O U R N E X T M O V E
Annual Report 2014
April 1, 2013–March 31, 2014
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I N N O V A T I O N b y C h e m i s t r y
Contents
02 INNOVATION BY CHEMISTRY
10 INTEGRATED VALUE CREATION
12 Consolidated Financial & Non-fi nancial Highlights
14
To Toray Stockholders and Investors
19 Special Feature: Medium-term Management Program
“Project AP-G 2016”
29
Toray Group Segments
38 INTEGRATED VALUE MANAGEMENT
40 R&D and Intellectual Property
45 Sustainable Management
59 FINANCIAL SECTION
103 INVESTOR INFORMATION AND CORPORATE DATA
Profile
Toray Group is an integrated chemical industry group aiming to be a global top company in advanced materials based
on the fi rm belief that, “as the foundation of products, materials have the power to bring about fundamental transfor-
mations in society.”
Based on our core technologies of organic synthetic chemistry, polymer chemistry, biotechnology, and nanotechnol-
ogy as the sources of value creation, we develop the Core Growth Driving Businesses of Fibers & Textiles and Plastics
& Chemicals, Strategically Expanding Businesses of IT-related Products and Carbon Fiber Composite Materials, and
Intensively Developing and Expanding Businesses of Environment & Engineering and Life Science in 25 countries and
regions around the world.
Toray aims to be a corporate group with high value for all stakeholders and seeks to use the power of chemistry to
address social issues worldwide guided by our corporate philosophy of “contributing to society through the creation of
new value with innovative ideas, technologies and products.”
Corporate Philosophy
Contributing to society through the creation of new value with innovative ideas, technologies and products
Corporate Missions
For our customers
To provide new value to our customers through high-quality products and superior services
For our employees
To provide our employees with opportunities for self development in a challenging environment
For our stockholders To provide our stockholders with dependable and trustworthy management
For society
To establish ties and develop mutual trust as a responsible corporate citizen
The Concept of our Corporate Slogan, “Innovation by Chemistry”
The Toray Group adopted “Innovation by Chemistry” as its corporate slogan in April 2006 as a
declaration of our intention to use chemistry as the driving force in our aim “to become a top global corpo-
ration in advanced materials.”
The word “Chemistry” has two meanings. The obvious one is the science that forms the basis for the
advanced materials which we supply. The other is rapport. For us, that means maintaining a good rapport
with everyone who is involved with TORAY—customers, employees, stockholders, business partners, con-
sumers, and people in the local community—and maintaining good rapport among the companies in the
TORAY group and strong connections among our business offi ces throughout the world.
“Innovation” is how we will realize our corporate philosophy of “Contributing to society through the
creation of new value with innovative ideas, technologies and products.” “Innovation” refers not only to
technological innovation but to our intention to pursue innovation in all aspects of our corporate activities.
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Cautionary statement with respect to forward-looking statements
Descriptions of predicted business results, projections and business plans contained in this annual report are based on forecasts and assumptions regarding the
future business environment made at the present time. This annual report is not a guarantee of the Company’s future business performance.
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A D V A N C E D M a t e r i a l s g e n e r a t e . . .
A D V A N C E D M a t e r i a l s
g e n e r a t e F u t u r e I n d u s t r y
History shows that advanced materials created
in one period become the core drivers of industry
in the next period. This means materials, as used
for a wide range of products, have the power to
potentially bring about a fundamental transforma-
tion in society and people’s lives.
One example is HEATTECH®, Toray’s collaborative
development with UNIQLO, in 2003, integrating the
best of our synthetic fi ber technologies to create the
remarkably comfortable clothing with revolution-
ary functionality. HEATTECH® has achieved com-
bination of various functions such as absorption
and heat retention, and the technology is further
advancing, while its market is growing worldwide.
HEATTECH® is a registered trademark of Fast Retailing Co., Ltd.
Akihiro Nikkaku
President
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G R E E N
t e c h n o l o g i e s l e a d t o . . .
G R E E N I n n o v a t i o n
Toray Group is harnessing the power of
chemistry to help solve environmental, natural
resource, and energy issues that affect us all.
Toray was one of the world’s fi rst manufacturers to
begin development of carbon fi ber composite materi-
als. Our tenacious drive to advance and commercial-
ize our innovations has created TORAYCA® and led to
the Boeing Company using the material as a primary
structure material of 787 Dreamliner, Boeing’s state-
of-the-art passenger plane, for signifi cant reduc-
tions in weight and CO2 emissions. In other fi elds, the
recent shale gas revolution is also generating demand
for TORAYCA®, which is used in compressed natural
gas (CNG) tanks for automobiles.
Our desalination technology that converts seawater
to safe drinking water also helps many water-hungry
communities. Toray’s reverse osmosis water treat-
ment membranes (RO), which are created from our
unique nanotechnology, are used in the world’s largest
desalination plants such as in Algeria and Singapore.
Expanding China’s economy is making growth in wa-
ter demand, thereby increasing construction of such
plants. Our technology now provides daily life water
to over 100 million people on the planet.
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L I F E w i l l b e b e t t e r w i t h . . .
L I F E I n n o v a t i o n
We are raising the quality of medical treatment
and reducing the burden at healthcare facilities.
Toray Group has been improving the quality of
healthcare since the 1970s when it began full-
fl edged development of pharmaceuticals and medi-
cal devices. We continue to develop new, innovative
products, such as the FERON® treatment for viral
hepatitis and malignant tumor and the FILTRYZER®
artifi cial kidney units. These products are playing
important roles at healthcare facilities.
In addition, medical uniforms are made from
our high-functional fi bers and textiles for increased
hygiene and comfort, and patients’ wear have
become much more convenient with our materi-
als. Moreover, carbon fi ber composite materials are
used as top panels for CT scanners to reduce patient
radiation exposure due to their high radiolucency
enabling highly accurate X-ray imaging even at low
dosage levels.
Toray Group will continue developing pharma-
ceuticals and medical devices while applying its
advanced materials to create new products and con-
tribute to the development in the life innovation fi eld.
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(Billion yen)
200
150
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I N T E G R A T E D V a l u e C r e a t i o n
NT-II
100
93.0
93.0
NT-21
81.1
81.1
8
56.86.
56.8
33.03
33.0
51.2
50
8
18.8
0
Contents
12
Consolidated Financial & Non-fi nancial Highlights
Trends in Operating Income
FY
2000
2001
2002 2003
2004 2005
14
To Toray Stockholders and Investors
19
Special Feature: Medium-term Management Program
“Project AP-G 2016”
29
Toray Group Segments
Long-term Corporate Vision: AP-Growth TORAY 2020: Toray Group’s vision
is to be “a corporate group that continually increases revenues and profits,”
“a corporate group that proactively contributes to social development and environ-
mental stewardship,” and “a corporate group that provides high value for all stake-
holders.” To realize this vision, we are stepping up efforts to expand earnings and
broaden our global operations while continuing to develop the green innovation
and life innovation businesses. Our performance objective is attaining consolidated
net sales of ¥3 trillion and operating income of ¥300 billion around the year 2020.
AP-G 2016
300.0
AP-G 2013
180.0
IT-II
IT-2010
130,0
103.403
103.4
102.4
102.4
.1
100.
100.1
107.707
107.7
.3
105.05
105.3
83.43
83.4
0
36.0
40.1
40.1
2006 2007 2008
2009 2010
2011 2012 2013
2014
(Forecast)
2016
(Target)
Arou
Around
2020
(Image)
Medium-term Management Program: Project AP-G 2016: Project AP-G
2016 is a three-year medium-term management program for implementing our
growth strategies and fortifying our corporate structure to put us in a position to
achieve our long-term corporate vision. Under the previous Project AP-G 2013,
which completed in fi scal 2013, we made substantial progress expanding our busi-
nesses in growth business fi elds and growth regions and set the Group on a new
path for growth. We are continuing this proactive management stance with Project
AP-G 2016 that launched in fi scal 2014 and sets consolidated performance tar-
gets for fi scal 2016 of ¥2.3 trillion in net sales and ¥180 billion in operating income.
Image of
Financial Indicators
Around 2020
Net Sales
¥3,000 billion
Core Growth Driving
Businesses
¥1,500 billion
(50%)
Strategically Expanding
Businesses and
Intensively Developing and
Expanding Businesses
¥1,500 billion
(50%)
Green Innovation Businesses
¥1,000 billion
(33%)
Life Innovation Businesses
¥300 billion
(10%)
Asia, America,
Emerging countries*
¥1,800 billion
(60%)
( ) net sales ratio
Operating Income
¥300 billion
Operating Income to
Net Sales ratio
10%
ROA
10%
ROE
13%
* Under “Project AP-G 2013,” sales fore-
cast to Asia and Emerging countries
was 1,500 billion yen. Forecast is revised
as above in “Project AP-G 2016.”
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Consolidated Financial & Non-financial Highlights
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31
Financial Highlights
For the year:
Net sales
Operating income
Net income (loss)
Millions of yen
Thousands of
U.S. dollars*1
2014
2013
2012
2011
2010
2014
¥1,837,778
¥1,592,279
¥1,588,604
¥1,539,693
¥1,359,631
$17,842,505
105,253
59,608
83,436
48,477
107,721
100,087
40,107
1,021,874
64,218
57,925
(14,158)
578,718
Cash fl ows from operating activities
161,455
100,815
104,410
129,214
166,215
1,567,524
Cash fl ows used in investing activities
(214,826)
(107,525)
(104,002)
(50,734)
(121,723)
(2,085,689)
Free cash fl ows
(53,371)
(6,710)
408
78,480
44,492
(518,165)
Cash fl ows from fi nancing activities
Capital expenditures
Depreciation and amortization
R&D expenditure
41,475
118,207
78,743
55,500
26,167
99,135
67,588
53,342
(23,645)
(33,039)
(43,361)
402,670
98,384
67,443
51,450
55,942
70,479
46,566
57,073
74,904
46,188
1,147,641
764,495
538,835
At year-end:
Total assets
Net assets
¥2,119,683
¥1,731,933
¥1,581,501
¥1,567,470
¥1,556,796
$20,579,447
944,625
778,626
674,149
640,970
518,216
9,171,117
Per share of common stock (in yen and U.S. dollars):
Net income (loss):
Basic
Diluted
Cash dividends
Net assets
Ratios:
Operating income to net sales
Equity ratio
ROA
ROE
Debt/equity ratio (times)
Non-fi nancial Highlights
Number of employees
Toray
Domestic
Overseas
Percentage of women in
management positions (non-consolidated)*2
Employment rate for the handicapped
(non-consolidated)*3
¥ 36.59
¥ 29.75
¥ 39.41
¥ 36.41
¥ (10.12)
$ 0.36
35.70
10
28.90
10
37.46
10
34.43
7.5
—
5
527.32
444.45
384.90
363.90
336.65
0.35
0.10
5.12
5.7%
40.5%
5.5%
7.5%
0.76
5.2%
41.8%
5.0%
7.2%
0.73
6.8%
39.7%
6.8%
10.5%
0.77
6.5%
37.8%
6.4%
10.9%
0.83
2.9%
30.3%
2.6%
(3.0)%
1.34
7,123
10,247
28,511
7,097
10,177
25,310
6,976
10,303
22,948
6,797
10,261
21,682
6,915
10,339
20,682
7.95%
7.49%
7.06%
6.77%
6.36%
2.07%
2.03%
1.96%
1.95%
1.93%
Social contribution activities*4 (billions of yen)
1.1
1.1
1.2
1.3
1.0
*1: U.S. dollar amounts have been converted from yen at the exchange rate of ¥103=US$1, the approximate exchange rate prevailing on March 31, 2014.
*2: As of end April each year
*3: As of end June each year
*4: See page 13 for more details.
Net Sales
(Billions of yen)
2,500
2,000
1,500
1,000
500
0
Mar/
10
11
12
13
14
15
(Forecast)
Cash Flows
(Billions of yen)
200
150
100
50
0
-50
-100
-150
-200
-250
Mar/
10
11
12
13
14
Cash flows from operating activities
Cash flows used in investing activities
Free cash flows
Operating Income and
Operating Income to Net Sales
(Billions of yen)
150
120
90
60
30
0
Mar/
10
11 12 13 14
15
(Forecast)
Operating income (left)
Net Income (Loss)
(Billions of yen)
80
60
40
20
0
-20
(%)
10
8
6
4
2
0
Mar/
10
11
12
13
14
15
(Forecast)
Operating income to net sales (right)
Net Assets and Equity Ratio
Cash Dividend Per Share
(Billions of yen)
1,000
(%)
60
(Yen)
10
750
500
250
0
Mar/
10
11
12
13
14
Net assets (left)
Equity ratio (right)
45
30
15
0
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ROA and ROE
Number of Employees
(%)
12
8
4
0
-4
Mar/
10
11
12
13
14
ROA
ROE
50,000
40,000
30,000
20,000
10,000
0
Mar/
10
11
12
13
14
Toray
Domestic Overseas
8
6
4
2
0
Mar/
10
11
12
13
14
15
(Forecast)
Breakdown of
Social Contribution Activities
Academics,
science research,
education
58%
Year ended
March
2014
Disaster relief and
other activities
8%
Environmental
preservation
3%
Community
social welfare,
international
exchange
17%
Art, culture, sports
14%
To Toray Stockholders and Investors
Akihiro Nikkaku
President
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The Toray Group is further advancing growth strategies
and corporate structure reinforcement measures to realize
sustaining earnings growth.
Three Group-wide Projects under the Medium-term Management Program—Project AP-G 2013
Green Innovation Business
Expansion (GR) Project
Global development of Green Innovation Businesses based on our
strengths in chemistry
Asia and Emerging Country
Business Expansion (AE) Project
Proactive development of business in Asia and emerging countries
in other regions
Total Cost Reduction (TC-II) Project
Establishment of a robust business footing through initiatives based
on group-wide projects
Major Results of “Project AP-G 2013”
Net Sales
Net Sales of Green Innovation Businesses
Net Sales in Growth Countries and Regions
Operating Income
Operating Income to Net Sales
ROA
ROE
(Billion yen)
FY2010 (Actual)
1,539.7
378.0
540.3
100.1
6.5%
6.4%
10.9%
FY2013 (Initial Target)
1,800.0
500.0
720.0
150.0
8.3%
8%
11%
FY2013 (Actual)
1,837.8
575.0
708.6
105.3
5.7%
5.5%
7.5%
ROA=Operating Income/Total Assets ROE=Net Income/Shareholders’ Equity
Record-high Sales in Fiscal 2013
I would like to begin this report by expressing our pro-
found gratitude to our stockholders and investors for
their continuing support. In the year ended March 31,
2014 (fi scal 2013), economic conditions improved mar-
ginally but remained virtually stagnant in Europe, and
economic growth rates slowed in China and other
emerging countries. The U.S. economy continued
expanding at a moderate pace supported by improv-
ing employment and steady personal consumption.
The Japanese economy continued its gradual recov-
ery trend supported by a fi rm undertone in personal
consumption and public investment, some movement
toward recovery in private-sector capital investment,
and steadily improving employment conditions.
In these conditions, the Toray Group generated
15.4% year-on-year growth in all the segments to a
record-high ¥1,837.8 billion in consolidated net sales in
fi scal 2013: the Fibers & Textiles, Plastics & Chemicals,
IT-related Products, Carbon Fiber Composite Materials,
Environment & Engineering, Life Science, and Others
segments. Operating income also approached record
levels, rising 26.1% to ¥105.3 billion, and net income
increased 23.0% to ¥59.6 billion. Based on this earn-
ings performance and the business outlook for fi scal
2014, the Company declared an annual dividend of
¥10.00 per share.
Proactive Management Initiatives of
Project AP-G 2013
Next, I review Project AP-G 2013 medium-term manage-
ment program for the fi scal years 2011 to 2013, com-
pleted in fi scal 2013.
Under Project AP-G 2013, we implemented growth
strategies guided by the core objective to “expand busi-
nesses in growth business fi elds and regions” and took
steps to further strengthen our total cost competitive-
ness with the aim of putting us in a position to fulfi ll
our AP-Growth TORAY 2020 long-term corporate vision
for our business structure and achieve the performance
targets of consolidated net sales of ¥3 trillion and oper-
ating income of ¥300 billion around the year 2020.
Project AP-G 2013 comprised three Group-wide proj-
ects: the Green Innovation Business Expansion (GR)
Project focused on fi nding solutions for global environ-
mental, natural resource, and energy issues, the Asia
and Emerging Country Business Expansion (AE) Project
to develop growth strategies for those regions, and the
Total Cost Reduction (TC-II) Project.
Our efforts proved successful, as we steadily advanced
our growth strategies and exceeded our project’s sales
target. We also made investments for global growth in all
of our business segments and advanced R&D for major
new products and technologies for the future.
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To Toray Stockholders and Investors
Trends in Net Sales of Green Innovation Businesses
(Billion yen)
2,000
Green Innovation Businesses
Net Sales
Trends in Net Sales in Growth Countries and Regions
(Billion yen)
Growth countries and regions (Asia, Others)
2,000
Others (Japan, U.S., Europe)
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1,500
1,000
500
1,500
1,000
500
0
FY
07
10
11
12
13
(Initial
Target)
13
(Actual)
0
FY
00
10
11
12
13
(Initial
Target)
13
(Actual)
Net sales ratio of Green Innovation Businesses
Net sales ratio of Growth Countries and Regions
FY2007
(Actual)
13%
FY2011
(Actual)
27%
FY2012
(Actual)
28%
FY2013
(Initial Target)
28%
FY2013
(Actual)
31%
FY2000
(Actual)
23%
FY2011
(Actual)
35%
FY2012
(Actual)
36%
FY2013
(Initial Target)
40%
FY2013
(Actual)
39%
Green Innovation Business Expansion
Project Targets Exceeded
The Green Innovation Business Expansion (GR) Project
is a strategy to establish the Group as the leading player
in the global markets for carbon fi ber composite mate-
rials, water treatment membranes, battery materials,
and biomass materials. Green Innovation Business net
sales reached ¥575.0 billion in fi scal 2013, substantially
exceeding our initial ¥500 billion target for the year.
Key GR Project Developments under Project AP-G
2013 in Fiscal 2013 were as follows.
Carbon Fiber Composite Materials
• Resolved to expand production capacity at the four
global bases in Japan, the U.S., France, and South Korea.
(Carbon fi ber at all bases in March 2012; prepreg in Japan
in June 2013 and the U.S. in January 2014)
• Established or invested in automotive parts manufac-
turing companies in Japan, Asia, the U.S., and Europe.
(Europe in March 2011, Japan and Asia in April 2013, the
U.S. in July 2013)
• Acquired and made Zoltek Companies, Inc., a large tow
carbon fi ber manufacturer in the U.S., a wholly owned
subsidiary. (February 2014)
Battery Components
• Made Toray Tonen Specialty Separator Godo Kaisha a
wholly owned subsidiary and Toray Battery Separator Film
Godo Kaisha (currently a company limited) (January 2012)
Water Treatment Membranes
• Concluded a contract to establish a water treatment joint
venture, Toray Membrane Middle East LLC, with the
Abunayyan Holding Company, a strategic business group
partner in the electric power and water desalination fi eld
in Saudi Arabia (February 2014)
Printing Plate Materials
• Constructed and started operation of a waterless print-
ing plate manufacturing plant in the Czech Republic
(November 2013)
Biomass Materials
• Successfully test produced the world’s fi rst 100% bio-
based polyester fi ber (November 2011)
Asia and Emerging Country Business
Expansion Project Targets at Target Level
The Asia and Emerging Country Business Expansion
(AE) Project is a strategy for investing in business
growth and establishing and expanding business bases
in regions of expected growth around the world. Sales
in growth countries and regions grew to ¥708.6 billion
in fi scal 2013, which was very close to our target level,
and sales to Asian and emerging countries increased to
39% of total sales.
Key AE Project Developments under Project AP-G
2013 in Fiscal 2013 were as follows.
Variable Cost Reduction Implement “Variable cost innovation 10% (Vci-10)” Project
(cid:116)(cid:49)(cid:83)(cid:80)(cid:78)(cid:80)(cid:85)(cid:70)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:1)
(cid:83)(cid:70)(cid:69)(cid:86)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:74)(cid:79)(cid:1)(cid:77)(cid:74)(cid:79)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)
(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:84)(cid:85)(cid:83)(cid:66)(cid:85)(cid:70)(cid:72)(cid:74)(cid:70)(cid:84)
(cid:116)(cid:39)(cid:86)(cid:83)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:84)(cid:85)(cid:83)(cid:70)(cid:79)(cid:72)(cid:85)(cid:73)(cid:70)(cid:79)(cid:1)
(cid:68)(cid:80)(cid:77)(cid:77)(cid:66)(cid:67)(cid:80)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:74)(cid:79)(cid:1)
(cid:85)(cid:73)(cid:70)(cid:1)(cid:40)(cid:83)(cid:80)(cid:86)(cid:81)
(cid:116)(cid:52)(cid:85)(cid:83)(cid:70)(cid:79)(cid:72)(cid:85)(cid:73)(cid:70)(cid:79)(cid:1)(cid:72)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)
(cid:81)(cid:83)(cid:80)(cid:68)(cid:86)(cid:83)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:84)(cid:90)(cid:84)(cid:85)(cid:70)(cid:78)
Fixed Cost Reduction
Reduce variable
costs by over 3%
each year and over
10% (over 70
billion yen) over
three years
Reduced
11.4% or
75.7 billion yen
in three years
Results
27.0
Billion
yen
10% over
three years
(more than
70 billion
yen)
24.1
Billion
yen
24.6
Billion
yen
(cid:53)(cid:66)(cid:83)(cid:72)(cid:70)(cid:85)
(cid:39)(cid:58)(cid:18)(cid:18)
(cid:39)(cid:58)(cid:18)(cid:19)
(cid:39)(cid:58)(cid:18)(cid:20)
(cid:116)(cid:34)(cid:81)(cid:81)(cid:83)(cid:80)(cid:81)(cid:83)(cid:74)(cid:66)(cid:85)(cid:70)(cid:77)(cid:90)(cid:1)(cid:78)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:69)(cid:1)(cid:71)(cid:74)(cid:89)(cid:70)(cid:69)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:85)(cid:73)(cid:74)(cid:84)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:70)(cid:89)(cid:81)(cid:66)(cid:79)(cid:84)(cid:74)(cid:80)(cid:79)(cid:66)(cid:83)(cid:90)(cid:1)(cid:81)(cid:73)(cid:66)(cid:84)(cid:70)
(cid:116)(cid:42)(cid:79)(cid:85)(cid:83)(cid:80)(cid:69)(cid:86)(cid:68)(cid:70)(cid:69)(cid:1)(cid:49)(cid:14)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:78)(cid:70)(cid:85)(cid:73)(cid:80)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:84)(cid:70)(cid:68)(cid:86)(cid:83)(cid:70)(cid:1)(cid:81)(cid:83)(cid:80)(cid:71)(cid:74)(cid:85)(cid:1)(cid:66)(cid:81)(cid:81)(cid:83)(cid:80)(cid:81)(cid:83)(cid:74)(cid:66)(cid:85)(cid:70)(cid:1)(cid:85)(cid:80)(cid:1)
(cid:74)(cid:79)(cid:68)(cid:83)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:66)(cid:77)(cid:1)(cid:71)(cid:74)(cid:89)(cid:70)(cid:69)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:84)
(cid:116)(cid:36)(cid:80)(cid:79)(cid:85)(cid:74)(cid:79)(cid:86)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:74)(cid:78)(cid:81)(cid:83)(cid:80)(cid:87)(cid:70)(cid:1)(cid:80)(cid:81)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1)(cid:70)(cid:71)(cid:71)(cid:70)(cid:68)(cid:85)(cid:74)(cid:87)(cid:70)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:76)(cid:70)(cid:70)(cid:81)(cid:1)(cid:71)(cid:74)(cid:89)(cid:70)(cid:69)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:84)(cid:1)(cid:66)(cid:85)(cid:1)
(cid:81)(cid:83)(cid:80)(cid:81)(cid:70)(cid:83)(cid:1)(cid:77)(cid:70)(cid:87)(cid:70)(cid:77)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:77)(cid:74)(cid:79)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:81)(cid:83)(cid:80)(cid:71)(cid:74)(cid:85)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)
Reduced
46.3 billion yen in costs
budget in three years
P-ratio=1.0
* P (performance)-ratio=fixed cost growth rate/marginal profit growth rate: 1.0 or less, or manageme at each division against a budget.
China
(cid:129) Established a manufacture and sales company for dialy-
sis machines and artifi cial kidneys (June 2011)
(cid:129) Started operations at a new manufacturing plant for dialy-
sis machines (April 2012)
(cid:129) Established and started operation of a plastic resin
compound company in Chengdu, Szechuan Province
(August 2013)
ASEAN
(cid:129) Expanded production capacity and started operation at
a facility in Thailand for Nylon 66 fi ber for automobile air-
bags (August 2012)
(cid:129) Resolved to establish a vapor deposition facility for pack-
aging fi lms in Malaysia (April 2013)
(cid:129) Launched a business for high-performance polypropyl-
ene spunbond nonwoven fabric for disposable diapers in
Indonesia (June 2013)
(cid:129) Established and started operation of a plastic resin com-
pound manufacturing base in Indonesia (November 2013)
South Korea
(cid:129) Subsidiary Toray Advanced Materials Korea Inc. acquired
a 56.2% stake and made a subsidiary of fi ber and water
treatment membrane manufacturer Woongjin Chemical
Co., Ltd. (February 2014)
Emerging Countries
(cid:129) Enhanced the operating and information-gathering bases
in India, Brazil and Turkey
TC-II Project Targets Exceeded, but the
Revenue Environment becomes Severer
In the second half period of the AP-G 2013 Project, we
confronted the harsh business environment, which
included the persisting recession in Europe following
the sovereign debt crisis, slowing economic growth
in China, and sluggish growth in emerging economies
triggered by the tapering of monetary easing policy in
the U.S. We also faced unexpectedly strong revenue
pressure in the IT-related segment from inert growth for
liquid crystal display (LCD) panels for TVs and weaken-
ing PDP demand, which led to falling PDP material and
component prices, and in the Plastics & Chemicals seg-
ment from declining polyester fi lm prices.
In these rapidly changing business conditions, we
continued rigorously
implementing the Total Cost
Reduction (TC-II) Project toward our three-year target
to cut variable costs by 10% (3% or more per year) or
by over ¥70 billion from the FY2010 level and ultimately
reduced variable costs by ¥75.7 billion, marking a 11.4%
reduction. We also reduced fi xed costs by ¥46.3 billion
relative to the three year budget and maintained a per-
formance ratio of 1.0, meeting our objective of holding
it at 1.0 or lower. The P-ratio, which is derived by dividing
the fi xed cost growth rate by the marginal profi t growth
rate, is a benchmark indicator we introduced for the cur-
rent business expansion phase to ensure that the rise in
fi xed costs is proportionate to our profi t levels.
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To Toray Stockholders and Investors
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Trends in Capital Expenditures, Depreciation and R&D Expenses
Capital Expenditures
(Billion yen)
160
Depreciation
(Billion yen)
80
R&D Expenses
(Billion yen)
80
120
80
40
0
60
40
20
0
60
40
20
0
FY
12
13
14
(Forecast)
FY
12
13
14
(Forecast)
FY
12
13
14
(Forecast)
Consolidated Subsidiaries
Consolidated Subsidiaries
Consolidated Subsidiaries
Toray
Toray
Toray
Forecast for Double-digit Sales and Profi t
Growth in Fiscal 2014
In fi scal 2014, the fi rst year of the new three-year
medium-term management program Project AP-G 2016,
we anticipate our investments for growth through plant
construction and expansion for polypropylene spun-
bond, airbag fi bers, high-performance fi lms, carbon fi ber,
high-performance resins, and other products to gener-
ate expanding production output and sales around the
world. At the same time, we will continue endeavor-
ing to reduce our total costs. Based on this outlook, we
forecast double-digit growth in sales and profi t in fi scal
2014 with consolidated net sales rising to ¥2,150 bil-
lion, operating income to ¥130 billion, and net income
to ¥70 billion. Beginning in fi scal 2014, the Company
and its consolidated subsidiaries in Japan will change
the method for calculating the depreciation costs of tan-
Business Forecast for the Fiscal Year 2014
FY2014
(Forecast)
(Billions of yen)
Changes
Net Sales
2,150.0
+17.0%
Operating Income
130.0
+23.5%
Net Income
70.0
+17.4%
Remarks: Estimated exchange rate: 100 yen/US$
gible fi xed assets from the declining-balance method to
the straight-line method. We estimate that the effect
will be a decrease of about ¥9.0 billion in depreciation
costs in fi scal 2014.
We anticipate overall moderately improving global
economic conditions during the year despite some lin-
gering areas of concern. We also anticipate gradual
recovery in business conditions in Japan, particularly in
the second half of the fi scal year after temporary reper-
cussions from the consumption tax increase.
Toray Group will continue constantly seeking to pio-
neer technological advances in the world and develop
and commercialize leading-edge technologies and new
materials under the fi rm belief that materials, as used
for a wide range of products, have the power to bring
about fundamental transformations in society. We will
maintain our business growth track by emphasizing
our capabilities in all aspects of our operating activities
and by overcoming obstacles through thorough under-
standing and analysis of actual conditions. Through our
products, activities, and innovations, we will continue
creating new value that contributes to society.
To the Next Stage
Special Feature
M E D I U M - T E R M
M A N A G E M E N T
P R O G R A M
Pr oje ct AP- G 2016
(FY2 014–FY 2016 )
Innovation and Proactive
Management
–Implementation of Growth Strategy–
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Financial Targets
Net Sales
Operating Incommmmmmeeeeee
Operating Incommmmmmme te te te tte to No No No No No NNNet et et eteee SaSaSaSaalS es Ratio
ROA
ROE
FY201013
(Actual)l)
1,837.8
105.33
5.7%
5.5%
7.5%
BBBBilBilBilBiBilBillioiliolioliolioionsnsnsnsnns fofofofofofofof yenyennnnnnyenyenyeny
FY2016
(Target)
2,300
180
8%
8%
10%%%%
Remarks: Estimated exchange rate 100 yen/US$ Estimated oil price 110 US$/B (DUBAI FOB)
Basic policy of Dividends
Aim for sustainable increase of dividends
linked to the business performance
Guide line of D/E ratio
Below 1
Toray Group is following the completion of Project AP-G 2013 with the new medium-term management program
Project AP-G 2016 for fi scal years 2014 to 2016 (April 2014 through March 2017).
Project AP-G 2016 launches a new set of growth strategies to continue advancing and building on the previous
project’s progress expanding businesses in growth fi elds and regions and establishing a robust business footing
by cost reductions. We will also continue stressing “innovation and proactive management” to further advance
our growth strategies and corporate structure reinforcement measures. The project also outlines plans for step-
ping up investment and R&D to broaden our businesses and enhance our future profi tability. Management also
aims to continue to increase the dividend distribution amount linked to our results performance, while maintain-
ing a healthy fi nancial standing with a debt-to-equity ratio of one or below.
We will advance business expansion into domains
where we can fully leverage Toray Group’s
strengths and implement strategies and programs
to become the global leader in each segment
The Key Principles of Project AP-G 2016
Project AP-G 2016 will continue to drive us closer to our
AP-Growth TORAY 2020 long-term corporate vision by con-
tinuing and deepening the Project AP-G 2013 initiatives for
Green Innovation Business Expansion, Asia and Emerging
Country Business Expansion, and Variable and Fixed Cost
Reduction. Furthermore, we will broaden these three to
add new initiatives of Life Innovation Business Expansion,
the Americas Business Expansion, and Production Process
Innovation and Total Operational Cost Reduction in Sales
and Marketing.
