases are located, the
Group’s management and financial performance could be affected.
(9) Overseas Business Risk
The Group’s trading transactions involving products and raw
materials are subject to fluctuations in exchange rates. However,
the Group reduces their impact on operating results mainly by
hedging foreign currency risk through forward exchange
transactions. The Group does not engage in derivative transactions
for speculative purposes. Line items denominated in foreign
currencies, including the net sales, expenses, assets and liabilities
of consolidated overseas subsidiaries, are converted into yen for
the purpose of preparing consolidated financial statements. In the
event of a large change in the prevailing exchange rate on the
conversion date, there will be a substantial corresponding change in
the yen value of such line items. The Group is also exposed to the
risk of changes in regulations by foreign governments, as well as
economic conditions. These and other factors could affect the
Group’s operating results and financial position.
(4) Legal Constraints
The Group’s products include OTC pharmaceuticals,
quasi-pharmaceuticals, cosmetics, medical devices, and more. The
Group’s operating results and financial position could be affected if
the development or launch of products is subject to sanctions or
other measures under Japan’s Pharmaceutical Affairs Act or other
relevant laws and regulations.
(10) Information Management and System Risk
The Group holds large volumes of information mainly as part of its
Mail Order Business, including personal information. For this
reason, the Group has established an internal information
management system in conjunction with enhancing in-house
training programs and information management. However, the
Group’s operating results and financial position could be affected by
a loss of public trust caused by a leak of information.
(5) Product Liability Risk
The Group’s products include OTC pharmaceuticals,
quasi-pharmaceuticals, cosmetics, medical devices, foods, and
more. Any health problems caused to consumers or patients as a
result of quality defects in these products may result in significant
damage to the Group, which could affect the Group’s operating
results and financial position.
(11) Intellectual Property Risk
Third-party infringement of intellectual property rights, including the
Group’s brands and related trademarks, may result in large
damages to the Group. Furthermore, the inadvertent infringement of
the intellectual property rights of a third party by the Group may also
have adverse consequences. These and other factors could impact
the Group’s operating results and financial position.
(6) Changes in Raw Material Prices
The Group’s Consumer Products Business and Mail Order Business
are exposed to the risk of changes in raw material prices. Despite
ongoing cost reductions, the Group’s operating results and financial
condition may be affected by a sharp rise in raw material prices
triggered by surging crude oil prices and other factors.
(12) Share Price Fluctuation
Most of the investment securities owned by the Kobayashi
Pharmaceutical Group are listed, and therefore have a risk of share
price fluctuation. Any losses or declines in valuation gains for
securities, based on the market prices of the fiscal year ends, may
impact the business results and financial status of the Kobayashi
Pharmaceutical Group.
Annual Report 2012
36
Consolidated Financial Statements
Consolidated Balance Sheets
Kobayashi Pharmaceutical Co., Ltd. and Consolidated Subsidiaries
March 31, 2012 and 2011
Thousands of
U.S. dollars
(Note 1)
Millions of yen
2012
2011
2012
¥ 42,836
¥ 31,963
$ 521,183
Trade notes and accounts receivable (Notes 4 and 15)
32,114
29,880
390,729
Securities (Notes 5 and 15)
11,004
11,006
133,885
9,506
8,402
115,659
Assets
Current assets:
Cash and time deposits (Notes 3 and 15)
Inventories:
Commodities and finished goods
Work in process
458
477
5,572
2,050
2,016
24,942
12,014
10,895
146,173
Deferred income taxes (Note 12)
3,288
4,170
40,005
Other current assets
1,351
1,285
16,437
(69)
(362)
(840)
102,538
88,837
1,247,572
15,979
15,519
194,415
Machinery, equipment and vehicles (Note 6)
6,715
6,416
81,701
Tools, furniture and fixtures (Note 6)
1,050
1,017
12,776
Land
3,469
3,471
42,207
98
107
1,192
2,074
2,431
25,234
Raw materials and supplies
Total inventories
Allowance for doubtful accounts
Total current assets
Property, plant and equipment:
Buildings and structures (Note 6)
Construction in progress
Leased assets (Notes 6 and 9)
Total property, plant and equipment
Accumulated depreciation
Property, plant and equipment, net
29,385
28,961
357,525
(15,757)
(14,805)
(191,714)
13,628
14,156
165,811
1,778
1,863
21,633
17,353
15,388
211,133
Investments and other assets:
Investments in securities (Notes 5 and 15):
Unconsolidated subsidiaries and affiliates
Other
Total investments in securities
19,131
17,251
232,766
Deferred income taxes (Note 12)
1,302
2,335
15,841
Goodwill (Note 6)
3,592
4,022
43,704
884
898
10,756
Software
Other intangible assets
810
1,003
9,855
Investment properties, net (Note 7)
3,103
3,114
37,754
Other assets (Notes 6 and 15)
3,058
2,931
37,206
Total investments and other assets
Total assets (Note 19)
See accompanying notes to consolidated financial statements.
37
Annual Report 2012
(155)
(191)
(1,886)
31,725
31,363
385,996
¥147,891
¥134,356
$1,799,379
Thousands of
U.S. dollars
(Note 1)
Millions of yen
2011
2012
2012
Liabilities and Net Assets
Current liabilities:
Short-term loans (Notes 8 and 15)
Trade notes and accounts payable (Notes 4 and 15)
Lease obligations (Notes 9 and 15)
Accrued income taxes (Notes 12 and 15)
¥
5
¥
26
$
61
12,824
12,881
156,029
392
462
4,769
4,498
2,178
54,727
14,670
12,859
178,489
Reserve for sales returns
1,039
1,661
12,641
Accrued bonuses
2,095
2,086
25,490
13
13
158
Other accounts payable (Note 15)
Asset retirement obligations (Note 11)
Other current liabilities (Note 15)
Total current liabilities
2,255
2,359
27,436
37,791
34,525
459,800
484
874
5,889
5,313
5,159
64,643
18
15
219
Long-term liabilities:
Lease obligations (Notes 9 and 15)
Accrued retirement benefits for employees (Note 10)
Accrued retirement benefits for directors and corporate
auditors
Asset retirement obligations (Note 11)
Other liabilities
Total long-term liabilities
Total liabilities
87
73
1,059
2,319
2,367
28,214
8,221
8,488
100,024
46,012
43,013
559,824
3,450
3,450
41,976
4,219
4,219
51,332
101,128
92,186
1,230,417
(4,702)
(4,701)
(57,209)
104,095
95,154
1,266,516
1,998
490
24,310
Contingent liabilities (Note 14)
Net Assets
Shareholders’ equity (Note 13):
Common stock:
Authorized
– 170,100,000 shares
Issued
– 42,525,000 shares in 2012 and 2011
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders’ equity
Accumulated other comprehensive income (loss):
Unrealized holding gain on securities
Unrealized loss on deferred hedges (Note 16)
Translation adjustments
Total accumulated other comprehensive loss, net
Stock acquisition rights
Minority interests
Total net assets
Total liabilities and net assets
(323)
(599)
(3,930)
(4,050)
(3,875)
(49,276)
(2,375)
(3,984)
(28,896)
159
160
1,935
—
13
—
101,879
91,343
1,239,555
¥147,891
¥134,356
$1,799,379
Annual Report 2012
38
Consolidated Statements of Income
Years ended March 31, 2012 and 2011
Thousands of
U.S. dollars
(Note 1)
Millions of yen
2012
2011
¥131,167
54,636
76,531
¥130,824
56,184
74,640
$1,595,900
664,753
931,147
7,201
5,087
14,999
—
9,891
804
6,992
5,134
13,489
341
9,951
837
87,614
61,893
182,492
—
120,343
9,782
4
3
49
262
740
505
1,738
4,727
4,386
6,889
57,233
19,298
230
822
1,223
1,633
4,776
4,069
6,519
56,019
18,621
3,188
9,004
6,144
21,146
57,513
53,364
83,818
696,350
234,797
381
408
(43)
(1,149)
52
663
(86)
(31)
(641)
(3)
223
—
336
383
(61)
(1,158)
(173)
660
(76)
(637)
—
(37)
53
(5,143)
4,636
4,964
(523)
(13,980)
633
8,067
(1,046)
(377)
(7,799)
(37)
2,713
—
Cumulative effect of change in method of accounting
for asset retirement obligations
—
(25)
—
Loss on disaster
Other, net
Income before income taxes and minority interests
Income taxes (Note 12):
Current
Deferred
(39)
789
19,822
(259)
694
13,178
(475)
9,600
241,173
6,936
1,160
8,096
11,726
(0)
¥ 11,726
4,917
(1,075)
3,842
9,336
0
¥ 9,336
84,390
14,114
98,504
142,669
(0)
$ 142,669
Net sales (Note 19)
Cost of sales
Gross profit
Selling, general and administrative expenses:
Sales promotions
Freight and storage
Advertising
Provision for allowance for doubtful accounts
Salaries and bonuses
Net pension cost
Provision for accrued retirement benefits for directors and
corporate auditors
Taxes and dues other than income taxes
Depreciation and amortization (Note 19)
Amortization of goodwill (Note 19)
Office rent and other rental charges
External service fees
Research and development costs
Other
Total selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income (Note 19)
Equity in earnings of affiliates (Note 19)
Interest expense (Note 19)
Sales discounts
Foreign currency exchange gain (loss), net
Royalty income
Loss on disposal or sales of property, plant and equipment, net
Loss on impairment of fixed assets (Notes 6 and 19)
Loss on sales of shares of an affiliate
Loss on devaluation of shares of affiliates
Gain on sales of investments in securities
Loss on devaluation of investments in securities (Note5)
Income before minority interests
Minority interests
Net income
39
Annual Report 2012
2012
Consolidated Statements of Comprehensive Income
Thousands of
U.S. dollars
(Note 1)
Millions of yen
2011
2012
Income before minority interests
Other comprehensive income (loss):
Unrealized gain (loss) on deferred hedges
Share of other comprehensive income (loss) of an affiliate
accounted for by the equity method
Other comprehensive income, net (Note 18)
Comprehensive income
Comprehensive income attributable to:
Shareholders of Kobayashi Pharmaceutical Co., Ltd.
