Annual Report 2013
Fiscal Year Ended March 31, 2013
Creating Products and Solutions
that Offer Comfort and Amenity
together with Environment-Friendliness
The Daikin Group’s operations center on air-conditioning systems and have grown to encom-
pass such offerings as fluorochemical refrigerant gases, resins, and elastomers; chemicals; and
other products and systems that are providing benefits in a wide range of fields. Having begun
undertaking M&A transactions and establishing joint ventures throughout the world from an
early date, Daikin has made rapid progress in creating global production, marketing, and service
networks while endeavoring to be “a truly global and excellent company” that makes significant
contributions to the realization of sustainable growth in the global economy.
Today, the industrialized and emerging countries are facing shared challenges regarding the
prevention of global warming and conservation of energy. Japan is striving to balance its sup-
plies of and demand for electric power, and this project is increasing the need for electric power
conservation measures. Since air conditioning accounts for a large share of electric power con-
sumption along with associated CO2 emissions, “energy control” has become one of the Daikin
Group’s most-important missions.
All of us in the Daikin Group are committed to generating outstanding technologies, products,
and solutions that effectively enhance the comfort and amenity of life for people throughout the
world while also promoting greater harmony with the global environment. By doing our utmost in
these ways to earn high levels of trust and confidence throughout global society, we are building
a solid foundation for sustained increases in Daikin’s profit-earning power and corporate value.
Contents
Financial Highlights 2
At a Glance 3
A Message from the CEO 4
Interview with the COO 6
Review of Operations
Corporate Governance 20
Consolidated Statement of Comprehensive Income 37
Directors, Auditors, and Executive Officers 22
Consolidated Statement of Changes in Equity 37
Compliance and Risk Management 23
Consolidated Statement of Cash Flows 38
Corporate Social Responsibility (CSR) 24
Notes to Consolidated Financial Statements 39
Financial Section 26
Independent Auditors’ Report 61
Air Conditioning—The Japanese Market 12
Ten-Year Financial Highlights 26
Corporate Data 62
Air Conditioning—The Global Market 14
Financial Review 28
Chemicals 16
Oil Hydraulics 18
Defense 19
DAIKIN INDUSTRIES, LTD.
Consolidated Balance Sheets 34
Consolidated Statement of Income 36
Our Group Philosophy
1. Create New Value by Anticipating the Future Needs of Customers
2. Contribute to Society with World-Leading Technologies
3. Realize Future Dreams by Maximizing Corporate Value
4. Think and Act Globally
5. Be a Flexible and Dynamic Group
1. Flexible Group Harmony
2. Build Friendly yet Competitive Relations with Our Business Partners to Achieve Mutual Benefit
6. Be a Company that Leads in Applying Environmentally Friendly Practices
7. With Our Relationship with Society in Mind, Take Action and Earn Society’s Trust
1. Be Open, Fair, and Known to Society
2. Make Contributions that Are Unique to Daikin to Local Communities
8. The Pride and Enthusiasm of Each Employee Are the Driving Forces of Our Group
1. The Cumulative Growth of All Group Members Serves
as the Foundation for the Group’s Development
2. Pride and Loyalty
3. Passion and Perseverance
9. Be Recognized Worldwide by Optimally Managing the Organization and its Human Resources,
under Our Fast & Flat Management System
1. Participate, Understand, and Act
2. Offer Increased Opportunities to Those who Take on Challenges
3. Demonstrate Our Strength as a Team Composed of Diverse Professionals
10. An Atmosphere of Freedom, Boldness, and “Best Practice, Our Way”
Forward-Looking Statements
This annual review contains statements regarding the future plans and strategies of Daikin Industries, Ltd. (the Company), as well as the Company’s future performance.
These statements are not statements of past facts but are based on judgments made by the Company on the basis of information known at the time. Therefore, readers
should refrain from drawing conclusions based only on these statements regarding the future performance of the Company. The actual future performance of the
Company may be influenced by economic trends, strong competition in the industrial sectors where it conducts its operations, foreign currency exchange rates, and
changes in taxation and other systems. For these reasons, these forward-looking statements are subject to latent risk and uncertainty.
ANNUAL REPORT 2013
1
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Financial Highlights
Daikin Industries, Ltd. and Consolidated Subsidiaries
Years Ended March 31
Operating Results (for the year):
Net sales
Gross profi t
Operating income
Net income
Cash Flows (for the year):
Net cash provided by operating activities
Net cash used in investing activities
Free cash fl ow (Note)
Net cash provided by (used in) fi nancing activities
Financial Position (at year-end):
Total assets
Total shareholders’ equity
Per Share Data (yen):
Net income (basic)
Shareholders’ equity
Cash dividends
Cash fl ow per share
Ratios (%):
Gross profi t margin
Operating income margin
Return on shareholders’ equity (ROE)
Shareholders’ equity ratio
Note: Free cash flow = Net cash provided by operating activities + net cash used in investing activities.
Millions of yen
2012
2013
¥1,218,701
371,902
81,193
41,172
¥1,290,903
388,046
88,627
43,585
¥44,967
(62,955)
(17,988)
(1,113)
¥103,161
(218,386)
(115,225)
143,520
¥1,160,564
502,309
¥1,735,836
618,118
¥ 141.37
1,725.64
36.00
(62)
¥ 149.73
2,123.10
36.00
(396)
30.52%
6.66
8.30
43.28
30.06%
6.87
7.78
35.61
Net Sales, Gross Profit,
and Gross Profit Margin
Operating Income and
Operating Income Margin
(¥ billion)
1,500
1,200
900
600
300
0
(%)
35
28
21
14
7
0
(¥ billion)
100
80
60
40
20
0
ROE
(%)
10
(%)
10
8
6
4
2
0
8
6
4
2
0
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
Net Sales
Gross Profit
Gross Profit Margin
Operating Income
Operating Income Margin
2
DAIKIN INDUSTRIES, LTD.
At a Glance
Air-Conditioning
Percentage of Net Sales
Air-Conditioning 86.8%
Chemicals 9.6%
Defense 1.5%
Oil Hydraulics 1.8%
Net Sales and Operating Income (Loss)
Major Products & Services
Description
(¥ billion)
1,200
1,000
800
600
400
200
0
70.9
1,120.0
(¥ billion)
120
100
80
60
40
20
0
2009
2010
2011
2012
2013
Chemicals
(¥ billion)
(¥ billion)
250
200
150
100
50
0
16.5
124.4
25
20
15
10
5
0
-5
-10
2009
2010
2011
2012
2013
Oil Hydraulics
(¥ billion)
(¥ billion)
0.2
23.9
30
20
10
0
2009
2010
2011
2012
2013
0.6
18.9
Defense
(¥ billion)
20
15
10
5
0
2009
2010
2011
2012
2013
30
20
10
0
-10
-40
(¥ billion)
0.8
0.6
0.4
0.2
0
(cid:129) Room air-conditioning systems
(cid:129) Heat-pump hot-water-supply and room-heating
systems
(cid:129) Packaged air-conditioning systems
(cid:129) Multiple air-conditioning systems for office buildings
(cid:129) Air-conditioning systems for facilities and plants
(cid:129) Medium- and low-temperature air-conditioning
systems
(cid:129) Absorption refrigerators
(cid:129) Humidity-adjusting external air-processing units
(cid:129) Air purifiers (cid:129) Water chillers
(cid:129) Air-handling units
(cid:129) Marine-type container refrigeration
Since becoming the first in
Japan to manufacture pack-
aged air-conditioning systems,
in 1951, Daikin has supported
comfortable living based on the
strengths of technologies that
it has itself nurtured as the
world’s sole manufacturer to
create a full line of products
from refrigerants to air
conditioners.
(cid:129) Fluorocarbons
(cid:129) Fluoroplastics
(cid:129) Fluoro coatings
(cid:129) Fluoroelastomers
(cid:129) Fluorinated oils
(cid:129) Oil- and water-repellent products
(cid:129) Mold release agents
(cid:129) Pharmaceuticals and intermediates
(cid:129) Semiconductor-etching products
(cid:129) Dry air suppliers
In 1933, Daikin was the first
in Japan to engage in research
on fluorinated refrigerants.
Today, our activities range from
research and development to
commercialization, and we
offer a lineup of more than
1,800 fluorine compounds.
(cid:129) Oil hydraulic pumps
(cid:129) Oil hydraulic units
(cid:129) Oil hydraulic valves
(cid:129) Cooling equipment and systems
(cid:129) Hydrostatic transmissions
(cid:129) Centralized lubrication units and systems
Daikin’s unique hydraulic
technologies offer outstanding
energy-conservation perfor-
mance and are contributing to
the development of industry by
unleashing the potential of
power control.
(cid:129) Warheads
(cid:129) Warheads for guided missiles
(cid:129) Home-use oxygen therapy equipment
Daikin’s superior machining
and quality control technolo-
gies are used in the production
of defense-related products
and other industries where
high levels of precision and
performance are critical.
ANNUAL REPORT 2013
3
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
A Message from the CEO
Tackling One Challenge after Another
Despite a harsh operating environment during the fiscal year under review,
Daikin made steady progress in implementing key strategies for attaining
its FUSION 15 five-year strategic management plan targets and also achieved
a third consecutive fiscal year of growth in both sales and profitability. Striving
to realize growth in our corporate value, we will continue vigorously addressing
one new challenge after another going forward.
Fiscal 2013 (ended March 31, 2013) was a year in which the management environment became even harsher than
we had anticipated, owing to such developments as economic sluggishness in Europe and a slowdown in the
emerging economies’ expansion, as well as such factors as the increasing opacity of China’s economic outlook.
Emphasizing the sustained generation of short-term profits, the Daikin Group strove to promote greater sales of
products centering on air-conditioning products in Japan and overseas markets. As a result of this along with our
continued progress in comprehensive cost-cutting programs, thorough attention to marketing price strategies, and
relentless quality reform measures, the Group was able to achieve growth in both sales and profitability for a third
consecutive fiscal year.
Determined to position Daikin for sustained growth over the medium-to-long term, we reinforced the foundation
for realizing the objectives of the FUSION 15 strategic management plan, which covers the five fiscal years through
March 31, 2016. Specifically, we prepared to rapidly expand our business in emerging economy markets through
such initiatives as those to augment local manufacturing operations in China and India; strengthen marketing sys-
tems in such countries as Turkey, Vietnam, and Indonesia; and steadily implement other market cultivation mea-
sures. In Japan, we launched the first air conditioner in the world to employ the highly environment-friendly and
efficient refrigerant R32 and other high-value-added products that made an important contribution to performance
in fiscal 2013. We have continued closely monitoring households’ and companies’ rising consciousness of electric
power conservation needs, and we are providing such customers with the energy conservation solutions that they
seek. In addition, in November 2012, we acquired Goodman Global Group, Inc., a leading air-conditioner manufac-
turing company based in the United States. Goodman has the top share of the U.S. market for household air condi-
tioners, and it also has abundant growth potential regarding commercial-use air conditioners. By taking advantage
of synergies between Goodman and other Daikin Group units, we intend to earn a solid position as one of the top
players in the North American air-conditioning market in the near future.
As the central third year of FUSION 15’s five-year term, fiscal 2014 is an extremely important year during which we
must make sure to prepare a solid foundation for the attainment of the strategic management plan’s final objectives.
Our fundamental growth strategies will be focused on speeding up “expanding our business in emerging economy
countries and volume-zone markets,” “developing solutions businesses that meet customer needs in each region of
the world,” and “generating environment-related innovation business.” By assiduously implementing these strategies,
we are earnestly striving to create a rock-solid foundation that enables Daikin to become the leading company in glob-
al air-conditioning markets and fully live up to its stakeholders’ expectations regarding growth in corporate value.
June 2013
Noriyuki Inoue
Chairman of the Board and CEO
4
DAIKIN INDUSTRIES, LTD.
ANNUAL REPORT 2013
5
Interview with the COO
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
6
DAIKIN INDUSTRIES, LTD.
Focusing on Growth and Profitability
During the fiscal year under review, Daikin maintained robust short-term profitability
and moved dynamically ahead with measures based on growth strategies articulated in its
FUSION 15 strategic management plan. In fiscal 2014—the central third year of FUSION
15’s five-year term—we are determined to make considerable additional progress in
expanding our business scale while thoroughly strengthening our profit-generation
capabilities.
June 2013
Masanori Togawa
President and COO
Q1: The fiscal year under review (fiscal 2013,
ended March 31, 2013) was your second
year as Daikin’s president and COO, and you faced an
operating environment replete with situations requiring
difficult decisions. Looking back at the year, could you
tell us your thoughts regarding Daikin’s performance
and related issues?
As a result of those efforts, our consolidated net sales grew
5.9% from the level in the previous fiscal year, to ¥1,290.9 billion,
and our operating income was up 9.2%, to ¥88.6 billion.
Reflecting foreign exchange gains associated with the correction
of the yen’s excessive strength near the end of the fiscal year,
our ordinary income surged 15.2%, to ¥94.1 billion. And
although we recorded a ¥12.7 billion write-down of investment
securities, our net income increased to ¥43.6 billion, a year-on-
Togawa: We faced a management environment that was harsh-
year rise of 5.9%. Fiscal 2013 was the third consecutive year in
er than originally anticipated owing to such situations as the
which we achieved growth in both sales and profitability.
weakness of the European economy and the slackening of
Moreover, rather than simply managing to maintain strong
growth in emerging country economies. Because of that, making
short-term profitability, we also moved vigorously ahead with
sure that various measures required to maintain robust short-
longer-term management tasks. We began the implementation
term profitability were effectively implemented was the task
of numerous new measures designed to elevate our
requiring the most-intensive efforts.
profitability over the medium-to-long term.
Specifically, in air-conditioning business, we strove to expand
The Daikin Group is currently midway through the implementa-
sales in Japan, the United States, China, and other Asian countries
tion of the FUSION 15 strategic management plan, which covers
and achieve rapid business growth in such emerging economies
the five fiscal years through fiscal 2016, ending March 31, 2016,
as those of India, Vietnam, and Turkey. At the same time, we con-
and we are making steady progress toward realizing the plan’s
tinued moving quickly ahead with such profit structure enhance-
objectives of boosting net sales and operating income to levels
ment measures as a comprehensive cost reduction program
in excess of ¥2 trillion and ¥200 billion, respectively.
encompassing fundamental reevaluation of our fixed costs along
with measures to ensure the thorough implementation of selling
price adjustment policies.
ANNUAL REPORT 2013
7
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Q2: Regarding medium- to long-term mea-
sures, you are steadily advancing toward
the target of completing the implementation of mea-
sures emphasized within FUSION 15 by fiscal 2016.
Please explain the progress Daikin made in this
respect during fiscal 2013.
Q3: How do you expect your acquisition of
U.S.-based Goodman to promote the
Daikin Group’s development going forward?
Togawa: Goodman is an air-conditioner manufacturer with the
top share of North America’s residential air-conditioner market.
It has one of the largest marketing networks in North America
Togawa: The principal growth strategies emphasized by FUSION
(more than 900 directly operated outlets and approximately
15 include those designed to “expand our business in emerging
60,000 affiliated dealers), and its thorough efforts to rationalize
economy countries and volume-zone markets,” “develop solu-
its distribution and marketing systems have enabled it to attain
tions businesses that meet customer needs in each region of the
a high level of profit-earning power. Goodman’s strong product
world,” “generate environment-related innovation business,” and
lineup with respect to ducted residential unitary (central) HVAC
“accelerate growth through alliances, partnerships, and M&A
systems—the main type of HVAC product in the North American
transactions.”
market—as well as furnace heating equipment and commercial
During fiscal 2013, our progress expanding business in
HVAC equipment gives it the potential for realizing additional
emerging economy countries was particularly noteworthy in
business expansion in both the residential HVAC market, where
the Asian region, where we implemented strategies focused on
demand is projected to recover to approximately six million units
volume-zone markets by augmenting our local manufacturing
by 2015, and the commercial HVAC market, which is projected
operations (China and India) and establishing marketing compa-
to maintain steady growth.
nies (Indonesia and Vietnam). Regarding solutions business, we
The acquisition of Goodman with its huge presence in the
have finally been making substantive progress in building HVAC
United States positions the Daikin Group to accelerate the full-
(heating, ventilation, and air-conditioning) solutions designed to
scale development of its business in the U.S. residential air-
contribute to the realization of “zero energy residences, office
conditioning equipment market—which accounts for most of the
buildings, and stores” (energy conservation and generation) suit-
U.S. air-conditioning equipment market, the world’s largest mar-
able for the advent of the “smart city” era, and tangible benefits
ket for such equipment—and the light commercial air-condition-
from our efforts in this field are beginning to emerge. With
ing market for medium-scale office buildings. By coordinating the
respect to environmental innovation, we launched the Urusara
operations of Goodman with those of McQuay International, a
7 room air conditioner—the first air conditioner in the world to
U.S.-based Daikin subsidiary that offers medium- to large-scale
employ the environment-friendly HFC refrigerant R32 and winner
HVAC systems, and Daikin AC (Americas), Inc., a U.S.-based
of the Minister of Economy, Trade and Industry Prize, the top
Daikin subsidiary that provides Japanese-style ductless HVAC
prize in the 2012 Energy Conservation Award program—and
systems, the Daikin Group can operate as a comprehensive
other air-conditioner products with outstanding energy conser-
air-conditioning equipment manufacturer prepared to serve all
vation performance in the Japanese market and were thereby
kinds of markets from the residential market through the large-
able to expand our share of Japan’s residential air-conditioner
scale office building market. This puts us in a strong position to
market. Each of these achievements is considerably bolstering
quickly become the No. 1 air-conditioning company in North
the foundation for our attainment of FUSION 15’s final-year
America and thereby become the global leading company in the
objectives.
air-conditioning field.
We are also striving to achieve further growth in the sales and
We performed our initial estimates of synergies stemming from
profitability of our air-conditioning business in the industrialized
the Goodman acquisition at the time of the completion of the
countries. During fiscal 2013, we acquired Goodman Global
acquisition process in November 2012. Based on those esti-
Group, Inc., which has a leading share of the U.S. residential
mates, we are anticipating approximately ¥24 billion of cumula-
air-conditioner market, and we also progressed with the imple-
tive synergy benefits in terms of operating income during the first
mentation of business structure reforms in Europe designed to
three years following the acquisition and approximately ¥250 bil-
adjust our operations in line with the slack conditions seen in
lion of benefits over the first decade following the acquisition.
European economies. In China, Japanese companies are facing
We have been making smooth progress in realizing those
special challenges amid an operating environment made more
benefits. In fiscal 2014, the first year in which Goodman’s per-
difficult by the deceleration of economic growth to the 7%-8%
formance will be included in the Daikin Group’s consolidated
level, but we were able to achieve positive results from large-
statement of income, we are anticipating that such measures as
scale sales promotion programs that made the most of our
those to integrate the procurement functions of Goodman and
powerful marketing network.
8
DAIKIN INDUSTRIES, LTD.
McQuay will contribute roughly ¥2 billion of profit. Since May
2013, we have begun marketing ductless products through
Goodman’s marketing routes, and we have begun full-scale par-
ticipation in the light commercial market through the launch of
ducted rooftop units for medium-scale commercial applications.
We are also giving priority to the expedited implementation of
various other Goodman-related business projects with a high
level of potential for contributing to Group profitability. For exam-
ple, we are developing high-value-added products for the premi-
um zone of the U.S. ducted unitary residential air-conditioning
market and are planning to launch those products in early 2014,
Summary of FUSION 15
(cid:2) Development Direction and Quantitative Targets
FUSION 15—Designed to Maximize Our Corporate Value as a “Global and Excellent
Company”
FY2011 actual
results
FY2014 plan
FY2016 goals
Net sales
¥1,160.3 billion ¥1,600.0 billion
Operating income (%)
¥75.5 billion
(6.5%)
¥130.0 billion
(8.1%)
Over ¥2,000.0
billion
Over 10%
and we are also arranging for Goodman plants to handle the
Overseas business ratio (%)
61%
65%
Over 70%
local manufacturing in the United States of ductless products,
including multi-split air-conditioning systems for office buildings
and room air conditioners.
On a nonconsolidated basis, our fiscal 2014 performance
targets call for Goodman to record ¥206.0 billion in net sales,
up 6% from the previous year on a local currency basis, and
achieve an operating income ratio of 13%. After deductions for
such items as the depreciation of goodwill, we are anticipating
that Goodman will contribute roughly ¥13.5 billion to the Daikin
Group’s consolidated operating income. While replacement
demand in the U.S. residential air-conditioner market for the
types of products regarding which Goodman is particularly
strong is recovering only gradually, demand for new installations
has become active, so demand for Goodman products is robust
overall. Viewing these kinds of market trends as opportunities for
business expansion, we intend to launch new energy-conserving
versions of ductless (Daikin) products and ducted unitary
(Goodman) products and undertake vigorously sales promotion
campaigns for those products that leverage the capabilities of
Goodman’s powerful dealer network. While we are likely to face
such new challenges as intensifying competition with other com-
(cid:2) Air-conditioning business: Daikin aims to achieve ¥1.9 trillion in net sales
and a 10% share of the HVAC&R market in FY2016.
(cid:2) Chemicals business: Daikin aims to become a global No. 1, excellent com-
pany that leads applications development and expands the fluorochemicals
market.
(cid:2) Details of 11 Group-wide Core Strategy Themes
[Four New Growth Strategy Themes: Innovation that incorporates the changes
of the era as growth]
(1) Fully enter emerging markets and the volume zones.
(2) Develop a solutions business that meets customer needs.
(3) Expand environment-related innovation business.
(4) Accelerate growth through alliances, partnerships, and M&A.
[Four Management Constitution Reform Themes: Sophistication of the
management platform to succeed in the new era]
(1) Innovate product development, production, procurement, and quality
capabilities.
(2) Strengthen global marketing function.
(3) Comprehensively develop capacity to utilize IT.
(4) Fundamentally reinforce profitability.
[Three Themes to Enhance HR Capabilities Based on People-Centered
Management]
(1) Implement and sophisticate People-Centered Management, a source of
Daikin Group’s competitiveness.
(2) Accelerate development of measures to secure and develop quality HR that
go beyond past measures.
panies and increases in the cost of new product development
(3) Speed up management localization and promote two-way communication
programs, we are determined to maintain Goodman’s high level
between the head office and local bases.
of profit-generating power.