These key principles will guide our efforts to advance
business expansion into domains where we can fully lever-
age Toray Group’s strengths and to implement strategies
and programs to become the global leader in each seg-
ment as we seek to attain fi scal 2016 performance targets
of consolidated net sales of ¥2,300 billion and operating
income of ¥180 billion.
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A P - G 2 0 1 6 B a s i c
S t r a t e g i e s
Basic Segment Strategies and Objectives
Each segment will implement basic strategies
toward achieving specifi c objectives for Project
AP-G 2016.
Fibers & Textiles
Plastics & Chemicals
IT-related Products
Bolster earning strength as the Core Growth
Driving Businesses and expand global busi-
ness in growth markets and regions
Expand business and increase earnings by
developing high value-added products for
growing applications and market regions
Expand business by developing and market-
ing new high value-added products focused
on the display and semiconductor fi elds
(Billion yen)
1,000
(Billion yen)
100
(Billion yen)
600
(Billion yen)
60
(Billion yen)
300
(Billion yen)
60
500
0
Net sales (left)
Operating income (right)
50
0
FY
2013
(Actual)
2016
(Targets)
300
0
30
0
FY
2013
(Actual)
2016
(Targets)
200
100
0
40
20
2013
(Actual)
2016
(Targets)
0
FY
AP-G 2013
AP-G 2016
Additional New Perspective
AdAA ditional New Perspective
Capture Business Opportunities in Growth Business Fields
Expansion of Green Innovation Businesses + Expansion of Life Innovation Businesses
EExpansion of Life Innovation Businesses
Business Expansion in Growth Countries and Regions
Expansion of Asia and Emerging Country Businesses + Expansion of Businesses in America
EExpansion of Businesses in America
Strengthen Total Cost Reduction
Reduction of Variable Costs and Fixed Costs + Innovation of Production Process, Total Operational
IInnovation of Production Process, Total Operational
CCost Reduction in Sales and Marketing
Cost Reduction in Sales and Marketing
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Carbon Fiber Composite Materials
Environment & Engineering
Life Science
Further expand business as the world’s lead-
ing carbon fi ber manufacturer
Expand business in the environment and ener-
gy fi elds by applying primarily our expertise in
water treatment membranes and facility design
Strengthen development globally and seek to
contribute to medical advances
(Billion yen)
200
(Billion yen)
40
(Billion yen)
300
100
0
20
0
FY
2013
(Actual)
2016
(Targets)
200
100
0
(Billion yen)
30
20
10
2013
(Actual)
2016
(Targets)
0
FY
(Billion yen)
90
60
30
0
(Billion yen)
15
10
5
0
2013
(Actual)
2016
(Targets)
FY
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We will use innovation to drive further growth in the Environment & Energy and
the Medical & Health fi elds
The fi rst basic strategy, “business expansion in growth business fi elds,” will be implemented by leveraging our accumulated
technological capabilities and strong business foundation to develop advanced materials and create new businesses with
a focus on the Environment & Energy and Medical & Health fi elds.
We will expand businesses that contribute
solutions to environmental as well as resource
and energy issues
(Billion yen)
1,000
( ) net sales ratio
The Green Innovation Business Expansion (GR) Project
calls for achieving net sales near ¥700 billion in fi scal 2016
in fi elds that contribute to resolving environmental as well
as resource and energy issues including energy conserva-
tion, new energy, biomass derivatives, water treatment, air
purifi cation, low environmental burden, recycling, and pro-
cess innovation with the addition of shale gas development
and related industries in priority fi elds. At the same time,
we will implement environmental Life Cycle Management
(LCM) practices to reduce the environmental burden over
the complete life cycles of products and services from raw
materials to production, use, and disposal and promote
sustainable growth for Toray Group.
700
(approx. 30%)
575
(31%)
800
600
400
200
0
FY
2013
Actual
2016
Target
2020
Image
Reduction of GHG Emissions Low Environmental Load
Water Treatment Recycling Air Purification Others
B A S I C S T R A T E G Y 1
Bus in ess Expa nsion in Gr owt h Bu si nes s Fi el ds
G R E E N I N N O VAT I O N
B U S I N E S S E X PA N S I O N
( G R ) P r o j e c t
FY2016
Sales Target
¥700 billion
Toray Group Green Innovation Businesses
Net Sales in FY2013 ¥575.0 billion
Air Purification
>Dust collecting filter/air filter
Recycling
> Regeneration-type recycling,
circulation-type recycling/
material, chemical recycling
Water Treatment
> RO, MBR, MF/UF membrane
> TORAYVINO™ home water purifier
Reduction of GHG emissions
> TORAYCA® carbon fiber for aircrafts,
automobiles, pressure vessels, etc.
>Back sheets for solar cells/
lithium-ion battery separators
©BOEING
©LUXFER GAS CYLINDERS
Low Environmental Load
> Non-halogen flame-retardant material
> TORAY WATERLESS PLATE®
In the Environment & Energy fi eld, we will pursue business opportunities in the shale gas revolution to further acceler-
ate the growth of the Green Innovation businesses. In the Medical & Health fi eld, the Life Innovation Business Expansion
Project is a fundamental strategy as we expand our present pharmaceutical and medical businesses and implement
growth strategies engaging Toray Group’s advantages such as advanced materials, core and fundamental technologies,
and business platforms.
We will expand businesses that improve the
quality of healthcare, ease the burden at medical
institutions, and contribute to health and longevity
(Billion yen)
300
( ) net sales ratio
The Life Innovation Business Expansion (LI) Project calls for
achieving net sales of ¥170 billion in fi scal 2016. To this end,
200
we will expand business in our present pharmaceutical and
medical businesses and apply the Toray Group’s advanced
materials, core and fundamental technologies, and busi-
ness platforms to improve the quality of healthcare, ease
100
170
(approx. 7%)
approx.120
（approx. 7%）
the burden at medical institutions, and contribute to health
and longevity. In the pharmaceutical and medical busi-
nesses, we will achieve this by creating new products and
cultivating new business fi elds as well as strengthening
development of our competitive advanced materials for
medical equipment and healthcare products. We will also
collaborate with strategic partners, participate in medical
clusters, and take other steps to expand business, acceler-
ate development, and explore new business avenues.
0
FY
2013
Actual
2016
Target
2020
Image
Advanced Materials in LI Business*
Pharmaceuticals & Medical
*Toray Group estimation
B A S I C S T R A T E G Y 1
Busi ness Ex pansion in Gr owt h Bu si n ess Fi el ds
L I F E I N N O VAT I O N
B U S I N E S S E X PA N S I O N
( L I ) P r o j e c t
FY2016
Sales Target
¥170 billion
Toray Group Life Innovation Businesses
Net Sales in FY2013 Approx. ¥120.0 billion
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Advanced Materials in LI Business*
Approx. ¥62 billion
> PP spunbond for sanitary materials
> TORAYVINO™ home water purifier
> Hospital-use clothing
> Air filter
> X-ray CT cradle, cartridge
> DNA chip (for research)
*Toray Group estimation
Pharmaceuticals and Medical
Approx. ¥58 billion
> Pharmaceuticals
> Artificial kidney
> Catheter
> Dialysis machine
> Contact lens
> Extracorporeal circulation
therapeutic columns
We will further strengthen the organic
relationships among Toray Group overseas bases
to develop new markets and expand business
(Billion yen)
1,800
( ) net sales ratio
Implementing the second basic strategy of “business
expansion in growth countries and regions” entails accel-
erating the Asia and Emerging Country Business Expansion
(AE) Project of the previous Project AP-G 2013 and ensuring
that we fully capture the demand being created by the grow-
ing middle- and upper-income populations in those regions.
Project AP-G 2016’s Asia, Americas and Emerging Country
Business Expansion (AE-II) Project adds the Americas to the
target growth regions and a focus on strengthening organic
collaboration between the Group’s overseas bases and
establishing new business bases. The fi scal 2016 perfor-
mance objective for the project is for net sales near ¥1,150
billion, representing roughly 50% of total sales.
1,500
1,200
900
600
300
1,150
(approx. 50%)
approx. 809
（approx. 44%)
0
FY
2013
Actual
2016
Target
2020
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B A S I C S T R A T E G Y 2
Business Ex pansio n in
Gr owth Count rie s and R egio ns
A S I A , A M E R I C A S A N D
E M E R G I N G C O U N T R Y
B U S I N E S S E X PA N S I O N
( A E - I I ) P r o j e c t
FY2016
Sales Target
¥1,150 billion
Initiatives in Asia and Emerging Countries
We will fully leverage the solid business foundation we
have constructed in China to continue expanding business
and improving profi tability. We will also introduce high-
performance products to meet the increasing demand
from the growing market for high value-added products
and for environmental solutions accompanying the coun-
try’s industrialization.
In Indonesia, Thailand, and Malaysia, we will acceler-
ate development in our strength area of high value-added
products and new business in the light of each country’s
industrial policy and level of industrial sophistication. In
India, we will expand business and establish new pro-
duction bases. We will also expand our business in other
emerging countries and regions, including Central and
South America, the Middle East and Turkey, Russia, Central
and Eastern Europe, and Africa.
Initiatives in the Americas
Toray Group views the Americas as a new driver of busi-
ness expansion. The shale gas revolution is spurring the
U.S. to regain industrial competitiveness and to rejuve-
nate the manufacturing industry while the development of
new leading-edge technologies in the aircraft and energy
industries in the country is generating growing demand for
advanced materials.
The Toray Group purchased approximately 400 acres
(1.6 million square meters) of commercial land in South
Carolina in February 2014 and plans to concentrate man-
agement resources on preparing the site to become a new
supply hub for advanced materials.
Our carbon fi ber composite materials business is one of
our core operations in the U.S., and we have fully integrat-
ed production systems carrying out the complete process
from raw material fi ber spinning to carbonization and produc-
tion equipment for prepreg intermediate material using high-
performance TORAYCA® carbon fi ber. We are planning to
expand our presence to meet the growing demand from the in-
creasing production of Boeing 787 aircraft and for compressed
natural gas tanks and other energy-related applications.
Each of the textile, resin, and carbon fi ber compos-
ite businesses is considering new manufacturing bases
to meet the rising demand in North, Central and South
Americas for automotive components. Moreover, we are
aggressively seeking to expand operations by entering new
business areas and pursuing strategic M&A and alliances.
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Fibers & Textiles
Plastics & Chemicals
IT-related Products
Carbon Fiber Composite Materials
Environment & Engineering
Life Science
Trading Companies
Overseas Offices/
Regional Supervisory Organization
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Constantly strengthening the corporate structure,
creating a resilient business structure, and targeting
the world’s highest level of cost competitiveness
The Total Cost Reduction (TC-III) Project, the third basic strat-
egy, extends and deepens the focus on reducing variable
costs and strict management of fi xed costs using the per-
formance ratio (P-ratio) from the TC-II Project of the previous
Project AP-G 2013, while adding new initiatives for “produc-
tion process innovation” and “total operational cost reduc-
tion in sales and marketing.” The TC-III Project targets cutting
costs by a total of ¥200 billion from fi scal 2014 to 2016.
Continuation of
TC-II
Innovation of
Production Process
(cid:129) Continuing the activities of variable costs reduction (over 3% each year and over 10% over three years)
(cid:129) Controlling fi xed costs through P-ratio* accounting method (P-ratio=under 0.96 each fi scal year)
(cid:129) Activities involve participation of employees group-wide
(cid:129) Set up innovative production processes to achieve drastic cost reductions based on new perspectives
and approaches
(cid:129)Collaborate across organizations, between research, technical, production and engineering departments
Total Operational Cost Reduction
in Sales and Marketing
(cid:129) Establish a highly competitive supply chain, by analyzing and understanding the operational costs and
logistics systems
* P (performance)-ratio=fi xed cost growth rate/marginal profi t growth rate: 1.0 or less, or manageme at each division against a budget.
B A S I C S T R A T E G Y 3
Bolst ering Compe titiveness
T O TA L C O S T R E D U C T I O N
( T C - I I I ) P r o j e c t
Target to reduce
¥200 billion
from 2014 to 2016
B A S I C S T R A T E G Y 4
S T R E N G T H E N I N G
S a l e s a n d
M a r k e t i n g
Toray Group Midstream and Downstream Strategies
[Carbon Fiber Composite Materials, Aircraft Application]
Supply Prepreg
Aircraft
Manufacturer
(cid:116)(cid:1)(cid:49)(cid:83)(cid:80)(cid:69)(cid:86)(cid:68)(cid:85)(cid:1)(cid:69)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:78)(cid:70)(cid:79)(cid:85)
(cid:116)(cid:1)(cid:53)(cid:70)(cid:68)(cid:73)(cid:79)(cid:74)(cid:68)(cid:66)(cid:77)(cid:1)(cid:84)(cid:86)(cid:81)(cid:81)(cid:80)(cid:83)(cid:85)
(cid:116)(cid:1)(cid:52)(cid:85)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:84)(cid:86)(cid:81)(cid:81)(cid:77)(cid:90)
Tier 1
Tier 2
Toray Group
Material and Processed
products manufacturer
We will implement business strategies that
encompass the complete supply chain and create
profi t-generating sales channels to expand global
business revenue
The fourth basic strategy is “strengthening sales and mar-
keting.” We will bolster our sales capabilities by horizontally
developing business operations modeled after the Fibers &
Textiles segment and the Carbon Fiber Composite Materials
segment’s aircraft applications with strategies that encom-
pass the complete supply chain to create profi t-generating
sales channels to expand global business revenues.
To achieve this, we will develop a full-fl edged solutions
business and strengthen ties with key customers. Fur-
thermore, we will implement measures aimed at elevat-
ing all of our products and businesses to leading positions
around the world. We will also expand the businesses and
cultivate a core sales staff with global skill sets. In addi-
tion, management resources will be focused on advancing
the global business development and launching effective
PR strategies to raise Toray brand recognition and brand
strength overseas.
[Fibers & Textiles, Apparel Applications]
General Supply Chain (Numbers of multi-steps in sales channels of each material, applications and items)
Fibers
Manufacturer
(cid:53)(cid:83)(cid:66)(cid:69)(cid:74)(cid:79)(cid:72)
(cid:53)(cid:70)(cid:89)(cid:85)(cid:74)(cid:77)(cid:70)
Manufacturer
(cid:53)(cid:83)(cid:66)(cid:69)(cid:74)(cid:79)(cid:72)
Garment
Manufacturer
(cid:53)(cid:83)(cid:66)(cid:69)(cid:74)(cid:79)(cid:72)
Apparel
Ware
house
Dealer
Retailer
Development of New Supply Chains = One Stop Total Service (Respond directly to any material, application or item)
Toray Group
Yarn-manufacturing > Weaving/Knitting > Dyeing > Garment
Apparel, SPA
The fi fth basic strategy comprises “R&D strategies” and
“intellectual property strategies.” Our R&D strategies
will entail activating Toray Group’s core and fundamental
technologies, and business platforms to focus on busi-
ness themes that generate primary, long-term competitive
strength. Moreover, we will fortify peripheral areas to our
core products and technologies in addition to the cores,
work at research leading to advances into new fi elds and
technologies, and pursue production process innovation
that will lead to future core technologies. We have set a
budget for research and technology development dur-
ing the three years to 2016 of ¥180 billion with 50% to be
applied to Green Innovation and 20% to Life Innovation.
Our intellectual property strategies are to construct
competitive entry barriers to our business arenas globally
and to bolster the Toray Group’s technical advantages.
R&D Expenses
Green
(cid:42)(cid:79)(cid:79)(cid:80)(cid:87)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)
Life
(cid:42)(cid:79)(cid:79)(cid:80)(cid:87)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)
B A S I C S T R A T E G Y 5
Invest
R & D S T R AT E G I E S/
I n t e l l e c t u a l
P R O P E R T Y S T R AT E G I E S
¥180 billion
of R&D expenses in 3 years
from FY2014
B A S I C S T R A T E G Y 6
C a p i t a l
I n v e s t m e n t
S T R AT E G I E S
¥400 billion
of capital investment
planned in 3 years
from FY2014
The sixth basic strategy is laid as “capital investment
strategies.” We have set a three-year capital investment
budget of ¥400 billion, with roughly 60% to be used in
growth and expansion business fi elds as well as 60% to
focus on investment in Asia, emerging countries, and the
Americas where we expect clear economic growth. This
investment program to fi scal 2016 will be designed to
promote business expansion and include investment in
long-term growth strategies aimed at reaching our objec-
tives for 2020.
Maintenance/
Improvement
Growth and
Expansion
Approx. 60% of total capital expenditures
will be allocated to
Growth and Expansion fields
Japan,
others
Asia/
Emerging
Countries
Americas
Approx. 60% of total capital expenditures
will be allocated to
Asia/Emerging Countries
and Americas
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B A S I C S T R A T E G Y 7
M & A a n d
Business Alliance
S T R AT E G I E S
The seventh basic strategy is set as “M&A and business
alliance strategies.” We will pursue M&A and alliances
capable of generating advantageous synergy effects with
our core technologies as an effective option for advancing
our growth strategy and actively invest our management
resources in rewarding cases for realizing the business
expansion required to become the global business leader.
M&A funds will be allocated and used based on strategic
decisions and will not utilize funds from the capital invest-
ment budget.
The effective application of these strategies will require
highly capable human resources in key position in each
of the target areas. We will secure and cultivate highly
skilled employees capable of driving dramatic growth
of our global operations. Based on our business strate-
gies, we actively rotate staff among Toray and affi liated
companies in Japan and abroad, securing and cultivat-
ing core human resources, and optimally assigning per-
sonnel throughout the Group. In overseas businesses,
we will also work to secure and cultivate local core staff
to carry out business operations.
Furthermore, we aim to secure and cultivate per-
sonnel with global skill sets, the ability to make on-site
decisions and provide leadership on the front lines, and
to formulate effective action plans for new business
development, structural reform, and other key strate-
gies. We will continue to employ and cultivate a diverse
staff of men and women from around the world and
provide a full range of training programs along with on-
the-job training to further augment each employee’s
professional expertise.
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B A S I C S T R A T E G Y 8
H u m a n
R e s o u r c e s
S T R AT E G I E S
Tr e n d s i n
C a s h F l o w s
Implementing the eight basic strategies will put us in a
phase of higher cash fl ow for investing until fi scal 2016. At
the same time, we remain committed to providing invest-
ment return to stockholders and plan to raise cash fl ows
from operating activities with the goal of generating over-
all positive free cash fl ow for the three years of the AP-G
2016 Project.
Trends in Consolidated Cash Flows
(Billion yen)
Cash flows from operating activities
Cash flows from investment activities
Free cash flows
300
200
100
0
-100
-200
-300
FY
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
Toray Group Segments
C or e G rowth Driving
Busine sses
St r a t eg ically Expanding
Busine sses
F I B E R S & T E X T I L E S
P L A S T I C S & C H E M I C A L S
I T - R E L A T E D P R O D U C T S
C A R B O N F I B E R C O M P O S I T E M A T E R I A L S
E N V I R O N M E N T & E N G I N E E R I N G
Int e ns ively De ve lo ping and
E xpa nding Businesse s
L I F E S C I E N C E
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Toray Group works to expand earnings via our Strategically Expanding Businesses of IT-related
Products and Carbon Fiber Composite Materials, while securing profi ts from Core Growth Driving
Businesses, Fibers & Textiles and Plastics & Chemicals. Simultaneously, Toray Group nurtures pri-
mary revenue sources in the future business, such as the life science, water treatment, and envi-
ronment fi elds to seek sustainable growth.
Toray Group Segments
Business Categories
Segments
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Core Growth
Driving
Businesses
Strategically
Expanding
Businesses
Intensively
Developing
and Expanding
Businesses
Net Sales
Ratio
66.7%
Operating
Income Ratio
56.1%
Net Sales
Ratio
19.6%
Operating
Income Ratio
32.8%
Net Sales
Ratio
13.0%
Operating
Income Ratio
9.5%
F I B E R S &
T E X T I L E S
P L A S T I C S &
C H E M I C A L S
I T - R E L A T E D
P R O D U C T S
C A R B O N F I B E R
C O M P O S I T E
M A T E R I A L S
E N V I R O N M E N T &
E N G I N E E R I N G
L I F E S C I E N C E
Notes: 1 Each percentage shows the share of net sales/operating income in the consolidated net sales/consolidated operating income respectively in the segment.
2 Excludes other businesses, equivalent to ¥14.3 billion (0.8%) in net sales and ¥2.0 billion (1.6%) in operating income, and adjustment of operating
income of -¥21.2 billion.
Main Products
Application Examples
Filament yarns, staple fi bers, and woven and
knitted fabrics of nylon, polyester and acrylic
fi bers, etc.; non-woven fabrics, man-made
suede and apparel products
(cid:129) Women’s and men’s clothes (coats: man-made suede, dress shirts:
polyester-cotton blended fabric, stockings: nylon fi ber, apparel products)
(cid:129) Automobiles (car seats: polyester fi ber, airbags: nylon fi ber, seatbelts:
polyester fi ber)
Nylon, ABS, PBT, PPS and other resins and
molded products, polyolefi n foam; polyester,
polypropylene, PPS and other fi lms and pro-
cessed fi lm products; raw materials for synthetic
fi bers and other plastics; zeolite catalysts; fi ne
chemicals for pharmaceuticals and agrochem-
icals; veterinary medicine (excludes fi lm and
resin covered in IT-related Products segment)
Films and plastic products for information and
telecommunications related products; materi-
als for electronic circuits and semiconductors;
color fi lters for LCDs and related materials;
materials for plasma display panels; magnetic
recording materials; graphic materials and IT
equipment
Carbon fi bers, carbon fi ber composite materials
and their molded products
(cid:129) Furniture & interior (sofas: man-made suede, carpets: BCF nylon, curtains:
halogen-free, fl ame retardant materials)
(cid:129) Disposable diapers: polypropylene fi lament yarn non-woven fabric
(cid:129) Tents: polyester fi ber
(cid:129) Automobile components (radiator tanks: nylon resin, intake manifold: nylon
resin, connectors: PBT resin, capacitor for hybrid cars: polypropylene fi lm)
(cid:129) Home appliances (housing for washing machines, vacuum cleaners, air
conditioners: ABS resin)
(cid:129) Power tools (circular tools housing: nylon resin)
(cid:129) Backsheet of solar panels (PET fi lm)
(cid:129) Packs for snack (polypropylene fi lm, PET fi lm)
(cid:129) Veterinary medicine (for dogs and cats)
(cid:129) Flat panel display televisions (PET fi lm and LCD color fi lter manufacturing
equipment)
(cid:129) PCs (circuit materials, PET fi lm, polyimide coatings)
(cid:129) Cellular phones (color fi lters, LCP resin, circuit materials, PET fi lm)
(cid:129) Printing (waterless printing plates, relief printing on resins, printing equipment)
(cid:129) Backup tapes for server (PET fi lm)
(cid:129) In-vehicle multimedia LANs (optical fi ber)
(cid:129) Semiconductors (semiconductor coating materials)
(cid:129) Aircraft structure (carbon fi ber composite materials)
(cid:129) Sports gear and goods: golf shafts, tennis rackets
(cid:129) Bike frames: carbon fi ber composite materials
(cid:129) PC chassis (carbon fi ber molded products)
(cid:129) Wind-power generator blades (carbon fi bers)
(cid:129) Marine vessels (carbon fi bers)
(cid:129) Industrial equipment materials (carbon fi ber, carbon fi ber composite materials)
(cid:129) Bridge pier reinforcement (carbon fi ber woven fabrics)
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Comprehensive engineering; condominiums;
industrial equipment and machinery; environment-
related equipment; water treatment membranes
and related equipment; materials for housing,
building and civil engineering
(cid:129) Seawater desalination facilities (water treatment membranes and equipment)
(cid:129) Sewage and waste-water treatment facilities (water treatment membranes
and equipment)
(cid:129) Condominiums
(cid:129) Housing (wall siding for houses, interior materials for buildings)
(cid:129) Plants and manufacturing facilities (comprehensive engineering services)
Pharmaceuticals and medical products; analy-
sis, physical evaluation and research services
(cid:129) Pharmaceuticals (natural interferon-beta preparation, prostacyclin,
antipruritus drug for suppressing intractable itching accompanying
hemodialysis)
(cid:129) Medical treatment devices (hemodialyzers, dialyzer and equipment)
Toray Group Segments
Core Growth Driving Businesses
Fibers & Textiles
Fiscal
Net sales
Operating income
Assets
2012
632.2
43.2
456.8
2013
755.5
52.9
618.5
Fiscal 2014 forecasts announced on August 7, 2014.
Changes
19.5%
22.4%
(Billions of yen)
2014 Forecast
870.0
56.0
Net Sales
Operating Income
755.5
632.2
(Billions
of yen)
52.9
43.2
2012
2013
2012
2013
(FY)
ROA
(Operating income/Assets)
Operating income
to net sales
9.8%
7.0%
Capital
expenditures
¥26.1 billion
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Summary of Consolidated Financial Results for the Year
Ended March 31, 2014 (Fiscal 2013)
Fibers & Textiles segment net sales increased 19.5% year on year to
¥755.5 billion. Operating income increased 22.4% to ¥52.9 billion.
In Japan, while sales of functional apparel applications grew
strongly, those of general apparel applications, though show-
ing signs of recovery, remained weak. On the other hand, exports
recovered partly due to the correction in the strong yen. Sales for
industrial applications, led by automobile-related applications, con-
tinued on track to recovery.
Overseas, while the conditions continued to be tough with
Europe remaining mired in economic slump and sluggish domestic
demand in China, textile subsidiaries in Southeast Asia and China
pursued sales expansion and a shift towards high value added prod-
ucts. Also, while the fl oods in Thailand that occurred in October
2011 had affected the operations in the same period a year earlier,
the production and sales recovered since then, contributing to the
improved performance.
Outlook for the Year Ending March 2015 (Fiscal 2014)
In Japan, despite continuous signs of recovery in demand for apparel
applications, it is forecast that demand will be weak centered in the
fi rst half partially due to the fallback from advance demand before the
expected consumption tax increase. The impact of rising raw mate-
rial and fuel prices is also a concern. Overseas, the economic condi-
tions in the U.S. and emerging countries will generally remain steady,
while demand will stagnate in Europe and remains weak in China.
In this business environment, the Fibers & Textiles segment will
continue fortifying and expanding the integrated operations from
fi bers and textiles to end products businesses, which are Toray’s
areas of strong advantage, and seek to expand sales for automobile
airbag, disposable diaper, and environmental applications and other
growth fi elds as well as in China, emerging countries, the U.S., and
other growth regions. We will also strengthen the segment’s cor-
porate structure through cost reduction and other measures and
aim to achieve earnings growth and global business expansion as
expected of Toray’s Core Growth Driving Business.
Topics
High-performance Polypropylene
Spunbond Capacity to be Expanded
in China
Toray has decided to expand the production
facilities of the high-performance polypro-
pylene spunbond (PP spunbond) business
of Toray Polytech (Nantong) Co., Ltd. (TPN).
The new facility will have an annual pro-
duction capacity of about 20,000 tons,
increasing TPN’s annual capacity to about
78,000 tons. Production at the new facil-
ity is scheduled to start in December 2014
and will bring the Toray Group’s annual pro-
duction capacity for PP spunbond to about
141,000 tons. The Toray Group currently
produces PP spunbond at production facili-
ties in Korea, China, and Indonesia, where
the production started in June 2013, for
markets in Japan, Korea, China, India,
ASEAN countries, and throughout in Asia.
The expanding market for disposable dia-
pers for babies and infants is expected to
boost annual demand for PP spunbond in
Asia from an estimated 290,000 tons in 2012
to 750,000 tons in 2020. Toray is preparing
for the demand growth and developing prod-
ucts to meet the need for high-performance
disposable diaper materials.
Core Growth Driving Businesses
Plastics & Chemicals
Fiscal
Net sales
Operating income
Assets
2012
395.8
18.3
456.7
2013
470.5
18.0
507.1
Fiscal 2014 forecasts announced on August 7, 2014.
Changes
18.9%
-1.6%
(Billions of yen)
2014 Forecast
550.0
24.0
Net Sales
Operating Income
470.5
395.8
18.3
18.0
(Billions
of yen)
2012
2013
2012
2013
(FY)
ROA
(Operating income/Assets)
Operating income
to net sales
3.7%
3.8%
Capital
expenditures
¥18.2 billion
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Summary of Consolidated Financial Results for the Year
Ended March 31, 2014 (Fiscal 2013)
Plastics & Chemicals segment net sales increased 18.9% year
on year to ¥470.5 billion. Operating income declined 1.6% to
¥18.0 billion.
Though sales for automotive applications in the resin business
increased in Japan, those for electronics and general industrial
applications remained weak. The business was also affected by the
increase in raw material prices resulting from the correction of the
strong yen. Overseas, automotive applications in North America,
China and Southeast Asia led the sales expansion. Demand for the
fi lm business’s products remained sluggish on the whole within
and outside Japan, with continued price competition, even though
domestic sales for capacitors used in hybrid cars remained strong.
Also, trading subsidiaries expanded their business transactions
on the back of market recovery and strong overseas business.
Outlook for the Year Ending March 2015 (Fiscal 2014)
Economic conditions in Japan are forecast to improve, supported
by brisk demand with particularly strong growth in high value-added
fi elds, amid various unstable elements, including sharply fl uctuat-
ing raw material and fuel costs. Overseas, demand is expected to
recover worldwide, led by emerging countries.
In this business environment, in the plastic resins business, we
plan to maximize sales of strong-selling products and expand sales
in China, ASEAN, and emerging countries while quickly incorporat-
ing material and fuel costs rises into our product prices to maintain
and expand the spread between these costs and sales prices. In the
fi lms business, although we expect strong pressure from custom-
ers to lower prices, we will continue expanding sales of high value-
added products for packaging and industrial applications.
Topics
TORELINA® PPS Resin Production
Base to be Constructed in South Korea
It has been decided to construct a new pro-
duction plant for the TORELINA® polyphen-
ylene sulfi de (PPS) resin at Toray Advanced
Materials Korea Inc., a 100% subsidiary.
The facility, which will be the Toray’s fi rst
overseas production base for PPS resin, is
scheduled to start operations in April 2016
with an annual production capacity of 8,600
tons, bringing the Group’s total annual pro-
duction capacity for PPS resin to 27,600
tons, combined with the Tokai Plant.
The facility will be a highly cost compet-
itive operation with fully integrated produc-
tion from main raw materials to resin and
will supply products to resin compounds
bases mainly in China, excluding portions
used in South Korea. The factory will also
install resin compound lines for design and
functionality processing with an annual
capacity of 3,300 tons and is aiming to start
precedent shipments in October 2015.
PPS resin is a “super engineering plas-
tic” with superior mechanical strength and
resistance to heat, chemicals, and fi re and
is widely used in automotive electrical com-
ponents, electrical machinery, electronic
devices, offi ce automation equipment, and
home appliances. Worldwide demand for
compounds was estimated at 70,000 tons
in 2012 and is expected to continue grow-
ing at an annual pace of 8% or higher.
Toray Group Segments
Strategically Expanding Businesses
IT-related Products
Fiscal
Net sales
Operating income
Assets
2012
237.6
23.0
334.2
2013
245.7
24.6
361.1
Fiscal 2014 forecasts announced on August 7, 2014.