Minority interests
2012
¥11,726
¥9,336
$142,669
1,508
127
(175)
1,451
(114)
(1,066)
18,348
1,545
(2,129)
149
(162)
1,813
1,609
¥13,335
109
¥9,445
19,577
$162,246
¥13,335
¥(0)
¥9,445
¥0
$162,246
$(0)
Consolidated Statements of Changes in Net Assets
Millions of yen
Number of
shares
issued
Common
(Thousands)
stock
Balance at April 1, 2010
Net income for the year
Cash dividends
Purchases of treasury stock
Other changes
Cash dividends
Disposal of treasury stock
Other changes
Balance at March 31, 2012
42,525
—
—
—
—
42,525
—
—
—
—
—
42,525
¥3,450
—
—
—
—
3,450
—
—
—
—
—
¥3,450
Retained
earnings
Treasury
stock, at
cost
Unrealized
holding
gain
on
securities
¥4,219 ¥ 85,553
—
9,336
—
(2,703)
—
—
—
—
4,219
92,186
—
11,726
—
(2,784)
—
—
—
—
—
—
¥4,219 ¥101,128
¥(4,701)
—
—
(0)
—
(4,701)
—
—
(1)
0
—
¥(4,702)
¥ (961)
—
—
—
1,451
490
—
—
—
—
1,508
¥1,998
Capital
surplus
Unrealized
loss
on
Stock
deferred Translation acquisition
hedges adjustments
rights
¥(323)
—
—
—
(276)
(599)
—
—
—
—
276
¥(323)
¥(2,809)
—
—
—
(1,066)
(3,875)
—
—
—
—
(175)
¥(4,050)
Minority
interests
¥163
—
—
—
(3)
160
—
—
—
—
(1)
¥159
Total
net
assets
¥12 ¥ 84,603
—
9,336
—
(2,703)
—
(0)
1
107
13
91,343
—
11,726
—
(2,784)
—
(1)
—
0
(13)
1,595
¥— ¥101,879
Thousands of U.S. dollars (Note 1)
Common
stock
Cash dividends
Disposal of treasury stock
Other changes
Balance at March 31, 2012
$41,976
—
—
—
—
—
$41,976
Capital
surplus
Retained
earnings
Treasury
stock, at
cost
$51,332 $1,121,621 $(57,197)
—
142,669
—
—
(33,873)
—
—
—
(12)
—
—
0
—
—
—
$51,332 $1,230,417 $(57,209)
Unrealized
holding
gain
on
securities
$ 5,962
—
—
—
—
18,348
$24,310
Unrealized
loss
on
Stock
deferred Translation acquisition
hedges adjustments
rights
$(7,288) $(47,147)
—
—
—
—
—
—
—
—
(2,129)
3,358
$(3,930) $(49,276)
Minority
interests
$1,947
—
—
—
—
(12)
$1,935
Total
net
assets
$158 $1,111,364
—
142,669
—
(33,873)
—
(12)
—
0
(158)
19,407
$ — $1,239,555
Annual Report 2012
40
Consolidated Statements of Cash Flows
Thousands of
U.S. dollars
(Note 1)
Millions of yen
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Loss on impairment of fixed assets
(Decrease) increase in allowance for doubtful accounts
Increase in accrued retirement benefits
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Loss on sales of shares of an affiliate
Gain on sales of investments in securities
Loss on devaluation of investments in securities
Loss on disposal or sales of property, plant and equipment, net
Loss on devaluation of shares of affiliates
Changes in operating assets and liabilities:
Increase in trade notes and accounts receivable
(Increase) decrease in inventories
Decrease in trade notes and accounts payable
Increase in other accounts payable
Decrease in consumption taxes payable
Other
Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Decrease in time deposits
Purchases of securities
Proceeds from sales and redemption of securities
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of intangible assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Increase in other assets
Purchases of investments in subsidiaries resulting in change in
scope of consolidation
Other
Net cash used in investing activities
Cash flows from financing activities:
Decrease in short-term loans, net
Repayment of long-term debt
Dividends paid
Increase in treasury stock
Decrease in lease obligations
Liquidating dividend of a subsidiary paid to minority interests
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Decrease in cash and cash equivalents due to exclusion of
consolidated subsidiary from scope of consolidation
Cash and cash equivalents at end of the year (Note 3)
41
Annual Report 2012
2012
2011
2012
¥19,822
¥13,178
$241,173
3,232
31
(327)
150
(381)
43
(408)
641
(223)
—
86
3
4,155
637
345
342
(336)
61
(383)
—
(53)
5,143
76
37
39,324
377
(3,979)
1,825
(4,636)
523
(4,964)
7,799
(2,713)
—
1,046
37
(2,060)
(1,019)
(6)
1,932
(165)
(347)
21,004
1,036
(28)
(4,762)
¥17,250
(3,716)
430
(1,599)
252
(17)
326
18,878
479
(47)
(6,142)
¥13,168
(25,064)
(12,398)
(73)
23,507
(2,008)
(4,222)
255,554
12,605
(340)
(57,939)
$209,880
¥
—
(39,990)
41,000
(1,748)
15
(345)
(1,249)
712
(174)
¥
44
(36,989)
37,000
(1,868)
2
(299)
(6,084)
53
(122)
$
—
(486,556)
498,844
(21,268)
183
(4,198)
(15,196)
8,663
(2,117)
(979)
—
(11,911)
(171)
(2,929)
(116)
(8,379)
(2,081)
(35,637)
(30)
—
(2,784)
(1)
(463)
(14)
(3,292)
(1,673)
(176)
(2,703)
(0)
(602)
—
(5,154)
(365)
—
(33,873)
(12)
(5,633)
(171)
(40,054)
(154)
10,875
31,963
(296)
(661)
32,624
(1,874)
132,315
388,892
(2)
—
(24)
¥42,836
¥31,963
$521,183
Notes to Consolidated Financial Statements
1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Kobayashi Pharmaceutical Co., Ltd. (the “Company”) and its consolidated subsidiaries
(collectively, the “Group”) have been prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been made to the
consolidated financial statements issued domestically in order to present them in a format which is more familiar to readers outside Japan. In
addition, certain notes included herein are not required under accounting principles generally accepted in Japan but are presented as additional
information.
Certain reclassifications of previously reported amounts have been made to conform the consolidated financial statements for the year ended
March 31, 2011 to the 2012 presentation. Such reclassifications had no effect on consolidated net income or net assets.
The U.S. dollar amounts included in the accompanying consolidated financial statements and the notes are presented solely for convenience
and are translated, as a matter of arithmetic computation only, at ¥82.19 = U.S.$1.00, the approximate exchange rate in effect on March 31, 2012.
This translation should not be construed as a representation that Japanese yen amounts have been, could have been, or could in the future be,
converted into U.S. dollars at the above or any other rate.
2. Summary of Significant Accounting Policies
(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries. All significant
intercompany transactions and accounts have been eliminated in consolidation. Investments in an affiliate (company over which the Company has
the ability to exercise significant influence) are, with certain minor exceptions, accounted for by the equity method.
Goodwill is amortized principally by the straight-line method over a twenty-year period. Minor differences are charged or credited to income in
the year of acquisition.
The balance sheet date of certain consolidated subsidiaries is December 31. Any significant differences in intercompany accounts and
transactions arising from intervening intercompany transactions during the period from January 1 through March 31 have been adjusted, if
necessary.
In addition, the balance sheet date of one domestic consolidated subsidiary is June 30. For consolidation purposes, the financial statement of
the subsidiary was prepared as of and for the year ended March 31.
(b) Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the
year-end date of the financial statements and the reported amounts of revenues and expenses for the reporting period. The actual results could
differ from these estimates.
(c) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits with banks withdrawable on demand, and short-term investments which are readily
convertible to cash subject to an insignificant risk of any change in their value and which were purchased with an original maturity of three months
or less.
(d) Foreign currency translation
Revenue and expenses denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at the respective
transaction dates. All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the rates of exchange in
effect at the balance sheet date except for those items covered by forward foreign exchange contracts and currency options.
The balance sheet accounts of the overseas consolidated subsidiaries are translated into Japanese yen at the rates of exchange in effect at
the balance sheet date except that the components of net assets excluding minority interests are translated at their historical exchange rates.
Revenue and expense accounts are translated at the average rates of exchange in effect during the year. Differences resulting from translating the
financial statements of the overseas subsidiaries have not been included in the determination of net income, but are presented as “Translation
adjustments” in the consolidated financial statements.
(e) Investments in securities
Securities are classified into three categories: trading securities, held-to-maturity debt securities, or other securities. Trading securities, consisting
of debt and marketable equity securities, are stated at fair value. Gain or loss, both realized and unrealized, is credited or charged to income.
Held-to-maturity debt securities are stated at amortized cost. Marketable securities classified as other securities are carried at fair value with any
changes in unrealized holding gain or loss, net of the applicable income taxes, reported as a separate component of accumulated other
comprehensive income (loss). Non-marketable securities classified as other securities are carried at cost.