ANNUAL REPORT 2013
9
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Q4: Even compared to the other initiatives
emphasized by FUSION 15, your plans for
deepening Daikin’s presence in emerging economy
markets with great growth potential going forward are
attracting considerable attention. Could you explain
the specifics of your business development plans in
individual target countries?
Togawa: To attain our FUSION 15 targets, it will be crucial to
accelerate our business expansion in emerging economies as
well as further elevate our profitability in those markets, and our
business expansion projects have been progressing smoothly
in such countries as India, Vietnam, Indonesia, and Turkey.
Looking at principal initiatives in individual countries during
households financially positioned to purchase room air condi-
tioners. While the operating environment in Australia continues to
be harsh, we are planning to realize a V-shaped recovery in per-
formance in that country by working to augment our lineup of
residential air-conditioner products and concurrently striving to
strengthen our sales promotion campaigns for commercial-use
air conditioners with particular attention to promoting our
products at early architectural design stages.
Q5: On the other hand, the Japanese market is
becoming mature, and there appears to be
a need to create new paths for demand growth. What
is Daikin’s strategic vision for mature markets?
fiscal 2014, in India, we are planning to begin full-scale manufac-
Togawa: Measures for strengthening our solutions business
turing of room air conditioners, add models employing the new
are a key part of our strategy for promoting the Daikin Group’s
refrigerant R32 to our lineup, and accelerate the addition of new
development over the medium-to-long term. Aiming to achieve
dealers and marketing routes with an eye to elevating our market
further growth and strengthen profitability in the mature
share. In Vietnam, we are expediting our measures to develop
Japanese air-conditioning market, we are implementing structur-
new dealers and broaden the scope of marketing from large cit-
al and organizational reforms in our applied (large-scale commer-
ies to regional cities, and we expect that our vigorous sales pro-
cial) air-conditioning equipment business and solutions business,
motion campaigns will be facilitated by the government’s move
and our new organizational structure for those operations began
to relax its restrictive monetary policies. In Indonesia, the directly
operating from April 2013. By leveraging our core competitive
operated marketing company we recently acquired began oper-
strengths regarding air-conditioning equipment to address
ating in June 2012, and it is expanding its sales of products cen-
peripheral service needs—such as those related to the engineer-
tered on residential air conditioners. Having acquired another
ing, installation, and operation of air-conditioning systems along
marketing company focused on commercial air-conditioning
with instrumentation and control systems—we are seeking to
products in July 2013, we have prepared a solid foundation for
provide levels of energy conservation, environmental friendliness,
implementing our strategy aimed at becoming the No. 1 air-
and amenity that are unattainable through the supply of equip-
conditioning company in the Indonesian market. In Turkey, we
ment alone. We are aiming to build a highly profitable cyclical-
acquired a company two years ago that has begun manufactur-
type business format encompassing equipment sales together
ing room air conditioners tailored to local needs and is also
with installation, maintenance, and renovation services.
strengthening its marketing network for its mainstay multi-split
air-conditioning systems for office buildings.
We are moving ahead with deliberations regarding the possibili-
ty of following up our recent start of local marketing company
operations in Brazil with an additional plan for local manufac-
turing operations in that country, and we are also engaged
Q6: Could you explain the recent performance
of Daikin’s chemicals business along with
the challenges you are facing in that business and your
strategies for developing that business going forward?
in full-scale market research programs in connection with our
Togawa: During fiscal 2013, the net sales and operating income
consideration of plans to establish presences in additional
of our chemicals business fell below the previous year’s levels as
promising markets in North Africa, Central Asia, Myanmar,
a result of the large impact of selling price declines stemming
and elsewhere.
from the protraction of slack demand in semiconductor-related
In addition, we believe that of all the regions in which we have
markets and the softening of conditions in refrigerant gas mar-
been developing our air-conditioning business, the region with
kets. At this point, we have fallen behind our time schedule for
the greatest potential for additional sales growth is the Asia-
attaining the realization of the chemicals business objectives of
Oceania region. In Thailand, we are engaged in a marketing pro-
the FUSION 15 strategic management plan. In fiscal 2014, we
motion campaign targeting a powerful resurgence of demand
are accelerating our development of fluorochemical applications
associated with such factors as the expansion of direct invest-
designed to enable the use of fluorochemicals in place of other
ments from overseas and growth in the number of middle-class
materials, striving to expand our business in the Chinese market
10 DAIKIN INDUSTRIES, LTD.
and other Asian markets projected to grow over the medium-to-
In Japan, Europe, and China, we will be intensifying our mar-
long term, and speedily moving ahead with the implementation
keting promotion programs for air-conditioning equipment and
of other recovery strategies.
solutions, accelerating our applications development programs
One key focus of our application development programs is the
for chemical products, and taking other measures designed
use of composite technologies for enhancing the painting appli-
to bolster our marketing power. In emerging countries, we will
cation, adhesion, and mixing of fluorochemicals, and we are also
emphasize measures for elevating profitability levels. In Japan,
emphasizing new approaches to promoting greater sales of fluo-
we will thoroughly implement selling price policies that reflect the
rochemical resins in China’s volume-zone market in ways that
depreciation of the yen, sustain our comprehensive programs for
enable us to overcome competition from local chemical makers.
reducing all kinds of costs, including fixed costs, and endeavor
Aiming to maintain our short-term profitability, we are promot-
to maximize our free cash flow through such measures as those
ing fluorochemical sales in robust markets for automotive appli-
to streamline inventories.
cations as well as in next-generation product fields while
When it was initially drafted, FUSION 15 called for us to gener-
concurrently moving ahead with comprehensive cost reduction
ate ¥130 billion in consolidated operating income during fiscal
programs. Specifically, we are targeting environment-friendli-
2014. In view of such situations as the weakness of demand for
ness-related applications for individual automobile makers by
air conditioners in Europe and the delay of recovery in demand
accelerating our efforts to promote the inclusion of our fluoro-
for fluorochemicals, however, we adjusted our fiscal 2014 operat-
chemical products in initial automobile design specifications with
ing income forecast downward to ¥125 billion at the start of the
respect to such components as fluoroelastomers used in fuel
fiscal year. It remains difficult to project future trends in our oper-
hoses and fluorochemical additives used in the electrolyte solu-
ating environment, but we are maintaining a flexible posture and
tions of lithium-ion batteries. We are campaigning to promote
are ready to rapidly implement suitable responses to whatever
greater sales of Daikin’s unique high-value-added products, such
may happen in the environment—whether it be a further deterio-
as OPTOOL anti-smudge surface coating agents used in smart-
ration of conditions or a sharp recovery. In other words, we are
phone touch panels and other products, ZEFFLE anti-fouling
selectively employing defensive and aggressive policies where
and weather-resistant coatings, and fluororesin films used to
they are appropriate as we aim to ensure a substantial increase in
protect solar cells. In response to major changes in industrial
profitability. Although the operating environment may make our
structure, we are preparing to establish new presences in such
original ¥130 billion operating income target extremely difficult to
environmental protection-related business fields as those associ-
attain at this point, we remain intent on doing our best to over-
ated with shale gas/oil production and water filters.
come the various challenges that must be surmounted to achieve
Q7: Could you tell us about any general strate-
gic adjustments you may have in mind for
fiscal 2014? In addition, please explain how you deter-
mined the level of cash dividends applicable to fiscal
2013.
that target, and that will be a principal objective as we make
adjustments to our management strategies during the year.
Regarding returns to shareholders, Daikin has a fundamental
policy of maintaining the ratio of cash dividends to net assets
(DOE) at 2.0% or higher and is seeking to set stable levels of divi-
dends based on a comprehensive consideration of such factors
as the Company’s consolidated performance, financial position,
Togawa: We are aiming to further elevate our Groupwide profit
and funding requirements. We are also striving to maintain inter-
figures and profit-to-sales ratio during fiscal 2014 by proactively
nal reserves sufficient to further strengthen our management
promoting additional business expansion and augmenting our
constitution while accelerating global business development,
fundamental profitability strengthening measures. As the third of
speeding up the development of products that help protect the
the five years covered by our FUSION 15 strategic management
natural environment, and making strategic investments designed
plan, fiscal 2014 represents the midpoint of our current medium-
to augment our business expansion and upgrade our competitive
term strategy, and our performance during the year will be an
power. In light of all these factors, dividends applicable to fiscal
extremely important determinant of our success in attaining
2013 amounted to ¥36 per share, unchanged from the previous
FUSION 15’s ultimate objectives. Accordingly, we will be striving
year.
to further speed up the implementation of our fundamental
I greatly appreciate the understanding and confidence Daikin’s
growth strategies focused on “expanding business in emerging
stakeholders have shown to date, and I am hoping for your
economy countries and volume-zone markets,” “developing
continued support going forward.
solutions businesses that meet diverse customer needs,” and
“generating environment-related innovation business.”
ANNUAL REPORT 2013
11
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Review of Operations
Air Conditioning—The Japanese Market
Overview of Operations in Fiscal 2013
Promoting Sales Based on Environment-
Friendliness and High-Value-Added Features
them easy for seniors to use, and they also incorporate
built-in humidity sensors and functions that facilitate the
adjustments required to achieve optimally comfortable
room temperatures.
During fiscal 2013, the Japanese economy benefited from a
Daikin’s sales promotion campaigns for such high-
sustained gradual recovery in capital investments and hous-
value-added products as Urusara 7 and RakuAir, organization
ing construction starts. These fundamental trends, rising
of energy conservation events in major cities, and other
demand associated with electric power conservation, and the
efforts helped boost shipments of the Group’s residential
positive effects of a government subsidy program combined
air-conditioner products at a rate exceeding the rate of
to support continued robust demand for commercial air-
growth in market demand, and the Group’s net sales of those
conditioning products.
products were above the level in the previous fiscal year.
In May 2012, the Daikin Group launched two new lines
Against the backdrop of growing concerns regarding
of commercial air-conditioning equipment that offer further
pollen and PM 2.5 fine atmospheric particulates (suspended
improvement in energy-saving performance—the SkyAir
particles with diameters of 2.5 micrometers or less), overall
series of air conditioners for buildings, stores, and offices and
demand in the Japanese market for residential air purifiers
the Ve-up series of variable refrigerant volume (VRV) air-con-
increased. The Daikin Group achieved considerable growth in
ditioning systems. These new products enabled the Group to
its sales of such products through such initiatives as the July
meet additional new and replacement demand, and Daikin’s
2012 launch of new models in its Uruoi Hikari Kurieru line of
commercial air-conditioning equipment sales in Japan
air purifiers, which feature a dual air purification method—
surpassed the level in the previous fiscal year.
using Daikin’s unique Flash Streamer technology and an
Overall demand in Japan’s residential air-conditioning
active plasma ionizer—that clearly differentiates them from
market was boosted by growth in new housing starts,
competing products.
an increase in demand for energy-saving air conditioners
associated with a general rise in energy conservation
consciousness, and favorable weather conditions.
In November, 2012, the Daikin Group launched the Urusara
7, the first room air conditioner in the world to use R32, a
Initiatives in Fiscal 2014
Addressing Electric Power Conservation
Needs and Pioneering New Markets
highly environment-friendly new HFC refrigerant with a low
In fiscal 2014, the Daikin Group believes it will be important
global warming potential (GWP). In recognition of Urusara 7’s
to increase the proactiveness and effectiveness of its efforts
high energy conservation performance level and the techno-
to address Japan’s electric power conservation needs. While
logical innovation underlying that performance, Urusara 7
diverse and increasingly dynamic measures are being taken
was awarded the Minister of Economy, Trade and Industry
to facilitate tangible progress toward zero-energy residences,
Prize, the top prize in the 2012 Energy Conservation Award
office buildings, and stores, Daikin plans to promote the
program. In April 2012, Daikin launched the RakuAir line of
realization of zero-energy structures going forward by foster-
room air conditioners employing easy-to-use remote control-
ing the development of HVAC (heating, ventilation, air
lers. Designed based on analyses of user psychology, the
conditioning) solutions business as a principal pillar of its
new remote controllers offer distinctive features that make
air-conditioning operations in Japan.
12 DAIKIN INDUSTRIES, LTD.
The Urusara 7 room air conditioner is the first air conditioner in the world to employ the environment-friendly
HFC refrigerant R32.
In the commercial air-conditioning market, the Daikin
the wake of high-profile findings with respect to the dangers
Group is promoting sales of offerings highly differentiated
of PM 2.5 particles.
from competing products on the basis of their high levels of
While Japan’s air-conditioning market is becoming increas-
energy-conservation performance, such as offerings in the
ingly mature, Daikin believes it can identify and develop addi-
Eco-ZEAS80 line, and Daikin is concurrently striving to devel-
tional growth fields in Japan going forward. Examples of such
op a cyclical-type business format involving the provision of
fields include the communication industry’s data centers,
solutions that encompass equipment sales together with
which are growing in step with the increasingly widespread
installation, maintenance, and renovation services.
use of smartphones and tablets; agricultural production
Daikin is sustaining its efforts to expand its share of the
plants, which are aiming to ensure food safety and realize
residential air-conditioning market through measures cen-
international competitiveness; housing facilities for seniors
tered on such highly differentiated products as Urusara 7 and
that offer nursing and other services; and facilities designed
RakuAir. The Group is also seeking to increase its annual
in line with the “smart city” concept for realizing zero-energy
sales of residential air purifiers to above the one million unit
structures. HVAC solutions that help reduce electric power
mark by emphasizing the outstanding performance of prod-
and energy consumption are an important requirement in all
ucts in its Uruoi Hikari Kurieru line, and it anticipates that
those fields, and Daikin plans to achieve additional growth
these efforts will be facilitated by the increasing attention air
in its Japanese air-conditioning business operations by
quality issues have received throughout Japanese society in
proactively pioneering those new markets.
ANNUAL REPORT 2013
13
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
to strengthen sales networks and bolster product lineups.
Despite harsh market conditions, Daikin’s proactive expan-
sion of sales promotion measures led to a year-on-year rise
in its overall sales in China.
In the Asia/Oceania region, the impact of unseasonable
weather and other factors restrained sales in the major mar-
ket of Australia to roughly the same level as in the previous
fiscal year. However, sales growth in such emerging countries
as Thailand, India, Vietnam, and Indonesia (where a new
marketing company was established in June 2012) caused
Daikin’s overall sales in the region to surpass the level in the
previous fiscal year.
Regarding the Americas region, demand for large-scale
(applied) air-conditioning systems in North America was flat,
but Daikin was able to increase its sales of such systems in
the Americas region by augmenting its sales of new products,
expanding its service business operations, and broadening the
scope of marketing operations in Central America and South
America. In the North American ductless air-conditioner mar-
ket, the Group stepped up its efforts to elevate the awareness
of the Daikin brand on the parts of dealers and construction -
related companies and was thereby able to achieve a further
increase in sales of VRV building-type multi-split air-condition-
ing systems. Sales of residential air-conditioning systems as
well as air-conditioning systems for small and medium-sized
shops were above the level in the previous year.
A Group company in Turkey has begun manufacturing air-conditioner
products designed to match local needs.
Initiatives in Fiscal 2014
Europe: Strengthening Business Structures
and Expanding Room Heating System
Business
While demand in Europe is projected to remain weak during
fiscal 2014, Daikin is emphasizing measures to strengthen
its regional businesses over the medium term, aiming to
fundamentally upgrade its competitive power through such
initiatives as those to reform and reinforce the marketing cap-
abilities and cost-competitiveness of all 12 Group marketing
Air Conditioning—The Global Market
Overview of Operations in Fiscal 2013
Sustained Business Expansion in China,
the United States, and Emerging Countries
During fiscal 2013, Daikin’s air-conditioning business units
continued to face harsh conditions in the important European
region market but sustained strong sales in other regions
of the world. The Group’s overall sales in the global market
surpassed the level in the previous fiscal year.
In the European region, the strong impact of widespread
recessionary economic conditions caused a year-on-year
decline in Daikin’s sales of residential air conditioners.
Regarding commercial air conditioners, the weakness of
sales in EU countries was offset by sales growth in the Middle
East, Turkey, and other emerging countries, and overall sales
of mainstay VRV multi-split type commercial air-conditioning
systems were maintained at approximately the same level as
in the previous fiscal year. Operations in Turkey continued to
contribute to consolidated performance, reflecting the strong
performance of a local subsidiary acquired in July 2011. With
respect to heat-pump water and room heating systems,
demand was down in the major markets of France as well
as the United Kingdom, but Daikin’s efforts to expand its
marketing channels in the central Europe, Italy, Greece, and
other new markets enabled it to achieve year-on-year growth
in unit sales volume.
With respect to China, demand was robust in the suburbs
of major cities and in regional cities but fell in major cities. As
a result, Daikin moved further ahead with its development of
commercial air-conditioning equipment marketing agencies in
suburbs and in China’s central and western regions and other
inland regions. Regarding residential air-conditioning prod-
ucts, the Group moved ahead with the pioneering of new
market segments by expanding its marketing network for
residential multi-type air conditioners in all regions of China
and by developing special models with specifications tailored
to match needs in China. Regarding large-scale (applied)
air-conditioning systems, the Group also took measures
14 DAIKIN INDUSTRIES, LTD.
companies in Europe. The Group is also proceeding with
the implementation of strategies for expanding sales of
Asia/Oceania Region: Full-Scale
Local Manufacturing in India
volume-zone residential air-conditioning products in southern
European markets and increasing sales of high-value-added
Daikin is working to promote greater sales and further
offerings throughout the Europe region. In addition to moving
strengthen its profitability in the strategically emphasized
ahead with the expansion of marketing channels for room
markets of India, Vietnam, and Indonesia, seeking to greatly
heating systems throughout the region, Daikin is launching
increase the overall level of its sales in the Asia/Oceania region.
new room heating offerings tailored to local market needs,
In India, the Group inaugurated full-scale local manufacturing
such as compact Altherma heat-pump water and room heat-
operations for room air conditioners and expanded its product
ing systems in France and combustion-type heating products
lineup with the addition of models that use R32, a highly
in Germany and Italy.
China: Multi-Dimensional Measures
for Elevating Marketing Power
and Product Power
While the outlook for a recovery in demand in China remains
somewhat opaque, Daikin is working to expand its nation-
wide marketing network—increasing the number of outlets
from 12,000 to 14,000—and accelerate its marketing pro-
grams in regional cities and inland regional cities. While the
environment-friendly new HFC refrigerant with a low global
warming potential (GWP). In Vietnam, the Group is creating
additional marketing outlets and accelerating its business
development programs in regional cities. In Indonesia, a newly
established local marketing subsidiary is playing a central role
in creating additional marketing outlets at a rapid pace.
North America: Accelerating Business
Expansion Based on Synergies with
Goodman
demand associated with large-scale projects is declining, the
Overall demand for air-conditioning products in the North
Group is seeking to increase its sales by emphasizing retail
America region is projected to recover slowly but steadily.
sales. The Group reevaluated all its commercial and residen-
Regarding applied products, Daikin is launching new prod-
tial offerings and undertook a full model change transition for
ucts, reinforcing its marketing network, and working to
more than 1,000 products in March 2013. Regarding its
expand its solutions business. General awareness of the ener-
mainstay VRV systems, also, Daikin is striving to increase its
gy-saving characteristics of ductless air conditioners is rising
market share by introducing new models that feature over-
in the region, and the Group is expanding its lineup of such
whelmingly superior energy-conservation performance. In the
products as well as its related marketing and servicing sys-
relatively mature markets of major cities, the Group is cultivat-
tems. The Group is placing strong strategic emphasis on
ing replacement demand by proposing solutions packages
measures to generate synergies between Daikin’s environ-
that include services. The Group is also establishing air-
mental technologies and the dealer network of Goodman
business operations related to air purifiers and total heat
Global Group, Inc., which was acquired in fiscal 2013.
exchangers, for which demand is expected to surge along
Besides seeking to meet residential replacement demand,
with the general rise in the awareness of the dangers of PM
Daikin is bolstering its lineup of high-value-added products
2.5 fine atmospheric particulates.
and working to expand its sales in the newly constructed
housing market. Additional initiatives are being made to estab-
lish a full-scale presence in the light commercial market for
systems used in medium-sized buildings. All these measures
are designed to quickly realize Daikin’s objective of becoming
Daikin is further expanding and strengthening its
marketing network throughout China.
the No. 1 air-conditioning
company in North America.
Daikin’s sales of residential air
conditioners in the United States
have been surging since the
acquisition of Goodman Global
Group, Inc.
ANNUAL REPORT 2013
15
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Chemicals
Overview of Operations in Fiscal 2013
OPTOOL Products: A Principal Chemicals
Segment Sales Growth Driver
was down in China and other Asian countries, but Daikin
moved ahead with the marketing of products for new appli-
cations in the U.S. and European markets. In addition, sales
of OPTOOL anti-smudge surface coating agents used in
In fiscal 2013, the Chemicals segment recorded year-on-year
smartphone touch panels and other products were up by a
decreases in sales and operating income.
considerable margin. This achievement reflected the benefits
Among principal fluoropolymer sector products, the Daikin
of efforts to develop applications in fields where fluorochemi-
Group achieved robust sales of such melt resins as fluorinat-
cals had not previously been used, thoroughly coordinate
ed ethylene propylene (FEP) and ethylene tetrafluoroethylene
Group operations and promote information sharing globally,
(ETFE) in the U.S. market for LAN cable applications, the
and closely monitor changes in needs related to end users’
Chinese market for communications terminal electrical
supply chains and quickly respond to those changes. As a
cables, and other parts of the global market for electric
result, overall sales of offerings in the chemical products
cable-related applications. In China, despite the slowing of
sector rose to above the level in the previous year.
economic expansion and deceleration in demand associated
Sales of fluorocarbon gas refrigerant products were down
with infrastructure investment and exports, the Group was
considerably from the fiscal year owing to the impact of price
able to maintain strong sales owing to its sales promotion
declines accompanying the softening of market conditions
campaigns for polytetrafluoroethylene (PTFE) resins in
in Japan, China, and other Asian countries, and this fluoro-
volume-zone market segments. On the other hand, demand
carbon gas sales drop had a large impact on the overall
in semiconductor-related and other markets of Japan, else-
performance of the Chemicals segment.
where in Asia, and the United States was sluggish. Sales of
fluororubber products were down owing to the impact of
factors that included a decrease in automobile-related
demand in Europe. As a result, total sales of fluoropolymers
were below the level of the previous year.