Changes
3.4%
7.1%
(Billions of yen)
2014 Forecast
275.0
30.0
Net Sales
Operating Income
237.6
245.7
(Billions
of yen)
23.0
24.6
2012
2013
2012
2013
(FY)
ROA
(Operating income/Assets)
Operating income
to net sales
7.1%
10.0%
Capital
expenditures
¥17.2 billion
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Summary of Consolidated Financial Results for the Year
Ended March 31, 2014 (Fiscal 2013)
IT-related Products segment net sales increased 3.4% year on year
to ¥245.7 billion. Operating income increased 7.1% to ¥24.6 billion.
The sales of products for small and mid-sized displays such as
smartphones and tablet terminals in general were strong, although
they were partly affected by the production adjustment of end
products in the second half. Sales of fi lms and processed fi lm prod-
ucts for large LCD panels, after performing strongly in the fi rst half,
were infl uenced by stagnating demand for fl at-screen TV sets in the
second half.
Sub-segments
Fiscal
Display materials
Electronic components,
semiconductors, electric circuit
materials
(Billions of yen)
2012
79.0
2013
85.5
Changes
8%
96.6
106.6
10%
Data storage materials
Equipment, others
31.2
30.7
30.9
22.7
-1%
-26%
Outlook for the Year Ending March 2015 (Fiscal 2014)
It is forecast that large LCD panel makers will continue operating
at a fi rm pace while customers will relentlessly demand for lower
prices. A temporary adjustment can be expected but the demand
will continuously grow for smartphone and tablet device compo-
nents. Prices will be also under increasing pressure to be lowered.
In this business environment, we will seek to expand sales and
market share for our high value-added fi lms and processed fi lm
products for display and electronic component applications. We
will also focus on raising sales of other products including organic
EL materials, semiconductor materials, printing materials, and bat-
tery separator fi lms.
Topics
Capacity Expanded for RAYBRID™
Photosensitive Functional Materials
In September 2013, Toray expanded its
annual production capacity six-fold to 120
tons for the RAYBRID™ photosensitive con-
ductive paste for touch panel wiring patterns.
Narrowing frame sections on smart-
phones and tablet devices for enlarging
screen sizes are requiring increasingly fi n-
er conductive wiring to convey signals
from the touch panel to the computer
components. Photolithography is gaining
increasing attention as a method for cre-
ating cellular micro patterns. The method
involves coating a photosensitive paste on
a substrate and forming a wiring pattern
through the process including exposure,
development, and fi ring.
Toray’s RAYBRID™ is a photosensitive func-
tional material used as a substrate coating
material in the microfabrication photolitho-
graphic process and enables microwiring
through a photosensitive resin containing in-
organic particles with various functions. The
Company is fortifying its RAYBRID™ mar-
keting efforts to expand sales in the smart-
phone and tablet device market, which is
projected to grow to annual shipments of 2
billion units in 2017.
Strategically Expanding Businesses
Carbon Fiber Composite Materials
Fiscal
Net sales
Operating income
Assets
2012
77.6
7.3
233.1
2013
113.3
16.9
341.8
Fiscal 2014 forecasts announced on August 7, 2014.
(Billions of yen)
Changes
46.0%
2014 Forecast
160.0
131.9%
23.0
Net Sales
Operating Income
113.3
77.6
(Billions
of yen)
16.9
ROA
(Operating income/Assets)
Operating income
to net sales
5.9%
14.9%
2012
2013
7.3
2012
2013
(FY)
Capital
expenditures
¥38.5 billion
Summary of Consolidated Financial Results for the Year
Ended March 31, 2014 (Fiscal 2013)
Carbon Fiber Composite Materials segment net sales increased
46.0% year on year to ¥113.3 billion. Operating income increased
131.9% to ¥16.9 billion.
As demand for aircrafts as well as that in the environment and
energy fi elds including compressed natural gas tank applications
expanded, sales of carbon fi bers and intermediate products (pre-
preg) grew strongly for aerospace applications and general indus-
trial applications. In the composite business, sales of carbon fi ber
reinforced plastic chassis for notebook PCs, which boast high
strength and light weight, increased.
Sub-segments
Fiscal
Aircraft
Sporting goods
Industrial
2012
30.4
12.2
35.0
(Billions of yen)
Changes
88%
16%
20%
2013
57.2
14.2
41.9
Outlook for the Year Ending March 2015 (Fiscal 2014)
It is forecast that demand for aircraft and environment and energy-
related applications will continue driving steady growth in global
demand for carbon fi ber in 2014. Simultaneously, pricing competi-
tion will remain in Asia for general-purpose and sports applications
and the markets will not recover in the immediate future.
In this business environment, we plan to maintain steady ship-
ments of carbon fi ber for aircraft applications centered on our Boeing
787 account and to expand sales in line with the growing demand for
environment and energy-related product applications. In carbon fi ber
products for sports applications, we will shift to high value-added
products and revise prices on general-purpose products.
Topics
Acquisition of Zoltek, of the U.S.,
Marks Entry to the Large Tow
Carbon Fiber Business
Toray purchased all shares of large tow*1
carbon fi ber manufacturer Zoltek Compa-
nies, Inc., of the U.S., and made the compa-
ny a wholly owned subsidiary.
We expect global demand for carbon fi ber
to grow by 15% or more annually not only
for its energy-saving potential as lightweight
material but for its capability as a contrib-
utor to broader use of oil and coal alterna-
tive energy sources. We expect widening
use of regular tow*2 carbon fi ber materials
for applications requiring high performance
and high quality, such as in aircrafts, as well
as large tow materials, which offer an attrac-
tive cost and performance balance for use
in wind-power generation equipment and as
an automotive structural material.
After entering the large tow carbon fi ber
business in 1988, Zoltek implemented com-
prehensive measures to enhance its cost
competitiveness and generated substantial
business and earnings growth.
Toray had focused management resourc-
es on building its strength in regular tow
carbon fi ber, but did not offer any large tow
products and was seeking an entry to the
rapidly growing market for general-purpose
products. The acquisition of Zoltek provides
opportunities for new growth.
*1 Large tow carbon fi ber is carbon fi ber with 40,000 or
more fi laments.
*2 Regular tow carbon fi ber is carbon fi ber with up to
24,000 fi laments.
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Toray Group Segments
Intensively Developing and Expanding Businesses
Environment & Engineering
Fiscal
Net sales
Operating income
Assets
2012
178.4
2.6
176.6
2013
180.2
6.4
202.1
Fiscal 2014 forecasts announced on August 7, 2014.
(Billions of yen)
Changes
1.0%
2014 Forecast
220.0
143.4%
9.5
Net Sales
Operating Income
178.4
180.2
(Billions
of yen)
6.4
ROA
(Operating income/Assets)
Operating income
to net sales
3.4%
3.6%
2012
2013
2.6
2012
2013
(FY)
Capital
expenditures
¥3.2 billion
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Summary of Consolidated Financial Results for the Year
Ended March 31, 2014 (Fiscal 2013)
Environment & Engineering segment net sales increased 1.0% year
on year to ¥180.2 billion. Operating income increased 143.4% to
¥6.4 billion.
While the market for water treatment membranes has not yet
fully recovered refl ecting continued uncertainties over the global
economic outlook, shipment of reverse osmosis membranes to the
Middle East was strong at Toray. Among domestic subsidiaries, the
progress of plant construction projects remained slow at an engi-
neering subsidiary.
Outlook for the Year Ending March 2015 (Fiscal 2014)
We plan to expand sales while vastly cutting costs in the water treat-
ment membranes business amid expectations of improving busi-
ness conditions worldwide supported by ongoing strong business
in Asia and gradually improving conditions in the U.S. and Europe.
In the engineering business, we aim to increase orders for indus-
trial, solar cell, and lithium-ion battery equipment.
Topics
Joint Venture Agreement with
Abunayyan Holding Company of
Saudi Arabia
Toray and Abunayyan Holding Company
(AHC), of Saudi Arabia, signed an agree-
ment to launch Toray Membrane Middle
East LLC (TMME) as a joint venture special-
izing in water and wastewater treatment
technologies in Dammam, Saudi Arabia.
TMME will manufacture and sell water
treatment membranes and provide tech-
nical services and will be launched with
an expected ¥8.2 billion in capital funding
from AHC and Toray’s water treatment sub-
sidiary Toray Membrane Europe AG (TMEu).
TMME will construct a world-class re-
verse osmosis (RO) membrane element pro-
duction plant in Dammam’s Third Industrial
City with Toray’s manufacturing technology
and plans to commence operations meet-
ing global quality control standards in 2015.
This new plant by TMME will globally make
the Toray Group’s fi fth base of the RO mem-
brane elements manufacturing in addition
to the Group’s current operational manufac-
turing bases in Japan, the U.S., China and
South Korea.
Intensively Developing and Expanding Businesses
Life Science
Fiscal
Net sales
Operating income
Assets
2012
56.6
7.5
69.1
2013
58.2
5.6
76.4
Fiscal 2014 forecasts announced on August 7, 2014.
Changes
2.8%
-24.8%
(Billions of yen)
2014 Forecast
60.0
6.5
Net Sales
Operating Income
56.6
58.2
7.5
(Billions
of yen)
5.6
2012
2013
2012
2013
(FY)
ROA
(Operating income/Assets)
Operating income
to net sales
7.7%
9.6%
Capital
expenditures
¥8.7 billion
Summary of Consolidated Financial Results for the Year
Ended March 31, 2014 (Fiscal 2013)
Life Science segment net sales increased 2.8% year on year to
¥58.2 billion. Operating income declined 24.8% to ¥5.6 billion.
Sales of REMITCH®, an oral anti-pruritus drug for hemodialysis
patients, expanded robustly, though other pharmaceutical products
were affected by intensifying competition and royalty income on
some products decreased. In medical devices, sales in Japan as
well as exports of FILTRYZER®, polymethylmethacrylate (PMMA)
dialysis membrane-based hemodialyzer, and TORAYSULFONE®,
polysulfone membrane artifi cial kidneys, grew strongly.
*REMITCH® is a registered trademark of Torii Pharmaceutical Co., Ltd.
Outlook for the Year Ending March 2015 (Fiscal 2014)
The pharmaceutical and medical device markets are expected to
grow steadily overall, even as competition continues intensifying
from the introduction of a growing number of generic drugs.
In these conditions, we will seek to further expand sales of
REMITCH® as well as of dialyzers, dialysis equipment, and other
medical devices. Toray Medical (Qingdao) Co., Ltd. in China started
its production of dialyzers in March 2014 and launched sales for the
Japanese market in April.
*REMITCH® is a registered trademark of Torii Pharmaceutical Co., Ltd.
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Topics
New Life Innovation Facilities
Established in Minnesota, USA, and
Kobe, Japan
Toray established new life innovation re-
search facilities in the Medical Devices
Center of the University of Minnesota in the
U.S. and the Kobe Biomedical Innovation
Cluster in Japan to strengthen its capabil-
ities in research and technology develop-
ment for expanding its business in the life
innovation fi eld.
Minnesota is a major medical indus-
try cluster area where some of the world’s
most advanced R&D in medical devices is
taking place, and Kobe is rapidly becoming
a key medical cluster site in Japan. Toray is
actively seeking alliances with world’s medi-
cal institutions, testing and diagnostic facil-
ities, and medical instrument makers in the
cluster regions with the aim of accelerat-
ing development of medical devices and
expanding applications of Toray’s advanced
materials for medical devices.
The increasing complexity and sophisti-
cation of medical practice is creating a need
for more direct and rapid exchange of infor-
mation. While developing its medical device,
pharmaceuticals, and bio tool businesses,
Toray is seeking to meet the increasingly
sophisticated needs by providing advanced
materials to medical device makers and a
wide range of materials with advanced func-
tionality for use at medical sites.
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I N T E G R A T E D Va l u e M a n a g e m e n t
Contents
40
R&D and Intellectual Property
45
Sustainable Management
46 CSR Initiatives
52 Corporate Governance
56 Corporate Information
Toray Group aims to be a corporate group that delivers exceptional value to each and every one of its stake-
holders. Based on its corporate philosophy, “contributing to society through the creation of new value with
innovative ideas, technologies and products by creating new value,” the Group advances its global opera-
tions through the strategy trinity of Business, R&D, and Intellectual property. At the same time, the Group
promotes bolstered safety, accident prevention, and environmental preservation, corporate ethics, and
legal compliance to fulfi ll its corporate social responsibility (CSR) as its top priority management theme to
achieve sustainable growth.
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R&D and Intellectual Property
Since its founding, Toray has carried out R&D on advanced materials based on the fi rm
conviction that “Research and technical development provide the key to building the
Toray of tomorrow.”
Core
Technologies
Polymer Chemistry
Organic Synthetic
Chemistry
Biotechnology
R & D
Bas ic Pol i cy,
Feat ur es, and Strengths
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Toray R&D Features
1. Culture of Commitment to Basic Research
We are creating innovative, advanced materials and grow-
ing further. Originated as fi bers & textile materials, our
products, such as leading-edge carbon fi ber and water
separation membranes for water treatment, are the fruits
of many years’ diligent R&D. We have the culture of pri-
oritizing basic research unaltered by popular trends with
our belief that values the ultimate pursuit as we can make
new innovations and discoveries when we continue delv-
ing deep into one theme.
2. Specialist Teams in Many Fields
Toray’s teams of specialists have abundant knowledge
and experience in a wide variety of fi elds including poly-
mer design, function enhancement technology, and drug
discovery, formulation, and pharmacology, which are appli-
cations of our core technologies.
3. Undivided R&D Organization
Toray’s R&D organization operates as a single, undivided
system led by the Technology Center, which formulates
company-wide R&D strategies and plans for key projects.
Aiming to be the Global Leader in Advanced Materials
Toray Group aims to be the global leader in advanced materials. Following our motto that “innovative products only come
with innovative materials,” we are deepening and integrating our four core technologies of organic synthetic chemistry,
polymer chemistry, biotechnology, and nanotechnology to pursue innovation and play an active role developing society as
well as conserving and existing in harmony with the environment.
Fiber Technology
Synthetic Fibers
Core
Technologies
Advanced
Materials
Film Technology
Polymer Design
High-performance
Polymers
Specialty Polymers
Textile Technology
Textiles, Apparels
Ultramicro Fiber
Technology
Film Processing
Technology
Suede-texture
Artificial Leather
High-performance Films
and
Processed Film Products
Molding Technology
Engineering Plastics
Fine Patterning
Carbonization
Technology
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Fine and Composite
Technology
Microstructure
Control
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Electronic Materials
Printing Materials
Carbon Fibers, Advanced
Composite Materials
Industrial Materials and
Amenity Materials
Synthetic Raw Materials
High-performance Membranes,
Water Treatment Systems
Artificial Organs and
Medical Devices
Fine Chemicals,
Veterinary Medicines
Medical Chemistry
Pharmaceuticals
This structure facilitates technology fusion that leads to
innovation and enables advanced materials created in one
fi eld to be rapidly applied to other fi elds.
4. Leader in Industry-government-academia
Collaborative Research
External collaboration and open innovation activities
with industries, governments, and academic institu-
tions in Japan and overseas has made Toray a leader
in technology fusion and a producer of first-to-market
advanced materials.
5. Advanced Analytical Capabilities
Toray is constantly extending the limits of technology
through its close relation with Toray Research Center Inc.
(TRC). Created from Toray’s Research and Development
Division, TRC maintains state-of-the-art, maximum-perfor-
mance facilities and provides technical support by apply-
ing analytical techniques and physical analysis methods
for “cause analysis” and “problem solving” related to R&D
and production technology.
R&D and Intellectual Property
Toray Group’s R&D facilitates fortifying the stable revenue bases
and enhancing the earnings of the two Core Growth Driving
Businesses of Fibers & Textiles and Plastics & Chemicals. R&D
also supplies a steady stream of advanced materials in the
Group’s four priority growth fi elds of environment, water-related
and energy; information, telecommunications and electronics;
automobiles and aircraft; and life science.
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R & D
R &D Exp enditure
an d A chievements
Percentages of
Total R&D Expenses in Fiscal 2013
FIBERS &
TEXTILES
8%
PLASTICS &
CHEMICALS
14%
IT-RELATED
PRODUCTS
CARBON FIBER
COMPOSITE
MATERIALS
ENVIRONMENT &
ENGINEERING
LIFE SCIENCE
21%
6%
3%
13%
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R&D Expenses
(Billions of yen)
60
55.5 billion yen
50
40
30
20
10
0
Fiscal/
09
10
11
12
13
Toray
Consolidated subsidiaries
HEAD OFFICE R&D
35%
Fiscal 2013 R&D Achievements
R&D Topics
Toray successfully developed synthetic fi ber manufac-
turing technology capable of freely combining raw res-
ins on the nanometer order and the school uniform
industry’s fi rst gym wear made from plant-based poly-
ester fi ber. Furthermore, it developed the MIRANY™
textile fabric using the fi nest nylon fi lament yarn of the
world’s best quality standards.
Toray successfully developed a carbon fi ber-reinforced
polyphenylene sulfi de (PPS) resin that can be used for
injection molding and has comparable tensile strength to
aluminum die-cast. It also cooperated with Genomatica,
Inc., of the U.S., in successful trial polymerization of a
partially biomass-based polybutylene terephthalate (PBT)
at a medium-sized facility.
Toray developed a heat-resistant photosensitive resist
that vastly simplifi es the ion injection processes for sili-
con carbide semiconductor device manufacturing. The
segment also developed a photosensitive polyimide
bonding fi lm with applications as a sealant material for
miniaturized electronic components and high-density
packaging. Moreover, it achieved the world’s highest
degree of carrier mobility for a single-wall carbon nano-
tube (CNT) thin-fi lm transistor (TFT) coating. In addition,
it developed and marketed a new product using photo-
sensitive conductive paste enabling touch panel wiring
with 20 µm particle distribution.
Toray developed high tensile strength and modulus car-
bon fi ber TORAYCA® T1100G and high-performance
prepreg using TORAYCA® T1100G.
Toray developed a high permeability, high durabil-
ity reverse osmosis membrane that operates under
ultralow pressure enabling 30% energy saving for water
treatment. In amenity products, the segment developed
and launched sales of the compact and attractively
designed TORAYVINO™ Cassetty 307MX faucet water
fi lter with high particle removal performance.
Following the positive response to its successful devel-
opment and marketing of the REMITCH®* Capsules 2.5
µg, the world’s fi rst oral antipruritus drug with the selec-
tive k-opioid receptor agonist for hemodialysis-related
refractory pruritus, the Life Science segment received
the National Invention Prize, “Inventor’s Award,” for the
k-opioid receptor agonist nalfurafi ne hydrochloride.
*REMITCH® is a registered trademark of Torii Pharmaceutical Co., Ltd.
Corporate Research
In the corporate research, Toray achieved the world’s
highest level of conversion effi ciency exceeding 10%
of a single-layer element for organic membrane solar
cells. In new businesses, the adoption of Toray’s high
sensitivity DNA microarray 3D-Gene® by the University
of Cambridge, in England, prompted accelerating adop-
tion of the biomarker measurement technology in the
UK and across Europe.
T O P I C S
1 Carbon fi ber composite materials
for aircraft earns a 13th Okochi
Memorial Prize
Toray was awarded the 60th Annual (Fiscal 2013) Okochi
Memorial Grand Production Prize for its accomplish-
ment developing carbon fi ber composite materials for
aircrafts. The Company was highly lauded for develop-
ing the TORAYCA® T800S/3900-2B prepreg, an interme-
diate composite material and establishing its production
systems. This composite was selected as a primary
structure material by The Boeing Company for its state-
of-the-art Boeing 787 model, making it the world’s fi rst
commercial aircraft with an all-composite primary struc-
ture. The Okochi Memorial Prize is awarded in Japan
for outstanding achievements in industrial engineering,
R&D of production technologies, and the implementa-
tion of advanced manufacturing systems. In the award’s
60-year history, Toray has received the Okochi Memorial
Prize 13 times, including in the previous fi scal year, and
the prestigious Grand Production Prize three times.
T O P I C S
2 Ultralow pressure, high durability
reverse osmosis membrane
achieves 30% energy saving
Toray successfully increased number of fi ne pores in
minute space in separating function layer material for
improved water permeability while blocking other mol-
ecules, such as sodium ions. It enables separation
function layers to be formed with resistance to pore-
structural deterioration and superior durability even for
chemical cleaning.
These new developments in RO membrane tech-
nology maintained the outstanding substance removal
performance while improving water permeability by
1.5 times, enabling water treatment with lower pres-
sure and resulting in energy saving of about 30%. The
membrane is expected to contribute to reduction of
water treatment costs for wastewater treatment and
other applications where low water quality requires
more frequent treatment.
Toray is aiming to commercially launch the “ultralow
pressure, high durability RO membrane” in 2014 and
actively introduce it to the rapidly expanding Asian
markets including China and India as well as Europe,
North America, and other regions.
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R&D and Intellectual Property
I N T E L L E C T U A L
P R O P E R T Y
Basic Policy and
Priority Strategies
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Intellectual property strategies must be organically linked
to business strategies and R&D strategies. Toray pursues
an intellectual property strategy with coordination of these
three areas in line with management policies.
While continuing to create innovative new materials
and technologies, Toray seeks to fi rmly maintain its tech-
nical advantages by pursuing an intellectual property strat-
egy comprising the following four points, the realization of
which would be entry barriers for competitors.
1. Further enhance the quality of patents
2. Construct a globally competitive network of patents
3. Protect the Company’s technical advantages with effec-
tive measures including strategic patent applications
4. Cultivate personnel with deep knowledge of overseas
intellectual property
The Company is currently stepping up patent applications
and rights acquisitions and constructing a strong patent
portfolio globally with a priority in the growth areas of the
Project AP-G 2016 medium-term management program’s
Green Innovation Business Expansion (GR) Project and Life
Innovation Business Expansion (LI) Project.
Under the Asia, America and Emerging Country Business
Expansion (AE-II) Project, the Company is formulating and
advancing intellectual property strategies correlated with
the business strategies and R&D strategies that Toray Group
is implementing globally with a focus on growth countries
and regions showing promise for future business expan-
sion. While fortifying Toray’s patent applications and rights
acquisitions overseas, Toray Group companies overseas are
also stepping up patent application and rights acquisition
activities to properly protect inventions created at Group
R&D bases worldwide.
Toray Patents Filed in
Year Ended March 31, 2014
1,580
Overseas
Domestic
3,445
Total Patents Held to Date
Overseas
Domestic
886
1,205
In fi scal 2013, Toray Group fi led 1,580 patent applications
in Japan and 3,445 overseas, and 886 patents in Japan and
1,205 overseas of them were registered.
Toray publishes an annual Intellectual Property Report
describing the intellectual property initiatives by Toray
Group. The report is available for download at:
http://www.toray.com/ir/library/lib_005.html
S U S T A I N A B L E M a n a g e m e n t
The Fifth CSR Road Map
Creation of
New Value
Governance
• Contributing solutions
to social issues through
business activities
• Corporate governance and
management transparency
• Corporate ethics and legal
compliance
• Risk management
CSR
Guidelines
• Train personnel and
promote human rights
• Product safety and quality
• Facilitate CSR initiatives
throughout the supply
chain
• Communication
• Social contribution
activities
• Emphasize safety, accident
prevention, and environ-
mental preservation
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Society
Environment
We regard safety, accident prevention and environmental preservation as well as corporate ethics
and legal compliance as the most important management priorities for Toray Group. Our goal is to
earn respect and support in the international community and provide high value for all stakehold-
ers by contributing to society through our core business activities.
Sustainable Management
CSR Initiatives
Toray Group’s Corporate Philosophy
and CSR Activities
Toray’s Management Philosophy
and Code of Conduct
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Management
Philosophy
Corporate
Philosophy
Declaration outlining
the obligations of
Toray Group as a good
corporate citizen
Corporate Missions
Basic objectives are based on
a breakdown of the Corporate
Philosophy as related to each
type of stakeholder
Corporate Guiding Principles
Putting the Corporate Philosophy and the Corporate
Mission into practice together with the aims and
goals of each and every employee
Corporate Ethics and Legal Compliance Code of Conduct
Concrete standards relating to ethics and compliance with laws
and regulations
Toray Group views the objective of CSR to be to realize
sustainable social and corporate development by apply-
ing “Response + Ability” to social issues and changes.
Throughout our history, our mission has been to con-
tribute to society through our core business activities
following our Corporate Philosophy of “contributing to
society through the creation of new value with innovative
ideas, technologies and products,” and our Management
Philosophy is to realize this mission by fulfi lling our CSR.
Our Management Philosophy is also supported by
our Corporate Ethics and Legal Compliance Code of
Conduct, which provide a reference for specifi c stan-
dards of conduct for all employees.
Progress we have achieved in implementing the
Company’s Fourth CSR Road Map launched in fi scal
2011 includes life cycle management (LCM) analysis
of our core products, the achievement and third-party
verifi cation of greenhouse gas (GHG) emissions reduc-
tion targets, reorganization of our CSR procurement
structure, creation of a business continuity plan (BCP)
for earthquakes, and improvement of our priority risk
response preparedness.
We also established
interdepartmental working
groups and improved our response structure to incorpo-
rate newly emerging issues, such as confl ict minerals.
Environmental
Management
Initiatives
Promotion of LCM-based Environmental
Management
Toray Group’s approach to environmental management
is based on lifecycle management (LCM). With the LCM
concept, all business activities are viewed from the per-
spective of product and service lifecycles. The aim is
to improve economic and social value while reducing
environmental loads. Our Green Innovation products all
embody this concept. Our LCM initiatives include the
introduction of lifecycle assessment and the T-E2A effi -
ciency analysis tool. We are now working to disseminate
and consolidate these concepts.
The International Council of Chemical Associations and
the World Business Council of Sustainable Development
in October 2013 published international guidelines for
accounting for and reporting greenhouse gas emissions.
Toray and the Japan Chemical Industry Association played
a central role in the creation of the publication.
The new guidelines are another step toward interna-
tional recognition of the Japanese guidelines published
in February 2012 and are drawing attention as a Japan-
led movement for standardization that will infl uence the
direction of rules governing the measurement of CO2
emissions while also promoting widespread adoption
of the fundamental principles of the Toray LCM-based
Environmental Management.
Initiatives to Fight Global Warming
Toray Group was an early adopter of greenhouse gas
(GHG) reduction initiatives aimed at realizing a sustain-
able low-carbon society. Under the Fourth Medium-
Term Environmental Plan launched in fi scal 2011, the
Group has systematically implemented measures to
reduce GHG emissions, including improving its pro-
cesses to conserve energy and installing gas cogene-
ration systems.
Voluntary Reduction in Atmospheric Emission of
Chemical Substances
Toray Group regards the reduction of environmental
loads, including releases of chemical substances into
the atmosphere, as one of its most important priorities.
We are working to achieve this goal through group-
level initiatives.
Under the Fourth Medium-Term Environmental Plan,
launched in April 2011, we are systematically imple-
menting voluntary initiatives to resolutely achieve the
targets of fi scal 2015 for reducing emissions of sub-
stances covered by the PRTR law and volatile organic
substances (VOCs).
Initiatives to Prevent Air and Water Pollution
Toray Group’s environmental preservation activities
include permanent measures to prevent air and water
pollution at its production facilities. Efforts in Japan and
overseas in recent years include installing desulfurization
systems, converting to alternative fuels to reduce sulfur
oxide (SOx) emissions, and expanding our wastewater
treatment facilities and other measures to lower chemi-
cal oxygen demand (COD) levels.
Water Resource Management Initiatives
Toray Group, through its water treatment business, is
addressing water resource issues around the world
based on the following principles. The Group also
takes steps to ensure the proper management of water
resources used in its business activities, including using
recycled water to enhance water usage effi ciency.
1. Toray Group recognizes that water is one of the most
important resources for humanity, and that people are
confronting problems related to water resources in
many areas of the world.
2. Toray Group is committed to helping to solve global
water resources problems through its products, tech-
nologies and services.
3. Toray Group continuously monitors the state of
regional water resources, and conducts appropriate
management of water resources according to the
basic principle of sharing precious water resources
with the local communities where the Group operates.
Initiatives to Reduce Waste
Toray Group is seeking to achieve zero waste emissions
to help create a sustainable, recycling-oriented society.
The Group is implementing measures to achieve the
Fourth Medium-Term Environmental Plan’s fi scal 2015
numerical targets for simply disposed waste, landfi ll, and
recycling ratios set as indicators for measuring progress
toward attaining zero emissions.
Biodiversity Conservation Initiatives
Together with the reduction of greenhouse gas emis-
sions, biodiversity conservation is recognized by Toray
Group as a key global environmental priority. Our initia-
tives relating to biodiversity conservation and sustain-
able use are guided by the Toray Group Biodiversity Basic
Policy, which was adopted in 2010.
In line with the policy, the Group is consolidating its
biodiversity conservation measures, formulating three-
year road maps, and prioritizing the implementation of
new initiatives. In 2013, Toray Group launched a new set
of measures under the Second Three-year Road Map
of environmental measures for the fi scal years 2013 to
2015, which focuses mainly on activities to increase and
preserve greenery.
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Sustainable Management
CSR Initiatives
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CSR Procurement
and Purchasing
CSR Procurement and Purchasing Activities
As a manufacturer of advanced materials, Toray places
considerable importance on source control linked to end-
user needs in a number of areas, such as raw materials
used to make the materials and products that it supplies,
and also in relation to its production facilities. This per-
ception, and our commitment to fair trade, are refl ected
in our Basic Purchasing Policies. We have also formulated
CSR Procurement Guidelines, which call for the devel-
opment of value chains that allow us to fulfi ll our social
responsibilities in partnership with our suppliers, and for
Training and
Human Rights
Promoting Human Rights
Toray Group regards respect for human rights as a vital
aspect of its business operations. In addition to our
efforts to improve awareness of human rights, we totally
prohibit discrimination based on ethnicity, beliefs, gen-
der, educational background, nationality, religion, physi-
cal characteristics or other attributes.
This prohibition applies to recruitment activities,
deployment, remuneration, education and retirement. In
compliance with international rules, including the United
Nations Universal Declaration of Human Rights and the
ILO Convention, we also prohibit forced labor and child
labor. In addition, we are committed to full compliance
with the laws and regulations of each country and region.
Retaining and Nurturing Employees who Generate
New Value
Toray Group’s “commitment to employees” is stipulated
in its Corporate Guiding Principles. The Group’s basic
policy regarding core staff is to provide stable, continu-
ous employment based on a long-term outlook, irrespec-
tive of economic trends and corporate performance. In
addition, we do not make employment adjustment for
short-term purposes.
the supply of environmentally and socially responsible
materials and products to our customers. Toray has also
adopted CSR procurement compliance rules covering all
corporate activities to ensure that it is able to provide cus-
tomers with accurate reports about its CSR initiatives.
Toray has established contact points for CSR procure-
ment, through which we manage and internally share
customer and supplier information.
Environmentally Conscious Distribution Policies
Toray’s Basic Distribution Policies defi nes key policies
relating to the equity and fairness of business transac-
tions, and to environmental preservation. In addition to
our ongoing efforts to reduce logistics-related environ-
mental loads and improve quality, we also hold annual
briefi ngs on our Basic Distribution Policies to ensure that
our logistics partners are fully conversant with Toray poli-
cies on logistics, and to enhance performance.
The Group is actively working to expand its global
businesses and is stepping up activities in Japan and
overseas to recruit and cultivate strongly motivated and
highly skilled employees with global capabilities.
With the aim of cultivating fair-minded individuals
with high ethical standards and a sense of responsibil-
ity as well as professionals and leaders with foresight
and a sense of balance, the Group provides a wide range
of training for employees at all levels and in all fi elds to
strengthen management capabilities, augment sales
capabilities, production technology skills, and special-
ized expertise, and develop abilities to adapt to a global-
izing environment.
Promoting Diversity
Toray Group promotes diversity to help create thriving
workplaces where people from diverse backgrounds can
perform to their full potential.