If the fair value of other securities has declined significantly and the impairment in value is not deemed temporary, these securities are written
down to fair value and the resulting loss is charged to income as incurred.
Annual Report 2012
42
(f) Inventories
Commodities and raw materials are stated principally at the lower of cost, determined by the moving average method, or net selling value. Finished
goods, work in process and supplies are principally stated at the lower of cost, determined by the weighted-average method, or net selling value.
(g) Property, plant and equipment (excluding leased assets)
Property, plant and equipment are stated at cost. The Company and its domestic consolidated subsidiaries calculate depreciation by the
declining-balance method except for buildings (other than structures attached to the buildings) acquired after March 31, 1998, to which the
straight-line method is applied. The overseas consolidated subsidiaries calculate depreciation by the straight-line method.
(h) Leased assets
Leased assets under finance lease transactions which do not transfer ownership to the lessee are capitalized and depreciated over the respective
lease terms by the straight-line method assuming a nil residual value.
(i) Allowance for doubtful accounts
The Company and its domestic consolidated subsidiaries provide an allowance for doubtful accounts principally at an amount based on their
historical bad debt ratio. In addition, an additional allowance is provided at an estimate of uncollectible amounts with respect to certain specific
doubtful receivables. Overseas consolidated subsidiaries provide an allowance for doubtful accounts based on estimate of uncollectible amounts
with the current status.
(j) Reserve for sales returns
The Company and certain domestic consolidated subsidiaries provide a reserve for sales returns based on the historical sales return ratio.
(k) Accrued bonuses
The Company and its domestic consolidated subsidiaries provide accrued bonuses for the future payment of employees’ bonuses based on the
estimated amount of bonus payments.
(l) Accrued retirement benefits
Pension plans of the Company and certain consolidated subsidiaries include an unfunded defined retirement benefit plan, a non-contributory
funded pension plan, and defined contribution pension plans. The unfunded defined retirement benefit plans provide for lump-sum payments to
eligible employees who terminate their services which are determined by reference to their current rate of pay, length of service and the conditions
under which termination occurs.
Accrued retirement benefits for employees of the Company and two domestic consolidated subsidiaries represent the estimated present
value of the projected benefit obligation in excess of the fair value of the pension plan assets.
All other domestic consolidated subsidiaries and certain overseas consolidated subsidiaries have adopted a simplified method of calculation.
Under this simplified method, accrued retirement benefits for employees are stated at 100% of the amount which would be required to be paid if all
eligible employees voluntarily retired at the balance sheet date.
Prior service cost is being amortized by the straight-line method over ten years which is a shorter period than the average remaining years of
service of the participants.
Actuarial differences are amortized in the year following the year in which differences are recognized by the straight-line method over ten
years which is a shorter period than the average remaining years of service of the participants.
Directors and corporate auditors of certain domestic consolidated subsidiaries (collectively, “officers”) are customarily entitled, subject to
shareholders’ approval, to lump-sum payments under an unfunded retirement allowances plan. Accrued retirement benefits for officers have been
made at an estimated amount based on the consolidated subsidiaries’ internal regulations.
The Company decided to abolish the retirement allowances plan for officers at the Board of Directors meeting held on February 12, 2009. At
the annual general shareholders’ meeting held on June 26, 2009, a proposal was then subsequently approved to provide retirement allowances for
these officers when they retire.
(m) Income taxes
Deferred income taxes have been recognized with respect to the differences between financial reporting and the tax bases of the assets and
liabilities. Deferred income taxes are measured at the rates expected to apply to the period when each asset or liability is realized, based on the tax
rates that will be in effect as of the balance sheet date or are to be subsequently effective.
(n) Research and development costs and computer software
Research and development costs are charged to income when incurred.
Expenditures relating to computer software developed for internal use are charged to income when incurred, except if they contribute to the
generation of future income or cost savings. Such expenditures are capitalized as assets and are amortized over their respective estimated useful
lives, customarily 5 years.
(o) Distribution of retained earnings
Under the Corporation Law, the distribution of retained earnings with respect to a given financial period can be made by resolution of the Board of
Directors meeting held subsequent to the close of the financial period. The accounts for that period do not, therefore, reflect such appropriations
(see Note 20).
43
Annual Report 2012
(p) Derivatives and hedging activities
Derivative financial instruments, which include forward foreign exchange contracts and currency options, are used to offset the Group’s risk of
exposure to fluctuation in currency exchange rates.
Derivatives are carried at fair value with any changes in unrealized gain or loss credited or charged to income, except for those which meet
the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as a separate component of accumulated other
comprehensive income (loss). When forward foreign exchange contracts or currency options meet certain criteria, receivables and payables
covered by the contract are translated at the contracted rates.
The Company and domestic consolidated subsidiaries evaluate the effectiveness of their hedging activities by reference to the accumulated
gain or loss on each hedging instrument and on the related underlying hedged item from the commencement of the hedge.
(Additional Information)
Accounting changes and error corrections
Effective April 1, 2011, the Company and its domestic consolidated subsidiaries adopted the “Accounting Standard for Accounting Changes
and Error Corrections” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 24 issued on December 4, 2009) and the “Guidance
on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No. 24 issued on December 4, 2009).
3. Cash and Cash Equivalents
A reconciliation between the balances of cash and time deposits in the accompanying consolidated balance sheets at March 31, 2012 and 2011
and the balances of cash and cash equivalents as presented in the accompanying consolidated statements of cash flows for the years then ended
have been omitted since there were no reconciliation items.
4. Trade Notes Receivable and Trade Notes and Accounts Payable
Although the balance sheet date for the year ended March 31, 2012 fell on a bank holiday, trade notes receivable of ¥125 million ($1,521
thousand), trade notes payable of ¥733 million ($8,918 thousand) and factoring accounts payable of ¥829 million ($10,086 thousand) with due
date of March 31, 2012 were accounted for as settlement on that date and were excluded from the respective balances in the consolidated
balance sheet at March 31, 2012.
Annual Report 2012
44
5. Securities and Investments in Securities
(a) Securities classified as “Other securities” at March 31, 2012 and 2011 are summarized as follows:
( I ) Securities whose carrying value exceeds their acquisition cost
Millions of yen
Acquisition cost
2012
Carrying value
¥ 8,369
12,644
¥21,013
¥ 4,647
12,531
¥17,178
Equity securities
Debt securities
Unrealized gain Acquisition cost
¥3,722
113
¥3,835
¥ 728
8,034
¥8,762
2011
Carrying value
Unrealized gain
¥ 2,396
8,040
¥10,436
¥1,668
6
¥1,674
2011
Carrying value
Unrealized loss
Acquisition cost
2012
Carrying value
Unrealized gain
$ 56,540
152,464
$209,004
$101,825
153,839
$255,664
$45,285
1,375
$46,660
Equity securities
Debt securities
( II ) Securities whose acquisition cost exceeds their carrying value
Millions of yen
Acquisition cost
2012
Carrying value
¥2,310
5,505
¥7,815
¥1,545
5,504
¥7,049
Equity securities
Debt securities
Unrealized loss Acquisition cost
¥(765)
(1)
¥(766)
¥ 5,995
10,009
¥16,004
¥(806)
(51)
¥(857)
¥ 5,189
9,958
¥15,147
Acquisition cost
2012
Carrying value
$28,106
66,979
$95,085
$18,798
66,967
$85,765
Equity securities
Debt securities
Unrealized loss
$(9,308)
(12)
$(9,320)
(III) Securities whose market value is not determinable
Millions of yen
Unlisted equity securities
2012
2011
2012
¥295
¥811
$3,589
(IV) Proceeds from sales, and gross realized gain on other securities
Millions of yen
Proceeds from sales
Gross realized gain
45
Annual Report 2012
2012
2011
2012
¥—
—
¥53
53
$—
—
(b) Loss on devaluation of investments in securities for the years ended March 31, 2012 and 2011
For the year ended March 31, 2011, loss on devaluation of investments in securities of ¥5,143 million was recognized in the consolidated
statement of income. If the fair value of other securities has declined by more than 30% from their acquisition costs, loss on devaluation is
recognized on those securities, considering their recoverability. If the fair value of other securities has declined by more than 50% from their
acquisition costs, loss on devaluation is fully recognized on those securities.
There is no loss on devaluation of investments in securities for the year ended March 31, 2012.
6. Loss on Impairment of Fixed Assets
The Company and its consolidated subsidiaries group their property, plant and equipment and intangible assets for business use at each
business segment unit and these are defined as the smallest identifiable group of assets generating cash inflows. The head office building, central
laboratories and certain other assets are grouped as one common asset group.
For the years ended March 31, 2012 and 2011, the carrying value of production facilities and other, which are not anticipated to be utilized
in the future, have been reduced to their respective recoverable amounts and a loss on impairment of fixed assets was recognized in the
accompanying consolidated statements of income.
The recoverable amounts of production facilities and medical devices are based on the value in use. For the years ended March 31, 2012
and 2011, the value in use of the production facilities is measured at zero because future cash flow is not expected.
The Company reviewed the fair value, including the consolidated goodwill, of an acquired subsidiary since expected earnings from the
acquired subsidiary have not materialized. As a result, the Company reduced the carrying value of the goodwill to the recoverable amount and
loss on impairment was recognized in the consolidated statement of income for the year ended March 31, 2011.