Initiatives in Fiscal 2014
Aiming for Sales/Profit Growth
Centered on Newly Developed Applications
Regarding the chemical products sector, demand for water
While Daikin anticipates that demand level recoveries will be
and oil repellents associated with apparel-related applications
delayed to various degrees in individual product segments
during fiscal 2014, the Group is accelerating its use of com-
posite technologies for enhancing the painting application,
adhesion, and mixing of fluorochemicals while concurrently
emphasizing measures to promote the sales of environment -
friendly products designed to facilitate the realization of
such objectives as fuel efficiency increases and exhaust gas
emission reductions.
In China, Daikin is anticipating that the expansion of the
automobile-related market and a resurgence of infrastructure
investments will support robust growth in demand for such
products as fluororubbers, PTFE, and weather-resistant
coatings, and the Group is launching new offerings and
Fluororesins are used to manufacture automobile components
with outstanding heat resistance and low fuel permeability.
16 DAIKIN INDUSTRIES, LTD.
undertaking marketing promotion campaigns targeting the
Regarding new markets, Daikin is addressing opportunities
volume-zone segments of Chinese markets for such prod-
associated with emerging markets for information terminal
ucts. The FUSION 15 strategic management plan has set
applications of its oil- and water-repellent coating agents
the goal of increasing annual Chemicals segment sales in
as well as applications of R32 HFC refrigerant and other
China to roughly ¥100 billion. In addition to leveraging the
products. The Group is examining numerous opportunities for
benefits of previous efforts to strengthen marketing pro-
inaugurating environment-related business associated with oil
grams designed to be effective in Chinese markets, bolster
and gas production—particularly in the United States, which
cost-competitiveness, and progressively boost capabilities for
is experiencing a boom in the employment of unconventional
developing products that match local needs, Daikin is seek-
methods for exploiting shale oil resources—and it is moving
ing to attain this goal by focusing on new applications and
ahead with the development of new product applications
making the most of its new local manufacturing base—the
related to all aspects of global oil and gas production
Changshu Plant, which began manufacturing DAIEL fluoro-
activities.
rubber products and ZEFFLE weather-resistant coatings
With respect to new products, plans call for the develop-
in fiscal 2014.
ment of additional products targeting volume-zone market
Other important strategic themes for Chemicals segment
segments as well for the use of Daikin’s unique technologies
operations are expanding operations in new regions, initiating
to develop and launch numerous new highly differentiated
business in new markets, and developing applications for
offerings.
new products.
In addition to these initiatives, aiming to ensure it can
In line with its strategy of targeting emerging economy
increase its sales and profitability during fiscal 2014, Daikin is
country markets, Daikin has begun the full-scale development
implementing such measures as those focused on strength-
of operations in South Korea, where it recently established a
ening short-term profitability through the thorough application
local marketing base, and is moving ahead with measures for
of product pricing policies, the reduction of raw materials
expanding marketing operations to end users in India, Brazil,
procurement costs amid softening market conditions, and
and ASEAN member countries. In particular, Daikin plans to
the lowering of fixed-cost levels.
establish a local base in India and undertake the full-scale
development of its operations in that country.
Used here on a railway station building, ZEFFLE Infrared Reflective
Coating is a fluorochemical coating that is highly resistant to weathering.
ANNUAL REPORT 2013
17
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Oil Hydraulics
Overview of Operations in Fiscal 2013
Strong Sales of Oil Hydraulic Equipment
Used in Construction Machinery
and Motor Vehicles
Initiatives in Fiscal 2014
Attaining FUSION 15 Targets through
Emphasis on Chinese Business
Fiscal 2014 is the third of the five years covered by the
Daikin’s oil hydraulic equipment is used to enable the smooth
FUSION 15 strategic management plan, and the Daikin
operation of power shovels and other construction equip-
Group is implementing various strategically emphasized
ment, processing equipment in factories, as well as tractors
measures aimed at making steady progress toward the goal
and other small-scale motor vehicles. The Daikin Group is
of increasing Oil Hydraulics segment sales to ¥30 billion
leveraging energy-conservation technologies accumulated in
by fiscal 2016, the final year of FUSION 15.
its air-conditioning operations to develop and manufacture
The strategically emphasized measures receiving top priori-
hydraulic pumps, hydraulic units, and other oil hydraulic prod-
ty are those focused on strengthening business in China. In
ucts that help improve the performance of machinery and
view of the particular importance of cost-competitiveness in
vehicles with respect to high-precision operations, noise
Chinese markets, the Oil Hydraulics segment is collaborating
reduction, compactness, and energy conservation. In addi-
with the Group’s Air Conditioning segment to progressively
tion, by integrating oil hydraulic control technologies and
increase the local procurement of materials and components
invertor motor technologies to create hybrid hydraulic
and augment the internal production of cast metal compo-
systems, the Group is developing unique products that
nents and other components at the plant of Daikin Hydraulics
contribute to the protection of the natural environment.
(Suzhou) Co., Ltd.
In fiscal 2013, Daikin’s industrial machinery-related oil
Regarding industrial machinery-related oil hydraulic equip-
hydraulic equipment business maintained robust sales in the
ment business, the Group is emphasizing the realization of
U.S. market, although slack demand in European, Japanese,
global business growth through measures to newly enter
and other Asian markets kept sales below the level in the pre-
such markets as those of South Korea and countries in
vious year. Sales of oil hydraulic equipment used in construc-
Europe and the ASEAN countries. In the mainstay Japanese
tion machinery and motor vehicles were up year on year,
market, Daikin is striving to accelerate the expansion of its
reflecting the strength of domestic and overseas demand.
customer base by integrating the operations of marketing,
In January 2013, the Daikin Group moved to strengthen
technical, and manufacturing units to further enhance its mar-
its oil hydraulic transmission operations targeting China’s agri-
keting power and engineering power as a means of better
cultural machinery market by reorganizing those operations
meeting such customer needs as those related to electric
within a newly established joint venture, Daikin-Sauer-
power and energy conservation as well as low-cost
Danfoss, Ltd. The Group’s maintenance, repair, and opera-
operations.
tions (MRO) business in the U.S. market has continued to
In addition to the above-mentioned initiatives, Daikin is
realize a smooth increase in sales.
seeking to utilize the business know-how of Chicago-based
subsidiary All World Machinery Supply, Inc., to expand the
scope of reliably profitable MRO business in the United
States by establishing presences in Latin American and
Asian markets.
18 DAIKIN INDUSTRIES, LTD.
Defense
Overview of Operations in Fiscal 2013
Achievement of Year-on-Year Sales Growth
During fiscal 2013, orders from Japan’s Ministry of Defense
for artillery shells and guided missile components increased
despite the reduction of Japan’s defense budget. With
respect to business in civil-sector fields, the segment main-
tained strong sales of mainstay home-use oxygen therapy
equipment offerings. Aiming to better differentiate its offerings
from competing products, Daikin launched five-liter oxygen-
concentration devices that are roughly as compact as previ-
ously marketed three-liter oxygen-concentration devices in
December 2012, and the new products have been highly
evaluated in the market. As a result, the Defense segment’s
overall sales surpassed the previous year’s level.
Initiatives in Fiscal 2014
Pioneering Chinese Markets
for Civil-Sector Offerings
While the restriction of Japan’s defense budget is projected
to present challenges during fiscal 2014, Daikin is working to
overcome those challenges by reducing fixed and variable
costs as a means of strengthening profit-earning capabilities
while also implementing a comprehensive reform of all busi-
ness processes from materials procurement through product
shipments and further reducing inventory levels. In civil-sector
fields, the Group is working to expeditiously initiate and
expand the marketing of oxygen-concentration devices in
China. Having established Daikin Medical Technology
(Suzhou) Co, Ltd., Daikin plans to provide home-use oxygen
therapy equipment along with a set of related services, in
accordance with its business model for such operations in
Japan, and it will concurrently accelerate its development
of such equipment designed for the volume-zone market
segment.
ANNUAL REPORT 2013
19
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Corporate Governance
Fundamental Corporate Governance Concept
The Daikin Group’s corporate governance systems are designed
Accordingly, experience as a top manager in a listed enterprise
is a principal nomination criterion for outside director recruitment.
to help accelerate decision making and operational execution
To ensure that the outside directors can effectively contribute
work in anticipation of and response to changes in management
to Daikin’s corporate governance system, the outside directors
tasks and the management environment while concurrently pro-
are assigned assistants in the Management Planning Office who
moting consistently high levels of management transparency and
strive to provide the outside directors with early notice of Board
soundness, thereby seeking to increase the Group’s corporate
of Directors meetings. In addition, in the case that an outside
value.
director is not able to attend a Board of Directors meeting, the
Going forward, the Group will be striving to ensure the increas-
assistants provide the outside director with related materials and
ing sophistication of speedy management, the strengthening of
subsequently provide the outside director with an explanation of
consolidated management, and still-higher levels of soundness
the proceedings of the meeting and provide other assistance.
and transparency. In addition, to realize an increase in corporate
value, the Group will continually consider and reevaluate its con-
Shareholders’ Meeting
cepts regarding the most-appropriate forms of corporate gover-
nance as it pursues a diverse range of Group-level initiatives
aimed at ensuring best practices throughout the Group.
Accounting
Auditor
Management and Operational Execution Systems
Rather than adopt a U.S.-style “committees system” that com-
pletely separates decision making from operational execution,
the Group has adopted an “integrated management” system that
calls for directors to bear responsibility for management respon-
sibilities as well as for operational execution responsibilities. In
view of the special characteristics of the Group’s business, it was
judged that this is a more-effective means of accelerating deci-
sion making and operational execution. In addition, the Group
has introduced an Executive Officer System to accelerate the
speed of execution based on autonomous judgments and deci-
sions in units handling each region, division, and function.
Daikin entrusts the CEO with the responsibility for making
management decisions and assigns the COO the responsibility
for executing operations. The CEO bears responsibility primarily
for decision making with respect to a full range of management
issues, including those involving Group companies. The COO
bears responsibility primarily for executing operations. This sys-
tem is used to give due attention to both decision making and
operational execution processes while seeking to accelerate both
kinds of processes with respect to all kinds of management
tasks, including important management issues.
To facilitate speedy decision making based on substantive
discussions, the Board of Directors has been designed to include
a small number of members. As of June 2013, the Board of
Directors included 12 members, including one female external
Appointment, dismissal
CSR Committee, Corporate
Ethics and Risk Management
Committee, Development
Committee for Operational
Adequacy Promotion System,
Independent Committee,
Information Disclosure Committee
Member of the Advisory Council
HRM and
Compensation Advisory Committee
Group Steering
Meeting
Executive Officers
Meeting
Group
Management
Meeting
Audit
Board of Directors
Appointment,
supervision
Chairman and CEO
President and COO
Audit &
Supervisory
Board
Audit &
Supervisory
Board Member
Group
Auditors
Meeting
Executive Officers
(The rest is abbreviated)
Activities by External Directors
Name
Principal Activities
Chiyono Terada
Kosuke
Ikebuchi
Attended 14 out of 16 meetings of the Board of Directors this fiscal
year, Chiyono Terada offered timely proposals as needed, based on
her abundant experience and deep insight as a corporate manager
and especially from her broad and advanced perspective, including
proposals concerning management based on the viewpoints of
consumers, such as the importance of the brand of the Company,
and measures to further promote achievements of female employ-
ees.
Attended all 16 meetings of the Board of Directors this fiscal year,
Kosuke Ikebuchi provided timely proposals as needed, based on his
abundant experience and deep insight as a corporate manager and
especially from his broad and advanced perspective, including
viewpoints concerning manufacturing, such as production innova-
tion, cost reduction, and enhancement of reliability and productivity.
director and one non-Japanese part-time director. Based on this
system, the Board of Directors is making speedy strategic deci-
Systems for Supporting Speedy Management
The top deliberative unit in the Group’s management system is
sions and performing sound supervision for the entire Group.
the Group Steering Meeting. This unit determines the direction
Daikin’s Board of Directors included two outside directors as
of important management policies and strategies in a rapid and
of June 2013. Daikin seeks to recruit outside directors who have
timely manner, thereby accelerating the resolution of issues.
abundant experience and deep insight and can, therefore, offer
In addition, the Group Management Meeting aims to thorough-
a sophisticated perspective on a broad range of issues as they
ly share information on important management policies and the
participate in decision making and supervise management.
basic strategies of the Group and support and expedite Group
20 DAIKIN INDUSTRIES, LTD.
companies’ problem-solving efforts. To further increase the
Group’s overall corporate value and ensure the Group lives up
to its responsibilities to society, the Group Management Meeting
strives to ensure that the Group is characterized by a unified
understanding and speedy corporate operations.
The Group’s management system also includes such units as
an Executive Officers Meeting as well as an Advisory Council that
offers opinions and advice regarding management issues from an
independent standpoint.
Audit System
Daikin employs a Board of Corporate Auditors and seeks to
nominate two or more outside members to its Board of Corporate
Auditors. The principal nomination criteria for outside corporate
auditors are the same as those for outside directors and include
independence from the Company in terms of not having a rela-
tionship of interest with the Company. As of June 2013, Daikin’s
four corporate auditors included two outside corporate auditors.
The outside corporate auditors attend meetings of the Board of
Directors as well as other important meetings and receive reports.
In addition, they are able to express diverse opinions.
To ensure effective audit functions, the Board of Corporate
Auditors receives reports on important issues related to manage-
ment and performance when necessary and also investigates
relevant units, confirms approval of documents, and regularly
exchanges opinions with representative directors, executive offi-
cers, and the independent auditors. To strengthen Groupwide
auditing and auditing functions for all Group companies, includ-
ing overseas subsidiaries, principal Group companies appoint
Group auditors. The corporate auditors and Group auditors
regularly hold Group Auditors’ meetings and otherwise work
to increase the smoothness of information flows.
Activities by External Corporate Auditors
Name
Principal Activities
Yoshiyuki
Kaneda
Hitoshi
Murakami
Attending all 16 meetings of the Board of Directors and 14 out of
15 meetings for the Board of Auditors this fiscal year, Yoshiyuki
Kaneda offered timely proposals as needed, based on his abundant
experience and deep insight as a corporate manager, especially in
manufacturing technology and production management.
Attending all 16 meetings of the Board of Directors and all 15
meetings of the Board of Auditors this fiscal year, Hitoshi Murakami
offered timely proposals as needed, based on his abundant experi-
ence and deep insight as a corporate manager, especially in risk
management. As of June 27, 2013, Hitoshi Murakami retired from
his position as a corporate auditor upon the completion of his term.
Ryu Yano
Appointed in June 2013, Ryu Yano is offering timely proposals as
needed, based on his abundant experience and deep insight as a
corporate manager, particularly with respect to overseas business.
Corporate Officer Remuneration, Etc.
To ensure the transparent management of its corporate
officer-related personnel and remuneration management
processes, Daikin has established the Compensation Advisory
Committee, which is chaired by an outside director. This
committee engages in discussions and deliberations regarding
such issues as those related to corporate officer nomination
criteria, corporate officer candidates, and remuneration. The
remuneration of directors and corporate auditors is deter-
mined so as to fall within the aggregate remuneration ceiling
of directors and corporate auditors as determined by a resolu-
tion of the general shareholders’ meeting. Based on a report
from the Compensation Advisory Committee, the directors’
remuneration is determined by a resolution of the Board of
Directors while the corporate auditors’ remuneration is deter-
mined by a resolution of the Board of Corporate Auditors.
Daikin’s corporate officer remuneration system is designed
to accord with the Group’s management policy and respond
to shareholders’ expectations by increasing corporate offi-
cers’ motivation to promote a sustained increase in Group
performance over the medium-to-long term and thereby
contributing to a rise in the Group’s corporate value.
Directors’ remuneration includes “fixed compensation,”
“performance-linked compensation” that reflects the Group’s
short-term performance (net sales and operating income) and
each director’s job responsibilities, and “stock options” that
reflect the Group’s medium- to long-term performance. The
performance-linked compensation of Daikin directors is given
a somewhat higher ratio of linkage with performance than
average to ensure that the incentive effect of that compensa-
tion is sufficient.
The remuneration of outside directors and corporate
auditors includes “fixed compensation” only.
Compensation levels are determined based on consider-
ation of Daikin’s performance and remuneration levels com-
pared to those of other leading manufacturing companies in
Japan after analyzing and comparing data from an outside
specialized institution on the remuneration of corporate
officers active in approximately 200 Japanese companies
listed on the First Section of the Tokyo Stock Exchange.
Total Compensation for Directors and Corporate Auditors
Position
Number of Directors and
Corporate Auditors
Total Compensation
(Millions of yen)
Directors
Corporate Auditors
Total
13
4
17
823
89
913
Total Compensation for External Directors
and External Corporate Auditors
Position
Number of Directors and
Corporate Auditors
Total Compensation
(Millions of yen)
Total Compensation for
External Directors and
External Corporate
Auditors
4
59
ANNUAL REPORT 2013
21
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Directors, Auditors, and Executive Offi cers (As of June 27, 2013)
Position(s)
Responsibilities & Principal Jobs
Name
Chairman of the Board
and CEO
President and COO,
Member of the Board
Noriyuki Inoue
Masanori Togawa
Member of the Board (external) Chiyono Terada
President and CEO of Art Corporation
Member of the Board (external) Kosuke Ikebuchi
Senior Advisor to the Board and Senior Technical Executive of Toyota Motor Corporation
Member of the Board
and Senior Executive Officer
Member of the Board
and Senior Executive Officer
Member of the Board
and Senior Executive Officer
Member of the Board
and Senior Executive Officer
Guntaroh Kawamura Responsible for Chemicals Business and General Manager of Yodogawa Plant
Ken Tayano
Responsible for Domestic Air-Conditioning Business, Representative of China Region, Chairman and
President of Daikin (China) Investment Co., Ltd., and Member of Global Air-Conditioning Committee
Takeshi Ebisu
Responsible for Corporate Planning and G Company
Masatsugu Minaka
Representative of Air-Conditioning Operations in the Europe/Middle East/Africa Region, President of Daikin Europe N.V.,
and Member of Global Air-Conditioning Committee
Member of the Board
and Senior Executive Officer
Jiro Tomita
General Manager of Air-Conditioning Manufacturing Division, Chairman of PD Alliance Promotion Committee,
General Manager of Sakai Plant, Member of Technology and Innovation Center Preparation Office, Sub-leader of ATT Project,
and AGH Project Leader
Member of the Board
and Senior Executive Officer
Takashi Matsuzaki
Responsible for Air-Conditioning Research and Development (including Applied Solution Business and Refrigeration) and
Global Procurement, General Manager of Shiga Plant, and Member of Technology and Innovation Center Preparation Office
Member of the Board
and Executive Officer
Koichi Takahashi
Responsible for Accounting, Finance, and Budget Operations, General Manager of the Finance and Accounting Division,
Chairman of Information Disclosure Committee, Chairman of Development Committee for Operational Adequacy Promotion
System, IZS Project Leader
Member of the Board
(non-resident)
Audit and Supervisory Board
Member
Audit and Supervisory Board
Member
Audit and Supervisory Board
Member (external)
Audit and Supervisory Board
Member (external)
Frans Hoorelbeke
Chairman of Daikin Europe N.V.
Shigeru Murakami
Kenji Fukunaga
Yoshiyuki Kaneda
Former Officer of Sony Corporation
Ryu Yano
Director and Chairman of Sumitomo Forestry Co., Ltd.
Senior Executive Officer
Junichi Sato
Representative of Air-Conditioning Operations in Central America and South America (including American Air Filter)
and Member of Global Air-Conditioning Committee
Senior Executive Officer
Yukio Hayashi
Responsible for Liaison Business and Defense Division and General Manager of Tokyo Office
Senior Executive Officer
Kosei Uematsu
Responsible for Global Air-Conditioning Business (excluding Japan) and Refrigeration Division
and Member of Global Air-Conditioning Committee
Senior Executive Officer
Shigeki Hagiwara
Responsible for Applied Solution Business, Service Operations, and Training
and General Manager of Applied Solution Business Division
Senior Executive Officer
Hiroo Yoshioka
Senior Executive Officer
Susumu Okano
Responsible for Manufacturing Technology and Oil Hydraulics Business,
Deputy General Manager of Air-Conditioning Manufacturing Division, and Member of Global Air-Conditioning Committee
Responsible for CSR and Corporate Communication, Corporate Ethics, Compliance, Legal Affairs, and IT Development,
Department Manager of Corporate Communication Department and Department Manager of Corporate IR Group,
and Chairman of CSR Committee and Corporate Ethics and Risk Management Committee
Senior Executive Officer
Shinya Okada
Responsible for Global Environment, GRT Project Leader
Senior Executive Officer
Yasushi Yamada
Responsible for Safety
Executive Officer
Executive Officer
Executive Officer
Katsuyuki Sawai
Responsible for Human Resources and General Affairs
Toshitaka Tsubouchi General Manager of Air-Conditioning Sales Division
Osamu Tanaka
Deputy General Manager of Air-Conditioning Manufacturing Division (Product Development), and Member of Technology and
Innovation Center Preparation Office
Executive Officer
Hiroo Sakai
Responsible for Chemicals Research/Technology Product Commercialization Promotion/Environment/Safety
and General Manager of Chemicals Division
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Yoshikazu Tayama
Department Manager of Consolidated Management Administration Group, Finance and Accounting Division
Yoshiyuki Uemura
Director of Goodman Global Group, Inc., EVP for Cooperation and Strengthening Technological Capabilities, and
Director of Daikin Holdings (Houston), Inc.
Masayuki Moriyama
Director and Vice President of Daikin (China) Investment Co., Ltd. and COO of McQuay China
Yoshihiro Mineno
General Manager of Global Operations Division, Director (non-resident) of Goodman Global Group, Inc., Director of Daikin Holdings
(Houston), Inc., and Sub-leader of GRT Project
Executive Officer
Hitoshi Jinno
Responsible for PL/Quality, Air-Conditioning/Refrigeration/Applied, Manufacturing Excellence in the Newly Emerging Countries, and
Deputy General Manager of Air-Conditioning Manufacturing Division
22 DAIKIN INDUSTRIES, LTD.
Compliance and Risk Management
Compliance
In fiscal 2004, the Daikin Group established the Corporate
Ethics Committee as an organ for promoting corporate ethics
throughout the Group, and this committee was renamed as
the Corporate Ethics and Risk Management Committee in fis-
cal 2008. This committee meets twice each year, in principle,
with the purpose of undertaking the integrated promotion of
compliance (business ethics and legal compliance) and risk
management throughout the Group.