Throughout its history, Toray has actively employed
women and sought to provide comfortable work environ-
ments for them. The number and percentage of women
holding management positions continues to rise each
year as a result of ongoing improvements in its pro-
motion structure and revisions to employee programs,
including the introduction of a childcare leave program in
1974, almost 20 years before its establishment as law. As
in April 2014, 7.95% of unit manager positions or higher,
and 4.17% of section manager positions or higher were
held by women.
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Communication
Activities
All of our business activities depend on good dialog
with stakeholders. Toray Group is committed to com-
munication in good faith, including the timely disclo-
sure of accurate information, as the basis for mutual
understanding with our wide-ranging stakeholders,
including stockholders, customers, employees and
local communities.
Stakeholder Communication
One way we communicate with stockholders and inves-
tors is through quarterly fi nancial presentations. We
also hold requisite briefi ngs for individual investors. In
addition, we communicate directly with investors and
analysts in individual meetings, as required.
We also ensure fair disclosure of information by dis-
tributing annual reports and other documents, and by
posting information that is useful to stockholders and
investors on our website.
Toray lives up to its reputation for putting the customer
fi rst by actively communicating with our customers, primar-
ily through our sales and marketing divisions. We also partic-
ipate in many exhibitions and briefi ngs targeted customers.
The Group communicates with employees through
in-house publications, intranet, and other various media
presenting messages from the President and other infor-
mation in Japanese, English, and Chinese to share infor-
mation and deepen understanding of management and
business topics.
Toray Group also highly values dialogue between its
Group companies, offi ces and factories and their local
communities in Japan and overseas, and regularly holds
social gatherings with local residents. We also seek to
maintain good relations with people from the local com-
munities by efforts such as presentation meetings about
our business activities and products as well as river and
road cleanup activities around our factory sites.
While Toray has presented comprehensive informa-
tion in English on our corporate websites, we launched
web pages for India and Taiwan on the heels of con-
tent for the U.S., Malaysia, and Thailand, specifi cally for
local viewers. We are also preparing to open pages for
Singapore, Europe, Brazil, and South Korea.
Furthermore, Toray Group has now provided the
updated corporate website with responsive web design to
enable viewers to browse not only PCs but smartphones,
tablets, and other various devices with optimal design.
Principal SRI indexes in which Toray is included
• FTSE KLD Global Climate 100 Index
• Morningstar Socially Responsible Investment Index
(as of March 31, 2014)
Sustainable Management
CSR Initiatives
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Social Contribution
Activities
In fi scal 2013, Toray Industries contributed approxi-
mately ¥800 million in funding and the Toray Group pro-
vided a total of approximately ¥1.1 billion for CSR activities.
Our Social Contribution Policy
Through our core business activities, we fulfi ll our
Corporate Philosophy of “contributing
to society
through the creation of new value with innovative ideas,
technologies and products.” We also contribute to soci-
ety in various other ways under the Toray Group Social
Initiative Policies. Our wide-ranging activities include the
provision of funding for the Toray Science Foundation
(Public Interest Incorporated Foundation), which was
founded in 1960.
Contributing to Future Generations
Children will inherit the future. Toray Group supports
education by providing products, technology and
human resources. Employees act as special instruc-
tors for elementary and junior high school programs
that teach children to enjoy scientifi c experiments and
understand the role of technology in solving global envi-
ronmental problems. Toray and Toray Research Center
Inc. host science camps, which are science and tech-
nology experiment programs for high school students
with an interest in science. Front-line researchers and
engineers use experiments and other activities to pro-
vide direct instruction to high schools students from
throughout Japan.
Topic
TORAYSCUE®
Used for Disaster Relief
in the Philippines
Toray Group, through an intermediary NGO, donated
two TORAYSCUE® portable freshwater generators to the
Philippines to assist relief operations in areas devastated
by Typhoon Haiyan in November 2013.
The TORAYSCUE® freshwater generators incorporate
reverse osmosis membranes, which Toray developed and
have been used for many seawater desalination projects.
The generator leverages pressurization to fi lter out not
only bacteria, viruses, and fi ne particles, but salts, heavy
metals, and organic substances from water and produce
highly pure and safe drinking water. Toray specifi cally
designed the generators to be portable and enable their
use to secure drinking water in disaster emergencies.
Toray received a request of TORAYSCUE® from
Operation Blessing Japan*, a specifi ed nonprofi t corpo-
ration that started quickly performing emergency relief
efforts in the disaster-stricken area. The NPO had pre-
viously expressed interest in the freshwater generators,
and Toray donated the TORAYSCUE® units to ensure
affected people secured a suffi cient supply of safe water
following the typhoon disaster.
Operation Blessing Japan team members, who
received instructions from Toray, taught local residents
on the use of the equipment. In the areas where the
two generators were set up, people expressed heart-
felt appreciation for the aid and also commented on the
good taste of the water.
Toray Group will continue using its technology and
products to help resolve social issues, while collaborat-
ing with NPOs and NGOs, as it aims to maintain its sta-
tus as a corporate group with high social value.
* Operation Blessing Japan’s parent organization, Operation Blessing Inter-
national Relief and Development Corporation, is headquartered in Vir-
ginia, the U.S., and is one of the world’s largest charity groups providing
clean water, disaster relief, medical aid, and other assistance programs.
Established after the Great East Japan Earthquake, the organization is
conducting disaster relief and reconstruction support programs.
Pagnamitan Village in Guiuan,
Eastern Samar Province, on Samar Island
(Program launched January 21, 2014)
TORAYSCUE® freshwater generators are providing drink-
ing water, until new wells are dug, for approximately 300
households in Pagnamitan Village and the neighboring
area. Pagnamitan Village was where Typhoon Haiyan
made landfall.
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Bantigue Village in Panay, Capiz Province,
on Panay Island
(Program launched February 27, 2014)
The village of Bantigue was particularly devastated by
the typhoon, with approximately 90% of the homes
destroyed and the wells contaminated with salt-
water. A Philippines military ship helped deliver the
TORAYSCUE® units, which were used to provide daily
drinking water for some 400 households in the village
and on nearby islands.
All photographs are courtesy of Operation Blessing Japan
For more information on CSR, please see:
http://www.toray.com/csr/
Sustainable Management
Corporate Governance
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Toray Group’s Basic
Policy on Corporate
Governance
Toray Group’s basic policy on corporate governance is
contained in its Corporate Missions, which requires
the Group to provide stockholders with dependable
and trustworthy management. The Corporate Guiding
Principles require the Group to obtain the trust of soci-
ety and meet its expectations by acting fairly while
maintaining high ethical standards and a strong sense
of responsibility as well as maintaining transparency in
management. Toray’s management structure has been
designed to facilitate the realization of these objectives.
Outline of Corporate Governance Structure and
Reasons for Adoption
Toray’s Board of Directors is made up of 26 members. As
Toray is a manufacturer that supplies basic materials to a
broad range of industries, it needs to make various man-
agement and business decisions based on expert knowl-
edge concerning specifi c businesses. In addition, under
Toray’s governance structure, members of the Board
with extensive knowledge of its business activities who
are elected at general stockholders’ meetings make deci-
sions and execute business under supervision conducted
from diverse viewpoints from the perspective of fulfi lling
management’s responsibilities to stockholders. In order
to further enhance the transparency and objectivity of
management by supervising members of the Board from
a broader perspective, Toray elected one outside director
at the Ordinary General Meeting of Stockholders held on
June 25, 2014.
Toray operates under a corporate auditor system.
Two members of the four-member Board of Corporate
Auditors are outside corporate auditors. The corporate
auditors conduct auditing activities based on expertise
and abundant experiences concerning corporate legal
affairs as well as fi nancial and accounting affairs. Toray
operates under a corporate auditor system. To ensure
management transparency, as well as objectivity and
neutrality in management oversight, the Company has a
Board of Corporate Auditors that is fully independent of
the Board of Directors.
Basic Policy on Internal Control Systems and Their
Development
We develop and maintain internal control systems as
a framework for the development of appropriate orga-
nizational structures, the formulation of rules and reg-
ulations, the dissemination of information and the
monitoring of business operations. The purpose of these
systems is to ensure that all Toray Group executives and
employees are able to realize the Corporate Philosophy,
Corporate Missions and Corporate Guiding Principles of
Toray Group, as expressed in the words “contributing to
society through the creation of new value with innova-
tive ideas, technologies and products.” We review and
improve these systems as required to ensure that our
business operations are conducted effi ciently and in
compliance with the law. The following specifi c systems
have been established.
(cid:129) System to ensure that the execution of duties by members of the Board and employees comply with laws
and regulations and the Company’s Articles of Incorporation
(cid:129) System to ensure the effi cient execution of duties by members of the Board execute their duties effi ciently
(cid:129) System for preserving and managing information pertaining to the execution of duties by the members of
the Board
(cid:129) Rules and other systems pertaining to controls over risks of loss
(cid:129) System of reporting to corporate auditors and other systems for ensuring effective implementation of audits
by corporate auditors
(cid:129) Items pertaining to employees assisting with corporate auditors’ duties and items pertaining to the indepen-
dence of said employees
(cid:129) System for ensuring appropriate business operations by Toray Group
Governance Structure
Toray Group is determined to justify the trust placed in it by society by working in good faith to maintain highly transparent
governance systems.
General Stockholders Meeting
Election
Election
Election
Audit
Board of
Corporate Auditors
Audit
Board of Directors
Resolution
Auditing Department
President
Approval
Deliberations Council
Executive Committee and
Board of Senior Vice Presidents
Accounting
Auditor
Internal audit
Audit
Management execution
Company-wide
Committees
CSR Committee
Toray’s
Divisions
and plants
Japanese
subsidiaries
and
affi liates
Overseas
subsidiaries
and
affi liates
Departmental Committees
Auditing by
Corporate Auditors,
Internal Auditors
The corporate auditors, including the outside corporate
auditors, possess considerable expertise concerning
fi nancial and accounting affairs. In fi scal 2013, too, they
attended meetings of the Board of Directors, and held
meeting with all members of the Board, divisional and
departmental general managers and conducted periodic
audits of Toray offi ces and plants worldwide, including
subsidiaries and affi liated companies.
The corporate auditors also work closely with internal
control organizations. For example, they attend as observ-
ers at meetings of the Corporate Ethics Committee, which
was established to promote corporate ethics and regu-
latory compliance as key elements of corporate social
responsibility, and the Company-Wide Legal Compliance
Committee. The Audit Department, which reports directly
to the President, was established as part of our internal
control structure. Its task is to conduct internal audits
of Toray and its subsidiaries and affi liated companies.
Information is continually exchanged. For example, all
audit reports submitted to the President by the Audit
Department are also submitted to the corporate auditors.
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Remuneration
(I) Details of Remuneration
Position
Total
remuneration
(millions of yen)
Total remuneration by type (millions of yen)
Basic
Bonuses
Provision for the
allowance for
retirement benefi ts
18
Stock
options as
remuneration
248
Members of the Board
1,535
1,124
146
Corporate auditors (excluding
outside corporate auditors)
Outside corporate auditors
86
21
79
19
7
2
—
—
—
—
Notes: 1. Recipients included two directors who retired during fi scal 2013, and one corporate auditor (excluding outside corporate auditors).
2. Total amounts of remuneration do not include ¥84 million paid in salaries to eight employee-directors.
Recipients
28
3
2
Sustainable Management
Corporate Governance
(II) Total Remuneration Received by Members of the Board and Corporate Auditors
Name
Total
consolidated
remuneration
(millions of yen)
Position
Status of
company
Basic
Bonuses
Sadayuki Sakakibara
Akihiro Nikkaku
151
134
Member of the Board Filing company
Member of the Board Filing company
115
98
15
15
Note: Information about consolidated remuneration is shown only for persons receiving more than ¥100 million.
Total remuneration by type (millions of yen)
Provision for the
allowance for
retirement benefi ts
—
Stock
options as
remuneration
21
—
21
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(III) Policy on Remuneration for Members of the Board and Corporate Auditors
Remuneration for members of the Board and corporate
auditors consists of monthly remuneration, a bonus and
stock acquisition rights in the form of stock options. The
purpose of this structure is to ensure management trans-
parency and fairness, and to provide enhanced incentives
for the improvement of fi nancial performance and corpo-
rate value in the short-, medium- and long-term perspec-
tives. Remuneration for corporate auditors consists of
monthly remuneration and a bonus.
Furthermore, the amount of remuneration for mem-
bers of the Board and corporate auditors is set at suf-
fi cient levels to secure capable personnel and provide
motivation to enhance business performance while tak-
ing into account the results of research conducted by a
third-party organization to ensure objectivity.
The maximum total amount of monthly remunera-
tion is determined by resolution at the Ordinary General
Meeting of Stockholders. Resolutions are passed as
required to determine whether or not bonuses should be
paid and the amount of such bonuses.
Ordinary General Meetings of Stockholders set upper
limits for the number of stock options granted to mem-
bers of the Board as remuneration, and for the total
amount of remuneration provided. The Board of Directors
determines the number of stock options granted to
members of the Board within those limits according to
internal regulations established by the Company.
Corporate Ethics and
Legal Compliance
All of us at Toray Group are working as one to uphold cor-
porate ethics and ensure legal compliance in accordance
with clear guidelines established by and under the lead-
ership of the top management.
Framework for Promoting Corporate Ethics and
Legal Compliance
Toray has established a Corporate Ethics Committee under
the chairmanship of the President as a framework for coop-
erative initiatives by labor and management. This commit-
tee deliberates on all policies pertaining to corporate ethics.
The Company-Wide Legal Compliance Committee works
under the auspices of the Corporate Ethics Committee to pro-
mote independent activities, and is specifi cally tasked with
advancing initiatives relating to company-wide priorities. The
committee’s administration is based on close communica-
tion between committee members, who are mainly section
managers from each business line, and top management.
All divisions, offi ces and plants have established CSR/
Legal Compliance Committees to carry out activities in-
volving individual employees in their workplaces.
Subsidiaries and affi liated companies in Japan and
overseas have also established CSR/Legal Compliance
Committees and are promoting activities in cooperation with
Toray’s relevant divisions and the CSR Operations Dept.
To ensure that all executives and employees, includ-
ing contract, part-time and temporary employees, are
fully informed about compliance requirements, we dis-
tribute copies of the Corporate Ethics and Legal Compli-
ance Handbook, which defi nes standards of conduct and
provides detailed information about matters that require
special care. The Handbook is updated as required, such
as when laws and regulations are amended.
The subsidiaries and affi liated companies in Japan
and overseas that established CSR/Legal Compliance
Committees are working to ensure consistent compli-
ance by compiling similar codes of conduct, guidelines,
handbooks and other materials.
Framework for Promoting Corporate Ethics and
Legal Compliance in Toray
Corporate
Ethics
Committee
* Chaired by Toray’s
company president
Company-wide Legal
Compliance Committee
Division-and Plant-level
CSR/Legal Compliance
Committees
Risk Management
We regard risk management as a fundamental element
in the corporate management of Toray Group. Under our
corporate risk management policies, which are admin-
istered over three-year cycles, we aim to identify and
reduce potential risk factors in our business activities
and prevent recurrences. We have also formulated Crisis
Management Regulations as the basis for the devel-
opment and administration of an Emergency Quick
Response System designed to prevent emergency situa-
tions from expanding and ensuring the early restoration
of normal operations.
Developing Risk Management System
Toray has established the Group-wide Risk Management
Committee under the CSR Committee in order to moni-
tor the status of company-wide risk reduction efforts in
normal times and to manage the functions of planning
and promotion of company-wide risk management mea-
sures in an integrated manner.
Moreover, the Company has established risk manage-
ment subcommittees at divisions, business offi ces and
plants, and they are engaging in activities to prevent and
reduce risks specifi c thereto.
Group companies are also promoting activities to
reduce risks specifi c to themselves and report the sta-
tus of activities each fi scal year to the Group-Wide Risk
Management Committee.
Under the corporate risk management system intro-
duced in fi scal 2008, we evaluate potential risk factors
that could affect the business operations of Toray Group
from a group-wide perspective. The system is managed
based on the PDCA cycle.
Dealing with Priority Risks
Risk reduction measures relating to priority risks are
implemented by the units responsible for each risk
category, or by working groups. The Group-Wide Risk
Management Committee receives regular reports about
priority risks and assesses progress toward the reduction
of risks after seeking input from the director in charge of
each area. Working groups are established to take action
in relation to the following types of priority risks.
1. Information security risks
Toray continued to use e-learning to provide secu-
rity training. In fi scal 2013, a total of 8,200 employees
have completed this program.
2. Supply-chain risks
Toray Group checked the status of use of confl ict min-
erals with regard to all products manufactured by
the group and ensured that customer inquiries are
answered promptly and effi ciently based on central
management of data.
Crisis Management System
Toray’s Crisis Management Regulations set out basic
principles for a group-wide response to serious risks
affecting Toray Group. The purpose of the regulations is
to ensure a consistent and comprehensive response in a
crisis situation.
The regulations are revised as appropriate so as to
prepare for new risks that may emerge as a result of
change in the social environment.
Security Trade Administration
Toray maintains strict control over exports of all prod-
ucts, equipment, materials and samples and provision
of technologies to overseas entities, with particular
emphasis placed on control over items which are sub-
ject to the list control and whose exports require per-
mission by the Minister of Economy, Trade and Industry,
such as TORAYCA® resin compounds, carbon fi ber com-
posite materials, coatings for semiconductors and water
treatment membranes.
Promotion of Business Continuity Plan (BCP)
We have always regarded major earthquakes as a signifi -
cant risk factor and conducted activities under our Major
Earthquake Business Continuity Plan.
In fi scal 2013, we assumed a scenario in which it
is impossible to establish a Company-Wide Response
Headquarters in Tokyo because the capital has been
directly hit by a major earthquake. Under this sce-
nario, we conducted drills for the establishment of an
emergency Company-Wide Response Headquarters in
Kansai and for the transfer of the response function to
a Company-Wide Response Headquarters in Tokyo after
the restoration of the Tokyo Head Offi ce.
Toray has introduced a system to check the safety and
whereabouts of employees at all of its offi ces and plants
and is also introducing a similar system at affi liated com-
panies in Japan.
In addition, we are continually working to mitigate risk
factors that could affect business continuity by systemati-
cally implementing earthquake-proofi ng of plant buildings,
reviewing continuity planning for corporate functions and
key business operations and identifying potential prob-
lems affecting supply chains for each product.
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Corporate Information
Board of Directors and Corporate Auditors
(As of June 25, 2014)
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Chairman of
the Board
Sadayuki Sakakibara
President and
Representative
Member of
the Board
Akihiro Nikkaku
Executive Vice
President and
Representative Member
of the Board
Eizo Tanaka
Executive Vice
President and
Representative Member
of the Board
Nobuo Suzui
Executive Vice
President and
Representative Member
of the Board
Koichi Abe
Senior Vice President
(Member of the Board & Member
of the Executive Committee)
Senior Vice President
(Member of the Board & Member
of the Executive Committee)
Senior Vice President
(Member of the Board & Member
of the Executive Committee)
Senior Vice President
(Member of the Board & Member
of the Executive Committee)
Senior Vice President
(Member of the Board & Member
of the Executive Committee)
Moriyuki Onishi
Shinichi Okuda
Kazushi Hashimoto
Ryo Murayama
Yukichi Deguchi
Senior Vice
President
(Member of the Board)
Senior Vice
President
(Member of the Board)
Senior Vice
President
(Member of the Board)
Senior Vice
President
(Member of the Board)
Senior Vice
President
(Member of the Board)
Senior Vice
President
(Member of the Board)
Senior Vice
President
(Member of the Board)
Akira Uchida
Shogo Masuda
Akira Umeda
Hiroshi Murakami
Akio Sato
Hiroshi Otani
Satoru Hagiwara
Vice President
(Member of the Board)
Vice President
(Member of the Board)
Vice President
(Member of the Board)
Vice President
(Member of the Board)
Vice President
(Member of the Board)
Vice President
(Member of the Board)
Vice President
(Member of the Board)
Minoru Yoshinaga
Kunihiko Yoshida
Toru Fukasawa
Yasuo Suga
Hirofumi Kobayashi
Masashi Fujita
Kazuhiko Shutou
Vice President
(Member of the Board)
Vice President
(Member of the Board)
Tetsuya Tsunekawa
Kunio Ito*1
Corporate Auditor
Kiyoshi Fukuchi
Corporate Auditor
Motoyuki Yagita
Corporate Auditor
Mitsuaki Yahagi*2
Corporate Auditor
Makoto Matsuo*2
*1 Kunio Ito is outside director.
*2 Mitsuaki Yahagi and Makoto Matsuo are outside corporate auditors.
Organization
(As of July 1, 2014)
Board of Directors
Corporate Strategic Planning Division
President & Executive Vice President
Personnel & Industrial Relations Division
General Administration & Legal Division
Executive Committee &
Board of Senior Vice Presidents
Board of Corporate Auditors
Corporate Auditors
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Finance & Controller’s Division
Investor Relations Dept.
Corporate Communications Dept.
Auditing Dept.
Intellectual Property Division
Information Systems Division
Purchasing & Logistics Division
International Division
Advertising Dept.
Corporate Marketing Planning Dept.
Automotive Material Strategic Planning Dept.
Global Environment Business Strategic Planning Dept.
Life Innovation Business Strategic Planning Dept.
Branch
Affi liated Companies Division
Fibers & Textiles Division
Resins & Chemicals Division
Films Division
Torayca & Advanced Composites Division
Electronic & Information Materials Division
Pharmaceuticals & Medical Products Division
Water Treatment & Environment Division
Product Safety & Quality Assurance Planning Dept.
Regulatory Compliance Division
Technology Center
Manufacturing Division
Engineering Division
Research & Development Division
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Toray Group Worldwide Network
(Major consolidated subsidiaries and affi liates)
(As of March 31, 2014)
Toray Group operates businesses in 25 countries and
regions including Japan.
Consolidated subsidiaries
Subsidiaries accounted
for by equity method
Total subsidiaries
Affi liates accounted
for by equity method
Companies subject to
consolidation
Japan Overseas Total
62
27
89
13
97
159
29
126
56
215
25
38
102
151
253
EUROPE
United Kingdom
Consolidated Subsidiaries
● Toray Textiles Europe Ltd. (TTEL)
■ Toray International U.K. Ltd. (TIUK)
France
Consolidated Subsidiaries
■ ● Toray Films Europe S.A.S. (TFE)
■ Toray Carbon Fibers Europe S.A. (CFE)
Switzerland
Subsidiary Accounted for by Equity Method
● Toray Membrane Europe AG (TMEu)
Italy
Consolidated Subsidiary
● Alcantara S.p.A.
Subsidiary Accounted for by Equity Method
■ Toray International Italy S.r.l. (TIIT)
Czech Republic
Consolidated Subsidiary
● Toray Textiles Central Europe s.r.o. (TTCE)
Germany
Consolidated Subsidiaries
■ Toray International Europe GmbH (TIEU)
Others
ASIA
China
Consolidated Subsidiaries
■ Toray Industries (China) Co., Ltd. (TCH)
● Toray Fibers (Nantong) Co., Ltd. (TFNL)
● Toray Sakai Weaving & Dyeing (Nantong)
Co., Ltd. (TSD)
● Toray Polytech (Nantong) Co., Ltd. (TPN)
● Toray Jifa (Qingdao) Textile Co., Ltd. (TJQ)
■ ● Toray Plastics (China) Co., Ltd. (TPCH)
■ ● Toray Plastics (Shenzhen) Ltd. (TPSZ)
■ ● Toray Plastics (Chengdu) Co., Ltd. (TPCD)
■ ● Toray Plastics Precision (Hong Kong) Ltd.
(TPPH)
■ ● Toray Plastics Precision (Zhongshan) Ltd.
(TPPZ)
■ Toray Industries (H.K.) Ltd. (THK)
■ Toray International (China) Co., Ltd. (TICH)
■ Toray Film Products (Hong Kong) Ltd. (TFH)
■ Toray Film Products (Zhongshan) Ltd. (TFZ)
● Toray BlueStar Membrane Co., Ltd. (TBMC)
■ Toray Medical (Qingdao) Co., Ltd. (TMQ)
Others
Affi liate Accounted for by Equity Method
■ Yihua Toray Polyester Film Co., Ltd. (YTP)
Taiwan
Consolidated Subsidiary
■ Toray Advanced Film Kaohsiung Co., Ltd.
(TAFK)
Subsidiary Accounted for by Equity Method
■ Toray International Taipei Inc. (TITP)
Others
Republic of Korea
Consolidated Subsidiaries
● ■ ● Toray Advanced Materials Korea Inc. (TAK)
● STEMCO, Ltd. (STEMCO)
● ■ ● Toray Chemical Korea Inc. (TCK)
Affi liates Accounted for by Equity Method
● STECO, Ltd. (STECO)
Others
Malaysia
Consolidated Subsidiaries
● Penfabric Sdn. Berhad (PAB)
● ■ ● Penfi bre Sdn. Berhad (PFR)
■ ● Toray Plastics (Malaysia) Sdn. Berhad (TPM)
Others
Subsidiary Accounted for by Equity Method
■ Toray Industries (Malaysia) Sdn. Berhad
(TML)
Affi liate Accounted for by Equity Method
Indonesia
Consolidated Subsidiaries
● P.T. Acryl Textile Mills (ACTEM)
● P.T. Century Textile Industry Tbk (CENTEX)
● P.T. Easterntex (ETX)
● P.T. Indonesia Synthetic Textile Mills (ISTEM)
● P.T. Indonesia Toray Synthetics (ITS)
● P.T. Toray Polytech Jakarta (TPJ)
Subsidiaries Accounted for by Equity Method
■ P.T. Toray Industries Indonesia (TIN)
■ Toray BASF PBT Resin Sdn. Berhad (TBPR)
Others
Singapore
Consolidated Subsidiary
■ Toray International Singapore Pte. Ltd. (TISP)
Japan
Consolidated Subsidiaries
● ■ Ichimura Sangyo, Co., Ltd.
● ■ ● Toray Fine Chemicals Co., Ltd.
■ ● Toyo Plastic Seiko Co., Ltd.
■ ● Toray Advanced Film Co., Ltd.
● Toray KP Films Inc.
● Toray Battery Separator Film Co., Ltd.
■ Soda Aromatic Co., Ltd.
● ● Toray Engineering Co., Ltd.
● Toray Construction Co., Ltd.
● Suido Kiko Kaisha, Ltd.
■ Toray Medical Co., Ltd.
■ Toray Research Center Inc.
■ Toray International, Inc.
■ Chori Co., Ltd.
Others
Subsidiaries Accounted for by Equity Method
■ Toray Carbon Magic Co., Ltd.
■ Toyo Business Support Inc.
Others
Affi liates Accounted for by Equity Method
● ■ ● Du Pont-Toray Co., Ltd.
● Toray Opelontex Co., Ltd.
■ ● Dow Corning Toray Co., Ltd.
■ Sanyo Chemical Industries, Ltd.
Others
Affi liates Accounted for by Equity Method
■ P.T. Petnesia Resindo (PNR)
Others
Thailand
Consolidated Subsidiaries
● Luckytex (Thailand) Public Co., Ltd. (LTX)
● Thai Toray Textile Mills Public Co., Ltd. (TTTM)
● ■ ● Thai Toray Synthetics Co., Ltd. (TTS)
Subsidiary Accounted for by Equity Method
■ Toray Industries (Thailand) Co., Ltd. (TTH)
Affi liate Accounted for by Equity Method
■ Thai PET Resin Co., Ltd. (TPRC)
NORTH AMERICA
U.S.A.
Consolidated Subsidiaries
● Toray Fluorofi bers (America), Inc. (TFA)
● ■ Toray International America Inc. (TIAM)
■ Toray Plastics (America), Inc. (TPA)
■ Toray Resin Co. (TREC)
■ Toray Carbon Fibers America, Inc. (CFA)
■ Toray Composites (America), Inc. (TCA)
■ Zoltek Companies, Inc. (Zoltek)
● Toray Membrane USA, Inc. (TMUS)
Others
■ Regional Supervisory Organization
● Fibers & Textiles
■ Plastics & Chemicals
● IT-related Products
■ Carbon Fiber Composite Materials
● Environment & Engineering
■ Life Science & Other Businesses
■ Trading
Major Offi ces in Japan
Overseas Offi ces and Branches
Osaka Head Offi ce
Nakanoshima Mitsui Building,
3-3, Nakanoshima 3-chome,
Kita-ku, Osaka 530-8222,
Japan
Telephone: 81 (6) 6445-4101
Facsimile: 81 (6) 7688-3774
New York
Toray Industries (America) Inc.
(TAM)
461 Fifth Ave., 9th Fl., New York,
NY 10017, U.S.A.
Telephone: 1 (212) 697-8150
Facsimile: 1 (212) 972-4279
Germany
Toray Industries, Inc., Europe
Offi ce (TEU)
Hugenottenallee 175, 63263
Neu-Isenburg, Germany
Telephone: (49) 6102-7999-1000
Facsimile: (49) 6102-7999-1008
Beijing
Toray Industries, Inc., Beijing
Offi ce
Beijing Fortune Bldg., No. 917, 5,
Dong San Huan Bei-Lu, Chao Yang
District, Beijing 100004, China
Telephone: 86 (10) 6590-8961—3
Facsimile: 86 (10) 6590-8964
Seoul
Toray Industries, Inc., Seoul Offi ce
10th Fl., 155, Mapo-daero, Mapo-gu,
Seoul 121-721, Republic of Korea
Telephone: 82 (2) 707-0381—2
Facsimile: 82 (2) 707-0067
India
Toray Industries (India) Private
Limited (TID)
Unit No. 504, 5th Floor, Vatika City Point,
MG Road Gurgaon, Haryana
122002, India
Telephone: 91 (12) 4387-7900
Facsimile: 91 (12) 4387-7901
Brazil
Toray do Brasil Ltda. (TBL)
Av. Paulista, 1048-Conj 71 Bela Vista
Sao Paulo - SP 01310-100, Brasil
Telephone/Facsimile: 55 (11) 4314-7792
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F I N A N C I A L S e c t i o n
Contents
60 Six-Year Summary of Selected Financial Data
61 Management’s Discussion and Analysis
66 Consolidated Balance Sheets
68 Consolidated Statements of Income
68 Consolidated Statements of Comprehensive Income
69 Consolidated Statements of Changes in Net Assets
70 Consolidated Statements of Cash Flows
71 Notes to Consolidated Financial Statements
102 Independent Auditor’s Report
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Six-Year Summary of Selected Financial Data
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31
Net sales*1
Fibers & Textiles
Plastics & Chemicals
IT-related Products
Millions of yen
2014
2013*2
2012
2011
2010
2009
¥ 1,837,778
¥ 1,592,279 ¥ 1,588,604 ¥ 1,539,693 ¥ 1,359,631 ¥ 1,471,561
755,474
632,150
638,375
584,115
525,204
568,996
470,542
395,835
397,815
382,299
332,735
377,644
245,741
237,593
243,404
262,027
230,433
229,421
Carbon Fiber Composite Materials
113,342
77,620
69,914
67,018
50,676
70,390
Environment & Engineering
180,197
178,355
170,247
178,183
159,787
160,207
Life Science
Others
58,205
14,277
56,599
55,554
52,430
46,656
14,127
13,295
13,621
14,140
—
—
Life Science & Other Businesses
—
—
—
—
—
64,903
Operating income
105,253
83,436
107,721
100,087
40,107
36,006
Income (loss) before income
taxes and minority interests
Net income (loss)
Net cash provided by
operating activities
97,760
77,828
101,091
82,893
(2,415)
(19,751)
59,608
48,477
64,218
57,925
(14,158)
(16,326)
161,455
100,815
104,410
129,214
166,215
38,447
Depreciation and amortization
78,743
67,588
67,443
70,479
74,904
83,764
Capital expenditures
118,207
99,135
98,384
55,942
57,073
92,349
Total assets
2,119,683
1,731,933 1,581,501 1,567,470 1,556,796 1,523,603
Property, plant and equipment, net
781,235
627,240
561,923
531,595
580,344
596,261
Interest-bearing liabilities
654,163
532,002
481,906
493,509
632,160
663,945
Net assets
944,625
778,626
674,149
640,970
518,216
512,610
Yen
Per share of common stock:
Net income (loss):
Basic
Diluted
Cash dividends
Net assets
Ratios:
¥
36.59
¥
29.75 ¥
39.41 ¥
36.41 ¥
(10.12)
¥
(11.66)
35.70
28.90
37.46
34.43
—
10.00
10.00
10.00
7.50
5.00
—
7.50
527.32
444.45
384.90
363.90
336.65
335.04
Operating income to net sales
5.73%
5.24%
6.78%
6.50%
2.95%
2.45%
Net income (loss) to net sales
Equity ratio
Return on equity
3.24
40.5
7.5
3.04
41.8
7.2
Debt/equity ratio (times)
0.76
0.73
4.04
39.7
10.5
0.77
Yen
3.76
37.8
10.9
0.83
(1.04)
30.3
(3.0)
1.34
Common stock price range:
High
Low
¥
786 ¥
654 ¥
631 ¥
643 ¥
591 ¥
584
421
511
420
390
(1.11)
30.8
(3.1)
1.42
694
350
Number of employees
45,881
42,584
40,227
38,740
37,936
37,924
*1 Effective from the year ended March 31, 2011, “Revised Accounting Standard for Disclosures about Segments of an Enterprise and Related Information”
(Accounting Standards Board of Japan (ASBJ) Statement No.17, March 27, 2009) and “Guidance on the Accounting Standard for Disclosures about Segments
of an Enterprise and Related Information” (ASBJ Guidance No.20, March 21, 2008) are applied. Accordingly, segment information for the year ended March 31,
2010 is restated.