Loss on impairment of fixed assets for the years ended March 31, 2012 and 2011 are summarized as follows:
2012
Location
Osaka and other
Osaka and other
Classification
Millions of yen
Machinery, equipment and other
Leased assets
¥28
3
¥31
Description
Production facilities and other
Production facilities
$340
37
$377
2011
Location
Osaka and other
Osaka
Osaka and other
United States
Osaka
Description
Production facilities and other
Medical devices
Production facilities
Other
Other
Classification
Machinery, equipment and other
Tools, furniture and fixtures
Leased assets
Goodwill
Long-term prepaid expenses
included in other assets
Millions of yen
¥ 19
20
21
573
4
¥637
Annual Report 2012
46
7. Investment Properties
The Company and certain consolidated subsidiaries own rental properties (including land) in Osaka prefecture and other areas.
Rental income from these properties amounted to ¥275 million ($3,346 thousand) and ¥274 million, and related costs amounted to ¥77
million ($937 thousand) and ¥80 million for the years ended March 31, 2012 and 2011, respectively.
The carrying value on the consolidated balance sheets at March 31, 2012 and 2011, and corresponding fair value of those properties are as
follows:
Millions of yen
Carrying value
Fair value
As of April 1, 2011
Net change
¥3,775
As of March 31, 2012
¥3,762
¥4,098
¥3,775
¥4,197
¥ (13)
Millions of yen
Carrying value
As of April 1, 2010
Net change
¥3,810
Fair value
¥ (35)
Carrying value
Fair value
As of April 1, 2011
Net change
$45,930
$ (158)
$45,772
$49,860
The carrying value represents the acquisition cost less accumulated depreciation and cumulative impairment loss.
The significant components of net changes in carrying value for the years ended March 31, 2012 and 2011 were due to net effect of
increases related to repair work on real estate properties in the amount of ¥26 million ($316 thousand) and acquisition of real estate properties in
the amount of ¥5 million, and decreases related to depreciation in the amount of ¥37 million ($450 thousand) and ¥38 million for the years ended
March 31, 2012 and 2011, respectively.
The fair value of the main properties is estimated based on a real estate appraisal report issued by independent real estate appraisers.
8. Short-Term Loans
The average interest rates on short-term bank loans at March 31, 2012 and 2011 were 1.07% and 1.58%, respectively.
In order to achieve more efficient and flexible financing, the Company and certain consolidated subsidiaries have concluded line-of-credit
agreements with certain financial institutions. The status of these at March 31, 2012 and 2011 is summarized as follows:
Millions of yen
Lines-of-credit
Credit used
Available credit
2012
2011
2012
¥26,424
—
¥26,424
¥26,401
(26)
¥26,375
$321,499
—
$321,499
9. Lease Transactions
(a) Finance lease transactions
The Group principally leases production facilities, consisting of machinery, equipment, vehicles, furniture and fixtures, which are used in the
consumer products division and facilities, consisting of furniture and fixtures, which are used in the medical devices division. The Group also leases
software.
Lease obligations related to finance lease transactions at March 31, 2012 are summarized as follows:
Millions of yen
2012
Finance lease obligations due in installments from 2013 through 2019
Less current portion
47
Annual Report 2012
¥876
(392)
¥484
2012
$10,658
(4,769)
$ 5,889
The aggregate annual maturities of finance lease obligations subsequent to March 31, 2012 are summarized as follows:
Year ending March 31,
Millions of yen
$ 4,769
3,492
1,497
535
207
158
$10,658
¥392
287
123
44
17
13
¥876
2013
2014
2015
2016
2017
2018 and thereafter
Total
(b) Operating lease transactions
Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2012 for non-cancelable operating leases are
summarized as follows:
Year ending March 31,
Millions of yen
$1,387
596
$1,983
¥114
49
¥163
2013
2014 and thereafter
Total
10. Accrued Retirement Benefits for Employees
The following table sets forth the funded and accrued status of the plans, and the amounts recognized in the accompanying consolidated balance
sheets at March 31, 2012 and 2011 for the Group’s defined benefit plans:
Millions of yen
Projected benefit obligation
Fair value of pension plan assets
Unfunded retirement benefit obligation
Unrecognized prior service cost
Unrecognized actuarial differences
Net retirement benefit obligation
Prepaid pension cost
Accrued retirement benefits for employees
2012
2011
2012
¥(10,124)
5,164
(4,960)
68
406
(4,486)
(827)
¥ (5,313)
¥(9,861)
4,884
(4,977)
137
505
(4,335)
(824)
¥(5,159)
$(123,178)
62,830
(60,348)
827
4,940
(54,581)
(10,062)
$ (64,643)
The components of net pension cost for the years ended March 31, 2012 and 2011 were as follows:
Millions of yen
Service cost
Interest cost
Expected return on pension plan assets
Amortization:
Prior service cost
Actuarial differences
Cost of contribution pension plan
Net pension cost
2012
2011
2012
¥ 605
182
(98)
¥ 621
175
(92)
$ 7,361
2,215
(1,192)
68
139
170
¥1,066
68
143
173
¥1,088
827
1,691
2,068
$12,970
Annual Report 2012
48
The assumptions used in accounting for the above plans for the years ended March 31, 2012 and 2011 were as follows:
Discount rate
Expected rate of return on plan assets
2012
2011
2.0%
2.0%
2.0%
2.0%
11. Asset Retirement Obligations
Asset retirement obligations are the result of legal obligations for the removal of leasehold improvements and the restoration of premises to their
original conditions upon termination of leases.
Asset retirement obligations are measured based on the estimated useful life of 10 years and the discount rate of a 10-year Japanese
government bond at the commencement of the lease contract.
Changes in the balance of asset retirement obligations for the years ended March 31, 2012 and 2011 are as follows:
Millions of yen
2012
Asset retirement obligations at beginning of year
Liabilities incurred for a leased buildings
Accretion expense
Asset retirement obligations at end of year
2011
¥ 86
13
1
¥100
¥ 85
—
1
¥ 86
2012
$1,047
158
12
$1,217
Balance at beginning of the year ended March 31, 2011 was calculated after the adoption of “Accounting Standard for Asset Retirement
Obligations” (ASBJ Statement No.18 issued on March 31, 2008) and “Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ
Guidance No.21 issued on March 31, 2008).
12. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on income which, in the aggregate, resulted in a statutory tax rate
of approximately 40.6% for the years ended March 31, 2012 and 2011. The overseas subsidiaries are subject to the income taxes of their
respective countries of domicile.
A reconciliation of the differences between the statutory tax rate and the effective tax rate in the accompanying consolidated statement of
income for the year ended March 31, 2011 is as follows:
2011
Statutory tax rate
Tax loss carryforwards of consolidated subsidiaries
Valuation allowances
Utilization of tax loss carryforwards
Tax credits on research and development costs
Amortization of goodwill
Expenses not deductible for tax purposes
Nontaxable dividend Income
Other
Effective tax rate
40.6 %
2.8
(12.8)
(0.8)
(2.3)
2.1
1.4
(1.2)
(0.4)
(0.2)
29.2 %
A reconciliation of the statutory tax rate and the effective tax rate for the year ended March 31, 2012 has been omitted as the difference was
less than 5% of the statutory tax rate.
49
Annual Report 2012
The tax effects of the temporary differences which gave rise to a significant portion of the deferred tax assets and liabilities at March 31,
2012 and 2011 are presented below:
Millions of yen
2012
2011
2012
Deferred tax assets:
Accrued retirement benefits for employees
Net operating loss carryforwards
Accrued bonuses
Accrued retirement benefits for directors and statutory auditors
Accrued expenses
Accrued enterprise tax
Unrealized intercompany profits
Loss on disposal or write-offs of inventories
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
¥1,578
433
782
7
1,697
369
173
557
324
94
1,741
7,755
(2,099)
5,656
¥1,730
1,289
826
6
1,606
178
162
639
602
576
1,701
9,315
(2,489)
6,826
$19,199
5,268
9,515
85
20,647
4,490
2,105
6,777
3,942
1,144
21,182
94,354
(25,538)
68,816
Deferred tax liabilities:
Other
Total deferred tax liabilities
Net deferred tax assets
(1,072)
(118)
(1,190)
¥4,466
(328)
(69)
(397)
¥6,429
(13,043)
(1,435)
(14,478)
$54,338
Net deferred tax assets in the above table are analyzed as follows:
Millions of yen
Current assets – deferred tax assets
Investments and other assets – deferred tax assets
Long-term liabilities – deferred tax liabilities
2012
2011
2012
¥3,288
1,302
(124)
¥4,466
¥4,170
2,335
(76)
¥6,429
$40,005
15,841
(1,508)
$54,338
The “Act for Partial Revision of the Income Tax Act etc. for the Purpose of Creating Taxation System Responding to Changes in Economic
and Social Structures” (Act No. 114 of 2011) and the “Act for 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 on December 2, 2011
and the staged reduction of the national corporate tax rate and a special reconstruction corporate tax will apply to corporate taxes effective
fiscal years beginning on or after April 1, 2012.
As a result, the effective statutory tax rate used to measure the Company’s deferred tax assets and liabilities was changed from 40.63%
to 37.96% for the temporary differences expected to be realized or settled in the period from April 1, 2012 to March 31, 2015 and from
40.63% to 35.59% for temporary differences expected to be realized or settled from fiscal years beginning April 1, 2015. The effect of the
announced reduction of the effective statutory tax rate was to decrease deferred tax assets, net of deferred tax liabilities, by ¥377 million
(U.S. $4,587 thousand), and increase income taxes-deferred by ¥524 million (U.S. $6,375 thousand), unrealized holding gain on securities by
¥151 million (U.S. $1,837 thousand) and unrealized loss on deferred hedges by ¥4 million (U.S. $49 thousand) as of and for the year ended
March 31, 2012.