Regarding compliance, each division and Group company
(including principal overseas Group companies) appoint
“compliance and risk management leaders” (CRLs) who play
a central role in the daily gathering of up-to-date information
on relevant laws and regulations. The CRLs also adjust inter-
nal regulations and manuals to reflect the new information
and play a central role in “daily triple check” activities to con-
firm that compliance with respect to the regulations and man-
uals is rigorous. The results of checks are reported at monthly
CRL meetings, and related information is shared at those
meetings. In addition, each employee annually performs a
“compliance self-assessment check” to confirm that his or
her behavior is in accordance with the behavior guidelines
articulated in Daikin’s Handbook for Corporate Ethics.
Risk Management
Regarding risk management, in light of the Daikin Group’s rapid
business expansion, Daikin is endeavoring to accurately and
quickly execute comprehensive risk assessments (related to such
issues as profitability, product quality, safety, manufacturing, and
marketing activities, etc.) from a global perspective and institute
Groupwide systems for alleviating risks. Each year, after each
division conducts its own risk assessment to identify major risks,
Daikin drafts and implements individual divisional counter-
measures as well as Companywide countermeasures.
In preparation for the incidence of major earthquakes,
Daikin has built a system for quickly confirming the safety of
employees and their families and, therefore, maintains a list
of mobile phone contact numbers for all Group employees
and their families. The Company is also seeking to ensure
employees’ safety by promoting measures to upgrade the
resistance to earthquakes of its offices and other facilities.
Furthermore, to promote the resumption of operations with
maximum expeditiousness in the case that Daikin facilities
were to suffer major damage from a natural disaster, the
Company has drafted a business continuity plan and is
implementing such measures as those to prevent damage
to manufacturing facilities and strengthen supply chains.
In addition, based on consideration of issues that came
to light in connection with the Great East Japan Earthquake,
the Company is improving its system for confirming the safety
of employees and their families while also placing satellite
phones at principal business sites as a means of ensuring
emergency communications capabilities. The Company
is also taking such initiatives as those to reevaluate its
emergency management systems and increase the amount
of disaster relief supplies that are stored in preparation for use
during emergency situations.
Responsibility to Shareholders and Investors
To live up to the expectations of shareholders and investors,
the Daikin Group believes that it must increase its corporate
value. It, therefore, emphasizes free cash flow as a source of
corporate value and works to augment its profitability while
lowering the levels of its trade receivables and inventories.
Stable Levels of Cash Dividends
Daikin has a fundamental policy of maintaining the ratio of
cash dividends to net assets (consolidated basis) at 2.0% or
higher and is seeking to set stable levels of dividends based
on a comprehensive consideration of such factors as the
Company’s consolidated performance, financial position,
and funding requirements.
Respect for the Exercise of Voting Rights
To enable shareholders to exercise voting rights after due
consideration of resolution items, Daikin provides sharehold-
ers with invitations to general shareholders’ meetings and
ancillary materials a week in advance of the statutory dead-
line. Non-Japanese institutional investors are provided with
English-language versions of the invitations and ancillary
materials, and both English- and Japanese-language versions
of the invitations and ancillary materials are also posted on
the Company’s website.
Furthermore, Daikin has established systems that enable
shareholders to exercise their voting rights via personal
computers and mobile phones.
Information Disclosure
Recognizing that it has an important responsibility to
increase its management transparency from the perspectives
of shareholders and investors, Daikin is proactively working
to disclose relevant information by executing diverse kinds
of IR activities.
For analysts and institutional investors, Daikin holds
performance explanation briefings when announcing its
second-quarter and full-year financial results, and telephone
conference briefings are organized when announcing
first-quarter and third-quarter financial results. The Company
also undertakes visits to institutional investors in Japan and
overseas and organizes meetings with individual investors.
Daikin’s website offers access to such legally mandated
materials as securities reports (yuka shoken hokoku-sho)
as well as other corporate performance-related materials
that are posted as soon as they are prepared. Daikin
endeavors to post these reports and materials in a fair
and timely manner.
Daikin has also undertaken diverse management measures
in response to the feedback that it receives from its share-
holders and investors.
ANNUAL REPORT 2013
23
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Corporate Social Responsibility (CSR)
As a global company, the Daikin Group believes that it has
the responsibility to expand its business operations while
concurrently making contributions to global society. This
belief is reflected in the FUSION 15 strategic management
plan—covering the five fiscal years through March 31,
2016—which specifies the key objective of “concurrently
achieving environmental contributions and business
expansion” as well as the key strategy of “strengthening
human resource capabilities” as a means of attaining
that objective.
CSR and Management Strategies
To realize sustainable corporate growth, it is important to draft
management strategies based on consideration of society’s
needs and demands and then proceed to make systematic
efforts to address those needs and demands. As a global enter-
prise rapidly expanding its business operations, the Daikin Group
maintains a strong emphasis on its Group Philosophy and “peo-
ple-centered management” policies and has therefore incorporat-
ed provisions for addressing CSR issues within its FUSION 15
strategic management plan designed to ensure that it implements
all the measures required to fully live up to its responsibilities to
society. The Group is committed to responding to society’s
expectations and thereby earning the trust and confidence of
stakeholders throughout the world.
Daikin signed the United Nations Global Compact in 2008
and gives due emphasis to the compact’s core values regarding
human rights, labor standards, environmental protection, and
anti-corruption efforts. Specific policies for promoting those val-
ues are incorporated in the Group Compliance Guidelines and
Handbook for Corporate Ethics, which are the foundation of the
action guidelines instituted by individual Group companies. This
is the method by which Daikin is seeking to ensure that all of its
business activities are in harmony with the spirit of the Global
Compact. Based on the ISO 26000 international CSR standard,
Daikin is also striving to move ahead with CSR programs that
are in accord with global CSR standards.
(cid:129) Our Group Philosophy (Instituted in 1990)
http://www.daikin.com/company/rinen.html
(cid:129) Group Compliance Guidelines (Instituted in 2008)
http://www.daikin.com/csr/company/idea.html#chap07
CSR Issues Daikin Is Addressing
As an enterprise engaged in business operations primarily
in the field of air conditioning, the Daikin Group considers cli-
mate change to be the most-important CSR issue it should be
addressing. Given that it is expanding its operations in geograph-
ic regions throughout the world, Daikin also considers it highly
important to emphasize contributions to regional development.
24 DAIKIN INDUSTRIES, LTD.
Daikin’s Measures for Addressing CSR Issues
Issue 1: Climate Change
Responding to grow-
ing demand for air
conditioners in
emerging countries
Preventing global
warming
Rapidly rising demand for air conditioners in China, India,
Turkey, and other emerging countries accompanied by growth
in electric power consumption
energy-saving products that match local needs
Respond by providing
Energy shortages are becoming increasingly serious problems,
particularly in Japan following the recent earthquake disaster
Pursue progress in the energy conservation perfor-
mance of air conditioners, which account for a large share
of overall electric power consumption
Preventing environ-
mental damage from
fluorochemicals
The greenhouse gas characteristics of alternative fluorochemi-
cal refrigerants are considered problematic
next-generation refrigerants that do not harm the ozone
layer and that have low global warming potential (GWP)
Employ
Issue 2: Regional Development
Promoting regional
development by
expanding employ-
ment and fostering
the development of
human resources
Emerging countries are demanding greater opportunities for
Expand
employment and human resource development
local manufacturing/marketing facilities in emerging
countries and offer employment and human resource
development opportunities at those facilities
CSR Policies within the FUSION 15
Strategic Management Plan
The FUSION 15 strategic management plan specifies four
emphasized CSR themes—the environment, quality/customer
service, human resources, and social contributions—and Daikin
is moving ahead with various initiatives regarding those themes.
(cid:2) Environment
Positioning climate change prevention as its top-priority CSR
theme, Daikin is implementing measures associated with the fol-
lowing three emphasized themes: (1) globally providing products
that help customers conserve energy, (2) minimizing the environ-
mental impact of manufacturing operations, and (3) promoting
the global spread of a “green-hearted” spirit that cherishes the
Earth and emphasizes environmental friendliness
(1) Providing energy-saving products: Daikin is aiming to
promote the widespread use of invertor products and other
environment-friendly products, particularly in emerging countries
realizing rapid economic growth, aiming to reduce emerging
countries’ annual CO2 emissions by 30 million tons by fiscal 2016.
Daikin is aiming to develop technologies and launch products in
accordance with the latest refrigerant-related standards and act
as a world leader in globally cultivating demand associated with
the electric power conservation business.
(2) Minimizing environmental impact: Daikin is aiming to reduce
greenhouse gas emissions from manufacturing and other Group
activities to 67% below the fiscal 2006 level by fiscal 2016. In
fiscal 2013, manufacturing volume was almost twice the fiscal
2006 level, but overall Group greenhouse gas emissions were
68% below the fiscal 2006 level. Daikin is also seeking to reduce
its water consumption. In fiscal 2013, water consumption per
unit of manufacturing output had been reduced to 4% below the
fiscal 2011 level in the case of Group companies in Japan and to
25% below the fiscal 2011 level in the case of overseas Group
companies. Daikin is seeking to reduce its use of hazardous
chemicals. In fiscal 2013, the volume of PRTR (Pollutant Release
and Transfer Registry) substances used was 16% below the
fiscal 2011 level.
(3) Promoting a “green-hearted” spirit: Daikin is promoting bio-
diversity programs in numerous locations around the world, such
as a reforestation program in Indonesia and environmental pro-
tection and renovation programs on Japan’s Shiretoko Peninsula.
Working in cooperation with local governments and residents,
NGOs, and other organizations, Daikin is engaged in an increas-
ingly wide range of activities designed to help maintain ecological
balances and restore the vitality of natural environments.
(cid:2) Quality/Customer Service
Based on the emphasized theme of “providing customers with
the highest levels of satisfaction,” Daikin is striving to anticipate
societal and regional needs and provide high-quality products
that precisely match those needs as means of progressively
elevating customer satisfaction (CS).
Ensuring quality/safety: Based on consideration of customers’
perspectives, Daikin is endeavoring to ensure that all of its prod-
ucts are safe and offer outstanding quality. Daikin has obtained
ISO 9001 certification of its quality management systems and is
sustaining its efforts at development and manufacturing stages to
further elevate product quality levels. Daikin discloses information
with the goal of ensuring the safety of customers when they are
using Daikin products. In addition, Daikin collects post- marketing
information on products and seeks to employ that information to
realize additional product quality improvements.
Elevating CS levels: Based on the fundamental policy of “realizing
optimal after-services with respect to speed, accuracy, and
friendliness,” Daikin is endeavoring to attain still-higher levels of
CS. In Japan, the Daikin Contact Center accepts all kinds of
inquiries, including requests for repairs and technical consulta-
tion, 24 hours a day, 365 days a year. In addition, Daikin is work-
ing to bolster its local service systems in countries worldwide.
(cid:2) Human Resources
Because it considers “people” to be the primary source of its
competitive power, the Daikin Group emphasizes the implemen-
tation of “people-centered management” policies as part of its
efforts to create environments that make the most of the poten-
tials of each of its employees. In the geographical regions where
it operates, Daikin is doing its utmost to employ and foster the
development of local human resources, and each Group facility
is striving to contribute to the sustainable growth of its region.
Human resource development: Daikin’s corporate philosophy
states that “The Pride and Enthusiasm of Each Employee Are
the Driving Forces of Our Group,” and Daikin considers this to
be true with respect to all Group employees regardless of their
nationality or the specific Group unit they are employed by.
Based on the concept that “people grow by means of work
experience,” Daikin is striving to develop the potentials and
promote the career development of all employees. In addition
to proactively establishing educational and training programs
for local staff at each global base, Daikin is seeking to promote
a growing number of local staff to managerial positions.
Promoting diversity: Daikin has set itself the ambitious goal of
building a Group organization that makes the most of the poten-
tials of each of its employees—regardless of their age, gender,
nationality, or race—and employs diverse people who respect
different value systems. Daikin believes that this kind of organiza-
tion serves as a primary source of the Group’s dynamic strength.
In accordance with this concept and the Group Compliance
Guidelines—which state, “We shall respect the human rights of
each and every employee and diversity in values and approach
to work while striving to create a workplace that is safe and
comfortable to work”—Daikin encourages its employees to work
in a harmoniously concerted manner that enables individuals
to boldly pursue their dreams while maintaining high levels
of enthusiasm and ambition.
Work-life balance: Daikin emphasizes measures to enable
employees to realize optimal work-life balances. As a result of ini-
tiatives that include those aimed at providing work environments
that enable employees with children to concurrently handle work
and child-raising tasks with confidence and peace of mind,
Daikin has introduced diverse work systems that offer flexible
work modes and time schedules suitable for diverse employees.
Occupational safety and health: In accordance with the Group
Compliance Guidelines—which state, “We shall take all possible
precautions for safe operations and act with a mind-set of
‘Safety First’ to ensure the safety of the workplace”—Daikin
endeavors to make sure all its employees and employees of sub-
contractors enjoy safe work environments. To this end, and to
promote the peace of mind of people in communities near Group
facilities, Daikin strives to realize a “zero accident” performance
at each of its facilities.
(cid:2) Social Contributions
Aiming to be a company with deep roots in the many communi-
ties throughout the world where it is developing business opera-
tions, Daikin organizes numerous kinds of activities that enable
participating employees to contribute to local societies. These
activities center on the emphasized themes of “environmental
protection,” “support for education,” and “art and culture.”
Environmental protection: Daikin is moving ahead with programs
to protect and revitalize the natural environment at numerous
locations worldwide. In addition, overseas Group companies
organize their own programs, including tree-planting and nature
conservation programs.
Support for education: Daikin provides support for the education
of young people in each region where it has a presence. Besides
offering scholarships and technical training programs, Daikin
organizes experiential education events and plant study visits
for the students of each region’s primary schools.
Art and culture: To promote art and culture, Daikin has estab-
lished the Daikin Foundation for Contemporary Arts, which
supports exhibitions, lectures, academic research, publishing
programs, and other activities of the National Museum of Art,
Osaka. In addition, Daikin contributes to the arts overseas
through such initiatives as those to sponsor music concerts.
ANNUAL REPORT 2013
25
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Ten-Year Financial Highlights
Daikin Industries, Ltd. and Consolidated Subsidiaries
Years Ended March 31
Operating Results (for the year):
Net sales
Gross profi t
Selling, general and administrative expenses
Research and development expenses (Note 1)
Operating income
EBITDA (Note 2)
Net income
Cash Flows (for the year):
Net cash provided by operating activities
Net cash used in investing activities
Free cash fl ow (Note 3)
Net cash provided by (used in) fi nancing
activities
Financial Position (at year-end):
Total assets
Total interest-bearing liabilities
Total shareholders’ equity
Per Share Data (yen):
Net income (basic)
Shareholders’ equity
Cash dividends
Ratios (%):
Gross profi t margin
Operating income margin
EBITDA margin
Return on shareholders’ equity (ROE)
Shareholders’ equity ratio
2004
2005
2006
¥625,080
212,402
165,482
23,817
46,920
68,835
26,869
¥ 40,306
(31,594)
8,711
2,182
¥534,726
148,949
234,029
¥101.57
888.29
14.00
33.98%
7.51
11.01
12.24
43.77
¥729,414
256,289
196,083
24,583
60,206
83,630
38,083
¥ 43,970
(42,091)
1,879
3,534
¥615,596
166,442
271,716
¥ 144.24
1,031.73
18.00
35.14%
8.25
11.47
15.06
44.14
¥792,837
269,906
203,359
26,648
66,547
95,816
40,146
¥ 63,511
(63,420)
91
(4,284)
¥716,440
172,995
340,523
¥ 152.11
1,293.41
22.00
34.04%
8.39
12.09
13.11
47.53
Notes:
1. R&D expenses are included within general administrative expenses and manufacturing expenses.
2. EBITDA = Operating income + depreciation and amortization.
3. Free cash flow = Net cash provided by operating activities + net cash used in investing activities.
Net Sales
Operating Income
Net Income
(¥ billion)
1,500
1,200
900
600
300
0
(¥ billion)
150
120
90
60
30
0
(¥ billion)
80
60
40
20
0
04 05 06 07 08 09 10 11 12 13
04 05 06 07 08 09 10 11 12 13
04 05 06 07 08 09 10 11 12 13
26 DAIKIN INDUSTRIES, LTD.
2007
2008
2009
2010
2011
2012
2013
Millions of yen
¥911,749
312,688
231,934
27,204
80,754
115,315
45,420
¥ 83,725
(305,251)
(221,526)
245,975
¥1,291,081
441,549
313,451
32,075
128,098
179,469
74,822
¥103,329
(76,428)
26,902
3,367
¥1,202,420
363,660
302,266
30,535
61,394
118,325
21,755
¥ 62,238
(99,302)
(37,065)
48,382
¥1,023,964
319,301
275,263
28,220
44,038
96,462
19,391
¥129,227
(39,848)
89,379
(34,942)
¥1,160,331
361,665
286,210
30,771
75,455
127,168
19,873
¥78,411
(23,306)
55,105
(37,623)
¥1,218,701
371,902
290,709
32,987
81,193
131,719
41,172
¥44,967
(62,955)
(17,988)
(1,113)
¥1,290,903
388,046
299,419
33,569
88,627
140,151
43,585
¥103,161
(218,386)
(115,225)
143,520
¥1,161,364
456,074
397,542
¥1,210,094
356,928
545,641
¥1,117,418
417,919
471,686
¥1,139,656
399,313
496,179
¥1,132,507
372,481
487,876
¥1,160,564
389,891
502,309
¥1,735,836
705,871
618,118
¥ 172.66
1,511.47
28.00
34.30%
8.86
12.65
12.31
34.23
¥ 262.24
1,867.79
38.00
34.20%
9.92
13.90
15.87
45.09
¥ 74.51
1,615.98
38.00
30.24%
5.11
9.84
4.28
42.21
¥ 66.44
1,701.29
32.00
¥ 68.14
1,672.74
36.00
¥ 141.37
1,725.64
36.00
¥ 149.73
2,123.10
36.00
31.19%
4.30
9.42
4.01
43.54
31.17%
6.50
10.96
4.04
43.08
30.52%
6.66
10.81
8.30
43.28
30.06%
6.87%
10.86%
7.78%
35.61%
Research and Development
Expenses
Shareholders’ Equity
Total Assets
(¥ billion)
40
30
20
10
0
(¥ billion)
800
600
400
200
0
(¥ billion)
1,800
1,500
1,200
900
600
300
0
04 05 06 07 08 09 10 11 12 13
04 05 06 07 08 09 10 11 12 13
04 05 06 07 08 09 10 11 12 13
ANNUAL REPORT 2013
27
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Financial Review
Overview of Net Sales
Looking at economic conditions throughout the world during fi scal 2013, the
U.S. economy showed signs of recovery, while the European economy remained
weak against the backdrop of debt problems and fi scal budget austerity
measures. Overall, emerging country economies benefi tted from robust
domestic demand but generally lacked vigor as the pace of their expansion
slowed amid the deceleration of exports to industrialized countries.
In Japan, the perception of an economic slowdown intensifi ed as a result of
export weakness accompanying the strong yen and slumping demand overseas.
However, the correction of the yen’s excessive strength during the last three
months of the fi scal year, increasing demand from the public sector, and other
factors have spurred growing expectations of an economic recovery.
Although the Daikin Group’s operating environment was made harsh by
situations, including the slackness of air-conditioner demand in Europe and a
delay in the recovery of demand for fl uorochemicals, particularly fl uorochemicals
with semiconductor applications, the Group was able to boost its consolidated
sales and profi ts during fi scal 2013, thanks to such factors as the growth of
air-conditioner business sales in Japan, China, elsewhere in Asia, and other
regions. This strong performance, which followed three consecutive years of
growth in that business’s sales and profi ts, refl ected the Group’s efforts to
promote the sales of highly differentiated products designed to leverage
Japanese customers’ increasingly general consciousness of energy conserva-
tion issues, measures to promote the global sales of relatively popular products
in relatively robust markets, and concerted Groupwide cost-cutting measures.
Moreover, it was achieved despite a decline in the sales and profi ts of the
Group’s Chemicals business.
Overall, consolidated net sales reached ¥1,290.9 billion, up 5.9% from the
level in the previous fi scal year. Gross profi t amounted to ¥388.0 billion,
up ¥16.1 billion, and the gross profi t ratio for the fi scal year was 30.1%.
Currency Exchange Rates
Because of the sharp depreciation of the yen beginning from the third quarter of
fi scal 2013, the average currency exchange rate during the fi scal year was ¥83
to one U.S. dollar, compared to the assumed rate of ¥80 to one U.S. dollar, and
¥107 to one euro, compared to the assumed rate of ¥100 to one euro.
As a result of these movements in foreign currency exchange rates, Daikin
consolidated net sales were estimated to be ¥20.0 billion higher and operating
income ¥0.5 billion higher than they would have been without movements in
exchange rates.
Yen-U.S. dollar rate
Yen-euro rate
Fiscal 2012
¥ 79
¥109
Fiscal 2013
¥ 83
¥107
SG&A Expenses and Operating Income
As a result of a rise in personnel expenses associated with the acquisition of
Goodman, SG&A expenses increased to ¥299.4 billion, but the ratio of SG&A
expenses to net sales improved to 23.2%, a decrease of 0.7 percentage point
from the previous fi scal year. Operating income grew 9.2%, to ¥88.6 billion,
and the operating income ratio rose 0.2 percentage point, to 6.9%.
R&D Expenses
R&D expenses amounted to ¥33.6 billion and corresponded to 2.6% of net
sales.