*2 Effective from the year ended March 31, 2014, certain overseas subsidiaries applied IAS 19 “Employee Benefi ts” (revised on June 16, 2011). As this change in
accounting policy is applied retrospectively, the related fi nancial data for 2013 refl ect the retrospective application.
Management’s Discussion and Analysis
OVERVIEW
During the period covered by year ended March 31, 2014 (fi s-
cal 2013), the global economy continued to expand gradually,
as consumer spending in the U.S. increased on the back of
improved employment, while the European economy contin-
ued to stagnate despite some signs of recovery and the growth
rate of China and other emerging economies slowed down.
The Japanese economy has been recovering at a gradual pace
with consumer spending and public investment remaining
steady, the private sector’s capital expenditure also showing
signs of recovery and employment situation improving steadily.
Under such circumstances, Toray Group implemented the
growth strategy with focus on pursuing business expansion
in growth business fi elds and growth regions and further bol-
stering its total cost competitiveness in accordance with the
medium-term management program “Project AP-G 2013.”
As a result of these efforts, Toray Group posted a year-on-
year increase in both revenues and earnings.
INCOME ANALYSIS
Net Sales
Consolidated net sales in the year ended March 31, 2014 amount-
ed to ¥1,837.8 billion, up 15.4% or ¥245.5 billion from the previ-
ous fi scal year. Sales increased in all business segments.
Sales by Segment
Fibers & Textiles
Total sales in this segment increased ¥123.3 billion, or 19.5%,
to ¥755.5 billion.
In Japan, while sales of functional apparel applications
grew strongly, those of general apparel applications, though
showing signs of recovery, remained weak. On the other hand,
exports recovered partly due to the correction in the strong
yen. Sales for industrial applications, led by automobile-related
applications, continued on track to recovery.
Overseas, while the conditions continued to be tough with
Europe remaining mired in economic slump and sluggish
domestic demand in China, textile subsidiaries in Southeast
Asia and China pursued sales expansion and a shift towards
high value-added products. Also, while the fl oods in Thailand
that occurred in October 2011 had affected the operations in
the same period a year earlier, the production and sales recov-
ered since then, contributing to the improved performance.
Plastics & Chemicals
Total sales in this segment increased ¥74.7 billion, or 18.9%,
to ¥470.5 billion.
Though sales for automotive applications in the resin busi-
ness increased in Japan, those for electronics and general
industrial applications remained weak. Overseas, automotive
applications in North America, China and Southeast Asia led
the sales expansion.
Net Sales by Segment
(Billions of yen)
2,000
1,837.8
1,592.3
1,588.6
1,539.7
1,500
1,471.6
1,359.6
1,000
500
0
Operating Income by Segment
(Billions of yen)
150
107.7
105.3
100.1
83.4
40.1
36.0
120
90
60
30
0
-30
Mar/
‘09
‘10
‘11
‘12
‘13
‘14
Mar/
‘09
‘10
‘11
‘12
‘13
‘14
(cid:81) Fibers & Textiles (cid:81) Plastics & Chemicals (cid:81) IT-related Products
(cid:81) Carbon Fiber Composite Materials (cid:81) Environment & Engineering
(cid:81) Life Science & Other Businesses (cid:81) Life Science (cid:81) Others
(cid:81) Fibers & Textiles (cid:81) Plastics & Chemicals (cid:81) IT-related Products
(cid:81) Carbon Fiber Composite Materials (cid:81) Environment & Engineering
(cid:81) Life Science & Other Businesses (cid:81) Life Science (cid:81) Others
(cid:81) Elimination & Corporate (cid:81) Adjustment
*1 Effective from the year ended March 31, 2011, “Revised Accounting Standard for Disclosures about Segments of an Enterprise and Related Information”
(ASBJ Statement No.17 of March 27, 2009) and “Guidance on the Accounting Standard for Disclosures about Segments of an Enterprise and Related
Information” (ASBJ Guidance No.20 of March 21, 2008) are applied. Accordingly, segment Information for the year ended March 31, 2010 is restated.
*2 Operating income by segment that is not attributable to any segment is included in “Elimination & Corporate” for the fi scal year ended March 31, 2009, and
included in “Adjustment” for the fi scal years ended March 31, 2010, 2011, 2012, 2013 and 2014 respectively.
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Demand for the fi lm business’s products remained slug-
gish on the whole within and outside Japan, with continued
price competition, even though domestic sales for capacitors
used in hybrid cars remained strong.
Also, trading subsidiaries expanded their business transactions
on the back of market recovery and strong overseas business.
IT-related Products
Total sales in this segment increased ¥8.1 billion, or 3.4%, to
¥245.7 billion.
The sales of products for small and mid-sized displays such
as smartphones and tablet terminals in general were strong,
although they were partly affected by the production adjust-
ment of end products in the second half. Sales of fi lms and
processed fi lm products for large LCD panels, after perform-
ing strongly in the fi rst half, were infl uenced by stagnating
demand for fl at-screen TV sets in the second half.
Carbon Fiber Composite Materials
Total sales in this segment increased ¥35.7 billion, or 46.0%,
to ¥113.3 billion.
As demand for aircrafts as well as that in the environment
and energy fi elds including compressed natural gas tank appli-
cations expanded, sales of carbon fi bers and intermediate
products (prepreg) grew strongly for aerospace applications
and general industrial applications. In the composite business,
sales of carbon fi ber reinforced plastic chassis for notebook
PCs, which boast high strength and light weight, increased.
Environment & Engineering
Total sales in this segment increased ¥1.8 billion, or 1.0%, to
¥180.2 billion.
While the market for water treatment membranes has not
yet fully recovered refl ecting continued uncertainties over the
global economic outlook, shipment of reverse osmosis mem-
branes to the Middle East was strong at the Company. Among
domestic subsidiaries, the progress of plant construction proj-
ects remained slow at an engineering subsidiary.
Life Science
Total sales in this segment increased ¥1.6 billion, or 2.8%, to
¥58.2 billion.
Sales of REMITCH®*, an oral anti-pruritus drug for hemo-
dialysis patients, expanded robustly, though other pharma-
ceutical products were affected by intensifying competition
and royalty income on some products decreased. In medi-
cal devices, sales in Japan as well as exports of FlLTRYZER®,
polymethylmethacrylate (PMMA) dialysis membrane-based
hemodialyzer, and TORAYSULFONE®, polysulfone membrane
artifi cial kidneys, grew strongly.
*REMITCH® is a registered trademark of Torii Pharmaceutical Co., Ltd.
Others
Net sales increased ¥0.2 billion, or 1.1%, to ¥14.3 billion.
Costs and Expenses
The ratio of total costs and expenses to net sales for the year
was 94.3%, down 0.5 percentage points from the previous fi s-
cal year.
Consolidated net sales increased 15.4% year on year, and
cost of sales increased 16.0%. As a result, the cost of sales
ratio increased 0.4 percentage points to 80.8%.
Selling, general and administrative expenses increased
¥19.2 billion, or 8.4%, to ¥247.4 billion. The ratio of selling,
general and administrative expenses to net sales decreased
0.9 percentage points to 13.5%.
R&D expenses increased ¥2.2 billion, or 4.0%, to ¥55.5 billion.
Operating Income and Net Income
Consolidated operating income increased ¥21.8 billion or 26.1%
from the previous fi scal year, to ¥105.3 billion, and the ratio of
operating income to net sales rose 0.5 percentage point to 5.7%.
Operating income rose in all segments but Plastics &
Chemicals and Life Science.
Fibers & Textiles segment operating income rose ¥9.7
billion or 22.4% year on year to ¥52.9 billion supported by
increased sales and a shift to high value-added products at the
textile subsidiaries in Southeast Asia and China as well as the
low comparison base due to the impact on last year’s perfor-
mance from the fl oods in Thailand.
Operating income in the Plastics & Chemicals segment
dipped by ¥0.3 billion or 1.6% to ¥18.0 billion. The resin busi-
ness recorded brisk sales for automotive applications in Japan,
but results were tempered by higher materials costs related to
the correction of the strong yen. Film business sales struggled
against weak overall demand in Japan and overseas along with
ongoing price competition.
IT-related Products segment operating income rose ¥1.6 bil-
lion or 7.1% to ¥24.6 billion supported by generally solid sales
of small and mid-sized display materials for smartphones, tab-
let computers, and other products.
The Carbon Fiber Composite Materials segment generated a
¥9.6 billion or 131.9% increase in operating income to ¥16.9 bil-
lion. Sales of carbon fi bers and intermediate products (prepreg)
for aircraft, aerospace, and general industrial applications were
brisk amid growing demand for aircrafts as well as that in the
environment and energy fi elds including compressed natural gas
tank applications.
Operating income in the Environment & Engineering seg-
ment rose ¥3.8 billion or 143.4% to ¥6.4 billion supported
by strong shipments of reverse osmosis membranes to the
Middle East and other products by the water treatment mem-
branes business.
The Life Science segment posted a ¥1.9 billion or 24.8%
decline in operating income to ¥5.6 billion due mainly to inten-
sifying competition and decreased license fee revenue in med-
ical products.
Operating income of Others rose ¥0.4 billion or 27.6% to
¥2.0 billion.
In net other income (expenses), Toray Group reported
¥7.5 billion in expenses, a ¥1.9 billion year-on-year increase.
Interest and dividend income increased ¥0.5 billion over the
previous fi scal year to ¥3.8 billion, while interest expense fell
¥0.6 billion to ¥4.9 billion. This led to a ¥1.1 billion improve-
ment in net fi nancial expenses to ¥1.1 billion. Equity in earn-
ings of unconsolidated subsidiaries and affi liated companies
increased ¥0.3 billion to ¥7.7 billion. Loss on impairment of
fi xed assets increased ¥12.4 billion year on year to ¥14.4 bil-
lion. Loss on sales and disposal of property, plant and equip-
ment, net, increased by ¥0.8 billion to ¥5.2 billion.
As a result of the above, income before income taxes and
minority interests increased ¥19.9 billion to ¥97.8 billion. After
deductions for income taxes and minority interests in earnings
of consolidated subsidiaries, net income amounted to ¥59.6
billion, up ¥11.1 billion from the previous fi scal year.
Net income per share was ¥36.59, an increase of ¥6.84.
The Company declared a year-end cash dividend of ¥5.00 per
share in light of the profi t conditions for the year under review
and the profi t outlook for the next fi scal term. Added to the
interim cash dividend, this brought the total annual dividend to
¥10.00 per share.
FINANCIAL POSITION
Assets
Total assets on March 31, 2014, stood at ¥2,119.7 billion, up
¥387.8 billion or 22.4% from the end of the previous fi scal year.
This was mainly due to the increases in trade receivables, in inven-
tories and in property, plant and equipment, net of depreciation.
Total Assets and Net Assets
(Billions of yen)
2,400
(%)
80
2,119.7
1,800
1,200
1,731.9
60
1,523.6
1,556.8 1,567.5 1,581.5
39.7
41.8
37.8
40.5
40
944.6
30.8
30.3
778.6
518.2
641.0
674.1
600
512.6
0
Mar/
‘09
‘10
‘11
‘12
‘13
‘14
(cid:81) Total Assets (cid:81) Net Assets —Equity Ratio
20
0
* Effective from the year ended March 31, 2014, certain overseas subsidiar-
ies applied IAS 19 “Employee Benefi ts” (revised on June 16, 2011). As this
change in accounting policy is applied retrospectively, the related fi nancial
data for 2013 refl ect the retrospective application.
Current Assets
Current assets were up 15.5%, or ¥123.6 billion, to ¥920.4
billion. Trade receivables were up 14.2%, or ¥43.9 billion, to
¥352.1 billion. Inventories rose to ¥370.8 billion, up ¥57.1 bil-
lion or 18.2%.
Property, Plant and Equipment
Property, plant and equipment, net of depreciation compared
with the end of the previous fi scal year grew 24.6%, or ¥154.0
billion, to ¥781.2 billion. Capital expenditures totaled ¥113.9
billion, up 16.2% or ¥15.9 billion based on our policy of invest-
ing selectively in prospective growth areas while streamlining
and modernizing production facilities to enhance production
effi ciency.
In the Fibers & Textiles segment, capital expenditures totaled
¥26.1 billion, which included additional polypropylene spun-
bond production facilities at Toray Polytech (Nantong) Co.,
Ltd. In the Plastics & Chemicals segment, capital expenditures
amounted to ¥18.2 billion, which included new PPS resin pro-
duction facilities at Toray Advanced Materials Korea Inc. Capital
expenditures in the IT-related Products segment were ¥17.2
billion, which included additional polyethylene fi lm production
facilities at Toray Battery Separator Film Co., Ltd. In the Carbon
Fiber Composite Materials segment, capital expenditures
amounted to ¥38.5 billion, which included additional carbon
fi ber production facilities at Toray Carbon Fibers Europe S.A. In
the Environment & Engineering segment, capital expenditures
amounted to ¥3.2 billion. In the Life Science segment, capital
expenditures amounted to ¥8.7 billion, which included new dia-
lyzer production facilities at Toray Medical (Qingdao) Co., Ltd.
Liabilities
Total liabilities increased ¥221.8 billion, or 23.3%, to ¥1,175.1
billion. A major factor was the increase in total interest-bearing
liabilities—consisting of short-term bank loans, current portion
of long-term debt, commercial paper, long-term debt and lease
obligations—up ¥122.2 billion, or 23.0%, to ¥654.2 billion.
Net Assets
Net assets came to ¥944.6 billion and net assets less minor-
ity interests in consolidated subsidiaries and stock acquisition
rights stood at ¥859.0 billion. As a result, net assets per share
increased ¥82.87 to ¥527.32. The equity ratio fell 1.3 percent-
age points to 40.5%, while the debt/equity ratio worsened by
0.03 point to 0.76.
CASH FLOWS
In the year ended March 31, 2014, net cash used in invest-
ing activities exceeded net cash provided by operating activi-
ties by ¥53.4 billion. On the other hand, net cash provided by
fi nancing activities was ¥41.5 billion due mainly to an increase
in interest-bearing liabilities. Including fl uctuations in foreign
currency exchange rates, cash and cash equivalents at fi scal
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year-end stood at ¥113.1 billion, up ¥5.4 billion or 5.1% from
the end of the previous fi scal year.
Cash Flows from Operating Activities
Net cash provided by operating activities amounted to ¥161.5
billion, up ¥60.6 billion from the previous fi scal year. Major
factors for provision of cash include income before income
taxes and minority interests of ¥97.8 billion and depreciation
and amortization of ¥78.7 billion, while major factors for use
of cash include an increase in inventories of ¥18.9 billion, and
income taxes paid of ¥23.2 billion.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥214.8 billion,
up ¥107.3 billion from the previous fi scal year. Main factors
include capital expenditures of ¥112.9 billion.
Cash Flows from Financing Activities
Net cash provided by fi nancing activities was ¥41.5 billion, up
¥15.3 billion from the previous fi scal year. Main factors include
proceeds from long-term debt of ¥170.1 billion, which con-
trasted with repayment of long-term debt of ¥100.3 billion and
cash dividends paid of ¥17.4 billion.
BUSINESS RISKS
Operational and other risks faced by Toray Group that could
have a major infl uence on the decisions of investors are
described below. Toray Group works constantly to avoid such
potential risks, minimize their impact, and build a system to
enable swift responses and accurate information disclosure
on the occurrence of unforeseen situations. Please note that
the risks described below are those identifi ed by Toray Group
when this annual report was produced, and do not represent
all the operational and other risks that could affect Toray Group.
(1) Domestic and overseas demand and market trends
As a supplier of basic materials to a broad range of industries,
Toray Group is exposed to various factors that could cause a
sharp drop in demand for its products. These include changes
in both worldwide and regional supply-demand conditions,
increased use of substitute materials, and changes to the pur-
chasing policies of business partners. In addition to severe
competition with other companies, Toray Group’s various busi-
nesses also face the risk of new players entering the market.
Price fl uctuations, stemming from the reduction of National
Health Insurance (NHI) drug prices and reimbursement prices,
also affect the pharmaceuticals and medical products busi-
ness. Although Toray Group takes steps to maintain its com-
petitive advantage, a decline in demand for, or falling prices of,
such items, or the appearance of a credit risk affecting Toray
Group’s business partners, could have a negative impact on
Toray Group’s results of operations and fi nancial conditions.
(2) Rising prices of fuel and raw materials
The prices of petrochemical raw materials and fuel used by
Toray Group are subject to signifi cant fl uctuations. If Toray
Group is unable to fully pass the increases in such prices on
to its product prices, or cannot raise its product prices due to
lack of progress in shifting to high-value-added products, its
results of operations and fi nancial conditions could be nega-
tively affected.
.
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Interest-bearing Liabilities and D/E Ratio
(Billions of yen)
700
663.9
(Times)
1.60
654.2
632.2
1.42
1.34
493.5
481.9
532.0
0.83
0.77
0.73
0.76
Cash Flows
(Billions of yen)
200
166.2
1.40
1.20
1.00
0.80
0.60
0.40
0.20
150
100
50
0
-50
-100
-150
-200
-250
161.5
129.2
104.4
100.8
78.5
38.4
-74.9
44.5
0.4
-6.7
-50.7
-53.4
-113.4
-121.7
-104.0 -107.5
-214.8
600
500
400
300
200
100
0
Mar/
‘09
‘10
‘11
‘12
‘13
‘14
Mar/
‘09
‘10
‘11
‘12
‘13
‘14
(cid:81) Interest-bearing Liabilities
—D/E Ratio
(cid:81) Cash Flows from Operating Activities
(cid:81) Cash Flows from Investing Activities
—Free Cash Flows
(3) Capital expenditures, joint ventures,
— Unforeseen introduction, changes or abolition of laws and
alliances and acquisitions
Toray Group makes capital expenditures in a wide range of
business fi elds. Its other activities include formation of various
joint ventures or strategic alliances with third parties, as well
as business acquisitions.
When Toray Group becomes involved in capital expendi-
tures, joint ventures, alliances and acquisitions, it considers the
potential for profi tability and return on investment. However,
there is not necessarily any guarantee that the outcome will be
consistent with expectations. If unforeseen market changes
or signifi cant discrepancies between actual results and initial
business plans occur due to sudden changes in the operat-
ing environment, there could be a loss on impairment of fi xed
assets or equity in losses of unconsolidated subsidiaries and
affi liated companies. As a result, Toray Group’s results of oper-
ations and fi nancial conditions could be negatively affected.
(4) Foreign currency, interest rate and
securities market fl uctuations
Foreign currency exchange rate fl uctuations affect Toray
Group’s consolidated fi nancial statements when the fi nancial
statements of the overseas operations presented in local cur-
rencies are translated into yen. Toray Group takes measures,
such as entering forward exchange contracts, to alleviate risks
associated with transactions denominated in foreign curren-
cies. However, unforeseen exchange rate fl uctuations could
have an impact on Toray Group’s results of operations and
fi nancial conditions.
Moreover, rapid and unforeseen changes in interest rates
and other aspects of fi nancial market turmoils, as well as
changes in the value of securities and pension assets held by
Toray Group, may have an impact on Toray Group’s results of
operations and fi nancial conditions.
(5) Changes in assumptions on which forecasts are
based that might affect employee retirement benefi t
obligations and deferred tax assets
Toray’s consolidated fi nancial statements contain employee
retirement benefi t obligations based on future pension pay-
ments calculated in accordance with certain criteria, as well
as deferred tax assets stated according to likely tax refunds
based on taxable income estimates for the future fi scal years.
However, if changes in the criteria used to calculate pension
payments were to occur, or if fl uctuations arose in the esti-
mates of future taxable income, Toray Group’s results of oper-
ations and fi nancial conditions could be affected.
(6) Overseas operations
Toray Group is developing a broad geographical presence,
with operations in various countries of Asia, Europe, and the
Americas. Some of the major potential risks associated with
various regions are summarized below. If such risks were to
become reality, Toray Group’s results of operations and fi nan-
cial conditions could be negatively affected.
regulations such as changes in taxation systems
— Unforeseen economic or political events
— Social upheaval, including acts of terror or war
(7) Product liability
Toray Group strives to supply the world’s best-in-class product
quality. However, it cannot always guarantee against a major
unforeseen quality problem. If quality-related serious situa-
tions were to occur, Toray Group’s results of operations and
fi nancial conditions could be negatively affected.
(8) Lawsuits
In the course of conducting its wide range of business activ-
ities, Toray Group faces the risk of being targeted by legal
action pertaining to various matters such as intellectual prop-
erty, product liability, environment, and labor issues. If Toray
Group were subject to a major lawsuit, its results of operations
and fi nancial conditions could be negatively affected.
(9) Laws and regulations, taxes, competition policies and
internal controls
Various laws and regulations apply in the countries and
regions where Toray Group conducts its business. These
laws and regulations include regulations related to the envi-
ronment, commercial trading, labor, intellectual property, taxa-
tion and foreign exchange, investment approval protocols and
import/export controls, and policies on competition based on
antitrust laws. Through the establishment and maintenance
of internal control systems, Toray Group endeavors to comply
with all such laws and regulations. However, changes to such
laws and regulations, including the introduction of new envi-
ronmental regulations and taxes, as well as changes to the
corporate income tax rate could affect Toray Group’s results
of operations and fi nancial conditions. Also, if Toray Group is
judged as having violated such laws and regulations, is sub-
ject to government sanctions initiated by a fair trade commis-
sion, receives a notice of correction from tax authorities, has
an employee who engages in illicit behavior, or is unable to
uphold internal controls pertaining to fi nancial statements, its
results of operations and fi nancial conditions could be nega-
tively affected.
(10) Natural disasters and accidents
Toray Group places top priority on safety, accident prevention,
and environmental preservation. To minimize losses caused
by the suspension of production, Toray Group conducts regu-
lar accident prevention inspections, maintenance of its manu-
facturing facilities, and safety activities. However, the advent
of a major natural disaster or unprecedented accident could
cause damage to Toray Group’s manufacturing facilities, or
could cause inadequate supply of raw materials, which could
have a negative impact on its results of operations and fi nan-
cial conditions.
.
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Consolidated Balance Sheets
Toray Industries, Inc. and Consolidated Subsidiaries
March 31, 2014 and 2013
Assets
Current assets:
Cash (Notes 4 and 5)
Time deposits (Notes 4 and 5)
Trade receivables (Notes 4, 5 and 7):
Notes receivable
Accounts receivable
Inventories (Notes 3 and 4)
Deferred tax assets (Note 10)
Prepaid expenses and other current assets (Notes 5 and 6)
Allowance for doubtful accounts
Total current assets
.
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Property, plant and equipment (Notes 4 and 13):
Land
Buildings
Machinery and equipment
Construction in progress
Accumulated depreciation
Property, plant and equipment, net
Intangible assets (Note 13):
Goodwill
Other
Total intangible assets
Investments and other assets:
Millions of yen
Thousands of
U.S. dollars (Note 2)
2014
2013
2014
¥
80,582 ¥
87,276
$
782,350
33,556
21,390
325,786
25,685
32,747
326,409
275,483
370,822
313,707
25,600
21,405
60,204
46,852
(2,493)
(2,128)
249,369
3,169,019
3,600,214
248,544
584,505
(24,204)
920,365
796,732
8,935,583
76,403
69,672
547,810
489,399
741,777
5,318,544
1,819,635 1,572,900
17,666,359
97,810
62,998
949,612
2,541,658 2,194,969
24,676,291
(1,760,423) (1,567,729)
(17,091,485)
781,235
627,240
7,584,806
72,300
29,767
27,784
12,853
100,084
42,620
701,942
269,748
971,689
Investments in unconsolidated subsidiaries and affi liated companies (Note 5)
100,643
78,031
Investment securities (Notes 4, 5 and 6)
Long-term loans receivable
Deferred tax assets (Note 10)
Other (Note 8)
Allowance for doubtful accounts
Total investments and other assets
146,232
120,851
1,551
929
21,441
19,502
50,454
48,144
(2,322)
(2,116)
977,117
1,419,728
15,058
208,165
489,845
(22,544)
317,999
265,341
3,087,369
Total assets
¥ 2,119,683 ¥ 1,731,933
$ 20,579,447
See accompanying notes to consolidated fi nancial statements.
Liabilities and Net Assets
Current liabilities:
Millions of yen
Thousands of
U.S. dollars (Note 2)
2014
2013
2014
Short-term bank loans (Notes 4, 5 and 7)
¥ 131,444 ¥
98,633
$ 1,276,155
Current portion of long-term debt (Notes 4, 5 and 7)
Commercial paper (Note 5)
Trade payables (Notes 5 and 7):
Notes payable
Accounts payable
Income taxes payable (Note 10)
Accrued liabilities
Other current liabilities (Notes 4 and 10)
Total current liabilities
77,201
98,225
10,000
30,000
33,403
31,077
176,062
154,850
16,411
9,764
52,439
45,593
99,622
82,136
749,524
97,087
324,301
1,709,340
159,330
509,117
967,204
596,582
550,278
5,792,058
Long-term debt (Notes 4, 5 and 7)
428,932
302,739
4,164,388
Deferred tax liabilities (Note 10)
20,758
9,048
201,534
Accrued employees’ retirement benefi ts (Note 8)
—
69,359
—
Net defi ned benefi t liability (Note 8)
93,172
—
904,583
Customers’ guarantee deposits and other liabilities (Note 4)
35,614
21,883
345,767
Total liabilities
1,175,058
953,307
11,408,330
Commitments and contingent liabilities (Note 12)
Net assets (Note 11):
Stockholders’ equity:
Common stock:
Authorized—4,000,000,000 shares
Issued—1,631,481,403 shares
Capital surplus
Retained earnings
Treasury stock, at cost
Total stockholders’ equity
Accumulated other comprehensive income:
Net unrealized gains on securities
Net deferred losses on hedges
Foreign currency translation adjustments
Remeasurements of defi ned benefi t plans
Total accumulated other comprehensive income
Stock acquisition rights (Note 9)
Minority interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets
147,873
147,873
136,735
136,748
505,834
462,536
1,435,660
1,327,524
4,911,010
(1,455)
(1,170)
(14,126)
788,987
745,987
7,660,068
49,546
35,388
(508)
(883)
37,664
(55,515)
(16,688)
(816)
70,014
(21,826)
991
566
84,633
53,899
481,029
(4,932)
365,670
(162,019)
679,748
9,621
821,680
944,625
778,626
9,171,117
¥ 2,119,683 ¥ 1,731,933
$ 20,579,447
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(47,515)
36,835
74,757
(50,883)
(139,709)
3,495
50,272
(72,748)
949,126
257,845
54,767
312,612
636,515
(57,796)
Consolidated Statements of Income
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Net sales
Costs and expenses:
Millions of yen
Thousands of
U.S. dollars (Note 2)
2014
2013
2014
¥ 1,837,778 ¥ 1,592,279
$ 17,842,505
Cost of sales (Notes 3, 8, 13 and 14)
1,485,171 1,280,649
14,419,136
Selling, general and administrative expenses (Notes 8, 13 and 14)
247,354
228,194
2,401,495
1,732,525 1,508,843
16,820,631
105,253
83,436
1,021,874
Operating income
Other income (expenses):
Interest expense
Interest and dividend income
Equity in earnings of unconsolidated subsidiaries and affi liated companies
Loss on sales and disposal of property, plant and equipment, net
Loss on impairment of fi xed assets
Gain on sales and loss on write-down of investment securities, net
Other, net
(4,894)
(5,460)
3,794
7,700
(5,241)
(14,390)
360
5,178
(7,493)
3,247
7,431
(4,444)
(1,972)
(1,267)
(3,143)
(5,608)
Income before income taxes and minority interests
97,760
77,828
Income taxes (Note 10):
Current
Deferred
Income before minority interests
Minority interests in earnings of consolidated subsidiaries
26,558
17,876
5,641
32,199
65,561
8,870
26,746
51,082
(5,953)
(2,605)
Net income
¥
59,608 ¥
48,477
$
578,718
See accompanying notes to consolidated fi nancial statements.
Consolidated Statements of Comprehensive Income
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Income before minority interests
Other comprehensive income (Note 16)
Net unrealized gains on securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defi ned benefi t plans
Share of other comprehensive income of unconsolidated subsidiaries and
affi liated companies accounted for by the equity method
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Minority interests
See accompanying notes to consolidated fi nancial statements.