Annual Report 2012
50
13. Shareholders’ Equity
The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus
(other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at
any time by resolution of the shareholders, or by the Board of Directors meeting if certain conditions are met.
Retained earnings include the legal reserve provided in accordance with the provisions of the Law. The legal reserve of the Company included
in retained earnings amounted to ¥340 million ($4,137 thousand) at March 31, 2012 and 2011.
Stock-based compensation plan
As of March 31, 2012, the Company had one stock option plan: 2007 stock option plan. The 2007 stock option plan (the 2007 plan) was
approved at the annual general meeting of shareholders of the Company held on June 28, 2007. The 2007 plan provides for granting options to
purchase 260,800 shares of common stock to directors, corporate auditors and certain key employees of the Company, and directors and
certain key employees of certain consolidated subsidiaries. The exercise price was ¥4,329 ($53) per share at March 31, 2012. This exercise price is
subject to adjustment in certain cases which include stock splits. The options became exercisable on July 1, 2009 and are scheduled to expire on
June 30, 2012.
Information regarding the Company’s stock option plan was as follows:
The 2007 plan
Number of options:
Outstanding at March 31, 2011
Granted
Cancelled
Exercised
Outstanding at March 31, 2012
242,600
—
1,700
—
240,900
Yen
¥ 645
Fair value of options as of the grant date
U.S. dollars
& 7.85
Fair value of options as of the grant date
Treasury stock
Movements in treasury stock for the years ended March 31, 2012 and 2011 are summarized as follows:
Number of shares
2012
Treasury stock
April 1, 2011
Increase
1,575,987
350
Decrease
50
March 31, 2012
1,576,287
Number of shares
2011
April 1, 2010
1,575,862
Treasury stock
51
Annual Report 2012
Increase
125
Decrease
—
April 1, 2011
1,575,987
14. Contingent Liabilities
At March 31, 2012, the Company had the following contingent liability:
Millions of yen
2012
Recourse obligation under factoring transactions
¥587
2012
$7,142
15. Financial Instruments
(a) Overview
(I) Policy for financial instruments
In consideration of plans for capital investment, the Group raises the required funds. The Group manages temporary fund surpluses
principally through financial assets with high liquidity. Further, the Group raises short-term working capital through bank borrowings. The
Group uses derivatives for the purpose of reducing risk and does not enter into derivatives for speculative or trading purposes.
(II) Types of financial instruments and related risk
Trade receivables, notes and accounts receivable, are exposed to credit risk in relation to customers. In addition, the Group is exposed to foreign
currency exchange risk arising from trade receivables denominated in foreign currencies.
Securities and investments in securities are exposed to market risk. Those securities are mainly composed of treasury discount bills,
interest-bearing government bonds and the shares of common stock of other companies with which the Group has business relationships.
Trade payables, notes and accounts payable, have payment due dates within 4 months. Although the Group is exposed to foreign
currency exchange risk arising from those payables denominated in foreign currencies, forward foreign currency exchange contracts are
arranged to hedge the risk.
Borrowings and lease obligations are raised principally for the purpose of making capital investments or working capital.
Regarding derivatives, the Group enters into foreign exchange forward and currency option contracts to reduce the foreign currency exchange
risk arising from the trade payables denominated in foreign currencies. Further information regarding the method of hedge accounting, hedging
instruments and hedged items, hedging policy, and the assessment of the effectiveness of hedging activities can be found in Note 2(p).
(III) Risk management for financial instruments
(i) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arising from receivables, each related division monitors the credit
worthiness of their main customers periodically, and monitors due dates and outstanding balances by customer. In addition, the Group makes
efforts to identify and mitigate risks of bad debt from customers experiencing financial difficulties.
The Group also believes that the credit risk of derivatives is insignificant as the Group enters into derivative transactions only with
financial institutions with high credit rating.
(ii) Monitoring of market risks (the risks arising from fluctuations in foreign exchange rates, interest rates and others)
For trade payables denominated in foreign currencies, the Group identifies the foreign currency exchange risk by each currency on a monthly
basis and enters into forward foreign exchange contracts to hedge such risk.
For securities and investments in securities, the Group periodically reviews the fair values of such financial instruments and the financial
position of the issuers. In addition, the Group continuously reviews market conditions and our business relations with those companies to
decide whether the shares should be retained or disposed of.
In conducting derivative transactions, the division in charge of each derivative transaction follows the internal policies, which set forth
delegation of authority and maximum upper limit on positions, and obtains approval from the finance director.
(iii) Monitoring of liquidity risk (the risk that the Group may not be able to meet its obligations on the scheduled due dates)
Based on reports from each division, the Group prepares and updates its cash flow plans on a timely basis to manage liquidity risk.
(IV) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available,
fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions
and factors could result in different fair value. In addition, the notional amounts of derivatives in Note 16. “Derivatives and Hedging
Activities” are not necessarily indicative of the actual market risk involved in derivative transactions.
Annual Report 2012
52
(b) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the consolidated balance sheets as of March 31, 2012 and 2011, the estimated fair value and
difference are shown in the following table. The following table does not include financial instruments for which it is extremely difficult to
determine the fair value. (Please refer to Note II below).
Millions of yen
2012
Carrying
value
Assets
(i) Cash and time deposits
(ii) Trade notes and accounts receivable
(iii) Securities and investments in securities
(iv) Long-term loans receivable included in other assets
Allowance for doubtful accounts (*1)
Total assets
Liabilities
(i) Trade notes and accounts payable
(ii) Short-term loans
(iii) Other accounts payable
(iv) Current portion of lease obligations
(v) Accrued Income taxes
(vi) Accrued consumption taxes, included in other
current liabilities
(vii) Lease obligations
Total liabilities
Total derivatives (*2)
Estimated
fair value
2011
Difference
¥—
—
—
448
¥87,874
(37)
¥(37)
¥—
—
—
553
¥103,566
(31)
¥(31)
¥31,963
29,880
25,583
500
(15)
485
¥87,911
¥12,824
5
14,670
392
4,498
¥12,824
5
14,670
396
4,498
¥—
—
—
4
—
¥12,881
26
12,859
462
2,178
¥12,881
26
12,859
466
2,178
¥—
—
—
4
—
382
484
¥33,255
¥(164)
382
486
¥33,261
¥(164)
—
2
¥ 6
¥—
568
874
¥29,848
¥(373)
568
876
¥29,854
¥(373)
—
2
¥ 6
¥—
Carrying
value
Estimated
fair value
Assets
(i) Cash and time deposits
$521,183
$521,183
(ii) Trade notes and accounts receivable
390,729
390,729
341,441
341,441
(iv) Long-term loans receivable included in other assets
7,300
Allowance for doubtful accounts (*1)
(195)
6,728
7,105
Total assets
$1,260,458 $1,260,081
Annual Report 2012
¥31,963
29,880
25,583
Difference
¥42,836
32,114
28,063
2012
Estimated
fair value
¥42,836
32,114
28,063
600
(16)
584
¥103,597
53
Carrying
value
Difference
$ —
—
—
(377)
$(377)
2012
Carrying
value
Liabilities
(i) Trade notes and accounts payable
(ii) Short-term loans
(iii) Other accounts payable
(iv) Current portion of lease obligations
(v) Accrued Income taxes
(vi) Accrued consumption taxes, included in other
current liabilities
(vii) Lease obligations
Total liabilities
Total derivatives (*2)
Estimated
fair value
Difference
$156,029
61
178,489
4,769
54,727
$156,029
61
178,489
4,818
54,727
$ —
—
—
49
—
4,647
5,889
$404,611
$(1,995)
4,647
5,913
$404,684
$(1,995)
—
24
$ 73
—
(*1) Excluding allowances for doubtful accounts recorded individually for long-term loans receivable.
(*2) Assets and liabilities arising from derivatives are shown at net value, and an amount in parentheses represents net liability position.
I. Method to determine the estimated fair value of financial instruments and other matters related to derivative transactions.
Assets
(i) Cash and time deposits and (ii) trade notes and accounts receivable
Since these items are settled in a short period of time, their carrying values approximate the fair value.
The fair values of equity securities are based on quoted market prices. The fair value of debt securities is based on either quoted market price
or the price provided by the financial institutions making markets in these securities. For information on securities classified by holding purpose,
please refer to Note 5.
(iv) Long-term loans receivable
The fair value of long-term loans receivable is based on the present value of the future cash flows discounted by the interest rate which is
determined using an appropriate index including interest rates of government bonds plus a credit spread premium, classifying long-term loans
receivable by credit risk status based on credit risk management and a certain remaining period. The fair value of probable specific bad debt is
based on the present value of the estimated cash flows discounted by an interest rate described above or the estimated amounts collectable
by the collaterals and guarantees.
Liabilities
(i) Trade notes and accounts payable, (iii) other accounts payable, (v) accrued income taxes and (vi) accrued consumption taxes
Since these items are settled in a short period of time, their carrying values approximate the fair value.
(ii) Short-term loans, (iv) current portion of lease obligations and (vii) lease obligations
The fair value is based on the present value of the total of principal and interest discounted by the interest rate to be applied if a similar new
borrowings or lease agreements were entered into.
Derivatives
Refer to Note 16. “Derivatives and Hedging Activities”.
II. Financial instruments for which it is extremely difficult to determine the fair value.
Millions of yen
Type
2012
2011
2012
Unlisted equity securities:
¥2,072
¥2,674
$25,210
Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included
in the preceding table on estimated fair value.