Of this, R&D expenses for air-conditioning and refrigeration equipment
operations totaled ¥28,532 million. Regarding residential air-conditioning
equipment, Daikin launched the Urusara 7 wall-mounted room air conditioner,
which is the fi rst air conditioner in the world to employ the environment-friendly
refrigerant R32 and the industry’s fi rst 4.0kW-class product offering energy
conservation performance that exceeds the annual performance factor (APF) 7.0
level. With respect to other residential equipment, Daikin launched DESICA
HOME AIR, which employs heat-pump technology to overcome the challenges
of optimally controlling ventilation and humidity in residences with increasingly
high levels of air tightness and thermal insulation, thereby realizing both
comfortable living spaces and energy savings. In North America, Daikin
launched Smart Source, a water source heat pump unit that offers improved
partial load effi ciency as well as low noise, as well as the Revel, a rooftop-
mounted, energy-conserving heat pump equipped with an inverter scroll
compressor that offers the highest integrated energy effi ciency ratio (IEER)
among AHRI-certifi ed products. In China, Daikin expanded its product lineup
Domestic and Overseas Sales
Operating Income
and Operating Income Margin
Net Income
(¥ billion)
1,500
1,200
900
600
300
0
(¥ billion)
100
80
60
40
20
0
(%)
10
(¥ billion)
50
8
6
4
2
0
40
30
20
10
0
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
Domestic
Overseas sales
Operating income
Operating income margin
28 DAIKIN INDUSTRIES, LTD.
with the introduction of water-cooled screw chillers equipped with large capacity
screw compressors as well as the introduction of air-cooled inverter module
chillers that have realized higher integrated part load values (IPLVs) through their
incorporation of inverter compressors.
R&D expenses for Chemicals operations totaled ¥3,889 million. Daikin’s
Chemical Research and Development Center is responsible for generating a
steady fl ow of new products and major next-generation research themes, and
its Technical Service Department is quickly responding to customer requests by
implementing medium- and short-term intensive research programs.
R&D expenses for oil hydraulics, defense systems, and other operations
totaled ¥1,148 million.
Other Income (Expenses) and Net Income
Refl ecting a rise in foreign exchange gains as well as such other income
(expense) items as a ¥12,651 million write-down of investment securities,
net income amounted to ¥43,585 million, 5.9% higher than in the previous
fi scal year.
Dividend Policy and Dividends Applicable to the Fiscal Year
The Company provides a stable return to shareholders taking into account
consolidated business results, fi nancial position, and funding requirements and
other factors based on a policy of maintaining at least a 2.0% consolidated ratio
of dividends to net assets.
Internal reserves will be applied to strategic investments aimed at expanding
business operations and increasing competitiveness by such means as further
strengthening management systems, accelerating the development of global
businesses, and accelerating the development of environmentally conscious
products.
For the year ended March 31, 2013, the Company has proposed distributing
an annual cash dividend of ¥36 per share (an interim dividend of ¥18 per share
and a year-end dividend of ¥18 per share), unchanged from the previous fi scal
year. Refl ecting the rise in shareholders’ equity resulting from the sharp
depreciation of the yen, the consolidated ratio of dividends to net assets for the
fi scal year under review will be 1.9%.
Performance by Business Segment
(cid:129) Air-Conditioning
Refl ecting higher revenues stemming from measures to promote sales of such
highly differentiated products as Urusara 7 and Eco-ZEAS80, total sales of the
Air-Conditioning and Refrigeration Equipment segment increased to ¥1,119,972
million, up 7.5% from the previous fi scal year. Operating income increased
17.8%, to ¥70,905 million.
Japan
Industry demand remained robust in Japan’s commercial air-conditioning
equipment market owing to a continuing moderate recovery trend in capital
investment and construction starts along with rising demand for energy-saving
equipment and the effects of the government’s subsidy system. Aiming to offer
even greater energy-saving performance, the Group launched the SkyAir series
of air conditioners for buildings, stores, and offi ces and the Ve-up series of
variable refrigerant volume (VRV) air-conditioning systems in May 2012. These
new products enabled the Group to meet additional new and replacement
demand, and Daikin’s commercial air-conditioning equipment sales in Japan
rose to above the level in the previous fi scal year.
In Japan’s residential air-conditioning market, industry demand was boosted
by growth in new housing starts, an increase in demand for energy-saving air
conditioners associated with a general rise in energy conservation consciousness,
and favorable weather conditions. In November, the Group launched the Urusara
7, the fi rst room air conditioner in the world to use R32, a highly environment -
friendly new HFC refrigerant with a low global warming potential (GWP). In
recognition of Urusara 7’s high energy conservation performance level and the
technological innovation underlying that performance, Urusara 7 was awarded the
Minister of Economy, Trade and Industry Prize, the top prize in the 2012 Energy
Conservation Award program. Daikin’s implementation of sales promotion
campaigns for such high-value-added products as RakuAir room air conditioners
employing easy-to-use remote controllers along with the Group’s organization of
energy-conservation events in major cities helped boost sales to above the level
in the previous fi scal year. Pollen and air-pollution issues contributed to a rise in
demand for residential air purifi ers, and Daikin achieved considerable year-on-
year growth in its sales of such products through such initiatives as the launch of
Uruoi Hikari Kurieru air purifi ers, which feature a dual air purifi cation method—
using Daikin’s unique Flash Streamer technology and an active plasma ionizer—
that clearly differentiates them from competing products.
Selling, General
and Administrative Expenses
Revenues by Segment
Segment Profit (Loss)
(¥ billion)
320
240
160
80
0
(¥ billion)
1,500
1,200
900
600
300
0
(¥ billion)
100
80
60
40
20
0
-20
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
Air conditioning
Chemicals
Other
Air conditioning
Chemicals
Other
ANNUAL REPORT 2013
29
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Unit Sales of Air-Conditioning Systems in the Japanese Air-Conditioning Industry (Fiscal 2013)
(1,000 units)
Residential use
Commercial use
First half
5,579
436
Year on year
103%
104%
Second half
2,942
343
Year on year
102%
95%
Full year
8,521
779
Fiscal 2013
103%
100%
Overseas
Due to robust sales mainly in China and other regions, overall sales in the
overseas air-conditioner business market exceeded those in the previous fi scal
year, despite persistently harsh conditions with regard to demand in the
mainstay European market.
(cid:129) Europe Region—The European air-conditioner market recovered tempo-
rarily during the high-demand season of July and August owing to favorable
weather in southern Europe, and Daikin’s sales in principal countries increased
during the latter half of the fi scal year, refl ecting the Group’s stepped-up visits
to dealers and other sales promotion efforts, but the strong impact of Europe’s
economic recession restrained the Group’s overall sales of residential air-
conditioning systems to below the previous year’s level. Regarding commercial
air-conditioning systems, Daikin’s sales were down in EU countries where
construction demand was sluggish, but the Group maintained its overall sales
of mainstay VRV building-type multi-split air-conditioning systems at roughly
the same level as in the previous fi scal year due to business expansion in the
Middle East, Turkey, and other emerging countries. In particular, the strong
performance of a Turkey-based subsidiary acquired in July 2011 continued to
make a major contribution. Business providing residential heat pump water and
room heating systems faced challenges—including sluggish demand in the
major market of France and a slump in demand for products targeting public
housing facilities in the United Kingdom—but the bolstering of sales promotion
activities focused on dealers and end users supported a shift to year-on-year
sales growth during the latter half of the fi scal year. As a result of this and sales
growth achieved throughout the year in such peripheral markets as those of
central European countries, Italy, and Greece, overall sales of residential heat
pump water and room heating systems were up year on year. As part of its
profi tability-strengthening strategy, Daikin implemented various measures
during the year to reform its fi xed-cost structure, including moves to unify
distribution, IT, and other support operations.
(cid:129) China—In China, demand in major cities slowed due to worsening conditions
regarding large-scale real estate and new building projects, although robust
demand expansion continued in suburbs of major cities as well as regional
cities. Amid these circumstances, the Group was able to achieve year-on-year
growth in sales of both residential and commercial air-conditioning systems by
focusing on retail sales. In its mainstay commercial air-conditioning systems
market, the Group launched products designed for retailing, and sustained
efforts to develop dealers and cultivate demand associated with specifi c
customer groups and applications. Regarding residential air-conditioning
products, Daikin moved ahead with the pioneering of new market segments
by expanding its marketing network for residential multi-type air conditioners
in all regions of China and by assembling a broad product lineup through the
development of special models with specifi cations tailored to match needs in
China. Despite shrinking demand in the room air-conditioner market, the Group
made additional progress in building a new sales network and launching new
products and thereby realized a year-on-year sales increase in that market.
Although demand for large-scale (applied) air-conditioning systems increased
only marginally, Daikin was able to increase its sales of such systems by means
of measures to strengthen sales networks and bolster product lineups. Smooth
growth was also achieved in service business operations.
(cid:129) Asia/Oceania Region—Daikin was able to realize considerable year-on-
year growth in its overall sales in the region, despite the impact of unseasonable
weather and other factors that restrained sales in the major market of Australia
to roughly the same level as in the previous fi scal year. This refl ected robust
sales achieved in Thailand owing to favorable weather and demand associated
with the recovery from recent fl oods; the contribution of expanded marketing
operations in Vietnam and other emerging markets, including Indonesia, where
a new marketing company was established during the year; and measures
taken in India to expand local manufacturing operations, launch locally devel-
oped products, and intensify comprehensive cost reduction campaigns.
Composition of Sales
Others 3.6%
Chemicals 9.6%
30 DAIKIN INDUSTRIES, LTD.
Research and
Development Expenses
Air-Conditioning
86.8%
(¥ billion)
40
30
20
10
0
2009 2010 2011 2012 2013
(cid:129) Americas Region—Despite fl at demand for large-scale (applied) air-
conditioning systems in North America, Daikin was able to increase its sales of
such systems in the Americas Region by augmenting its sales of new products,
expanding its service business operations, and broadening the scope of
marketing operations in Central America and South America.
In the North American ductless air-conditioner market, demand associated
with government buildings with high levels of non-centralized air-conditioning
needs decreased, but the Group stepped up its efforts to elevate awareness of
the Daikin brand on the parts of dealers and construction-related companies,
and it was thereby able to achieve a further increase in its sales of building-type
multi-split air-conditioning systems. Considerable year-on-year growth was real-
ized in sales of residential air-conditioning systems as well as air-conditioning
systems for small and medium-sized shops, refl ecting the strength of shipments
to wholesalers with whom transactions were recently initiated.
(cid:129) Chemicals
Daikin maintained robust sales of fl uoropolymer resins in the U.S. market for
applications related to LAN cables and other electrical cables as well as in
Chinese markets, despite the slowing of China’s economic expansion and
decelaration in Chinese demand associated with infrastructure investment and
exports. On the other hand, demand in semiconductor-related and other
markets of Japan, elsewhere in Asia, and the United States was sluggish. Sales
of fl uororubber products were down owing to the impact of an automobile-
related demand decrease and inventory adjustments in Europe. As a result,
total sales of fl uoropolymers were below the level of the previous year.
Regarding the chemical products sector, demand for water and oil repel-
lents associated with apparel-related applications was down in China and other
Asian countries, particularly in the fi rst half of the fi scal year, although Daikin
moved ahead with the development of new applications for the U.S. and
European markets. In addition, successful programs to develop new applica-
tions for anti-smudge surface coating agents used in smartphone touch panels
and other products led to the expansion of surface coating agent sales,
contributing to a year-on-year increase in overall sales of offerings in the
chemical products sector.
Sales of fl uorocarbon gas products were down considerably from the level
in the previous fi scal year owing to the impact of price declines accompanying
the softening of market conditions in Japan, China, and other Asian countries.
The Daikin Group’s total sales in the Chemicals segment decreased 6.4%
from the previous year, to ¥124,436 million, refl ecting the large impact of the
drop in fl uorocarbon gas product sales. The segment’s operating income fell to
¥16,491 million, down 18.2% from the previous year.
(cid:129) Others
Total net sales of the Others segment amounted to ¥46,495 million, up 4.8%
from the previous fi scal year. The segment’s operating income increased
44.2%, to ¥1,229 million.
Daikin’s industrial machinery-related oil hydraulic equipment business
maintained robust sales in the U.S. market, although slack demand in European,
Japanese, and other Asian markets caused a year-on-year decrease in sales in
those markets. A year-on-year increase was realized in sales of oil hydraulic
equipment used in construction machinery and motor vehicles, refl ecting the
strength of domestic and overseas demand for the products of our key
customers in Japan.
Sales in the defense business sector were up owing to a rise in orders from
Japan’s Ministry of Defense for artillery shells and guided missile components.
Sales of home-use oxygen therapy equipment were also strong. Electronic
systems business sales exceeded the level in the previous year owing to growth
in sales of database systems for design and development applications.
Outlook for Fiscal 2014
For fi scal 2014, ending March 31, 2014, Daikin has instituted the Group new
year’s policy “Maintain confi dence in our current development path and
potential while addressing challenge after challenge.” In accordance with this
policy, the Group is striving to fl exibly and quickly respond to changes in its
operating environment as it seeks to maintain a balanced emphasis on both
medium- to long-term corporate development and short-term profi tability
going forward.
Specifi cally, the Daikin Group will strive to increase sales and profi ts by
addressing such Group-wide key challenges as accelerating the expansion of
businesses in emerging markets through the development and promotion of
products that meet local needs, maximizing business synergy with the newly
acquired Goodman Group, building solutions businesses that meet the needs of
customers around the world, expanding sales of air-conditioning equipment that
uses next-generation refrigerants with low global warming potentials (GWPs),
Total Assets
Working Capital and Current Ratio
Total Shareholders’ Equity
and Shareholders’ Equity Ratio
(¥ billion)
2,000
1,500
1,000
500
0
(¥ billion)
500
400
300
200
100
0
(%)
250
200
150
100
50
0
(¥ billion)
750
600
450
300
150
0
(%)
50
40
30
20
10
0
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
Working capital
Current ratio
Shareholders’ equity
Shareholders’ equity ratio
ANNUAL REPORT 2013
31
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
expanding environment-related innovation businesses that encompass respons-
es to the increasingly widespread awareness of electric power conservation
needs through the proposal of energy-saving products, promoting a decrease
in variable costs, as well as reducing the levels of fi xed costs and inventories.
Daikin’s performance outlook on a consolidated basis for fi scal 2014 is for a
36.3% increase in net sales, to ¥1,760.0 billion, a 41.0% increase in operating
income, to ¥125.0 billion, and a 46.8% increase in net income, to ¥64.0 billion.
Foreign currency exchange rates assumed for fi scal 2014 are ¥125 to one euro
and ¥95 to one U.S. dollar.
Assets, Liabilities, and Total Equity
(cid:129) Assets
At the end of fi scal 2013, current assets amounted to ¥803,326 million, up
¥174,279 million from the end of the previous fi scal year, owing to such factors
as an increase resulting from the Goodman Group’s conversion into a consoli-
dated subsidiary as well as to increases in cash and cash equivalents and trade
receivables. Noncurrent assets were ¥400,993 million higher than at the end
of the previous fi scal year, at ¥932,510 million, due to such factors as the
recording of goodwill resulting from the acquisition of the Goodman Group and
an increase in the customer relationship item resulting from the Goodman
Group’s conversion into a consolidated subsidiary.
Daikin made the Goodman Group a wholly owned subsidiary during the fi scal
year under review. The assumed acquisition date is December 31, 2012, and
the fi nancial statements of the newly consolidated subsidiary as of December
31, 2012 were used as a basis for the consolidation process. Therefore, only
the Goodman Group’s balance sheets were subject to consolidation as of the
end of the consolidated fi scal year under review. Consequently, total assets
amounted to ¥1,735,836 million as of March 31, 2013, up ¥575,272 million
from the end of the previous fi scal year.
(cid:129) Liabilities and Total Equity
Total liabilities rose to ¥1,099,839 million, up ¥455,196 million from the end of
the previous fi scal year, owing to an increase in long-term debt associated with
the procurement of funds for the acquisition of the Goodman Group and other
factors. As a result, the ratio of interest-bearing debt grew to 40.7%, from
33.6% at the end of the previous fi scal year. Despite a decrease associated
with the disbursal of cash dividends, total equity increased ¥120,076 million, to
¥635,997 million, owing to such factors as the generation of net income and
changes in foreign currency translation adjustments, and the equity ratio stood
at 35.6% at the end of the fi scal year.
Capital Investment and Depreciation
In accordance with the Daikin Group’s fundamental strategy of “concentrating
management assets in business fi elds that offer higher profi tability,” the
Company implemented capital investments during fi scal 2013 with a total value
of ¥54,323 million, largely in the air-conditioning and chemicals business fi elds.
In the air-conditioning fi eld, the Company invested ¥8,920 million, mainly for
R&D related to room air conditioners and package air conditioners and for
rationalization objectives, and Daikin Air-conditioning (Suzhou) Co., Ltd.,
implemented ¥7,663 million of capital investments, mainly for increasing its
manufacturing capabilities. In the chemicals fi eld, the Company invested
¥5,671 million, mainly for increasing production capacity and for rationalization
objectives, and Daikin Fluorochemicals (China) Co., Ltd., implemented ¥4,993
million of capital investments, mainly for increasing its production capabilities.
Depreciation expense amounted to ¥39.4 billion, up ¥1.2 billion from the
previoius fi scal year.
Cash Flows
Net cash provided by operating activities amounted to ¥103,161 million, up
¥58,194 million compared with the previous fi scal year, refl ecting such factors
as a decrease in inventories.
Net cash used in investing activities amounted to ¥218,386 million, up
¥155,431 million compared with the previous fi scal year, owing to such factors
as payments for the acquisition of shares in Goodman Global Group, Inc.
Net cash provided by fi nancing activities amounted to ¥143,520 million,
a change of ¥144,633 million from ¥1,113 million of cash used in fi nancing
activities in the previous fi scal year, owing to such factors as an increase in
proceeds from long-term loans payable and proceeds from the issuance of
bonds for the purpose of fi nancing the acquisition of the Goodman Group.
As a result of these changes, cash and cash equivalents at March 31, 2013,
amounted to ¥185,571 million, up ¥50,144 million from the previous fi scal
year-end.
ROE
ROA
Capital Investment
and Depreciation and Amortization
(%)
10
8
6
4
2
0
(%)
4
3
2
1
0
(¥ billion)
75
60
45
30
15
0
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
32 DAIKIN INDUSTRIES, LTD.
Capital investment
Depreciation and amortization
(excluding amortization of goodwill)
Principal Risks Associated
with the Daikin Group’s Operations
(cid:129) Sharp changes in politico-economic conditions
or supply-demand relationships in principal markets
The Group provides goods and services throughout the world, and there is a
possibility that Group performance could be impacted in the case of changes in
politico-economic situations related to such markets as those of Japan, Europe,
North America, China, and other countries in the Asian region. In particular,
because the Group is proactively developing its business operations outside
Japan through such measures as the establishment of new air-conditioning
equipment manufacturing facilities and acquisition of air-conditioning equipment
dealers in Europe as well as the establishment of manufacturing and marketing
companies in China, there is a possibility that the Group’s performance could be
impacted by business environment changes in one or more global regions, such
as the deterioration of economic conditions, raw material price surges that
elevate costs, or the intensifi cation of competition with other companies.
Regarding the United States, on November 1, 2012, Daikin completed all
procedures related to the acquisition of Goodman Global Group, Inc. (Head
Offi ce: Houston, Texas, U.S.A. - hereinafter “Goodman”) for a purchase price of
US$3.7 billion (including the refi nancing of Goodman’s existing indebtedness).
By means of this acquisition, Daikin intends to reinforce Goodman’s sales
network—the largest sales network in the U.S. residential and commercial
air-conditioning equipment market—through the launch of environment-friendly
products incorporating Daikin’s state-of-the-art environmental technologies,
thereby aiming to bring about new trends in the U.S. air-conditioner market that
will enable the Group to concurrently realize business expansion and environ-
mental protection contributions. Furthermore, Daikin hopes to further improve
its competitiveness by leveraging Goodman’s low-cost management know-how
to develop business in emerging economies and volume-zone markets as well
as reform the earnings structure of the Daikin Group’s operations, including
activities in the advanced economies, and there is a possibility that the degree
of progress toward realizing those objectives could impact the Daikin Group’s
performance.
(cid:129) Cold summer weather and other unusual weather patterns
accompanied by changes in demand for air conditioners
Because air-conditioning and refrigeration operations account for 86.8% of the
Daikin Group’s consolidated net sales, the Group strives to accurately monitor
weather information and demand trends in the world’s principal markets, and
it employs fl exible manufacturing methods and marketing policies designed
to minimize the impact of demand trends on its performance. Depending on
the magnitude of changes regarding cold summer weather and other unusual
weather patterns accompanied by changes in demand for air conditioners,
however, there is a possibility that such changes could impact the Group’s
performance.
(cid:129) Large fl uctuations in currency exchange rates
Overseas sales account for 62% of the Daikin Group’s consolidated net sales,
and the acceleration of global business development going forward is expected
to further elevate the level of the Group’s overseas sales ratio. Consolidated
fi nancial statements are prepared by translating local-currency-denominated
items for Group operations in each global region, including local currency
fi gures for sales, expense, and assets. Accordingly, depending on currency
exchange rates at the time of the currency translation, there may be an impact
on yen translation values even when there has been no change in local-curren-
cy-denominated fi gures. In addition, because the Group engages in foreign-
currency-denominated transactions related to the procurement of raw materials
and components as well as related to the sale of goods and services, there is
a possibility that changes in currency exchange rates could have an impact on
manufacturing costs and sales performance. To avoid such currency exchange
rate-related risks, the Group undertakes short-term risk hedging by means of
forward exchange contracts and similar instruments and undertakes medium-
to long-term measures to continuously adjust procurement and manufacturing
operations and optimize them with respect to changing currency exchange-rate
trends, promote a balance of imports and exports related to each currency, and
otherwise realize a business structure that is not greatly impacted by changes in
currency exchange rates. However, it cannot be claimed that currency exchange
rate-related risks can be completely avoided.
The Group also recognizes signifi cant risks associated with the following
items.