Millions of yen
Thousands of
U.S. dollars (Note 2)
2014
2013
2014
¥ 65,561
¥ 51,082
$ 636,515
13,951
332
94,354
(82)
14,981
(807)
52,466
(508)
135,447
3,223
916,058
(796)
5,212
2,607
50,602
113,767
68,739
1,104,534
¥ 179,328
¥ 119,821
$ 1,741,049
¥ 167,273
¥ 113,675
$ 1,624,010
12,055
6,146
117,039
Consolidated Statements of Changes in Net Assets
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Stockholders’ equity
Accumulated other comprehensive income
Millions of yen
Common
stock
Capital
surplus
Retained
earnings
Treasury
stock,
at cost
Total
stockholders’
equity
Net
unrealized
gains on
securities
Net
deferred
losses on
hedges
Foreign
currency
translation
adjustments
Remeasure-
ments of
defi ned
benefi t plans
Total
accumulated
other compre-
hensive
income
Stock
acquisition
rights
Minority
interests in
consolidated
subsidiaries
Total net
assets
Balance as of April 1, 2012
¥147,873 ¥136,740 ¥430,365
¥(1,194) ¥713,784
¥20,659
¥ (78) ¥(107,254) ¥ — ¥(86,673)
¥287 ¥46,751 ¥674,149
Cumulative effect of
changes in accounting
policies
(351)
(351)
(130)
(481)
Restated balance
147,873 136,740 430,365
(1,194)
713,784
20,659
(78)
(107,254)
(351)
(87,024)
287
46,621 673,668
Changes in:
Dividends
Net income
Acquisition of treasury stock
Disposition of treasury stock
Other
Items other than
stockholders’ equity, net
(16,302)
48,477
8
(4)
(16,302)
48,477
(36)
68
(4)
(36)
60
(16,302)
48,477
(36)
68
(4)
14,729
(805)
51,739
(465)
65,198
279
7,278
72,755
Total changes
—
8
32,171
24
32,203
14,729
(805)
51,739
(465)
65,198
279
7,278 104,958
Balance as of March 31, 2013 ¥147,873 ¥136,748 ¥462,536
¥(1,170) ¥745,987
¥35,388
¥(883) ¥ (55,515) ¥ (816) ¥(21,826)
¥566 ¥53,899 ¥778,626
Balance as of April 1, 2013
¥147,873 ¥136,748 ¥462,536
¥(1,170) ¥745,987
¥35,388
¥(883) ¥ (55,515) ¥ (816) ¥(21,826)
¥566 ¥53,899 ¥778,626
Changes in:
Dividends
Net income
Acquisition of treasury stock
Disposition of treasury stock
Other
Items other than
stockholders’ equity, net
(16,300)
59,608
(13)
(10)
(16,300)
59,608
(394)
96
(10)
(394)
109
(16,300)
59,608
(394)
96
(10)
14,158
375
93,179
(15,872)
91,840
425
30,734 122,999
Total changes
—
(13)
43,298
(285)
43,000
14,158
375
93,179
(15,872)
91,840
425
30,734 165,999
Balance as of March 31, 2014 ¥147,873 ¥136,735 ¥505,834
¥(1,455) ¥788,987
¥49,546
¥(508) ¥ 37,664 ¥(16,688)
¥ 70,014
¥991 ¥84,633 ¥944,625
Stockholders’ equity
Accumulated other comprehensive income
Thousands of U.S. dollars (Note 2)
Common
stock
Capital
surplus
Retained
earnings
Treasury
stock,
at cost
Total
stockholders’
equity
Net
unrealized
gains on
securities
Net
deferred
losses on
hedges
Foreign
currency
translation
adjustments
Remeasure-
ments of
defi ned
benefi t plans
Total
accumulated
other compre-
hensive
income
Stock
acquisition
rights
Minority
interests in
consolidated
subsidiaries
Total net
assets
Balance as of April 1, 2013
$1,435,660 $1,327,650 $4,490,641
$(11,359) $7,242,592
$343,573
$(8,573)
$ (538,981) $ (7,922)
$ (211,903)
$5,495
$ 523,291 $ 7,559,476
Changes in:
Dividends
Net income
Acquisition of treasury stock
Disposition of treasury stock
Other
Items other than
stockholders’ equity, net
(158,252)
578,718
(126)
(97)
(158,252)
578,718
(3,825)
932
(97)
(3,825)
1,058
(158,252)
578,718
(3,825)
932
(97)
137,456
3,641
904,650
(154,097)
891,650
4,126
298,388
1,194,165
Total changes
—
(126)
420,369
(2,767)
417,476
137,456
3,641
904,650
(154,097)
891,650
4,126
298,388
1,611,641
Balance as of March 31, 2014
$1,435,660 $1,327,524 $4,911,010
$(14,126) $7,660,068
$481,029
$(4,932)
$ 365,670
$(162,019)
$ 679,748
$9,621
$821,680 $9,171,117
See accompanying notes to consolidated fi nancial statements.
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Consolidated Statements of Cash Flows
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Cash fl ows from operating activities:
Income before income taxes and minority interests
¥ 97,760
¥ 77,828
$ 949,126
Millions of yen
Thousands of
U.S. dollars (Note 2)
2014
2013
2014
Adjustments to reconcile income before income taxes and
minority interests to net cash provided by operating activities:
Depreciation and amortization
Loss on impairment of fi xed assets
Interest and dividend income
Equity in earnings of unconsolidated subsidiaries and affi liated companies
Interest expense
Loss on sales and disposal of property, plant and equipment, net
Gain and loss on sales and loss on write-down of investment securities, net
Insurance income
Increase in accrued employees’ retirement benefi ts
Increase in net defi ned benefi t liability
Increase in trade receivables
Increase in inventories
Decrease in trade payables
Other, net
Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Proceeds from insurance
78,743
14,390
(3,794)
(7,700)
4,894
5,241
(343)
(6,818)
—
3,066
(6,330)
(18,908)
(1,582)
15,933
67,588
1,972
(3,247)
(7,431)
5,460
4,444
1,442
(274)
1,844
—
(10,223)
(4,473)
(5,170)
(12,364)
764,495
139,709
(36,835)
(74,757)
47,515
50,883
(3,330)
(66,194)
—
29,767
(61,456)
(183,573)
(15,359)
154,689
174,552
117,396
1,694,680
8,208
(4,962)
9,647
(5,565)
(23,161)
(20,937)
6,818
274
79,689
(48,175)
(224,864)
66,194
Net cash provided by operating activities
161,455
100,815
1,567,524
Cash fl ows from investing activities:
Capital expenditures
Purchases of investment securities
Proceeds from sales of property, plant and equipment
Proceeds from sales of investment securities
Acquisition of shares of consolidated subsidiaries resulting in
change in scope of consolidation
Additional acquisition of shares of consolidated subsidiaries
Other, net
(112,905)
(105,093)
(1,096,165)
(10,513)
2,057
954
(91,391)
—
(3,028)
(1,951)
1,635
257
(1,328)
(374)
(671)
(102,068)
19,971
9,262
(887,291)
—
(29,398)
Net cash used in investing activities
(214,826)
(107,525)
(2,085,689)
Cash fl ows from fi nancing activities:
Net decrease in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Cash dividends paid
Other, net
Net cash provided by fi nancing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
(9,716)
(5,788)
(94,330)
170,139
101,565
1,651,835
(100,266)
(17,357)
(1,325)
41,475
17,343
5,447
(53,806)
(17,210)
1,406
26,167
6,811
26,268
(973,456)
(168,515)
(12,864)
402,670
168,379
52,883
Cash and cash equivalents at beginning of year
107,690
81,289
1,045,534
Beginning balance of cash and cash equivalents at subsidiaries
not previously included in consolidation
—
133
—
Cash and cash equivalents at end of year
¥ 113,137
¥ 107,690
$ 1,098,417
See accompanying notes to consolidated fi nancial statements.
Notes to Consolidated Financial Statements
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
1. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presenting Consolidated Financial Statements
The accompanying consolidated fi nancial statements of Toray
Industries, Inc. (the “Company”) and its consolidated subsid-
iaries have been prepared in accordance with the provisions
set forth in the Financial Instruments and Exchange Law of
Japan and its related accounting regulations, and in conformity
with accounting principles and practices generally accepted
in Japan, which are different in certain respects as to appli-
cation and disclosure requirements of International Financial
Reporting Standards.
For the preparation of consolidated fi nancial statements,
the accounting policies and procedures applied to a par-
ent company and its subsidiaries for similar transactions and
events under similar circumstances should be unifi ed, in princi-
ple. However, fi nancial statements prepared by overseas sub-
sidiaries in accordance with International Financial Reporting
Standards or the generally accepted accounting principles in
the United States tentatively may be used for the consolida-
tion process. In addition, some items should be adjusted in
the consolidation process so that net income is accurately
accounted for, unless they are not material.
Certain items presented in the original consolidated fi nan-
cial statements in Japanese have been reclassifi ed for the con-
venience of readers outside Japan.
b) Principles of Consolidation
The accompanying consolidated fi nancial statements include the
accounts of the Company and substantially all of its subsidiaries.
Assets and liabilities of the consolidated subsidiaries are
revalued to fair market value when the majority interest in the
subsidiaries is purchased.
Investments in unconsolidated subsidiaries and affi liated
companies are accounted for by the equity method.
All intercompany accounts and transactions have been elim-
inated in consolidation. The difference between the acquisition
cost and the underlying net assets of the subsidiaries is recog-
nized as goodwill and amortized principally over its estimated
useful life not exceeding twenty years on a straight-line method.
c) Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2014 and 2013 include
cash, short-term time deposits which may be withdrawn on
demand without diminution of principal and highly liquid
investments with original maturities of three months or less.
Cash and cash equivalents consisted of:
Millions of yen
Thousands of
U.S. dollars
2014
2013
2014
Cash
¥ 80,582 ¥ 87,276 $ 782,350
Time deposits
33,556 21,390 325,786
Less — Time deposits with
maturities of over 3 months
(1,001)
(976)
(9,718)
Cash and cash equivalents
¥ 113,137 ¥ 107,690 $ 1,098,417
d) Financial Instruments
Derivatives:
All derivatives are stated at fair value, with changes in fair
value included in net income or loss for the period in which
they arise, except for derivatives that are designated as
“hedging instruments” (see Hedge Accounting below).
Securities:
Held-to-maturity debt securities that the Company and its con-
solidated subsidiaries have the intent to hold to maturity, are
stated at cost after accounting for premium or discount on
acquisition, which are amortized over the period to maturity.
Other securities for which market quotations are avail-
able are stated at fair value. Net unrealized gains or losses
on these securities are reported as a separate item in net
assets at a net-of-tax amount.
Other securities for which market quotations are unavailable
are stated at cost, except as stated in the paragraph below.
In cases where the fair value of held-to-maturity debt
securities or other securities has declined signifi cantly and
such impairment of the value is not deemed temporary,
those securities are written down to fair value and the result-
ing losses are included in net income or loss for the period.
Hedge Accounting:
Gains or losses arising from changes in fair value of deriv-
atives designated as “hedging instruments” are deferred
as a separate item of net assets at a net-of-tax amount and
included in net income or loss in the same period during
which the gains and losses on the hedged items or transac-
tions are recognized.
The derivatives designated as hedging instruments by
the Company and its consolidated subsidiaries are principally
interest rate swaps and forward foreign exchange contracts.
The related hedged items are trade accounts receivable and
payable, long-term bank loans and debt securities issued by
the Company and its consolidated subsidiaries.
The Company and its consolidated subsidiaries have a pol-
icy to utilize the above hedging instruments in order to reduce
their exposure to the risk of interest rate and foreign currency
fl uctuations. Thus, their purchases of the hedging instruments
are limited to, at maximum, the amounts of the hedged items.
The Company and its consolidated subsidiaries eval-
uate the effectiveness of hedging activities by refer-
ence to the accumulated gains or losses on the hedging
instruments and the related hedged items from the com-
mencement of the hedges.
e) Allowance for Doubtful Accounts
In the Company and its domestic consolidated subsidiaries,
an allowance for doubtful accounts, including receivables and
loans, is determined from the amounts considered unlikely to
be recovered, estimated from past actual bad debt ratio records
for general receivables and from studying the probability of
recovery in individual cases where there is concern over claims.
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f) Inventories
Inventories are stated at the lower of acquisition cost, princi-
pally determined by the moving average method, or net sell-
ing value to refl ect any decreased profi tability of inventories.
g) Property, Plant and Equipment
Property, plant and equipment are stated at cost.
Depreciation for property, plant and equipment (except
leased assets) of the Company and its domestic consolidated
subsidiaries is principally computed by the declining balance
method, and depreciation for those of its overseas consolidated
subsidiaries is principally computed by the straight-line method
at rates based on estimated useful lives that are as follows:
Buildings
3–60 years
Machinery and equipment 3–15 years
Principally, a depreciation method of leased assets is iden-
tical to the method applicable to its own fi xed assets. In the
Company and its domestic consolidated subsidiaries, fi nance
lease transactions which do not transfer ownership of the
leased assets whose lease inceptions are on or before March
31, 2008 are accounted for by a method similar to the method
applicable to ordinary operating lease transactions.
h) Income Taxes
Income taxes of the Company and its domestic consolidated
subsidiaries consist of corporate income taxes, local inhabitants
taxes and enterprise taxes. Deferred income taxes are deter-
mined using the asset and liability approach, where deferred tax
assets and liabilities are recognized for temporary differences
between the tax basis of assets and liabilities and their reported
amount in the fi nancial statements. The Company also provides
for the anticipated tax effect of future remittances of retained
earnings from overseas subsidiaries and affi liated companies.
i) Retirement Benefi ts
The Company and its domestic consolidated subsidiaries have
an unfunded lump-sum benefi t plan, a funded contributory
pension plan and a defi ned contribution pension plan covering
all eligible employees.
Under the terms of the unfunded lump-sum benefi t plan,
eligible employees are entitled under most circumstances,
upon mandatory retirement or earlier voluntary severance, to
indemnities based on compensation at the time of severance
and years of service.
The funded contributory pension plan and the defi ned con-
tribution pension plan provide, in general, pension payments
for life commencing from age 60.
To provide for the payment of retirement benefi ts to employ-
ees, net defi ned benefi t liability is recognized at an amount
equal to the expected retirement benefi t obligations net of the
fair value of pension assets at the end of the period.
Past service cost is amortized as incurred using the straight-
line method over a certain period within the employees’ aver-
age remaining years of service (primarily 15 years).
Actuarial gains and losses are amortized from the follow-
ing fi scal year after recognition using the straight-line method
over a certain period within the employees’ average remaining
years of service (primarily 15 years).
Unrecognized actuarial gains and losses and unrecog-
nized past service cost are recognized in remeasurements of
defi ned benefi t plans in accumulated other comprehensive
income under the net assets section, net of deferred taxes.
Allowance for retirement benefi ts for members of the
Board and corporate auditors (“executives”) of the Company
and certain of its domestic consolidated subsidiaries is pro-
vided based on the companies’ pertinent rules and is calcu-
lated as the estimated amount which would be payable if
all executives were to retire at the balance sheet date. Any
amounts payable to executives upon retirement are subject to
approval at the annual stockholders’ meeting. The amount is
included in “customers’ guarantee deposits and other liabili-
ties” on the consolidated balance sheets.
j) Appropriation of Retained Earnings
Cash dividends are recorded in the fi scal year when the pro-
posed appropriation of retained earnings is approved by the
Board of Directors and/or stockholders.
k) Foreign Currency Transactions
All monetary assets and liabilities denominated in foreign cur-
rencies, whether long-term or short-term, are translated into
Japanese yen at the exchange rates prevailing at the balance
sheet date. Resulting gains and losses are included in net
income or loss for the period.
l) Translation of Foreign Currency Financial Statements
Translation of foreign currency fi nancial statements of over-
seas subsidiaries into Japanese yen for consolidation pur-
poses is made by using the current exchange rates prevailing
at their balance sheet dates, with the exception that the trans-
lation of stockholders’ equity is made by using historical rates.
Revenue and expense accounts are principally translated at
the average exchange rates during the year. Differences in
yen amounts arising from the use of different rates are pre-
sented as “foreign currency translation adjustments” in net
assets except for the portion belonging to minority stockhold-
ers, which is included in “minority interests in consolidated
subsidiaries” in net assets.
m) Application of “Employee Benefi ts”
In connection with the application of “Employee Benefi ts”
(International Accounting Standards Board,
International
Accounting Standard No. 19, revised on June 16, 2011) from fi s-
cal periods starting on or after January 1, 2013, effective from
the year ended March 31, 2014, certain overseas subsidiaries
have adopted accounting standard and thereby changed their
methods for recognizing actuarial gains and losses, past ser-
vice cost, and net interest on the net defi ned benefi t liability, etc.
Changes in the accounting policy have been applied retro-
actively in the consolidated fi nancial statements for the year
ended March 31, 2013. The effect of the retrospective applica-
tion is insignifi cant.
n) Application of Accounting Standard for Retirement
Benefi ts
Effective from the end of the year ended March 31, 2014,
for
the Company has adopted “Accounting Standard
Retirement Benefi ts” (Accounting Standards Board of Japan
(ASBJ) Statement No. 26, May 17, 2012) and “Guidance on
Accounting Standard for Retirement Benefi ts” (ASBJ Guidance
No. 25, May 17, 2012) (except for certain provisions described
in the main clause of Section 35 of the standard and in the
main clause of Section 67 of the guidance). Accordingly, the
Company and its domestic consolidated subsidiaries have
adopted a new accounting method under which an amount
equal to the expected retirement benefi t obligations net of the
fair value of pension assets is recorded as net defi ned ben-
efi t asset or liability, and unrecognized actuarial gains and
losses and unrecognized past service cost are recorded in net
defi ned benefi t asset and liability.
The application of the standard and the guidance is sub-
ject to the transitional treatment set forth in Section 37 of the
standard, and the effect of the change is added to or deducted
from remeasurements of defi ned benefi t plans in accumu-
lated other comprehensive income at March 31, 2014. As a
result, the Company and its domestic consolidated subsid-
iaries recorded net defi ned benefi t asset of ¥24,500 million
($237,864 thousand) (included in other in investments and
other assets) and net defi ned benefi t liability of ¥84,579 million
($821,155 thousand), while accumulated other comprehensive
income decreased by ¥15,825 million ($153,641 thousand). In
addition, net assets per share decreased by ¥9.71 ($0.09).
o) Standards Issued but Not Yet Adopted
Accounting Standards for Business Combinations
On September 13, 2013, the ASBJ issued “Revised Accounting
Standard for Business Combinations” (ASBJ Statement No.21),
“Revised Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No.22), “Revised Accounting
Standard for Business Divestitures” (ASBJ Statement No.7),
“Revised Accounting Standard for Earnings Per Share” (ASBJ
Statement No.2), “Revised Guidance on Accounting Standard
for Business Combinations and Accounting Standard for
Business Divestitures” (ASBJ Guidance No.10) and “Revised
Guidance on Accounting Standard for Earnings Per Share”
(ASBJ Guidance No.4).
(1) Overview
Under these revised accounting standards, the account-
ing treatment for any changes in a parent’s ownership
2. U.S. DOLLAR AMOUNTS
interest in a subsidiary when the parent retains control
over the subsidiary and the corresponding accounting for
acquisition-related costs were revised. In addition, the
presentation method of net income was amended, the
reference to “minority interests” was changed to “non-
controlling interests,” and transitional provisions for these
accounting standards were also defi ned.
(2) Scheduled Date of Adoption
The Company expects to adopt these revised accounting
standards and guidance from the beginning of the year
ending March 31, 2016.
(3) Impact of Adopting Revised Accounting Standards and
Guidance
The impact of adopting the revised accounting standards
and guidance on consolidated fi nancial statements is cur-
rently under evaluation.
Accounting Standards for Retirement Benefi ts
On May 17, 2012, the ASBJ issued “Accounting Standard for
Retirement Benefi ts” (ASBJ Statement No.26) and “Guidance
on Accounting Standard for Retirement Benefi ts” (ASBJ
Guidance No.25), which replaced the Accounting Standard
for Retirement Benefi ts 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, being followed
by partial amendments from time to time through 2009.
(1) Overview
The standard provides guidance for the accounting for
unrecognized actuarial gains and losses and unrecognized
past service cost, the calculation methods for retirement
benefi t obligation and service cost, and enhancement of
disclosures taking into consideration improvements to
fi nancial reporting and international trends.
(2) Scheduled Date of Adoption
Revisions to the calculation methods for the retirement ben-
efi t obligation and service cost are scheduled to be adopted
from the beginning of the year ending March 31, 2015.
(3) Impact of Adopting Revised Accounting Standard and
Guidance
The impact of adopting the revised accounting standard
and guidance on consolidated fi nancial statements is cur-
rently under evaluation.
The Company and its domestic consolidated subsidiaries maintain
their accounting records in yen. The U.S. dollar amounts included
in the accompanying consolidated fi nancial statements and notes
thereto represent the arithmetic results of translating yen into U.S.
dollars at the rate of ¥103 to $1.00, the approximate exchange
rate prevailing on March 31, 2014. The inclusion of such U.S. dol-
lar amounts is solely for the convenience of readers outside Japan
and is not intended to imply that yen amounts and assets and lia-
bilities that originated in yen have been or could be readily con-
verted, realized or settled in U.S. dollars at this or at any other rate.
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3. INVENTORIES
At March 31, 2014 and 2013, inventories consisted of the following:
Merchandise and fi nished goods
Work in process
Raw materials and supplies
Millions of yen
Thousands of
U.S. dollars
2014
2013
2014
¥ 211,837
¥ 175,553
$ 2,056,670
74,546
84,439
70,121
68,033
723,748
819,796
¥ 370,822
¥ 313,707
$ 3,600,214
Losses recognized and charged to cost of sales as a result of valuation at March 31, 2014 and 2013 were ¥2,559 million ($24,845
thousand) and ¥2,139 million, respectively.
4. SHORT-TERM BANK LOANS, LONG-TERM DEBT AND LEASE OBLIGATIONS
Short-term bank loans at March 31, 2014 and 2013 represented bank overdrafts and short-term notes. The Company is not required
to pay commitment fees on unused balances of the bank overdraft agreements.
Long-term debt and lease obligations at March 31, 2014 and 2013 were as follows:
Loans principally from banks and insurance companies with interest rates
primarily from 0.16% to 7.05%, maturing serially through 2025:
Unsecured
Secured
Lease obligations maturing serially through 2028:
Unsecured
Yen notes with an interest rate of 1.61% due 2013
Yen notes with an interest rate of 0.93% due 2022
Yen notes with an interest rate of 1.01% due 2023
Zero coupon convertible bonds due 2014
Korean won notes with an interest rate of 5.7% due 2014
U.S. dollar notes with an interest rate of 3 month U.S. dollar
LIBOR+1.3% due 2014
Less amounts due within one year
At March 31, 2014, assets pledged as collateral were as follows:
Cash and time deposits
Trade receivables
Inventories
Property, plant and equipment, net
Investment securities
Others
Millions of yen
Thousands of
U.S. dollars
2014
2013
2014
¥ 441,883
¥ 320,964
$ 4,290,126
20,197
—
196,087
6,586
—
20,000
20,000
2,405
10,000
20,000
—
—
50,000
2,998
1,055
—
—
63,942
—
194,175
194,175
—
29,107
10,243
512,719
403,369
4,977,854
78,959
99,115
766,592
¥ 433,760
¥ 304,254
$ 4,211,262
Millions of yen
Thousands of
U.S. dollars
¥ 3,240
$ 31,456
1,717
3,511
16,670
34,087
42,384
411,495
60
2,976
583
28,893
¥ 53,888
$ 523,184
The annual maturities of long-term debt and lease obligations subsequent to March 31, 2014 were as follows:
Years ending March 31:
2015
2016
2017
2018
2019
2020 and thereafter
5. FINANCIAL INSTRUMENTS
Conditions of Financial Instruments
a) Policy in Relation to Financial Instruments
The policy of the Company and its consolidated subsidiaries
is to manage funds only by short-term deposits, etc. and to
raise funds by borrowing from banks and issuing corporate
bonds. The Company and its consolidated subsidiaries use
derivatives to hedge risks associated with foreign currency
exchange rates and fl uctuations of borrowing interest rates
and do not enter into derivative transactions for speculative or
trading purposes.
b) Contents and Risk of Financial Instruments and Risk
Management System
Trade receivables are operating receivables and therefore are
exposed to customer credit risk. Under their internal regula-
tions, the Company and its consolidated subsidiaries care-
fully manage payment periods for receivables and outstanding
balances of all customers and regularly monitor the credit
standing of major clients. Operating receivables and payables
denominated in foreign currencies that arise from the global
business operations are also exposed to foreign currency
exchange risk. The Company and its consolidated subsidiaries
hedge this risk mainly through the use of forward exchange
contracts against positions after netting receivables and pay-
ables denominated in the same foreign currencies. Likewise,
the Company and its consolidated subsidiaries mainly use cur-
rency swaps to hedge the foreign currency exchange risk of
bank loans denominated in foreign currencies.
Investment securities are exposed to the risk of market
price fl uctuations. Most of these securities are the shares of
corporations with which the Company and its consolidated
subsidiaries have business relationships.
The fair value and fi nancial positions of the issuing entities
(clients) are regularly monitored.
Trade payables are operating payables, most of which are
due and payable within one year.
Millions of yen
Thousands of
U.S. dollars
¥ 78,959
$ 766,592
62,603
57,687
77,220
35,943
607,796
560,068
749,709
348,961
200,307
1,944,728
¥ 512,719
$ 4,977,854
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Short-term bank loans and commercial paper are fi nanc-
ing instruments mainly for operating transactions, while long-
term bank loans and bonds (due within ten years, in principle)
are primarily for capital expenditures. Bank loans and bonds
are exposed to the risk of interest rate fl uctuation. Bank loans
and bonds at fl oating interest rates carry the risk of higher inter-
est expenses when rates rise, while bank loans and bonds at
fi xed interest rates carry the risk of higher interest expenses
when rates fall. The Company and its consolidated subsidiar-
ies use derivative transactions (interest rate swap transactions)
to minimize the risk of interest rate fl uctuation, taking into con-
sideration the balance between fi xed interest rates and fl oating
interest rates.
Hedging instruments, hedged items, the policy for utiliz-
ing such hedging instruments and the method for evaluat-
ing the effectiveness of hedging activities are described in
Note 1. SIGNIFICANT ACCOUNTING POLICIES d) Financial
the
Instruments, Hedge Accounting
Consolidated Financial Statements.
Derivative transactions are executed and managed in accor-
dance with the internal regulations prescribing the authoriza-
tion for transactions. To mitigate credit risk, the Company and
its consolidated subsidiaries carry out derivative transactions
only with highly rated fi nancial institutions.
the Notes
to
in
c) Supplemental Explanation on Fair Value of Financial
Instruments
The fair value of fi nancial instruments is based on market
prices, or reasonable estimate of fair value for instruments for
which market prices are not available. Estimates of fair value
are subject to fl uctuation because they employ various factors
and assumptions. In addition, the contract amount of deriva-
tives in Note 7. DERIVATIVES in the Notes to the Consolidated
Financial Statements is not an indicator of market risk associ-
ated with derivative transactions.
Fair Value of Financial Instruments
Carrying value, fair value and unrealized gain (loss) as of March 31, 2014 and 2013 were as follows.
In addition, fi nancial instruments, for which it is extremely diffi cult to measure the fair value, are not included. (Please refer to Note
2 below).
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Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Investment securities in subsidiaries and affi liated companies
Other securities
Assets
Trade payables
Short-term bank loans
Commercial paper
Bonds *1
Long-term bank loans *2
Liabilities
Derivative transactions *3
Hedge accounting is not applied
Hedge accounting is applied
Derivative transactions
Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Investment securities in subsidiaries and affi liated companies
Other securities
Assets
Trade payables
Short-term bank loans
Commercial paper
Bonds *1
Long-term bank loans *2
Liabilities
Derivative transactions *3
Hedge accounting is not applied
Hedge accounting is applied
Derivative transactions
Millions of yen
2014
Carrying value
Fair value
Unrealized gain (loss)
¥ 114,138
¥ 114,138
¥ —
352,094
352,094
94
17,753
94
13,665
139,491
139,491
—
—
(4,088)
—
¥ 623,570
¥ 619,482
¥ (4,088)
¥ 209,465
¥ 209,465
¥ —
131,444
131,444
10,000
44,053
10,000
44,089
—
—
36
462,080
468,931
6,851
¥ 857,042
¥ 863,929
¥ 6,887
¥
(85)
¥
(85)
¥ —
(539)
(539)
—
¥
(624)
¥
(624)
¥ —
Millions of yen
2013
Carrying value
Fair value
Unrealized gain (loss)
¥ 108,666
¥ 108,666
¥ —
308,230
308,230
92
15,355
92
9,817
115,575
115,575
¥ 547,918
¥ 542,380
¥ 185,927
¥ 185,927
98,633
30,000
80,000
98,633
30,000
80,222
—
—
(5,538)
—
¥ (5,538)
¥ —
—
—
222
320,964
327,307
¥ 715,524
¥ 722,089
6,343
¥ 6,565
¥
426
¥
426
¥ —
(1,145)
(1,145)
—
¥
(719)
¥
(719)
¥ —
Cash and time deposits
Trade receivables
Investment securities
$ 1,108,136
$ 1,108,136
$
3,418,388
3,418,388
Held-to-maturity debt securities
913
913
—
—
—
Investment securities in subsidiaries and affi liated companies
172,359
132,670
(39,689)
Thousands of U.S. dollars
2014
Carrying value
Fair value
Unrealized gain (loss)
Other securities
Assets
Trade payables
Short-term bank loans
Commercial paper
Bonds *1
Long-term bank loans *2
Liabilities
Derivative transactions *3
Hedge accounting is not applied
Hedge accounting is applied
Derivative transactions
1,354,282
1,354,282
—
$ 6,054,078
$ 6,014,388
$ (39,689)
$ 2,033,641
$ 2,033,641
$
1,276,155
1,276,155
97,087
427,699
97,087
428,049
4,486,214
4,552,728
—
—
—
350
66,515
$ 8,320,796
$ 8,387,660
$ 66,864
$
(825)
$
(825)
$
(5,233)
(5,233)
$
(6,058)
$
(6,058)
$
—
—
—
*1: Bonds include bonds due within one year.
*2: Long-term bank loans include long-term bank loans due within one year.
*3: Receivables and payables arising from derivative transactions are indicated in net amounts. Total net payables, if any, are shown in parentheses.
Notes:
1. Estimation method for fair value of fi nancial instruments and items related to securities and derivative transactions
Assets
Cash and time deposits and Trade receivables
Carrying value is used for fair value since the items will be settled within the short term and the fair value is approximately
equal to the carrying value.
Investment securities
Securities are valued at quoted market price. Debt securities are valued at quoted market price or at the price provided
by correspondent fi nancial institutions. For information on securities classifi ed by holding purpose, please refer to Note 6.
SECURITIES of the Notes to the Consolidated Financial Statements.
Liabilities
Trade payables, Short-term bank loans and Commercial paper
Carrying value is used for fair value since the items will be settled within the short term and the fair value is approximately
equal to the carrying value.
Bonds
The fair value of bonds is based on market price. However, in cases where the interest rate of bonds fl uctuates or the spe-
cial accounting method for interest rate swaps is applied to make the interest rate fl uctuating, the fair value is approximately
equal to the carrying value because the interest rates are adjusted periodically. Therefore, the fair value is based on the car-
rying value.
Long-term bank loans
The fair value of long-term bank loans is estimated by discounting the principal amounts and interest based on estimated
interest rates if similar new loans were entered into in the current period. The fair value of long-term bank loans for which the
special accounting method for interest rate swaps is applied is estimated by discounting the total principal amount and inter-
est (accounted for together with the interest rate swaps) based on estimated interest rates if similar new loans were entered
into in the current period. For long-term bank loans at fl oating interest rates, however, the fair value is approximately equal to
the carrying value because the interest rates are adjusted periodically. Therefore, the fair value is based on the carrying value.
Derivative transactions
Please refer to Note 7. DERIVATIVES in the Notes to the Consolidated Financial Statements.
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2. Financial instruments for which it is extremely diffi cult to determine the fair value
Unlisted securities
Millions of yen
Thousands of
U.S. dollars
2014
2013
2014
¥ 72,663
¥ 54,075
$ 705,466
Unlisted securities have no quoted market price and the fair value is extremely diffi cult to determine. Therefore, they are not
included in the preceding table.