Annual Report 2012
54
III. The redemption schedule for monetary assets and debt securities with maturity dates at March 31, 2012 and 2011 is summarized as follows:
Millions of yen
Due in
1 year
or less
(i) Time deposits
(ii) Trade notes and
accounts receivable
(iii) Securities and
investments in securities:
Government bonds
(national and local)
Total assets
¥42,826
¥
—
¥
Due after
10 years
Due in
1 year
or less
—
¥—
¥31,953
2011
Due after
Due after
5 years
1 year
through
through
10 years
5 years
¥
Due after
10 years
—
¥—
¥—
32,114
—
—
—
29,880
—
—
—
11,000
2,000
5,000
—
11,000
2,000
5,000
—
6
¥85,946
575
¥ 2,575
3
¥ 5,003
—
¥—
6
¥72,839
473
¥ 2,473
5
¥ 5,005
16
¥ 16
Due in
1 year
or less
(i) Time deposits
(ii) Trade notes and
accounts receivable
(iii) Securities and
investments in securities:
Government bonds
(national and local)
Total assets
2012
Due after
Due after
1 year
5 years
through
through
5 years
10 years
$521,061
2012
Due after
Due after
1 year
5 years
through
through
5 years
10 years
$
—
$
Due after
10 years
—
$ —
390,729
—
—
—
133,836
24,334
60,835
—
73
$1,045,699
6,996
$31,330
36
$60,871
—
$ —
IV. The redemption schedule for lease obligations is disclosed in Note 9.
16. Derivatives and Hedging Activities
The notional amounts and the estimated fair value of the derivative instruments outstanding at March 31, 2012 and 2011 were as follows:
1. Derivatives for which hedge accounting is not applied
Currency-related transactions
Millions of yen
2012
Type
Description of
transaction
Over-the-counter
transactions
Forward foreign
exchange contracts
Purchase:
U.S. dollars
55
Annual Report 2012
Notional amount
¥ 466
Notional amount
(over 1 year)
¥—
Estimated
fair value
¥(17)
Unrealized loss
¥(17)
2012
Type
Description of
transaction
Over-the-counter
transactions
Forward foreign
exchange contracts
Purchase:
U.S. dollars
Notional amount
(over 1 year)
Notional amount
$ 5,670
Estimated
fair value
$—
Unrealized loss
$(207)
$(207)
There were no derivative transactions which did not qualify for deferral hedge accounting at March 31, 2011.
2. Derivatives for which hedge accounting is applied
Currency-related transactions
Millions of yen
2012
Method of hedge
accounting
Description of
transaction
Forward foreign
exchange contracts
Purchase:
U.S. dollars
Deferral hedge
accounting
British pounds
Euros
Thai bahts
Hedged items
Trade accounts
payable
Trade accounts
payable
Trade accounts
payable
Trade accounts
payable
Notional
amount
2011
Notional
amount
(over 1 year)
Estimated
fair value
Notional
amount
Notional
amount
(over 1 year)
Estimated
fair value
¥6,209
¥2,072
¥(146)
¥5,863
¥1,825
¥(400)
562
155
(8)
508
115
10
274
—
(11)
313
—
17
529
—
17
—
—
—
2012
Method of hedge
accounting
Description of
transaction
Forward foreign
exchange contracts
Purchase:
U.S. dollars
Deferral hedge
accounting
British pounds
Euros
Thai bahts
Hedged items
Trade accounts
payable
Trade accounts
payable
Trade accounts
payable
Trade accounts
payable
Notional
amount
Notional
amount
(over 1 year)
Estimated
fair value
$75,544
$25,210
$(1,776)
6,838
1,886
(97)
3,334
—
(134)
6,436
—
207
The fair value of derivatives are based on the prices provided by financial institutions.
Annual Report 2012
56
17. Amounts per Share
Yen
2012
Net income:
Basic
Cash dividends
Net assets
¥ 286.36
78.00
2,484.08
U.S. dollars
2011
¥ 227.98
66.00
2,226.42
2012
$ 3.48
0.95
30.22
Basic net income per share has been computed based on the net income available for distribution to shareholders of common stock and the
weighted-average number of shares of common stock outstanding during the year. The amounts per share of net assets have been computed
based on the net assets available for distribution to the shareholders of common stock and the number of shares of common stock outstanding
at the year end.
Cash dividends per share represent the cash dividends proposed by the Board of Directors meeting as applicable to the respective years
together with the interim cash dividends paid.
18. Other Comprehensive Income
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income for the year
ended March 31, 2012:
Millions of yen
Thousands of
U.S. dollars
¥ 2,253
2,253
(745)
1,508
$ 27,412
27,412
(9,064)
18,348
Unrealized gain on deferred hedges:
Amount arising during the year
Reclassification adjustments for losses included in net income
Amount before tax effect
Tax effect
Unrealized gain on deferred hedges
(331)
556
225
(98)
127
(4,027)
6,765
2,738
(1,193)
1,545
Translation adjustments:
(378)
203
(175)
(4,599)
2,470
(2,129)
(222)
371
149
¥ 1,609
(2,701)
4,514
1,813
$ 19,577
Unrealized holding gain on securities:
Amount before tax effect
Tax effect
Share of other comprehensive income of an affiliate accounted for by the equity method:
Share of other comprehensive income of an affiliate accounted for by the equity method
Total other comprehensive income
57
Annual Report 2012
19. Segment Information
(a) Business Segment Information
1. Outline of reportable segments
The Company’s reportable segments are its structural units, for which separate financial information is available. These segments are
subject to periodic review by the Board of Directors in order to assist decision making on the allocation and assessment of business
performance.
The Company sets up divisions by product and service under an operational headquarters. Each division formulates comprehensive
domestic and overseas strategies for its products and services and conducts business activities according to these strategies.
The Company’s segments are classified by product and service on the basis of its operational headquarters. There are three
reportable segments, which are the consumer products division, the mail-order division, and the medical devices division.
The consumer products division manufactures and sells pharmaceuticals, oral hygiene products, sanitary products, deodorizing air
fresheners, household sundries, food products and body warmers. The mail-order division sells dietary supplement products and skin care
products and similar items. The medical devices division sells medical equipment.
2. Calculation methods used for sales, income or loss, assets, and other items on each reportable segment.
The accounting policies of the segments are substantially the same as those described in the significant accounting policies in Note 2.
Reportable segment income represents ordinary income, which consists of operating income and nonoperating income/expenses.
Intersegment sales are recorded at the same prices used in transactions with third parties.
3. Information as to sales, income or loss, assets, and other items for each reportable segment for the years ended March 31, 2012 and
2011 were as follows:
Millions of yen
2012
Reportable segments
Net sales
Inter-segment sales and transfers
Total
Segment income
Segment assets
Other items
Interest income
Interest expenses
Investment in equity method affiliate
Increase in property, plant, and
equipment and intangible assets
Adjustments
and
Consolidated
eliminations
Consumer
Products
Mail-order
¥109,203
3,221
¥112,424
¥ 17,546
¥ 64,334
¥10,381
—
¥10,381
¥ 138
¥ 1,501
¥10,476
—
¥10,476
¥ 1,334
¥ 8,182
¥130,060
3,221
¥133,281
¥ 19,018
¥ 74,017
¥1,107
5,147
¥6,254
¥1,233
¥4,551
¥131,167
8,368
¥139,535
¥ 20,251
¥ 78,568
—
(8,368)
¥ (8,368)
¥ (158)
¥69,323
¥131,167
—
¥131,167
¥ 20,093
¥147,891
¥
¥
¥
¥
2,455
505
51
19
407
1,684
¥ 124
—
95
43
—
—
¥
¥
¥
1,842
172
2,277
497
40
—
—
—
1,676
34
—
3
—
—
—
57
Medical
Devices
144
8
8
19
407
1,684
109
Total
Other
Total
2,579
505
146
62
407
1,684
2,014
¥
148
—
(19)
(19)
1
—
199
2,727
505
127
43
408
1,684
2,213
Notes:
1. “Other” consists of business segments that are not included in reportable segments, such as transportation, plastic container manufacture and
sale, insurance agency, real estate management, and advertisement planning and creation.
2. Details of adjustments and eliminations are as follows:
(i) Segment income of ¥158 million ($1,922 thousand), interest income of ¥19 million ($231 thousand), and interest expenses of ¥19 million
($231 thousand) are categorized as eliminations between inter segment transactions.
(ii) Corporate assets included in the adjustments and eliminations of segment assets amount to ¥73,253 million ($891,264 thousand) and
mainly consists of extra funds for investment by the parent company (cash and securities), funds for long-term investment (investment
securities), and assets related to administrative departments.
(iii) Adjustments and eliminations of equity in earnings of affiliates of ¥1 million ($12 thousand) correspond to adjustment of inventories.
3. Segment income is adjusted for the ordinary income as described in 2. Calculation method of reportable segment income or loss.
4. Increase in depreciation, property, plant and equipment and intangible assets includes an increase in long-term prepaid expenses and
amortization of long-term prepaid expenses.