• Major product quality claims
• Major problems with manufacturing systems
• Major changes in the market prices of negotiable securities and other assets
• Natural disasters
Free Cash Flow
(¥ billion)
120
60
0
-60
-120
2009 2010 2011 2012 2013
ANNUAL REPORT 2013
33
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Consolidated Balance Sheet
Daikin Industries, Ltd. and Consolidated Subsidiaries
March 31, 2013
ASSETS
Current assets:
Cash and cash equivalents (Note 17)
Short-term investments (Note 17)
Trade receivables (Notes 8, 9 and 17):
Notes
Accounts
Allowance for doubtful receivables
Inventories (Notes 3 and 9)
Deferred tax assets (Note 13)
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment (Note 9):
Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Lease assets (Note 16)
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
Investments and other assets:
Investment securities (Notes 6 and 17)
Investments in and advances to unconsolidated subsidiaries and associated companies
Goodwill (Notes 5 and 7)
Customer relationships (Note 5)
Other intangible assets (Note 5)
Deferred tax assets (Note 13)
Other assets (Note 10)
Total investments and other assets
Total
See notes to consolidated financial statements.
34 DAIKIN INDUSTRIES, LTD.
Millions of yen
2013
2012
¥ 185,571
¥ 135,427
221
36,348
172,729
(4,808)
243,600
9,381
36,149
629,047
30,739
182,550
362,450
116,034
6,635
18,313
716,721
(492,364)
224,357
84,219
15,205
166,276
4,271
9,939
9,276
17,974
307,160
43,464
219,859
(6,227)
285,169
21,782
53,708
803,326
33,121
216,148
414,716
131,921
6,279
18,111
820,296
(546,095)
274,201
102,588
14,831
348,411
109,723
52,754
3,570
26,432
658,309
¥1,735,836
¥1,160,564
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings (Notes 9 and 17)
Current portion of long-term debt (Notes 9 and 17)
Current portion of long-term lease obligations (Note 16)
Trade payables (Note 17):
Notes
Accounts
Income taxes payable (Note 17)
Deferred tax liabilities (Note 13)
Provision for product warranties
Accrued expenses
Other current liabilities (Note 8)
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 9 and 17)
Long-term lease obligations (Note 16)
Liabilities for retirement benefits (Note 10)
Deferred tax liabilities (Note 13)
Long-term accounts payable
Other long-term liabilities
Total long-term liabilities
Commitments and contingent liabilities (Notes 16 and 18)
Equity (Notes 11, 12 and 22):
Common stock—authorized, 500,000,000 shares; issued 293,113,973 shares in 2013 and 2012
Capital surplus
Stock acquisition rights
Retained earnings
Treasury stock, at cost: 1,974,043 shares in 2013 and 2,028,808 shares in 2012
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities
Deferred loss on derivatives under hedge accounting
Foreign currency translation adjustments
Subtotal
Minority interests
Total equity
Total
Millions of yen
2013
2012
¥ 65,335
¥ 90,449
4,126
1,464
7,377
119,987
14,694
5,518
40,235
67,089
56,802
57,290
2,042
6,392
103,716
9,836
2,974
23,674
52,748
47,218
382,627
396,339
633,033
238,108
1,912
3,960
54,362
1,387
22,558
2,002
2,016
4,327
443
1,408
717,212
248,304
85,032
83,017
1,335
438,671
(6,772)
18,431
(146)
(115)
619,453
16,544
635,997
85,032
82,977
1,501
415,231
(6,961)
(2)
(74)
(73,894)
503,810
12,111
515,921
¥1,735,836
¥1,160,564
ANNUAL REPORT 2013
35
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Consolidated Statement of Income
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2013
Net sales (Note 8)
Cost of sales (Note 15)
Gross profit
Selling, general and administrative expenses (Notes 7, 8 and 15)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Exchange gains
Loss on disposals of property, plant and equipment
Gain on sales of investment securities (Note 6)
Impairment losses on investment securities (Note 6)
Equity in earnings of unconsolidated subsidiaries and associated companies
Gain on reversal of stock acquisition rights
Gain on insurance adjustment
Gain on sales of shares of an associated company
Loss on restructuring of a subsidiary
Compensation for cancellation of contracts
Loss on impairment of long-lived assets (Note 4)
Other—net (Note 10)
Other expenses—net
Income before income taxes and minority interests
Income taxes (Note 13):
Current
Prior years
Deferred
Total income taxes
Net income before minority interests
Minority interests in net income
Net income
Amounts per common share (Note 20):
Basic net income
Diluted net income
Cash dividends applicable to the year
See notes to consolidated financial statements.
36 DAIKIN INDUSTRIES, LTD.
Millions of yen
2013
2012
¥1,290,903
¥1,218,701
902,857
388,046
299,419
88,627
4,690
(7,081)
6,849
(497)
117
(12,651)
1,063
310
166
986
(783)
(319)
(7,150)
81,477
32,677
(1,841)
3,500
34,336
47,141
(3,556)
846,799
371,902
290,709
81,193
4,875
(6,136)
22
(430)
1,437
(1,874)
2,918
69
(1,502)
(356)
352
(625)
80,568
26,152
9,796
35,948
44,620
(3,448)
¥ 43,585
¥ 41,172
Yen
¥149.73
149.71
36.00
¥141.37
36.00
Consolidated Statement of Comprehensive Income
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2013
Net income before minority interests
Other comprehensive income (loss) (Note 19):
Unrealized gain (loss) on available-for-sale securities
Deferred (loss) gain on derivatives under hedge accounting
Foreign currency translation adjustments
Share of other comprehensive income (loss) in affiliates accounted for using the equity method
Total other comprehensive income (loss)
Comprehensive income
Total comprehensive income attributable to:
The Company’s shareholders
Minority interests
See notes to consolidated financial statements.
Consolidated Statement of Changes in Equity
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2013
Millions of yen
2013
¥ 47,141
2012
¥44,620
18,434
(72)
64,782
1,483
84,627
(4,642)
17
(12,968)
(78)
(17,671)
¥131,768
¥26,949
¥126,233
5,535
¥23,561
3,388
Stock
Common
Acquisition
Rights
Stock
¥85,032 ¥82,977 ¥1,293 ¥385,761 ¥(5,473)
Retained
Earnings
Treasury
Stock
Capital
Surplus
Millions of yen
Accumulated Other Comprehensive Income
(Loss)
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities
¥ 4,641
Deferred
Loss on
Derivatives
under Hedge
Accounting
¥ (91)
Foreign
Currency
Translation
Adjustments
¥(64,971)
Total
Minority
Interests
¥489,169 ¥11,759 ¥500,928
Total
Equity
(1,205)
41,172
(10,490)
(1,521)
33
(7)
(1,205)
41,172
(10,490)
(1,521)
26
(1,205)
41,172
(10,490)
(1,521)
26
Outstanding
Number of
Common
Shares Issued
291,662,445
(586,496)
9,067
149
291,085,165
85,032
82,977
208
1,501
415,231
(6,961)
(4,643)
(2)
17
(74)
(8,923)
(73,894)
(13,341)
503,810
352
(12,989)
12,111 515,921
Balance, April 1, 2011
Effect of change of the fiscal
year-end of certain consolidated
subsidiaries (Note 2)
Net income
Cash dividends, ¥36 per share
Repurchase of treasury stock
Disposal of treasury stock
Change in equity in affiliates
accounted for by equity
method—treasury stock
Net change in the year
Balance, March 31, 2012
Effect of change of the fiscal
year-end of certain consolidated
subsidiaries (Note 2)
Net income
Cash dividends, ¥36 per share
Repurchase of treasury stock
Disposal of treasury stock
(310)
55,075
Net change in the year
Balance, March 31, 2013
(9,666)
43,585
(10,479)
40
(166)
189
(9,666)
43,585
(10,479)
(9,666)
43,585
(10,479)
229
91,974
229
96,407
¥619,453 ¥16,544 ¥635,997
4,433
18,433
¥18,431
(72)
¥(146)
73,779
¥ (115)
291,139,930
¥85,032 ¥83,017
¥1,335 ¥438,671 ¥(6,772)
See notes to consolidated financial statements.
ANNUAL REPORT 2013
37
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Consolidated Statement of Cash Flows
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2013
Operating activities:
Income before income taxes and minority interests
¥ 81,477
¥ 80,568
Millions of yen
2013
2012
Adjustments for:
Income taxes—paid
Depreciation and amortization
Gain on sales of investment securities
Impairment losses on investment securities
Loss on disposals of property, plant and equipment
Equity in earnings of unconsolidated subsidiaries and associated companies
Changes in assets and liabilities, net of effects of the purchase of subsidiaries:
Trade notes and accounts receivable
Inventories
Other current assets
Prepaid pension cost
Trade notes and accounts payable
Accrued expenses
Other current liabilities
Liabilities for retirement benefits
Accounts payable for transaction to defined contribution pension plan
Other—net
Total adjustments
Net cash provided by operating activities
Investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for acquisition of shares of newly consolidated subsidiaries,
net of cash and cash equivalents acquired (Note 14)
Payments for acquisition of investment securities
Proceeds from sales of investment securities (Note 6)
Proceeds from sales of shares of an associated company
Other—net
Net cash used in investing activities
Financing activities:
Net (decrease) increase in short-term borrowings
Increase in long-term debt
Repayments of long-term debt
Cash dividends paid to the Company’s shareholders
Cash dividends paid to minority interests
Proceeds from issuance of shares to minority interests
Other—net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Effect of change of the fiscal year-end of consolidated subsidiaries
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See notes to consolidated financial statements.
38 DAIKIN INDUSTRIES, LTD.
(29,688)
51,524
(117)
12,651
497
(1,063)
(22,587)
10,299
(3,924)
(306)
343
1,801
1,672
(204)
(510)
1,296
21,684
103,161
(53,046)
1,146
(163,652)
(4,877)
518
1,883
(358)
(218,386)
(42,868)
383,246
(183,354)
(10,479)
(1,232)
674
(2,467)
143,520
19,740
48,035
2,109
135,427
¥185,571
(28,116)
50,526
(1,437)
1,874
430
(2,918)
(15,680)
(33,398)
(5,878)
896
(5,566)
2,888
(819)
(1,763)
(699)
4,059
(35,601)
44,967
(42,459)
728
(20,875)
(1,304)
1,892
(937)
(62,955)
14,237
2,996
(2,321)
(10,490)
(1,915)
(3,620)
(1,113)
(4,617)
(23,718)
(8,151)
167,296
135,427
Notes to Consolidated Financial Statements
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2013
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Daikin Industries, Ltd. (the “Company”) have been prepared in accordance
with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in
accordance with accounting principles generally accepted in Japan (the “Japanese GAAP”), which are different in certain respects
as to the application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the
Company’s consolidated financial statements issued domestically in order to present them in a form which is more familiar to read-
ers outside Japan.
In addition, certain reclassifications have been made in the 2012 consolidated financial statements to conform to the
classification used in 2013.
2. Summary of Significant Accounting Policies
Principles of Consolidation and Accounting for Investments in Unconsolidated Subsidiaries
and Associated Companies
The accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries
(collectively, the “Group”).
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise control
are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for
by the equity method.
The Group applies the equity method of accounting for investments in unconsolidated subsidiaries and associated companies
except for certain insignificant companies. Investments in such insignificant companies are stated at cost except that appropriate
write-downs are recorded for investments for which the value has been permanently impaired. If these subsidiaries and associated
companies had been consolidated or accounted for using the equity method, respectively, the effect on the accompanying con-
solidated financial statements would not have been material.
For the year ended March 31, 2013, OYL Manufacturing Company Sdn. Bhd. and 49 other subsidiaries changed their fiscal
year-end from December 31 to March 31. In addition, Daikin Fluorochemicals (China) Co., Ltd. and 33 other subsidiaries whose
fiscal year-end is other than March 31, closed their books at March 31 for consolidation reporting purpose.
The Company included the subsidiaries’ operating results for the 12-month period in the consolidated statement of income and
included their operating results for the 3-month period in the consolidated statement of changes in equity directly charging into
retained earnings as effect of change of the fiscal year-end of certain consolidated subsidiaries.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit includ-
ed in assets resulting from transactions within the Group is eliminated.
Unification of Accounting Policies Applied to Foreign Subsidiaries
for the Consolidated Financial Statements
In accordance with the Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task Force No. 18, “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,” the accounting poli-
cies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circum-
stances should, in principle, be unified for the preparation of the consolidated financial statements. However, financial statements
prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or the generally accepted
accounting principles in the United States of America tentatively may be used for the consolidation process, except for the follow-
ing items which should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese
GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions
that has been directly recorded in equity; (c) expensing capitalized development costs of research and development; (d) cancella-
tion of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost
model accounting; and (e) exclusion of minority interests from net income, if contained in net income.
Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method
In accordance with ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments,” adjust-
ments to be made to conform the associate’s accounting policies for similar transactions and events under similar circumstances
to those of the parent company when the associate’s financial statements are used in applying the equity method unless it is
impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in
accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United
States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is
accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amorti-
zation of actuarial gain or loss of pensions that has been directly recorded in the equity; (c) expensing capitalized development
costs of research and development; (d) cancellation of the fair value model accounting for property, plant, and equipment and
investment properties and incorporation of the cost model accounting; and (e) exclusion of minority interests from net income, if
contained in net income.
ANNUAL REPORT 2013
39
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Business Combinations
As discussed in more detail in Note 5 to the consolidated financial statements, the Group acquired Goodman Global Group, Inc.
and its subsidiaries on November 1, 2012, and A˙IRFEL ISITMA VE SO ˘GUTMA S˙ISTEMLER˙I SANAY˙I VE T˙ICARET A.ÇS. on July
8, 2011. The Group accounted for these transactions by the purchase method in accordance with ASBJ Statement No. 21,
“Accounting Standard for Business Combinations.”
Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of
changes in value.
Cash equivalents include time deposits, which mature within three months of the date of acquisition. Time deposits that mature
in more than three months, but within a year of the date of acquisition, are recorded as short-term investments.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the past credit loss experience
and an evaluation of potential losses in the receivables outstanding.
Inventories
Inventories of the Company and its consolidated domestic subsidiaries are principally stated at the lower of cost, determined
by the average method, or net selling value. Inventories of consolidated foreign subsidiaries are principally stated at the lower
of cost, determined by the average method, or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consoli-
dated domestic subsidiaries is principally computed by the declining-balance method while the straight-line method is applied to
buildings acquired after April 1, 1998. Depreciation of property, plant and equipment of the consolidated foreign subsidiaries is
principally computed by the straight-line method at rates based on the estimated useful lives of the assets.
The range of useful lives is from 15 to 50 years for buildings and structures, and from 5 to 15 years for machinery and
equipment. The useful lives for lease assets are the terms of the respective leases.
Asset Retirement Obligations
In accordance with ASBJ Statement No. 18, “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21,
“Guidance on Accounting Standard for Asset Retirement Obligations,” an asset retirement obligation is defined as a legal obliga-
tion imposed either by law or contract that results from the acquisition, construction, development and normal operation of a tan-
gible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as
the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation
is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the
period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement
obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capital-
ized by increasing the carrying amount of the related fixed the asset by the amount of the liability. The asset retirement cost is sub-
sequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to
its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash
flows are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset retire-
ment cost.
Long-Lived Assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount
of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset
group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition
of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset
exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition
of the asset or the net selling price at disposition.
Leases
In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the
previous accounting standard for lease transactions.
Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to
the lessee were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions
if certain “as if capitalized” information was disclosed in the note to the lessee’s financial statements. The revised accounting stan-
dard requires that all finance lease transactions be capitalized by recognizing lease assets and lease obligations in the balance
sheet. In addition, the accounting standard permits leases that existed at the transition date and do not transfer ownership of the
leased property to the lessee to continue to be accounted for as operating lease transactions.
40 DAIKIN INDUSTRIES, LTD.
The Company and its consolidated domestic subsidiaries applied the revised accounting standard effective April 1, 2008.
In addition, the Company and its consolidated domestic subsidiaries continue to account for leases that existed at the transition
date and do not transfer ownership of the leased property to the lessee as operating lease transactions.
All other leases are accounted for as operating leases.
Investment Securities
All marketable securities held by the Group are classified as available-for-sale securities and are reported at fair value, with
unrealized gains and losses, net of appli cable taxes, reported in a separate component of equity. The cost of securities sold is
principally determined based on the moving-average method.
Non-marketable available-for-sale securities are stated at cost principally determined by the moving- average method.
For other-than-temporary declines in fair value, available-for-sale securities are reduced to net realizable value by charging such
losses to income.
Goodwill and Intangible Assets
Goodwill and intangible assets arise principally from business combinations. Goodwill represents the excess of the purchase price
over the fair value of the identifiable net assets acquired. Goodwill is amortized over a period of 3 to 20 years. Intangible assets
include primarily customer relationships. Customer relationships are amortized using the straight-line method over the estimated
useful lives (mainly 30 years).
Provision for Product Warranties
The Group repairs or exchanges certain products without charge under specific circumstances. The provision for product warran-
ties is stated in amounts considered to be appropriate based on the past experience and an evaluation of potential losses on the
product warranties.
Employees’ Retirement Benefits
The Company and its consolidated domestic subsidiaries have non-contributory funded pension plans covering substantially all of
their employees. Certain consolidated foreign subsidiaries have pension plans. The liabilities for retirement benefits are computed
based on projected benefit obligations and plan assets at the balance sheet date.
Stock Options
In accordance with ASBJ Statement No. 8, “Accounting Standard for Stock Options,” the Company measures the cost of employ-
ee stock options based on the fair value at the date of grant and recognize compensation expense over the vesting period as con-
sideration for receiving goods or services. The Company accounts for stock options granted to nonemployees based on the fair
value of either the stock option or the goods or services received. In the consolidated balance sheets, the stock option is present-
ed as a stock acquisition right as a separate component of equity until exercised.
Foreign Currency Transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese
yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the
consolidated statement of income to the extent that they are not hedged by forward exchange contracts.
Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate
as of the balance sheet date except for equity, which is translated at the historical rates. Revenue and expense accounts of the
consolidated foreign subsidiaries are translated into Japanese yen at the average exchange rate. Differences arising from such
translations are shown as “foreign currency translation adjustments” under accumulated other comprehensive income in a sepa-
rate component of equity.
Income Taxes
The provision for current income taxes is computed based on the income before income taxes and minority interests included in
the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and
liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.
Derivative Financial Instruments
The Group uses foreign exchange forward contracts, currency swaps and currency options to hedge foreign exchange risk
associated with certain assets and liabilities denominated in foreign currencies.
The Group uses mainly interest rate swaps and interest rate options to manage its exposures to fluctuations in interest rates.
The Group uses commodity future contracts to hedge the risk of fluctuation of commodity price for materials.
The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) derivatives are principally recognized as either
assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated
statement of income and (2) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because
of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses are deferred until
maturity of the hedged transactions.
ANNUAL REPORT 2013
41
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
The interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured at market
value but the differential paid or received under the swap agreements is recognized and included in interest expense or income.
Amounts per Common Share
Basic net income per common share is computed by dividing net income available to common shareholders by the weighted-
average number of common shares outstanding for the period, retroactively adjusted for stock splits.
Diluted net income per share of common stock assumes full exercise of the outstanding stock options which have dilutive effect
at the beginning of the year (or at the time of issuance).
Cash dividends per share presented in the accompanying consolidated statement of income are dividends appli cable to the
respective years including dividends to be paid after the end of the year.
New Accounting Pronouncements
Accounting Standard for Retirement Benefits
On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits,” and ASBJ Guidance
No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the Accounting Standard for Retirement
Benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the other
related practical guidance, and followed by partial amendments from time to time through 2009.
Major changes are as follows:
(a) Treatment in the balance sheet
Under the current requirements, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are
not recognized in the balance sheet, and the difference between retirement benefit obligations and plan assets (hereinafter, “deficit
or surplus”), adjusted by such unrecognized amounts, is recognized as a liability or asset.
Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit
or loss shall be recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and any result-
ing deficit or surplus shall be recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).
(b) Treatment in the statement of income and the statement of comprehensive income
The revised accounting standard does not change how to recognize actuarial gains and losses and past service costs in profit or
loss. Those amounts would be recognized in profit or loss over a certain period no longer than the expected average remaining
working lives of the employees. However, actuarial gains and losses and past service costs that arose in the current period and
have not yet been recognized in profit or loss shall be included in other comprehensive income and actuarial gains and losses and
past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the
current period shall be treated as reclassification adjustments.
(c) Amendments relating to the method of attributing expected benefit to periods and relating to the discount rate and expected
future salary increases
The revised accounting standard also made certain amendments relating to the method of attributing expected benefit to periods
and relating to the discount rate and expected future salary increases.
The accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods beginning on or
after April 1, 2013, and for (c) above are effective for the beginning of annual periods beginning on or after April 1, 2014, or for
the beginning of annual periods beginning on or after April 1, 2015, subject to certain disclosure in March 2015, both with earlier
application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective
application of this accounting standard to consolidated financial statements in prior periods is required.
The Company expects to apply the revised accounting standard for (a) and (b) above from the end of the annual period begin-
ning on April 1, 2013, and for (c) above from the beginning of the annual period beginning on April 1, 2014, and is in the process
of measuring the effects of applying the revised accounting standard in future applicable periods.
3. Inventories
Inventories at March 31, 2013 and 2012 consisted of the following:
Finished products and merchandise
Semifinished products and work in process
Raw materials and supplies
Total
Millions of yen
2013
2012
¥191,195
¥153,913
41,381
52,593
42,153
47,534
¥285,169
¥243,600
42 DAIKIN INDUSTRIES, LTD.
4. Long-Lived Assets
The Group reviewed its long-lived assets for impairment for the year ended March 31, 2012. As a result, the Group recognized an
impairment loss as other expense for certain machinery and equipment and other, which were deemed to be idle assets with no
future plan for utilization and for which the carrying amount exceeded the fair value at March 31, 2012, as follows:
Asset Category
Machinery and equipment, etc.
Machinery and equipment, etc.
Total
Location
Settsu City, Osaka Prefecture
Kamisu City, Ibaraki Prefecture
Millions of yen
¥261
95
¥356
The carrying amounts of the relevant assets were written down to the recoverable amount. The recoverable amounts of these
assets were measured by the net selling price at disposition.
No impairment loss was recognized for the year ended March 31, 2013.
5. Business Combination
Acquisition of an entity during the year ended March 31, 2013
1. Outline of the business combination:
(1) Name and business contents of the acquiree
Name:
Business contents:
Goodman Global Group, Inc.