3. Redemption schedule for receivables and investment securities with maturities at March 31, 2014 and 2013
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Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Other securities
Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Other securities
Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Other securities
Millions of yen
2014
Due within
one year
Due after one year
through fi ve years
Due after fi ve years
through ten years
Due after
ten years
¥ 114,138
352,094
3
725
¥ 466,960
¥ —
—
82
—
¥ 82
¥ —
—
9
10
¥ 19
¥ —
—
—
800
¥ 800
Millions of yen
2013
Due within
one year
Due after one year
through fi ve years
Due after fi ve years
through ten years
Due after
ten years
¥ 108,666
308,230
14
—
¥ 416,910
¥ —
—
72
574
¥ 646
¥ —
—
6
10
¥ 16
Thousands of U.S. dollars
2014
Due within
one year
Due after one year
through fi ve years
Due after fi ve years
through ten years
$ 1,108,136
3,418,388
29
7,039
$ 4,533,592
$ —
—
796
—
$ 796
$ —
—
87
97
$ 184
¥ —
—
—
800
¥ 800
Due after
ten years
$ —
—
—
7,767
$ 7,767
4. The redemption schedule for long-term debt is disclosed in Note 4. SHORT-TERM BANK LOANS, LONG-TERM DEBT AND LEASE
OBLIGATIONS of the Notes to the Consolidated Financial Statements.
6. SECURITIES
At March 31, 2014 and 2013, information on securities classifi ed as held-to-maturity debt securities was as follows:
Held-to-maturity debt securities
¥ 94
Carrying
value
Millions of yen
2014
Thousands of U.S. dollars
2014
Fair
value
¥ 94
Unrealized
gains
Unrealized
losses
¥ —
¥ —
Carrying
value
$ 913
Fair
value
$ 913
Unrealized
gains
Unrealized
losses
$ —
$ —
Held-to-maturity debt securities
¥ 92
Carrying
value
Millions of yen
2013
Fair
value
¥ 92
Unrealized
gains
Unrealized
losses
¥ —
¥ —
At March 31, 2014 and 2013, information on securities classifi ed as other securities was as follows:
Millions of yen
2014
Thousands of U.S. dollars
2014
Carrying
value
Acquisition
cost
Unrealized
gains
Unrealized
losses
Carrying
value
Acquisition
cost
Unrealized
gains
Unrealized
losses
Other securities
¥ 139,491 ¥ 65,303
¥ 75,558
¥ 1,370
$ 1,354,282 $ 634,010 $ 733,573
$ 13,301
Millions of yen
2013
Carrying
value
Acquisition
cost
Unrealized
gains
Unrealized
losses
Other securities
¥ 115,575
¥ 62,341
¥ 56,236
¥ 3,002
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7. DERIVATIVES
The Company and its consolidated subsidiaries had the following derivative contracts outstanding at March 31, 2014 and 2013:
Hedge accounting is not applied
Millions of yen
Thousands of U.S. dollars
Forward foreign exchange contracts:
Buying U.S. dollar
Buying euro
Buying British pound
Buying Thai baht
Buying Australian dollar
Buying New Zealand dollar
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Japanese yen
Foreign currency swaps:
Contract
amount
2014
Fair
value
Unrealized
gain (loss)
Contract
amount
2014
Fair
value
Unrealized
gain (loss)
¥ 4,802
¥ 37
¥ 37
$ 46,621
$ 359
$ 359
44
5
442
1
3
879
6,891
196
130
8
1,304
0
0
(2)
0
0
(23)
(4)
1
0
0
34
0
0
(2)
0
0
(23)
(4)
1
0
0
34
427
49
0
0
4,291
(19)
10
29
0
0
8,534
(223)
66,903
1,903
1,262
78
(39)
10
0
0
12,660
330
0
0
(19)
0
0
(223)
(39)
10
0
0
330
Receiving U.S. dollar, paying Korean won
1,449
(144)
(144)
14,068
(1,398)
(1,398)
Interest rate swaps:
Floating-rate receipt, fi xed-rate payment
1,000
16
16
9,709
155
155
¥ —
¥ (85)
¥ (85)
$
—
$ (825)
$ (825)
Forward foreign exchange contracts:
Buying U.S. dollar
Buying euro
Buying Thai baht
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Japanese yen
Foreign currency swaps:
281
422
362
5,314
218
147
50
823
Receiving U.S. dollar, paying Korean won
1,477
Foreign currency options:
Buying Japanese yen (put)
Selling Japanese yen (call)
Interest rate swaps:
Floating-rate receipt, fi xed-rate payment
600
600
693
Millions of yen
2013
Fair
value
Contract
amount
¥ 4,468
¥ 292
Unrealized
gain (loss)
¥ 292
0
116
(9)
(30)
0
0
1
16
(31)
76
0
(5)
0
116
(9)
(30)
0
0
1
16
(31)
76
0
(5)
¥ —
¥ 426
¥ 426
Hedge accounting is applied
Millions of yen
2014
Hedge accounting method Type of derivative and principal hedged items
Contract amount Fair value
Estimation method for fair value
Deferral hedge
method
Forward foreign exchange contracts:
Accounted for as part of trade receivables
Special accounting
method for interest
rate swaps
Allocation method
for forward foreign
exchange contracts
and trade payables
Buying U.S. dollar
Buying Japanese yen
Selling U.S. dollar
Selling euro
Foreign currency options:
Accounted for as part of trade payables
Buying Japanese yen (call)
Selling Japanese yen (put)
Foreign currency swaps:
Accounted for as part of bonds
and long-term bank loans
Receiving U.S. dollar, paying Korean won
Interest rate swaps:
Accounted for as part of long-term bank loans
Floating-rate receipt, fi xed-rate payment
Interest rate swaps:
Accounted for as part of bonds
¥
221
2,991
738
131
1,270
875
¥ (4) Forward foreign exchange quotes
(202)
8
4
(67) The price provided by
44
correspondent fi nancial institutions
4,076
(74)
The price provided by
correspondent fi nancial institutions
5,011
(92)
The price provided by
correspondent fi nancial institutions
and long-term bank loans
Floating-rate receipt, fi xed-rate payment
Floating-rate receipt, fl oating-rate payment
Fixed-rate receipt, fl oating-rate payment
58,200 *1
57,600
68,000
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables (Forecasted transactions)
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Korean won
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Japanese yen
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Thai baht
Foreign currency swaps:
Accounted for as part of long-term bank loans
Receiving U.S. dollar, paying Japanese yen
Receiving Australian dollar,
paying Japanese yen
26,027
1,186
1,259
4,185
15,848
2,199
1
43
40
18,528 *2
64
15
4
35,901
4,703
30
189
108
152,156 *2
3,129
—
36 Forward foreign exchange quotes
17
(23)
(57)
(74)
(55)
0
0
0
—
—
¥
— ¥ (539)
.
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i
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s
u
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n
I
y
a
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o
T
81
4
1
0
2
t
r
o
p
e
R
l
a
u
n
n
A
Hedge accounting method Type of derivative and principal hedged items
Contract amount Fair value
Estimation method for fair value
Deferral hedge
method
Forward foreign exchange contracts:
Accounted for as part of trade receivables
Millions of yen
2013
Special accounting
method for interest
rate swaps
Allocation method
for forward foreign
exchange contracts
.
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82
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t
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and trade payables
Buying U.S. dollar
Buying euro
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling Japanese yen
Foreign currency options:
Accounted for as part of trade payables
Buying Japanese yen (call)
Selling Japanese yen (put)
Interest rate swaps:
Accounted for as part of long-term bank loans
Floating-rate receipt, fi xed-rate payment
Interest rate swaps:
Accounted for as part of bonds
and long-term bank loans
Floating-rate receipt, fi xed-rate payment
Floating-rate receipt, fl oating-rate payment
Fixed-rate receipt, fl oating-rate payment
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables (Forecasted transactions)
Buying U.S. dollar
Buying euro
Buying Canadian dollar
Buying Czech koruna
Buying Chinese yuan
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Foreign currency swaps:
Accounted for as part of long-term bank loans
¥
26 ¥
199
5,818
402
107
783
2 Forward foreign exchange quotes
7
(463)
8
2
86
5,787
2,974
(520) The price provided by
269
correspondent fi nancial institutions
8,386
(224)
The price provided by
correspondent fi nancial institutions
72,500*1
49,400
48,000
20,183
1,232
467
1,800
510
14,639
2,070
3
1
—
501 Forward foreign exchange quotes
18
(5)
(33)
100
(639)
(61)
0
0
(Forecasted transactions)
Receiving U.S. dollar, paying Japanese yen
20,000
(193)
The price provided by
correspondent fi nancial institutions
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables
Buying U.S. dollar
Buying euro
Buying Canadian dollar
Buying Thai baht
Selling U.S. dollar
Selling euro
Selling British pound
Selling Canadian dollar
Selling Thai baht
Foreign currency swaps:
Accounted for as part of long-term bank loans
Receiving U.S. dollar, paying Japanese yen
Receiving Australian dollar,
paying Japanese yen
15,161*2
44
3
4
30,361
4,258
15
21
75
44,417*2
3,129
¥
— ¥ (1,145)
—
—
Hedge accounting method Type of derivative and principal hedged items
Contract amount
Fair value
Estimation method for fair value
Deferral hedge
method
Forward foreign exchange contracts:
Accounted for as part of trade receivables
Thousands of U.S. dollars
2014
Special accounting
method for interest
rate swaps
Allocation method
for forward foreign
exchange contracts
and trade payables
Buying U.S. dollar
Buying Japanese yen
Selling U.S. dollar
Selling euro
Foreign currency options:
Accounted for as part of trade payables
Buying Japanese yen (call)
Selling Japanese yen (put)
Foreign currency swaps:
Accounted for as part of bonds
$
2,146
29,039
7,165
1,272
$ (39) Forward foreign exchange quotes
(1,961)
78
39
12,330
8,495
(650) The price provided by
427
correspondent fi nancial institutions
and long-term bank loans
Receiving U.S. dollar, paying Korean won
39,573
(718)
The price provided by
correspondent fi nancial institutions
Interest rate swaps:
Accounted for as part of long-term bank loans
Floating-rate receipt, fi xed-rate payment
Interest rate swaps:
Accounted for as part of bonds
48,650
(893)
The price provided by
correspondent fi nancial institutions
and long-term bank loans
Floating-rate receipt, fi xed-rate payment
Floating-rate receipt, fl oating-rate payment
Fixed-rate receipt, fl oating-rate payment
565,049 *1
559,223
660,194
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables (Forecasted transactions)
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Korean won
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Japanese yen
252,689
11,515
12,223
40,631
153,864
21,350
10
417
388
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Thai baht
Foreign currency swaps:
Accounted for as part of long-term bank loans
179,883 *2
621
146
39
348,553
45,660
291
1,835
1,049
—
350 Forward foreign exchange quotes
165
(223)
(553)
(718)
(534)
0
0
0
—
—
.
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4
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0
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Receiving U.S. dollar, paying Japanese yen 1,477,243 *2
Receiving Australian dollar,
30,379
paying Japanese yen
*1 The fair value of interest rate swaps to which a special accounting method is applied is included in the fair value of bonds and long-term bank loans in Note
5. FINANCIAL INSTRUMENTS of the Notes to the Consolidated Financial Statements because such interest rate swaps are accounted for together with the
corresponding bonds and long-term bank loans.
*2 The fair value of forward foreign exchange contracts to which the allocation method is applied, except for forecasted transactions, is included in the fair value
of trade receivables, trade payables and long-term bank loans in Note 5. FINANCIAL INSTRUMENTS of the Notes to the Consolidated Financial Statements
since such forward foreign exchange contracts are accounted for together with the corresponding trade receivables, trade payables and long-term bank loans.
$
— $(5,233)
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84
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8. RETIREMENT BENEFIT PLAN
For the year ended March 31, 2014
The changes in the retirement benefi t obligation during the year ended March 31, 2014 were as follows:
Millions of yen
Thousands of
U.S. dollars
Retirement benefi t obligation at April 1, 2013
Service cost
Interest cost
Actuarial gains and losses
Retirement benefi t paid
Past service cost
Effect of signifi cant business combinations
Other
2014
2014
¥ 181,735
$ 1,764,417
5,927
3,590
12,106
(15,650)
(33)
3,115
1,726
57,544
34,854
117,534
(151,942)
(320)
30,243
16,757
Retirement benefi t obligation at March 31, 2014
¥ 192,516
$ 1,869,087
The changes in the plan assets at fair value during the year ended March 31, 2014 were as follows:
Millions of yen
Thousands of
U.S. dollars
Plan assets at April 1, 2013
Expected return on plan assets
Actuarial gains and losses
Contributions
Retirement benefi t paid
Effect of signifi cant business combinations
Other
Plan assets at March 31, 2014
2014
2014
¥ 117,661
$ 1,142,340
2,408
8,516
4,724
(12,000)
1,710
825
23,379
82,680
45,864
(116,505)
16,602
8,010
¥ 123,844
$ 1,202,369
The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of
March 31, 2014 for the Company’s and its consolidated subsidiaries’ defi ned benefi t plans:
Millions of yen
Thousands of
U.S. dollars
Funded retirement benefi t obligation
Plan assets at fair value
Unfunded retirement benefi t obligation
Net liability for retirement benefi ts in the balance sheet
Net defi ned benefi t liability
Net defi ned benefi t asset
2014
2014
¥ 112,024
$ 1,087,612
(123,844)
(1,202,369)
(11,820)
80,492
68,672
93,172
(24,500)
(114,757)
781,476
666,718
904,583
(237,864)
Net liability for retirement benefi ts in the balance sheet
¥
68,672
$ 666,718
The components of retirement benefi t expense for the year ended March 31, 2014 were as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service cost
Retirement benefi t expense
Millions of yen
Thousands of
U.S. dollars
2014
2014
¥ 5,927
$ 57,544
3,590
(2,408)
6,522
(2,866)
34,854
(23,379)
63,320
(27,825)
¥ 10,765
$ 104,515
In addition to the above, special severance payments of ¥733 million ($7,117 thousand) and contributions to the defi ned contribu-
tion pension plan of ¥5,224 million ($50,718 thousand) were recognized for the year ended March 31, 2014.
Actuarial gains and losses included in other comprehensive income (before tax effect) for the year ended March 31, 2014 were
as follows:
Actuarial gains and losses
Total
Millions of yen
2014
¥ (105)
¥ (105)
Thousands of
U.S. dollars
2014
$ (1,019)
$ (1,019)
Unrecognized past service cost and unrecognized actuarial gains and losses included in accumulated other comprehensive income
(before tax effect) as of March 31, 2014 were as follows:
Millions of yen
Thousands of
U.S. dollars
Unrecognized past service cost
Unrecognized actuarial gains and losses
Total
2014
2014
¥ (16,378)
41,396
¥ 25,018
$ (159,010)
401,903
$ 242,893
The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2014 was as follows:
Bonds
Stocks
Cash and time deposits
Other
Total
2014
13%
53%
6%
28%
100%
The expected return on plan assets has been estimated based on the anticipated allocation to each asset class and the expected
long-term returns on assets held in each category.
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The assumptions used in accounting for the above plans were as follows:
Discount rate
Expected rate of return on plan assets
For the year ended March 31, 2013
Accrued employees’ retirement benefi ts as of March 31, 2013 were analyzed as follows:
Retirement benefi t obligations
Plan assets
Unrecognized actuarial gains and losses
Unrecognized past service cost
Prepaid pension cost (included in other assets)
Accrued employees‘ retirement benefi ts
2014
primarily 2.0%
primarily 2.0%
Millions of yen
2013
¥ (181,735)
117,661
(64,074)
42,946
(19,222)
(40,350)
29,009
¥
(69,359)
.
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86
4
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2
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The components of net periodic benefi t cost related to the employees’ retirement benefi ts for the year ended March 31, 2013 were
as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service cost
Net periodic benefi t cost
Contribution to defi ned contribution pension plan and other
Millions of yen
2013
¥ 5,552
3,782
(3,359)
6,976
(2,871)
10,080
4,706
¥ 14,786
In addition to the above, special severance payments of ¥752 million were recognized for the year ended March 31, 2013.
Assumptions used in calculation of the above information were as follows:
Method of attributing the projected benefi ts to periods of services
Discount rate
Expected rate of return on plan assets
Amortization period of past service cost
Amortization period of actuarial gains and losses
2013
straight-line basis
primarily 2.0%
primarily 3.0%
primarily 15 years
primarily 15 years
9. STOCK OPTION PLANS
1. Stock option expense included in selling, general and administrative expenses amounted to ¥322 million ($3,126 thousand) and
¥345 million for the years ended March 31, 2014 and 2013, respectively.
2. Information on stock options issued
The following table summarizes the stock options outstanding as of March 31, 2014.
Company name
Toray Industries, Inc.
Position and number
of grantees
Type and number of shares
to be issued upon exercise
Grant date
Vesting conditions
Vesting period
Exercise period
No.1 Stock
Option Plan
No.2 Stock
Option Plan
No.3 Stock
Option Plan
Members of the Board
of the Company
Directors of
the Company
28
32
26
32
26
26
Common stock
747,000 shares
844,000 shares
583,000 shares
August 20, 2011
August 4, 2012
August 10, 2013
Based on the number
of months that have
elapsed during
the vesting period
Based on the number
of months that have
elapsed during
the vesting period
Based on the number
of months that have
elapsed during
the vesting period
June 24, 2011–
June 22, 2012
June 22, 2012–
June 26, 2013
June 26, 2013–
June 25, 2014
August 21, 2011–
August 20, 2041
August 5, 2012–
August 4, 2042
August 11, 2013–
August 10, 2043
Company name
Toray Chemical Korea Inc.
Position and number
of grantees
Executives of
the Company
No.1 Stock
Option Plan
15
No.2 Stock
Option Plan
No.3 Stock
Option Plan
1
5
Common stock
526,816 shares
18,815 shares
108,160 shares
Type and number of shares
to be issued upon exercise
Grant date
Vesting conditions
Vesting period
Exercise period
Company name
March 21, 2008
July 22, 2008
March 20, 2009
Holders must be in
continuous employ-
ment from the grant
date to the vesting
date of March 20, 2011
Holders must be in
continuous employ-
ment from the grant
date to the vesting
date of July 21, 2011
Holders must be in
continuous employ-
ment from the grant
date to the vesting
date of March 19, 2012
March 21, 2008–
March 20, 2011
March 21, 2011–
March 20, 2018
July 22, 2008–
July 21, 2011
July 22, 2011–
July 21, 2018
March 20, 2009–
March 19, 2012
March 20, 2012–
March 19, 2019
Toray Chemical Korea Inc.
No.4 Stock
Option Plan
No.5 Stock
Option Plan
No.6 Stock
Option Plan
2
4
5
Position and number
of grantees
Executives of
the Company
Type and number of shares
to be issued upon exercise
Grant date
Vesting conditions
Vesting period
Exercise period
Common stock
20,000 shares
38,468 shares
41,120 shares
March 19, 2010
March 18, 2011
March 23, 2012
Holders must be in
continuous employ-
ment from the grant
date to the vesting
date of March 18, 2013
Holders must be in
continuous employ-
ment from the grant
date to the vesting
date of March 17, 2014
Holders must be in
continuous employ-
ment from the grant
date to the vesting
date of March 22, 2015
March 19, 2010–
March 18, 2013
March 18, 2011–
March 17, 2014
March 23, 2012–
March 22, 2015
March 19, 2013–
March 18, 2020
March 18, 2014–
March 17, 2021
March 23, 2015–
March 22, 2022
The following table summarizes movements of stock options during the year and price information on stock options as of March
31, 2014. The number of stock options are translated into the number of shares.
(1) Number of stock options
Company name
Toray Industries, Inc.
No.1 Stock
Option Plan
No.2 Stock
Option Plan
No.3 Stock
Option Plan
Stock acquisition rights not yet vested
As of March 31, 2013
Granted
Forfeited
Vested
As of March 31, 2014
Stock acquisition rights already vested
As of March 31, 2013
Vested
Exercised
Forfeited
As of March 31, 2014
—
—
—
—
—
618,000
—
100,000
—
518,000
237,000
—
—
237,000
—
607,000
237,000
107,000
—
737,000
—
583,000
—
412,000
171,000
—
412,000
—
—
412,000
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.
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Company name
Toray Chemical Korea Inc.
No.1 Stock
Option Plan
No.2 Stock
Option Plan
No.3 Stock
Option Plan
Stock acquisition rights not yet vested
As of December 31, 2012
Granted
Increase due to consolidation
Forfeited
Vested
As of December 31, 2013
Stock acquisition rights already vested
As of December 31, 2012
Vested
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Increase due to consolidation
202,260
18,815
75,240
Exercised
Forfeited
—
—
—
—
—
—
As of December 31, 2013
202,260
18,815
75,240
Company name
Toray Chemical Korea Inc.
No.4 Stock
Option Plan
No.5 Stock
Option Plan
No.6 Stock
Option Plan
Stock acquisition rights not yet vested
As of December 31, 2012
Granted
Increase due to consolidation
Forfeited
Vested
As of December 31, 2013
Stock acquisition rights already vested
As of December 31, 2012
Vested
Increase due to consolidation
Exercised
Forfeited
As of December 31, 2013
(2) Price information
Company name
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
Company name
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
—
—
—
—
—
—
—
—
20,000
—
—
20,000
—
—
28,468
—
—
28,468
—
—
—
—
—
—
—
—
41,120
—
—
41,120
—
—
—
—
—
—
Yen
Toray Industries, Inc.
No.2 Stock
Option Plan
¥ 1
621
394
Won
Toray Chemical Korea Inc.
No.2 Stock
Option Plan
W 8,480
—
7,067
No.3 Stock
Option Plan
¥ 1
—
546
No.3 Stock
Option Plan
W 6,900
—
5,597
No.1 Stock
Option Plan
¥ 1
621
513
No.1 Stock
Option Plan
W 6,030
—
5,006
Company name
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
Company name
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
Company name
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
Company name
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
Won
Toray Chemical Korea Inc.
No.5 Stock
Option Plan
W 11,900
—
9,310
U.S. dollars
Toray Industries, Inc.
No.2 Stock
Option Plan
$ 0.01
6.03
3.83
U.S. dollars
Toray Chemical Korea Inc.
No.2 Stock
Option Plan
$ 7.97
—
6.64
U.S. dollars
Toray Chemical Korea Inc.
No.5 Stock
Option Plan
$ 11.18
—
8.75
No.6 Stock
Option Plan
W 9,980
—
5,360
No.3 Stock
Option Plan
$ 0.01
—
5.30
No.3 Stock
Option Plan
$ 6.48
—
5.26
No.6 Stock
Option Plan
$ 9.38
—
5.04
No.4 Stock
Option Plan
W 10,800
—
8,120
No.1 Stock
Option Plan
$ 0.01
6.03
4.98
No.1 Stock
Option Plan
$ 5.67
—
4.70
No.4 Stock
Option Plan
$ 10.15
—
7.63
.
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3. Estimation method and assumptions used for the per share fair value of stock options
(1) Estimation method
Black-Scholes model
(2) Assumptions used for the per share fair value of stock options
Company name
Expected volatility*1
Expected holding period*2
Expected dividend*3
Risk-free rate*4
Toray Industries, Inc.
No.3 Stock Option Plan
34.057%
8 years
¥10 per share ($0.10)
0.623%
*1 The expected volatility is based on actual share prices during 8 years from August 11, 2005 to August 9, 2013.
*2 The expected holding period is calculated based on the service period of past members of the Board.
*3 This is based on the dividend for the year ended March 31, 2013.
*4 The risk-free interest rate is the yield on Japanese government bonds for the period that corresponds to the remaining life of the option.
Because it is diffi cult to reasonably estimate the number of options that will expire in the future, only the number of options that
have actually forfeited is applied.
.
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90
4
1
0
2
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10. INCOME TAXES
The statutory tax rate in Japan used for calculating deferred tax assets and liabilities for the years ended March 31, 2014 and 2013
was 38.0%.
At March 31, 2014 and 2013, signifi cant components of deferred tax assets and liabilities were as follows:
Deferred tax assets:
Accrued bonuses
Accrued employees’ retirement benefi ts
Net defi ned benefi t liability
Tax loss carryforwards
Unrealized intercompany profi ts
Investments in subsidiaries and affi liated companies
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for advanced depreciation
Depreciation
Undistributed earnings of overseas subsidiaries and affi liated companies
Unrealized gains on securities
Other
Total deferred tax liabilities
Net deferred tax assets
Millions of yen
Thousands of
U.S. dollars
2014
2013
2014
¥ 6,154
¥
—
35,001
39,172
13,736
23,047
36,559
5,975
27,501
—
35,273
11,464
22,631
34,602
$
59,748
—
339,816
380,311
133,359
223,757
354,942
153,669
(48,394)
105,275
137,446
(41,467)
95,979
1,491,932
(469,845)
1,022,087
6,653
20,948
11,287
25,706
14,419
10,220
14,711
7,926
19,181
12,091
64,592
203,379
109,583
249,573
139,990
79,013
¥ 26,262
64,129
¥ 31,850
767,117
$ 254,971
At March 31, 2014 and 2013, deferred tax assets and liabilities were classifi ed as follows:
Deferred tax assets - current
Deferred tax assets - non-current
Deferred tax liabilities - current (included in other current liabilities)
Deferred tax liabilities - non-current
Millions of yen
2014
¥ 25,600
21,441
21
20,758
2013
¥ 21,405
19,502
9
9,048
Thousands of
U.S. dollars
2014
$ 248,544
208,165
204
201,534
The reconciliation of the statutory tax rate and the effective income tax rates for the years ended March 31, 2014 and 2013 was as
follows:
Statutory tax rate
Increase (decrease) in taxes resulting from:
Permanent differences
Equity in earnings of unconsolidated subsidiaries and affi liated companies
Differences of tax rates for overseas consolidated subsidiaries
Undistributed earnings of overseas subsidiaries and affi liated companies
Change in statutory tax rate
Amortization of goodwill
Other
Effective income tax rates
2014
38.0%
(1.3)
(3.0)
(5.8)
3.4
1.6
1.4
(1.4)
32.9%
2013
38.0%
0.7
(3.6)
(7.2)
2.4
—
1.5
2.6
34.4%
The “Act for Partial Amendment of the Income Tax Act, etc.”
(Act No. 10 of 2014) was promulgated on March 31, 2014 and,
as a result, the Company and its domestic subsidiaries are no
longer subject to the Special Reconstruction Corporation Tax
effective for fi scal years beginning on or after April 1, 2014.
As a result, the effective statutory tax rate used to measure
the Company’s deferred tax assets and liabilities was changed
from 38.0% to 35.6% for the temporary differences expected
to be realized or settled in the fi scal year beginning April 1,
2014. The effect of the announced reduction of the effective
statutory tax rate was to decrease deferred tax assets after
offsetting deferred tax liabilities by ¥1,627 million ($15,796
thousand), net deferred losses on hedges by ¥6 million ($58
thousand) and remeasurements of defi ned benefi t plans by
¥74 million ($718 thousand) and increase deferred income
taxes by ¥1,547 million ($15,019 thousand) as of and for the
year ended March 31, 2014.
11. NET ASSETS
The Corporation Law of Japan provides that an amount equal
to 10% of the amount to be disbursed as distributions of cap-
ital surplus (other than the capital reserve) and retained earn-
ings other than the earned reserve) be transferred to the
capital reserve and the earned reserve, respectively, until the
sum of the capital reserve and the earned reserve equals 25%
of the capital stock account. Such distributions can be made
at any time by resolution of the stockholders, or by the Board
of Directors if certain conditions are met.
At the June 2014 annual stockholders’ meeting, stock-
holders approved the payment of cash dividends of ¥5.00 per
share, aggregating to ¥8,149 million ($79,117 thousand) which
has not been refl ected in the accompanying consolidated
fi nancial statements for the year ended March 31, 2014.
12. COMMITMENTS AND CONTINGENT LIABILITIES
At March 31, 2014, commitment line of credit to unconsolidated subsidiaries and affi liated companies was as follows:
Total commitment line of credit
Loans receivable outstanding
Balance
This commitment does not necessarily imply that the unused amount may be fully utilized.
Millions of yen
¥ 3,400
196
¥ 3,204
Thousands of
U.S. dollars
$ 33,010
1,903
$ 31,107
At March 31, 2014 and 2013, contingent liabilities were as follows:
As guarantors of loans to:
Unconsolidated subsidiaries and affi liated companies
Other
Notes discounted
Export bills discounted
Notes endorsed
Millions of yen
Thousands of
U.S. dollars
2014
2013
2014
¥ 3,324
¥ 1,432
8,052
6,959
¥ 11,376
¥ 8,391
¥ 1,060
¥
627
892
—
541
640
$ 32,272
78,175
$ 110,447
$ 10,291
6,087
8,660
Contingent liabilities associated with securitization of receivables
¥ 11,531
¥ 10,361
$ 111,951
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13. LEASES
Finance leases
The Group holds certain buildings, machinery and equipment
and intangible assets by leases.
Finance lease transactions which do not transfer ownership
of the leased assets whose lease inceptions are on or before
March 31, 2008 are accounted for by a method similar to the
method applicable to ordinary operating lease transactions. Total
lease payments under these leases were ¥209 million ($2,029
thousand) and ¥383 million for the years ended March 31, 2014
and 2013, respectively. Pro forma information relating to acquisi-
tion costs, accumulated depreciation/amortization and accumu-
lated loss on impairment and net book value for property held
under fi nance lease transactions which do not transfer owner-
ship of the leased property to the lessee on an “as if capitalized”
basis at March 31, 2014 and 2013 was as follows:
March 31, 2014:
Machinery and equipment
March 31, 2013:
Machinery and equipment
March 31, 2014:
Machinery and equipment
Millions of yen
Accumulated
depreciation/
amortization
Net book value
Acquisition costs
¥ 1,727
¥ 1,727
¥ 1,581
¥ 1,581
¥ 146
¥ 146
Millions of yen
Accumulated
depreciation/
amortization
Net book value
Acquisition costs
¥ 2,160
¥ 2,160
¥ 1,793
¥ 1,793
¥ 367
¥ 367
Thousands of U.S. dollars
Acquisition costs
$ 16,767
$ 16,767
Accumulated
depreciation/
amortization
$ 15,350
$ 15,350
Net book value
$ 1,417
$ 1,417
Future minimum lease payments under fi nance leases subsequent to March 31, 2014 and 2013 were as follows:
Due within one year
Due after one year
Total
Millions of yen
2014
¥ 134
12
¥ 146
2013
¥ 220
147
¥ 367
Thousands of
U.S. dollars
2014
$ 1,301
117
$ 1,417
The acquisition costs and future minimum lease payments under fi nance leases include the imputed interest expense portion.
Operating leases
Future minimum lease payments under noncancellable operating leases subsequent to March 31, 2014 and 2013 were as follows:
Due within one year
Due after one year
Total
Millions of yen
2014
¥ 420
1,755
¥ 2,175
2013
¥ 247
586
¥ 833
Thousands of
U.S. dollars
2014
$ 4,078
17,039
$ 21,117
14. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2014 and 2013 were ¥55,500 million ($538,835 thousand) and ¥53,342 million, respectively.
15. LOSS ON IMPAIRMENT OF FIXED ASSETS
The Company and its consolidated subsidiaries grouped assets used for business based on the classifi cation under the manage-
ment accounting. For assets to be disposed and idle assets, each asset is considered to constitute a group.
For the year ended March 31, 2014, the carrying value of certain business-use assets for which profi tability declined and assets
to be disposed were written down to the recoverable amount. As a result, the Company and its consolidated subsidiaries recog-
nized a loss on impairment of fi xed assets in the amount of ¥14,390 million ($139,709 thousand).
The major assets for which a loss on impairment was recognized were as follows:
Millions of yen
Thousands of
U.S. dollars
Location
Use
Classifi cation
Loss on impairment
Urayasu, Chiba, Japan
Second Head Offi ce Bldg.