Annual Report 2012
58
Millions of yen
2011
Reportable segments
Net sales
Total
Segment income
Segment assets
Other items
Interest income
Interest expenses
Adjustments
and
Consolidated
eliminations
Consumer
Products
Mail-order
¥107,657
3,136
¥110,793
¥ 17,944
¥ 61,970
¥9,872
—
¥9,872
¥ 317
¥1,237
¥12,184
—
¥12,184
¥ 1,189
¥10,416
¥129,713
3,136
¥132,849
¥ 19,450
¥ 73,623
¥1,111
5,150
¥6,261
¥ 664
¥4,486
¥130,824
8,286
¥139,110
¥ 20,114
¥ 78,109
¥
—
(8,286)
¥ (8,286)
¥ (1,104)
¥56,247
¥130,824
—
¥130,824
¥ 19,010
¥134,356
¥
¥
¥
¥
2,630
1,223
25
56
384
1,776
¥ 139
—
70
18
—
—
¥
¥
¥
2,105
158
2,388
1,044
10
25
—
—
1,796
29
—
3
—
—
—
20
Medical
Devices
213
179
12
31
384
1,776
289
Total
Other
Total
2,769
1,223
95
74
384
1,776
2,263
163
—
(13)
(13)
(1)
—
84
2,932
1,223
82
61
383
1,776
2,347
Notes:
1. “Other” consists of business segments that are not included in reportable segments, such as transportation, plastic container manufacture and
sale, insurance agency, real estate management, and advertisement planning and creation.
2. Details of adjustments and eliminations are as follows:
(i) Segment income of ¥1,104 million, interest income of ¥13 million, and interest expenses of ¥13 million are categorized as eliminations
between inter segment transactions.
(ii) Corporate assets included in the adjustments and eliminations of segment assets amount to ¥59,501 million and mainly consists of extra
funds for investment by the parent company (cash and securities), funds for long-term investment (investment securities), and assets related
to administrative departments.
(iii) Adjustments and eliminations of equity in earnings of affiliates of ¥1 million correspond to adjustment of inventories.
3. Segment income is adjusted for the ordinary income as described in 2. Calculation method of reportable segment income or loss.
4. Increase in depreciation, property, plant and equipment and intangible assets includes an increase in long-term prepaid expenses and
amortization of long-term prepaid expenses.
59
Annual Report 2012
2012
Reportable segments
Consumer
Products
Net sales
$1,328,665
39,190
Total
$1,367,855
Segment income
$ 213,481
Segment assets
$ 782,747
Other items
Depreciation and amortizations $ 27,704
6,047
Interest income
487
Interest expenses
—
—
—
20,391
Medical
Devices
Mail-order
Total
$126,305
—
$126,305
$ 1,679
$ 18,263
$127,461
—
$127,461
$ 16,231
$ 99,550
$
$
414
—
37
—
—
—
$13,469
62,623
$76,092
$15,001
$55,371
$1,582,431
39,190
$1,621,621
$ 231,391
$ 900,560
1,752 $
97
97
231
4,952
20,489
1,326
694
Other
Total
$1,595,900
101,813
$1,697,713
$ 246,392
$ 955,931
29,870
6,144
621
231
4,952
20,489
$ 1,509 $
—
1,155
523
—
—
22,411
2,093
Adjustments
and
Consolidated
eliminations
$
—
(101,813)
$ (101,813)
$ (1,922)
$ 843,448
$1,595,900
—
$1,595,900
$ 244,470
$1,799,379
31,379 $
6,144
1,776
754
4,952
20,489
1,801 $
—
(231)
(231)
12
—
33,180
6,144
1,545
523
4,964
20,489
24,504
2,421
26,925
4. Related information
(1) Geographical information
(a) Sales
As domestic sales in Japan amounted to more than 90% of net consolidated sales, the disclosure of regional sales information has
been omitted.
(b) Property, plant and equipment
As the consolidated balance of property, plant and equipment located in Japan amounted to more than 90% of consolidated balance
of property, plant and equipment, the disclosure of regional information for property, plant and equipment has been omitted.
(2) Information by major customers
Millions of yen
2012
Paltac Corporation
Arata Corporation
2011
Sales
Related segment
Sales
Related segment
¥53,433
¥14,143
Consumer Products
Consumer Products
¥51,204
¥13,970
Consumer Products
Consumer Products
2012
Paltac Corporation
Arata Corporation
Sales
Related segment
$650,116
$172,077
Consumer Products
Consumer Products
Annual Report 2012
60
5. Loss on impairment of fixed assets by reportable segment
Information on loss on impairment of fixed assets by reportable segment for the years ended at March 31, 2012 and 2011 is as follows:
Millions of yen
2012
Consumer
Products
Mail-order
Medical
Devices
Other
Total
¥26
¥—
¥—
¥5
¥31
Millions of yen
2011
Consumer
Products
Mail-order
Medical
Devices
Other
Total
¥44
¥—
¥593
¥—
¥637
2012
Consumer
Products
Mail-order
Medical
Devices
Other
Total
$316
$—
$—
$61
$377
6. Amortization of goodwill and remaining balance by reportable segment
Information of amortization and balance of goodwill by reportable segment as of and for the years ended at March 31, 2012 and 2011 are as follows:
Millions of yen
2012
Amortization for the year
Balance at the end of year
Consumer
Products
Mail-order
Medical
Devices
Other
Total
¥ 497
3,582
¥—
—
¥ 8
10
¥—
—
¥ 505
3,592
Millions of yen
2011
Consumer
Products
Mail-order
Medical
Devices
Other
Total
¥1,044
4,003
¥—
—
¥179
19
¥—
—
¥1,223
4,022
2012
61
Annual Report 2012
Consumer
Products
Mail-order
Medical
Devices
Other
Total
$ 6,047
43,582
$—
—
$ 97
122
$—
—
$ 6,144
43,704
20. Subsequent Events
(a) Appropriation of retained earnings
The following appropriation of retained earnings of the Company, which has not been reflected in the consolidated financial statements for the
year ended March 31, 2012, was approved at the Board of Directors meeting held on May 25, 2012:
Cash dividends (¥43.00 = $0.52 per share)
Millions of yen
¥1,761
$21,426
(b) Sale of shares of consolidated subsidiary
At the meeting of the Board of Directors held on April 24, 2012, the Board passed a resolution approving the sale of 80% (80,000 shares) of the
outstanding shares of Kobayashi Medical Co., Ltd., a consolidated subsidiary, to Mitsubishi Corporation. The share transfer was completed on
May 31, 2012.
Since 1992, the Company has operated its medical devices business as a division involving the import and sales of medical equipment and
developed the business under a vision of offering increased safety and security to the medical field. This division was subsequently named to
Kobayashi Medical Co., Ltd. The Company spun off Kobayashi Medical Co., Ltd., on April 1, 2010 in order to enhance competitiveness, product
specialization capabilities and improve productivity in response to significant changes in the market environment.
Kobayashi Medical Co., Ltd. is involved in highly specialized areas, applying its expertise to develop medical devices used for surgery,
respiration, ventilation and anesthesia, and orthopedics.
Mitsubishi Corporation Group, which started operating in medical field in the 1970s, has focused on healthcare related business, often in
collaboration with medical or nursing care business firms in which the Company has invested, and expanded its business from sales and
procurement support of medical devices and materials to medical equipment rentals in domestic and overseas markets experiencing deregulation
in the medical and nursing care industries.
It is anticipated that this transaction will be beneficial in growing the medical device market further as it is possible to integrate the “Total
Solution” in the medical device field by Mitsubishi Corporation Group with the advanced expertise of Kobayashi Medical Co., Ltd.
Annual Report 2012
62
Report of Independent Auditors
63
Annual Report 2012
History
1886
Founder Chubei Kobayashi established Kobayashi Seidaido, an unlimited partnership company, in Monzen-cho, Naka-ku, Nagoya
The Company sold general merchandise, cosmetics
1894
Launched 10 types of proprietary pharmaceuticals including Daikomaru, Ichinichimaru and Tamushichinki
1912
Established Kobayashi Daiyakubou, a limited partnership company, in Hiranomachi, Higashi-ku, Osaka
1919
Incorporated as Kobayashi Daiyakubou, Co., Ltd. in Kyomachibori, Nishi-ku, Osaka through a merger involving unlimited partnership
company Kobayashi Seidaido and limited partnership company Kobayashi Daiyakubou
Kichitaro Kobayashi is appointed as the first president
1939
Launched Hakkiri, a headache medicine
1940
Spun off the manufacturing unit of Kobayashi Daiyakubo, to establish Kobayashi Pharmaceutical Co., Ltd.
Juso Plant began operations in Higashi-yodogawa-ku, Osaka (currently Yodogawa-ku)
1948
Saburo Kobayashi is appointed as the second president
1956
Kobayashi Daiyakubo Co., Ltd. and Kobayashi Pharmaceutical Co., Ltd. were merged and renamed Kobayashi Pharmaceutical Co., Ltd.
Relocated the Head Office to Dosho-machi, Higashi-ku, Osaka (currently Dosho-machi, Chuo-ku)
1958
Teruko Kobayashi is appointed as the third president
1967
Launched Ammeltz, an external anti-inflammatory
1969
Launched Bluelet, a toilet bowl cleaner, and entered the household products market
1972
Formed partnership with C.R. Bard, Inc. of the U.S. to establish medical devices importer—Japan Medico, Inc. and enter the medical
devices market
1975
Launched Sawaday, a toilet air freshener, and entered the deodorizing air fresheners market
1976
Kazumasa Kobayashi is appointed as the fourth president
Japan Medico, Inc. became Medicon, Inc., a joint venture company with C.R. Bard, Inc.