Development, manufacture and sale of residential and commercial air-condition-
ing equipment
(2) Main reason for the business combination: The Company has assessed that Goodman Global Group, Inc. has an extensive
sales network and a significant presence in the residential unitary HVAC (heating,
ventilating and air-conditioning) segment in North America. Through the busi-
ness combination, the Group’s sales are expected to grow substantially with an
outstanding and complementary product portfolio covering not only ducted and
ductless air-conditioning systems but also furnace and heat-pump systems in
the world’s largest HVAC market, and to consolidate its position as a leading
company in the global air-conditioning market.
November 1, 2012
Merger with a special purpose company for acquisition which was set up in the
United States by Daikin Holdings (Houston), Inc., the Company’s newly estab-
lished subsidiary in the United States.
(3) Date of the business combination:
(4) Legal form of the business combination:
(5) Name of the acquiree after business combination:
(6) Ratio of voting rights acquired:
(7) Basis for determination of the acquirer:
Goodman Global Group, Inc.
Ratio of voting rights held just before the business combination: —%
Ratio of additional voting rights acquired
on the date of business combination:
Ratio of voting rights held after the business combination:
Goodman Global Group, Inc. merged with the special purpose company for
acquisition which was set up in the United States by Daikin Holdings (Houston),
Inc., a subsidiary of the Company, and Daikin Holdings (Houston), Inc. held
100% of the voting rights of Goodman Global Group, Inc.
100%
100%
2. Period of operating result of the acquiree included in the consolidated financial statements:
The operating result of the acquiree was not included in the consolidated statement of income for the year ended March 31,
2013, because the Company deemed the acquisition date as December 31, 2012, and used the financial statements of the
subsidiary as of December 31, 2012, in the preparation of the consolidated financial statements.
3. Amount and breakdown of the acquisition costs:
Payment for acquisition of shares: USD2,200 million
Expenses related directly to the acquisition, including mainly advisory expenses: ¥2,824 million
4. Amount of goodwill recognized, reason for recognition, and method and period for amortization of goodwill:
(1) Amount of goodwill recognized: USD2,260 million
(2) Reason for recognition: Future business activities are expected to generate excess profitability.
(3) Method and period for amortization of goodwill: Straight-line method over 20 years
ANNUAL REPORT 2013
43
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
5. Amount and breakdown of the assets acquired and the liabilities assumed at the acquisition date:
Year Ended March 31, 2013
Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Millions of USD
$ 795
4,190
$4,985
$2,005
744
$2,749
In the purchase price allocation, those allocated to intangible assets other than goodwill mainly include customer relationships
of USD1,218 million and rights of trademarks of USD425 million, and the amortization periods for these assets are determined
individually based on their useful lives.
6. Unaudited summaries of estimated impact on consolidated financial statement of income:
Estimated impact on the consolidated financial statement of income for the fiscal year ended March 31, 2013, which provide
the effects of the acquisition as if it had been completed on April 1, 2012, are as follows:
Net sales
Operating income
Income before income taxes and minority interests
Net income
Amount per common share
Millions of Yen
¥159,599
21,219
12,355
7,607
Yen
¥26.13
These summaries of estimated impact were based on the hypothesis that this business combination had been completed
on April 1, 2012, the beginning of the fiscal year ended March 31, 2013. Amortization of goodwill and other intangible assets
arising from this acquisition for the period from April 1, 2012 to March 31, 2013, is not reflected in the estimated impact.
These summaries have not been audited by an independent auditor.
Acquisition of an entity during the year ended March 31, 2012
1. Outline of the business combination:
(1) Name and business contents of the acquiree
Name:
Business contents:
(2) Main reason for the business combination: To strengthen product offering and sales network in the Turkish market
A˙IRFEL ISITMA VE SO ˘GUTMA S˙ISTEMLER˙I SANAY˙I VE T˙ICARET A.ÇS.
Manufacture and distribution of air-conditioning equipment
(3) Date of the business combination:
(4) Legal form of the business combination:
(5) Name of the acquiree after business combination:
and expand the business in the Middle East, Africa and CIS
July 8, 2011
The issued shares were acquired for cash
(6) Ratio of voting rights acquired:
(7) Basis for determination of the acquirer:
A˙IRFEL ISITMA VE SO ˘GUTMA S˙ISTEMLER˙I SANAY˙I VE T˙ICARET A.ÇS.
(Corporate name was changed to DAIKIN ISITMA VE SO ˘GUTMA S˙ISTEMLER˙I
SANAY˙I VE T˙ICARET A.ÇS.)
Ratio of voting rights held just before the business combination: —%
Ratio of additional voting rights acquired on the date of
business combination:
Ratio of voting rights held after the business combination:
Daikin Europe N.V., a consolidated subsidiary of the Company, acquired
the shares by cash and held 100% of voting rights of the acquiree.
100%
100%
2. Period of operating result of the acquiree included in the consolidated financial statements:
From July 1, 2011 to December 31, 2011
3. Amount and breakdown of the acquisition costs:
Year Ended March 31, 2012
Payment for acquisition of shares
Acquisition costs
Millions of EUR
178
178
44 DAIKIN INDUSTRIES, LTD.
4. Amount of goodwill recognized, reason for recognition, and method and period for amortization of goodwill
(1) Amount of goodwill recognized:
(2) Reason for recognition:
(3) Method and period for amortization of goodwill: Straight-line method over 10 years
TRY178 million
Future business activities are expected to generate excess profitability.
5. Amount and breakdown of the assets acquired and the liabilities assumed at the acquisition date:
Year Ended March 31, 2012
Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Millions of TRY
201
190
391
119
30
149
6. Even if this business combination had been completed as of April 2011, the beginning of the fiscal year ended March 31, 2012,
the Company believes the effect of consolidating this company on the financial statements would be minor. Therefore, the unau-
dited pro forma financial statements are omitted.
6. Investment Securities
The acquisition costs and aggregate fair values of marketable available-for-sale securities included in investment securities
at March 31, 2013 and 2012, were as follows:
Securities classified as available-for-sale:
Equity securities
Debt securities
Total
Securities classified as available-for-sale:
Equity securities
Debt securities
Other
Total
Millions of yen
2013
Unrealized
Gains
Unrealized
Losses
Fair
Value
¥29,193
4
¥29,197
¥(2,415)
¥(2,415)
¥93,611
129
¥93,740
Cost
¥66,833
125
¥66,958
Millions of yen
2012
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
¥74,570
150
396
¥75,116
¥12,396
4
45
¥12,445
¥(12,353)
(4)
¥(12,357)
¥74,613
154
437
¥75,204
The information of available-for-sale securities which were sold during the years ended March 31, 2013 and 2012, is as follows:
March 31, 2013
Available-for-sale:
Equity securities
March 31, 2012
Available-for-sale:
Equity securities
Millions of yen
Proceeds
Realized
Gains
Realized
Loss
¥518
¥117
Millions of yen
Proceeds
Realized
Gains
Realized
Loss
¥1,892
¥1,437
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2013 and 2012 were
¥12,651 million and ¥1,874 million, respectively.
ANNUAL REPORT 2013
45
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
7. Goodwill
Amortization of goodwill is ¥12,077 million and ¥12,147 million for the years ended March 31, 2013 and 2012, respectively, which
is included in selling, general and administrative expenses.
8. Related Party Transactions
Material transactions and balances with related individuals for the years ended March 31, 2013 and 2012, were as follows:
(1) 2013
(a) The Company
Name
Description of Post
Chiyono Terada
Outside Director/
Chief Executive
Officer (CEO)
and President of
Art Corporation
(b) The Company’s consolidated subsidiaries
Name
Description of Post
Chiyono Terada
Outside Director/CEO
and President of
Art Corporation
Ownership of
the Company
(%)
0.00
Ownership of
the Company
(%)
0.00
Millions of yen
Transactions
Resulting Account Balances
Description of Transaction
Commission for moving
business and delivery business
2013
¥488
Account
Other current
liabilities
2013
¥39
Millions of yen
Transactions
Resulting Account Balances
Description of Transaction
Commission for moving
business and delivery business
2013
¥70
Account
Other current
liabilities
2013
¥ 4
Sales of products and other
77
Accounts receivable
16
The terms and conditions applicable to the above-mentioned transactions have been determined on the basis of arm’s length
and by reference to the normal market price.
(2) 2012
(a) The Company
Name
Description of Post
Chiyono Terada
Outside Director/CEO
and President of
Art Corporation
(b) The Company’s consolidated subsidiaries
Name
Description of Post
Chiyono Terada
Outside Director/CEO
and President of
Art Corporation
Ownership of
the Company
(%)
0.00
Ownership of
the Company
(%)
0.00
Millions of yen
Transactions
Resulting Account Balances
Description of Transaction
Commission for moving
business and delivery business
2012
¥470
Account
Other current
liabilities
2012
¥42
Millions of yen
Transactions
Resulting Account Balances
Description of Transaction
Commission for moving
business and delivery business
2012
¥72
Account
Other current
liabilities
2012
¥ 4
Sales of products and other
71
Accounts receivable
13
The terms and conditions applicable to the above-mentioned transactions have been determined on the basis of arm’s length
and by reference to the normal market price.
46 DAIKIN INDUSTRIES, LTD.
9. Short-Term Borrowings and Long-Term Debt
Short-term borrowings of the Group at March 31, 2013 and 2012, consisted of the following:
Bank overdrafts and notes to banks
Commercial paper
Total
Millions of yen
2013
¥63,408
1,927
¥65,335
2012
¥67,395
23,054
¥90,449
Unused short-term bank credit lines were ¥150,000 million at March 31, 2013. Weighted-average interest rates of bank
overdrafts and notes to banks at March 31, 2013 and 2012 were 1.37% and 0.89%, respectively.
Weighted-average interest rates of commercial paper at March 31, 2013 and 2012 were 0.25% and 0.13%, respectively.
Long-term debt at March 31, 2013 and 2012 consisted of the following:
1.00% unsecured bonds, due 2014
1.42% unsecured bonds, due 2016
0.46% unsecured bonds, due 2017
1.86% unsecured bonds, due 2019
0.72% unsecured bonds, due 2019
1.20% unsecured bonds, due 2022
Unsecured loans from government-sponsored banks, with interest 1.75%, due through 2019
Collateralized loans from banks and others, payable in foreign currencies, with interest 4.75% (2013)
and 7.63% (2012), due through 2016
Unsecured loans from banks and others, payable in foreign currencies, with interest ranging from
0.71% to 5.90% (2013) and from 0.71% to 5.99% (2012), due through 2022
Unsecured loans from banks and others with interest ranging from 0.30% to 3.59% (2013) and from
0.39% to 3.63% (2012), due through 2026
Total
Less current portion
Long-term debt, less current portion
Annual maturities of long-term debt outstanding at March 31, 2013, were as follows:
Year Ending March 31
2014
2015
2016
2017
2018
2019 and thereafter
Total
Millions of yen
2013
¥ 30,000
30,000
10,000
40,000
10,000
30,000
20,000
2012
¥ 30,000
30,000
40,000
20,000
28
26
152,088
13,318
315,043
637,159
(4,126)
¥633,033
162,054
295,398
(57,290)
¥238,108
Millions of yen
¥ 4,126
94,697
35,170
70,233
65,106
367,827
¥637,159
At March 31, 2013, property, plant and equipment; trade accounts receivables; inventories; and other with a book value of
¥39,212 million, ¥15,952 million, ¥8,241 million and ¥4,220 million, respectively, were pledged as collateral for short-term borrow-
ings and long-term debt.
Certain loan agreements provide that the lender may require the Group to submit proposals for paying dividends, issuing addi-
tional long-term debt and certain other matters, for prior approval. As is customary in Japan, security must be given if requested
by a lending bank. Banks have the right to offset cash deposited with them against any debt or obligation that becomes due, or,
in case of default and certain other specified events, against all other debt payable to them. To date, none of the lenders has
ever exercised these rights with respect to debt of the Group.
ANNUAL REPORT 2013
47
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
10. Severance Indemnities and Pension Plans
Under the Group’s severance indemnities and pension plans, employees terminating their employment are, in most circum stances,
entitled to severance and pension payments based on their average pay during their employment, length of service and certain
other factors.
For the year ended March 31, 2013, one domestic consolidated subsidiary implemented a defined contribution pension plan
and then terminated a part of its defined benefit pension plan. In addition, the subsidiary withdrew from the employees’ pension
fund. The effect of this implementation and this withdrawal were to decrease income before taxes and minority interests by ¥346
million and were included in other-net of other expenses of the consolidated statement of income for the year ended March 31,
2013.
The liabilities for employees’ retirement benefits at March 31, 2013 and 2012, consisted of the following:
Projected benefit obligation
Fair value of plan assets
Unrecognized prior service cost
Unrecognized actuarial gain
Net assets
Prepaid pension cost (included in other assets of investments and other assets)
Liabilities for retirement benefits
Millions of yen
2013
¥84,071
(80,088)
225
(10,816)
(6,608)
(10,568)
¥3,960
2012
¥69,387
(66,632)
10
(10,976)
(8,211)
(10,227)
¥ 2,016
The components of net periodic benefit costs for the years ended March 31, 2013 and 2012, are as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss
Net periodic benefit costs
Contribution to defined contribution pension plan and other
Total
Assumptions used for the years ended March 31, 2013 and 2012, are set forth as follows:
Millions of yen
2013
¥4,015
1,856
(2,210)
(46)
557
4,172
2,922
¥7,094
2012
¥3,543
1,912
(2,186)
(24)
1,400
4,645
2,766
¥7,411
Discount rate
Expected rate of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial gain/loss
11. Equity
2013
Mainly 1.2%
Mainly 2.5%
Mainly 10 years
Mainly 10 years
2012
Mainly 2.0%
Mainly 2.5%
Mainly 10 years
Mainly 10 years
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are summarized below:
(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend
upon resolution at the Shareholders’ meeting. For companies that meet certain criteria, the Board of Directors may declare
dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles of
incorporation. However, the Company cannot do so because it does not meet all the above criteria.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incor-
poration of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends
or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the
amount of net assets after dividends must be maintained at no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of
retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account that was charged
upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the
common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without
limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus
and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
48 DAIKIN INDUSTRIES, LTD.
(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution
of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to
the shareholders which is determined by specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of equity.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock
acquisition rights.
12. Stock Options
The stock options outstanding for the year ended March 31, 2013, were as follows:
Number of
Options Granted
298,000 shares
Date of Grant
Exercise Price
Exercise Period
2006.7.18
¥3,790
Stock Option
2006 Stock Option
2007 Stock Option
2008 Stock Option
2009 Stock Option
2010 Stock Option
2011 Stock Option
2012 Stock Option
Persons
Granted
9 directors
44 employees
9 directors
42 employees
8 directors
44 employees
8 directors
42 employees
8 directors
41 employees
10 directors
39 employees
10 directors
41 employees
The stock option activity was as follows:
292,000 shares
2007.7.17
¥4,640
308,000 shares
2008.7.14
¥5,924
294,000 shares
2009.7.13
¥3,250
290,000 shares
2010.7.14
¥3,050
296,000 shares
2011.7.14
¥2,970
300,000 shares
2012.7.13
¥2,186
From July 19, 2008
to July 18, 2012
From July 18, 2009
to July 17, 2013
From July 15, 2010
to July 14, 2014
From July 14, 2011
to July 13, 2015
From July 15, 2012
to July 14, 2016
From July 15, 2013
to July 14, 2017
From July 14, 2014
to July 13, 2018
2005
Stock
Option
2006
Stock
Option
2007
Stock
Option
2008
Stock
Option
2009
Stock
Option
2010
Stock
Option
2011
Stock
Option
2012
Stock
Option
Shares
308,000
88,800
262,000
254,700
(9,000)
(79,800)
(20,000)
242,000
(20,000)
234,700
Year Ended March 31, 2012
Vested
April 1, 2011—Outstanding
Granted
Exercised
Canceled
March 31, 2012—Outstanding
Year Ended March 31, 2013
Vested
April 1, 2012—Outstanding
Granted
Exercised
Canceled
March 31, 2013—Outstanding
Exercise price
Average stock price at exercise
Fair value price at grant date
The assumptions used to measure fair value of 2012 Stock Option
Black-Scholes option pricing model
Estimate method:
Volatility of stock price:
47.5%
Estimated remaining outstanding period: 4 years
Estimated dividend:
Risk-free interest rate:
(40,000)
202,000
¥4,640
¥36 per share
0.1%
¥2,852
¥2,792
(234,700)
234,700
242,000
¥1,035
¥3,790
¥ 736
(42,000)
266,000
266,000
(46,000)
220,000
¥5,924
¥ 803
294,000
290,000
296,000
294,000
290,000
296,000
294,000
290,000
296,000
300,000
(16,000)
(66,000)
212,000
¥3,250
¥3,756
¥ 899
(39,000)
251,000
¥3,050
¥3,756
¥1,113
296,000
¥2,970
300,000
¥2,186
¥ 935
¥ 676
ANNUAL REPORT 2013
49
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
13. Income Taxes
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes that, in the aggregate, result-
ed in a normal effective statutory tax rate of approximately 37.9% for the years ended March 31, 2013 and 40.6% for the year
ended March 31, 2012.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in deferred tax assets and liabilities,
at March 31, 2013 and 2012, were as follows:
Deferred tax assets:
Tax loss carryforwards
Provision for product warranties
Inventories
Investment securities
Accrued bonus
Software and other intangible assets
Foreign income tax credit
Allowance for doubtful receivables
Liabilities for retirement benefits
Other
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Undistributed earnings of consolidated subsidiaries
Unrealized gain on available-for-sale securities
Prepaid pension cost
Deferred gains on sales of property
Other
Total deferred tax liabilities
Net deferred tax (liabilities) assets
Millions of yen
2013
2012
¥ 15,325
11,583
9,474
7,434
3,430
3,243
1,436
1,352
878
17,112
(21,927)
¥ 49,340
¥ 47,895
14,197
8,346
3,697
1,961
7,772
¥ 83,868
¥(34,528)
¥18,511
5,576
5,202
2,924
3,146
3,045
1,048
737
1,140
7,793
(16,094)
¥33,028
¥ 895
9,965
86
4,288
1,906
4,532
¥21,672
¥11,356
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
consolidated statement of income for the years ended March 31, 2013 and 2012, is as follows:
Normal effective statutory income tax rate
Difference in foreign subsidiaries’ tax rate
Tax and tax effect on dividends from foreign subsidiaries
Amortization of goodwill
Consolidation adjustment for gain on sales of shares of a subsidiary
Valuation allowance
Income taxes—prior years
Unrecognized tax effect on unrealized profit
Unrecognized tax effect on foreign income tax credit
Foreign taxes on royalties and other
Amendment of deferred tax assets by change in the income tax rates
Other—net
Actual effective income tax rate
2013
37.9%
(13.5)
7.0
5.2
5.0
3.2
(2.1)
(1.8)
1.3
(0.1)
42.1%
2012
40.6%
(16.4)
4.3
5.4
7.3
0.2
1.3
1.0
0.9
44.6%
On December 2, 2011, new tax reform laws were enacted in Japan, which changed the normal effective statutory tax rate from
approximately 40.6% to 37.9% effective for the fiscal years beginning on or after April 1, 2012 through March 31, 2015, and to
35.6% afterward.
During the current year, the Company received a refund notice from the Japanese tax authority informing that they reached an
agreement with the Chinese tax authority regarding the taxation of the Company’s intercompany transactions. The refund amount
to ¥1,841 million is presented as income taxes-prior years in the consolidated statement of income for the year ended March 31,
2013.
50 DAIKIN INDUSTRIES, LTD.
At March 31, 2013, the Company and certain consolidated subsidiaries had tax loss carryforwards aggregating approximately
¥35,679 million, which are available to be offset against taxable income of the Company and such subsidiaries in future years.
These tax loss carryforwards, if not utilized, will expire as follows:
Year Ending March 31
2014
2015
2016
2017
2018
2019 and thereafter
Total
Millions of yen
¥ 137
113
68
861
2,903
31,597
¥35,679
14. Supplemental Cash Flow Information
The Group acquired Goodman Global Group, Inc. and its consolidated subsidiaries during the year ended March 31, 2013.
A reconciliation between cash paid for the shares of Goodman Global Group, Inc. and payment for the acquisition of these newly
consolidated subsidiaries, net of cash and cash equivalents acquired, was as follows:
Current assets
Fixed assets
Goodwill
Current liabilities
Long-term liabilities
Foreign currency translation adjustments
Cash paid for the shares
Cash and cash equivalents of consolidated subsidiary
Payment for acquisition of shares of newly consolidated subsidiary, net of cash and cash equivalents acquired
Millions of yen
2013
¥ 68,866
166,943
195,711
(173,607)
(64,386)
(17,879)
175,648
(11,996)
¥163,652
The Group acquired A˙IRFEL ISITMA VE SO ˘GUTMA S˙ISTEMLER˙I SANAY˙I VE T˙ICARET A.ÇS. during the year ended March
31, 2012.
A reconciliation between cash paid for the shares of A˙IRFEL ISITMA VE SO ˘GUTMA S˙ISTEMLER˙I SANAY˙I VE T˙ICARET A.ÇS.
and payment for the acquisition of this newly consolidated subsidiary, net of cash and cash equivalents acquired, was as follows:
Current assets
Fixed assets
Goodwill
Current liabilities
Long-term liabilities
Cash paid for the shares
Cash and cash equivalents of consolidated subsidiary
Payment for acquisition of shares of newly consolidated subsidiary, net of cash and cash equivalents acquired
Millions of yen
2012
¥ 9,991
9,422
8,826
(5,915)
(1,500)
20,824
(124)
¥20,700
15. Research and Development Costs
Research and development costs included in cost of sales and selling, general and administrative expenses were ¥33,569 million
and ¥32,987 million for the years ended March 31, 2013 and 2012, respectively.
ANNUAL REPORT 2013
51
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
16. Leases
The Group leases certain computer equipment and other assets.