St-Maurice de Beynost, France Films production facilities
Buildings
Land
Other
Machinery and equipment
Other
¥ 1,131
7,060
3
¥ 3,385
506
$ 10,981
68,544
29
$ 32,864
4,913
The recoverable amount of the above assets was measured at their value in use or the net selling value. The value in use was cal-
culated by discounting future cash fl ows at a discount rate of 8%, and the net selling value was calculated based on the real estate
appraisal value.
16. OTHER COMPREHENSIVE INCOME
The following table presents reclassifi cation adjustments and tax effects allocated to each component of other comprehensive
income for the years ended March 31, 2014 and 2013.
Millions of yen
Thousands of
U.S. dollars
Net unrealized gains on securities:
Amount arising during the year
Reclassifi cation adjustments for gains and losses included in net income
Before tax effect
Tax effect
Net unrealized gains on securities
Net deferred gains (losses) on hedges:
Amount arising during the year
Reclassifi cation adjustments for gains and losses included in net income
Assets acquisition cost adjustment
Before tax effect
Tax effect
Net deferred gains (losses) on hedges
Foreign currency translation adjustments:
Amount arising during the year
Reclassifi cation adjustments for gains and losses included in net income
Foreign currency translation adjustments
Remeasurements of defi ned benefi t plans:
Amount arising during the year
Reclassifi cation adjustments for gains and losses included in net income
Before tax effect
Tax effect
Remeasurements of defi ned benefi t plans
Share of other comprehensive income of unconsolidated subsidiaries
and affi liated companies accounted for by the equity method:
Amount arising during the year
Reclassifi cation adjustments for gains and losses included in net income
Share of other comprehensive income of unconsolidated subsidiaries
and affi liated companies accounted for by the equity method
Total other comprehensive income
2014
2013
2014
¥ 21,039
(8)
21,031
(7,080)
13,951
¥ 21,611
1,467
23,078
(8,097)
14,981
$ 204,262
(78)
204,184
(68,738)
135,447
(432)
72
896
536
(204)
332
(955)
(17)
(385)
(1,357)
550
(807)
94,366
(12)
94,354
51,585
881
52,466
(199)
94
(105)
23
(82)
5,225
(13)
5,212
(661)
—
(661)
153
(508)
2,614
(7)
2,607
(4,194)
699
8,699
5,204
(1,981)
3,223
916,175
(117)
916,058
(1,932)
913
(1,019)
223
(796)
50,728
(126)
50,602
¥ 113,767
¥ 68,739
$ 1,104,534
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17. Business Combinations
Acquisition of Zoltek Companies, Inc.
1. Summary of business combination
The Company purchased the entire stake in Zoltek Companies, Inc. on February 28, 2014.
(1) Name and business of the acquired company
Name of the acquired company: Zoltek Companies, Inc.
Business: Manufacture and distribution of large tow carbon fi ber composite materials
(2) Major reason for business combination
The Company has showed its presence in the fi eld of advanced applications such as aerospace and natural gas pressure ves-
sels by concentrating its business resources on high-performance / high-quality regular tow carbon fi ber. Through entering into
the large tow carbon fi ber business, the Company aims to address promising growth in commodity industrial fi eld such as wind
energy-related applications, which show rapid demand growth in recent years, and automobile structural parts applications.
(3) Date of business combination
February 28, 2014
(4) Legal form of business combination
Acquisition of shares for cash consideration
(5) Company name after business combination
Zoltek Companies, Inc.
(6) Percentage of acquired voting rights
100%
(7) Basis for determining the acquiring company
The Company acquired 100% of the voting rights in exchange for cash.
2. Period of operating results of the acquired company included in the consolidated fi nancial statements
The acquired company’s balance sheet date is September 30, 2013. For consolidation purposes, the fi nancial statements as of
December 31, 2013 were used. However, as the Company deemed the acquisition date as January 1, 2014, operating results
were not included in the consolidated fi nancial statements.
3. Acquisition cost
Acquisition cost: $584,000 thousand
Cost directly related to acquisition: ¥859 million ($8,340 thousand)
4. Amount of goodwill, reason for recognition, and amortization method and period
Amount of goodwill: $275,000 thousand
Reason for recognition: Goodwill was recognized as the excess of the acquisition cost over the net fair value of assets acquired
and liabilities assumed.
Amortization method and period: Straight-line method over 10 years
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5. Details on assets acquired and liabilities assumed on the date of business combination
Current assets
Non-current assets
$154,000 thousand
$209,000 thousand
$363,000 thousand
Total assets
Current liabilities
Non-current liabilities
Total liabilities
$22,000 thousand
$24,000 thousand
$46,000 thousand
6. Allocation of acquisition cost
As the allocation of the acquisition cost is incomplete as of March 31, 2014, provisional accounting treatment is applied based
on reasonable information available as of that date.
7. Effect on the consolidated statement of income assuming the business combination had been carried out on April 1, 2013
The effect on operating results for the year ended March 31, 2014 was immaterial. This information has not been audited by the
independent auditors of the Company.
Purchase of Shares in Woongjin Chemical Co., Ltd.
1. Summary of business combination
Toray Advanced Materials Korea Inc., a consolidated subsidiary of the Company, purchased a 56.35% stake in Korea’s Woongjin
Chemical Co., Ltd. on February 28, 2014.
(1) Name and business of the acquired company
Name of the acquired company: Woongjin Chemical Co., Ltd.
Business: Manufacture and distribution of fi bers, water treatment fi lters, A-PET sheets (cast fi lm), etc.
(2) Major reason for business combination
By acquiring the acquired company’s main business of fi bers and textiles as well as its water treatment fi lters business,
which has grown in recent years and has been improving profi tability, the Company expects it would enhance the busi-
ness foundation of Toray Advanced Materials Korea Inc. and generate synergies in the overall business development of
the Toray Group.
(3) Date of business combination
February 28, 2014
(4) Legal form of business combination
Acquisition of shares for cash consideration
(5) Company name after business combination
Woongjin Chemical Co., Ltd. (The name has been changed to Toray Chemical Korea Inc. effective March 31, 2014.)
(6) Percentage of acquired voting rights
Percentage of voting rights before the acquisition: 0.52%
Percentage of additional acquisition of voting rights: 56.35%
Percentage of voting rights after the acquisition: 56.88%
(7) Basis for determining the acquiring company
The Company and Toray Advanced Materials Korea Inc. acquired more than half of the voting rights in exchange for cash.
2. Period of operating results of the acquired company included in the consolidated fi nancial statements
The acquired company’s balance sheet date is December 31, 2013. However, as the Company deemed the acquisition date as
January 1, 2014, operating results were not included in the consolidated fi nancial statements.
3. Acquisition cost
Acquisition cost: W432.7 billion ($406,673 thousand)
4. Amount of goodwill, reason for recognition, and amortization method and period
Amount of goodwill: W168.5 billion ($158,365 thousand)
Reason for recognition: Goodwill was recognized as the excess of the acquisition cost over the net fair value of assets acquired
and liabilities assumed.
Amortization method and period: Straight-line method over 10 years
5. Details on assets acquired and liabilities assumed on the date of business combination
Current assets
W251.8 billion ($236,654 thousand)
Non-current assets W703.1 billion ($660,808 thousand)
W954.9 billion ($897,462 thousand)
Total assets
Current liabilities
W273.0 billion ($256,579 thousand)
Non-current liabilities W215.5 billion ($202,538 thousand)
W488.6 billion ($459,117 thousand)
Total liabilities
6. Effect on the consolidated statement of income assuming the business combination had been carried out on April 1, 2013
The effect on operating results for the year ended March 31, 2014 was immaterial. This information has not been audited by the
independent auditors of the Company.
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18. Supplementary Cash Flow Information
The following is the summary of assets acquired and liabilities assumed through the acquisition of shares of Zoltek Companies, Inc., its
subsidiaries and Woongjin Chemical Co., Ltd. (renamed Toray Chemical Korea Inc.), related acquisition costs and net disbursement during
the year ended March 31, 2014:
Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Minority interests in consolidated subsidiaries
Other
Acquisition costs of shares
Cash and cash equivalents
Net disbursement due to share acquisition
19. Segment Information
Millions of yen
Thousands of
U.S. dollars
2014
2014
¥ 41,405
92,356
41,438
(29,662)
(24,056)
(20,024)
(460)
$ 401,990
896,660
402,311
(287,981)
(233,553)
(194,408)
(4,466)
100,997
980,553
(9,606)
(93,262)
¥ 91,391
$ 887,291
(Segment information)
1. Outline of reportable segments
The reportable segments of the Group are components for which discrete fi nancial information is available and whose operating results
are regularly reviewed by the Board of Directors to make decisions about resource allocation to the segments and assess performance.
The Company identifi es the following six segments according to the nature of the products and market for their products.
Reportable segment
Main products
Fibers & Textiles
Plastics & Chemicals
IT-related Products
Filament yarns, staple fi bers, and woven and knitted fabrics of nylon, polyester and acrylic
fi bers, etc.; non-woven fabrics, ultra-microfi ber non-woven fabric with suede texture and
apparel products
Nylon, ABS, PBT, PPS and other resins and molded products, polyolefi n foam; polyester,
polypropylene, PPS and other fi lms and processed fi lm products; raw materials for synthetic
fi bers and other plastics; zeolite catalysts; fi ne chemicals for pharmaceuticals and agrochem-
icals; veterinary medicine (excludes fi lm and resin covered in IT-related Products segment)
Films and plastic products for information and telecommunications related products; mate-
rials for electronic circuits and semiconductors; color fi lters for LCDs and related materials
and equipment; materials for plasma display panels; magnetic recording materials; graphic
materials and related equipment
Carbon Fiber Composite Materials Carbon fi bers, carbon fi ber composite materials and their molded products
Environment & Engineering
Comprehensive engineering; condominiums; industrial equipment and machinery;
environment-related equipment; water treatment membranes and related equipment;
materials for housing, building and civil engineering
Life Science
Pharmaceuticals and medical devices
2. Measurement of sales, income, assets and other material items of reportable segments
The accounting policies for the reportable segments are the same as those described in Note 1. SIGNIFICANT ACCOUNTING POLICIES.
The fi gures of segment income are based on operating income.
Intersegment sales are determined based on consideration of the market price and related information.
3. Information on sales, income, assets and other material items of reportable segments
Millions of yen
Year ended
March 31, 2014:
Sales to outside customers ¥ 755,474 ¥ 470,542 ¥ 245,741 ¥ 113,342 ¥ 180,197 ¥ 58,205 ¥ 14,277 ¥1,837,778 ¥
7,139
Intersegment sales
16,199
32,751
118,518
Life Science
1,213
60,907
308
Others
1
Total
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering
Plastics
&
Chemicals
Fibers
&
Textiles
Adjustments
Consolidated
Total
— ¥ 1,837,778
—
(118,518)
Total sales
¥ 756,687 ¥ 503,293 ¥ 252,880 ¥ 113,650 ¥ 241,104 ¥ 58,206 ¥ 30,476 ¥ 1,956,296 ¥ (118,518) ¥ 1,837,778
Segment income
¥ 52,919 ¥ 18,010 ¥ 24,586 ¥ 16,927 ¥ 6,397 ¥ 5,605 ¥ 1,987 ¥ 126,431 ¥
(21,178) ¥ 105,253
¥ 618,469 ¥ 507,133 ¥ 361,102 ¥ 341,762 ¥ 202,146 ¥ 76,440 ¥ 57,717 ¥ 2,164,769 ¥
(45,086) ¥ 2,119,683
Segment assets
Depreciation and
amortization
Investment in unconsolidated
subsidiaries and affi liated
companies accounted for
by the equity method
Capital expenditures
19,368
19,688
18,331
14,339
2,843
2,134
1,235
77,938
805
78,743
24,148
41,252
4,006
3,432
9,996
2,853
5,422
91,109
(587)
90,522
26,842
19,386
20,059
40,290
3,333
8,632
1,069
119,611
(1,404)
118,207
Millions of yen
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Year ended
March 31, 2013:
Sales to outside customers ¥ 632,150 ¥ 395,835 ¥ 237,593 ¥ 77,620 ¥ 178,355 ¥ 56,599 ¥ 14,127 ¥ 1,592,279 ¥
7,403
Intersegment sales
27,946
Life Science
64,485
652
839
Others
1
Total
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering
Plastics
&
Chemicals
Fibers
&
Textiles
16,301 117,627 (117,627)
Adjustments
Consolidated
Total
— ¥ 1,592,279
—
Total sales
¥ 632,989 ¥ 423,781 ¥ 244,996 ¥ 78,272 ¥ 242,840 ¥ 56,600 ¥ 30,428 ¥ 1,709,906 ¥ (117,627) ¥ 1,592,279
Segment income
¥ 43,222 ¥ 18,302 ¥ 22,959 ¥
7,299 ¥
2,628 ¥ 7,456 ¥ 1,557 ¥ 103,423 ¥ (19,987) ¥ 83,436
¥ 456,766 ¥ 456,685 ¥ 334,165 ¥ 233,085 ¥ 176,568 ¥ 69,087 ¥ 47,238 ¥ 1,773,594 ¥ (41,661) ¥ 1,731,933
Segment assets
Depreciation and
amortization
Investment in unconsolidated
subsidiaries and affi liated
companies accounted for
by the equity method
Capital expenditures
15,572
17,704
15,850
11,760
2,626
1,905
1,257
66,674
914
67,588
16,308
36,386
3,205
224
6,938
2,933
5,075
71,069
(631)
70,438
27,297
24,521
23,393
15,561
4,251
4,488
889 100,400
(1,265)
99,135
Thousands of U.S. dollars
Year ended
March 31, 2014:
Sales to outside customers $ 7,334,699 $ 4,568,369 $ 2,385,835 $ 1,100,408 $ 1,749,485 $ 565,097 $ 138,612
Intersegment sales
591,330
317,971
Life Science
69,311
11,777
2,990
Others
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering
Plastics
&
Chemicals
Fibers
&
Textiles
Total
Adjustments
Consolidated
Total
10 157,272 1,150,660 (1,150,660)
$ 17,842,505 $
— $ 17,842,505
—
Total sales
$ 7,346,476 $ 4,886,340 $ 2,455,146 $ 1,103,398 $ 2,340,816 $ 565,107 $ 295,883 $ 18,993,165 $ (1,150,660) $ 17,842,505
Segment income
$ 513,777 $ 174,854 $ 238,699 $ 164,340 $
62,107 $ 54,417 $ 19,291 $ 1,227,485 $
(205,612) $ 1,021,874
$ 6,004,553 $ 4,923,621 $ 3,505,845 $ 3,318,078 $ 1,962,583 $ 742,136 $ 560,359 $ 21,017,175 $
(437,728) $ 20,579,447
Segment assets
Depreciation and
amortization
Investment in unconsolidated
subsidiaries and affi liated
companies accounted for
by the equity method
Capital expenditures
188,039
191,146
177,971
139,214
27,602 20,718 11,990
756,680
7,816
764,495
234,447
400,505
38,893
33,320
97,049 27,699 52,641
884,553
(5,699)
878,854
260,602
188,214
194,748
391,165
32,359 83,806 10,379 1,161,272
(13,631) 1,147,641
Notes:
1) “Others” represents service-related businesses such as analysis, survey and research.
2) a) “Adjustments” of segment income for the year ended March 31, 2014 of ¥(21,178) million ($(205,612) thousand) includes
intersegment eliminations of ¥(934) million ($(9,068) thousand) and corporate expenses of ¥(20,244) million ($(196,544) thou-
sand). “Adjustments” of segment income for the year ended March 31, 2013 of ¥(19,987) million includes intersegment elim-
inations of ¥(27) million and corporate expenses of ¥(19,960) million. The corporate expenses consist of the headquarters’
research expenses, etc. that are not allocated to each reportable segment.
b) “Adjustments” of segment assets for the year ended March 31, 2014 of ¥(45,086) million ($(437,728) thousand) includes inter-
segment eliminations of ¥(63,419) million ($(615,718) thousand) and corporate assets of ¥18,333 million ($177,990 thousand).
“Adjustments” of segment assets for the year ended March 31, 2013 of ¥(41,661) million includes intersegment elimina-
tions of ¥(61,374) million and corporate assets of ¥19,713 million. The corporate assets consist of the headquarters’ research
assets, etc. that are not allocated to each reportable segment.
3) “Segment income” is reconciled to operating income.
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(Related information)
Geographic information
Sales to outside customers
Millions of yen
Asia
Year ended March 31, 2014:
Japan
China
Others
North America,
Europe
and other areas
Total
Sales to outside customers
¥ 925,867
¥ 305,742
¥ 323,151
¥ 283,018
¥ 1,837,778
Year ended March 31, 2013:
Japan
China
Others
Millions of yen
Asia
North America,
Europe
and other areas
Total
Sales to outside customers
¥ 870,315
¥ 222,514
¥ 268,291
¥ 231,159
¥ 1,592,279
Year ended March 31, 2014:
Japan
China
Others
Asia
North America,
Europe
and other areas
Total
Sales to outside customers
$ 8,989,000
$ 2,968,369
$ 3,137,388
$ 2,747,748
$ 17,842,505
Thousands of U.S. dollars
Sales amounts are allocated to countries or regions according to the customers’ location.
Property, plant and equipment, net
Millions of yen
Asia
March 31, 2014:
Japan
Republic of Korea
Others
North America,
Europe
and other areas
Total
Property, plant and equipment, net
¥305,161
¥152,570
¥154,781
¥168,723
¥781,235
March 31, 2013:
Japan
Republic of Korea
Others
Millions of yen
Asia
North America,
Europe
and other areas
Total
Property, plant and equipment, net
¥317,658
¥84,534
¥124,686
¥100,362
¥627,240
March 31, 2014:
Japan
Republic of Korea
Others
Asia
North America,
Europe
and other areas
Total
Property, plant and equipment, net
$ 2,962,728
$ 1,481,262
$ 1,502,728
$ 1,638,087
$ 7,584,806
Thousands of U.S. dollars
(Information about loss on impairment of fi xed assets by reportable segments)
Year ended
March 31, 2014:
Loss on impairment
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& corporate
Total
¥ 1,687
¥ 6,826
¥ 2,425
¥ 2,512
¥ 259
¥ 681
¥ —
¥ —
¥ 14,390
Millions of yen
Year ended
March 31, 2013:
Loss on impairment
Fibers
&
Textiles
¥ 150
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& corporate
Total
¥ 280
¥ 225
¥ 264
¥ 990
¥ 63
¥ —
¥ —
¥ 1,972
Millions of yen
Year ended
March 31, 2014:
Loss on impairment
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& corporate
Total
$ 16,379 $ 66,272
$ 23,544
$ 24,388
$ 2,515
$ 6,612
$ —
$ —
$ 139,709
Thousands of U.S. dollars
(Information about amortization and balance of goodwill by reportable segments)
Millions of yen
Year ended
March 31, 2014:
Amortization of goodwill
Balance of goodwill
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& corporate
Total
¥
12,724
(25) ¥ 191
1,384
¥ 3,070 ¥
24,801 29,976
300 ¥ —
3,414
¥ —
—
¥ —
1
¥ — ¥ 3,536
— 72,300
Year ended
March 31, 2013:
Amortization of goodwill
Balance of goodwill
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& corporate
Total
Millions of yen
¥ (248)
(72)
¥ 16
907
¥ 3,132 ¥ 238 ¥ (16)
27,871
1,060
—
¥ —
—
¥ 1
1
¥ — ¥ 3,123
— 29,767
Year ended
March 31, 2014:
Amortization of goodwill
Balance of goodwill
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& corporate
Total
$
(243) $ 1,854
123,534 13,437
$ 29,806 $ 2,913 $ —
240,786 291,029 33,146
$ —
—
$ —
10
$ — $ 34,330
— 701,942
Thousands of U.S. dollars
“Others” represents service-related businesses such as analysis, survey and research.
20. AMOUNTS PER SHARE
Basic net income per share is computed based on the net
income attributable to stockholders of common stock and the
weighted-average number of shares of common stock out-
standing during the year.
Diluted net income per share is computed based on the
net income available for distribution to the stockholders and
the weighted-average number of shares of common stock
outstanding during the year after giving effect to the dilutive
potential of shares of common stock to be issued upon the
exercise of warrants and stock acquisition rights.
Amounts per share of net assets are computed based on the
net assets available for distribution to the stockholders and the
number of shares of common stock outstanding at year end.
Cash dividends per share represent the cash dividends pro-
posed by the Board of Directors applicable to the respective
years together with any interim cash dividends paid.
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Net income:
Basic
Diluted
Cash dividends applicable to the year
Net assets
21. SUBSEQUENT EVENTS
Year ended March 31, 2014
Yen
2014
2013
U.S. dollars
2014
¥ 36.59
35.70
10.00
527.32
¥ 29.75
28.90
10.00
444.45
$ 0.36
0.35
0.10
5.12
Issuance of Zero Coupon Convertible Bonds
The Board of Directors of the Company resolved the issuance of zero coupon convertible bonds due 2019 and zero coupon con-
vertible bonds due 2021(hereinafter, the “Bonds”) on May 22, 2014. The payments for the Bonds were completed on June 9, 2014
(London time; unless otherwise indicated, hereinafter the same shall apply).
The outline of the issuance is as follows:
1. Outline of Zero Coupon Convertible Bonds due 2019
(1) Issue Price (amount to be paid)
100.0% of the principal amount of the Bonds (The Bonds are issued in the denomination of ¥10 million ($97 thousand) each.)
(2) Offer Price
102.5% of the principal amount of the Bonds
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(3) Aggregate Principal Amount of the Bonds
¥50 billion ($485 million) plus an aggregate principal amount of the Bonds in respect of replacement certifi cates (for lost, sto-
len, destroyed, mutilated or defaced certifi cates, if issued in accordance with the terms and conditions of the Bonds)
(4) Coupon
Zero
(5) Closing Date and Issuing Date of the Bonds
June 9, 2014
(6) Redemption
The Bonds shall be redeemed at 100% of their principal amount on August 30, 2019 (maturity date). In addition to this, the
Bonds may be redeemed if certain events occur as set forth in the terms and conditions of the Bonds.
(7) Matters regarding Stock Acquisition Rights
[1] Class and number of shares issued upon exercise of stock acquisition rights
The class of shares to be acquired by a bondholder exercising its stock acquisition rights shall be the shares of common
stock of the Company, and the number of the shares shall be determined by dividing the aggregate principal amount of
the Bonds with respect to the exercised stock acquisition rights by the conversion price as set forth in [3] (ii). Fractions of
a share shall not be issued upon the exercise and no adjustment or cash payment shall be made.
[2] Number of stock acquisition rights
5,000 plus the number of stock acquisition rights determined by dividing an aggregate principal amount of the Bonds in
respect of replacement certifi cates by ¥10 million ($97 thousand)
[3] Amounts to be paid upon exercise of stock acquisition rights
(i) Upon exercise of each stock acquisition right, the relevant Bond shall be deemed to be acquired by the Company as a
capital contribution in kind by the relevant bondholder at the price equal to the principal amount of the Bond.
(ii) Conversion price
¥891 ($9) per share (initial conversion price)
[4] Exercise period of stock acquisition rights
At any time during the period from, and including, June 23, 2014 to, and including, August 16, 2019 (at the local time of
the place where the stock acquisition right is to be exercised), but subject to certain provisions in the terms and condi-
tions of the Bonds
[5] Capital stock and capital surplus increased by the exercise of stock acquisition rights
The amount of capital stock increased by the exercise of stock acquisition rights shall be 50% of the maximum capital
increase amount calculated in accordance with Article 17 of the Ordinance on Company Accounting, rounding up the frac-
tion. The amount of capital surplus increased shall be the difference between the maximum capital increase amount and
the amount of capital stock increased.
[6] Grant of stock acquisition rights by the succeeding company in case of organizational restructuring, etc.
Certain provisions in the terms and conditions of the Bonds
(8) Acquisition at the Option of the Company
Certain provisions in the terms and conditions of the Bonds
(9) Collateral and Guarantee
No collateral or guarantee
(10) Use of Proceeds
The net proceeds from the issuance of zero coupon convertible bonds due 2019 and 2021 are expected to be used primar-
ily as follows:
[1] approximately ¥50 billion ($485 million) by the end of March 2015 for Toray Group’s capital expenditures including in
respect of carbon fi ber and prepreg (sheet consisting of resin-impregnated carbon fi ber) facilities in Japan and the United
States, facilities for fi lms for IT-related products in Japan, and PPS (polyphenylene sulphide) resin facilities in South Korea;
[2] approximately ¥30 billion ($291 million) by the end of March 2015 for R&D expenses, principally in respect of Green
Innovation Businesses and Life Innovation Businesses, which Toray Group considers to be its growth business fi elds; and
[3] approximately ¥20 billion ($194 million) by the end of July 2014 as funding for the repurchase of its own shares by the
Company with a view to enabling the Company to implement fl exible capital policies that respond to changes in the business
environment. As the number of its own shares the Company is able to repurchase is dependent on, among other things,
market conditions, to the extent not all of the amount referred to above in respect of the proceeds of the offering of the
Bonds is applied towards such repurchase, any balance will be applied towards repayment of interest-bearing liabilities.
2. Outline of Zero Coupon Convertible Bonds due 2021
(1) Issue Price (amount to be paid)
100.0% of the principal amount of the Bonds (The Bonds are issued in the denomination of ¥10 million ($97 thousand) each.)
(2) Offer Price
102.5% of the principal amount of the Bonds
(3) Aggregate Principal Amount of the Bonds
¥50 billion ($485 million) plus an aggregate principal amount of the Bonds in respect of replacement certifi cates (for lost, stolen,
destroyed, mutilated or defaced certifi cates, if issued in accordance with the terms and conditions of the Bonds)
(4) Coupon
Zero
(5) Closing Date and Issuing Date of the Bonds
June 9, 2014
(6) Redemption
The Bonds shall be redeemed at 100% of their principal amount on August 31, 2021 (maturity date). In addition to this, the
Bonds may be redeemed if certain events occur as set forth in the terms and conditions of the Bonds.
(7) Matters regarding Stock Acquisition Rights
[1] Class and number of shares issued upon exercise of stock acquisition rights
The class of shares to be acquired by a bondholder exercising its stock acquisition rights shall be the shares of common
stock of the Company, and the number of the shares shall be determined by dividing the aggregate principal amount of the
Bonds with respect to the exercised stock acquisition rights by the conversion price as set forth in [3] (ii). Fractions of a share
shall not be issued upon the exercise and no adjustment or cash payment shall be made.
[2] Number of stock acquisition rights
5,000 plus the number of stock acquisition rights determined by dividing an aggregate principal amount of the Bonds in
respect of replacement certifi cates by ¥10 million ($97 thousand)
[3] Amounts to be paid upon exercise of stock acquisition rights
(i) Upon exercise of each stock acquisition right, the relevant Bond shall be deemed to be acquired by the Company as a
capital contribution in kind by the relevant bondholder at the price equal to the principal amount of the Bond.
(ii) Conversion price
¥827 ($8) per share (initial conversion price)
[4] Exercise period of stock acquisition rights
At any time during the period from, and including, June 23, 2014 to, and including, August 17, 2021 (at the local time of the
place where the stock acquisition right is to be exercised), but subject to certain provisions in the terms and conditions of
the Bonds
[5] Capital stock and capital surplus increased by the exercise of stock acquisition rights
The amount of capital stock increased by the exercise of stock acquisition rights shall be 50% of the maximum capital
increase amount calculated in accordance with Article 17 of the Ordinance on Company Accounting, rounding up the frac-
tion. The amount of capital surplus increased shall be the difference between the maximum capital increase amount and the
amount of capital stock increased.
[6] Grant of stock acquisition rights by the succeeding company in case of organizational restructuring, etc.
Certain provisions in the terms and conditions of the Bonds
(8) Acquisition at the Option of the Company
Certain provisions in the terms and conditions of the Bonds
(9) Collateral and Guarantee
No collateral or guarantee
(10) Use of Proceeds
Please refer to 1(10) above.
Repurchase of Shares
The Board of Directors of the Company resolved at the meeting held on May 22, 2014 to repurchase the Company’s shares, pur-
suant to the provision of Article 156 of the Companies Act, as applied pursuant to the provision of Article 165, Paragraph 3 thereof.
1. Reason for Repurchase
The Company intends to repurchase its own shares in order to implement fl exible capital policies that respond to changes in the
business environment.
2. Matters regarding Repurchase
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(1) Class of Shares to be Repurchased
(2) Total Number of Shares to be Repurchased Up to 36,000,000 shares
(3) Total Amount of Shares to be Repurchased Up to ¥20 billion ($194 million)
(4) Repurchase Period
(5) Repurchase Method
From May 23, 2014 to July 31, 2014
Market purchase
Common stock
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Investor Information
(As of March 31, 2014)
Common Stock:
Issued:
1,629,814,175 shares
(excluding treasury stock)
Number of Stockholders: 172,709
Annual General Meeting:
The annual general meeting of stockholders is
normally held in June in Tokyo.
Listings:
Common stock is listed on the Tokyo Stock
Exchange.
Independent Auditors:
Ernst & Young ShinNihon LLC
Transfer Agent:
Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi Chiyoda-ku, Tokyo
100-0005, Japan
Cash Dividends Per Share
Total for the year
Interim
Principal Stockholders
2014
2013
¥10.00
¥10.00
5.00
5.00
Thousands of
shares
Percentage of
shares held
The Master Trust Bank of Japan, Ltd. (Trust account)
116,556
Nippon Life Insurance Co.
Japan Trustee Services Bank, Ltd. (Trust account)
Mitsui Life Insurance Co., Ltd.
Sumitomo Mitsui Banking Corporation
Japan Trustee Services Bank, Ltd. (Trust 4 account)
Mitsui Fudosan Co., Ltd.
State Street Bank West Client-Treaty
Mitsui Sumitomo Insurance Co., Ltd.
71,212
70,393
35,961
30,022
21,447
19,460
19,057
17,638
7.15
4.37
4.32
2.21
1.84
1.32
1.19
1.17
1.08
The Chase Manhattan Bank, N.A. London S.L.
Omnibus Account
16,924
1.04
* Percentage of shares held is calculated excluding 1,667,228 shares of treasury stock.
Stock Price Range
Composition of Stockholders (Thousands of shares)
(Yen)
1,200
1,000
800
600
400
200
0
2009
April
2010
April
2011
April
2012
April
2013
April
2014
March
Individuals and
Others
450,898
27.64%
Companies and
Individuals in
Foreign Countries
412,928
25.31%
Financial
Institutions
596,714
36.57%
Securities
Companies
24,000
1.47%
Other
Japanese
Companies
146,942
9.01%
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Corporate Data
(As of March 31, 2014)
Toray Industries, Inc.
Head Offi ce
Nihonbashi Mitsui Tower, 1-1,
Nihonbashi-Muromachi 2-chome,
Chuo-ku, Tokyo 103-8666, Japan
Telephone: 81 (3) 3245-5111
Facsimile: 81 (3) 3245-5054
URL:
http://www.toray.com
Established:
January 1926
Paid-in Capital:
¥147,873,030,771
Number of Employees:
45,881
Parent company:
7,123
Japanese subsidiaries: 10,247
Overseas subsidiaries: 28,511
Toray Industries, Inc.
1-1, Nihonbashi-Muromachi 2-chome,
Chuo-ku, Tokyo 103-8666, Japan
Telephone: 81(3)3245-5111
Facsimile: 81(3)3245-5054
URL:
http://www.toray.com
For questions about this report:
Contact IR Dept.
Telephone: 81(3)3245-5113
Facsimile: 81(3)3245-5459
e-mail:
ir@nts.toray.co.jp
Printed in Japan
Issued: October 2014