1983
Established Toyama Kobayashi Pharmaceutical Co., Ltd. (Toyama City, Toyama Prefecture)
1988
Angel Ltd. made a consolidated subsidiary of Kobayashi Pharmaceutical Co., Ltd. to gain a manufacturing site (Niihama City, Ehime Prefecture)
1992
Established Kobayashi Medical, as part of the Medical Devices Business
1993
Established Sendai Kobayashi Pharmaceutical Co., Ltd. (Kurokawa-gun, Miyagi Prefecture)
1996
Launched Toughdent, denture cleanser
1998
Established Shanghai Kobayashi Friendship Daily Chemicals Co., Ltd., a joint venture company in China
Established Kobayashi Healthcare, Inc. in the U.S.
1999
Listed on the Second Section of the Osaka Securities Exchange
Launched nutritional supplements through the mail order sales channel
2000
Listed on the First Section of the Tokyo Stock Exchange and Osaka Securities Exchange
Established the Central R&D Laboratory in Ibaraki City, Osaka Prefecture
Spun-off the Trade Company to form Kobashou Co., Ltd.
2001
Acquired Kiribai Chemical Co., Ltd., a body warmer manufacturer, as a subsidiary (Yodogawa-ku, Osaka)
Established Kobayashi Healthcare Europe, Ltd. in the United Kingdom
2002
Established Kobayashi Pharmaceutical (Hong Kong) Co., Ltd. in Hong Kong
Made Shanghai Kobayashi Friendship Daily Chemicals Co., Ltd. into a wholly owned subsidiary and changed its name to Shanghai
Kobayashi Daily Chemicals Co., Ltd.
Took over the health food business, mainly for Tochucha (Eucommia leaf tea), from Hitachi Zosen Corporation
2003
Angel Ltd. renamed Ehime Kobayashi Pharmaceutical Co., Ltd.
2004
Yutaka Kobayashi is appointed as the fifth president
2005
Obtained exclusive distribution rights for women’s health medicine Inochi No Haha A from Sasaokayakuhin Corporation
2006
Made eVent Medical Ltd., a medical device manufacturer, into a subsidiary in Ireland
Made HeatMax, Inc., a body warmer manufacturer in the U.S., into a subsidiary
2008
Kobashou Co., Ltd. and Mediceo Paltac Holdings Co., Ltd. conducted share exchange.
Spun off the manufacturing division of Kiribai Chemical Co., Ltd. to establish Kiribai Kobayashi Pharmaceutical Co., Ltd.
Obtained trademark right for Bisrat Gold from Ishihara Chemical Co., Ltd.
2009
Established Kobayashi Pharmaceutical (Singapore) Pte. Ltd. in Singapore
2010
Spun off medical device division into Kobayashi Medical Co., Ltd.
2011
Transferred all eVent Medical INC. shares in a management buy-out
Established Kobayashi Healthcare (Malaysia) Sdn. Bhd. in Malaysia
Established Kobayashi Pharmaceutical (Taiwan) Co., Ltd. in Taiwan
2012
Made Grabber, Inc., a body warmer manufacturer in the U.S., a subsidiary
Established PT. Kobayashi Pharmaceutical Indonesia in Indonesia
Transferred 80% of Kobayashi Medical Co., Ltd. shares to Mitsubishi Corporation
Annual Report 2012
64
Group Companies
Company
Location
Capital
Main Business
Domestic Consolidated Subsidiaries
Toyama Kobayashi Pharmaceutical Co., Ltd.
Toyama, Japan
¥100 million
Manufacturing of pharmaceuticals and other products
Sendai Kobayashi Pharmaceutical Co., Ltd.
Taiwa-cho, Kurokawa-gun,
Miyagi, Japan
¥200 million
Manufacturing of pharmaceuticals and other products
Ehime Kobayashi Pharmaceutical Co., Ltd.
Niihama, Ehime, Japan
¥77 million
Hygienic and paper goods manufacturing
Kiribai Chemical Co., Ltd.
Yodogawa-ku, Osaka, Japan
¥49 million
Disposable body warmer sales
Kiribai Kobayashi Pharmaceutical Co., Ltd.
Sanda, Hyogo, Japan
¥49 million
Disposable body warmer manufacturing
Chuo-ku, Osaka, Japan
¥50 million
Medical equipment and device import and sales
Kobayashi Pharmaceutical Plax Co., Ltd.
Toyama, Japan
¥95 million
Synthetic resin products manufacturing
SP-Planning, Inc.
¥10 million
Displays and model production
Archer Corporation
Chuo-ku, Tokyo
¥10 million
Advertising, planning and creation
Suehiro Sangyo Co., Ltd.
¥15 million
Daily goods sales
Kobayashi Pharmaceutical Life Service Co., Ltd.
¥10 million
Insurance agency and real estate management
Kobayashi Pharmaceutical Distribution Co., Ltd.
¥10 million
Transportation Services
Kobayashi Healthcare, LLC.
Georgia, U.S.A.
US$ 5,110,000
Daily goods sales
Kobayashi Healthcare Europe, Ltd.
London, U.K.
UK£ 14,081
Daily goods sales
Shanghai Kobayashi Daily Chemicals Co., Ltd.
Shanghai, China
RMB160,326,485
Daily goods manufacturing and sales
Shanghai Kobayashi Pharmaceutical Business Co., Ltd.
Shanghai, China
RMB25,648,850
Information Collection and Quality Management
Kobayashi Pharmaceutical (Hong Kong) Co., Ltd.
Hong Kong, China
HK$ 1,570,000
Daily goods sales
Kobayashi Pharmaceutical (Singapore) Pte. Ltd.
Singapore
S$ 300,000
Daily goods sales
HeatMax, Inc.
Georgia, U.S.A.
US$ 1,230,001
Disposable body warmer manufacturing and sales
Mediheat, Inc.
Georgia, U.S.A.
US$ 10
Thermomax, Inc.
Georgia, U.S.A.
US$ 0
Kobayashi Healthcare of America, Inc.
Georgia, U.S.A.
US$ 6,200
Holding company
Kobayashi Pharmaceutical (Taiwan) Co., Ltd.
Taipei, Taiwan
NT$ 8,000,000
Daily goods sales
Kobayashi Healthcare (Malaysia) Sdn. Bhd.
Kuala Lumpur, Malaysia
RM 1,000,000
Daily goods sales
Grabber, Inc.
Michigan, U.S.A.
US$ 323
Disposable body warmer sales
YSC, Inc.
Michigan, U.S.A.
US$ 1,000
Mail order sales of daily goods
Kobayashi Pharmaceutical of America, Inc.
California, U.S.A.
US$ 1
Asset management
¥160 million
Medical equipment and device import and sales
Overseas Consolidated Companies
Equity-Methed Affiliates
Medicon, Inc.
65
Annual Report 2012
Other Business
Corporate Data / Investor Information
Corporate Data
Investor Information
Corporate Name:
KOBAYASHI PHARMACEUTICAL CO., LTD.
Common Stock:
Foundation:
August 22, 1919
KDX Kobayashi Doshomachi Bldg., 4-10,
Doshomachi 4-chome, Chuo-ku,
Osaka 541-0045, Japan
Number of Shares Authorized: 170,100,000
Head Office:
¥3,450 million
Number of Shares Issued:
42,525,000
Number of Shareholders:
12,148
Representative Director:
Yutaka Kobayashi, President
(Appointed president on June 29, 2004)
Stock Exchange Listing:
Tokyo Stock Exchange 1st Section,
Osaka Securities Exchange 1st Section
Number of Employees:
2,414 (Consolidated)
1,062 (Unconsolidated)
Transfer Agent / Institution
Managing Designated:
Mitsubishi UFJ Trust and
Banking Corporation
Consolidated Subsidiaries:
27
Annual Shareholders’ Meeting:
June
Equity-Methed Affiliates:
1
KOBAYASHI PHARMACEUTICAL CO., LTD.
Corporate Communication Department
Phone +81-6-6222-0142
Investor Relations:
F A X +81-6-6222-4261
E-mail [email protected]
U R L http://www.kobayashi.co.jp/english/index.shtml
Shareholder Composition
Major Shareholders
Name
Percentage of Total Shares Held (%)
Akihiro Kobayashi
10.9
Kobayashi International Scholarship Foundation
7.1
Yukako Iue
6.1
State Street Bank and Trust Company
3.5
Ikuko Watanabe
3.0
The Master Trust Bank of Japan, Ltd. (trust accounts)
2.9
Teruhisa Miyata
2.8
The Chase Manhattan Bank N.A. London S.L. Omnibus Account
2.6
Ohtori Co., Ltd.
2.6
Forum Co.,Ltd.
2.4
3.71%
Treasury
Stock
1.18%
Banks
10.87%
Trust Banks
(Incl. trust accounts)
2.78%
Other Financial
Institutions
16.73%
42.96%
Other
Corporations
Individuals
and Other
1 The percentage of total shares held is calculated by deducting 1,575,862 shares
of treasury stock.
21.77%
Foreign Corporations
Stock Price and Trading Volume
(Yen)
(Shares)
5,000,000
5,000
4,500,000
4,500
4,000,000
4,000
3,500,000
3,500
3,000,000
3,000
2,500,000
2,500
2,000,000
2,000
1,500,000
1,500
1,000,000
1,000
Trading Volume
(Left Axis)
500
500,000
0
Stock Price
(Right Axis)
2
4
6
2010
8
10
12
2
4
6
2011
8
10
12
2
4
0
6 (month)
2012
Annual Report 2012
66
Head Office: KDX Kobayashi Doshomachi Bldg., 4-10,
Doshomachi 4-chome, Chuo-ku, Osaka 541-0045, Japan
Phone: +81-6-6222-0142
URL: http://www.kobayashi.co.jp/english/index.shtml
Printed in Japan

Annual Report 2012

Transcription

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