Obligations under finance leases and future minimum payments under noncancelable operating leases as of March 31, 2013,
were as follows:
Due within one year
Due after one year
Total
Millions of yen
Finance Leases
Operating Leases
¥1,464
1,912
¥3,376
¥11,138
19,542
¥30,680
Pro Forma Information for the Years Ended March 31, 2013 and 2012
As discussed in Note 2, the Company and its consolidated domestic subsidiaries account for leases which existed at the transition
date of ASBJ Statement No. 13 and do not transfer ownership of the leased property to the lessee as operating lease transac-
tions. Pro forma information of such leases existing at the transition date, such as acquisition cost, accumulated depreciation, obli-
gations under finance leases and depreciation expense on an “as if capitalized” basis for the years ended March 31, 2013 and
2012, were as follows:
Acquisition cost
Accumulated depreciation
Net leased property
Obligations under finance leases:
Due within one year
Due after one year
Total
Millions of yen
Furniture
and Fixtures
¥147
120
¥ 27
2013
Others
¥111
86
¥ 25
Total
¥258
206
¥ 52
Furniture
and Fixtures
¥669
580
¥ 89
2012
Others
¥249
198
¥ 51
Total
¥918
778
¥140
Millions of yen
2013
¥27
25
¥52
2012
¥ 88
52
¥140
The amounts of acquisition cost and obligations under finance leases include the imputed interest expense portion.
Lease payments and depreciation expense under finance leases:
Lease payments
Depreciation expense
Millions of yen
2013
¥87
87
2012
¥260
260
Depreciation expense, which is not reflected in the accompanying consolidated statement of income, was computed using the
straight-line method.
17. Financial Instruments and Related Disclosures
Group Policy for Financial Instruments
The Group uses financial instruments, mainly bank loans and bonds, based on its capital financing plan. Short-term bank loans
and commercial paper are used to fund the Group’s ongoing operations, and cash surpluses are invested in low-risk financial
assets. Derivatives are used not for speculative purposes, but to manage exposure to financial risks as described below.
Nature and Extent of Risks Arising from Financial Instruments, and Risk Management
for Financial Instruments
Receivables, such as trade notes and trade accounts are exposed to customer credit risk. The Group manages its credit risk from
receivables on the basis of the internal policies, which include monitoring of payment term and balances of major customers to
identify the default risk of the customers.
Payment terms of payables, such as trade notes and trade accounts, are less than one year.
Although receivables and payables in foreign currencies are exposed to the market risk of fluctuation in foreign currency
exchange rates, the net position of receivables and payables in each foreign currency is hedged by using mainly forward foreign
currency contracts and currency swaps. In addition, receivables and payables in foreign currencies which are expected from
forecasted transactions are hedged by using forward foreign currency contracts and currency swaps.
Investment securities, mainly equity instruments of customers and suppliers of the Group, are exposed to the risk of market price
fluctuations. Investment securities are periodically managed by monitoring market values and financial position of issuers.
52 DAIKIN INDUSTRIES, LTD.
Short-term bank loans and commercial paper are mainly used to fund the Group’s ongoing operations. Long-term bank loans
and bonds are used mainly for capital expenditures. Although the payables such as trade notes and trade accounts, bank loans
and bonds, are exposed to liquidity risk, the Group manages its liquidity risk along with adequate financial planning by the corpo-
rate treasury department and has short-term bank credit lines. A part of long-term bank loans, which are exposed to market risks
from change in interest rates, is hedged by using mainly interest rate swaps.
Derivatives mainly include forward foreign currency contracts, interest rate swaps, and commodity future contracts, which are
used to manage exposure to market risks from changes in foreign currency exchange rates of receivables and payables, from
changes in interest rates of bank loans, and from changes in market value fluctuation of the raw materials.
Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the
authorization and credit limit amount.
Because the counterparties to these derivatives are limited to financial institutions with high creditworthiness, the Group does
not anticipate any losses arising from credit risk.
Fair Values of Financial Instruments
The carrying amount, fair value and unrealized loss of significant financial instruments were as follows. Fair values of financial instru-
ments are based on quoted price in active markets. If a quoted price is not available, another rational valuation technique is used
instead. Instruments whose fair value cannot be readily determined are not included in the following:
Cash and cash equivalents
Trade notes and accounts receivable
Investment securities
Total
Trade notes and accounts payable
Short-term borrowings
Income taxes payable
Long-term debt
Total
Derivatives
Cash and cash equivalents
Short-term investments
Trade notes and accounts receivable
Investment securities
Total
Trade notes and accounts payable
Short-term borrowings
Income taxes payable
Long-term debt
Total
Derivatives
Millions of yen
March 31, 2013
Fair
Value
¥185,571
263,323
93,740
¥542,634
¥127,364
65,335
14,694
647,497
¥854,890
¥ 893
Millions of yen
March 31, 2012
Fair
Value
¥135,427
221
209,077
75,204
¥419,929
¥110,108
90,449
9,836
305,991
¥516,384
¥ 51
Carrying
Amount
¥185,571
263,323
93,740
¥542,634
¥127,364
65,335
14,694
637,159
¥844,552
¥ 893
Carrying
Amount
¥135,427
221
209,077
75,204
¥419,929
¥110,108
90,449
9,836
295,398
¥505,791
¥ 51
Unrealized
Loss
¥10,338
¥10,338
Unrealized
Loss
¥10,593
¥10,593
Assets
Cash and cash equivalents and short-term investments
The carrying values of cash and cash equivalents and short-term investments approximate fair value because of their short
maturities.
Trade notes and accounts receivable
The carrying values of trade notes and accounts receivable approximate fair value because of their short maturities.
Investment securities
The fair values of equity securities are measured at the quoted market price of the stock exchange for the equity instruments,
the fair value of debt securities are measured at the amount to be received through maturity discounted at the Group’s assumed
corporate discount rate, and the fair values of investment trusts are measured at the constant value. The information related
to the fair value of the investment securities by classification is included in Note 6.
ANNUAL REPORT 2013
53
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Liabilities
Trade notes and accounts payable, short-term borrowings, and income taxes payable
The carrying values of trade notes and accounts payable, short-term borrowings, and income taxes payable approximate fair value
because of their short maturities.
Long-term debt
The fair values of bonds are determined at the quoted market price of the over-the-counter market for the corporate bonds,
and the fair values of long-term loans are determined by discounting the cash flows related to the loans at the Group’s assumed
corporate borrowing rate. The fair values of long-term loans with floating interest, which are hedged by the interest rate swaps
which qualify for hedge accounting and meet specific matching criteria, are determined by discounting the cash flows related to
the loans and the interest rate swaps at the Group’s assumed corporate borrowing rate.
Derivatives
The fair value of derivatives is measured at quoted price obtained from the financial institution.
The contracts or notional amounts of derivatives that are shown in the below table do not represent the amounts exchanged by
the parties and do not measure the Group’s exposure to credit or market risk.
Derivative transactions to which hedge accounting is not applied
Millions of yen
March 31, 2013
Contract
Amount
Due after
One Year
Fair
Value
Unrealized
Gain (Loss)
¥ 29
(169)
970
42
(12)
(9)
78
29
53
(4)
(127)
27
(8)
70
¥ 29
(169)
970
42
(12)
(9)
78
29
53
(4)
(127)
27
(8)
70
Contract
Amount
¥ 920
42,962
17,233
3,887
1,556
866
5,457
1,215
188
2,183
1,667
8,826
1,692
164
303
752
¥ 1,278
¥ (47)
¥ (47)
Forward exchange contracts:
Selling: GBP
EUR
USD
AUD
NZD
ZAR
CZK
HKD
PLN
SGD
MYR
TRY
BRL
Buying: EUR
CNY
USD
Commodity future contracts:
Metal
Buying
54 DAIKIN INDUSTRIES, LTD.
Forward exchange contracts:
Selling: GBP
EUR
USD
AUD
NZD
ZAR
CZK
HKD
PLN
SGD
MYR
TRY
MXN
INR
Buying: EUR
USD
Currency swaps:
Receive JPY/Pay HKD
Commodity future contracts:
Metal
Buying
Millions of yen
March 31, 2012
Contract
Amount
Due after
One Year
Fair
Value
Unrealized
Gain (Loss)
¥ (2)
250
(129)
66
(4)
1
(13)
(7)
(8)
20
(26)
(2)
(21)
32
84
¥ (2)
250
(129)
66
(4)
1
(13)
(7)
(8)
20
(26)
(2)
(21)
32
84
¥ 18
¥ 18
Contract
Amount
¥ 583
24,023
12,058
4,647
269
778
3,547
953
301
1,997
1,641
6,274
180
468
6,551
1,232
¥ 83
¥ 1,706
¥(134)
¥(134)
Derivative transactions to which hedge accounting is applied
Forward exchange contracts:
Selling: GBP
EUR
USD
AUD
ZAR
CZK
PLN
TRY
Buying: CNY
USD
Millions of yen
March 31, 2013
Contract
Amount
Due after
One Year
Hedged Item
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Payables
Payables
Contract
Amount
¥ 5,953
25,013
630
630
588
8,469
893
4,650
32
12,550
Interest rate swaps:
Fixed rate payment, floating rate receipt
Fixed rate payment, floating rate receipt*
Long-term debt
Long-term debt
¥ 80,000
215,000
¥ 80,000
215,000
Fair
Value
¥ 21
(426)
(16)
(50)
(7)
247
(2)
(105)
(7)
440
¥(126)
ANNUAL REPORT 2013
55
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Forward exchange contracts:
Selling: GBP
EUR
USD
AUD
ZAR
CZK
PLN
TRY
Buying: USD
Interest rate swaps:
Fixed rate payment, floating rate receipt
Fixed rate payment, floating rate receipt*
Millions of yen
March 31, 2012
Contract
Amount
Due after
One Year
Hedged Item
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Payables
Contract
Amount
¥ 5,171
20,873
1,306
673
631
8,013
910
1,599
2,464
Long-term debt
Long-term debt
¥ 30,000
122,000
¥97,000
Fair
Value
¥ (75)
174
13
(27)
(9)
(241)
(28)
(56)
218
¥ (43)
* The above interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received
under the swap agreements is recognized and included in interest expense or income. In addition, the fair value of such interest rate swaps is included in long-term debt.
Financial instruments whose fair value cannot be reliably determined
Nonlisted equity securities
Investments in limited partnerships and other investments
Total
Maturity analysis for financial assets and securities with contractual maturities
Cash and cash equivalents
Trade notes and accounts receivable
Investment securities:
Available-for-sale securities with contractual maturities
(Corporate Bond)
Total
Cash and cash equivalents
Short-term investments
Trade notes and accounts receivable
Investment securities:
Available-for-sale securities with contractual maturities
(Corporate Bond)
Total
Please see Note 9 for annual maturities of long-term debt.
Due in
One Year
or Less
¥185,571
263,290
25
¥448,886
Due in
One Year
or Less
¥135,427
221
209,073
25
¥344,746
Millions of yen
Carrying Amount
2013
¥8,180
668
¥8,848
2012
¥8,235
780
¥9,015
Millions of yen
March 31, 2013
Due after
One Year
through
Five Years
Due after
Five Years
through
Ten Years
Due after
Ten Years
¥ 33
100
¥133
Millions of yen
March 31, 2012
Due after
One Year
through
Five Years
Due after
Five Years
through
Ten Years
Due after
Ten Years
¥ 4
100
¥104
¥25
¥25
56 DAIKIN INDUSTRIES, LTD.
18. Commitments and Contingent Liabilities
At March 31, 2013, the Group had the following commitment:
Capital expenditures
At March 31, 2013, the Group had the following contingent liabilities:
Trade notes endorsed
Millions of yen
¥14,451
Millions of yen
¥3,536
19. Comprehensive Income (Loss)
The components of other comprehensive income (loss) for the year ended March 31, 2013 and 2012, were as follows:
Unrealized gain (loss) on available-for-sale securities:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred (loss) gain on derivative under hedge accounting:
(Losses) gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Foreign currency translation adjustments:
Adjustments arising during the year
Share of other comprehensive income in affiliates accounted for using the equity method:
Adjustments arising during the year
Total other comprehensive income (loss)
Millions of yen
2013
2012
¥14,173
12,534
26,707
(8,273)
¥18,434
¥ (191)
90
(101)
29
¥ (72)
¥ (8,380)
437
(7,943)
3,301
¥ (4,642)
¥ 376
(298)
78
(61)
¥ 17
¥64,782
¥(12,968)
¥ 1,483
¥ (78)
¥84,627
¥(17,671)
20. Net Income Per Share
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2013 and
2012, was as follows:
Year Ended March 31, 2013
Basic EPS:
Net income available to common shareholders
Effect of dilutive securities
Stock options
Diluted EPS:
Net income for computation
Year Ended March 31, 2012
Basic EPS:
Net income available to common shareholders
Millions of yen
Thousands of shares
Net Income
Weighted
Average Shares
Yen
EPS
¥43,585
291,089
¥149.73
39
¥43,585
291,128
¥149.71
Millions of yen
Thousands of shares
Net Income
Weighted
Average Shares
Yen
EPS
¥41,172
291,242
¥141.37
Diluted net income per share for the year ended March 31, 2012, is not disclosed because there were no dilutive shares.
ANNUAL REPORT 2013
57
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
21. Segment Information
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance No. 20,
“Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial and descriptive
information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments
that meet specified criteria. Operating segments are components of an entity about which separate financial information is avail-
able and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in
assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for eval-
uating operating segment performance and deciding how to allocate resources to operating segments.
1. Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the
Company’s Board of Directors is being performed in order to decide how resources are allocated among the Group. Therefore, the
Group’s reportable segments consist of the “Air Conditioning” segment and the “Chemicals” segment.
The “Air Conditioning” segment manufactures, distributes and installs air conditioning and refrigeration equipment. The
“Chemicals” segment manufactures and distributes chemicals.
2. Methods of Measurement for the Amounts of Sales, Profit, Assets and Other Items
for Each Reportable Segment
The accounting policies of each reportable segment are generally consistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies”.
3. Information about Sales, Profit, Assets and Other Items
Reportable Segment
Millions of yen
March 31, 2013
Air
Conditioning
Chemicals
Total
Other
Total
Reconciliations Consolidated
¥1,119,972
855
1,120,827
70,905
1,445,186
¥124,436
5,804
130,240
16,491
150,099
¥1,244,408 ¥46,495
225
46,720
1,229
29,719
6,659
1,251,067
87,396
1,595,285
¥ 27,614
12,051
¥ 9,696
26
¥ 37,310 ¥ 2,099
12,077
¥1,290,903
6,884
1,297,787
88,625
1,625,004
¥ 39,409
12,077
¥ (6,884)
(6,884)
2
110,832
¥1,290,903
1,290,903
88,627
1,735,836
¥ 39,409
12,077
8,436
5,605
14,041
14,041
14,041
36,944
15,549
52,493
1,830
54,323
54,323
Sales:
Sales to external customers
Intersegment sales
Total
Segment profit
Segment assets
Other:
Depreciation
Amortization of goodwill
Investment balance in
unconsolidated subsidiaries
and associated companies
accounted for using
the equity method
Investment in property,
plant and equipment
and intangible assets
58 DAIKIN INDUSTRIES, LTD.
Reportable Segment
Millions of yen
March 31, 2012
Air
Conditioning
Chemicals
Total
Other
Total
Reconciliations Consolidated
¥1,041,387
1,193
1,042,580
60,175
903,203
¥132,931
10,071
143,002
20,172
130,213
¥1,174,318 ¥44,383
232
44,615
852
28,788
11,264
1,185,582
80,347
1,033,416
¥ 26,152
12,098
¥ 9,832
49
¥ 35,984 ¥ 2,263
12,147
¥1,218,701
11,496
1,230,197
81,199
1,062,204
¥ 38,247
12,147
¥(11,496)
(11,496)
(6)
98,360
¥1,218,701
1,218,701
81,193
1,160,564
¥ 38,247
12,147
7,202
6,287
13,489
763
14,252
14,252
37,485
9,151
46,636
1,713
48,349
48,349
Sales:
Sales to external customers
Intersegment sales
Total
Segment profit
Segment assets
Other:
Depreciation
Amortization of goodwill
Investment balance in
unconsolidated subsidiaries
and associated companies
accounted for using
the equity method
Investment in property,
plant and equipment
and intangible assets
Notes: 1. The “Other” segment is the aggregation of other operating segments which are not included in the reportable segments and consists of “Oil Hydraulics” segment,
“Defense” segment, and “Electronics” segment.
2. “Reconciliations” include unallocated items and intersegment eliminations. The unallocated corporate assets included in “Reconciliations” amount to ¥118,702 mil-
lion and ¥105,756 million at March 31, 2013 and 2012, respectively, which consisted mainly of the Company’s cash, time deposits, short-term investments and
investment securities.
3. The aggregated amount of segment profit equals to operating income in the consolidated statements of income.
4. Intersegment sales are recorded at values that approximate market prices.
4. Supplemental Information
(1) Information about Geographical Areas
a. Sales
Japan
China
Europe
Millions of yen
March 31, 2013
Asia and
Oceania
Americas
Other
¥494,284
¥234,774
¥195,053
¥186,219
¥137,479
¥43,094
Consolidated
¥1,290,903
Japan
China
Europe
Millions of yen
March 31, 2012
Asia and
Oceania
Americas
Other
Consolidated
¥474,572
¥215,655
¥205,656
¥163,502
¥127,268
¥32,048
¥1,218,701
Note: Sales are classified in countries or regions based on location of customers.
b. Property, Plant and Equipment
Millions of yen
March 31, 2013
Japan
¥91,759
China
¥69,951
USA
¥42,717
Europe
¥31,460
Millions of yen
March 31, 2012
Japan
¥93,585
China
USA
¥45,108
¥24,573
Europe
¥28,630
Asia and
Oceania
¥32,615
Asia and
Oceania
¥27,450
Other
¥5,699
Consolidated
¥274,201
Other
¥5,011
Consolidated
¥224,357
ANNUAL REPORT 2013
59
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
(2) Significant Impairment Loss on Noncurrent Assets
Millions of yen
March 31, 2012
Air
Conditioning
Chemicals
Other
¥356
Eliminations
and Corporate
Consolidated
¥356
Impairment losses on noncurrent assets
(3) Information about Goodwill
a. Balance of Goodwill by Reportable Segment
Goodwill for each reportable segment at March 31, 2013 and 2012, was as follows:
Goodwill
Goodwill
Millions of yen
2013
Chemicals
Other
Eliminations
and Corporate
Millions of yen
2012
Chemicals
Other
Eliminations
and Corporate
Air
Conditioning
¥348,411
Air
Conditioning
¥166,276
Consolidated
¥348,411
Consolidated
¥166,276
22. Subsequent Events
Resolutions approved by the Company’s Board of Directors at the meeting held on May 8, 2013, are subject to approval
at the general shareholders’ meeting planned to be held on June 27, 2013.
Appropriations of Retained Earnings
Payment of a year-end cash dividend of ¥18 per share to holders of record at March 31, 2013, totaling ¥5,241 million was
approved.
60 DAIKIN INDUSTRIES, LTD.
Independent Auditors’ Report
ANNUAL REPORT 2013
61
e
c
n
a
G
a
l
t
A
/
s
t
h
g
i
l
h
g
H
i
l
i
a
c
n
a
n
F
i
O
E
C
e
h
t
m
o
r
f
e
g
a
s
s
e
M
A
O
O
C
e
h
t
h
t
i
w
w
e
i
v
r
e
t
n
I
s
n
o
i
t
a
r
e
p
O
f
o
w
e
i
v
e
R
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
n
o
i
t
c
e
S
l
i
a
c
n
a
n
F
i
Corporate Data
(As of March 31, 2013)
Head Office
Umeda Center Bldg., 2-4-12, Nakazaki-Nishi, Kita-ku, Osaka 530-8323, Japan
Phone: 81-6-6373-4312
URL: http://www.daikin.com/
Tokyo Office
JR Shinagawa East Bldg., 2-18-1, Konan, Minato-ku, Tokyo 108-0075, Japan
Fiscal Year-End Date
March 31 on an annual basis
Phone: 81-3-6716-0111
Date of Founding
Date of Establishment
Paid-in Capital
October 25, 1924
February 11, 1934
¥85,032 million
Number of Shares of Common
293,113 thousand
Stock Issued
Number of Shareholders
41,662
Major Shareholders
(cid:129) The Master Trust Bank of Japan, Ltd. (Trust account)
(cid:129) Japan Trustee Services Bank, Ltd. (Trust account)
(cid:129) Japan Trustee Services Bank, Ltd. (Retirement Benefit Trust Account for Nippon Steel
& Sumitomo Metal Industries, Ltd.)
(cid:129) Sumitomo Mitsui Banking Corporation
(cid:129) SSBT OD05 OMNIBUS ACCOUNT-TREATY CLIENTS
(cid:129) Japan Trustee Services Bank, Ltd. (Retirement Benefit Trust Account
for The Norinchukin Bank)
(cid:129) The Bank of Tokyo-Mitsubishi UFJ, Ltd.
(cid:129) Japan Trustee Services Bank, Ltd. (Trust account 9)
(cid:129) Japan Trustee Services Bank, Ltd. (Trust account 4)
(cid:129) Mellon Bank, N.A. as Agent for Its Client Mellon Omnibus U.S. Pension
Number of Subsidiaries and
Subsidiaries: 207 Affiliates: 10
Affiliated Companies
Number of Employees
51,398 (Consolidated)
Stock Exchange Listing
Tokyo
Advertising Method
The Company uses the electronic advertising method, posting advertisements on its
website (http://www.daikin.co.jp/e-koukoku/). However, when electronic advertising is
not possible due to technical problems or other circumstances, the Company will post
advertisements in the Nikkei Shimbun.
Shareholder Register
Mitsubishi UFJ Trust and Banking Corporation
Administrator
3-6-3, Fushimicho, Chuo-ku, Osaka 541-8502, Japan
Ordinary General Meeting of
June
Shareholders
Auditor
Deloitte Touche Tohmatsu LLC
62 DAIKIN INDUSTRIES, LTD.
ANNUAL REPORT 2013
63
This report is printed on paper certified by the Forest Stewardship Council (FSC)—an inter-
national labeling scheme that provides a credible guarantee that the raw materials used in
the product come from an environmentally well-managed forest—and with vegetable ink for
waterless printing (non-VOC ink) that does not contain volatile organic compounds.
Printed in Japan
http://www.daikin.co.jp
CC-A2A(13-09-003)IB